1. Jerry Mann set up a business on 1 May 2010 and has recently completed his first year’s trading.  He has heard you are studying an accounting module at Edinburgh Napier and has asked you to help him prepare his accounts.


He initially put £30,000 into a business bank account and put in a further £10,000 on 1 December 2010. He took personal drawings of only £300 a week throughout the year as he had some savings.


On 1 May 2010 he purchased a small delivery van costing £12,000 which he thought would last 3 years and some computer equipment costing £4,000 with an expected five year life. He spent £3,000 on a series of advertisements in the local newspaper – getting a special rate by paying in advance up to the end of October 2012 and £10,000 on a stock of goods for sale.


During the year his receipts and payments were as follows:

Receipts from customers (cash sales of goods)               85,000

Payments to suppliers for additional stock of goods        40,000

Utilities bills paid (electricity and telephone)                       6,000

Business rates paid to 31 March 2011                                 2,400

Van running costs paid                                                           4,000

Postages and packing paid                                                    2,600

Sundry expenses paid                                                            6,000


At 30 April 2011 he had unpaid invoices from suppliers of £5,000 and the telephone company of £500. He had stock of £400 worth of unused packing materials and £2,000 stock of unsold goods (at cost price). He’s not been invoiced yet for the 2011/12 rates but is expecting a 10% increase.



3 a)    Prepare a profit and loss account to show Jerry’s profit or loss for the year ended 30 April 2011.                                                                                                                     (6 marks)


3 b)    Prepare a balance sheet for the business at 30 April 2011 including (as a note) your calculation of the cash / bank balance.                                                                     (6 marks)


All calculations must be shown

State any assumptions that you make                             TOTAL (12 marks)


4.       Megan McDonald is celebrating her 30th birthday party in October 2011 and plans a weekend away for herself and some of her closest friends in celebration. She has investigated several activities and has narrowed it down to three. Details are as follows:


Activity 1 – Shopping Experience

The train fare from Edinburgh to Glasgow is £7.20 single or £16.00 return. Rooms at the Travel Inn are £48 per night for a twin room. Megan would expect her friends to buy their own breakfasts and lunches but plans to treat them to a meal out on the Saturday night – there’s a good Spanish restaurant for £15 per person but the wine is £16 a bottle or an Italian where the food costs £20.00 per person and house wine is £12 a bottle.


Activity 2 – Wilderness Adventure

Megan and her friends would drive to the Highlands and car share (maximum 4 people per car) and petrol costs would be about £25 per car. A basic cottage with room for 8 people costs £300 for the weekend and a guide for the trekking would charge £80 for the day. As the cottage is isolated they’d take their own food and drink at a cost of about £25 per person.


Activity 3 – Pony Trekking

This would be a day trip on the Saturday and the trekking centre can be reached by bus costing £3.50 for a day ticket. The cost per person would be £50, reduced to £45 per person if 6 or more people are booked as a group. Lunch would cost £6 per person and afterwards Megan would have everyone back to her house for a takeaway and ‘sleepover’ with a fish supper (£5 each) and some drinks costing about £15 each.



4 a) Prepare a statement in columnar form, comparing the three venues and showing the total cost and the cost per person if Megan invites 4 friends.

                                                                                                     (5 marks)

4 b)    Calculate the costs that would be incurred (total and per person) if she invites 7 friends.            (5 marks)

4 c)    Explain the difference between fixed costs and variable costs and how they affect the overall costs per person.                                                                                    (3 marks)



All calculations must be shown and explain any assumptions that you have made.

    TOTAL (13 marks)



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