siness Accounting - A01_WOOD7886_12_SE_FM.qxd/12 10:06 AM Page 3 ...

S

OLUTIONS MANUAL

F rank Wood’s Bu siness Accounting 2 T

WELFTH EDITION

Frank Wood a nd A lan Sangster 1 / 4

Contents Preface4 Answers5 © Pearson Education Limited 2012 3 A01_WOOD7886_12_SE_FM.qxd 5/22/12 10:06 AM Page 3 2 / 4

© Pearson Education Limited 2012 5 Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 2, 12 th Edition, Solutions Manual Answers Answer to Question 1.4A BA 2 (a) All in £000 Branch Inventory (Selling price) Balance b/d 75 Returns 30 Goods to branch 600 Cash sales 120

Branch accounts receivable: returns 8 Branch accounts receivable 437

Inventory deficiency to branch adjustment 6 Balance c/d 90

683 683

Balance b/d 90 Goods Sent to Branch (Cost price) Returns from branch 20 Branch inventory 400 Head office trading a/c 380

400 400

Branch Adjustment (Profit loading) Returns from branch 10 Unrealised profit b/d 25 Branch inventory deficiency 6 Goods to branch 200 Branch profit and loss 179 Unrealised profit c/d 30

225 225

Unrealised profit b/d 30 Branch Accounts receivable

Balance b/d 66 Branch inventory: Returns 8

Branch inventory 437 Bank 390 Discounts 9 Bad debts 15 Balance c/d 81

503 503

Balance b/d 81 Branch Bank Balance b/d 3 General expenses 42 Cash sales 120 To HO bank 459 Branch accounts receivable 390 Balance c/d 12

513 513

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(b)Paper Products Income Statement for the year ending 31 March 2012 Head Office Branch Total

Revenue: Cash 1,500 120 1,620

Credit 1,960 429 2,389

3,460 549 4,009

Less Cost of goods sold:

Opening inventory 180 50 230 AddPurchases 2,400 380 2,780

2,580 430 3,010

LessClosing inventory 220 2 ,360 60 370 280 2,730 Gross profit 1,100 179 1,279

Less Expenses:

General expenses 410 42 452 Discounts allowed 29 9 38 Bad debts 24 463 15 66 39 529 Net profit 637 113 750 (c) See text,but merits mainly concern tight control as HO can see what profits the branch oughtto be making;also saves branch staff having to keep full accounting records.Demerits depend on whether branch staff are given room for initiative within the above system,or else the HO stupidly lets the system strangle all initiative.Answer to Question 1.6A BA 2 LR Income Statement for the year ending 31 December 2012 Head Office Branch Revenue 83,550 51,700

LessCost of goods sold:

Purchases 123,380 Goods to branch 44,264 44,264

79,116

LessClosing inventory 12,276 66 ,840 2 ,664 41 ,600 Gross profit 16,710 10,100 LessGeneral expenses 8,470 6,070 Net profit 8,240 4,030 Statement of Financial Position as at 31 December 2012 Non-current assets39,000 Current assets Inventory 14,940 Accounts receivable 15,020 Cash in transit 1,000 Bank5,260 36 ,220

75,220

Less Current liabilities Accounts payable12,690

62,530

Equity Capital introduced52,000 AddNet profit12,270

64,270

LessDrawings1,740

62,530

© Pearson Education Limited 2012 6 Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 2, 12 th Edition, Solutions Manual M01_WOOD7886_12_SE_C01.qxd 5/22/12 10:07 AM Page 6

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