The following balances were extracted from the books of Alex Penn on 31 March 2013. $ Equipment (net book value) 40000 Delivery vans (net book value) 22000 Inventory 10670 Trade receivables 11200 Other receivables 4130 Bank overdraft 4200 Trade payables 8800 6% Bank loan (repayable 23 May 2016) 15000 Capital 31 March 2013 70000 Drawings 10000 During the year Penn had purchased non-current assets to the value of $20000. REQUIRED

Mark scheme

Marking points from the official mark scheme (May/June 2013). The mark or mark type is shown in brackets.

1. [2] (a) $13 000
2. [2] (b)(i) 2:1
3. [2] (b)(i) Calculation: Current assets $26 000 / Current liabilities $13 000
4. [2] (b)(ii) 1.17:1
5. [2] (b)(ii) Alternative answer: 0.86:1
6. [2] (b)(ii) Calculation for 1.17:1: (Current assets less inventory) / Current liabilities ($26 000 – $10 670) / ($13 000)
7. [2] (b)(ii) Calculation for 0.86:1: (Current assets – inventory – other payables) / Current liabilities ($26 000 - $10 670 – $4130) / ($13 000)
8. [2] (c) Purchase of non-current assets $20 000
9. [2] (c) Cash withdrawn by Penn
10. [2] (c) Loss from business operations
11. [2] (c) Bank overdraft funds used to help finance purchase of non-current asset
12. [2] (c) Non/late payments by trade receivables
13. [2] (c) Fall in cash sales
14. [3] (d) Bring in more personal capital in the form of cash
15. [3] (d) Consider increasing bank loans
16. [3] (d) Reduce personal drawings
17. [3] (d) Carry out review of non-current assets with a view to selling off surplus to requirements
18. [3] (d) Chase late payers
19. [3] (d) Offer settlement discounts
20. [3] (d) Delay payments to trade payables