Bank account £ £ Realisation: Premises 47,500 Opening balance 28,700 Realisation: Stock 41,100 Creditors 78,300 Realisation: Debtors 26,800 Payment to Mourne 5,400 ______ Payment to Noonan 3,000 115,400 115,400 Capital accounts Mourne Noonan Knight Mourne Noonan Knight £ £ £ £ £ £ Loss on realisation 3,800 3,800 3,800 Opening balance 8,000 6,000 2,000 Knight* 800 600 Current accounts 2,000 1,400 400 Bank 5,400 3,000 Mourne* 800 Noonan* 600 8,000 7,400 44,700 10,000 7,400 3,800 * Garner v. (1904) requires that losses are shared in the ratio of the partners’ capital accounts (not their profit-sharing ratios). A2. Costing for specific orders and continuous processes The following narrative answers are indicative of the main points in the chapter. Distinguish between normal loss and abnormal loss, and explain their costing treatments. The main points are as follows: Normal loss is loss arising from a manufacturing or chemical process through waste, ‘the seepage, shrinkage, or spoilage that can be expected, on the basis of historical studies, to be part of that process. It may be expressed as a weight or volume or in other units appropriate to the process. It is usually not valued but if it is, a notional scrap value is used’ (Law, 2010, p. 299). On the other hand, abnormal loss is loss arising from a manufacturing or chemical process ‘the through abnormal waste, seepage, shrinkage, or spoilage in excess of the normal loss. It may be expressed as a weight or volume or in other units appropriate to the process; it is usually valued on the same basis as the good output’ (Law, 2010, p. 1). Imprint Ltd Imprint Ltd Job 213 Wedding invitations – £ Materials 30 (£5 4 hours) 20 Production overheads (£2.50 4 hours) 10 Production 60 General overheads (20%) 12 72 Profit (25%) 18
Bank account £ £ Realisation: Premises 47,500 Opening balance 28,700 Realisation: Stock 41,100 Creditors 78,300 Realisation: Debtors 26,800 Payment to Mourne 5,400 ______ Payment to Noonan 3,000 115,400 115,400 Capital accounts Mourne Noonan Knight Mourne Noonan Knight £ £ £ £ £ £ Loss on realisation 3,800 3,800 3,800 Opening balance 8,000 6,000 2,000 Knight* 800 600 Current accounts 2,000 1,400 400 Bank 5,400 3,000 Mourne* 800 Noonan* 600 8,000 7,400 44,700 10,000 7,400 3,800 * Garner v. (1904) requires that losses are shared in the ratio of the partners’ capital accounts (not their profit-sharing ratios). A2. Costing for specific orders and continuous processes The following narrative answers are indicative of the main points in the chapter. Distinguish between normal loss and abnormal loss, and explain their costing treatments. The main points are as follows: Normal loss is ‘the loss arising from a manufacturing or chemical process through waste, seepage, shrinkage, or spoilage that can be expected, on the basis of historical studies, to be part of that process. It may be expressed as a weight or volume or in other units appropriate to the process. It is usually not valued but if it is, a notional scrap value is used’ (Law, 2010, p. 299). On the other hand, abnormal loss is ‘the loss arising from a manufacturing or chemical process through abnormal waste, seepage, shrinkage, or spoilage in excess of the normal loss. It may be expressed as a weight or volume or in other units appropriate to the process; it is usually valued on the same basis as the good output’ (Law, 2010, p. 1). Imprint Ltd Imprint Ltd Job 213 – Wedding invitations £ Materials 30 (£5 4 hours) 20 Production overheads (£2.50 4 hours) 10 Production 60 General overheads (20%) 12 72 Profit (25%) 18
Answers-to-practice-questions.docx