Fundamentals Of Accounting - Accounting and Finance Assignment Help

Assignment Task

Question 1. Below is the trial balance of Onno’s Office Supplies at 31 December 20X1.

Onno's Office Supplies

Trial balance at 31 December 20X1                                            £                                       £

Trading account:

Sales                                                                                                                                  365,000

Opening inventory                                                                       30,000

Purchases                                                                                    225,000

Other revenue and expenses:

Equipment rental income                                                                                                  1,500

Rent                                                                                                11,000

Heating and lighting                                                                       3,000

Advertising expense                                                                       2,700

Wages                                                                                               8,200

Motor expenses                                                                              4,500

Discounts allowed                                                                           2,200

Balance sheet accounts:

Motor vehicle at cost                                                                   80,000

Motor vehicle - accumulated

depreciation                                                                                                                         20,000

Equipment at cost                                                                        40,000

Equipment - accumulated depreciation                                                                          12,000

Receivables                                                                                    39,500

Allowance for receivables                                                                                                    2,500

Bank                                                                                                20,300

VAT liability                                                                                                                          18,200

Payables                                                                                                                                26,500

Loan                                                                                                                                       20,000

Capital                                                                                                                                   35,000

Drawings                                                                                       34,300                                       

                                                                                                      500,700                         500,700

 

The following information is relevant for the end-of-period adjustments.

1. The closing inventory at 31 December 20X1 is valued at £30,250.

2. The equipment rental income includes £500 that has been received in advance.

3. Depreciation on the motor vehicle is provided at 25% per annum on the reducing balance method.

4. Depreciation on the equipment is provided at 10% per annum on the straight line basis, assuming no residual value.

5. Onno estimates that £2,280 due from customers will be irrecoverable and must be written off.

6. The allowance for receivables is to be set at 7% of net receivables at 31 December 20X1.

7. Rent includes a prepayment of £1,000.

8. Advertising expense includes a prepayment of £200.

9. The heating bill will arrive on 8 January and about £650 is expected to relate to the period until 31 December.

10. The long-term loan is repayable in 10 years’ time. Interest payable on the loan is 9% and will be paid once per year

Required:

(a) Prepare the income statement for Onno’s Office Supplies for the year ended 31 December 20X1.

(b) Prepare the balance sheet for Onno’s Office Supplies as at 31 December 20X1.

Remember to show the appropriate workings

 

Question 2

 (a) Compare bookkeeping and accounting in terms of:

· purpose

· activities

(b) Define carriage inwards and carriage outwards, and explain how to account for them in the income statement.

 (c) Name the four day books in a manual accounting system and describe the purpose of each individual day book as well as the two general purposes of all day books.

(d) Judy is a professional accountant who has recently made a habit of agreeing a quote with a client for an agreed amount of work, and then invoicing the client with an inflated figure after the work is completed.

Required:

(i) State the two fundamental principles of professional accounting ethics that have been violated by Judy.

(ii) Explain the meaning of each of the two principles.

(iii) Explain why each of the two principles has been violated in the above scenario.

 

Question 3     (a) .  Set out below is Carmen’s balance sheet for her business at 30 September 20X6.   

Assets                                                                               £                                                £

Non-current assets                                                                                            Net Book Value

                                                                                                                                     140,000

Current assets:

Inventory                                                                     32,000

Receivables                                                                 58,000

Bank                                                                             68,500

                                                                                                                                       158,500

                                                                                                                                       298,500

Capital and liabilities

Capital:

Opening capital                                                         200,000

Less: Drawings                                                           68,700

Profit for the year                                                     113,450

Total capital                                                                                                                 244,750

Liabilities:

Non-current liabilities:

Bank loan                                                                    50,000

Current liabilities:

Interest payable                                                          3,750

Total current liabilities                                               3,750

Total liabilities                                                                                                               53,750

Total capital and liabilities                                                                                        298,500

    

The following sales, purchases and expenses are expected during the next 3 months.

                                                  Sales                           Purchases                                   Expenses

                                                     £                                        £                                                £

October                                102,000                             67,500                                       27,500

November                           144,000                             107,400                                     28,300

December                           212,000                              171,000                                     29,700

 

The sales and purchases figures above are before deduction of discounts. 50% of sales are on credit, with payment after 1 month. 50% of sales are for cash, with a discount of 3?ing given.

Payment for purchases is made in the month of purchase, to benefit from a 4% settlement discount.

The expenses figures include depreciation of £1,700 per month: the remaining expenses are all paid for in the month in which they are charged.

Loan interest for the whole year is payable at the end of December. Such loan interest includes the relevant accrual in the balance sheet at 30 September 20X6 as well as a further £1,250.

Required:

(a) Prepare the monthly cash budget for each of the next three months i.e. October to December 20X6.

(b) Explain what is meant by a ‘direct cost’. By means of appropriate examples, explain how such a cost can be fixed or variable.

(c) Outline four significant differences between strategic and tactical planning.

(d) What is the ‘controllability principle’? Explain the difficultly of applying such a principle in practice.

 

Question 4

(a) In a week’s production in a small factory, 80 hours of direct labour were used at £50 per hour. The relevant direct materials cost were £10,000 and the relevant conversion costs were £18,000. What were the relevant manufacturing overheads?

(b) The unit selling price and cost structure of a product based on producing 3,000 units is shown below:

Selling price                                                                                                                          £12

Variable cost per unit                                                                                                         £8

Fixed overheads per unit                                                                                                   £5

What would be the new total unit cost of production if the fixed overheads increased by £3,000?

(c) Raj is a builder who recently received an enquiry from a customer to provide a quote for a building job. Raj allocates all overheads using direct labour hours and charges a mark-up of 60% on all jobs. The annual overheads are £80,000. The annual estimated labour hours worked are 2,000. The labour cost is £20 per hour. The estimated requirements for this job are as follows:

Direct materials                                                                                                    £15,500

Direct labour hours                                                                                                      250

Required:

Calculate the estimated price notified to the customer.

(d) Futuretech Ltd is a manufacturer of specialist parts for jet engines. The company has been offered a contract to supply 4,000 units of Component ZX. Each unit requires 1 kilogram (kg) of material Alpha and 1 kg of material Bravo. 1 kg of material Alpha currently costs £1 to purchase and 1 kg of material Bravo currently costs £3 to purchase.

The company has 2,000 kg of material Alpha available. It can’t put the material to any other economic use. The material cost £800.

The company currently has 4,000 kg of material Bravo. The company will have to make a choice as to whether to use it for this contract or for components for existing customers. You have calculated that if the material is used for components for existing customers, Bravo will make a contribution of £2 per kg.

Required:

Based on the information above, calculate the total relevant cost of the material needed for 4,000 units of Component ZX for Futuretech Ltd.

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