MOCK 1 Page 1

Pearson Edexcel International Advanced Level

Time 3 hours
Paper
reference WAC12/01
 

Accounting
International Advanced Level
PAPER 2: Corporate and Management Accounting

Source Booklet
Do not return this Booklet with the question paper. MAY 24

Name________________________________________

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*P66181A*
P66181A
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SECTION A
Answer BOTH questions in this section.
1 Kwale Trucking plc merged with Voi Deliveries plc on 1 April 2022 to form a new
company called KV Logistics plc.
The Statements of Financial Position of Kwale Trucking plc and Voi Deliveries plc at
31 March 2022 are shown below.

Kwale Trucking plc Voi Deliveries plc

£ 000s £ 000s

ASSETS

Non-current assets

Property, plant and equipment 35 000 25 970

Computers 2 700 1 400

Fixtures and fittings 500 900

Motor vehicles 15 400 12 200

53 600 40 470

Current assets

Inventory 110 230

Trade receivables 3 400 2 400

Cash and cash equivalents 810 1 730

4 320 4 360

Total assets 57 920 44 830

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EQUITY AND LIABILITIES

Equity

Ordinary shares of £1 each 5 000 20 000

Share premium 15 000 4 000

Retained earnings 10 120 2 060

General reserve 1 000 500

Total equity 31 120 26 560

Non-current liabilities

Mortgage 18 000 13 000

Bank loans 6 000 4 000

24 000 17 000

Current liabilities

Trade payables 2 150 960

Other payables 650 310

2 800 1 270

Total equity and liabilities 57 920 44 830

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Additional information
KV Logistics plc agreed to take over all of the assets of Kwale Trucking plc at book
value, with the following exceptions.
• Property (being part of property, plant and equipment) was revalued from
£18 000 000 to £22 000 000
• Computers were reduced in value by £600 000
• Fixtures and fittings were valued at £400 000
• All motor vehicles were valued at 80% of their book value.
• Inventory valued at £20 000 was considered to have no value.
• 10% of trade receivables were written off as irrecoverable debts.
All liabilities were taken over at book value.
KV Logistics plc took over all of the assets of Voi Deliveries plc at book value, with the
following exceptions.
• Property (being part of property, plant and equipment) was revalued from
£16 000 000 to £19 000 000
• Computers were reduced in value by £250 000
• Fixtures and fittings were valued at £700 000
• All motor vehicles were valued at 80% of their book value.
• Inventory valued at £30 000 was considered to be worth £14 000
• 10% of trade receivables were written off as irrecoverable debts.
All liabilities were taken over at book value.

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Required
(a) Calculate the value of Kwale Trucking plc after the revaluations.
(9)
The directors of KV Logistics plc offered the following to shareholders in Kwale
Trucking plc.
For every £1 share owned in Kwale Trucking plc, a shareholder received:
• five £1 ordinary shares in KV Logistics plc at a premium of 30 pence (£0.30)
per share
plus
• 50 pence (£0.50) cash.
Required
(b) Calculate the goodwill paid by KV Logistics plc for Kwale Trucking plc.
(6)
(c) Prepare the Realisation Account in the books of Kwale Trucking plc.
(8)
The value of Voi Deliveries plc was agreed at £30 000 000 for the merger.
For every £1 share owned in Voi Deliveries plc, a shareholder received:
• one £1 ordinary share in KV Logistics plc at a premium of 30 pence (£0.30) per
share
plus
• 20 pence (£0.20) cash.
The goodwill paid for Voi Deliveries plc was £3 586 000
Required
(d) Prepare the Statement of Financial Position of KV Logistics plc at 1 April 2022.
(20)
(e) Evaluate which of the two groups of shareholders, Kwale Trucking plc or Voi
Deliveries plc, has benefitted the most from the merger.
(12)

(Total for Question 1 = 55 marks)

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2 Evangelos is a bus driver in the seaside town of Sunnymede. He is considering using

his lottery winnings of £40 000 to set up his own business providing bus tours.
Evangelos has to decide between two possible options.
Option A is to operate tours using an open-top bus around the town.
Option B is to operate tours using a mini-bus to local beauty spots outside the town.
The following information is available for Option A, the open-top bus tours around
the town.
• The tourist season will be 180 days (six months) and there will be four tours
per day.
• Each tour will carry an average of 40 customers.
• Customers will pay £8 for a ticket.
• An open-top bus will be purchased for £40 000 and last for five years before
being sold for £1 000 scrap value.
• The open-top bus will be serviced every two months of the tourist season at a
cost of £360 per service.
• A ticket office will be hired to sell the tickets at a rent of £25 per day.
• A member of staff will be employed to sell the tickets at a salary of £1 920
per month.
• A licence to operate must be paid to the town authorities of £1 250 per month
during the tourist season.
• Fuel costs for each tour will be £35, to be treated as a fixed cost.
• Evangelos will pay himself a wage of 37.5% of all ticket sales.
Required
(a) Calculate the break-even point for Option A, the open-top bus tours around the
town, measured in:
(i) total sales units (total number of customers)
(15)
(ii) total sales revenue.
(2)
(b) Calculate the number of customers needed per tour to break-even.
(3)
(c) Calculate for Option A, for the six-month tourist season, the:
(i) margin of safety in sales units (number of customers)
(3)
(ii) margin of safety as a percentage of sales.
(3)
(d) Calculate the expected profit for Option A, for a six-month tourist season.
(4)

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The following information is available for Option B, the mini-bus tours to local
beauty spots.
• The tourist season will be 180 days (six months) and there will be one tour
per day.
• Each tour will carry an average of 12 customers.
• Customers will pay £25 for a ticket.
• Total fixed costs for the year will be £30 000
• Evangelos will pay himself a wage of 40% of all ticket sales.
Required
(e) Complete, on the graph paper in the Question Paper, a break-even graph for
Option B, the mini-bus tours to local beauty spots, for Evangelos.
Your graph must show the following:
• appropriate axes and scales
• fixed costs
• total costs
• sales revenue
• break-even point measured in the number of customers and sales revenue
• margin of safety measured in the number of customers
• profit for the expected number of customers.
(9)
(f ) Calculate the expected profit for Option B, for a six-month tourist season.
(4)
(g) Evaluate the two possible bus tour options for Evangelos and recommend
one option.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

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SECTION B
Answer THREE questions from this section.
3 Divesocean Hotels plc had the following balances at the start of the financial year on
1 January 2021.

£ 000

Ordinary Shares of £1 32 000

Share Premium 8 000

To expand the business, the directors decided to issue additional ordinary shares to
existing shareholders.
During the year ended 31 December 2021, the following took place:
• On 1 February the company offered 6 000 000 ordinary shares at a price of
£1.25 on the following terms:
– 20 pence (£0.20) on application
– 45 pence (£0.45) on allotment (including the 25 pence
(£0.25) premium)
– 35 pence (£0.35) first call
– 25 pence (£0.25) second and final call
• On 13 March the company had received 8 300 000 applications. The directors
rejected applications for 2 300 000 shares and allotted the shares to the
successful applicants.
• On 24 March monies were returned to the unsuccessful applicants.
• On 30 June the balances due on allotment were fully received.
• On 15 July the first call was made and the amounts were fully received.
• On 31 August the second and final call was made and the amounts were
fully received.

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Required
(a) Prepare the following ledger accounts to record the transactions for the year
ended 31 December 2021.
(i) Ordinary share capital
(6)
(ii) Share premium
(3)
(iii) Application and allotment
(6)
(iv) First call
(2)
(v) Second and final call
(3)
(vi) Bank (relevant extracts to share issue only). A balance is not required at the
year end.
(4)
(b) Evaluate the use of ordinary shares as a method of raising further finance for
Divesocean Hotels plc.
(6)

(Total for Question 3 = 30 marks)

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4 QPKS Heating plc purchases gas boilers from suppliers, which are then sold
to customers.
The company has many stores throughout the country, and is to open its first store in
the North Point area on 1 April 2022.
The following information is available concerning purchases of gas boilers for the
North Point store:
• In the period April to July purchases will be 50 units each month.
• There are four suppliers of the gas boilers who each supply a boiler for £540
• The breakdown of the credit terms given by the four suppliers are:
– Acme sell only for cash and supply 20% of boilers
– Burghley give one month’s credit and supply 40% of boilers
– Crystal give two months’ credit and supply 30% of boilers
– Diamond give three months’ credit and supply 10% of boilers.
• Full advantage is taken of credit terms offered by suppliers.
Required
You are the Cost Accountant for QPKS Heating plc and have to prepare the following
budgets in columnar format.
(a) Prepare, for each of the four months from April to July 2022 for the North Point
store, the:
(i) Purchases budget, in pounds (£)
(2)
(ii) Trade Payables budget, in pounds (£), showing the amount owed to
Burghley, Crystal, and Diamond and the total owed at the end of each of the
four months.
(10)
The following information is available concerning the North Point store:
• QPKS Heating plc will keep one boiler in the store from each supplier on
permanent display to customers starting from April.
• The mark-up on all boilers is 80%
• All purchases, except those on display, are to be sold in the same month
as purchase.
• Sales are made on the following terms:
0 50% are for cash
0 50% have nothing to pay for one month, then will spread payments
equally over a six-month period, with the first payment due one
month after the sale.

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Required
(b) Prepare, for each of the four months from April to July 2022 for the North Point
store, the:
(i) sales budget, in pounds (£)
(2)
(ii) extract from the cash budget showing the amount received from customers.
(10)
(c) Evaluate the terms on which purchases and sales are made by QPKS Heating plc.
(6)

(Total for Question 4 = 30 marks)

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5 You are the Financial Accountant for Valetta Motors plc.

Extracts from the Statements of Financial Position for the last two years are
shown below.

31 December 31 December
2020 2021

£ (000) £ (000)

ASSETS

Non-current assets

Intangible assets 1 900 2 300

Property, plant and equipment at cost 6 439 4 552

Less Provision for depreciation (2 548) (2 146)

Property, plant and equipment carry

3 891 2 406
over

5 791 4 706

Current assets

Inventories 3 651 3 650

Trade receivables 217 209

Other receivables 19 24

Cash and cash equivalents ---------- 113

3 887 3 996

Current liabilities

Bank overdraft 67 ----------

Trade payables 2 281 2 079

Other payables 44 50

Current tax payable 298 272

2 690 2 401

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Additional Information
• On 4 April 2021, equipment that cost £252 000 with a net book value of
£174 000 was sold for £161 000
• On 23 June 2021, property that cost £1 760 000 with depreciation to date of
£525 000 was sold for £1 812 000
• On 25 October 2021, plant was bought for £125 000 by cheque.
• All Property, plant and equipment is kept in the Property, plant and
equipment Account at cost. All sales of non-current assets are entered into the
Disposals of non-current assets account.
• On 13 December 2021, an intangible asset was purchased for £595 000
by cheque.
• The bank overdraft averaged £48 000 for 5 months of the year at an interest
rate of 10% per annum.
• Profit after interest for the year ended 31 December 2021 was £1 432 000
Required
(a) Prepare, for the year ended 31 December 2021, the:
(i) Property, plant and equipment at cost Account
(4)
(ii) Operating Activities section from the Statement of Cash Flows, in
accordance with International Accounting Standard (IAS) 7 Statement of
Cash Flows (revised).
(20)
(b) Evaluate the usefulness of preparing a Statement of Cash Flows for
Valetta Motors plc.
(6)

(Total for Question 5 = 30 marks)

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6 Little Ben plc manufactures watches. It has been normal practice by senior
management to ask the accountant to value inventory using both the marginal
costing method and the absorption costing method.
The following information is available for the year ended 31 December 2021:
Opening inventory 5 950 units
Opening inventory value Marginal costing £160 650
Absorption costing £190 400
Production 76 000 units for the year
Semi-Variable costs £174 800 fixed element per year plus £0.65 per unit
of production
Fixed overheads £19 000 per month
Direct materials £12.10 per unit
Direct labour 1 hour 45 minutes work per unit at a wage rate of
£8.40 per hour
Sales 76 830 units for the year
Selling price £52 per unit
Inventory is valued using First In First Out (FIFO).
Required
(a) Prepare for management, in columnar format, a Statement of Profit or Loss and
Other Comprehensive Income for the year ended 31 December 2021, showing
inventory valuation using:
• marginal costing
• absorption costing.
(18)
(b) Explain:
(i) one disadvantage of marginal costing
(2)
(ii) two disadvantages of absorption costing.
(4)
A new customer is considering buying 5 000 watches but is only prepared to pay
£30 per unit.
(c) Evaluate whether Little Ben plc should accept the offer from the potential
new customer.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

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