Mock Exam O1

Name – ______________
1 Wilson maintains a three column cash book in his business. On 1 March 2019 the following

balances were available.

Cash 10
Bank overdraft 35

During March the following transactions occurred.

March 3 Cash sales, $570

10 Paid wages, $65, and general expenses, $19, in cash

12 Banked cash, $420

18 Cheque, $40, received from Glover in February was returned by the bank
marked

‘refer to drawer’

20 Settled Lou’s account of $250 by cheque after deducting 4% cash discount

25 Drawings taken $50 in cash, and $300 by cheque

30 Received a cheque, $285, from Fred after he had deducted 5% cash discount. This

was paid into the bank.

REQUIRED

(a) Prepare the three column cash book for March 2019 on the next page. Balance the
cash book and bring down the balances on 1 April 2019.
Cash Book

[10]

b) Complete the table by placing a tick (3) in the appropriate box to indicate how the cash book can
be classified.
 as a ledger account only as a book of prime as a ledger account and a
(original) entry only book of prime (original) entry
[1]

(c) Name the type of entry made in the cash book on 12 March.

........................................................................................................................................... [1]

(d) State two possible reasons why the bank returned the cheque from Glover on 18 March. .
1 ..............................................................................................................................................

2...............................................................................................................................................

[2]

(e) State the purpose of allowing Fred cash discount on 30 March.

............................................................................................................................................ [1]

Wilson received a bank statement which showed a credit bank balance of $345 on 31 March 2019.

Wilson compared the entries in the bank statement with those in his cash book and found that the
following were not recorded on the bank statement.

1 the cheque paid to Lou on 20 March

2 the cheque for drawings paid on 25 March

3 the cheque received from Fred and banked on 30 March

REQUIRED

(f) Prepare the bank reconciliation statement at 31 March 2019. Start with the balance recorded in
the bank statement.

Bank Reconciliation Statement at 31 March 2019

……………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………
…............................................................................................................................................................
...............................................................................................................................................................
...............................................................................................................................................................
[5]

Total 20 marks

2 Yasmin opened a garment factory on 1 May 2016.

She provided the following information.

$
On 1 May 2016
Cost of factory machinery 35 000
Cost of office furniture and equipment 8 500
Cost of tools 1 000
For the year ended 30 April 2017
Revenue 113 640
Purchases of raw materials 30 100
Purchases of finished goods 15 700
Wages and salaries
Factory operatives 31 500
 Factory supervisors 11 860
Office and sales staff 32 200
General expenses
Factory 3 240
Office 1 950
Rates
Factory 4 500
Office 1 500
At 30 April 2017
Inventory
Raw materials 3 150
Work in progress 2 820
Finished goods 6 800
Value of tools 830
Wages accrued
Factory operatives 800
Office and sales staff 950

Additional information

1 No additional non-current assets were purchased during the year.

2 The factory machinery is to be depreciated at 20% per annum on cost.

3 The office furniture and equipment is to be depreciated at 15% per annum on cost.

4 The tools are to be revalued at the end of each financial year.

REQUIRED

(a) Prepare the manufacturing account for the year ended 30 April 2017. [10]
Yasmin is hoping to decrease her cost of production in the future. She thinks that if she spends a
further $25 000 on factory machinery she will be able to reduce the costs of direct labour by one
third.
 REQUIRED
 (b) Advise Yasmin whether or not she should buy the extra factory machinery. Justify your answer
with two advantages and two disadvantages of your advice.
 ...................................................................................................................................................
 ...................................................................................................................................................
 ...................................................................................................................................................
 ...................................................................................................................................................
 ...................................................................................................................................................
 ...................................................................................................................................................
 ...................................................................................................................................................
 ...................................................................................................................................................
 ...................................................................................................................................................
 ...................................................................................................................................................
 .............................................................................................................................................. [5]
 (c) (i) Calculate the cost of sales for the year ended 30 April 2017.
 ...........................................................................................................................................
 ...........................................................................................................................................
 ...........................................................................................................................................
 ...........................................................................................................................................
 ...................................................................................................................................... [3]
 (ii) Calculate the gross profit for the year ended 30 April 2017.
 ...........................................................................................................................................
 ...........................................................................................................................................
 ...................................................................................................................................... [1]
 (d) Suggest one way in which Yasmin could increase the percentage of gross profit to revenue.

 ...................................................................................................................................................
 .............................................................................................................................................. [1]
 [Total: 20]
3 Sparky Ltd set up business on 1 May 2008 with the following assets:

Property (Land and buildings) 150 000

Computer equipment 40 000
Inventory (stock in trade) 70 000

Sparky Ltd decided on the following policy for depreciation:

1 Land costing $80 000 was not to be depreciated.

2 Buildings are to be depreciated at 2% per annum on cost using the straight line method.

3 Computer equipment is to be depreciated at 25% per annum using the diminishing

(reducing) balance method.

REQUIRED

(a) Define depreciation [2]

………………………………………………………………………………………………………
……………………………………………………………………………………………………

(b) State two causes of depreciation.

 (i)……………………………………………………………………………………………….

(ii) ........................................................................................................................... [2]

(c) Explain why Sparky Ltd does not depreciate each of the following:

(i)Land

(ii)Inventory (stock in trade)

[4]

(d) Calculate the depreciation on property (land and buildings) for the year ended
30 April 2009.

[1]

On 30 April 2010 Sparky Ltd sold some of the computer equipment for $7000. The computer equipment
had cost $12 000 on 1 May 2008. Sparky Ltd charges a full year’s depreciation in the year of disposal.

REQUIRED

(e) Prepare the disposal account on 30 April 2010 recording the disposal of the computer equipment.[5]

Disposal account

During the year ended 30 April 2010, Sparky Ltd carried out work on the buildings.

1 Built an extension

2 Redecorated the interior

3 Installed air conditioning

 REQUIRED

(f) State whether each item, 1 to 3 above, is capital expenditure or revenue expenditure.

1 .....................................................................................................................................

2 .....................................................................................................................................

3 ................................................................................................................................. [3]

[Total: 17]

4 Zaynah is in business buying and selling goods on credit. The following balances were
extracted from her books on 30 April 2010.

$
Revenue (Sales) 200000
Cost of sales 130000
Expenses 65000
Inventory (stock) 1 May 2009 20000
Inventory (stock) 30 April 2010 60000
Trade receivables (debtors) 16000
Trade payables (creditors) 35000
Loans repayable within 12 months 5000
(Bank overdraft)
Closing capital 100000

REQUIRED

(a) Calculate, to one decimal place, the following ratios for the year ended 30 April 2010.
Clearly show all workings.

(i) Gross profit to revenue (sales) percentage [3]

(ii) Working capital ratio (current ratio) [3]

(iii) Acid test ratio (quick ratio) [4]

(iv) Profit for the year (net profi t) to capital percentage (ROCE)
 ..................................................................................................................................
 ..................................................................................................................................
 ..................................................................................................................................
 ..................................................................................................................................
 ..............................................................................................................................[4]

(b) Comment on the following ratios at 30 April 2010

:
 (i) Quick ratio (acid test)
 ..................................................................................................................................
 ..................................................................................................................................
 ..............................................................................................................................[2]

 (ii) Profi t for the year (net profi t) to capital percentage. (ROCE)
 ..................................................................................................................................
 ..................................................................................................................................
 ..............................................................................................................................[2]

In the previous year, ended 30 April 2009, the business of Zaynah achieved the following
ratios:

 Gross profit to revenue (sales) percentage 50%

 Working capital ratio (current ratio) 1.7:1

 REQUIRED
(c) Suggest one possible reason for the change over the year ended 30 April
2010 in the:

 (i) gross profit to sales percentage;

 ..................................................................................................................................

 ................................................................................................................................ .............
.................................................................................................................[2]

 (ii) working capital ratio (current ratio).

 ..................................................................................................................................
 ..................................................................................................................................
 ..............................................................................................................................[2]

(a) State 2 Asset management ratios. [2]

……………………………………………………………………………………………
…………………………………………………………………………………………….

[Total: 24]
3 The treasurer of Avalon Social Club did not keep proper accounting records. The information
was available at 31 October 2008:

1 Subscriptions paid in advance by members at 1 November 2007 amounted to $210.

The balance of subscriptions in arrears was $130.

2 Receipts during the year ended 31 October 2008:

Subscriptions - for the year ended 31 October 2007 130 (in arrears)

- for the year ended 31 October 2008 1490

- for the year ended 31 October 2009 90 (in advance)

Sale of refreshments 4970

3 Payments during the year ended 31 October 2008:

$
Purchase of refreshments 3630
Rent and rates 1400
Insurance 300
Sundry expenses 1300

Additional information:

1 November 2007 31 October 2008

$ $
Stock of refreshments 340 290
Balance at bank 740 Dr 790 Dr
All receipts and payments were made through the bank account

REQUIRED

(a) Calculate the accumulated fund at 1 November 2007.

………………………………………………………………………………………………………... .......
..............................................................................................................................
..............................................................................................................................
..................................................................................................................[3]

(b) Prepare the subscriptions account for the year ended 31 October 2008. [5]

Avalon Social Club

Subscriptions account
(c) Calculate the gross profit made on the sale of refreshments[3]

(d)Prepare the income and expenditure account for the year ended 31 October 20

Avalon Social Club

Income and Expenditure Account for the year ended 31 October 2008

(e) Define Accumulated fund . [2]

…………………………………………………………………………………………………………………………………………………………………
(f) Give 2 other type of income in club accounts other than profit [2]
…………………………………………………………………………………………………………………………………..

[Total: 19]