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Nov 2012 paper 33 1 B

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D C B B C

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C A C

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Realisation 50 Bank (Non CA) 65 25 Bank (CA) 23 14 Current Liabilities 18 1 16 106 106 The bank account is closed to the capital as the final closing entry of the business so is not included in the realisation. Non-Current Assets Disposal Balance 160 Disposal 50 NCA 50 Acc Dep 30 Balance 110 Profit 10 Bank 30 160 160 60 60 Old New Change X 8 6 Cr 2 Y 4 4 Z 2 Dr 2 Dividend increases (more shares to pay dividends on) Interest decreases (less borrowings to pay interest on) Gearing decreases (less borrowings) Bonus shares can be issued from any reserve (capital or revenue reserve). Ordinary shares can be issued as repayment of debentures but bonus shares can not. Share capital increases (more shares on issue). Shareholders funds do not change (bonus shares are issued from a reserve *already part of shareholders funds+). (100 60) + (400 x.05) = $60 000. Non-redeemable preference shares are part of issued capital. Bonus issue increases shares (12 + 12/4) = 15 000 shares but no change to bank. Rights issue 15 / 2 x 1.60 = $12 000 into bank account. journal entry to record purchase: Assets 110 Goodwill 10 Issued Capital 80 Share Premium 40 journal entry to record purchase: Assets 230 Goodwill 20 Issued Capital 80 Share Premium 80 Debenture 50 Bank 40 Net current assets = CA CL CA = Inventory (95) + 3 month deposit (125) CL = Bank overdraft (17) + 1/5 of loan (20) + payables (54) CA CL = 220 91 = 129 000 Both the loan and half the debentures will be repaid in the next period so are considered current liabilities. 300 + 80 -16 +12 10 = $366 Profit increases equity. Dividends (paid) decrease equity. A proposed dividend has not (yet) reduced equity. A transfer to a reserve is one form of equity swapped for another. Working capital cycle = Rec t/over + Inv t/over Payables T/over. The inventory turnover has to be converted to days (from times). 365 / 11 times = 33.18 days. So WC cycle = 26 + 33 34 = 25 days Non-current Assets Current Assets Bank (CL) Bank (Dis. Costs) Profit (50:50 split)

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D D

Interest cover = number of times profit available to pay interest (i.e. operating profit / interest) = 200 / 40 = 5 times. Dividend cover = number time profit available to pay ord dividend (i.e. After tax profit pref div / Ord div) = (125 25) / 50 Paying creditors more quickly will increase working capital cycle . A C all change the amount of working capital. CIE mark scheme gives the answer as B. Link below goes to IAS 37 as published look at Key definitions [IAS 37.10] and D must be the correct answer. http://www.iasplus.com/en/standards/ias/ias37
Quote from examiners report also supports D as correct answer This was a knowledge based question. IAS37 defines a provision as a liability of uncertain timing, which was the wording of the key.

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C B C D B

Equivalent units for labour / overheads = 200 x 50% complete + 1800 = 1900.

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C A

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A D

DM = 4000/$8 = 500 kgs material used. 50 normal loss so 450 completed. The Payables increases to $140 and an extra month is taken to repay so the company gets a cash saving of ($40K extra credit purchases + $140K not paid out this month) $180K DL variable 3400/1000 = 6800/2000 = $3.40 per unit. DM variable 17000/1000 = 34000/2000 =$17 per unit. O/heads are mixed (16000/1000 20000 / 2000). Variable component = (20 16) /( 2 1) = $4/ unit Fixed component = 16 ($4 x 1000) = $12 000. 1600 units would cost (3.4+17+4) x 1600 + 12000 = 51040 If fixed costs were as budgeted and actual total cost was $50K over budget then : $450k (actual total cost) - $50k (over budget) - $100 (fixed cost) = budgeted variable cost $300 000. If actual production = budgeted production $300k / 245000 units = $1.2244 SP x SQ $5 x (5 x 92) = 2300 SP x AQ $5 x (X) = 2400 due to $100 adverse variance. So X = 2400 / $5 = 480kg SP of materials = 120 / 60 = $2 per kilo. Standard quantity = 60 / 30 = 2 kilo per unit. SP x SQ = $2 x (2 x 28) = 112 000 SP x AQ = $2 x (57) = 114 000 = $2000 A volume variance AP x AQ = (given) = 136 800 = $22 800 A price Less skilled labour takes more time to complete tasks, decreasing labour efficiency. SP x SQ = $6 x X = $18 000 SP x AQ = $6 x 8000 = $48 000 gives efficiency variance of $30 000 A Therefore 3000 hours were standard for this. B, C and D consider cash flows only. ARR considers profit. Year 1 will realise cash flow of (120 + 15) 135 000 as will year 2. Leaves $30 000 to payback in year 3.