MUSENDO ONLINE PLATFORM

EXAM PREPARATION
General Certificate of Education Advanced Level

ACCOUNTING 6001/3
PAPER 3 Problem solving

TIME 2 hours 30 minutes

INSTRUCTIONS TO CANDIDATES

Answer all questions

Write your answers on the separate answer sheet provided.

If you 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.

1
 QUESTION 1

Shumi Power, extracted a trial balance on 31 March 2000, which failed to agree. The trial
balance totals were: $35 684 (debit) and $36 540 (credit). He entered the difference in a
suspense account to enable him to draft his final accounts. The draft profit and loss account
prepared by Shumi showed :
Gross profit $130 000
Operating profit of $138 000.
After completing the draft final accounts, Shumi consults you as accountant and you discover
the errors shown below:

i) An item for $1 076 in the Sales Day Book has been entered in Adbel’s account in the
Sales Ledger as $1 760.

ii) At 31 March 2000, Blessing’s account in the Sales Ledger showed a debit balance of
$900. There was also an account for her in the Purchases Ledger and it showed a
credit balance of $650. In offsetting these balances, the ledger clerk had debited
Blessing’s account in the Sales Ledger with $650 and credited her account in the
Purchases Ledger with the same amount.

iii) A purchase of goods costing $1 500 had been credited to the supplier’s account in the
Purchases Ledger but no other entry had been made in the books.

iv) A credit balance of $480 in the Sales Ledger had been included in the list of debtors as
a debit balance.

v) A sales invoice for $1 070 sent to Dunmore had been entered in the Sales Day Book as
$1 700.

vi) Discount receivable $300 in January 2000 had been debited in the Discount Allowed
account. Discount allowable of $800 for the same month had been credited in the
Discounts Received account.

vii) Some goods have been sent to Poppy, a customer, and invoiced to him for $2 450. The
mark-up on these goods was 40%. Poppy has notified Benjamin on 30 March 2000
that he has not ordered the goods and is returning them. No entries regarding the
return of these goods have been made in the books.

Required
a. Prepare the journal entries necessary to correct each of the errors given above.
(narratives not required) [9]
b. Write up the suspense account [5]
c. Prepare computations for the year ended 31 December 2003 of the following:
i) Corrected gross profit [6]
ii) Corrected net profit [5]

2
 QUESTION 2

The following is the Receipts and Payments account of the Outerpspace Sports and
Social Club for the year ended 31 October 2005.

$ $
Balance b/d 5 950 Clubhouse 65 000
Subscriptions 17 600 Equipment 7 400
Restaurant sales 62 100 Wages 23 400
Loan from members 60 000 Equipment repairs 4 320
Restaurant suppliers 35 500
Annual dance 3 750
General expenses 5 420

Additional information

1. Assets and liabilities at 31 Oct 2004 31 Oct 2005

$ $
Subscriptions in arrears 550 650
Subscriptions in advance 100 450
Restaurant stock 6 390 7 520
Restaurant creditors 4 235 4 785
Annual dance costs owing 50 125
Clubhouse at cost - 65 000
Equipment at cost 8 000 15 400
Loan from members - 60 000
Provision for depreciation on equipment 2 000 ?

2. The original equipment was purchased on 1 November 2003, the date the club
opened. Depreciation is charged at 2% straight-line on the clubhouse and 25%
reducing balance on equipment. Depreciation is charged for a complete year in the
year of purchase. Repairs were to original equipment.

3. All subscriptions owing in the year ended 31 October 2004 were paid during the year
ended 31 October 2005. Interest on the loan from members, which was received on 1
November 2004, is payable at the rate of 5% per annum.

4. $2 200 of the new equipment is for use in the restaurant. The general expenses include
$2 100 which should be charged to the restaurant. One third of the wages are paid to
restaurant staff.

Required

a. Prepare the club’s Income and Expenditure account for the year 31 October 2005.[16]

b. Statement of financial position as at 31 October 2005. [9]

3
 QUESTION 3

Admire Ltd was unable to physically check inventory at 30 April 2019. However, inventory
check was completed on 10 May 2019, when it was valued at $64 000. The inventory taking
exercise was not performed with its usual efficiency.

During the first ten day of May, the following transactions took place;

(i) Inventory totalling $30 000, list price, had been sent to customers.
A trade discount of 5% was offered to all customers.

(ii) Goods worth $42 000 were bought.

(iii) Debit notes issued to suppliers totalled $800.

(iv) Credit notes issued to customers amounted to $2 400 (list price)

(v) Inventory worth $1 000 was taken from warehouse for use in the business.

After thorough investigations of inventory and related records, the

accountant discovered the following matters:

(vi) Inventory with a net selling price of $900 had been damaged and was now
worthless.

(vii) Carriage inwards, relating to unsold inventory amounting to $260, had been
incorrectly debited to carriage outwards.

(viii) Inventory which had cost $2 800 was slightly spoilt and would have to be
sold for $3 200 after being repaired at a cost of $1 000.

(ix) Included in the inventory figure at 10 May 2019 are goods costing $5 000
which had been acquired by the company on a sale or return basis. The
company is yet to decide whether or not to keep the goods.

(x) Goods sold during April for $4 200 were yet to be collected by a customer.

The company marks up all goods at 20%.

Required

(a) The value of inventory at cost, at 30 April 2019. [20]

4
 QUESTION 4

Musendo Power Limited manufactures garden furniture. One of the lines it produces is a bird
table and the contribution made by the bird tables to the overall company results for the year
ended 30 June 2017 was as follow :
Contribution statement for the bird tables for the year to 30 June 2017.
$ $
Sales 162 000
Less: Variable costs
Raw materials 53 280
Direct labour 47 680 100 960
61 040

Additional information

1) No opening or closing stocks of bird tables.

2) Budget and standard costs for the year ended 30 June 2017.
i) Budgeted sales of bird tables: 15 000@ $10 each.
ii) Each bird table would require 4kg of materials at a cost of 80cents per kg
iii) Three bird tables should be made per hour of direct labour.
iv) The direct labour rate is $7.20 per hour.

3) The additional results for the year ended 30 June 2017 revealed the following:
i) 18 000 bird tables were sold.
ii) 74 000 kg of raw material was used.
iii) Direct labour amounted to 6 400 hours.
Required
a) i) Sales volume variance {2}
ii) Sales price variance {2}
iii) Total sales variance {2}
iv) Raw material usage variance {2}
v) Raw materials price variance {2}
vi) Total raw materials variance {2}
vii) Direct labour efficiency variance {2}
viii) Direct labour rate variance {2}
h) Total direct labour variance {2}

b) Prepare a statement that shows the budgeted contribution for the year ended 30 June
2017. {4}