Question 1

Adams plc buys and sells handbags for cash. It buys them for £20 each and sells them for £35 each. During April, its first month of trading, the company bought 50 handbags and had 10 handbags remaining in inventory at the month’s end.

Ignoring any other expenses or payments, which of the following statements is true for April?

Question 2

Jones plc bought a motor vehicle for £26,000. The vehicle has an estimated useful life of 3 years and an estimated residual value of £3,500.

If depreciation is to be provided on a straight-line basis, which of the following statements is true?

Question 3

Howell Ltd made an operating profit of £4,500,000 for the year ended 31 December 2021. An extract from the company’s statement of financial position as of 31 December 2021, was as follows:

The company has no long-term loans. The return on capital employed for the year ended 31 December 2021 was:

Question 4

A company has a gross profit ratio of 30%. The trade receivables collection period for the company has been calculated at 62 days. If the actual gross profit earned was £360,000, what were the trade receivables?

Question 5

The cost of the inventory items of Robertson Ltd at the end of the year 2021 corresponds to £25,000. The selling price is £30,000 but the costs related to the selling and delivery of the inventory items are £7,000. The value of the inventory at the end of the year 2021 is:

Question 6

The manufacturing plant at Daydream plc has three departments. The budgets for each department is shown below:

Calculate the production overhead for each department.

Question 7

Bates Ltd makes and sells 200,000 gadgets for children a year for £15 each. Fixed costs are £360,000 a year and variable costs are £12 per unit.

If Bates Ltd can increase the volume of sales to 250,000 gadgets by reducing its selling price to £14.50. What is the breakeven by volume?