Name

Date
Full marks
Percentage
Grade

Question number Full marks Marks obtained

1. 52
2. 52
3. 52
4. 52
Total marks 156

Grade A B C D E
Lowest mark for award of grade 80 75 65 55 50

ANSWER ANY THREE QUESTIONS.

TEACHERS COMMENTS:

Parent’s feedback:
 P age |2

1. Saima ltd manufactures and retails two products: sports bags and gold bags.
The following balances were extracted from the books on 31st December 2007.
£
Stock at 1 January 2007
Raw materials 500000
Work in progress:
Sports bags 9500
Golf bags 33000
Finished goods:
Sports bags 15000
Golf bags 9600
Purchases of raw materials 225000
Production wages 180000
Management salaries 98000
Administration salaries 76500
Rent and insurance 105000
Light and power 56000
Marketing 50000
Plant and machinery at cost 400000
Provision for depreciation for plant and machinery 100000
Office fixtures at cost 78000
Office fixtures provision for depreciation 35100
Sales
Sports bag 480000
Gold bag 350000

Additional information:
i.
Stock at 31 December 2007
Raw materials £55000
Work in progress:
Sports bags £43500
Golf bags £26000
Finished goods:
Sports bags £26500
Golf bags £18200

ii. Raw materials records show that £100000 of raw materials was used for the
production of sports bags and the remainder of raw materials was used in the
manufacture of golf bags
iii. Production workers work 40 hours per week for 50 weeks per year. There 10
production workers producing the sports bag being paid £5 per hour; and 10
production workers producing the golf bags being paid £4 per bag.
iv. During the year, 20000 sports bags and 8000 golf bags were manufactured and
transferred to the finished goods warehouse.
v. During the year 1800 sports bags and 7000 golf bags were sold by Saima Ltd

ACCOUNTING TEST #4
 P age |3

vi. Depreciation is charged on plant and equipment at the rate of 25% using the
diminishing balance method, and on the office fixtures at the rate of 15% on cost
using the straight line method.
vii. All the factory overheads are to be apportioned between the sports bags and the
golf bags using the most appropriate basis from the information detailed below:
Sports bags Golf bags Administration
Floor area (sq m) 600 400 500
Power usage (kwh) 1500 2500 3000
Plant & equipment (value£) 240000 160000
Number of employees 10 10 8

Required:
a. Prepare for the year ended 31 December 2007, the:
i. Manufacturing account (columnar format) showing the prime cost
and production cost of manufacturing sports bags and golf bags.
ii. Trading profit and loss account, showing the gross profit for the both
the sports bags and golf bags and the total net profit for the business.
(32)
b. Saima Ltd has been experiencing difficulties in selling both the sports bags
and the golf bags due to increased competition. An overseas supplier has
offered to supply Saima Ltd with the sports bag for £15 and golf bag for £30.
Calculate the effect on net profit of Saima Ltd if the offer was accepted and
the production bags ceased. (4)
c. Discuss the financial and non-financial factors involved in the offer of the
overseas supplier. (8)
d. You are informed that the trade average for the industry is:
Mark up:
Net profit as a percentage of sales:
Rate of stock turn over
Evaluate the performance of Saima Ltd (8)

ACCOUNTING TEST #4
 P age |4

2. John and Kyle were partners in retail business. The partnership agreement stated that
profits and losses were shared equally after allowing interest on capital at the rate of 4%
per annum.
On 1st January 2005, Saima was admitted into the partnership. The following agreement
was made:
Goodwill would be valued at £35000 on 31 December 2004. Goodwill would not remain in
the books of the business.
Saima would bring the following assets into the new partnership as capital:
! Delivery Van £4800
! Stock £6500
! Bank transfer £13700
John would withdraw £10000 of his capital, by cheque on 1 January 2005.
Profits and losses would be shared in the ratio John one fifth, Kyle two fifths and Saima
two fifths.
Saima would take no active part in the business. Kyle would work in the business for 50%
of the time.
The following balances were extracted from the books at 31 December 2004.
£
John:
Capital account 10000
Current account 1 July 2004 460 DR
Drawings 7000
Kyle:
Capital account 15000
Current account 1 July 2004 1300 CR
Drawings 6500
Net profit for the 6 months to 31 December 2004 13600
Lease hold premises 60000
Accrued expenses 830
Prepaid expenses 150
Debtors 1750
Fixtures and fittings at book value 8000
Bank overdraft 2500
Creditors 8950
Mortgage on premises 45000
Cash 970
Stock 12350
Required:
a. Prepare the following:
I. The appropriation account for the six months to 31 December 2004.(5)
II. The current account of John and Kyle for the six months to 31
December 2004. (5)
III. The capital accounts of John, Kyle and Saima as at 1 January 2005. (10)
IV. The balance sheet of the partnership as at 1 January 2005, after all the
adjustments in the capital accounts have been made. (20)
b. Distinguish between fixed and floating capital accounts (6)
c. Evaluate the decision of the partnership to admit a new partner. (6)

ACCOUNTING TEST #4
 P age |5

3. Huzaifa is a sole trader buying and selling on cash and credit. When he commenced
business he decided not to keep formal set of account and all bank transactions are
recorded in his personal bank account.
Huzaifa is now required to file his profit with the government and seeks your help to
prepare the return.
In discussion with Huzaifa the following information is available:
i. On 1st January 2007 assets and liabilities were as follows:
Stock £18600
Motor van for business use £5900
Debtors £1520
Creditors £810

ii. Payments had been received during the year, by cheque, £14000 for credit sales
and a further £1200 was owed by debtors on 31st December 2007.
iii. Huzaifa had banked all £13000 from cash sales after he had paid for the following
cash expenses: petrol and repairs for the motor van £920, a part time assistant
£2400 and personal drawings £9000.
iv. Credit purchases of £21000 were paid by cheque during the year and were paid
for during the year and £900 was owed to creditors on 31st December 2007.
v. The motor van was valued at £4800 at 31st December 2007.
vi. The mark up on goods is 50%.
vii. On 28 December 2007, Huzaifa’s storage was broken into and goods were stolen.
On 31 December 2007, carried out a stock take of the goods remaining and valued
the stock at £12240. Huzaifa will make an insurance claim for the stolen goods.
Required:
a. Calculate for the year ended 31 December 2007, the value of:
i. Sales
ii. Purchases (15)
b. Prepare for the year ended 31 December 2007:
i. Trading account
ii. The profit and loss account
iii. Calculation of the stock stolen. (22)
c. Identify and explain which accounting concept has been broken by Huzaifa’s
failure to maintain a separate bank account for the business. (5)
d. Evaluate the decision of not maintaining proper set of accounts. (4)
e. Huzaifa depreciates his assets by revaluation method. What other methods
are available to him for depreciating his assets. (6)

ACCOUNTING TEST #4
 P age |6

4. Saima is a sole trader selling satellite navigation unit for cars. Saima has not kept a full set
of double entry accounts.
Additional information for the year ended 30th April 2008.
i. Most of the sales have been in cash. Where sales have been made on credit, these
have been invoiced to customers.
ii. On 1st may 2007, Saima had a stock of 80 satellite navigation units in her shop
which had cost £100 each. During the year she purchased stocks of Navigation
units on 1 May, 1 August, 1 November and 1 February on credit. Saima calculates
her closing stock on the Last in First out basis. The following information is
available.
Purchases Sales in units
1 may to 31st July 90 units@ £110 120
1st august to 31st October 270 units @ £120 150
st st
1 November to 31 January 150 units @ £130 180
1st February to 30th April 120 units @ £140 150

iii. Sales are made at the rate of £200 per satellite navigation unit sold.
iv. During the year Saima was given a £1200 discount for prompt payment.
v. The following payments were made in cash in each of the 52 weeks of the year
from the cash till.
£
Rent of shop 100
Sales assistants wages 250 plus bonus of 2% of sales
Drawings 80

vi. After deducting cash expenditure in (v) above, all cash takings had been paid into
the bank. The following analysis of the bank account is available:
£
Receipts
Cash sales 75000
Credit sales banked 19640
Payments
Telephone and internet 890
Electricity 315
Sundry expenses 3720
Suppliers of goods 69850
Shop fixtures 900

vii. Other assets and liabilities were valued as follows:

1st May 2007 30th April 2008
£ £
Shop fixtures 11000 10500
Telephone and internet due 130 210
Electricity prepaid 80 95
Sundry expense dues 450 630
Sundry expenses prepaid - 160
Trade debtors 3400 ?
Trade creditors 5350 ?

ACCOUNTING TEST #4
 P age |7

Required:
a. Distinguish between perpetual and period stock valuation. (8)
b. Saima is considering shifting to FIFO method. Explain the impact on net
profit. (6)
c. Calculate the value of closing stock at 30th April 2008 using the Last in first
out perpetual method (12)
d. Prepare for Saima the trading profit and loss account for the year ended 30th
April 2008. (18).
e. Calculate at 30th April 2008 the value of the:
i. Trade debtors
ii. Trade creditors (8)

ACCOUNTING TEST #4