FOUNDATION STUDIES PROGRAMME

FOUNDATION IN COMMERCE


DECEMBER 2013
FINAL EXAMINATION

ACC011/2
ACCOUNTING 2

DURATION: 3 HOURS



DATE: 6 DECEMBER 2013 TIME:

ADDITIONAL REQUIREMENT: NIL

INSTRUCTIONS TO CANDIDATE:

1. Answer ALL FOUR (4) questions in the paper

2. All answers must be written in the answer booklet provided

3. All questions carry equal marks.


DO NOT REMOVE THIS EXAMINATION QUESTION PAPER FROM THE EXAMINATION
HALL






ACC011/2 Dec 2013

2

Question 1

Lan, Dan and Willson have been in partnership for some years sharing profits in the ratio of
3:2:1. On 1
st
January 2013 the firms balance sheet was as follows :-










On 30th June 2013 the partners decided to dissolve their partnership and the following
information is available:
i. Willson took over a Motor van which was valued at RM2,000.
ii. Lan took over some equipment valued at RM4,000.
iii. The remaining assets were realised for the following amounts:-
Plant and machinery RM11,000, Motor cars RM2,000, Office equipment RM400,
Inventory RM24,000.
iv. Amount of RM6,200 was collected from debtors and the amount owing to creditors
were settled in full and discounts received amounted to RM74.
v. Dissolution expense paid amounted to RM800

Required:
(a) Prepare the following accounts
I. Realisation account (9 marks)
II. Partners capital accounts (8 marks)
III. Bank account (6 marks)

(b) What is the rule when one of the partners who have a debit balance in his/her capital
account is not able to pay the amount due? (2 marks)
(Total 25 marks)

Non current Assets RM
Plant and machinery 12,000
Office Equipment 600
Motor Vehicles 3,000
Current Assets
Inventory 21,000
Accounts Receivable 6,400
Bank 3,800
Total Assets 46,800
Current Liabilities
Accounts Payable 2700
Long Term Liabilities
Loan from Lan 5,000
Total Liabilities 7,700
Net assets 39,100

Capital account: Lan 20,000
Dan 10,000
Willson 2,000

Current account: Lan 4,000
Dan 5,000
Willson (1,900)
39,100

ACC011/2 Dec 2013

3

Question 2
Jackson, owns a health food shop and trades mainly on cash terms. He does not keep proper
books of accounts but provides the following information:-

Balances as at 30
th
April 2012 30
th
April 2013
RM RM
Accounts receivable 110 195
Accounts payable 1,320 1,380
Inventory 410 540
Prepaid business rates 50 65
Accrued rent 110 100
Accrued electricity 40 45
Bank 1,430 1,200
Cash 120 110
Delivery van 600
Fixtures 900

There were no disposals during the year. Depreciation is charged on the reducing balance
methods as follows:

Delivery van 25%
Fixtures 10%.

An analysis of bank and cash movements for the year is given below:

Receipts Bank Cash
Cash sales - 17,200
Received from debtors 2410 30
Loan from father 5,000 -
Cash paid into bank 15,600 -
Total 23,010 17,230
Payments
Investment in shares 2,000 -
Wages 2,400 1,000
Drawings 3,000 420
Suppliers 11,100 -
Rent & Rates 1,210 -
General expenses - 220
Fixtures 3,000 -
Telephone 110 -
Electricity 420 -
Cash paid into bank - 15,600
Total 23,240 17,240

Additional information:
1. During the year Jackson took RM 500 worth of stock for personal use
2. A debtor who owed RM15 is unable to pay.

Required:
a. An income statement for the year ended 30
th
April 2013 (15 marks)
b. A statement of Financial Position as at 30
th
April 2013 (10 marks)
[Total 25 marks]
ACC011/2 Dec 2013

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Question 3

The following balances were extracted from the records of Langley PLC as at 31
st
December
2012.

RM
Inventory 1
st
January 2012 240,000
Sales 2,000,000
Purchases 1,140,000
Carriage inwards 9,000
Returns inwards 10,000
Returns outwards 5,000
Discount allowed 12,000
Discount received 14,000
Wages (putting goods into saleable conditions) 90,000
Salaries and wages: Sales and distribution 62,000
Salaries and wages: Administrative staff 74,000
Motor expenses(see note c) 24,000
Rent and business rates (see note d) 28,000
Investment in Shares (market value RM74,000) 100,000
Income from investment in Shares 5,000
General distribution and expenses 13,000
General administrative expenses 7,000
Bad debts 4,000
Interest from government securities 3,000
Haulage cost: distribution 4,000
Loan note interest payable 2,000
Retained profits 31
st
December 2011 98,000
Motor vehicles at cost: Distribution and sales 60,000
Administrative 26,000
Plant and machinery at cost: Distribution and sales 50,000
Administrative 30,000
Production 60,000
Directors remuneration 36,000
Dividends paid 50,000

Notes:
a) The production department put goods bought into a saleable condition.
b) Inventory at 31
st
December 2012 RM 180,000
c) Apportion motor expenses: distribution, administrative
d) Apportioned rent and business rates: distribution 40% , administrative 60%
e) Write RM 26,000 off the value of investments in shares
f) Depreciate motor vehicles 25% on cost and machinery 15% on cost.
g) Accrue auditors remuneration RM 14,000
h) Accrue corporation tax on ordinary activity profit RM 104,000
i) A sum of RM 25,000 is to be transferred to loan note redemption reserve.

You are required to prepare:
i. A detailed income statement for the year ended 31
st
December 2012 for internal
use. (10 marks)
ii. An income statement for the same period for publication. (10 marks)
iii. A statement of changes in equity. (5 marks)
[Total 25 marks]
ACC011/2 Dec 2013

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Question 4

The following is the summarised financial statements for the year ended 31
st
March 2013 of
Blackburn and Greenfield, two companies selling similar goods.

Balance Sheet Blackburn Greenfield
RM RM RM RM
Non-current assets
Building at cost 190,000 200,000
Less: Depreciation to date 60,000 130,000 50,000 150,000

Equipment at cost 90,000 100,000
Less: Depreciation to date 10,000 80,000 30,000 70,000
210,000 220,000

Current assets
Inventory 26,000 52,000
Accounts receivable 28,000 51,000
Bank 5,000 59,000 nil 103,000

Total Assets 269,000 323,000
Current liabilities
Accounts payable 29,000 67,000
Bank overdraft Nil 16,000
Total Liabilities 29,000 83,000
Net Assets 240,000 240,000

Capital and reserves 240,000 240,000


Income Statement
Sales Revenue 330,000 870,000
Less: Cost of goods sold
Opening inventory 32,000 60,000
Add: Purchases 211,000 531,000
243,000 591,000
Less: closing inventory (26,000) 217,000 (52,000) 539,000

Gross profit 113,000 331,000
Less: Expenses
Operating expenses 66,000 284,000

Net profit 47,000 47,000

Required:

a) Calculate the following ratios:

i. Gross profit as a % of revenue
ii. Net profit as a % of revenue
iii. Expenses as a % of revenue
iv. Inventory turnover
v. Rate of return on capital employed
ACC011/2 Dec 2013

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vi. Acid test ratio
vii. Current ratio
viii. Accounts receivable: revenue ratio
ix. Account payable : purchase ratio
(9 marks)
b) Based upon the ratios calculated for the two companies, comment upon the
differences and similarities of the two companies (13 marks).

c) Which company seems to the most efficient? Justify your answer by reference to the
ratios calculated
(3 marks)
[Total 25 marks]





END OF EXAMINATION PAPER




































ACC011/2 Dec 2013

7



MARKING SCHEME & SOLUTIONS

FOR



SUBJECT CODE
SUBJECT TITLE

Suggested Answer ACO11/2
Question 1
1. Realisation account
Plant and machinery 12,000 Discount received 74
Office Equipment 600 Willson- Motor Vech 2,000
Motor Vehicles 3,000 Lan- Eqip 4,000
Inventory 21,000 Bank- Acc Rec 6,200
Accounts Receivable 6,400 Plant 11,000
Bank-Diss expenses 800 Motor Vehicle 2,000
Capital- Off. Mach 400
Lan 2,937 Inventory 24,000
Dan 1,958
Willson 979
49,674 49,674
(9 marks)
2. Capital Account
Lan Dan Willson Lan Dan Wilson
Current - - 1,900 Balance 20,000 10,000 2,000
Realisation-
Motor Vehicle
2,000 Current a/c 4,000 5,000 -
Equipment 4,000 - - Loan 5,000 - -
Bank 27,937 16,958 - Realisation
-profit
2,937 1,958 979
Bank - - 921
31,937 16,958 2,979 31,937 16,958 2,979
(8 marks)
Bank Account
Balance b/d 3,800 Creditors 2626
Relisation- Debtors 6,200 Realisation-
expenses
800
-stock 24,000 Capital-Lan 27,937
Plant 11,000 -Dan 16,958
Motor car 2,000
Office
machinery
400
Capital- Willson 921
48,321 48,321
(6 marks)
ACC011/2 Dec 2013

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3. If a partner has a debit balance in the capital a/c and is unable to contribute cash to clear
the debit balance, the remaining partners must bear the loss by contributing their share in
the ratio of the last capital account balance.
(2 marks)


Question 2
Jackson
Income statement for the year ended 30th April 2013
Sales 19,725
Less cost of sales
Opening inventory 410
Purchase 10660
Closing inventory (540) 10530
Gross profit 9195
Wages 3,400
Rent/rates(1210+100+50-65-110) 1185
Electricity(420+45-40) 425
Telephone 110
General expenses 220
Bad debt 15
Depreciation- Delivery van 150
- Fixtures 390 5895
Net profit 3,300


(15 marks)
Statement of Financial position as at 30
th
April 2013
Non Current Assets
Delivery Van (600-150) 450
Fixtures (3000+900-390) 3,510
3960
Investment in Shares 2,000
Current Assets
Inventory 540
Accounts Receivable ( 195-15 ) 180
Prepayments 65
Bank 1200
110 2095
Total Assets 8055
Current liabilities
Accounts payable 1,380
Accrued expenses(100+45) 145
1525
Long term Liability
Loan 5000
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Total Liability 6525
Net Assets 1,530
Equity
Opening capital 2,150
Add Net Profit 3,300
Less drawings (3420+500) (3,920)
1,530
( 10 marks)
Question 3
i) Internal
Stanley plc.
Income statement for the year ended 31
st
December 2012

RM000 RM000 RM000
Sales 2,000.0
Less: Returns inwards 10.0 1990.0
Less: Cost of sales
Inventory 1/1/11 240.0
Add: purchases 1,140.0
Less Returns outwards 5.0 1,135.0
Carriage inwards 9.0
1,384.0
Less: Inventory 31
st
December 2012 (180.0)
Cost of goods sold 1,204.0
Wages 90.0
Depreciation of plant and machinery 9.0
1,303.0
Gross profit 687.0
Distribution cost
Salaries and wages 62.0
Rent and business rates 11.2
Motor expenses 18.0
General distribution expenses 13.0
Haulage cost 4.0
Depreciation: motor 15.0
Plant and machinery 7.5 130.7

Administration expenses
Salaries and wages 74.0
Rent and business rates 16.8
Motor expenses 6.0
General administrative expenses 7.0
Bad debt 4.0
Discount allowed 12.0
Auditors remuneration 14.0
Directors remuneration 36.0
Depreciation - motor 6.5
-plant 4.5 180.8
311.5
375.5
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Other income-discount received 14.0
Operating profit 389.5
Finance income
Income from investment in shares 5.0
Income from government securities 3.0 8.0
397.5
Finance costs
Amounts written off investments in
shares
26.0
Loan notes interest 2.0 28.0
Profit before tax 369.50
Taxation 104.0
Profit for the year 265.5
( 13 marks)
Statement of change in equity
Profit for the year 265.5
Retained profits brought forward 98.0
363.5
Transfer to loan redemption reserve 25.0
Dividend paid 50.0 75.0
Retained profit for the year 288.5
( 5 marks)
Published
Stanley plc
Income statement for the year ended 31
st
Dec 2012

Sales 1,990
Cost of sales 1,303
Gross profit 687
Distribution costs ( 130.7)
Administration costs ( 180.8)
Other income
Operating profit
14.0
389.5
Income from investment in shares 5.0
Other interests receivable 3.0 8.0
397.5
Amount written off investments 26.0
Interest payable 2.0 28.0
Profit before taxation 369.50
Taxation 104.0
Profit for the year 265.5

(10 marks)
Question 4
a.

Dept Blackburn Greenfield
GP/SALES 113/330=34.24% 331/870=38.05%
NP/SALES 47/330= 14.24% 47/870= 5.4%
EXP/SALES 66/330= 20% 284/870=32.64%
STOCK TUTNOVER 217/29=7.48 x 539/56= 9.63 x
ACC011/2 Dec 2013

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NP/ CAP Emp 47/240= 19.58 % 47/240= 19.58%
ACID TEST 33/29= 1.14:1 52/83= 0.61:1
CURRENT 59/29= 2.03:1 103/83= 1.24:1
ACC RECEIVABLE 28/330* 365= 31 days 51/870* 365= 21.4days
ACC PAYABLE 29/211* 365 =51 days 67/531* 365= 47 days
( 9 marks)
b.
similarities
1.net profit to capital employed
(2 marks)
Differences
1. gp/sales- greenfield achieved a higher %-38% vs 34%
2. np/sales- Blackburn achieved a higher% 14.24% vs only 5.4%
3. exp/sales- Blackburn achieved 20% vs 32%
4. stock turn- Greenfield achieved higher- 9.63 vs 7.48 x
5. Current and Acid Test- Black burn has a higher ratio
6. Acc receivable/payable Greenfield has a better control
(10 marks)
c. Greenfield overhead cost not controlled properly, settling creditors too early, credit period
could be extended.
(4 marks)