ZIMBABWE SCHOOL EXAMINATIONS COUNCIL General Certificate of Education Advanced Level ACCOUNTING 6001/3 PAPER 3 Problem Solving NOVEMBER 2018 SESSION 2 hours 30 minutes Additional materials: ‘Answer paper TIME 2 hours 30 minutes INSTRUCTIONS TO CANDIDATES Write your name, Centre number and candidate number in the spaces provided on the answer paper/answer booklet Answer all questions. Write your answers on the separate answer paper provided. Ifyou 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. This question paper consists of 7 printed pages and 1 blank pay Copyright: Zimbabwe School Examinations Council, N2018. OZIMSEC N2018 (Turn over ) ee2 Answer all questions, 1. The following is the draft statement of financial position of Stamford, a sole trader, at 30 April 2015, Statement of Financial Position at 30 April 2015 ‘Non current assets s $s Building at valuation 150 000 Equipment at book value 270 000 Motor vehicle at book value 165 000 585 000 Current assets Inventory 35.000 Trade receivables 9500 Other receivables 1000 Cash and cash equivalents 2.000 Capital and liabilities Capital 1 May 2014 500 000 Add Profit for the year 40 000 540 000 Less Drawings 37.500 Capital 30 April 2015 502 500 Non-current liabiliti 4% loan 100 000 Current liabilities Trade payables 28 500 Other payables 1500} — 30.000 932.500 Additional information After the preparation of the draft statement of Financial Position, the following errors were discovered 1, Inventory at 30 April 2015 includes goods costing $7 500 which were found to be damaged. The estimated net realisable value is $4 000, 2. Accrued loan interest had been omitted from the other payables amount. 3. No provision for depreciation on equipment had been made for the year. Depreciation should have been provided at 5% per annum using the reducing balance method. 4, During the year vehicle repairs of $10 000 had been incorrectly debited to the motor vehicles account. Motor vehicles were depreciated at 10% per annum. 5S. On28 April 2015 a customer who owed $1 800 was declared bankrupt. It was decided to write off this account in full. No record of this had been made in the accounts. 6001s 2018@) (b) © @ & wo Prepare a statement to show the corrected profit for the year ended 30 April 2015.6] Prepare the corrected statement of financial position as at 30 April 2015. @ Distinguish between cost and net realisable value of inventories. (ii) Explain how the prudence concept was applied in your treatment of damaged inventory in item (I) above, Using your corrected statement of financial position, calculate the following ratios to two decimal places, 10) Current ratio (ii) Acid test ratio State four ways in which Stamford could improve his working capital. Explain why the acid test ratio is a more reliable indicator of liquidity than the current ratio. ‘600123 N2018 7 Q] B) al a (4) 0) (Turn over4 2 The Sunrise sports club's bank account for the year ended 30 September 2015 was as follows: s Balance at | October 2014 16 800 | Purchases for shop 7490 Subscriptions received 15 690 | Shop wages 8000 Donations 1 200 | General expenses 3.000 Gate fees 6 $00 | Cost of annual dance 1300 Grant from local council 6.000 | Transfer to deposit account 20000 Annual dance receipts 1.400 | New equipment 10.000 Shop takings 14336 | Rent 16.000 Balance at 30 September 2015 4.064 65.990 In addition to an annual membership subseription, members pay $0,50 cach time they visit the club: This is referred to as gate fees The annual membership subscription was $50 until 30 September 2015, when it was raised to $55 There were 300 members at 1 October 2014. AL that date 20 of them had not paid their subscriptions for the year ended 30 September 2014 and 1 had already paid their subscriptions for the year ended 30 September 2015. By 30 September 2015, all members had paid their subscriptions due and some had paid in advance for the year ending 30 September 2016, but the treasurer had not yet calculated their number. Other balances were as follows: 30 September | 30 September 2014 2015 $ s Shop inventory 1700 Creditors for shop 1260 Deposit account 35.000 Equipment at cost 10000 The equipment at 30 September 2014 had been depreciated by $1 400 per annum for the past 5 years. The new equipment is to be depreciated at the same annual percentage rate ‘The grant from the local council was the first instalment of an annual grant of $10 000, Interest of $800 is due on the deposit account for the year ended 30 September 2015. AL30 September 2015 general expenses of $65 were due and unpaid (a) Calculate the accumulated fund at 1 October 2014. GB) (b) For the year ended 30 September 2015, prepare (the shop trading account, (6) (ii) the subscription account, 4) 0019 2014s (lit) the income and expenditure account, 9) (©) Calculate the number of members who had paid the ip ended 30 Septet 24 nembes Who had pad ther subscriptions for the year i (@) Explain how donations are accounted for by clubs, Q) 3 The Statement of Financial Position of Dennis Lid at 31 March 2017 was as follows, Non-current assets ‘Current assets Inventory Trade receivables Equity and liabilities Share capital and reserves Ordinary shares of $1 each fully paid Retained profit Non-current liabilities 8% debentures (2026) Current liabilities Trade payables Cash and cash equivalents Dennis Ltd acquired the partnership of Amon and Benny before the start of business on 1 April 2017. The partners shared profits and losses in the ratio of 3:2 respectively The statement of financial position of Amon and Benny at | April 2017 was as follows: s $ Non-current assets Goodwill 74 000 Property, plant and equipment 200.000] 274 000 Current assets Inventory 80.000 Accounts receivable 68 000 Cash and cash equivalents 32.000 | 180.000 454.000 Capital: Amon 243 600 Benny 162.400 Current liabil Accounts payable 6001 N2018 [Turn over6 Dennis Ltd took over the assets at the following valuations: $ Property, plant and equipment 160 000 Inventory 72.000 Accounts receivable At book value The company also took responsibility for the settlement of creditors of Amon and Benny Amon and Benny retained the bank balance, The purchase consideration was $600 000 made up as follows: (i) 320000 ordinary shares of $1 each in Dennis (i) $80 000 in 8% debentures at par. (ii) $40.000 in cash. The shares in Dennis Ltd were distributed in profit sharing ratios. The debentures were shared equally between the partners. (a) Prepare capital accounts to show the entries necessary to close the books of accounts of Amon and Benny. m7 Additional information In order to finance the acquisition of the partnership, a rights issue of one new ordinary share for every five was made to the original shareholders of Dennis Ltd at a price of $2,50 per share. The issue was completed successfully on 31 March 2017. The issue expenses amounted to $60 000. (b) Prepare the statement of financial position of Dennis Ltd on | April 2017 after the rights issue and acquisition of the partnership of Amon and Benny. [14] (©) Explain two advantages that a company hopes to gain by raising additional capital through a rights issue 14) ont 60487 4 A manufacturing company has three production departments and a service department. Departmental statistics for six months ending 31 December 2017 are as follows: Moulding | Assembly | Paint shop | Stores Area in square metres 7.000 8.000 3.000 2.000 Machinery at cost $65.000 | $45000 | $30.000 Number of workers 30 40 20 10 Number of orders from stores 600 500 400 Budgeted overheads for six months to 31 December 2015. Rent Lighting and heating Insurance of premises Canteen costs Machinery is to be depreciated at 30% per annum on cost. All workers will work 35 hours per week and there will be 24 working weeks in the six months to 31 December 2017, Actual results for the moulding department for the six months were as follows: Actual overheads $79 228 Actual hours 26 300 (a) Prepare a table to show the apportionment of overheads for the six months to 31 December 2017, clearly showing the re-apportionment of service department overheads to the production departments. Us} (b) Calculate to two decimal places the hourly overhead rate for each production department, (6) (©) (i) Calculate the amount of under or over absorption of overheads in the moulding department 2) (ii) Explain how the under or over absorption calculated above might have arisen Q) 6001/3 N2018