Questions and Answers of ISE Business Accounting

Greatsound Ltd manufactures and sells compact disc players, the cost of which is made up as follows:The current selling price is \(£ 187\).Greatsound Ltd works a day shift only, at present producing
(a) What is meant by the terms contribution and marginal cost?(b) Barton \& Co Ltd make and sell 2,000 units per month of a product 'Barco'. The selling price is \(£ 65\) per unit, and unit costs
Arncliffe Limited manufactures two types of product marketed under the brand names of 'Crowns' and 'Kings'. All the company's production is sold to a large firm of wholesalers.Arncliffe is in
A Reed Ltd manufactures three products A, B and C. Budgeted costs and selling prices for the three months ending 30 September \(19 \mathrm{X} 2\) are as follows:Labour costs are \(£ 3\) per hour,
Paul Wagtail started a small manufacturing business on 1 May 19 X8. He has kept his records on the double entry system, and has drawn up a trial balance at 30 April 19 X9 before attempting to prepare
The figures given below are all that could be salvaged from the records after a recent fire in the offices of Firelighters Limited. The company manufactures a single product, has no raw materials
A Gainford Ltd is a manufacturing company which produces three specialist products - A, B and C. For costing purposes the company's financial year is divided into thirteen periods of four weeks.
A Vale Manufacturing started in business on 1 April 19X3 and incurred the following costs during its first three years.Sales during the first three years were all at \(£ 20\) per
Glasses Ltd make four different products, \(Q, R, S\) and \(T\). They have ascertained the cost of direct materials and direct labour and the variable overhead for each unit of product. An attempt is
A Bottles Ltd makes six different products, F, G, H, I, J and K. An analysis of costs ascertains the following:Fixed costs of \(£ 11,400\) are allocated per unit as \(\mathrm{F} £ 4 ; \mathrm{G} £
Analyse the following costs between:(i) Direct materials(ii) Direct labour(iii) Factory indirect expenses(iv) Administration expenses(v) Selling and distribution expenses(vi) Finance expenses(a)
A Analyse the following costs between(i) Direct materials(ii) Direct labour(iii) Factory indirect expenses(iv) Administration expenses(v) Selling and distribution expenses(vi) Finance expenses(a)
A From the following information work out:(a) Prime cost(b) Production cost(c) Total cost Wages and salaries of employees: In factory (60 per cent is directly concerned with units being manufactured)
You are to study the following financial statements for two similar types of retail store and then answer the questions which follow.Required:(a) Calculate the following ratios:(i) gross profit as
Study the following financial statements of two companies and then answer the questions which follow. Both companies are stores selling textile goods.Required:(a) Calculate the following ratios for
Durham Limited had an authorised capital of £200,000 divided into 100,000 ordinary shares of £1 each and 200,000 8% preference shares of 50p each. The following balances remained in the accounts of
The summarised accounts of Hope (Eternal Springs) Ltd for the years 19X8 and 19X9 are given below.Required:(a) Calculate the following ratios for 19X8 and 19X9:(i) Gross profit: Sales (ii) Stock
The following figures are for AB Engineering Supplies Ltd at 31 December 19X9:(a) Calculate:(i) gross profit as a percentage of the sales;(ii) rate of stock turnover;(iii) net profit as a percentage
Galloway Ltd has an authorised capital of 250,000 ordinary shares of £1 each.(a) At the end of its financial year, 30 April 19X8, the following balances remained in the company’s books after
The trading stock of Joan Street, retailer, has been reduced during the year ended 31 March 19X8 by £6,000 from its commencing figure of £21,000.A number of financial ratios and related statistics
Harold Smart, who is a small manufacturer trading as Space Age Projects, is very pleased with his recently completed financial results which show that a planned 20% increase in turnover has been
(a) In accounting practice a distinction is drawn between the terms ‘reserves’ and ‘provisions’ and between ‘accrued expenses’ and ‘creditors’.Required:Briefly define each of the four
State whether you consider the following statements to be true or false:(a) During inflationary periods, historic cost accounts do not reflect a true and fair view.(b) The preparation of historic
A State whether you consider the following statements to be true or false:(a) The current cost of plant and machinery is likely to be its net realisable value.(b) A company should distribute
A What are the practical difficulties a company may encounter in ascertaining the current values of its assets?
Plant and machinery was purchased on 1 January 19 X3 for \(£ 30,000\), when the relevant specific price index was 90 . What is the current cost value of the asset at 31 December \(19 \mathrm{X} 4\)
A The plant and machinery, details of which are given in question 33.4, is depreciated on a straight line basis at 10 per cent per annum. The depreciation charge is based on year-end values. What is
Calculate backlog depreciation at 31 December \(19 \mathrm{X} 5\) for the plant and machinery whose details are given in question \(33.5 \mathrm{~A}\).
A A firm purchased machinery on 1 January \(19 \mathrm{X} 4\) for \(£ 40,000\), at which date the relevant price index for machinery was 100 . Depreciation is charged on a straight line basis at 25
The historic cost of sales figure for Apple Ltd for the year ended 31 December \(19 \mathrm{X} 3\) is calculated as follows: Opening stock Purchases Closing stock 50,000 450,000 500,000 70,000 Cost
A The balance sheet of Seafield L.td at 31 December \(19 \times 4\) shows the following balances:Using the above information, calculate the monetary working capital adjustment at 31 December 19X4 for
If the relevant price indices for trade debtors and trade creditors are as follows, calculate the monetary working capital adjustment for Seafield Ltd, using the details given in question 33.9 A. 31
A The information given below has been extracted from the accounting records of Cedarwood Ltd for the year ended 30 June 19X4. Prepare a statement showing the current cost operating profit to 30 June
The balance sheet for Cremore Ltd at 31 December \(19 \times 3\) is given below ( \(£ 000 \mathrm{~s})\) : 19X3 19X2 Plant and machinery Cost Depreciation 800 800 320 160 480 640 Current assets
A The following information has been extracted from the accounting records of Sycamore Ltd for the year ended 30 June 19 X3. Sales 9,000,000 Historic cost trading profit 4,000,000 Interest payable
During a period of inflation, many accountants believe that financial reports prepared under the historical cost convention are subject to the following major limitations:1 stocks are undervalued;2
A You are presented with the following information relating to Messiter plc:\section*{Required:}(a) Using the historic cost accounts and stating the formulae you use, calculate the following
A Review a set of company accounts for social disclosures. Consider the usefulness of such disclosures to different user groups.
The partners have always shared their profits in the ratios of X4: Y3: Z1. They are to alter their profit ratios to X3: YS: Z2. The last balance sheet before the change was:The partners agree to
The partners are to change their profit ratios as shown:They decide to bring in a goodwill amount of £18,000 on the change. The last balance sheet before any element of goodwill has been introduced
S, W and M are partners. They share profits and losses in the ratios of %, % and %respectively. .For the year ended 31 December 19X9 their capital accounts remained fixed at the following
Draw up a profit and loss appropriation account for Winn, Pool and Howe for the year ended 31 December 19X7, and balance sheet extracts at that date, from the following:(i) Net profits £30,350.(ii)
Moore and Stephens, who share profits and losses equally, decide to dissolve their partnership as at 31 March 19X9. Their balance sheet on that date was as follows:The debtors realised £2,700, the
X, Y and Z have been in partnership for several years, sharing profits and losses in the ratio 3:2:1. Their last balance sheet which was prepared on 31 October 19X9 is as follows:Despite making good
The following trial balance has been extracted from the books of Gain and Main as at 31 March 19X8; Gain and Main are in partnership sharing profits and losses in the ratio 3 to 2:In appropriating
A, B & C are partners sharing profits and losses in the ratio 2:2:1. The balance sheet of the partnership as at 30 September 19X7 was as follows:The partners agreed to dispose of the business to
GWR Ltd started in business on 1 January 19X6. Its issued share capital was 100,000 ordinary shares of £1 each and 50,000 10 per cent preference shares of £1 each.Its net profits for the first two
LMS Ltd has an authorised capital of £200,000, consisting of 160,000 ordinary shares of £1 each and 40,000 8 per cent preference shares of £1 each. Of these 120,000 ordinary shares had been issued
A balance sheet is to be drawn up from the following as at 30 June 19X6: Issued share capital: ordinary shares 1 each Authorised share capital: ordinary shares of 1 each 100,000 200,000 10 per cent
From the information given below you are required to prepare for Streamline plc:(a) a profit and loss appropriation account for the year ended 31 December 19X9;(b) a balance sheet as at 31 December
The trial balance extracted from the books of Chang Ltd at 31 December 19X8 was as follows:You are given the following additional information:(i) The authorised and issued share capital is divided
The following is the trial balance of B.B.C. Ltd as on 31 December 19X7:Given the following information, you are to draw up a trading and profit and loss account for the year ended 31 December 19X7,
You are to draw up a trading and profit and loss account for the year ended 31 December 19X8, and a balance sheet as at that date from the following trial balance and details of T Howe Ltd:Notes at
Here is the trial balance of RF Ltd as at 30 June 19X8:Given the following information as at 30 June 19X8, draw up a set of final accounts for the year to that date:(i) Stock 30 June 19X8
Burden plc has an authorised capital of 500,000 ordinary shares of £0.50 each.(a) At the end of its financial year, 31 May 19X9, the following balances appeared in the company’s books:The
A firm both buys loose tools and also makes some itself. The following data is available concerning the years ended 31 December 19X4, 19XS and 19X6.You are to draw up the Loose Tools Account for the
On 1 April 19X6 a business purchased a machine costing £112,000. The machine can be used for a total of 20,000 hours over an estimated life of 48 months. At the end of that time the machine is
A On 1 January 19X1 a business purchased a laser printer costing £1,800. The printer has an estimated life of 4 years after which it will have no residual value.It is expected that the output from
Prepare manufacturing, trading and profit and loss accounts from the following balances of T Jackson for the year ended 31 December 19X7.Rent is to be apportioned: Factory23; Office1/3. Stocks at 31
Chesterton Plc are manufacturers. At the end of their accounting year, 30 April 19X9, the following information was available:Required:For Chesterton Ple (a) A manufacturing account for the year
D Saunders is a manufacturer. His trial balance at 31 December 19X6 is as follows:Prepare the manufacturing, trading and profit and loss accounts for the year ended 31 December 19X6 and a balance
Jean Marsh owns a small business making and selling children’s toys. The following trial balance was extracted from her books on 31 December 19X9.Questions:For the year ended 31 December 19X9
The following list of balances as at 31 July 19X6 has been extracted from the books of Jane Seymour who commenced business on 1 August 19X5 as a designer and manufacturer of kitchen
The balance sheets of M Daly, a sole trader, for two successive years are shown below. You are required to draw up a cash flow statement for the year ended 31 December 19X4. Balance Sheets as at 31
Draw up a cash flow statement for John Flynn for the year ended 31 December 19X9. You are told that fixtures bought in 19X9 cost £400, whilst a motor van was bought for £4,000. Buildings Fixtures
Malcolm Phillips is a sole trader who prepares his accounts annually to 30 April. His summarised balance sheets for the last two years are shown below.Malcolm is surprised to see that he now has an
From the following details you are to draft a cash flow statement for C Willis for the year ended 31 December 19X8:The motor van was sold for £2,300 during 19X8. C Willis Profit and Loss Account for
You are required to draw up a cash flow statement for S Markham for the year ended 30 June 19X8 from the following information:The equipment was sold for £4,500. S Markham Profit and Loss Account
Ollier and Avon enter a joint venture, to share profits or losses equally, resulting from dealings in second-hand cars. Both parties take an active part in the business, each recording his own
Plant, Hoe & Reap entered into a joint venture for dealing in carrots. The transactions connected with this venture were:Required:Show the joint venture accounts in the books of Plant, Hoe &
Wild, Wood and Bine enter into a joint venture for dealing in antique brass figures. The following transactions took place:Required:Show the joint venture accounts in the books of each of the three
P Cummings buys goods from T Victor Ltd on January 21 19X7 for £2,900 and from C Bellamy & Co for £4,160. Bills are drawn on him and he accepts them.T Victor Ltd discount their bill with their bank
A purchases ledger control account should be drawn up for February 19X7 from the following:This question is being asked because it contains entries for bills of exchange. 19X7 Feb 1 Balances (Dr)
Enter the following in the appropriate ledger accounts of R Smith: 19X9 Jan " 5 R Smith sold goods to P Thomas, 320, and Thomas accepted Smith's bill for three months for this amount. 6 R Smith
On 1 June 19X8, X purchased goods from Y for £860 and sold goods to Z for £570.On the same date, X drew a bill (No. 1) at three months on Z for £400 and Z accepted it.On 12 June 19X2, Z drew a
Balances and transactions affecting a company’s control accounts for the months of May 19X8 are listed below:(a) Explain the purposes for which control accounts are prepared.(b) Post the sales
On 8 February 19X8 PJ, a London trader, consigned 120 cases of goods to MB, an agent in New Zealand.The cost of the goods was £25 a case. PJ paid carriage to the port £147 and insurance £93.On 31
On 15 November 19X8, Hughes consigned 300 cases of wooden items to Galvez of Madrid.On 31 December 19X8, Galvez forwarded an account sales, with a draft for the balance, showing the following
Stone consigned goods to Rock on 1 January 19X8, their value being £12,000, and it was agreed that Rock should receive a commission of 5 per cent on gross sales. Expenses incurred by Stone for
Adrian Frampton was considering the purchase of one of two businesses. However, Frampton had only been provided with limited information about the businesses, as follows:\section*{Additional
Three companies have the capital structures shown below.The return on capital employed was 20 per cent for each firm in \(19 \mathrm{X} 4\), and in \(19 \mathrm{X} 5\) was 10 per cent. Corporation
A Martha is the accountant of a trading business. During the past year she produced interim accounts for the six months ended 30 November 19X5, and draft final accounts for the year ended 31 May
John Jones is considering purchasing shares in one of two companies and has extracted the following information from the balance sheet of each company.Required:(a) Define the term 'gearing' stating
A The following are extracts from the balance sheets as at 31 March \(19 \mathrm{X} 4\) and \(31 \mathrm{March}\) 19X5 of Glebe Ltd:\section*{Required:}(a) Calculate for each of the two years two
Colin Black is considering investing a substantial sum in the ordinary shares of Jacks Ltd. Having some accounting knowledge he has extracted the following information from the accounts for the last
A The following information has been extracted from the accounts of Witton Way Ltd:Additional information During the year to 30 April \(19 \mathrm{X}\), the company tried to stimulate sales by
You are presented with the following information for three quite separate and independent companies:1 The operating profit before interest and tax for the year to 31 March 19X8 earned by each of the
A The chairman of a family business has been examining the following summary of the accounts of the company since it began three years ago.Required The company's products are popular in the locality
The following information is provided for Bessemer Ltd which operates in an industry subject to marked variations in consumer demand.A corporation tax rate of 30 per cent on reported profit before
A An investor is considering the purchase of shares in either AA plc or BB plc whose latest accounts are summarised below. Both companies carry on similar manufacturing activities with similar
The following are the summarised accounts for B Limited, a company with an accounting year ending on 30 September.You are required to:(a) calculate, for each year, two ratios for each of the
A The following are the financial statements of D Limited, a wholesaling company, for the year ended 31 December:The following information should be taken into consideration.1 You may assume that:(i)
A J plc supplies and fits car tyres, exhaust pipes and other components. The company has branches throughout the country. Roughly 60 per cent of sales are for cash (retail sales). The remainder are
Large plc, a manufacturer and wholesaler, purchased 600,000 of the 800,000 issued ordinary shares of a smaller company, Small Ltd, on 1 January 19X5 when the retained earnings account of Small Ltd
A Huge plc acquired a holding of 600,000 of the 800,000 ordinary \(£ 1\) shares of Large plc on 1 October 19 X5 when the revenue reserves of Large stood at \(£ 320,000\).On 1 October 19X6, the
Q plc has three subsidiaries: L Ltd, M Ltd, and N Ltd. All three were acquired on 1 January at the start of the financial year which has just ended. \(\mathrm{Q}\) has a 55 per cent, 70 per cent, and
At the end of 19X5, a parent company, P plc, with one subsidiary had a holding representing 10 per cent of the equity of R Ltd, a clothing company. It had cost \(£ 80,000\) when purchased at the
A Relevant balance sheets as at 31 March 19X4 are set out below:You have recently been appointed chief accountant of Jasmin (Holdings) plc and are about to prepare the group balance sheet at 31 March
A Using the following balance sheet and profit and loss accounts, calculate and comment on ten accounting ratios (ignore taxation): Balance Sheet as at 31 December 19X1 (000s) Fixed Assets Equipment
You are to study the following financial statements for two similar types of retail store and then answer the questions which follow.\section*{Required:}(a) Calculate the following ratios:(i) gross

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