1.

Bits and Pieces Ltd runs a hard ware store supplying items to the wholesale trade. The
companys trial balance at 30 April 2016 before any final adjustments have been made is
as follows:

Shop Fittings: cost

Provision for depreciation at 1 May 2015
Delivery vans: cost
Provision for depreciation at 1 May 2015
Inventory at 1 May 2015 at cost
Trade receivables
Provision for doubtful debts at 1 May 2015
Other receivables at 1 May 2015
Bank balance
Trade payables
12% Debentures
Ordinary share capital of $0.50 each)
Retained profit at 1 May 2015
Revenue
Purchases
Wages and salaries
Insurance
Rent
Electricity
Other operating expenses
Interim dividend paid

$
100 000

$
24 000

65 000
23 000
74 820
91 250
2 750
3 200
7 380
38 430
50 000
70 000
21 250
965 920
643 000
39 500
48 000
21 600
11 800
84 200
5 600
1195 350

1195 350

Additional information:

Depreciation is to be provided at the following rates:

Shop fittings
Delivery van

10 per cent per year on cost

20 per cent per year using the reducing balance method

Inventory was counted at the close of business on 30 April 2016 and was valued at
cost $71 220. This figure included $1 580 for some damaged inventory, which would
normally be sold for $3 250. They were sold in a clearance sale in May for $1 200.

A customer notified the company on 26 April that he was returning inventory of the
wrong specification for which he had been invoiced $5 200. The returned goods were
received into the shop on 2 May on which date the return was recorded in the
accounting records. The goods cost Bits and Pieces Ltd $2 580 and were retuned in
goods condition.

Bad debts of $2 700 are to be written off, and the provision for doubtful debts is to be
increased to $3 450.

The figure for other receivables in the trial balance is in respect of two months rent
paid in advance. As from 1 January 2016 the companys rent increased to $24 000
per year, payable quarterly in advance.

An invoice received from a supplier for $5 300 was entered in the accounting records
at $3 500 in error, and this sum was paid to the supplier.

At year end a right issue was made of one share for every four shares held at a
premium of $0.25 per share. Following the rights issue a bonus issue was made of
one share for every five shares held.

Corporation tax on the profit for the year to 30 April 2016 is estimated to be $24 000.

The directors paid the dividend for the year ended 30 April 2015 of $0.08 per share
on 31 July 2015.

Required:
(a) An Income statement for Bits and Pieces Ltd for the year ended 30 April 2016.
[12]
(b) Prepare a statement of changes in equity for the year ended 30 April 2016.
[8]
(c) Prepare a statement of financial position for the year ended 30 April 2016.
[10]

[Total marks 30]

2.

The Sales Ledger Control Account of Brodsworth showed a debit balance of $78 784 on
31 January 2016. On that date, the list of balances extracted from the Sales Ledger had
a net total of $79 200 debit.
The auditors discovered the following errors:
(1) An invoice for $60 recorded in the Sales Day Book had not been posted to the
customers account in the Sales Ledger.
(2) A page in the Sales Day Book had been under-added by $1 000.
(3) A sales invoice for $926 had been completely omitted from the books.
(4) A debit balance of $300 in the list of Sales Ledger balances had been wrongly listed
as a credit balance.
(5) Contras of $400 had been correctly recorded in the Purchase Ledger and Sales
Ledger Accounts but no entries had been made in either Control Account.
(6) The discount allowed column in the Cash Book had been over-added by $26.
(7) A cheque for $1 500 received from a customer had been entered in the customers
account as $1 050.
Required:
(a) Prepare Journal entries (without narratives) showing the corrections necessary to the
double entry records.
[4]
(b) Calculate:
(i) The corrected Sales Ledger Control Account balance
(ii) The corrected net total of the balances extracted from the Sales Ledger
[8]
(c) Calculate the change to Brodsworths net profit as a result of the auditors
discoveries.
[3]
[Total marks 15]

3.

Oak manufactures and sells three products: Theta, Bota and Kappa. The following
information is available for the year ended 31 December 2015 (on a per unit basis):
Inventory
Items

Theta
Bota
Kappa

Units

9 750
12 080
7 110

Costs
Incurred
$

Cost to
Complete
$

Sales Price
$

Costs to
Sell
$

3.15
4.75
2.00

2.75
1.6
Nil

7.85
5.75
6.55

0.90
0.75
2.25

Required:
(a) Briefly explain the following terms as they relate to inventory valuation in the financial
statements:

Cost
Net realisable value (NRV)
First in - first out (FIFO)
Weighted average cost (AVCO).
[8]

(b) Calculate the total value of inventory for inclusion in the financial statements of Oak
as at 31 December 2015.
[7]
[Total marks 15]

4.

The following is a list of unit for a single product, incurrent in a period, using either marginal
costing or absorption costing:

Marginal
costing
$

Absorption
costing
$

Production costs:
Prime cost
Variable overhead
Fixed overhead

4.20
0.60
-

4.20
0.60
3.80

Selling & administration costs:

Variable overhead
Fixed overhead
Total

1.00
5.80

1.00
2.90
12.50

The selling price of the product, through the period, was $14.50 per unit.11400 units of
the product were manufactured in the period during which 11200 units were sold. There
were no finished goods at the beginning of the period. Normal production level is 11300
units.
Required:
(a) Prepare absorption and marginal costing profit statements for the period.
[18]
(b) Calculate for the period
(i) Break even in units and in sales revenue.
(iI) Margin of safety in units and in percentage.

[8]

(c) Explain why the net profit using absorption costing differs from that using marginal
costing.
[4]
[Total marks 30]