questions for poa exam working out Flashcards
I Metevier and Moreno have been in partnership over the last year. Their partnership agreement
includes the following.
Interest on capital l0% per annum
Interest on drawings 5% per annum
(a) Other than the rate at which profit or loss is to be shared, name TWO other features
that may be included in a partnership agreement.
(b) Since the partnership agreement of Metevier and Moreno is silent, what rate should be
used to share the firm’s net profit or net loss?
(a) Answer - Interest on drawings and capital, salaries allowed to partners, Limits on drawings,capital contributed to partnership,Responsibilities of each partner.
(b) Answer - Profits should be shared equally
Metevier and Moreno who contributed capital of $ 120 000 in the ratio of 7 :5 ,
recorded
the following balances on 31 December 2015.
$
Net profit before interest 77 4O4
Long-term liabilities (6%oloan) 41 000 (interest not yet paid)
Drawings: Metevier 3 600
Moreno I 920
Prepare the Profit Appropriation Account for Metevier and Moreno for the year ended
3l December2015.
Other accormt balances recorded for Metevier and Moreno are as follows
Fixed assets
s
220 000
Current assets 18 000
Current liabilities 48 576
Prepare the Statement of Financial Position (Balance Sheet) as at 31 December 2015 for
Metevier and Moreno showing clearly
(i) the flrm’s working capital and
(ii) details of each partner’s earnings in the Capital section.
Metevier and Moreno who contributed capital of $ 120 000 in the ratio of 7 :5 ,
recorded
the following balances on 31 December 2015.
$
Net profit before interest 77 4O4
Long-term liabilities (6%oloan) 41 000 (interest not yet paid)
Drawings: Metevier 3 600
Moreno I 920
a. Tova Joyce, a sole trader, had already calculated her gross profit for the year ended
3lDecember20l5,butmustmakesomechangestoheraccountinginformation. Complete
the required changes for Tova Joyce using the information set out below.
Closing inventory was counted and valued at $8 670.
Tova Joyce had withdrawn $900 in inventory for her personal use after the closing
inventory had been counted and valued.
Goods valued at $185 were returned to the supplier on 31 December although they
had been included in the count and valuation of the closing inventory.
Use either the T-account format OR the lines below to show the changes needed to provide
a more accurate value for Tova Joyce’s closing inventory.
b. Errors were also discovered in Tova Joyce’s bank records. The information is provided
below.
The balance at bank showed an overdraft of $6 340 before the following items were
discovered.
Additional equipment was bought by cheque on 01 January 2015 for $ I 900 but had
not been recorded in the books of account.
J. Lawrence, a debtor who owed Tova Joyce S430, sent a cheque for $200 and
indicated that he was unable to pay any more.
Compute the new bank overdraft balance.
Tova Joyce produces the following information for your consideration.
Old equipment 58 000
Gross profit before all changes and corrections 46 690
Insurance expense 320
On investigation, it was found that the following items also had not been properly recorded
Depreciation on old and new equipment had not been charged at the company’s
rate of 25%o per year.
The owner had donated 5300 in cash to an animal shelter.
Calculate Tova Joyce’s net profit for the year ended 31 December 2015 after taking into
consideration all necessary changes and corrections.
Prepare the classifled Statement of Financial Position (Balance Sheet) for Tova Joyce as
at 31 December 2015 based on
the relevant information provided in Parts (a)-(c)
the revisions you have made and
the additional balances provided.
Use the lines provided on page 1l
Buildings 46,100
Cash in hand 3,120
Equipment 58,000
Accounts receivable 6,910
Accounts payable 4,990
Capital 66,500
In September, Grenade’s Cash Book showed an overdrawn balance of $3 400 which did not agree
with the balance on his bank statement. In checking his Cash Book with his bank statement
Grenade observed the following:
A cheque paid to Blue for S1 238 was correctly entered in the bank statement but entered
in the Cash Book as S1 328.
Bank charges for the month of $100 were entered on the bank statement but not in the Cash
Book.
The bank paid Grenade’s insurance of $900 as instructed by standing order,
Deposits of $8 000 made to the bank account on 29 September did not appear on the bank
statement.
Dividends of $2 100 from Red Ltd was paid directly to Grenade’s bank account.
Four cheques totalling 55 200 have not been presented to the bank for payment.
A cheque for $300 received from Yellow on 02 September had been returned by the bank
for insufficient funds.
(a) (i)
Grenade Updated Cash Book as at 30 September
(ii) Prepare Grenade’s Bank Reconciliation Statement for the month of September.
List TWO bank statement items which would be used to adjust the net income if the net
income was calculated before the bank statement was received.
Bank Charges and insurance would increase expenses and cause net income to be reduced.
List ONE internal user and ONE external user of accounting information.
internal users of accounting information include: managers, employees and board of directors. External users of accounting information include: financial (lending) institutions, creditors, government and potential investors
Complete the following by stating the accounting concept or principle violated in
each given situation.
Situation:
- A business owner pays the wage of his housekeeper and changes it to business expenses.
- A business owner plans to sell old equipment
next year at a profit of $6 000 but he records
that amount as profit in this year’s income
statement. - Every year a business owner uses different
methods to depreciate his non-current assets.
Accounting Concept/principle violated
1 (Answer) - Business Entity Concept (Business activities should be treated separately from the personal activities of owners)
2 (Answer) - Realisation Concept (profits should only be recorded when they have occured i.e. been realised)
3 (Answer) - Consistency Concept (the same accounting principles and conventions should be used from the year to year in the preparation of accounts and financial statements)
Little People Furnishings is a manufacturer of table-and-chair sets for toddlers. The following is
a list of revenue and expenses for the year ended 3 1 December 2015 .
Sales $278 800
Raw materials at 01 January 2015 $5 000
Purchases of raw materials during the year $112 000
Finished table-and-chair sets on hand at 01 January 2015 $66 000
Factory workers’wages $48 000
Office workers’wages $35 000
Plant and machinery at cost $92 000
Provision for depreciation on plant and machinery $18 400
Fixtures and fittings at cost $27 500
Provision for depreciation on fixtures and fittings $5 500
Repairs to fixtures and fittings $4 000
The following additional information was also provided at 31 December 2015:
. Raw materials at 31 December 2015 was valued at $90 000.
. Finished table-and-chair sets on hand were valued at $ 12 700.
o d licence fee of $2 per set is to be paid for each of the 12 900 sets manufactured this year.
. Plant and machinery are to be depreciated S7 360 for the year.
Fixtures and flttings are to be depreciated at 20% per annum, using the straight line method.
All expenses related to flxtures and fittings are to be allocated 40% to the factory and 60%
to administration.
Little People Furnishings:
Prepare the Manufacturing Account for the year ended 3 1 Decemb er 2015 , showing clearly
EACH of the following:
(i) Cost of raw materials used
(ii) Prime cost
(iii) Production cost
Little People Furnishings:
Prepare the Income Statement for the year ended 31 December 2015, showing clearly:
(i)
(ii)
Gross Income
Net Income
During the year ended 3l December 20l5, Little People Furnishings manufactured a total
of 12 900 table-and-chair sets. Calculate the unit cost of production for the year.
Unit cost of production for the year
= Total cost of production ÷ Total units produced
=$72,040 ÷ 12,900
=$ 5.58/unit (i.e. per table and chair set
