Bradford Senior School

Mock Exam Paper 3

TIME 2 hours 30 minutes

INSTRUCTIONS TO CANDIDATES

Answer all questions

Write your answers on the separate answer sheet provided.

If you use more than one sheet of paper, fasten the sheets together.

INFORMATION FOR CANDIDATES

The number of marks is given in brackets [ ] at the end of each question or part question.

All accounting statements are to be presented in good style. Workings should be shown.

You may use a calculator.

The businesses in this question paper are intended to be fictitious.

QUESTION 1

Patel, a sole trader, does not keep proper books of account. He provided the following
information.
1 January 2014 31 December 2014
$ $
Land and buildings at cost 50 000 50 000
Fixtures and fittings at valuation 6 000 4 500
Motor vehicles at net book value 7 600 ?
Trade payables 16 750 14 900
Trade receivables 14 670 13 690
Wages owing 1 200 1 400
Inventory 21 750 22 450
Cash in hand 800 950
Rent in advance 1 000 ?

Summary of Patel’s bank account for the year showed the following.
Receipts $ Payments $
Balance b/d 16 980 Payments to credit suppliers 109 620
Receipts from credit customers 156 420 Wages 22 670
Cash sales 20 700 Rent 19 000
Proceeds from sale of motor vehicle 1 500 Electricity 8 650
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 General expenses 4 750
Purchase of new motor vehicle 16 400
______ Balance c/d 14 510
195 600 195 600

Additional information
1. Before banking his receipts from cash sales Patel took $400 per month for his
personal drawings. All other payments were made from the bank.
2. During the year he took goods costing $2600 for his own use.
3. Patel depreciates his vehicles at 20% per annum using the reducing balance method.
A full year’s depreciation is charged in the year of purchase. No depreciation is
provided in the year of sale.
4. The vehicle sold had a net book value at 1 January 2014 of $2880.
5. A customer has been declared bankrupt and will not pay $750 owing. The amount
was included in the trade receivables at 31 December 2014.
6. In addition Patel has decided to create a provision for doubtful debts of 5%.
7. The rent payable is $16 000 per annum.

REQUIRED
(a) Prepare Patel’s income statement for the year ended 31 December 2014. [15]
(b) Prepare Patel’s statement of financial position at 31 December 2014. [10]

QUESTION 2
Musendo and Pashapa were in partnership, sharing profits and losses in the ratio 2 :1. They
decided to retire and sell their business to Adbel Ltd on 31 December 2017. Their statement
of financial position on that date is shown below.

Musendo and Pashapa Statement of Financial position 31 December 2017

Assets $ $
Property 150 000
Plant and machinery 120 000
Motor vehicles 36 000
Office equipment 15 000
Inventory 82 000
Trade receivables 94 000
Bank 40 000
537 000
Equity and liabilities
Capital accounts: Musendo 200 000
Pashapa 155 000 355 000

12% Loan from Musendo 75 000

Trade payables 107 000
537 000

Adbel Ltd agreed to take over all the assets, except the bank account, based on
the following valuations:
$ 000

2
 Property 300 000
Plant and machinery 90 000
Motor vehicles 27 000
Office equipment 8 000
Inventory 60 000
Trade receivables 75 000
Adbel Ltd took over the trade payables at their book value.
The purchase consideration of $600 000 was settled as follows:

1. Musendo received sufficient 10 % debentures in Adbel Ltd to ensure that he

continued to receive the same amount of interest as he had been entitled to on his
loan to the partnership.

2. Adbel Ltd. paid $120 000 to the partnership bank account.

3. The balance of the purchase price was settled in ordinary shares of $1 each in
Adbel Ltd at a price of $1,30 per share.
The shares were distributed among the partners in the profit sharing ratio and
the final balances on their capital accounts were settled in cash.

(a) Prepare the following accounts to close the books of the partnership:
(i) Realisation account [10]
(ii) Bank account [4]
(iii) Capital accounts in columnar form [10]

QUESTION 3

The Statements of financial position of Power plc showed the following

At 30 April 2011 At 30 April 2010

$000 $000 $000 $000 $000 $000
Non-current asset
Intangible
Patents 125 150

Tangible 3 430 3 173

3 555 3 323
Current assets
Inventory 124 106
Trade receivables 78 82
Cash and cash equivalents 58 -
260 188

Current liabilities
Trade payables 63 56
Taxation 28 24
Interest 4 14
Cash and cash equivalents - 95 42 136
165 52

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 3 720 3 375
Non-current liabilities
10% Debentures 2028 300 ----
3 420 3 375

Equity
Ordinary share of $1 each 2 000 1 000
Share premium 250 1 000
Revaluation reserve ---- 250
Retained earnings 1 170 1 125
3 420 3 375

Additional information

1. The income statement for the year ended 30 April 2011 showed interest payable of
$32 000 and taxation of $28 000. Dividends paid during the year amounted to
$30 000.

2. A bonus issue was made during the year which doubled the number of ordinary shares
in issue. An issue of debentures also took place.

3. At 30 April tangible non-current assets comprised:

2011 2010
$000 $000

Land at valuation 1 600 1 600

Buildings
Cost 1 200 1 200
Accumulated depreciation 168 144
1 032 1 056

Plant and equipment

Cost 1 125 729
Accumulated depreciation 327 212
798 517

4. During the year plant which had cost $92 000 was sold for $20 000. Depreciation of
$75 000 had been provided on plant.

REQUIRED

Prepare a statement of cash flows in accordance with the provisions of IAS 7 for the year
ended 30 April 2011. [25]

4
 QUESTION 4

Hunter Limited is preparing its master budget for 2018. Relevant data pertaining to its sales,
production and purchases budgets are given below.

1. Sales for the year are expected to total 210 000 units. Quarterly sales are expected to
be 15 %, 25 %, 35 % and 25 % of total sales respectively.
The unit selling price will be $70 for the first three quarters and $75 starting in the
fourth quarter.

Sales in the first quarter of 2019 are expected to be 10 % higher than the budgeted
sales volume for the first quarter of 2018.

2. Closing inventory of finished goods is maintained at 20 % of the next quarter’s

budgeted sales volume.

3. Each unit requires 2 kilograms of raw materials at a cost of $15 per kilogram.
Management desires to maintain raw materials inventory at 10 % of the next quarter’s
production requirements.

Assume the production requirements for the first quarter of 2019 are 115 000 kilograms.

(a) Define a master budget. [2]

(b) For each quarter of 2018, prepare:
(i) The sales budget, stating the units and revenue. [6]
(ii) The production budget, stating the units. [8]
(iii) The purchases budget, stating the kilograms and cost. [10]