A-Level Past Papers – AccountingA-Level Examinations October/November 2010

Paper Pages

Multiple ChoiceP1 - 9706/11 2 - 13P1 – 9706/12 14 - 25P1 – 9706/13 26 – 37

Structured QuestionsP2 – 9706/21 38 – 53P2 – 9706/22 54 – 69P2 – 9706/23 70 – 85

Multiple ChoiceP3 – 9706/31 86 – 97P3 – 9706/32 98 – 109P3 – 9706/33 110 – 121

Problem SolvingP4 – 9706/41 122 – 129P4 – 9706/42 130 – 137P4 – 9706/43 138 – 145

www.sheir.org

This document consists of 12 printed pages.

IB10 11_9706_11/6RP © UCLES 2010 [Turn over

*3054242948*

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Subsidiary Level and Advanced Level

ACCOUNTING 9706/11

Paper 1 Multiple Choice October/November 2010

1 hour

Additional Materials: Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.

Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you.

There are thirty questions on this paper. Answer all questions. For each question there are four possible answers A, B, C and D.

Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.

Any rough working should be done in this booklet.

Calculators may be used.

www.sheir.org

www.sheir.org

2

© UCLES 2010 9706/11/O/N/10

1 On 1 January 2009 a business had prepaid rent of $50. During 2009, three rent payments were made of $250 each. On 31 December 2009, the business still owes $200 rent on account for 2009.

The business owner has charged the rent payments made during 2009 in his income (profit and loss) account.

What is the effect on net profit?

A $200 too high

B $200 too low

C $250 too high

D $250 too low 2 A customer paid a deposit in advance for goods to be supplied at a later date.

How should this be recorded in the seller’s books?

debit credit

A cash customer

B cash sales

C customer prepayment

D customer sales

3 Non current (fixed) assets of a company were:

start of year

$ end of year

$

at cost 460 000 505 000

cumulative depreciation 215 000 237 000

net book value 245 000 268 000

During the year non current (fixed) assets costing $92 000 were purchased and non current (fixed) assets with a net book value of $16 000 were sold.

What was the depreciation charge for the year?

A $22 000 B $23 000 C $53 000 D $69 000

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3

© UCLES 2010 9706/11/O/N/10 [Turn over

4 What does the application of the accounting principle of consistency ensure?

A that all losses are provided for

B that assets are recorded at their actual cost

C that financial statements are produced annually

D that profits are calculated the same way each year 5 At 30 June the balance sheet of a business includes the following.

$

trade receivables (debtors) 46 000

provision for doubtful debts 5 % 2 300

During July, sales of $350 000 were made of which 20 % were in cash. Credit customers paid $303 800 after deducting a 2 % cash discount.

How much did the trade receivables (debtors) owe to the business at 31 July?

A $15 200 B $16 000 C $22 200 D $76 000 6 Which error will not affect the trial balance?

A posting of $3000 purchases to the debit of the motor vehicle account

B posting of $3000 purchases to the credit of the motor vehicle account

C posting of $3000 road tax refund to the debit of the motor vehicle account

D posting of $3000 sales to the debit of the motor vehicle account 7 Closing inventory (stock) has been overvalued.

What is the effect on the financial statements?

net current assets net profit

A no effect understated

B overstated no effect

C overstated overstated

D understated understated

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4

© UCLES 2010 9706/11/O/N/10

8 The trade receivable (debtors) control account of Y shows a balance of $14 320.

Customer X, who owes Y $1000, has also supplied Y with $400 of goods.

The supply of goods, $400, is to be offset by Y.

What is the corrected trade receivable (debtors) control account balance?

A $13 720 B $13 920 C $14 720 D $14 920 9 An electricity accrual of $375 was treated as a prepayment in preparing a trader’s income (profit

and loss) account.

What was the effect on profit?

A overstated by $375

B overstated by $750

C understated by $375

D understated by $750 10 At the end of a financial year the following information is available.

$

sales 200 000

opening inventory (stock) 15 000

closing inventory (stock) 18 000

If the business makes a standard mark-up of 25 %, what were the purchases?

A $147 000 B $153 000 C $157 000 D $163 000 11 For the eleven months ended 31 August 2009, snack bar takings were correctly recorded at

$109 340. For September 2009, the snack bar takings were mixed up with other income. The snack bar profit margin was 30.%.

The table shows figures for the snack bar for September 2009.

$

opening inventory (stock) at cost 6 303

purchases 8 844

closing inventory (stock) at cost 7 370

What was the gross profit of the snack bar for the year ended 30 September 2009?

A $27 566 B $36 135 C $36 593 D $43 912

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5

© UCLES 2010 9706/11/O/N/10 [Turn over

12 Information relating to a club’s subscription is:

$

received during the year 20 000

paid in advance in the previous year 2 000

paid in advance during the current year 1 000

There were no subscriptions in arrears at the start or end of the year.

Individual subscriptions have remained constant at $500 per annum for the last two years.

How many members does the club have?

A 38 B 40 C 42 D 44 13 X and Y are in partnership, sharing residual profits and losses equally after the payments below

are made.

1 2 % interest is charged on partners’ drawings

2 salary to Y of $10 000

The partners’ drawings for the year were:

X $12 000

Y $8000

The net profit for the current year is $52 000.

How much will each partner receive in share of residual profits?

A $10 800 B $11 200 C $20 800 D $21 200

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6

© UCLES 2010 9706/11/O/N/10

14 The table shows data for a manufacturing company for a year.

$

office salaries 34 500

factory wages 115 000

depreciation on plant 3 700

depreciation on office equipment 1 500

cost of raw materials 89 600

royalties paid 4 200

closing inventory (stock) of completed goods 5 100

What is the production cost of completed goods for the year?

A $203 000 B $208 300 C $212 500 D $214 000 15 A company has the following current assets and current liabilities.

$

bank deposit account 6 000

bank overdraft 4 500

loan interest payable 2 500

deposits from customers (for orders) 1 500

loans to employees 4 000

trade payables (creditors) 9 000

trade receivables (debtors) 12 000

What is the amount of the net current assets?

A $(3500) B $4500 C $7500 D $13 500 16 X started a business 3 years ago and now has a capital of $175 000.

Over that period his profits have been $73 000 and his drawings $52 000. In year 2 he introduced cash of $35 000 and in year 3 he took out of the business, for his own use, a non current (fixed) asset with a net book value of $4000.

How much capital did he start the business with?

A $67 000 B $115 000 C $123 000 D $158 000

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7

© UCLES 2010 9706/11/O/N/10 [Turn over

17 A business has two departments, men’s clothing and ladies’ clothing. The following information is available.

men’s department ladies’ department

sales assistants 7 9

floor space 160 m2 200 m2

value of non current (fixed) assets $59 000 $61 000

annual sales $450 000 $750 000

The cost of heating and lighting is $17 692.

What is the cost of heating and lighting for the men’s department?

A $6634.50 B $7740.25 C $7863.11 D $8698.57 18 A company makes a bonus issue of shares.

What is the effect on the net assets and the reserves in the balance sheet?

net assets reserves

A increase decrease

B increase unchanged

C unchanged decrease

D unchanged increase

19 The table shows extracts from the trial balance of a company at 31 December 2009.

$

ordinary share capital 750 000

8 % preference shares 250 000

6 % debentures (2015) 150 000

bank loan repayable (2012) 75 000

bank overdraft 110 000

mortgage on buildings (repayable 2010) 120 000

What is the total of non current liabilities in the balance sheet at 31 December 2009?

A $195 000 B $225 000 C $345 000 D $595 000

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8

© UCLES 2010 9706/11/O/N/10

20 A company’s share capital and reserves are:

$

non current (fixed) assets 250 000

net current assets 125 000

375 000

share capital and reserves

150 000 shares $1 each 150 000

share premium 75 000

general reserve 125 000

profits retained 25 000

375 000

The directors propose to issue bonus shares on the basis of one $1 share for every three already held. Following this the directors intend to make a rights issue on the basis of one new $1 share for every four shares held, at a premium of $0.20 per share.

What will the total net assets of the company be after the share issues?

A $425 000 B $435 000 C $475 000 D $485 000 21 A business has current liabilities of $4000 at its year end.

The quick (acid test) ratio is 1.5 : 1

The current ratio is 2.25 : 1

What is the value of inventory (stock) held at the year end?

A $3000 B $4000 C $9000 D $15 000 22 A company’s gross profit ratio for the year ended 31 December 2008 was 25 %. This increases to

28 % for the year ended 31 December 2009.

What could have been responsible for the increase?

A an increase in the cost of purchases during 2009

B an increase in the volume of sales during 2009

C an over-valuation of inventory (stock) as at 31 December 2009

D an under-valuation of inventory (stock) as at 31 December 2009

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9

© UCLES 2010 9706/11/O/N/10 [Turn over

23 A business has the following assets and liabilities.

$000 $000

non current (fixed) assets 420

inventory (stocks) 120

trade receivables (debtors) 310

430

trade payables (creditors) (220)

net current assets 210

total assets less current liabilities 630

long term loan (130)

net assets 500

What is the business's quick (acid test) ratio?

A 1.41 : 1 B 1.95 : 1 C 2.43 : 1 D 3.86 : 1 24 The table shows the year end information for three companies.

company sales

$ operating profit as %

of all sales capital employed

$

X 500 000 15 100 000

Y 200 000 8 40 000

Z 400 000 10 80 000

How should the companies rank in order of return on the actual capital employed?

return on capital employed

highest lowest

A X Z Y

B Y Z X

C Z X Y

D Z Y X

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10

© UCLES 2010 9706/11/O/N/10

25 In a job costing system, what is the correct entry to record the return of unused direct materials from production to stores?

debit credit

A cost of sales work in progress

B stores control finished goods

C stores control work in progress

D work in progress stores control

26 A company manufactures two products.

product X

$ product Y

$

selling price 20 30

direct labour (per unit) 10 20

direct materials (per unit) 4 2

Total fixed costs are $48 000. Only 3000 units of Y can be made and sold.

How many units of product X must be made and sold to break even?

A 1800 B 3000 C 4000 D 8000 27 A factory produces a product with a variable cost of $0.60 per unit.

Fixed costs are $15 000 per quarter, including rent of $6000 per quarter.

If more than 20 000 units are made per quarter, additional space is required which increases the rent by 50 %.

What is the total cost per unit of producing 30 000 units in a quarter?

A $0.60 B $0.90 C $1.10 D $1.20

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11

© UCLES 2010 9706/11/O/N/10 [Turn over

28 A manufacturer has 700 units of finished goods in stock on 1 March.

On 31 March the total number of units in stock is 770. At present, stock is valued using the total costing method.

What would be the effect on the operating profit if the marginal costing method is used for stock valuation?

A increase operating profit

B no change in operating profit

C no change in operating profit but a 10 % increase in gross profit

D reduce operating profit 29 A job cost sheet showed the following estimates.

$

materials 680

labour at $20 per hour 200

overheads at $10 per labour hour 100

profit 280

price of job 1 260

The job actually took 25 % more labour hours than were estimated.

What was the profit?

A $205 B $230 C $330 D $355

www.sheir.org

12

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2010 9706/11/O/N/10

30 The diagram shows a break-even chart.

Y

X

number of units

$

0

What is indicated by the line XY?

A total costs

B total fixed costs

C total sales

D total variable costs

www.sheir.org

This document consists of 12 printed pages.

IB10 11_9706_12/RP © UCLES 2010 [Turn over

*2013075856*

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Subsidiary Level and Advanced Level

ACCOUNTING 9706/12

Paper 1 Multiple Choice October/November 2010

1 hour

Additional Materials: Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.

Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you.

There are thirty questions on this paper. Answer all questions. For each question there are four possible answers A, B, C and D.

Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.

Any rough working should be done in this booklet.

Calculators may be used.

www.sheir.org

2

© UCLES 2010 9706/12/O/N/10

1 On 1 January 2009 a business had prepaid rent of $50. During 2009, three rent payments were made of $250 each. On 31 December 2009, the business still owes $200 rent on account for 2009.

The business owner has charged the rent payments made during 2009 in his income (profit and loss) account.

What is the effect on net profit?

A $200 too high

B $200 too low

C $250 too high

D $250 too low 2 A customer paid a deposit in advance for goods to be supplied at a later date.

How should this be recorded in the seller’s books?

debit credit

A cash customer

B cash sales

C customer prepayment

D customer sales

3 Non current (fixed) assets of a company were:

start of year

$ end of year

$

at cost 460 000 505 000

cumulative depreciation 215 000 237 000

net book value 245 000 268 000

During the year non current (fixed) assets costing $92 000 were purchased and non current (fixed) assets with a net book value of $16 000 were sold.

What was the depreciation charge for the year?

A $22 000 B $23 000 C $53 000 D $69 000

www.sheir.org

3

© UCLES 2010 9706/12/O/N/10 [Turn over

4 What does the application of the accounting principle of consistency ensure?

A that all losses are provided for

B that assets are recorded at their actual cost

C that financial statements are produced annually

D that profits are calculated the same way each year 5 At 30 June the balance sheet of a business includes the following.

$

trade receivables (debtors) 46 000

provision for doubtful debts 5 % 2 300

During July, sales of $350 000 were made of which 20 % were in cash. Credit customers paid $303 800 after deducting a 2 % cash discount.

How much did the trade receivables (debtors) owe to the business at 31 July?

A $15 200 B $16 000 C $22 200 D $76 000 6 Which error will not affect the trial balance?

A posting of $3000 purchases to the debit of the motor vehicle account

B posting of $3000 purchases to the credit of the motor vehicle account

C posting of $3000 road tax refund to the debit of the motor vehicle account

D posting of $3000 sales to the debit of the motor vehicle account 7 Closing inventory (stock) has been overvalued.

What is the effect on the financial statements?

net current assets net profit

A no effect understated

B overstated no effect

C overstated overstated

D understated understated

www.sheir.org

4

© UCLES 2010 9706/12/O/N/10

8 The trade receivable (debtors) control account of Y shows a balance of $14 320.

Customer X, who owes Y $1000, has also supplied Y with $400 of goods.

The supply of goods, $400, is to be offset by Y.

What is the corrected trade receivable (debtors) control account balance?

A $13 720 B $13 920 C $14 720 D $14 920 9 An electricity accrual of $375 was treated as a prepayment in preparing a trader’s income (profit

and loss) account.

What was the effect on profit?

A overstated by $375

B overstated by $750

C understated by $375

D understated by $750 10 At the end of a financial year the following information is available.

$

sales 200 000

opening inventory (stock) 15 000

closing inventory (stock) 18 000

If the business makes a standard mark-up of 25 %, what were the purchases?

A $147 000 B $153 000 C $157 000 D $163 000 11 For the eleven months ended 31 August 2009, snack bar takings were correctly recorded at

$109 340. For September 2009, the snack bar takings were mixed up with other income. The snack bar profit margin was 30.%.

The table shows figures for the snack bar for September 2009.

$

opening inventory (stock) at cost 6 303

purchases 8 844

closing inventory (stock) at cost 7 370

What was the gross profit of the snack bar for the year ended 30 September 2009?

A $27 566 B $36 135 C $36 593 D $43 912

www.sheir.org

5

© UCLES 2010 9706/12/O/N/10 [Turn over

12 Information relating to a club’s subscription is:

$

received during the year 20 000

paid in advance in the previous year 2 000

paid in advance during the current year 1 000

There were no subscriptions in arrears at the start or end of the year.

Individual subscriptions have remained constant at $500 per annum for the last two years.

How many members does the club have?

A 38 B 40 C 42 D 44 13 X and Y are in partnership, sharing residual profits and losses equally after the payments below

are made.

1 2 % interest is charged on partners’ drawings

2 salary to Y of $10 000

The partners’ drawings for the year were:

X $12 000

Y $8000

The net profit for the current year is $52 000.

How much will each partner receive in share of residual profits?

A $10 800 B $11 200 C $20 800 D $21 200

www.sheir.org

6

© UCLES 2010 9706/12/O/N/10

14 The table shows data for a manufacturing company for a year.

$

office salaries 34 500

factory wages 115 000

depreciation on plant 3 700

depreciation on office equipment 1 500

cost of raw materials 89 600

royalties paid 4 200

closing inventory (stock) of completed goods 5 100

What is the production cost of completed goods for the year?

A $203 000 B $208 300 C $212 500 D $214 000 15 A company has the following current assets and current liabilities.

$

bank deposit account 6 000

bank overdraft 4 500

loan interest payable 2 500

deposits from customers (for orders) 1 500

loans to employees 4 000

trade payables (creditors) 9 000

trade receivables (debtors) 12 000

What is the amount of the net current assets?

A $(3500) B $4500 C $7500 D $13 500 16 X started a business 3 years ago and now has a capital of $175 000.

Over that period his profits have been $73 000 and his drawings $52 000. In year 2 he introduced cash of $35 000 and in year 3 he took out of the business, for his own use, a non current (fixed) asset with a net book value of $4000.

How much capital did he start the business with?

A $67 000 B $115 000 C $123 000 D $158 000

www.sheir.org

7

© UCLES 2010 9706/12/O/N/10 [Turn over

17 A business has two departments, men’s clothing and ladies’ clothing. The following information is available.

men’s department ladies’ department

sales assistants 7 9

floor space 160 m2 200 m2

value of non current (fixed) assets $59 000 $61 000

annual sales $450 000 $750 000

The cost of heating and lighting is $17 692.

What is the cost of heating and lighting for the men’s department?

A $6634.50 B $7740.25 C $7863.11 D $8698.57 18 A company makes a bonus issue of shares.

What is the effect on the net assets and the reserves in the balance sheet?

net assets reserves

A increase decrease

B increase unchanged

C unchanged decrease

D unchanged increase

19 The table shows extracts from the trial balance of a company at 31 December 2009.

$

ordinary share capital 750 000

8 % preference shares 250 000

6 % debentures (2015) 150 000

bank loan repayable (2012) 75 000

bank overdraft 110 000

mortgage on buildings (repayable 2010) 120 000

What is the total of non current liabilities in the balance sheet at 31 December 2009?

A $195 000 B $225 000 C $345 000 D $595 000

www.sheir.org

8

© UCLES 2010 9706/12/O/N/10

20 A company’s share capital and reserves are:

$

non current (fixed) assets 250 000

net current assets 125 000

375 000

share capital and reserves

150 000 shares $1 each 150 000

share premium 75 000

general reserve 125 000

profits retained 25 000

375 000

The directors propose to issue bonus shares on the basis of one $1 share for every three already held. Following this the directors intend to make a rights issue on the basis of one new $1 share for every four shares held, at a premium of $0.20 per share.

What will the total net assets of the company be after the share issues?

A $425 000 B $435 000 C $475 000 D $485 000 21 A business has current liabilities of $4000 at its year end.

The quick (acid test) ratio is 1.5 : 1

The current ratio is 2.25 : 1

What is the value of inventory (stock) held at the year end?

A $3000 B $4000 C $9000 D $15 000 22 A company’s gross profit ratio for the year ended 31 December 2008 was 25 %. This increases to

28 % for the year ended 31 December 2009.

What could have been responsible for the increase?

A an increase in the cost of purchases during 2009

B an increase in the volume of sales during 2009

C an over-valuation of inventory (stock) as at 31 December 2009

D an under-valuation of inventory (stock) as at 31 December 2009

www.sheir.org

9

© UCLES 2010 9706/12/O/N/10 [Turn over

23 A business has the following assets and liabilities.

$000 $000

non current (fixed) assets 420

inventory (stocks) 120

trade receivables (debtors) 310

430

trade payables (creditors) (220)

net current assets 210

total assets less current liabilities 630

long term loan (130)

net assets 500

What is the business's quick (acid test) ratio?

A 1.41 : 1 B 1.95 : 1 C 2.43 : 1 D 3.86 : 1 24 The table shows the year end information for three companies.

company sales

$ operating profit as %

of all sales capital employed

$

X 500 000 15 100 000

Y 200 000 8 40 000

Z 400 000 10 80 000

How should the companies rank in order of return on the actual capital employed?

return on capital employed

highest lowest

A X Z Y

B Y Z X

C Z X Y

D Z Y X

www.sheir.org

10

© UCLES 2010 9706/12/O/N/10

25 In a job costing system, what is the correct entry to record the return of unused direct materials from production to stores?

debit credit

A cost of sales work in progress

B stores control finished goods

C stores control work in progress

D work in progress stores control

26 A company manufactures two products.

product X

$ product Y

$

selling price 20 30

direct labour (per unit) 10 20

direct materials (per unit) 4 2

Total fixed costs are $48 000. Only 3000 units of Y can be made and sold.

How many units of product X must be made and sold to break even?

A 1800 B 3000 C 4000 D 8000 27 A factory produces a product with a variable cost of $0.60 per unit.

Fixed costs are $15 000 per quarter, including rent of $6000 per quarter.

If more than 20 000 units are made per quarter, additional space is required which increases the rent by 50 %.

What is the total cost per unit of producing 30 000 units in a quarter?

A $0.60 B $0.90 C $1.10 D $1.20

www.sheir.org

11

© UCLES 2010 9706/12/O/N/10 [Turn over

28 A manufacturer has 700 units of finished goods in stock on 1 March.

On 31 March the total number of units in stock is 770. At present, stock is valued using the total costing method.

What would be the effect on the operating profit if the marginal costing method is used for stock valuation?

A increase operating profit

B no change in operating profit

C no change in operating profit but a 10 % increase in gross profit

D reduce operating profit 29 A job cost sheet showed the following estimates.

$

materials 680

labour at $20 per hour 200

overheads at $10 per labour hour 100

profit 280

price of job 1 260

The job actually took 25 % more labour hours than were estimated.

What was the profit?

A $205 B $230 C $330 D $355

www.sheir.org

12

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2010 9706/12/O/N/10

30 The diagram shows a break-even chart.

Y

X

number of units

$

0

What is indicated by the line XY?

A total costs

B total fixed costs

C total sales

D total variable costs

www.sheir.org

This document consists of 12 printed pages.

IB10 11_9706_13/FP © UCLES 2010 [Turn over

*7719005092*

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Subsidiary Level and Advanced Level

ACCOUNTING 9706/13

Paper 1 Multiple Choice October/November 2010

1 hour

Additional Materials: Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.

Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you.

There are thirty questions on this paper. Answer all questions. For each question there are four possible answers A, B, C and D.

Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.

Any rough working should be done in this booklet.

Calculators may be used.

www.sheir.org

2

© UCLES 2010 9706/13/O/N/10

1 A customer paid a deposit in advance for goods to be supplied at a later date.

How should this be recorded in the seller’s books?

debit credit

A cash customer

B cash sales

C customer prepayment

D customer sales

2 Non current (fixed) assets of a company were:

start of year

$ end of year

$

at cost 460 000 505 000

cumulative depreciation 215 000 237 000

net book value 245 000 268 000

During the year non current (fixed) assets costing $92 000 were purchased and non current (fixed) assets with a net book value of $16 000 were sold.

What was the depreciation charge for the year?

A $22 000 B $23 000 C $53 000 D $69 000 3 What does the application of the accounting principle of consistency ensure?

A that all losses are provided for

B that assets are recorded at their actual cost

C that financial statements are produced annually

D that profits are calculated the same way each year

www.sheir.org

3

© UCLES 2010 9706/13/O/N/10 [Turn over

4 At 30 June the balance sheet of a business includes the following.

$

trade receivables (debtors) 46 000

provision for doubtful debts 5 % 2 300

During July, sales of $350 000 were made of which 20 % were in cash. Credit customers paid $303 800 after deducting a 2 % cash discount.

How much did the trade receivables (debtors) owe to the business at 31 July?

A $15 200 B $16 000 C $22 200 D $76 000 5 Which error will not affect the trial balance?

A posting of $3000 purchases to the debit of the motor vehicle account

B posting of $3000 purchases to the credit of the motor vehicle account

C posting of $3000 road tax refund to the debit of the motor vehicle account

D posting of $3000 sales to the debit of the motor vehicle account 6 Closing inventory (stock) has been overvalued.

What is the effect on the financial statements?

net current assets net profit

A no effect understated

B overstated no effect

C overstated overstated

D understated understated

7 The trade receivable (debtors) control account of Y shows a balance of $14 320.

Customer X, who owes Y $1000, has also supplied Y with $400 of goods.

The supply of goods, $400, is to be offset by Y.

What is the corrected trade receivable (debtors) control account balance?

A $13 720 B $13 920 C $14 720 D $14 920

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© UCLES 2010 9706/13/O/N/10

8 An electricity accrual of $375 was treated as a prepayment in preparing a trader’s income (profit and loss) account.

What was the effect on profit?

A overstated by $375

B overstated by $750

C understated by $375

D understated by $750 9 At the end of a financial year the following information is available.

$

sales 200 000

opening inventory (stock) 15 000

closing inventory (stock) 18 000

If the business makes a standard mark-up of 25 %, what were the purchases?

A $147 000 B $153 000 C $157 000 D $163 000 10 For the eleven months ended 31 August 2009, snack bar takings were correctly recorded at

$109 340. For September 2009, the snack bar takings were mixed up with other income. The snack bar profit margin was 30.%.

The table shows figures for the snack bar for September 2009.

$

opening inventory (stock) at cost 6 303

purchases 8 844

closing inventory (stock) at cost 7 370

What was the gross profit of the snack bar for the year ended 30 September 2009?

A $27 566 B $36 135 C $36 593 D $43 912

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© UCLES 2010 9706/13/O/N/10 [Turn over

11 Information relating to a club’s subscription is:

$

received during the year 20 000

paid in advance in the previous year 2 000

paid in advance during the current year 1 000

There were no subscriptions in arrears at the start or end of the year.

Individual subscriptions have remained constant at $500 per annum for the last two years.

How many members does the club have?

A 38 B 40 C 42 D 44 12 X and Y are in partnership, sharing residual profits and losses equally after the payments below

are made.

1 2 % interest is charged on partners’ drawings

2 salary to Y of $10 000

The partners’ drawings for the year were:

X $12 000

Y $8000

The net profit for the current year is $52 000.

How much will each partner receive in share of residual profits?

A $10 800 B $11 200 C $20 800 D $21 200

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© UCLES 2010 9706/13/O/N/10

13 The table shows data for a manufacturing company for a year.

$

office salaries 34 500

factory wages 115 000

depreciation on plant 3 700

depreciation on office equipment 1 500

cost of raw materials 89 600

royalties paid 4 200

closing inventory (stock) of completed goods 5 100

What is the production cost of completed goods for the year?

A $203 000 B $208 300 C $212 500 D $214 000 14 A company has the following current assets and current liabilities.

$

bank deposit account 6 000

bank overdraft 4 500

loan interest payable 2 500

deposits from customers (for orders) 1 500

loans to employees 4 000

trade payables (creditors) 9 000

trade receivables (debtors) 12 000

What is the amount of the net current assets?

A $(3500) B $4500 C $7500 D $13 500 15 X started a business 3 years ago and now has a capital of $175 000.

Over that period his profits have been $73 000 and his drawings $52 000. In year 2 he introduced cash of $35 000 and in year 3 he took out of the business, for his own use, a non current (fixed) asset with a net book value of $4000.

How much capital did he start the business with?

A $67 000 B $115 000 C $123 000 D $158 000

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© UCLES 2010 9706/13/O/N/10 [Turn over

16 A business has two departments, men’s clothing and ladies’ clothing. The following information is available.

men’s department ladies’ department

sales assistants 7 9

floor space 160 m2 200 m2

value of non current (fixed) assets $59 000 $61 000

annual sales $450 000 $750 000

The cost of heating and lighting is $17 692.

What is the cost of heating and lighting for the men’s department?

A $6634.50 B $7740.25 C $7863.11 D $8698.57 17 A company makes a bonus issue of shares.

What is the effect on the net assets and the reserves in the balance sheet?

net assets reserves

A increase decrease

B increase unchanged

C unchanged decrease

D unchanged increase

18 The table shows extracts from the trial balance of a company at 31 December 2009.

$

ordinary share capital 750 000

8 % preference shares 250 000

6 % debentures (2015) 150 000

bank loan repayable (2012) 75 000

bank overdraft 110 000

mortgage on buildings (repayable 2010) 120 000

What is the total of non current liabilities in the balance sheet at 31 December 2009?

A $195 000 B $225 000 C $345 000 D $595 000

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© UCLES 2010 9706/13/O/N/10

19 A company’s share capital and reserves are:

$

non current (fixed) assets 250 000

net current assets 125 000

375 000

share capital and reserves

150 000 shares $1 each 150 000

share premium 75 000

general reserve 125 000

profits retained 25 000

375 000

The directors propose to issue bonus shares on the basis of one $1 share for every three already held. Following this the directors intend to make a rights issue on the basis of one new $1 share for every four shares held, at a premium of $0.20 per share.

What will the total net assets of the company be after the share issues?

A $425 000 B $435 000 C $475 000 D $485 000 20 A business has current liabilities of $4000 at its year end.

The quick (acid test) ratio is 1.5 : 1

The current ratio is 2.25 : 1

What is the value of inventory (stock) held at the year end?

A $3000 B $4000 C $9000 D $15 000 21 A company’s gross profit ratio for the year ended 31 December 2008 was 25 %. This increases to

28 % for the year ended 31 December 2009.

What could have been responsible for the increase?

A an increase in the cost of purchases during 2009

B an increase in the volume of sales during 2009

C an over-valuation of inventory (stock) as at 31 December 2009

D an under-valuation of inventory (stock) as at 31 December 2009

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© UCLES 2010 9706/13/O/N/10 [Turn over

22 A business has the following assets and liabilities.

$000 $000

non current (fixed) assets 420

inventory (stocks) 120

trade receivables (debtors) 310

430

trade payables (creditors) (220)

net current assets 210

total assets less current liabilities 630

long term loan (130)

net assets 500

What is the business's quick (acid test) ratio?

A 1.41 : 1 B 1.95 : 1 C 2.43 : 1 D 3.86 : 1 23 The table shows the year end information for three companies.

company sales

$ operating profit as %

of all sales capital employed

$

X 500 000 15 100 000

Y 200 000 8 40 000

Z 400 000 10 80 000

How should the companies rank in order of return on the actual capital employed?

return on capital employed

highest lowest

A X Z Y

B Y Z X

C Z X Y

D Z Y X

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© UCLES 2010 9706/13/O/N/10

24 In a job costing system, what is the correct entry to record the return of unused direct materials from production to stores?

debit credit

A cost of sales work in progress

B stores control finished goods

C stores control work in progress

D work in progress stores control

25 A company manufactures two products.

product X

$ product Y

$

selling price 20 30

direct labour (per unit) 10 20

direct materials (per unit) 4 2

Total fixed costs are $48 000. Only 3000 units of Y can be made and sold.

How many units of product X must be made and sold to break even?

A 1800 B 3000 C 4000 D 8000 26 A factory produces a product with a variable cost of $0.60 per unit.

Fixed costs are $15 000 per quarter, including rent of $6000 per quarter.

If more than 20 000 units are made per quarter, additional space is required which increases the rent by 50 %.

What is the total cost per unit of producing 30 000 units in a quarter?

A $0.60 B $0.90 C $1.10 D $1.20

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© UCLES 2010 9706/13/O/N/10 [Turn over

27 A manufacturer has 700 units of finished goods in stock on 1 March.

On 31 March the total number of units in stock is 770. At present, stock is valued using the total costing method.

What would be the effect on the operating profit if the marginal costing method is used for stock valuation?

A increase operating profit

B no change in operating profit

C no change in operating profit but a 10 % increase in gross profit

D reduce operating profit 28 A job cost sheet showed the following estimates.

$

materials 680

labour at $20 per hour 200

overheads at $10 per labour hour 100

profit 280

price of job 1 260

The job actually took 25 % more labour hours than were estimated.

What was the profit?

A $205 B $230 C $330 D $355

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12

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2010 9706/13/O/N/10

29 The diagram shows a break-even chart.

Y

X

number of units

$

0

What is indicated by the line XY?

A total costs

B total fixed costs

C total sales

D total variable costs 30 On 1 January 2009 a business had prepaid rent of $50. During 2009, three rent payments were

made of $250 each. On 31 December 2009, the business still owes $200 rent on account for 2009.

The business owner has charged the rent payments made during 2009 in his income (profit and loss) account.

What is the effect on net profit?

A $200 too high

B $200 too low

C $250 too high

D $250 too low

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This document consists of 13 printed pages and 3 blank pages.

DC (AC/CGW) 22297/6© UCLES 2010 [Turn over

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONSGeneral Certificate of EducationAdvanced Subsidiary Level and Advanced Level

*3906620666*

ACCOUNTING 9706/21

Paper 2 Structured Questions October/November 2010

1 hour 30 minutes

Candidates answer on the Question Paper.No Additional Materials are required.

READ THESE INSTRUCTIONS FIRST

Write your Centre number, candidate number and name on all the work you hand in.Write in dark blue or black pen.You may use a soft pencil for rough working.Do not use staples, paper clips, highlighters, glue or correction fluid.DO NOT WRITE IN ANY BARCODES.

Answer all questions.All accounting statements are to be presented in good style.Workings must be shown.You may use a calculator.

At the end of the examination, fasten all your work securely together.The number of marks is given in brackets [ ] at the end of each question or part question.

For Examiner’s Use

1

2

3

Total

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9706/21/O/N/10© UCLES 2010

ForExaminer’s

Use

1 On 1 January 2009 Clara Coyle, a sole trader, had the following balances:

$ Inventory (stock) 24 170 Premises 60 000 Fittings and fixtures (net book value) 28 000 Cash and cash equivalents (bank) 4 000 Rates prepaid 440 Trade receivables (debtors) 3 810 Trade payables (creditors) 3 420 Capital 117 000

There was no opening cash or cash equivalent.

Full accounting records were not kept, but the following information was available for the year ended 31 December 2009.

Bank Account Receipts $ Loan from uncle (interest free) 10 000 Receipts from trade receivables (debtors) 163 100 Cash sales paid into bank 34 000 Bank Account Payments Payments to trade payables (creditors) 141 508 Ordinary goods purchased (purchases) by cheque 6 300 Rates 2 600 Drawings 3 650 General expenses 4 410 Wages 21 300 Cash payments from cash sales General expenses 2 680 Purchases 1 200 Balances as at 31 December 2009 Trade receivables (debtors) 4 100 Trade payables (creditors) 11 850 Rates prepaid 240 General expenses owing 400 Wages owing 1 620 Cash and cash equivalents (cash) 515 Bank ?

Additional Information:

1 The selling price on all goods is based on cost plus 25%.

2 During the year Clara Coyle withdrew goods, costing $140, from the business, for her own use.

3 The business allowed discounts, $1 300, to its trade receivables (debtors).

4 The business received discounts, $1 600, from its trade payables (creditors).

5 No additions or disposals of non-current (fixed) assets took place during the year.

Depreciation of $3 000 is to be provided on fixtures and fittings.

Premises are not depreciated.

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9706/21/O/N/10© UCLES 2010 [Turn over

ForExaminer’s

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REQUIRED

(a) Calculate the total sales for the year ended 31 December 2009.

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(b) Calculate the total purchases for the year ended 31 December 2009.

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9706/21/O/N/10© UCLES 2010

ForExaminer’s

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(c) Prepare the Income Statement (trading and profit and loss account) for Clara Coyle for the year ended 31 December 2009.

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9706/21/O/N/10© UCLES 2010 [Turn over

ForExaminer’s

Use

(d) Prepare the Balance Sheet for Clara Coyle at 31 December 2009.

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[Total: 30]

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ForExaminer’s

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2 The following information is given about the Schubert Music Club.

Schubert Music ClubBalance Sheet at 31 December 2008

Cost Depreciation Net Book Value Non-current (Fixed) Assets $ $ $ Clubhouse 50 000 10 000 40 000 Instruments 06 000 05 000 01 000 56 000 15 000 41 000 Current Assets Inventory (stock) of cafe supplies 4 000 Subscriptions in arrears 400 Cash and cash equivalents (bank) 2 100 6 500 Current Liabilities Trade payables (creditors) for cafe supplies 3 000 Cafe expenses owing 1 200 Subscriptions in advance 0 300 4 500 02 000 43 000 Accumulated fund 41 000 Life subscriptions 02 000 43 000

Schubert Music ClubReceipts and Payments Account for the year ended 31 December 2009

$ $ Balance b/d 2 100 Suppliers for cafe 8 400 Subscriptions – 2008 300 Cafe expenses 4 200 Subscriptions – 2009 2 200 Wages – cafe staff 5 000 Life subscriptions 4 000 Clubhouse repairs 6 000 Cafe takings 18 500 Sundries 2 500 Balance c/d 01 000 27 100 27 100

Additional information at 31 December 2009

1 Inventory (stock) for the cafe was $2 000.

2 Suppliers for cafe purchases were owed $2 200.

3 Cafe expenses of $50 were owing.

4 Depreciation is to be charged on a straight line basis: Clubhouse: 4% on cost per annum Instruments: $1 000 per annum

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9706/21/O/N/10© UCLES 2010 [Turn over

ForExaminer’s

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5 Life subscriptions are available under a scheme which started 8 years ago. The cost remains at the original $500 per person. At 31 December 2008 there were six members with life subscriptions.

The life subscriptions are brought into income over 20 years commencing from the year in which payment of life subscription takes place.

6 The ordinary subscription rate for 2009 was $100 per person. This is to be increased by 50% in 2010.

No subscriptions are prepaid for 2010.

$300 remained owing from 2009 but these are expected to be received during January 2010.

Subscriptions owing at 31 December 2008, which were not received during 2009, are to be written off as bad debts.

REQUIRED

(a) Prepare a Subscriptions Account for ordinary members for the year ended 31 December 2009 (a life subscriptions account is not required).

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9706/21/O/N/10© UCLES 2010

ForExaminer’s

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(b) Prepare a Cafe Trading Account for the year ended 31 December 2009.

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(c) Prepare an Income and Expenditure Account for the year ended 31 December 2009.

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9706/21/O/N/10© UCLES 2010 [Turn over

ForExaminer’s

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The treasurer had suggested increasing cafe prices and the rate of lifetime subscriptions but the club committee refused to do this.

Instead, the committee decided to raise the ordinary subscriptions by 50%.

REQUIRED

(d) Suggest three additional ways in which the club could try to minimise or eliminate the deficit in future years.

1 .......................................................................................................................................

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2 .......................................................................................................................................

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3 .......................................................................................................................................

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9706/21/O/N/10© UCLES 2010

ForExaminer’s

Use

3 Debussy currently produces one product for which the following information is available:

Product D946 $ per unit

Selling price 6.00 Direct materials 2.50 Direct labour 1.40 Variable overheads 1.10 Total fixed costs $120 000 per annum Sales per annum (units) $200 000

REQUIRED

(a) Using the data for the current product D946 calculate the following:

(i) break – even point in units and sales value;

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(ii) profit for the year, showing the contribution per unit;

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9706/21/O/N/10© UCLES 2010 [Turn over

ForExaminer’s

Use

(iii) margin of safety in units and as a percentage of sales.

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(b) Prepare the contribution to sales (profit/volume) graph, using the chart below, for the current product D946. Clearly show the profit at the current sales level.

$000

’000 units

[4]

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9706/21/O/N/10© UCLES 2010

ForExaminer’s

Use

Debussy is considering extending its product range with two additional products.

The fixed costs would double to $240 000 if any new product was introduced and would apply regardless of the number of new products introduced.

Product D947 Product D948 $ per unit $ per unit Selling price 9.00 13.00 Direct materials 6.60 7.00 Direct labour 2.40 2.10 Variable overheads 1.50 0.90 Sales per annum (units) 50 000 30 000

The demand for each product is estimated to be fixed at the levels stated, regardless of whether one or two additional products are introduced.

The existing workforce is currently operating at full capacity in the production of product D946.

REQUIRED

(c) Debussy decides to extend the product range with both additional products.

Calculate the maximum profit Debussy could achieve in the next full year, if it were to produce products D946, D947 and D948.

Show clearly the total contribution per product.

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9706/21/O/N/10© UCLES 2010

ForExaminer’s

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(d) Based on your calculations advise Debussy whether or not to go ahead and produce all three products. Give reasons for your advice.

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[Total: 30]

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9706/21/O/N/10© UCLES 2010

BLANK PAGE

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9706/21/O/N/10© UCLES 2010

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

BLANK PAGE

www.sheir.org

This document consists of 13 printed pages and 3 blank pages.

DC (SJF/CGW) 35573© UCLES 2010 [Turn over

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONSGeneral Certificate of EducationAdvanced Subsidiary Level and Advanced Level

*8287436395*

ACCOUNTING 9706/22

Paper 2 Structured Questions October/November 2010

1 hour 30 minutes

Candidates answer on the Question Paper.No Additional Materials are required.

READ THESE INSTRUCTIONS FIRST

Write your Centre number, candidate number and name on all the work you hand in.Write in dark blue or black pen.You may use a soft pencil for rough working.Do not use staples, paper clips, highlighters, glue or correction fluid.DO NOT WRITE IN ANY BARCODES.

Answer all questions.All accounting statements are to be presented in good style.Workings must be shown.You may use a calculator.

At the end of the examination, fasten all your work securely together.The number of marks is given in brackets [ ] at the end of each question or part question.

For Examiner’s Use

1

2

3

Total

www.sheir.org

2

9706/22/O/N/10© UCLES 2010

ForExaminer’s

Use

1 On 1 January 2009 Clara Coyle, a sole trader, had the following balances:

$ Inventory (stock) 24 170 Premises 60 000 Fittings and fixtures (net book value) 28 000 Cash and cash equivalents (bank) 4 000 Rates prepaid 440 Trade receivables (debtors) 3 810 Trade payables (creditors) 3 420 Capital 117 000

There was no opening cash or cash equivalent.

Full accounting records were not kept, but the following information was available for the year ended 31 December 2009.

Bank Account Receipts $ Loan from uncle (interest free) 10 000 Receipts from trade receivables (debtors) 163 100 Cash sales paid into bank 34 000 Bank Account Payments Payments to trade payables (creditors) 141 508 Ordinary goods purchased (purchases) by cheque 6 300 Rates 2 600 Drawings 3 650 General expenses 4 410 Wages 21 300 Cash payments from cash sales General expenses 2 680 Purchases 1 200 Balances as at 31 December 2009 Trade receivables (debtors) 4 100 Trade payables (creditors) 11 850 Rates prepaid 240 General expenses owing 400 Wages owing 1 620 Cash and cash equivalents (cash) 515 Bank ?

Additional Information:

1 The selling price on all goods is based on cost plus 25%.

2 During the year Clara Coyle withdrew goods, costing $140, from the business, for her own use.

3 The business allowed discounts, $1 300, to its trade receivables (debtors).

4 The business received discounts, $1 600, from its trade payables (creditors).

5 No additions or disposals of non-current (fixed) assets took place during the year.

Depreciation of $3 000 is to be provided on fixtures and fittings.

Premises are not depreciated.

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9706/22/O/N/10© UCLES 2010 [Turn over

ForExaminer’s

Use

REQUIRED

(a) Calculate the total sales for the year ended 31 December 2009.

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(b) Calculate the total purchases for the year ended 31 December 2009.

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9706/22/O/N/10© UCLES 2010

ForExaminer’s

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(c) Prepare the Income Statement (trading and profit and loss account) for Clara Coyle for the year ended 31 December 2009.

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(d) Prepare the Balance Sheet for Clara Coyle at 31 December 2009.

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[Total: 30]

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2 The following information is given about the Schubert Music Club.

Schubert Music ClubBalance Sheet at 31 December 2008

Cost Depreciation Net Book Value Non-current (Fixed) Assets $ $ $ Clubhouse 50 000 10 000 40 000 Instruments 06 000 05 000 01 000 56 000 15 000 41 000 Current Assets Inventory (stock) of cafe supplies 4 000 Subscriptions in arrears 400 Cash and cash equivalents (bank) 2 100 6 500 Current Liabilities Trade payables (creditors) for cafe supplies 3 000 Cafe expenses owing 1 200 Subscriptions in advance 0 300 4 500 02 000 43 000 Accumulated fund 41 000 Life subscriptions 02 000 43 000

Schubert Music ClubReceipts and Payments Account for the year ended 31 December 2009

$ $ Balance b/d 2 100 Suppliers for cafe 8 400 Subscriptions – 2008 300 Cafe expenses 4 200 Subscriptions – 2009 2 200 Wages – cafe staff 5 000 Life subscriptions 4 000 Clubhouse repairs 6 000 Cafe takings 18 500 Sundries 2 500 Balance c/d 01 000 27 100 27 100

Additional information at 31 December 2009

1 Inventory (stock) for the cafe was $2 000.

2 Suppliers for cafe purchases were owed $2 200.

3 Cafe expenses of $50 were owing.

4 Depreciation is to be charged on a straight line basis: Clubhouse: 4% on cost per annum Instruments: $1 000 per annum

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5 Life subscriptions are available under a scheme which started 8 years ago. The cost remains at the original $500 per person. At 31 December 2008 there were six members with life subscriptions.

The life subscriptions are brought into income over 20 years commencing from the year in which payment of life subscription takes place.

6 The ordinary subscription rate for 2009 was $100 per person. This is to be increased by 50% in 2010.

No subscriptions are prepaid for 2010.

$300 remained owing from 2009 but these are expected to be received during January 2010.

Subscriptions owing at 31 December 2008, which were not received during 2009, are to be written off as bad debts.

REQUIRED

(a) Prepare a Subscriptions Account for ordinary members for the year ended 31 December 2009 (a life subscriptions account is not required).

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(b) Prepare a Cafe Trading Account for the year ended 31 December 2009.

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(c) Prepare an Income and Expenditure Account for the year ended 31 December 2009.

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The treasurer had suggested increasing cafe prices and the rate of lifetime subscriptions but the club committee refused to do this.

Instead, the committee decided to raise the ordinary subscriptions by 50%.

REQUIRED

(d) Suggest three additional ways in which the club could try to minimise or eliminate the deficit in future years.

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3 Debussy currently produces one product for which the following information is available:

Product D946 $ per unit

Selling price 6.00 Direct materials 2.50 Direct labour 1.40 Variable overheads 1.10 Total fixed costs $120 000 per annum Sales per annum (units) $200 000

REQUIRED

(a) Using the data for the current product D946 calculate the following:

(i) break – even point in units and sales value;

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(ii) profit for the year, showing the contribution per unit;

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(iii) margin of safety in units and as a percentage of sales.

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(b) Prepare the contribution to sales (profit/volume) graph, using the chart below, for the current product D946. Clearly show the profit at the current sales level.

$000

’000 units

[4]

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Debussy is considering extending its product range with two additional products.

The fixed costs would double to $240 000 if any new product was introduced and would apply regardless of the number of new products introduced.

Product D947 Product D948 $ per unit $ per unit Selling price 9.00 13.00 Direct materials 6.60 7.00 Direct labour 2.40 2.10 Variable overheads 1.50 0.90 Sales per annum (units) 50 000 30 000

The demand for each product is estimated to be fixed at the levels stated, regardless of whether one or two additional products are introduced.

The existing workforce is currently operating at full capacity in the production of product D946.

REQUIRED

(c) Debussy decides to extend the product range with both additional products.

Calculate the maximum profit Debussy could achieve in the next full year, if it were to produce products D946, D947 and D948.

Show clearly the total contribution per product.

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(d) Based on your calculations advise Debussy whether or not to go ahead and produce all three products. Give reasons for your advice.

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[Total: 30]

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

BLANK PAGE

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This document consists of 16 printed pages.

DC (AC) 22298/4© UCLES 2010 [Turn over

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONSGeneral Certificate of EducationAdvanced Subsidiary Level and Advanced Level

*4324142779*

ACCOUNTING 9706/23

Paper 2 Structured Questions October/November 2010

1 hour 30 minutes

Candidates answer on the Question Paper.No Additional Materials are required.

READ THESE INSTRUCTIONS FIRST

Write your Centre number, candidate number and name on all the work you hand in.Write in dark blue or black pen.You may use a soft pencil for rough working.Do not use staples, paper clips, highlighters, glue or correction fluid.DO NOT WRITE IN ANY BARCODES.

Answer all questions.All accounting statements are to be presented in good style.Workings must be shown.You may use a calculator.

At the end of the examination, fasten all your work securely together.The number of marks is given in brackets [ ] at the end of each question or part question.

For Examiner’s Use

1

2

3

Total

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1A James and Gemma are in partnership. They have provided the following information.

A balance sheet extract at 31 December 2008 showed the following balances:

$ Capital Accounts James 90 000 Gemma 60 000 Current Accounts James 12 000 (Cr) Gemma 9 000 (Cr)

Inventory (stock) 6 300 Non-current (fixed) assets at cost 204 000 Loan 45 000

The partnership agreement provides for: Interest on capital at 8% per annum. No interest on drawings A salary to Gemma of $6000 a year Profits and losses to be shared equally

On 1 July 2009 James introduced a further $25 000 to increase his fixed capital. This money was used to purchase additional non-current (fixed) assets on that date.

At 31 December 2009 the following information was available for the partnership. $ Revenue (sales) 1 January 2009 – 30 June 2009 90 000 Revenue (sales) 1 July 2009 – 31 December 2009 150 000 Ordinary goods purchased (purchases) 1 January 2009 – 30 June 2009 70 000 Ordinary goods purchased (purchases) 1 July 2009 – 31 December 2009 104 000

Additional information

1 Mark up was 50% on cost.

2 Total expenses for the year were $25 525. These included depreciation on non-current (fixed) assets at 5% per annum

(charged on cost for each proportion of the year) and the interest on the loan at 6% per annum.

The remaining expenses were split equally for each half of the year.

3 There are no accruals or prepayments at the end of the year.

4 Drawings for the year were: $ James 15 200 Gemma 18 300

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REQUIRED

(a) Assuming each month is of equal length prepare the income statement (profit and loss account) and appropriation account for

(i) the six month period ended 30 June 2009.

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(ii) the six month period ended 31 December 2009.

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(b) Prepare the current accounts in columnar form for both partners for the year ended 31 December 2009.

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(c) State three advantages for James and Gemma of trading as a partnership rather than as sole traders.

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1B Fred owns a general trading business. The following balances were extracted from his books at 30 April 2010.

$ Revenue (sales) 300 000 Opening inventory (stock) 18 000 General expenses 36 000 Trade payables (creditors) 64 000 Trade receivables (debtors) 60 000 Cash and cash equivalents (bank) 3 000 Closing capital 500 000

Additional information

1 The gross profit margin is 20%

2 There were no other current assets and current liabilities at the year end.

3 Closing inventory (stock) was valued at $22 000.

REQUIRED

(a) Calculate the following ratios for Fred. Give your answer to two decimal places.

Show all workings.

(i) Inventory (stock) turnover

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(ii) Return on capital employed

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(iii) Liquid ratio (acid test)

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[Total 30]

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2 Paula Bridgewater, a retailer, supplied the following information on purchases and sales for the month of February 2009.

At 1 February 2009 Paula Bridgewater had an opening inventory (stock) of 500 units valued at $14 each.

Date Purchase of goods for resale Revenue (purchases) (sales) Quantity Cost price Quantity Selling price (units) per unit ($) (units) per unit ($)

February 2 2 000 15

3 2 300 30

10 1 500 18

14 1 300 32

18 2 000 20

19 2 100 34

REQUIRED

(a) Calculate the closing inventory (stock) valuation at 28 February 2009 using the FIFO method of inventory (stock) valuation (perpetual).

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(b) Prepare the income statement (trading account) for the month of February 2009 using the FIFO method of inventory (stock) valuation (perpetual).

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(c) Advise Paula Bridgewater how the inventory (stock) should be valued in the final accounts. Give reasons for your advice.

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Paula Bridgewater continued trading throughout the remainder of 2009.

On 31 December 2009 her entire inventory (stock) together with all of her non-current (fixed) assets were destroyed by fire.

Some of her business records had also been destroyed but the following information is available.

1 When stocktaking last took place on 31 October 2009 the balance of inventory (stock) was $11 700.

Ordinary goods purchased (purchases) between 1 November 2009 and 31 December 2009 amounted to $22 600.

Revenue (sales) made for cash and on credit during this period amounted to

$36 200.

All revenue (sales) was made at a uniform profit margin of 25% and all purchases were on credit.

2 Information available from Paula Bridgewater’s Balance Sheet at 31 October 2009 included:

Non-current (fixed) assets Cost Depreciation Net Book Value $ $ $ Fixtures and Fittings 6 000 2 160 3 840 Current assets Inventory (stock) 11 700 Trade receivables (debtors) 2 400

3 Paula Bridgewater depreciates her fixtures and fittings at 20% per annum using the straight line method assuming a residual value of $600.

4 Also at that date the bank statement showed cash at the bank of $620.

5 Paula Bridgewater’s cash book showed receipts from trade receivables (debtors) for the two month period to be $4 300.

Her invoices to customers supplied on credit over the same period totalled $6 500.

6 One of the trade receivables (debtors) who owed $600 had gone bankrupt in the last week of December and Paula had decided to write off this amount.

7 Paula does not offer any discount to her customers for prompt payment.

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REQUIRED

(d) Calculate the cost of the inventory (stock) destroyed by the fire.

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(e) Calculate the net book value of the fixtures and fittings at 31 December 2009 (immediately prior to the fire) assuming depreciation is charged equally throughout the year.

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(f) Calculate the trade receivables (debtors) total to be included in the balance sheet at 31 December 2009.

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[Total 30]

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3 Mandar Limited manufactures components for the agricultural industry. The following budgeted information is available for the year ended 30 April 2009.

$ $ Direct materials 2 300 000 Direct labour: Cutting department (76 000 hours) 501 600 Pressing department (72 000 hours) 450 000 Production department (104 000 hours) 702 000 Assembly department (44 000 hours) 264 000 1 917 600 Prime cost 4 217 600 Factory overheads: Cutting department 364 800 Pressing department 439 200 Production department 509 600 Assembly department 233 200 1 546 800 Cost of production 5 764 400 Administration costs 1 152 880 Total costs 6 917 280

Additional information

1 Factory overheads are absorbed by departmental direct labour hours.

2 Administration costs are absorbed as a percentage of the cost of production.

REQUIRED

(a) Calculate the following for each department.

(i) The budgeted direct labour cost per hour.

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(ii) The budgeted factory overhead absorption rate per direct labour hour.

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Mandar Limited has received a request for some components, Job Number SMC20.

The following direct costs have been estimated.

$ $ Direct materials 140 156 Direct labour: Cutting department 13 200 Pressing department 9 000 Production department 16 200 Assembly department 06 000 444 400 Prime cost 184 556

The direct labour costs are based on budgeted hourly rates.

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REQUIRED

(b) Prepare a detailed statement showing the total cost of Job Number SMC20.

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(c) The selling price of Mandar Limited’s components is cost plus 25%.

Calculate the selling price of Job Number SMC20.

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

(d) Explain why Mandar Limited absorbs its overheads using direct labour hours.

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(e) State two alternative methods the business could use to absorb their overheads.

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[Total 30]

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This document consists of 12 printed pages.

IB10 11_9706_31/6RP © UCLES 2010 [Turn over

*3796654791*

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

General Certificate of Education Advanced Level

ACCOUNTING 9706/31

Paper 3 Multiple Choice October/November 2010

1 hour

Additional Materials: Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.

Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you.

There are thirty questions on this paper. Answer all questions. For each question there are four possible answers A, B, C and D.

Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.

Any rough working should be done in this booklet.

Calculators may be used.

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© UCLES 2010 9706/31/O/N/10

1 A company has operating profit of $326 000 after taking into account the following information.

$

depreciation 24 000

goodwill impairment 11 000

increase in inventory (stock) 18 000

What is the net cash flow from operating activities?

A $321 000 B $343 000 C $357 000 D $361 000 2 Why is goodwill adjusted in the accounts when a new partner is admitted?

A a more accurate value of non-current (fixed) assets is shown in the balance sheet

B original partners can be credited for their efforts in building up the partnership business

C partners can take higher drawings as a result of their share of the goodwill

D the new partner knows how much they have to introduce as capital 3 A company prepares internal accounts as follows.

year 1

$ year 2

$

profits 30 000 40 000

cost of goods sold 240 000 320 000

It then discovers that at the end of year 1 the value of stock was overstated by $2000.

What are the correct profit and cost of goods sold figures?

year 1 year 2

profits $

cost of goods sold $

profits $

cost of goods sold $

A 28 000 238 000 42 000 322 000

B 28 000 242 000 40 000 320 000

C 28 000 242 000 42 000 318 000

D 32 000 238 000 38 000 318 000

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© UCLES 2010 9706/31/O/N/10 [Turn over

4 X, Y and Z are in partnership sharing profits and losses equally. The data shown is extracted from their books.

$

Net assets at end of year 600 000

Capital account balances at start of year 320 000

Current account balances at start of year (credit) 100 000

Partnership salary – Y 30 000

Total drawings during year 60 000

What was X’s share of net profit for the year?

A $40 000 B $60 000 C $70 000 D $80 000 5 A company has been wound up and the only assets that remain have realised $45 000.

A summary of the company’s capital structure shows the following.

$

ordinary shares 20 000

preference shares 40 000

loan stock 30 000

How will the $45 000 be distributed?

ordinary shares

$ preference shares

$ loan stock

$

A 10 000 20 000 15 000

B – 15 000 30 000

C 20 000 25 000 –

D – 40 000 5 000

6 A plc company redeemed 50 000 ordinary shares of $5 each at par.

The redemption was in part financed by a new issue of 80 000 preference shares of $1 each, issued at a premium of $1 per share.

By what amount will distributable reserves be reduced?

A $90 000 B $160 000 C $170 000 D $250 000

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© UCLES 2010 9706/31/O/N/10

7 The table shows the assets and liabilities of a business.

$000

trade payables (creditors) 50

trade receivables (debtors) 15

fixtures and fittings 70

goodwill 15

inventory (stock) 20

How much did the purchaser pay for the business if the new balance sheet after the purchase shows a goodwill figure of $20 000?

A $55 000 B $70 000 C $75 000 D $145 000 8 A company purchases a business that it estimates has maintainable future earnings of $100 000

per annum.

The net assets purchased have a book value of $225 000, but are valued by the purchaser at a fair value of $300 000.

The company negotiated a purchase price, which met its return on investment of 20 %.

What was the amount paid for goodwill?

A $75 000 B $200 000 C $275 000 D $500 000 9 A limited company is acquiring the business of a sole trader by:

the issue of 50 000 $0.50 shares at a premium of $0.20 each

the issue of $20 000 debentures at a discount of 10 %

a cash payment

If the fair value of the acquired business is $80 000, how much will the cash payment be?

A $10 000 B $25 000 C $27 000 D $35 000

www.sheir.org

5

© UCLES 2010 9706/31/O/N/10 [Turn over

10 A company has the following costs for an item of inventory (stock).

$

purchase costs 12 000

carriage in 2 000

conversion costs 18 000

storage costs 8 000

What should the inventory (stock) be valued at?

A $12 000 B $14 000 C $32 000 D $40 000 11 A company has the following account balances at the end of its financial year.

$

cash in hand 1 200

cash at bank 16 000

bank overdraft 8 000

deposit, available at 2 months’ notice 7 000

deposit, available at 6 months’ notice 5 000

What is the figure for cash and cash equivalents to appear in the cash flow statement?

A $9200 B $16 200 C $17 200 D $21 200 12 X Plc incurred the following costs as a result of purchasing a new machine.

$

purchase price 7 000

installation cost 5 000

testing the machine before use 1 000

manufacturer’s list price 10 000

advertising the new products to be made by the machine 4 000

What is the maximum initial cost of the machine that would be recognised as an asset of the company?

A $13 000 B $16 000 C $17 000 D $20 000

www.sheir.org

6

© UCLES 2010 9706/31/O/N/10

13 A business has a trade receivables (debtors) turnover period of 40 days and annual sales of $479 970.

What is the year end trade receivables (debtors) figure?

A $11 999 B $15 780 C $39 997 D $52 599 14 Which ratio measures the return on an investment in shares which continue to be held?

A dividend cover

B dividend yield

C earnings per share

D interest cover 15 A company’s authorised share capital is 1 million ordinary shares of $1 each. 800 000 shares

have been issued and have a market value of $2.50 each.

Year end results show the following.

$

profits before interest and taxation 100 000

profits after interest and taxation 80 000

profits after interest, taxation and ordinary dividends 50 000

What is the price-earnings ratio?

A 10 B 20 C 25 D 40 16 The trade receivables (debtors) collection period of a business has reduced from 90 to 55 days.

Which reason could account for this?

A a large bad debt written off

B a large credit sale made just before the year end

C a major customer in financial difficulty

D poor credit control

www.sheir.org

7

© UCLES 2010 9706/31/O/N/10 [Turn over

17 The capital structure of a company is given.

$

400 000 ordinary shares of $0.50 200 000

reserves 90 000

9 % debentures 2010 – 2012 50 000

The company issues $30 000 10 % debenture stock 2015 – 2017 at par and makes a rights issue of 1 ordinary share for every four held at $0.60.

It also raises an unsecured loan of $50 000.

How will these transactions affect the balance sheet?

gearing reserves

A decrease decrease

B decrease increase

C increase decrease

D increase increase

18 The equity section of a company’s balance sheet is as follows.

$

ordinary shares of $0.50 each 200 000

preference shares of $1 each 100 000

share premium 50 000

retained earnings 120 000

The following items have not yet been adjusted.

1 purchase returns of $10 000 have been credited to the sales returns account

2 a long term loan of $40 000 has not been recorded

3 a rights issue during the year of 200 000 ordinary shares at a premium of $0.10 each

What will the total of equity be after the above adjustments have been made?

A $590 000 B $600 000 C $630 000 D $640 000

www.sheir.org

8

© UCLES 2010 9706/31/O/N/10

19 Which may result in an over-absorption of overheads?

A absorption based on actual expenditure and actual activity

B activity below budget

C expenditure below budget

D expenditure in excess of budget 20 The table shows the annual results of a company’s three departments.

department

X Y Z

$ $ $

sales 200 000 280 000 320 000

less: variable costs 130 000 190 000 100 000

headquarters fixed costs – apportioned 80 000 90 000 130 000

210 000 280 000 230 000

net profit (loss) (10 000) 0 90 000

Headquarters fixed costs will not be reduced if any department is closed.

What should the company do, on the basis of these results?

A Close department X and Y.

B Close department X only.

C Close department Y only.

D Keep all departments open.

www.sheir.org

9

© UCLES 2010 9706/31/O/N/10 [Turn over

21 The table shows the budgeted resources required for production and sales, and the available resources.

Market research shows sales demand for 120 000 units.

resources required

per unit resources available

material (kilos) 4.0 460 000 kilos

direct labour hours 3.0 400 000 hours

machine hours 0.5 70 000 hours

What is the principal limiting factor in this case?

A direct labour hours

B machine hours

C material

D sales 22 The table shows the costs involved in the production of 1000 units.

$

direct materials 4 000

direct labour 6 000

variable overheads 2 000

fixed overheads 8 000

If production increases by 25 %, what will be the effect on the total cost per unit?

A decrease of $1.60 per unit

B decrease of $5.00 per unit

C increase of $1.60 per unit

D increase of $5.00 per unit 23 When should a system of ‘Flexible Budgeting’ be used?

A to allow accurate comparison when budgeted and actual activity levels differ

B to budget for changes in costs arising from price increases

C to enable a company to change its budgetary control period

D to prepare budgets when selling prices are continuously changing

www.sheir.org

10

© UCLES 2010 9706/31/O/N/10

24 A company has the following production budget.

opening inventory (stock) 600 units

budgeted sales 10 000 units

closing inventory (stock) 800 units

selling price per unit $25

material cost per unit $13

What will be the production cost budget for material usage for the year?

A $120 000 B $127 400 C $130 000 D $132 600 25 A standard costing system uses routine exception reporting of variances.

What does this mean?

A Variances are investigated between certain limits.

B Variances are investigated if managers require it.

C Variances are only reported if unfavourable.

D Variances are reported if above or below agreed limits. 26 The standard direct materials cost per unit is as follows.

100 kg of material at $5 per kg

Last week 2000 units of the product were manufactured using 230 000 kg of material at a total cost of $1 035 000.

What was the material price variance?

A $100 000 adverse

B $100 000 favourable

C $115 000 adverse

D $115 000 favourable

www.sheir.org

11

© UCLES 2010 9706/31/O/N/10 [Turn over

27 A company manufactures a product.

The following standard information per 100 units is available.

materials content price / gm

component 1 25 gm $0.05

component 2 30 gm $0.03

direct labour content rate / hr

department A 1 hr $4.60

department B 1.5 hrs $5.00

Production overheads are $1.50 for each direct labour hour.

What is the standard unit cost of production?

A $0.16 B $0.18 C $0.19 D $0.20 28 The direct labour costs for a product are as follows.

standard 40 000 hours at $6.00 per hour

actual 36 000 hours at $6.30 per hour

What is the labour rate variance and the labour efficiency variance?

labour rate variance labour efficiency variance

A $10 800 adverse $24 000 favourable

B $10 800 favourable $24 000 adverse

C $24 000 adverse $10 800 favourable

D $24 000 favourable $10 800 adverse

29 Which statement about the use of payback as a method of capital investment appraisal is

correct?

A Payback allows cash to be used to generate profit in the most effective way.

B Payback can only be used to compare two projects when they have the same capital cost.

C Payback determines how long it takes before a profit is made.

D Payback determines how long it takes before the cash invested is returned.

www.sheir.org

12

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2010 9706/31/O/N/10

30 A company has evaluated the net present value of a project based on two separate discount rates, as follows.

net present value $

at 11 % 14 219 positive

at 16 % 5 368 negative

What is the internal rate of return of the project?

A 11.73 % B 12.61 % C 14.63 % D 15.73 %

www.sheir.org

This document consists of 12 printed pages.

IB10 11_9706_32/RP © UCLES 2010 [Turn over

*0430798319*

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

General Certificate of Education Advanced Level

ACCOUNTING 9706/32

Paper 3 Multiple Choice October/November 2010

1 hour

Additional Materials: Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.

Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you.

There are thirty questions on this paper. Answer all questions. For each question there are four possible answers A, B, C and D.

Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.

Any rough working should be done in this booklet.

Calculators may be used.

www.sheir.org

2

© UCLES 2010 9706/32/O/N/10

1 A company has operating profit of $326 000 after taking into account the following information.

$

depreciation 24 000

goodwill impairment 11 000

increase in inventory (stock) 18 000

What is the net cash flow from operating activities?

A $321 000 B $343 000 C $357 000 D $361 000 2 Why is goodwill adjusted in the accounts when a new partner is admitted?

A a more accurate value of non-current (fixed) assets is shown in the balance sheet

B original partners can be credited for their efforts in building up the partnership business

C partners can take higher drawings as a result of their share of the goodwill

D the new partner knows how much they have to introduce as capital 3 A company prepares internal accounts as follows.

year 1

$ year 2

$

profits 30 000 40 000

cost of goods sold 240 000 320 000

It then discovers that at the end of year 1 the value of stock was overstated by $2000.

What are the correct profit and cost of goods sold figures?

year 1 year 2

profits $

cost of goods sold $

profits $

cost of goods sold $

A 28 000 238 000 42 000 322 000

B 28 000 242 000 40 000 320 000

C 28 000 242 000 42 000 318 000

D 32 000 238 000 38 000 318 000

www.sheir.org

3

© UCLES 2010 9706/32/O/N/10 [Turn over

4 X, Y and Z are in partnership sharing profits and losses equally. The data shown is extracted from their books.

$

Net assets at end of year 600 000

Capital account balances at start of year 320 000

Current account balances at start of year (credit) 100 000

Partnership salary – Y 30 000

Total drawings during year 60 000

What was X’s share of net profit for the year?

A $40 000 B $60 000 C $70 000 D $80 000 5 A company has been wound up and the only assets that remain have realised $45 000.

A summary of the company’s capital structure shows the following.

$

ordinary shares 20 000

preference shares 40 000

loan stock 30 000

How will the $45 000 be distributed?

ordinary shares

$ preference shares

$ loan stock

$

A 10 000 20 000 15 000

B – 15 000 30 000

C 20 000 25 000 –

D – 40 000 5 000

6 A plc company redeemed 50 000 ordinary shares of $5 each at par.

The redemption was in part financed by a new issue of 80 000 preference shares of $1 each, issued at a premium of $1 per share.

By what amount will distributable reserves be reduced?

A $90 000 B $160 000 C $170 000 D $250 000

www.sheir.org

4

© UCLES 2010 9706/32/O/N/10

7 The table shows the assets and liabilities of a business.

$000

trade payables (creditors) 50

trade receivables (debtors) 15

fixtures and fittings 70

goodwill 15

inventory (stock) 20

How much did the purchaser pay for the business if the new balance sheet after the purchase shows a goodwill figure of $20 000?

A $55 000 B $70 000 C $75 000 D $145 000 8 A company purchases a business that it estimates has maintainable future earnings of $100 000

per annum.

The net assets purchased have a book value of $225 000, but are valued by the purchaser at a fair value of $300 000.

The company negotiated a purchase price, which met its return on investment of 20 %.

What was the amount paid for goodwill?

A $75 000 B $200 000 C $275 000 D $500 000 9 A limited company is acquiring the business of a sole trader by:

the issue of 50 000 $0.50 shares at a premium of $0.20 each

the issue of $20 000 debentures at a discount of 10 %

a cash payment

If the fair value of the acquired business is $80 000, how much will the cash payment be?

A $10 000 B $25 000 C $27 000 D $35 000

www.sheir.org

5

© UCLES 2010 9706/32/O/N/10 [Turn over

10 A company has the following costs for an item of inventory (stock).

$

purchase costs 12 000

carriage in 2 000

conversion costs 18 000

storage costs 8 000

What should the inventory (stock) be valued at?

A $12 000 B $14 000 C $32 000 D $40 000 11 A company has the following account balances at the end of its financial year.

$

cash in hand 1 200

cash at bank 16 000

bank overdraft 8 000

deposit, available at 2 months’ notice 7 000

deposit, available at 6 months’ notice 5 000

What is the figure for cash and cash equivalents to appear in the cash flow statement?

A $9200 B $16 200 C $17 200 D $21 200 12 X Plc incurred the following costs as a result of purchasing a new machine.

$

purchase price 7 000

installation cost 5 000

testing the machine before use 1 000

manufacturer’s list price 10 000

advertising the new products to be made by the machine 4 000

What is the maximum initial cost of the machine that would be recognised as an asset of the company?

A $13 000 B $16 000 C $17 000 D $20 000

www.sheir.org

6

© UCLES 2010 9706/32/O/N/10

13 A business has a trade receivables (debtors) turnover period of 40 days and annual sales of $479 970.

What is the year end trade receivables (debtors) figure?

A $11 999 B $15 780 C $39 997 D $52 599 14 Which ratio measures the return on an investment in shares which continue to be held?

A dividend cover

B dividend yield

C earnings per share

D interest cover 15 A company’s authorised share capital is 1 million ordinary shares of $1 each. 800 000 shares

have been issued and have a market value of $2.50 each.

Year end results show the following.

$

profits before interest and taxation 100 000

profits after interest and taxation 80 000

profits after interest, taxation and ordinary dividends 50 000

What is the price-earnings ratio?

A 10 B 20 C 25 D 40 16 The trade receivables (debtors) collection period of a business has reduced from 90 to 55 days.

Which reason could account for this?

A a large bad debt written off

B a large credit sale made just before the year end

C a major customer in financial difficulty

D poor credit control

www.sheir.org

7

© UCLES 2010 9706/32/O/N/10 [Turn over

17 The capital structure of a company is given.

$

400 000 ordinary shares of $0.50 200 000

reserves 90 000

9 % debentures 2010 – 2012 50 000

The company issues $30 000 10 % debenture stock 2015 – 2017 at par and makes a rights issue of 1 ordinary share for every four held at $0.60.

It also raises an unsecured loan of $50 000.

How will these transactions affect the balance sheet?

gearing reserves

A decrease decrease

B decrease increase

C increase decrease

D increase increase

18 The equity section of a company’s balance sheet is as follows.

$

ordinary shares of $0.50 each 200 000

preference shares of $1 each 100 000

share premium 50 000

retained earnings 120 000

The following items have not yet been adjusted.

1 purchase returns of $10 000 have been credited to the sales returns account

2 a long term loan of $40 000 has not been recorded

3 a rights issue during the year of 200 000 ordinary shares at a premium of $0.10 each

What will the total of equity be after the above adjustments have been made?

A $590 000 B $600 000 C $630 000 D $640 000

www.sheir.org

8

© UCLES 2010 9706/32/O/N/10

19 Which may result in an over-absorption of overheads?

A absorption based on actual expenditure and actual activity

B activity below budget

C expenditure below budget

D expenditure in excess of budget 20 The table shows the annual results of a company’s three departments.

department

X Y Z

$ $ $

sales 200 000 280 000 320 000

less: variable costs 130 000 190 000 100 000

headquarters fixed costs – apportioned 80 000 90 000 130 000

210 000 280 000 230 000

net profit (loss) (10 000) 0 90 000

Headquarters fixed costs will not be reduced if any department is closed.

What should the company do, on the basis of these results?

A Close department X and Y.

B Close department X only.

C Close department Y only.

D Keep all departments open.

www.sheir.org

9

© UCLES 2010 9706/32/O/N/10 [Turn over

21 The table shows the budgeted resources required for production and sales, and the available resources.

Market research shows sales demand for 120 000 units.

resources required

per unit resources available

material (kilos) 4.0 460 000 kilos

direct labour hours 3.0 400 000 hours

machine hours 0.5 70 000 hours

What is the principal limiting factor in this case?

A direct labour hours

B machine hours

C material

D sales 22 The table shows the costs involved in the production of 1000 units.

$

direct materials 4 000

direct labour 6 000

variable overheads 2 000

fixed overheads 8 000

If production increases by 25 %, what will be the effect on the total cost per unit?

A decrease of $1.60 per unit

B decrease of $5.00 per unit

C increase of $1.60 per unit

D increase of $5.00 per unit 23 When should a system of ‘Flexible Budgeting’ be used?

A to allow accurate comparison when budgeted and actual activity levels differ

B to budget for changes in costs arising from price increases

C to enable a company to change its budgetary control period

D to prepare budgets when selling prices are continuously changing

www.sheir.org

10

© UCLES 2010 9706/32/O/N/10

24 A company has the following production budget.

opening inventory (stock) 600 units

budgeted sales 10 000 units

closing inventory (stock) 800 units

selling price per unit $25

material cost per unit $13

What will be the production cost budget for material usage for the year?

A $120 000 B $127 400 C $130 000 D $132 600 25 A standard costing system uses routine exception reporting of variances.

What does this mean?

A Variances are investigated between certain limits.

B Variances are investigated if managers require it.

C Variances are only reported if unfavourable.

D Variances are reported if above or below agreed limits. 26 The standard direct materials cost per unit is as follows.

100 kg of material at $5 per kg

Last week 2000 units of the product were manufactured using 230 000 kg of material at a total cost of $1 035 000.

What was the material price variance?

A $100 000 adverse

B $100 000 favourable

C $115 000 adverse

D $115 000 favourable

www.sheir.org

11

© UCLES 2010 9706/32/O/N/10 [Turn over

27 A company manufactures a product.

The following standard information per 100 units is available.

materials content price / gm

component 1 25 gm $0.05

component 2 30 gm $0.03

direct labour content rate / hr

department A 1 hr $4.60

department B 1.5 hrs $5.00

Production overheads are $1.50 for each direct labour hour.

What is the standard unit cost of production?

A $0.16 B $0.18 C $0.19 D $0.20 28 The direct labour costs for a product are as follows.

standard 40 000 hours at $6.00 per hour

actual 36 000 hours at $6.30 per hour

What is the labour rate variance and the labour efficiency variance?

labour rate variance labour efficiency variance

A $10 800 adverse $24 000 favourable

B $10 800 favourable $24 000 adverse

C $24 000 adverse $10 800 favourable

D $24 000 favourable $10 800 adverse

29 Which statement about the use of payback as a method of capital investment appraisal is

correct?

A Payback allows cash to be used to generate profit in the most effective way.

B Payback can only be used to compare two projects when they have the same capital cost.

C Payback determines how long it takes before a profit is made.

D Payback determines how long it takes before the cash invested is returned.

www.sheir.org

12

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2010 9706/32/O/N/10

30 A company has evaluated the net present value of a project based on two separate discount rates, as follows.

net present value $

at 11 % 14 219 positive

at 16 % 5 368 negative

What is the internal rate of return of the project?

A 11.73 % B 12.61 % C 14.63 % D 15.73 %

www.sheir.org

This document consists of 11 printed pages and 1 blank page.

IB10 11_9706_33/3RP © UCLES 2010 [Turn over

*0752029569*

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

General Certificate of Education Advanced Level

ACCOUNTING 9706/33

Paper 1 Multiple Choice October/November 2010

1 hour

Additional Materials: Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, highlighters, glue or correction fluid.

Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you.

There are thirty questions on this paper. Answer all questions. For each question there are four possible answers A, B, C and D.

Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.

Any rough working should be done in this booklet.

Calculators may be used.

www.sheir.org

2

© UCLES 2010 9708/33/O/N/10

1 Why is goodwill adjusted in the accounts when a new partner is admitted?

A a more accurate value of non-current (fixed) assets is shown in the balance sheet

B original partners can be credited for their efforts in building up the partnership business

C partners can take higher drawings as a result of their share of the goodwill

D the new partner knows how much they have to introduce as capital 2 A company prepares internal accounts as follows.

year 1

$ year 2

$

profits 30 000 40 000

cost of goods sold 240 000 320 000

It then discovers that at the end of year 1 the value of stock was overstated by $2000.

What are the correct profit and cost of goods sold figures?

year 1 year 2

profits $

cost of goods sold $

profits $

cost of goods sold $

A 28 000 238 000 42 000 322 000

B 28 000 242 000 40 000 320 000

C 28 000 242 000 42 000 318 000

D 32 000 238 000 38 000 318 000

3 X, Y and Z are in partnership sharing profits and losses equally. The data shown is extracted

from their books.

$

Net assets at end of year 600 000

Capital account balances at start of year 320 000

Current account balances at start of year (credit) 100 000

Partnership salary – Y 30 000

Total drawings during year 60 000

What was X’s share of net profit for the year?

A $40 000 B $60 000 C $70 000 D $80 000

www.sheir.org

3

© UCLES 2010 9708/33/O/N/10 [Turn over

4 A company has been wound up and the only assets that remain have realised $45 000.

A summary of the company’s capital structure shows the following.

$

ordinary shares 20 000

preference shares 40 000

loan stock 30 000

How will the $45 000 be distributed?

ordinary shares

$ preference shares

$ loan stock

$

A 10 000 20 000 15 000

B – 15 000 30 000

C 20 000 25 000 –

D – 40 000 5 000

5 A plc company redeemed 50 000 ordinary shares of $5 each at par.

The redemption was in part financed by a new issue of 80 000 preference shares of $1 each, issued at a premium of $1 per share.

By what amount will distributable reserves be reduced?

A $90 000 B $160 000 C $170 000 D $250 000 6 The table shows the assets and liabilities of a business.

$000

trade payables (creditors) 50

trade receivables (debtors) 15

fixtures and fittings 70

goodwill 15

inventory (stock) 20

How much did the purchaser pay for the business if the new balance sheet after the purchase shows a goodwill figure of $20 000?

A $55 000 B $70 000 C $75 000 D $145 000

www.sheir.org

4

© UCLES 2010 9708/33/O/N/10

7 A company purchases a business that it estimates has maintainable future earnings of $100 000 per annum.

The net assets purchased have a book value of $225 000, but are valued by the purchaser at a fair value of $300 000.

The company negotiated a purchase price, which met its return on investment of 20 %.

What was the amount paid for goodwill?

A $75 000 B $200 000 C $275 000 D $500 000 8 A limited company is acquiring the business of a sole trader by:

the issue of 50 000 $0.50 shares at a premium of $0.20 each

the issue of $20 000 debentures at a discount of 10 %

a cash payment

If the fair value of the acquired business is $80 000, how much will the cash payment be?

A $10 000 B $25 000 C $27 000 D $35 000 9 A company has the following costs for an item of inventory (stock).

$

purchase costs 12 000

carriage in 2 000

conversion costs 18 000

storage costs 8 000

What should the inventory (stock) be valued at?

A $12 000 B $14 000 C $32 000 D $40 000

www.sheir.org

5

© UCLES 2010 9708/33/O/N/10 [Turn over

10 A company has the following account balances at the end of its financial year.

$

cash in hand 1 200

cash at bank 16 000

bank overdraft 8 000

deposit, available at 2 months’ notice 7 000

deposit, available at 6 months’ notice 5 000

What is the figure for cash and cash equivalents to appear in the cash flow statement?

A $9200 B $16 200 C $17 200 D $21 200 11 X Plc incurred the following costs as a result of purchasing a new machine.

$

purchase price 7 000

installation cost 5 000

testing the machine before use 1 000

manufacturer’s list price 10 000

advertising the new products to be made by the machine 4 000

What is the maximum initial cost of the machine that would be recognised as an asset of the company?

A $13 000 B $16 000 C $17 000 D $20 000 12 A business has a trade receivables (debtors) turnover period of 40 days and annual sales of

$479 970.

What is the year end trade receivables (debtors) figure?

A $11 999 B $15 780 C $39 997 D $52 599 13 Which ratio measures the return on an investment in shares which continue to be held?

A dividend cover

B dividend yield

C earnings per share

D interest cover

www.sheir.org

6

© UCLES 2010 9708/33/O/N/10

14 A company’s authorised share capital is 1 million ordinary shares of $1 each. 800 000 shares have been issued and have a market value of $2.50 each.

Year end results show the following.

$

profits before interest and taxation 100 000

profits after interest and taxation 80 000

profits after interest, taxation and ordinary dividends 50 000

What is the price-earnings ratio?

A 10 B 20 C 25 D 40 15 The trade receivables (debtors) collection period of a business has reduced from 90 to 55 days.

Which reason could account for this?

A a large bad debt written off

B a large credit sale made just before the year end

C a major customer in financial difficulty

D poor credit control 16 The capital structure of a company is given.

$

400 000 ordinary shares of $0.50 200 000

reserves 90 000

9 % debentures 2010 – 2012 50 000

The company issues $30 000 10 % debenture stock 2015 – 2017 at par and makes a rights issue of 1 ordinary share for every four held at $0.60.

It also raises an unsecured loan of $50 000.

How will these transactions affect the balance sheet?

gearing reserves

A decrease decrease

B decrease increase

C increase decrease

D increase increase

www.sheir.org

7

© UCLES 2010 9708/33/O/N/10 [Turn over

17 The equity section of a company’s balance sheet is as follows.

$

ordinary shares of $0.50 each 200 000

preference shares of $1 each 100 000

share premium 50 000

retained earnings 120 000

The following items have not yet been adjusted.

1 purchase returns of $10 000 have been credited to the sales returns account

2 a long term loan of $40 000 has not been recorded

3 a rights issue during the year of 200 000 ordinary shares at a premium of $0.10 each

What will the total of equity be after the above adjustments have been made?

A $590 000 B $600 000 C $630 000 D $640 000 18 Which may result in an over-absorption of overheads?

A absorption based on actual expenditure and actual activity

B activity below budget

C expenditure below budget

D expenditure in excess of budget

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8

© UCLES 2010 9708/33/O/N/10

19 The table shows the annual results of a company’s three departments.

department

X Y Z

$ $ $

sales 200 000 280 000 320 000

less: variable costs 130 000 190 000 100 000

headquarters fixed costs – apportioned 80 000 90 000 130 000

210 000 280 000 230 000

net profit (loss) (10 000) 0 90 000

Headquarters fixed costs will not be reduced if any department is closed.

What should the company do, on the basis of these results?

A Close department X and Y.

B Close department X only.

C Close department Y only.

D Keep all departments open. 20 The table shows the budgeted resources required for production and sales, and the available

resources.

Market research shows sales demand for 120 000 units.

resources required

per unit resources available

material (kilos) 4.0 460 000 kilos

direct labour hours 3.0 400 000 hours

machine hours 0.5 70 000 hours

What is the principal limiting factor in this case?

A direct labour hours

B machine hours

C material

D sales

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9

© UCLES 2010 9708/33/O/N/10 [Turn over

21 The table shows the costs involved in the production of 1000 units.

$

direct materials 4 000

direct labour 6 000

variable overheads 2 000

fixed overheads 8 000

If production increases by 25 %, what will be the effect on the total cost per unit?

A decrease of $1.60 per unit

B decrease of $5.00 per unit

C increase of $1.60 per unit

D increase of $5.00 per unit 22 When should a system of ‘Flexible Budgeting’ be used?

A to allow accurate comparison when budgeted and actual activity levels differ

B to budget for changes in costs arising from price increases

C to enable a company to change its budgetary control period

D to prepare budgets when selling prices are continuously changing 23 A company has the following production budget.

opening inventory (stock) 600 units

budgeted sales 10 000 units

closing inventory (stock) 800 units

selling price per unit $25

material cost per unit $13

What will be the production cost budget for material usage for the year?

A $120 000 B $127 400 C $130 000 D $132 600

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10

© UCLES 2010 9708/33/O/N/10

24 A standard costing system uses routine exception reporting of variances.

What does this mean?

A Variances are investigated between certain limits.

B Variances are investigated if managers require it.

C Variances are only reported if unfavourable.

D Variances are reported if above or below agreed limits. 25 The standard direct materials cost per unit is as follows.

100 kg of material at $5 per kg

Last week 2000 units of the product were manufactured using 230 000 kg of material at a total cost of $1 035 000.

What was the material price variance?

A $100 000 adverse

B $100 000 favourable

C $115 000 adverse

D $115 000 favourable 26 A company manufactures a product.

The following standard information per 100 units is available.

materials content price / gm

component 1 25 gm $0.05

component 2 30 gm $0.03

direct labour content rate / hr

department A 1 hr $4.60

department B 1.5 hrs $5.00

Production overheads are $1.50 for each direct labour hour.

What is the standard unit cost of production?

A $0.16 B $0.18 C $0.19 D $0.20

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11

© UCLES 2010 9708/33/O/N/10

27 The direct labour costs for a product are as follows.

standard 40 000 hours at $6.00 per hour

actual 36 000 hours at $6.30 per hour

What is the labour rate variance and the labour efficiency variance?

labour rate variance labour efficiency variance

A $10 800 adverse $24 000 favourable

B $10 800 favourable $24 000 adverse

C $24 000 adverse $10 800 favourable

D $24 000 favourable $10 800 adverse

28 Which statement about the use of payback as a method of capital investment appraisal is

correct?

A Payback allows cash to be used to generate profit in the most effective way.

B Payback can only be used to compare two projects when they have the same capital cost.

C Payback determines how long it takes before a profit is made.

D Payback determines how long it takes before the cash invested is returned. 29 A company has evaluated the net present value of a project based on two separate discount

rates, as follows.

net present value $

at 11 % 14 219 positive

at 16 % 5 368 negative

What is the internal rate of return of the project?

A 11.73 % B 12.61 % C 14.63 % D 15.73 % 30 A company has operating profit of $326 000 after taking into account the following information.

$

depreciation 24 000

goodwill impairment 11 000

increase in inventory (stock) 18 000

What is the net cash flow from operating activities?

A $321 000 B $343 000 C $357 000 D $361 000

www.sheir.org

12

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2010 9708/33/O/N/10

BLANK PAGE

www.sheir.org

This document consists of 8 printed pages.

DC (AT/MR) 17090/5© UCLES 2010 [Turn over

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONSGeneral Certificate of EducationAdvanced Level

*5733777862*

ACCOUNTING 9706/41

Paper 4 Problem Solving (Supplementary Topics) October/November 2010

2 hours

Additional Materials: Answer Booklet/Paper

READ THESE INSTRUCTIONS FIRST

If you have been given an Answer Booklet, follow the instructions on the front cover of the Booklet.Write your Centre number, candidate number and name on all the work you hand in.Write in dark blue or black pen.You may use a soft pencil for any diagrams, graphs or rough working.Do not use staples, paper clips, highlighters, glue or correction fluid.

Answer all questions.All accounting statements are to be presented in good style. Workings should be shown.You may use a calculator.

At the end of the examination, fasten all your work securely together.The number of marks is given in brackets [ ] at the end of each question or part question.

www.sheir.org

2

9706/41/O/N/10© UCLES 2010

1 Akram, Bhupesh and Chuck were in partnership. Their partnership agreement provided that:

1 Akram received a partnership salary of $8000 per annum

2 Partners be credited with interest on capital at 6% per annum

3 Residual profits be shared in the ratio 3 : 2 : 1 respectively

4 Chuck be guaranteed a minimum share of residual profits of $7 200.

The partnership trial balance at 31 March 2010, after the preparation of the partnership trading account, was as follows.

Dr Cr $ $

Gross profit 383 000 Trade receivables (debtors) 24 000 Trade payables (creditors) 18 000 Inventories (stock) at 31 March 2010 37 000 Non-current (fixed) assets at cost Buildings 310 000 Machinery 170 000 Vehicles 120 000 Provisions for depreciation Buildings 105 000 Machinery 68 000 Vehicles 77 000 General expenses 327 000 Bank 14 000 Capital accounts Akram 160 000 Bhupesh 110 000 Chuck 80 000 Current accounts Akram 14 000 Bhupesh 27 000 Chuck 37 000 Drawings Akram 40 000 Bhupesh 30 000 Chuck 35 000 1 093 0001 093 000

www.sheir.org

3

9706/41/O/N/10© UCLES 2010 [Turn over

Additional information

1 A family holiday taken by Bhupesh, costing $3400, had been entered in general expenses.

2 A bad debt of $500 was written off during the year. It had not been entered in the books of account.

3 A bad debt of $400 written off in the year ended 31 March 2009 was partially recovered. The debtor paid, by cheque, $0.50 for each $1 owed. No entries had been made in the books of account.

4 A machine purchased in January 2010 for $17 000 had been included in general expenses.

5 Depreciation is to be provided at the following rates:

Buildings at 2% per annum on cost Machinery at 10% per annum on cost Vehicles at 40% per annum reducing balance.

A full year’s depreciation is provided on non-current (fixed) assets acquired during the year.

REQUIRED

(a) Prepare an income statement (profit and loss account) and an appropriation account for the year ended 31 March 2010. [11]

(b) Prepare the partners’ current accounts at 31 March 2010. [6]

At the close of business on 31 March 2010 the partnership was taken over by EDC Ltd. The company took over all the assets and liabilities, with the exception of the bank balance, for a purchase consideration of $600 000.

The purchase consideration comprised: $30 000 in cash;

150 000 $1 debentures at par shared equally between the partners;

300 000 ordinary shares of $1 in EDC Ltd. These were shared among the partners in their profit sharing ratios.

The partnership expenses incurred in the takeover amounted to $20 200.

REQUIRED

(c) Prepare the partners’ capital accounts to close the books of account of the partnership. [16]

(d) Prepare the partnership bank account to close the books of account. [7]

[Total: 40]

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4

9706/41/O/N/10© UCLES 2010

2 The balance sheets at 31 March 2010 and 2009 for Costello plc are shown below:

2010 2009

$000 $000 $000 $000

Non-current (fixed) assets (Note 1) 8 080 5 330

Current assetsInventories (stock) 948 920Trade and other receivables (debtors) 542 522Cash and cash equivalents (bank) – 580

1 490 2 022

Current liabilities (creditors: amounts falling due within one year)Trade and other payables (creditors) (453) (234)Tax (168) (306)Cash and cash equivalents (bank) (87) –

(708) (540)Net current assets 782 1 482Total assets less current liabilities 8 862 6 812

Non-current liabilities (creditors: amounts falling due after more than one year)7% debentures (Note 2) (360) (500)Net assets 8 502 6 312

EquityOrdinary shares of $1 each fully paid (Note 3) 3 000 2 000Share premium account 1 000 –Retained earnings 4 502 4 312

8 502 6 312

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9706/41/O/N/10© UCLES 2010 [Turn over

The following information is available for the year ended 31 March 2010: $000

Profit from operations (operating profit) 393Finance costs (interest paid) (30)

363Tax (168)

195Dividends paid (5) Retained profit for the year 190

Note 1 Non-current (fixed) assets

2010 2009Land $000 $000Cost 2 550 2 550Additions 450 –Revaluation 500 –Book value 3 500 2 550

There were no disposals of land during the year.

Buildings $000 $000Cost 1 530 1 530Additions 1 350 –Accumulated depreciation (900) (430)Net book value 1 980 1 100

There were no disposals of buildings during the year.

Plant and machinery $000 $000Cost 1 600 1 600Additions 620 –Disposals (130) –Accumulated depreciation (810) (400)Net book value 1 280 1 200

During the year plant and machinery which had originally cost $130 000 was sold for $6000. The depreciation charged on this plant and machinery was $98 000.

Vehicles $000 $000Cost 900 900Additions 1 270 –Disposals (200) –Accumulated depreciation (650) (420)Net book value 1 320 480

During the year vehicles which had originally cost $200 000 were sold at a profit of $7000. The sales proceeds were $37 000.

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9706/41/O/N/10© UCLES 2010

Note 2

$140 000 debentures were redeemed on 30 September 2009.

Note 3

In May 2009 a bonus issue of 1 new ordinary share for every 4 held was made. It is company policy to maintain reserves in their most flexible form. A rights issue of 1 ordinary share for every 5 held at a premium of $2 each was made in February 2010.

REQUIRED

(a) Prepare a statement to show the reconciliation of profit from operations (operating profit) to net cash flow from operating activities for the year ended 31 March 2010. [13]

(b) Prepare a statement of cash flows (cash flow statement) for the year ended 31 March 2010 in good form. [16]

(c) Calculate the net debt of Costello plc at both 31 March 2009 and 31 March 2010.

Prepare a reconciliation showing the movement between the two figures. [7]

(d) State two reasons why a business might prepare a statement of cash flows (cash flow statement). [4]

[Total: 40]

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7

9706/41/O/N/10© UCLES 2010 [Turn over

3 The committee of the Qadir Cricket club want your financial advice about employing Brad Driscoll at the start of next season.

Brad is a young player who has impressed cricket lovers all over the world. He would sign a 5 year contract. He would receive an initial payment and be paid a salary as follows:

$ Initial payment 200 000 Salary year 1 30 000 2 36 000 3 43 200 4 51 840 5 62 208

The club would rent an apartment for Brad. The rent of the apartment would be as follows:

$ Rent year 1 3 600 2 3 600 3 4 500 4 4 500 5 4 500

The total rent for each year would be paid at the start of the year.

The club would pay Brad $1000 at the end of each year towards the air fare to visit home.

Without Brad attendance receipts would remain constant at $1 000 000 per year.

If Brad were employed receipts would rise by 10% each year.

REQUIRED

(a) Calculate the net cash flow generated by the new player, Brad Driscoll. [22]

The current cost of capital for the club is 12%.

The present value of $1 at an interest rate of 12% per annum is:

Year 1 $0.893 Year 2 $0.797 Year 3 $0.712 Year 4 $0.636 Year 5 $0.507

REQUIRED

(b) Calculate the net present value for Brad. [8]

(c) Calculate the discounted payback period for Brad. [4]

www.sheir.org

8

9706/41/O/N/10© UCLES 2010

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

The Qadir Cricket Club has also considered employing a different player, Tanzeel. The club accountant has calculated the net present value of Tanzeel to be $181 606 and that his payback period would be 2.27 years. Tanzeel would retire from cricket at the end of year 3.

REQUIRED

(d) Advise the club committee which player they should employ, Brad or Tanzeel. Give reasons for your answer, using both financial and non-financial factors. [6]

[Total: 40]

www.sheir.org

This document consists of 8 printed pages.

DC (NF/MR) 36610© UCLES 2010 [Turn over

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONSGeneral Certificate of EducationAdvanced Level

*8916067589*

ACCOUNTING 9706/42

Paper 4 Problem Solving (Supplementary Topics) October/November 2010

2 hours

Additional Materials: Answer Booklet/Paper

READ THESE INSTRUCTIONS FIRST

If you have been given an Answer Booklet, follow the instructions on the front cover of the Booklet.Write your Centre number, candidate number and name on all the work you hand in.Write in dark blue or black pen.You may use a soft pencil for any diagrams, graphs or rough working.Do not use staples, paper clips, highlighters, glue or correction fluid.

Answer all questions.All accounting statements are to be presented in good style. Workings should be shown.You may use a calculator.

At the end of the examination, fasten all your work securely together.The number of marks is given in brackets [ ] at the end of each question or part question.

www.sheir.org

2

9706/42/O/N/10© UCLES 2010

1 Akram, Bhupesh and Chuck were in partnership. Their partnership agreement provided that:

1 Akram received a partnership salary of $8000 per annum

2 Partners be credited with interest on capital at 6% per annum

3 Residual profits be shared in the ratio 3 : 2 : 1 respectively

4 Chuck be guaranteed a minimum share of residual profits of $7 200.

The partnership trial balance at 31 March 2010, after the preparation of the partnership trading account, was as follows.

Dr Cr $ $

Gross profit 383 000 Trade receivables (debtors) 24 000 Trade payables (creditors) 18 000 Inventories (stock) at 31 March 2010 37 000 Non-current (fixed) assets at cost Buildings 310 000 Machinery 170 000 Vehicles 120 000 Provisions for depreciation Buildings 105 000 Machinery 68 000 Vehicles 77 000 General expenses 327 000 Bank 14 000 Capital accounts Akram 160 000 Bhupesh 110 000 Chuck 80 000 Current accounts Akram 14 000 Bhupesh 27 000 Chuck 37 000 Drawings Akram 40 000 Bhupesh 30 000 Chuck 35 000 1 093 0001 093 000

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3

9706/42/O/N/10© UCLES 2010 [Turn over

Additional information

1 A family holiday taken by Bhupesh, costing $3400, had been entered in general expenses.

2 A bad debt of $500 was written off during the year. It had not been entered in the books of account.

3 A bad debt of $400 written off in the year ended 31 March 2009 was partially recovered. The debtor paid, by cheque, $0.50 for each $1 owed. No entries had been made in the books of account.

4 A machine purchased in January 2010 for $17 000 had been included in general expenses.

5 Depreciation is to be provided at the following rates:

Buildings at 2% per annum on cost Machinery at 10% per annum on cost Vehicles at 40% per annum reducing balance.

A full year’s depreciation is provided on non-current (fixed) assets acquired during the year.

REQUIRED

(a) Prepare an income statement (profit and loss account) and an appropriation account for the year ended 31 March 2010. [11]

(b) Prepare the partners’ current accounts at 31 March 2010. [6]

At the close of business on 31 March 2010 the partnership was taken over by EDC Ltd. The company took over all the assets and liabilities, with the exception of the bank balance, for a purchase consideration of $600 000.

The purchase consideration comprised: $30 000 in cash;

150 000 $1 debentures at par shared equally between the partners;

300 000 ordinary shares of $1 in EDC Ltd. These were shared among the partners in their profit sharing ratios.

The partnership expenses incurred in the takeover amounted to $20 200.

REQUIRED

(c) Prepare the partners’ capital accounts to close the books of account of the partnership. [16]

(d) Prepare the partnership bank account to close the books of account. [7]

[Total: 40]

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4

9706/42/O/N/10© UCLES 2010

2 The balance sheets at 31 March 2010 and 2009 for Costello plc are shown below:

2010 2009

$000 $000 $000 $000

Non-current (fixed) assets (Note 1) 8 080 5 330

Current assetsInventories (stock) 948 920Trade and other receivables (debtors) 542 522Cash and cash equivalents (bank) – 580

1 490 2 022

Current liabilities (creditors: amounts falling due within one year)Trade and other payables (creditors) (453) (234)Tax (168) (306)Cash and cash equivalents (bank) (87) –

(708) (540)Net current assets 782 1 482Total assets less current liabilities 8 862 6 812

Non-current liabilities (creditors: amounts falling due after more than one year)7% debentures (Note 2) (360) (500)Net assets 8 502 6 312

EquityOrdinary shares of $1 each fully paid (Note 3) 3 000 2 000Share premium account 1 000 –Retained earnings 4 502 4 312

8 502 6 312

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9706/42/O/N/10© UCLES 2010 [Turn over

The following information is available for the year ended 31 March 2010: $000

Profit from operations (operating profit) 393Finance costs (interest paid) (30)

363Tax (168)

195Dividends paid (5) Retained profit for the year 190

Note 1 Non-current (fixed) assets

2010 2009Land $000 $000Cost 2 550 2 550Additions 450 –Revaluation 500 –Book value 3 500 2 550

There were no disposals of land during the year.

Buildings $000 $000Cost 1 530 1 530Additions 1 350 –Accumulated depreciation (900) (430)Net book value 1 980 1 100

There were no disposals of buildings during the year.

Plant and machinery $000 $000Cost 1 600 1 600Additions 620 –Disposals (130) –Accumulated depreciation (810) (400)Net book value 1 280 1 200

During the year plant and machinery which had originally cost $130 000 was sold for $6000. The depreciation charged on this plant and machinery was $98 000.

Vehicles $000 $000Cost 900 900Additions 1 270 –Disposals (200) –Accumulated depreciation (650) (420)Net book value 1 320 480

During the year vehicles which had originally cost $200 000 were sold at a profit of $7000. The sales proceeds were $37 000.

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6

9706/42/O/N/10© UCLES 2010

Note 2

$140 000 debentures were redeemed on 30 September 2009.

Note 3

In May 2009 a bonus issue of 1 new ordinary share for every 4 held was made. It is company policy to maintain reserves in their most flexible form. A rights issue of 1 ordinary share for every 5 held at a premium of $2 each was made in February 2010.

REQUIRED

(a) Prepare a statement to show the reconciliation of profit from operations (operating profit) to net cash flow from operating activities for the year ended 31 March 2010. [13]

(b) Prepare a statement of cash flows (cash flow statement) for the year ended 31 March 2010 in good form. [16]

(c) Calculate the net debt of Costello plc at both 31 March 2009 and 31 March 2010.

Prepare a reconciliation showing the movement between the two figures. [7]

(d) State two reasons why a business might prepare a statement of cash flows (cash flow statement). [4]

[Total: 40]

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7

9706/42/O/N/10© UCLES 2010 [Turn over

3 The committee of the Qadir Cricket club want your financial advice about employing Brad Driscoll at the start of next season.

Brad is a young player who has impressed cricket lovers all over the world. He would sign a 5 year contract. He would receive an initial payment and be paid a salary as follows:

$ Initial payment 200 000 Salary year 1 30 000 2 36 000 3 43 200 4 51 840 5 62 208

The club would rent an apartment for Brad. The rent of the apartment would be as follows:

$ Rent year 1 3 600 2 3 600 3 4 500 4 4 500 5 4 500

The total rent for each year would be paid at the start of the year.

The club would pay Brad $1000 at the end of each year towards the air fare to visit home.

Without Brad attendance receipts would remain constant at $1 000 000 per year.

If Brad were employed receipts would rise by 10% each year.

REQUIRED

(a) Calculate the net cash flow generated by the new player, Brad Driscoll. [22]

The current cost of capital for the club is 12%.

The present value of $1 at an interest rate of 12% per annum is:

Year 1 $0.893 Year 2 $0.797 Year 3 $0.712 Year 4 $0.636 Year 5 $0.507

REQUIRED

(b) Calculate the net present value for Brad. [8]

(c) Calculate the discounted payback period for Brad. [4]

www.sheir.org

8

9706/42/O/N/10© UCLES 2010

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

The Qadir Cricket Club has also considered employing a different player, Tanzeel. The club accountant has calculated the net present value of Tanzeel to be $181 606 and that his payback period would be 2.27 years. Tanzeel would retire from cricket at the end of year 3.

REQUIRED

(d) Advise the club committee which player they should employ, Brad or Tanzeel. Give reasons for your answer, using both financial and non-financial factors. [6]

[Total: 40]

www.sheir.org

This document consists of 6 printed pages and 2 blank page.

DC (AC) 23172/5© UCLES 2010 [Turn over

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONSGeneral Certificate of EducationAdvanced Level

*4509860812*

ACCOUNTING 9706/43

Paper 4 Problem Solving (Supplementary Topics) October/November 2010

2 hours

Additional Materials: Answer Booklet/Paper

READ THESE INSTRUCTIONS FIRST

If you have been given an Answer Booklet, follow the instructions on the front cover of the Booklet.Write your Centre number, candidate number and name on all the work you hand in.Write in dark blue or black pen.You may use a soft pencil for any diagrams, graphs or rough working.Do not use staples, paper clips, highlighters, glue or correction fluid.

Answer all questions.All accounting statements are to be presented in good style. Workings should be shown.You may use a calculator.

At the end of the examination, fasten all your work securely together.The number of marks is given in brackets [ ] at the end of each question or part question.

www.sheir.org

2

9706/43/O/N/10© UCLES 2010

1 Boris and Cheong are in partnership. Their partnership agreement allows:

Interest on fixed capital accounts at 6%. Interest on total annual drawings to be charged at 8%. Residual profits to be shared in the ratio 3 : 2 respectively.

A draft income statement (profit and loss account) for the year ended 31 December 2009 showed a net profit of $72 000.

The draft balance sheet at 31 December 2009 revealed the following information:

$Capital account balances Boris 100 000

Cheong 90 000Current account balances Boris 9 908 Cr

Cheong 22 092 CrDrawings for the year Boris 22 000

Cheong 20 000

After the draft income statement (profit and loss account) and balance sheet had been prepared it was discovered that:

Interest on fixed capital account balances had been calculated at 8%. Interest on drawings had been calculated at 6%. Residual profits had been calculated at 2 : 3 respectively.

REQUIRED

(a) Calculate the opening balances on the partners’ current accounts at 1 January 2009. [8]

The following errors were also discovered after the preparation of the draft financial statements:

1 Depreciation for the year of $16 000 had been correctly entered in the depreciation of non-current (fixed) assets account in the general ledger but had been entered in the income statement (profit and loss account) as $1600.

2 A cash sale of a non-current (fixed) asset for $1000 had been omitted from the books of account. The asset had originally cost $6000 and had been depreciated by $4500.

3 Goods sold for $3500 on credit had been correctly entered in the debtor’s account but had been debited to the sales returns account twice.

4 The total of the discount received account, $300, had been treated as revenue expenditure.

5 A family holiday for Boris costing $3400 had been included as marketing expenses.

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3

9706/43/O/N/10© UCLES 2010 [Turn over

6 The books of account contained a provision for doubtful debts of 3% on 1 January 2009, based on trade debtors of $41 000.

At the end of the financial year trade debtors had increased by $3000.

However, none of the following items had been entered in the books of account during the year ended 31 December 2009.

A bad debt of $500.

A bad debt of $350 written off in the year ended 31 December 2008 was partially recovered. The debtor paid 60% of the debt.

The provision for doubtful debts was to be adjusted to 5% of closing trade debtors.

REQUIRED

(b) Calculate the corrected net profit for the year ended 31 December 2009. [10]

(c) Prepare an appropriation account for the year ended 31 December 2009 to show the division of profits between the partners. [8]

(d) Prepare the partners’ current accounts for the year ended 31 December 2009. [8]

(e) Explain two reasons why a partner might wish to keep separate capital and current accounts. [6]

[Total: 40]

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4

9706/43/O/N/10© UCLES 2010

2 The following information is available for Sanaa Malik Ltd at 31 May 2010:

Gross profit ratio margin (gross profit percentage) 40%Net profit ratio (net profit percentage) 15%Rate of inventory turnover (stockturn) 1 monthCreditors’ turnover (average payment period) 40 daysDebtors’ turnover (average collection period) 45 daysCurrent ratio 2.5 : 1Non-current (fixed) asset turnover 2 times

Additional information

1 Inventory (stock) at 1 June 2009 cost $27 000.

2 Revenue (sales) for the year ended 31 May 2010 was $870 000.

3 All ordinary goods purchased (purchases) were on credit.

4 50% of revenue (sales) was on credit.

5 Issued share capital at 31 May 2010 was:

8% preference shares of $1 each fully paid $50 000. Ordinary shares of $1 each fully paid $180 000.

6 6% debentures, repayable 2027, had been issued in 2007 for $100 000.

7 Retained earnings at 31 May 2009 were $93 733.

8 An ordinary share dividend of $0.10 per share and the preference dividends for the year ended 31 May 2009 were both paid in the year ended 31 May 2010.

9 An ordinary share dividend of $0.12 per share and the preference dividends for the year ended 31 May 2010 will both be paid in the year ended 31 May 2011.

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5

9706/43/O/N/10© UCLES 2010 [Turn over

REQUIRED

(a) Prepare an income statement (profit and loss account) and appropriation account for the year ended 31 May 2010. [12]

(b) Prepare a balance sheet at 31 May 2010. The balance at bank is a balancing figure. [13]

(c) Calculate:

(i) income gearing; [3]

(ii) the gearing ratio. [3]

(d) Comment on the ratios calculated in (c) above. [3]

(e) Comment on the liquidity position of the company. [6]

[Total: 40]

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3 DC Ltd manufactures one product, the NK1, which passes through two processes. The following information is available:

Process 1 No stocks of work in progress are kept. Each NK1 requires: 2 kgs of raw material costing $8 per kg 3 hours of direct labour costing $10 an hour. Variable overhead is charged at $6 per direct labour hour. Fixed overhead is charged at $2 per unit. Normal loss is 10% of production. Scrapped units are sold for $20 each.

Process 2 Each NK1 requires an extra: 2 kgs of raw material costing $12 per kg 4 hours of direct labour costing $11 an hour. Variable overhead is charged at $3 per direct labour hour. Fixed overhead is charged at $1.50 per completed unit.

During September 2010 the following took place:

Process 1 Cost of materials was $1 120 000. There were no abnormal gains or losses.

Process 2 Cost of materials was $? At the end of the month there were 2200 units of work in progress. 1000 units were 50% complete as to both materials and labour. 1200 units were 75% complete as to materials and 60% complete as to labour. All other units were transferred to finished goods.

REQUIRED (a) Calculate the number of units transferred from Process 1 to Process 2. [2]

(b) (i) Prepare the Process 1 account. [11]

(ii) Prepare the scrap account. [2]

(c) Calculate the cost of raw materials for Process 2 for September. [7]

(d) Calculate the cost of work in progress in Process 2. [15]

(e) State which characteristics of production would make process costing the most suitable costing method to use. Give an example. [3]

[Total: 40]

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

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