Series 4 2013

Question 1
A bank successfully tenders 1,976,000 for a 2,000,000 Treasury bill that runs for three months and is
to be redeemed at par.
(a)
Calculate the rate of simple interest per annum received on the investment in the Treasury bill.
(4 marks)
The
bank tenders in
4,650,000
for a 5,000,000
Treasury
bill that runs for two years and is due to be
Certificate
Advanced
Business
Calculations
redeemed at par.
ASE3003
(b)
Calculate:
Level 3(i)
the overall percentage interest received on the two-year investment in the Treasury bill
(2 marks)
the rate of compound
(ii) 21 November
Thursday
2013 interest per annum that this represents.
(3 marks)
Time allowed: 3 hours
The bank buys a 2,500,000 Treasury bill for 2,250,000. One year later, following a bail out agreement,
the bank redeems the bill for 1,800,000.
(c)
Express the loss as a percentage of the investment.
Information
There are 8 questions in this examination.
Total marks available: 100
(2 marks)
(Total 11 marks)
Question 2
Instructions
Steve purchased units in a unit trust with an offer price of 400 per unit, and sold the units after three
notper
open
this paper until you are told to do so by the supervisor.
at Do
years
451
unit.
(a)
Answer all questions.

Express the increase in price of the units as a percentage increase per annum, based on simple
interest.
Write your answers in blue or black ink/ballpoint. You can
only use a pencil for graphs, charts,
(2 marks)
diagrams, etc.
Steve bought 1,750 units in another unit trust and sold them later at 42.80 each, the total amount
Please
written
clearly.
received
being ensure
8,400your
moreanswers
than he are
bought
them
for.
(b)
Begin
yourthe
answer
to each
question
on a paid
new per
page.
Calculate
original
amount
that Steve
unit.
All answers must be correctly numbered but need not be in numerical order.
(2 marks)
Steve purchased 25,000 3% preference shares (nominal value 5 per share) at 7.77 per share.
Workings must be shown.
(c)
Calculate:
You can use mathematical and statistical tables.
(i)
the total cost of the shares
You may use a calculator provided the calculator gives no printout, has no word display facilities,
is
anddividend
cordless.received
The provision
of batteries
(ii)silent the
by Steve
each yearand their condition is your responsibility.
(2 marks)
(2 marks)
(iii)
his annual dividend as a percentage of the cost of investment.

(2 marks)
100 of government stock can be bought for 88. Steve bought government stock and found that the
nominal value was 28,800 more than the amount he paid for it.
(d)
Calculate how much Steve paid for the stock.

(3 marks)
(Total 13 marks)
ASE3003/4/13
Page 21 of 7
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Question 3
Manufacturer A sells product P at 66 per unit of product.
Manufacturing costs are as follows:
Fixed cost per period
Variable cost per unit of product
(a)
1,955,000
49
Calculate:
(i)
the profit or loss at an output of 150,000 units of product per period
(ii)
the break-even point in units of product per period.
(4 marks)
(3 marks)
During a sales period, manufacturer A makes and sells 65,000 units of product Q.
During this period:
the fixed costs of distribution are 78,000 per period
the variable costs of distribution are 4.90 per unit of product.
(b)
Calculate the total cost of distribution per unit of product during this period.
(2 marks)
In another period, manufacturer A makes and sells 125,000 units of product R at a selling price of
27.50, and makes a profit of 126,150.
The variable costs are 18.80 per unit of product R.
(c)
Calculate the break-even point in units of product per period.

(3 marks)
(Total 12 marks)
Question 4
The following information relates to business B in the most recent financial year:
Overheads
Turnover (Net sales)
Capital
Gross profit
Stock at start of year
Stock at end of year
42,357
299,250
420,900
71,820
17,000
14,500
Calculate:
(a)
the gross profit percentage on turnover

(2 marks)
(b)
the percentage return on capital employed

(3 marks)
(c)
the average stock held

(2 marks)
(d)
the annual rate of stockturn

(3 marks)
(e)
the average number of weeks that items remain in stock.

(2 marks)
(Total 12 marks)
ASE3003/4/13
Page 3 of 7

Question 5
A business owner has a choice of two investment projects.
The estimated life of each project is five years.
Further information is as follows:
Initial cost
Repair and maintenance costs per annum
Revenue returns
(a)
Year 1
Year 2
Year 3
Year 4
Year 5
Project One
1,000,000
Project Two
1,700,000
120,000
200,000
200,000
350,000
500,000
500,000
250,000
250,000
750,000
750,000
750,000
500,000
Calculate the average rate of return for each project.

(7 marks)
The owner estimates the following figures for Investment Project P:
2,000,000
400,000
750,000
750,000
500,000
Cost (year 0)
Year 1 Net cash inflow
(b)
Using the following table of discounting factors, calculate the net present value for Project P.
Discounting factor
Year 1
Year 2
Year 3
Year 4
0.901
0.812
0.731
0.659
(4 marks)
(c)
Calculate the percentage rate of return per annum represented by this table.
(2 marks)
(Total 13 marks)
ASE3003/4/13
Page 4 of 7

Question 6
In bankruptcy A, unsecured creditors receive 0.40 in the pound.
A lender is owed 250,000, of which 30% is secured against assets.
(a)
Calculate:
(i)
the amount received by the lender as a secured creditor
(ii)
the amount received by the lender as an unsecured creditor.
(2 marks)
(3 marks)
In bankruptcy B:
the total liabilities are 820,000
the amount owed to secured creditors is 395,000
an unsecured creditor who is owed 60,000 receives 21,000
the expenses of winding up the business are 11,250.
(b)
Calculate:
(i)
the rate in the pound payable to unsecured creditors
(ii)
how much is owed to unsecured creditors
(iii)
the total assets realised.
(2 marks)
(2 marks)
(2 marks)
Lucy is owed 44,000 as an unsecured creditor in bankruptcy C, which pays 0.17 in the pound to
unsecured creditors.
She is also owed 76,700 in bankruptcy D, as the sole secured creditor.
The total assets of D, after winding up expenses, realised 28,500.
(c)
Calculate how much Lucy receives in total.

(2 marks)
(Total 13 marks)
ASE3003/4/13
Page 5 of 7

Question 7
Machine A costs 195,000 and is estimated to have a life of four years and a scrap value of 15,000. It is
depreciated by the equal instalment method.
(a)
(i)
Calculate the annual depreciation.

(2 marks)
(ii)
Prepare a depreciation schedule for years 0 to 4 that shows:

the annual depreciation
the accumulated depreciation
the book value at the end of each year.
(4 marks)
Machine B is depreciated by the reducing balance (diminishing balance) method.

The depreciation schedule for the first three years is as follows:
Annual
depreciation
Accumulated
depreciation
72,000
39,600
21,780
?
111,600
133,380
Year 0 (Initial cost)

Year 1
Year 2
Year 3
(b)
Book value
at end of year
?
?
48,400
26,620
Calculate:
(i)
the accumulated depreciation in year 1
(ii)
the book value at the end of year 1
(iii)
the initial cost of machine B
(iv)
the annual rate of depreciation.
(1 mark)
(2 marks)
(2 marks)
(2 marks)
(Total 13 marks)
ASE3003/4/13
Page 6 of 7

Question 8
An index of prices at January 2013, based on January 2000 = 100, is shown below:
Item A
Item B
Item C
(a)
Weight
Index
119
97
84
165
147
99
(i)
Calculate the weighted index for the three items taken together.
(ii)
Explain what the index of 165 for item A represents.
(5 marks)
(2 marks)
A chain base index of production, starting from the year 2009, has the following values:
(b)
Year
2009
2010
2011
2012
Index
100
110
105
88
(i)
State in which year production was greatest.
(ii)
Express the production in 2011 as a quantity relative, based on year 2009 = 1.
(iii)
Calculate the percentage increase or decrease in production from 2010 to 2012.
(iv)
State in which of the four years production was least.
(1 mark)
(2 marks)
(2 marks)
(1 mark)
(Total 13 marks)
ASE3003/4/13
Page 7 of 7


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Question 1

Time allowed: 3 hours

There are 8 questions in this examination.

Total marks available: 100

Answer all questions.

his annual dividend as a percentage of the cost of investment.

Calculate how much Steve paid for the stock.

Pearson Education Ltd 2013

the profit or loss at an output of 150,000 units of product per period

the break-even point in units of product per period.

Calculate the break-even point in units of product per period.

the gross profit percentage on turnover

the percentage return on capital employed

the average stock held

the annual rate of stockturn

the average number of weeks that items remain in stock.

Pearson Education Ltd 2013

Calculate the average rate of return for each project.

The owner estimates the following figures for Investment Project P:

Pearson Education Ltd 2013

the amount received by the lender as a secured creditor

the amount received by the lender as an unsecured creditor.

the rate in the pound payable to unsecured creditors

how much is owed to unsecured creditors

the total assets realised.

Calculate how much Lucy receives in total.

Pearson Education Ltd 2013

Calculate the annual depreciation.

Prepare a depreciation schedule for years 0 to 4 that shows:

Machine B is depreciated by the reducing balance (diminishing balance) method.

Year 0 (Initial cost)

the accumulated depreciation in year 1

the book value at the end of year 1

the initial cost of machine B

the annual rate of depreciation.

Pearson Education Ltd 2013

Explain what the index of 165 for item A represents.

State in which year production was greatest.

Express the production in 2011 as a quantity relative, based on year 2009 = 1.

Calculate the percentage increase or decrease in production from 2010 to 2012.

State in which of the four years production was least.

Pearson Education Ltd 2013

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