Define the term price discrimination.

Using Table 2, calculate X (no working required).

Using Table 2, calculate the current ratio for 2019 (no working required).

Using Table 2, prepare a balance sheet for the year ending 31 December 2019.

Explain the possible changes to KPJ’s balance sheet for 2019 if KPJ spent $30 000 on a new digital projector.

PLEASE NOTE: Price Discrimination is not included in the syllabus for 2024 exams onward. Related parts of this multi-part question may be used.

Price discrimination is when a firm charges a different price to different groups of consumers for an identical good or service.

Award [1] for a basic definition conveying the idea that it allows a business to sell the same goods/services at different prices. Award an additional [1] for stating the differing prices are for different groups of consumers that can be separated in some way.

A candidate may achieve the second mark through the use of a good exemplar, eg by explaining that a cinema charges higher prices for adults than for children.

X = Gross profit

Gross profit = Sales revenue − costs of goods sold

$=\$175 000 - \pounds 122 000 = \$53 000$

Award [1] for correct answer with or without working.

$\mathrm{Current} \mathrm{ratio}=\frac{\mathrm{current} \mathrm{assets}}{\mathrm{current} \mathrm{liabilites}}$

$=\frac{\$8330}{\$6800}=1.23$

Award [4] if the candidate constructs an accurate balance sheet (that balances) according to the IB prescribed format.

Award [3] for a largely accurate balance sheet that balances, according to a generally accepted format, such as the vertical format above or the horizontal model typically used in the United States.

Award [2] if the candidate constructs a largely recognizable balance sheet but it does not balance, or it has two major problems of classification.

Award [1] if the candidate conveys some idea of what a balance sheet is.

For full marks, the balance sheet must be dated. Failure to date the balance sheet is an error and, therefore, the maximum award that an undated balance sheet could receive is [3].

The purchase of a new digital projector will increase net fixed assets by $30 000.
Award [1] for recognizing that the net fixed assets will increase. Award [1] if the candidate then addresses the offset, which could be

• a reduction in cash
• an increase in long-term debt (KPJ takes outa long-term loan).

Accept any other reasonable suggestion for financing the projector. Do not accept a short-term loan or expansion of trade credit.

The two potential marks for this question are independent of one another. In other words, a candidate may address the financing (the candidate suggests taking out a bank loan) and receive [1] even if s/he did not mention that net fixed assets will increase. Or, the candidate could state that net fixed assets will increase but not mention the offset, in which case the candidate would receive [1].

Maximum award: [2].

Many candidates performed well on this question.

Many candidates choosing question 2 answered this question correctly.

Many candidates choosing question 2 answered this question correctly, though some lost marks because they do not know how to round correctly.

Many candidates correctly created a balance sheet, though many struggled to do so correctly. Some candidates had virtually no idea what a balance sheet was.

Responses to this question were mixed. Some students suggested that the new digital projector would increase current assets. Some candidates did not indicate what the offsetting entry would be.