Coimisin na Scrduithe Stit State Examinations Commission

LEAVING CERTIFICATE 2008 MARKING SCHEME ACCOUNTING ORDINARY LEVEL

LEAVING CERTIFICATE 2008

MARKING SCHEME

ACCOUNTING

ORDINARY LEVEL

LEAVING CERTIFICATE ACCOUNTING 2008

Ordinary Level Marking Scheme

INTRODUCTION
The solutions and marking scheme for Accounting Ordinary Level are attached. Marks allocated to each line/figure are highlighted and shown in brackets like this [6] alongside. These marks are then totalled for each section/page and shown in a square like this

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Accounting solutions are mainly computational and most figures are made up of more than one component. If a figure is not as per the solution, the examiners analyse the make-up of the candidate's figure and allocate some marks for each correct element included. To facilitate this, where relevant, the make-up of the figures is shown in workings attached to the solution. In some Accounting questions there can be a number of alternative approaches and formats that can be validly used by candidates (eg A Bank Reconciliation Statement can start with either the bank statement figure or the adjusted bank account balance). The solutions provided here are based on the approaches adopted by the vast majority of teachers/candidates and alternatives are not included. In cases where a valid alternative solution is required, it is provided for the examiners, so that full marks can be gained for correct accounting treatment. Sometimes the solution to a part of a question may depend on the answer computed in another part of that question. Where a calculation in section (a) is incorrect, allowance is made for this in subsequent sections.

Accounting Ordinary Level Marking Scheme

Question 1

40
Manufacturing Account of Casey Ltd for the year ended 31/12/2007
Stock - Raw materials 1/1/2007 Add Purchase -Raw materials Less Stock - Raw materials 31/12/2007 Cost of raw materials consumed Add Factory wages (75% of 130,000) Add Direct expenses Prime Cost Add Factory Overhead Expenses Factory supervisors wages Factory insurance Factory light & heat Depreciation - Plant & Machinery Depreciation - Factory Buildings Factory cost Add Work in progress 1/1/2007 Less Work in progress 31/12/2007 Less Sale of scrap materials Cost of manufacture Profit on manufacture Transfer to Trading a/c at Current Market Value 58,000 344,000 402,000 (49,000) 353,000 97,500 38,000 488,500 32,500 13,500 43,400 88,000 18,000 [2] [4] [2] [3] [3] [3] [2] [3] [4] [2]

(W1) [1]

(W2)

195,400 683,900 33,000 716,900 (23,000) 693,900 (8,000) 685,900 14,100 700,000

[3] [3] [3] [1] [1]

Question 1

40
Trading, Profit and Loss Account of Casey Ltd for the year ended 31/12/2007
Sales Less Sales returns Less Cost of sales Opening stock of finished goods Add Cost of manufacture at market value Less closing stock of finished goods Cost of sales Gross Profit Add manufacturing Profit Less Expenses Administration Stationery Directors fees 980,000 [6] (3,400) [2] 976,600 64,000 [3] 700,000 [1] 764,000 (74,000) [3] (690,000) 286,600 [1] 14,100 [1] 300,700

[1] 5,400 [3] 36,000 [3] 41,400

Selling & Distribution [1] Advertising Depreciation - Delivery van 10% of Book Value Total Expenses Operating Profit Less Debenture interest (W3) Net Profit for this year Less Taxation Add Profit & Loss Balance 1/1/2007 Profit and Loss Balance at 31/12/2007

7,000 [3] 6,800 [3] 13,800 (55,200) 245,500 (15,000) 230,500 (12,000) 218,500 87,000 305,500

[2] [2] [1] [4]

Workings
(W1) (W2) (W3) Factory wages: Factory Insurance: Debenture Interest: 130,000 32,500 18,000 4,500 10% of 200,000 x 9 months = = = 97,500 13,500 15,000

Question 1 - continued

40
Balance Sheet of Casey Ltd as at 31/12/2007
Intangible Assets Patents 75,000 [2]

Accumulated
Fixed Assets Plant & machinery Delivery vans Factory buildings Cost Depreciation 440,000 [1] 148,000 [2] 92,000 [1] 30,800 [2] 600,000 [1] 18,000 [2] 1,132,000 196,800 Net 292,000 [1] 61,200 [1] 582,000 [1] 935,200

935,200 1,010,200

Current Assets
Closing Stocks: Raw materials Work in progress Finished goods Debtors Less provision of bad debts Insurance prepaid Less Creditors: amounts falling due within 1 year Creditors Taxation VAT Bank Debenture interest due Working Capital Total Net Assets 49,000 23,000 74,000 41,600 2,800 [2] [2] [2] [2] [2]

146,000 38,800 4,500 [2] 189,300

29,500 12,000 10,200 27,300 15,000

[2] [2] [2] [2] [2]

(94,000) 95,300 1,105,500

Financed by Creditors: amounts falling due after more than 1 year 10% Debentures Capital and Reserves Authorised Ordinary shares @ 1 each 800,000 [1] Profit & Loss Balance 31/12/2007

200,000 [2] Issued 600,000 [1] 305,500

905,500 1,105,500

Question 2

(a) Profit and Loss Account of Morgan Ltd for the year ended 31/12/2007
Net Profit for year Less Interest Less Taxation Profit after taxation Less: Appropriations General Reserve Ordinary Dividend 12c per share Preference Dividend for full year Retained profit for year Retained Profit 1/1/2007 Retained Profits carried forward 31/12/2007

35
210,000 [2] (15,000) [5] (47,000) [5] 148,000 25,000 [5] 48,000 [5] 10,000 [5]

(83,000) 65,000 180,000 [5] 245,000 [3]

(b) Balance Sheet extract as at 31/12/2007

Fixed assets/Current assets Less: Creditors: amount falling due within 1 year [1] Interest due Taxation due Financed by: Capital and reserves [1] Share Capital Ordinary Shares of 1 each 5% Preference Shares of 1 each General Reserve Profit and loss balance Shareholders Funds

25
1,017,000

15,000 [4] 47,000 [4]

(62,000) 955,000

Authorised

Issued

800,000 [1] 400,000 [2] 300,000 [1] 200,000 [2] 1,100,000 600,000 [1] 110,000 [4] 245,000 [4] 955,000 955,000

Question 3

(a)

35
Adjusted Bank Account
Balance b/d Interest received 16,075 [6] 200 [6] _____ 16,275 Balance b/d 15,352 Dishonoured cheque M. Feeney Standing Order Bank Charges Balance c/d 730 160 33 15,352 16,275 [6] [6] [6] [5]

(b)

25
Bank Reconciliation Statement
Balance as per Bank Statement Add: Unrecorded Lodgements Error M. Clarke 14,467 [3] 1,960 [5] 500 [7] 16,927 No 300104 No 300106 275 [4] 1,300 [4] (1,575) 15,352 [2]

Less: Cheques drawn not yet presented Balance as per Adjusted Bank Account

(b) Alternative

Bank Reconciliation Statement

Balance as per Adjusted Bank Account Add: Cheques not presented 15,352 [2] No 300104 No 300106 275 [4] 1,300 [4] 1,575 16,927

Less: Unrecorded lodgements Bank error M. Clarke Balance as per Bank Statement

1,960 [5] 500 [7] (2,460) 14,467 [3]

Question 4

60
Tabular Statement
Assets Buildings Motor Vehicles Stock Debtors Bank Total Oct 1 330,000 [2] 105,000 [2] 33,000 [2] 36,200 [2] 22,700 [2] 526,900 (2,500) [2] +2,300 [2] (200) +12,800 (1,900) [2] (1,900) (6,000) [2] (6,000) +3,200 +12,800 [2] (11,300) [2] +14,500 [2] (800) [2] +160 [2] (640) (1,700) [2] (10,000) [2] (1,700) +160,000 Oct 3 Oct 7 Oct 9 Oct 11 Oct 15 Oct 21 Oct 25 Oct 28 +170,000 [2] Totals 500,000 105,000 34,500 47,400 5,560 [1] 692,460

Liabilities Capital Drawings Profit/Loss Creditors New Finance Ltd. Expenses due Total

Oct 1 496,000 [2]

Oct 3 (200) [2]

Oct 7

Oct 9

Oct 11 300 [2]

Oct 15 +3,200 [2]

Oct 21 (640) [2]

Oct 25

Oct 28

Totals 498.660 [1]

(1,700) [2]

(1,700)

29,000 [2]

+12,800 [2]

(6,300) [2] +160,000 [2]

35,500 160,000

1,900 [2] 526,900 (200) +12,800

(1,900) [2] (1,900) (6,000) +3,200 (640) (1,700) +160,000 692,460

Question 5

100
(a)
(i) (ii) Opening Stock (610,000 + 63,000 620,000) 53,000 [10] Period of credit received from Creditors Creditors x 365 Credit Purchases = 35,600 x 365 620,000 = 21 days [10] 0.7 months

(iii)

Return on Capital Employed Operating profit x 100 Capital employed = (130,000 +24,000) x 100 903,000 = 17.05% [10]

(iv)

Acid Test Ratio Current Assets - Closing stock. Current Liabilities = 93,000 73,000 = 1.27 : 1 [10]

(b) (i) 8% Debentures (2011/2012) Debentures are Long-term Loans. The fixed annual rate of interest is 8%. Loan must be repaid in one lump sum during the years 2011/2012. Interest Paid: This is the rent [extra cost] paid for the use of money borrowed from a financial institution Liquid Assets: These are current assets [items of value] that can be turned into cash quickly. Liquid Assets are made up of cash/ bank and debtors. They are current assets excluding stock.

[10]

(ii)

[10]

(iii)

[10]

(iv)

Shareholders Funds The amount owed to the shareholders by a company. It is the issued capital plus reserves.

[10]

(c)

No. The Return on Capital Employed for 2007 is 17.05%. The return currently available from banks and building societies is less than 5% so the company is performing well and therefore would not have fared better if it had sold out and invested in a financial institution.

[10]

(d)

The liquidity of Walsh Ltd has improved. Walsh Ltd would not have difficulty paying its debts because it has an Acid Test Ratio of 1.27 to 1. This means that the firm has 1.27 available immediately for each 1 owed. This is better than the accepted norm of 1 to 1. Perhaps it could invest some of the idle cash.

[10]

Question 6

(a)

30
Creditors Control Account
2007 31 Dec Cash paid Balance c/d 57,400 [3] 4,900 [3] 62,300 2007 1 Jan 31 Dec Balance b/d *Credit Purchases 8,700 [3] 53,600 62,300

Total Purchases
Credit purchases Cash purchases Total purchases

53,600 92,200 [3] 145,800 [3]

Debtors Control Account

2007 1 Jan Balance b/d *Credit Sales 10,400 [3] 77,400 87,800 2007 31 Dec Cash Balance c/d 78,200 [3] 9,600 [3] 87,800

Total Sales
Credit sales Cash sales Total sales

77,400 205,000 [3] 282,400 [3]

(b) Trading and profit and Loss Account for year ended 31 December 2007
Sales Less Cost of goods sold Stock at 1 January 2007 Add purchases Less Stock at 31 Dec. 2007 Gross profit Add Commission received Less Expenses Wages and general expenses Depreciation Delivery Vans Net Profit

30
282,400 [2] 12,300 [3] 145,800 [2] 158,100 (14,200) [3] (143,900) 138,500 4,500 [6] 143,000 W1 74,380 [6] 13,600 [4] (87,980) 55,020 [4]

Question 6 (c) Balance Sheet at 31 December 2007

Fixed Assets Premises Delivery Vans Equipment Current Assets Stock Trade debtors Bank 840,000 840,000 [3] 68,000 [2] 13,600 [1] 54,400 [3] 4,600 _____ 4,600 [3] 912,600 13,600 899,000 14,200 [3] 9,600 [3] 58,300 [3] 82,100 Less Creditors: amounts falling due within 1 year. Trade creditors Accruals (Expenses) Net Current assets Total Assets less current liabilities Financed by Capital Balance at 1 Jan 2007 Add Net profit Less Drawings Capital employed

40

4,900 [3] 600 [3] (5,500) 76,600 975,600

W2

928,780 [8] 55,020 [1] 983,800 (8,200) [4] 975,600 975,600

Workings 1 Wages and General expenses paid Less Expenses due 1 Jan. 2007 Add Expenses prepaid 31 Dec 2007 74,300 (520) 600

74,380

Capital at 1 January 2007 Assets Buildings Delivery vans Debtors Stock Bank Less Liabilities Creditors Expenses due Capital at 1 January 2007

840,000 68,000 10,400 12,300 7,300 8,700 520

938,000

(9,220) 928,780

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Question 7

(a)

30
Reconciliation of Operating Profit to net cash flow.
Operating profit Depreciation Increase in Stock Increase in Debtors Increase in Creditors Net Cash inflow from operating activities 110,000 [6] 5,000 [6] (8,000) [6] (12,000) [6] 1,000 [6] 96,000

(b)

65
Cash Flow Statement of Milano Ltd for the year ended 31/12/2007
Operating Activities Net cash inflow from operating activities Return on investments and servicing of finance Interest paid Taxation Tax paid Capital Expenditure and Financial Investment Purchase of land/buildings [2] 96,000 [4] [2] (7,000) [8] [2] (26,000) [8] [2] (40,000) [8]

Equity / Ordinary Dividend paid [2] Dividend paid Net cash outflow before liquid resources and financing Financing Issue of ordinary share capital Receipts from debenture loan Increase in cash

(31,000) [8] (8,000)

[2]

30,000 [6] 10,000 [6]

40,000 32,000 [5]

(c) Reconciliation of Net Cash flow to movement in Net Debt Increase in cash in the period Cash receipt from debentures Change in net debt Net debt at 1/1/2007 Net debt at 31/12/2007

5
32,000 [1] (10,000) [1] 22,000 [1] (84,000) [1] (62,000) [1]

Net debt at 1/1/2007 (90,000 6,000) Net debt at 31/12/2007 (100,000 38,000)

= =

84,000 62,000

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Question 8

80
(a) Contribution per unit Selling price Less Variable cost Contribution 15.00 [6] 10.00 [6] 5.00 = [3] 5 per unit

(b)

Break-even point in units

35,000 [8] 5 [5] [2] 7,000 x 15[5]

[2] 7,000 units

[1]

105,000

(c)

Margin of safety

[5] 12,000 7,000 [2] 5,000 x 15

[1] 5,000 units [4] 75,000

(d)

Marginal Costing Statements Production levels Sales Less Variable cost Contribution Fixed cost Profit/Loss in 6,600 units 99,000 (66,000) 33,000 (35,000) (2,000) 7,700 units 115,500 (77,000) 38,500 (35,000) 3,500 8,800 units 132,000 (88,000) 44,000 (35,000) 9,000

[1] [1] [1] [1] [1]

[1] [1] [1] [1] [1]

[1] [1] [1] [1] [1]

(e)

Level of sales required Fixed cost + target profit Contribution Per Unit

[3] 35,000 + 30,000 [3] 5 [3] 13,000 13,000 x 15 = = [3] [3] 13,000 units 195,000

= =

12

Question 9
(a) Sales Budget Budgeted quantities Budgeted selling price Budgeted Sales Value Redline 1,400 [4] 190 [4] 266,000 [1] Blueline 900 [4] 280 [4] 252,000 [1]

80

(b) Budgeted sales Add budgeted closing stock

Production Budget Redline 1,400 275 1,675 (340) 1,335 [2] [2] [2] [2] Blueline 900 70 970 (160) 810 [2] [2] [2] [2]

Less budgeted opening stock Budgeted Production in units

(c)

Materials Usage Budget Material X Redline Blueline Budgeted material usage

(1,335 x 18 gms) (810 x 15gms)

Material Y [3] 14,685 gms (1,335 x 11 gms) [3] 11,340 gms (810 x 14 gms) [2] 26,025 gms

[3] 24,030 gms [3] 12,150 gms [2] 36,180 gms

(d)

Material Purchases Budget Budgeted Material Usage in gms Add Budgeted Closing stock Less Budgeted Opening stock Material Purchases Budget in gms Budgeted Purchase price per gm Material X 36,180 410 36,590 (370) 36,220 13 470,860 Labour Budget Redline (Production x Labour hrs per unit) (1,335 units x 5 hrs) Blueline (Production x Labour hrs per unit) (810 units x 8 hrs) Budgeted direct labour hours Labour rate per hour Direct labour budget in s 6,675 [4] 6,480 [4] 13,155 12 [2] 157,860 Material Y [2] 26,025 [3] 360 26,385 [3] (290) 26,095 [1] 17 [1] 443,615 [2] [3] [3] [1] [1]

(e)

Alternative (e) Budgeted Production Labour hrs per unit Labour Rate per hour Budgeted labour/ cost [1] [2] [1] [1]

Labour Budget Redline Blueline 1,335 [1] 810 5 hrs [2] 8 hrs 6,675 hrs [1] 6,480 hrs 12 [1] 12 77,760 80,100

157,860

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