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June 2005 Accounting Examiners Case Solution Paper

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June 2005 Examiner's Solution
C a s e S o l u t i o n 1
1. Prepare the accounting equation as at 31 July in a tabular format, detailing all of the transactions for the month and
incorporating the various adjustments identified by Cynthia.
(18 marks)
Equipment
Raw
Finished
Debtors
Pre-
Ordinary
Creditors
Retained
P&L
materials
goods
payments
share
capital
profits
account
At 1 July
125 000
22 000
14 050
75 600
291 250
150 000
47 500
93 750
291 250
1
−25 100
2A
−11 000
11 000
2B
3 000
3
−21 250
4A
−8 000
−8 000
4B
12 500
12 500
5
10 000
10 000
6
5 500
5 500
7
−3 000
8A
−4 500
−4 500
8B
7 250
9A
−6 000
6 000
9B
1 000
10
−1 500

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(i)
Accrual-Gas
−3 000
(ii)
RM write-off
−500
−500
(iii)
Depreciation
−2 250
−2 250
(iv)
Prepayment
2 000
2 000
At 31 July
132 750
10 000
22 550
63 000
2 000
287 500
150 000
41 750
93 750
−1 000
287 500
Notes:
Depreciation-machinery
£135 000
@20% per annum =
or £2250 per month
2. Prepare the Profit and Loss Account for July.
(7 marks)
Profit and Loss Account
July
Actual
£
£
Sales (12 500 + 7250)
19 750
Cost of Sales
Labour & Materials (8000 + 4500)
12 500
Write-off of Raw Materials
500
Depreciation-Equipment
2 250
15 250
Gross Profit
4 500
Less: Expenses
Gas
3 000

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June 2005 Examiner's Solution Case Solution 1 1. Prepare the accounting equation as at 31 July in a tabular format, detailing all of the transactions for the month and incorporating the various adjustments identified by Cynthia. (18 marks) Equipment At 1 July 125 000 Raw Finished materials goods 22 000 14 050 1 2A −11 000 2B Debtors share capital −25 100 25 100 291 250 150 000 47 500 Accruals 0 Retained P&L profits account 93 750 291 250 −3 000 −21 250 −8 000 −8 000 12 500 12 500 10 000 10 000 5 500 5 500 −3 000 8A −4 500 8B 10 at Bank −21 250 7 9B payments Creditors 11 000 4B 9A Ordinary 54 600 3 000 4A 6 Cash 75 600 3 5 Pre- −4 500 7 250 −6 000 −3 000 7 250 6 000 1 000 −1 000 −1 500 −1 500 (i) Accrual-Gas (ii) RM write-off (iii) Depreciation 3 000 −500 −500 −2 250 −2 250 (iv) Prepayment At 31 July Notes: −3 000 2 000 132 750 10 000 Depreciation-machinery 22 550 63 000 2 000 £135 000 @20% per annum = 2 000 57 200 287 500 150 000 41 750 3 000 93 750 −1 000 287 500 £27 000 or £2250 per month 2. Prepare the Profit and Loss Account for July. (7 marks) Profit and Loss Account July Actual £ Sales (12 500 + 7250) £ 19 750 Cost of Sales Labour & Materials (8000 + 4500) 12 500 Write-off of Raw Materials 500 Depreciation-Equipment 2 250 Gross Profit 4 500 Less: Expenses Gas 15 250 3 000 Rent (3000 − 2000 Prepaid) 1 000 Adver ...
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