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A-Level Past Papers Accounting


A-Level Examinations October/November 2010
Paper

Pages

Multiple Choice
P1 - 9706/11
P1 9706/12
P1 9706/13

2 - 13
14 - 25
26 37

Structured Questions
P2 9706/21
P2 9706/22
P2 9706/23

38 53
54 69
70 85

Multiple Choice
P3 9706/31
P3 9706/32
P3 9706/33

86 97
98 109
110 121

Problem Solving
P4 9706/41
P4 9706/42
P4 9706/43

122 129
130 137
138 145

www.sheir.org

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Subsidiary Level and Advanced Level

9706/11

ACCOUNTING
Paper 1 Multiple Choice

October/November 2010
1 hour

Additional Materials:

*3054242948*

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.

This document consists of 12 printed pages.


IB10 11_9706_11/6RP
UCLES 2010

[Turn over

www.sheir.org

www.sheir.org
2
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?

$200 too high

$200 too low

$250 too high

$250 too low

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


How should this be recorded in the sellers books?

debit

credit

cash

customer

cash

sales

customer

prepayment

customer

sales

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

UCLES 2010

$23 000

$53 000

9706/11/O/N/10

$69 000

www.sheir.org
3
4

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


A

that all losses are provided for

that assets are recorded at their actual cost

that financial statements are produced annually

that profits are calculated the same way each year

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


$
trade receivables (debtors)
provision for doubtful debts 5 %

46 000
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
6

$15 200

$16 000

$22 200

$76 000

Which error will not affect the trial balance?


A

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

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

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

posting of $3000 sales to the debit of the motor vehicle account

Closing inventory (stock) has been overvalued.


What is the effect on the financial statements?
net current assets

net profit

no effect

understated

overstated

no effect

overstated

overstated

understated

understated

UCLES 2010

9706/11/O/N/10

[Turn over

www.sheir.org
4
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

$13 920

$14 720

$14 920

An electricity accrual of $375 was treated as a prepayment in preparing a traders income (profit
and loss) account.
What was the effect on profit?
A

overstated by $375

overstated by $750

understated by $375

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

$153 000

$157 000

$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

UCLES 2010

$36 135

$36 593

9706/11/O/N/10

$43 912

www.sheir.org
5
12 Information relating to a clubs 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

40

42

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

salary to Y of $10 000

The partners drawings for the year were:


X

$12 000

$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

UCLES 2010

$11 200

$20 800

9706/11/O/N/10

$21 200

[Turn over

www.sheir.org
6
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

$208 300

$212 500

$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)

$4500

$7500

$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

UCLES 2010

$115 000

$123 000

9706/11/O/N/10

$158 000

www.sheir.org
7
17 A business has two departments, mens clothing and ladies clothing. The following information is
available.
mens department

ladies department

160 m2

200 m2

value of non current (fixed) assets

$59 000

$61 000

annual sales

$450 000

$750 000

sales assistants
floor space

The cost of heating and lighting is $17 692.


What is the cost of heating and lighting for the mens department?
A

$6634.50

$7740.25

$7863.11

$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

increase

decrease

increase

unchanged

unchanged

decrease

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

UCLES 2010

$225 000

$345 000

9706/11/O/N/10

$595 000

[Turn over

www.sheir.org
8
20 A companys 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

$435 000

$475 000

$485 000

$15 000

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

$4000

$9000

22 A companys 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

an increase in the volume of sales during 2009

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

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

UCLES 2010

9706/11/O/N/10

www.sheir.org
9
23 A business has the following assets and liabilities.
$000
non current (fixed) assets

$000
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

1.95 : 1

2.43 : 1

3.86 : 1

24 The table shows the year end information for three companies.
company

sales
$

operating profit as %
of all sales

capital employed
$

500 000

15

100 000

200 000

40 000

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

UCLES 2010

9706/11/O/N/10

[Turn over

www.sheir.org
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

cost of sales

work in progress

stores control

finished goods

stores control

work in progress

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)


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

3000

4000

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

UCLES 2010

$0.90

$1.10

9706/11/O/N/10

$1.20

www.sheir.org
11
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

no change in operating profit

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

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

UCLES 2010

$230

$330

9706/11/O/N/10

$355

[Turn over

www.sheir.org
12
30 The diagram shows a break-even chart.
$

number of units

What is indicated by the line XY?


A

total costs

total fixed costs

total sales

total variable costs

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

www.sheir.org

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Subsidiary Level and Advanced Level

9706/12

ACCOUNTING
Paper 1 Multiple Choice

October/November 2010
1 hour

Additional Materials:

*2013075856*

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.

This document consists of 12 printed pages.


IB10 11_9706_12/RP
UCLES 2010

[Turn over

www.sheir.org
2
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?

$200 too high

$200 too low

$250 too high

$250 too low

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


How should this be recorded in the sellers books?

debit

credit

cash

customer

cash

sales

customer

prepayment

customer

sales

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

UCLES 2010

$23 000

$53 000

9706/12/O/N/10

$69 000

www.sheir.org
3
4

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


A

that all losses are provided for

that assets are recorded at their actual cost

that financial statements are produced annually

that profits are calculated the same way each year

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


$
trade receivables (debtors)
provision for doubtful debts 5 %

46 000
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
6

$15 200

$16 000

$22 200

$76 000

Which error will not affect the trial balance?


A

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

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

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

posting of $3000 sales to the debit of the motor vehicle account

Closing inventory (stock) has been overvalued.


What is the effect on the financial statements?
net current assets

net profit

no effect

understated

overstated

no effect

overstated

overstated

understated

understated

UCLES 2010

9706/12/O/N/10

[Turn over

www.sheir.org
4
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

$13 920

$14 720

$14 920

An electricity accrual of $375 was treated as a prepayment in preparing a traders income (profit
and loss) account.
What was the effect on profit?
A

overstated by $375

overstated by $750

understated by $375

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

$153 000

$157 000

$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

UCLES 2010

$36 135

$36 593

9706/12/O/N/10

$43 912

www.sheir.org
5
12 Information relating to a clubs 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

40

42

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

salary to Y of $10 000

The partners drawings for the year were:


X

$12 000

$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

UCLES 2010

$11 200

$20 800

9706/12/O/N/10

$21 200

[Turn over

www.sheir.org
6
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

$208 300

$212 500

$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)

$4500

$7500

$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

UCLES 2010

$115 000

$123 000

9706/12/O/N/10

$158 000

www.sheir.org
7
17 A business has two departments, mens clothing and ladies clothing. The following information is
available.
mens department

ladies department

160 m2

200 m2

value of non current (fixed) assets

$59 000

$61 000

annual sales

$450 000

$750 000

sales assistants
floor space

The cost of heating and lighting is $17 692.


What is the cost of heating and lighting for the mens department?
A

$6634.50

$7740.25

$7863.11

$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

increase

decrease

increase

unchanged

unchanged

decrease

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

UCLES 2010

$225 000

$345 000

9706/12/O/N/10

$595 000

[Turn over

www.sheir.org
8
20 A companys 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

$435 000

$475 000

$485 000

$15 000

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

$4000

$9000

22 A companys 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

an increase in the volume of sales during 2009

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

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

UCLES 2010

9706/12/O/N/10

www.sheir.org
9
23 A business has the following assets and liabilities.
$000
non current (fixed) assets

$000
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

1.95 : 1

2.43 : 1

3.86 : 1

24 The table shows the year end information for three companies.
company

sales
$

operating profit as %
of all sales

capital employed
$

500 000

15

100 000

200 000

40 000

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

UCLES 2010

9706/12/O/N/10

[Turn over

www.sheir.org
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

cost of sales

work in progress

stores control

finished goods

stores control

work in progress

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)


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

3000

4000

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

UCLES 2010

$0.90

$1.10

9706/12/O/N/10

$1.20

www.sheir.org
11
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

no change in operating profit

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

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

UCLES 2010

$230

$330

9706/12/O/N/10

$355

[Turn over

www.sheir.org
12
30 The diagram shows a break-even chart.
$

number of units

What is indicated by the line XY?


A

total costs

total fixed costs

total sales

total variable costs

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

www.sheir.org

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Subsidiary Level and Advanced Level

9706/13

ACCOUNTING
Paper 1 Multiple Choice

October/November 2010
1 hour

Additional Materials:

*7719005092*

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.

This document consists of 12 printed pages.


IB10 11_9706_13/FP
UCLES 2010

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2
1

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


How should this be recorded in the sellers books?

debit

credit

cash

customer

cash

sales

customer

prepayment

customer

sales

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
3

$22 000

$23 000

$53 000

$69 000

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


A

that all losses are provided for

that assets are recorded at their actual cost

that financial statements are produced annually

that profits are calculated the same way each year

UCLES 2010

9706/13/O/N/10

www.sheir.org
3
4

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


$
trade receivables (debtors)
provision for doubtful debts 5 %

46 000
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
5

$15 200

$16 000

$22 200

$76 000

Which error will not affect the trial balance?


A

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

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

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

posting of $3000 sales to the debit of the motor vehicle account

Closing inventory (stock) has been overvalued.


What is the effect on the financial statements?

net current assets

net profit

no effect

understated

overstated

no effect

overstated

overstated

understated

understated

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

UCLES 2010

$13 920

$14 720

9706/13/O/N/10

$14 920

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4
8

An electricity accrual of $375 was treated as a prepayment in preparing a traders income (profit
and loss) account.
What was the effect on profit?

overstated by $375

overstated by $750

understated by $375

understated by $750

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

$153 000

$157 000

$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

UCLES 2010

$36 135

$36 593

9706/13/O/N/10

$43 912

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5
11 Information relating to a clubs 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

40

42

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

salary to Y of $10 000

The partners drawings for the year were:


X

$12 000

$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

UCLES 2010

$11 200

$20 800

9706/13/O/N/10

$21 200

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6
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

$208 300

$212 500

$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)

$4500

$7500

$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

UCLES 2010

$115 000

$123 000

9706/13/O/N/10

$158 000

www.sheir.org
7
16 A business has two departments, mens clothing and ladies clothing. The following information is
available.
mens department

ladies department

160 m2

200 m2

value of non current (fixed) assets

$59 000

$61 000

annual sales

$450 000

$750 000

sales assistants
floor space

The cost of heating and lighting is $17 692.


What is the cost of heating and lighting for the mens department?
A

$6634.50

$7740.25

$7863.11

$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

increase

decrease

increase

unchanged

unchanged

decrease

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

UCLES 2010

$225 000

$345 000

9706/13/O/N/10

$595 000

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8
19 A companys 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

$435 000

$475 000

$485 000

$15 000

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

$4000

$9000

21 A companys 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

an increase in the volume of sales during 2009

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

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

UCLES 2010

9706/13/O/N/10

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9
22 A business has the following assets and liabilities.
$000
non current (fixed) assets

$000
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

1.95 : 1

2.43 : 1

3.86 : 1

23 The table shows the year end information for three companies.
company

sales
$

operating profit as %
of all sales

capital employed
$

500 000

15

100 000

200 000

40 000

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

UCLES 2010

9706/13/O/N/10

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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

cost of sales

work in progress

stores control

finished goods

stores control

work in progress

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)


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

3000

4000

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

UCLES 2010

$0.90

$1.10

9706/13/O/N/10

$1.20

www.sheir.org
11
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

no change in operating profit

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

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

UCLES 2010

$230

$330

9706/13/O/N/10

$355

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12
29 The diagram shows a break-even chart.
$

number of units

What is indicated by the line XY?


A

total costs

total fixed costs

total sales

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

$200 too low

$250 too high

$250 too low

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

www.sheir.org

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Subsidiary Level and Advanced Level

* 3 9 0 6 6 2 0 6 6 6 *

9706/21

ACCOUNTING
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 Examiners Use


1
2
3
Total

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


DC (AC/CGW) 22297/6
UCLES 2010

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2
1

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

Inventory (stock)
Premises
Fittings and fixtures (net book value)
Cash and cash equivalents (bank)
Rates repaid
p
Trade receivables (debtors)
Trade payables (creditors)
Capital

$
24 170
60 000
28 000
4 000
440
3 810
3 420
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)
Receipts from trade receivables (debtors)
Cash sales paid into bank
Bank Account Payments
Payments to trade payables (creditors)
Ordinary goods purchased (purchases) by cheque
Rates
Drawings
General expenses
Wages
Cash payments from cash sales
General expenses
Purchases
Balances as at 31 December 2009
Trade receivables (debtors)
Trade payables (creditors)
Rates
prepai
d
General expenses owing
Wages owing
Cash and cash equivalents (cash)
Bank
Additional

$
10 000
163 100
34 000
141 508
6 300
2 600
3 650
4 410
21 300
2 680
1 200
4 100
11 850
240
400
1 620
515
?

ormation:
Inf

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.
UCLES 2010

9706/21/O/N/10

For
Examiners
Use

www.sheir.org
3
For
Examiners
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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...................................................................................................................................... [5]

UCLES 2010

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4
(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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..................................................................................................................................... [8]

UCLES 2010

9706/21/O/N/10

For
Examiners
Use

www.sheir.org
5
(d) Prepare the Balance Sheet for Clara Coyle at 31 December 2009.
..........................................................................................................................................

For
Examiners
Use

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................................................................................................................................... [12]
[Total: 30]

UCLES 2010

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2

The following information is given about the Schubert Music Club.

For
Examiners
Use

Schubert Music Club


Balance Sheet at 31 December 2008
Cost
$
50 000
06 000
56 000

Non-current (Fixed) Assets


Clubhouse
Instruments

Depreciation
$
10 000
05 000
15 000

Current Assets
Inventory (stock) of cafe supplies
Subscriptions in arrears
Cash and cash equivalents (bank)

Net Book Value


$
40 000
01 000
41 000

4 000
400
2 100
6 500

Current Liabilities
Trade payables (creditors) for cafe supplies
Cafe expenses owing
Subscriptions in advance

3 000
1 200
0 300
4 500

Accumulated fund
Life subscriptions

41 000
02 000
43 000

Schubert Music Club


Receipts and Payments Account for the year ended 31 December 2009

Balance b/d
Subscriptions 2008
Subscriptions 2009
Life subscriptions
Cafe takings

$
2 100
300
2 200
4 000
18 500

Suppliers for cafe


Cafe expenses
Wages cafe staff
Clubhouse repairs
Sundries
Balance c/d

27 100
Additional information at 31 December 2009
1

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

Suppliers for cafe purchases were owed $2 200.

Cafe expenses of $50 were owing.

Depreciation is to be charged on a straight line basis:


Clubhouse: 4% on cost per annum
Instruments: $1 000 per annum

UCLES 2010

02 000
43 000

9706/21/O/N/10

$
8 400
4 200
5 000
6 000
2 500
01 000
27 100

www.sheir.org
7
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.

For
Examiners
Use

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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UCLES 2010

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8
(b) Prepare a Cafe Trading Account for the year ended 31 December 2009.
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..................................................................................................................................... [8]
(c) Prepare an Income and Expenditure Account for the year ended 31 December 2009.
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UCLES 2010

9706/21/O/N/10

For
Examiners
Use

www.sheir.org
9

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For
Examiners
Use

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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 .......................................................................................................................................
..................................................................................................................................... [6]
[Total: 30]

UCLES 2010

9706/21/O/N/10

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10
3

Debussy currently produces one product for which the following information is available:
Product D946

$ per unit

Selling price
Direct materials
Direct labour
Variable overheads
Total fixed costs
Sales per annum (units)

6.00
2.50
1.40
1.10
$120 000 per annum
$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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UCLES 2010

9706/21/O/N/10

For
Examiners
Use

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11
(iii)

margin of safety in units and as a percentage of sales.


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For
Examiners
Use

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............................................................................................................................. [4]
(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]

UCLES 2010

9706/21/O/N/10

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12
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.

Selling icepr
Direct
mater
ials
Direct abour
l
Variable verheads
o
Sales per annum (units)

Product D947
$ per unit
9.00
6.60
2.40
1.50

Product D948
$ per unit
13.00
7.00
2.10
0.90

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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UCLES 2010

9706/21/O/N/10

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Examiners
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13
(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

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14
BLANK PAGE

UCLES 2010

9706/21/O/N/10

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15
BLANK PAGE

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9706/21/O/N/10

www.sheir.org
16
BLANK PAGE

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

9706/21/O/N/10

www.sheir.org

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Subsidiary Level and Advanced Level

* 8 2 8 7 4 3 6 3 9 5 *

9706/22

ACCOUNTING
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 Examiners Use


1
2
3
Total

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


DC (SJF/CGW) 35573
UCLES 2010

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2
1

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

Inventory (stock)
Premises
Fittings and fixtures (net book value)
Cash and cash equivalents (bank)
Rates repaid
p
Trade receivables (debtors)
Trade payables (creditors)
Capital

$
24 170
60 000
28 000
4 000
440
3 810
3 420
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)
Receipts from trade receivables (debtors)
Cash sales paid into bank
Bank Account Payments
Payments to trade payables (creditors)
Ordinary goods purchased (purchases) by cheque
Rates
Drawings
General expenses
Wages
Cash payments from cash sales
General expenses
Purchases
Balances as at 31 December 2009
Trade receivables (debtors)
Trade payables (creditors)
Rates
prepai
d
General expenses owing
Wages owing
Cash and cash equivalents (cash)
Bank
Additional

$
10 000
163 100
34 000
141 508
6 300
2 600
3 650
4 410
21 300
2 680
1 200
4 100
11 850
240
400
1 620
515
?

ormation:
Inf

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.
UCLES 2010

9706/22/O/N/10

For
Examiners
Use

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3
For
Examiners
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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UCLES 2010

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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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UCLES 2010

9706/22/O/N/10

For
Examiners
Use

www.sheir.org
5
(d) Prepare the Balance Sheet for Clara Coyle at 31 December 2009.
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Examiners
Use

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[Total: 30]

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6
2

The following information is given about the Schubert Music Club.

For
Examiners
Use

Schubert Music Club


Balance Sheet at 31 December 2008
Cost
$
50 000
06 000
56 000

Non-current (Fixed) Assets


Clubhouse
Instruments

Depreciation
$
10 000
05 000
15 000

Current Assets
Inventory (stock) of cafe supplies
Subscriptions in arrears
Cash and cash equivalents (bank)

Net Book Value


$
40 000
01 000
41 000

4 000
400
2 100
6 500

Current Liabilities
Trade payables (creditors) for cafe supplies
Cafe expenses owing
Subscriptions in advance

3 000
1 200
0 300
4 500

Accumulated fund
Life subscriptions

41 000
02 000
43 000

Schubert Music Club


Receipts and Payments Account for the year ended 31 December 2009

Balance b/d
Subscriptions 2008
Subscriptions 2009
Life subscriptions
Cafe takings

$
2 100
300
2 200
4 000
18 500

Suppliers for cafe


Cafe expenses
Wages cafe staff
Clubhouse repairs
Sundries
Balance c/d

27 100
Additional information at 31 December 2009
1

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

Suppliers for cafe purchases were owed $2 200.

Cafe expenses of $50 were owing.

Depreciation is to be charged on a straight line basis:


Clubhouse: 4% on cost per annum
Instruments: $1 000 per annum

UCLES 2010

02 000
43 000

9706/22/O/N/10

$
8 400
4 200
5 000
6 000
2 500
01 000
27 100

www.sheir.org
7
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.

For
Examiners
Use

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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...................................................................................................................................... [7]

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9706/22/O/N/10

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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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UCLES 2010

9706/22/O/N/10

For
Examiners
Use

www.sheir.org
9

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For
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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 .......................................................................................................................................
..................................................................................................................................... [6]
[Total: 30]

UCLES 2010

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10
3

Debussy currently produces one product for which the following information is available:
Product D946

$ per unit

Selling price
Direct materials
Direct labour
Variable overheads
Total fixed costs
Sales per annum (units)

6.00
2.50
1.40
1.10
$120 000 per annum
$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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UCLES 2010

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Use

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11
(iii)

margin of safety in units and as a percentage of sales.


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Examiners
Use

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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]

UCLES 2010

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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.

Selling icepr
Direct
mater
ials
Direct abour
l
Variable verheads
o
Sales per annum (units)

Product D947
$ per unit
9.00
6.60
2.40
1.50

Product D948
$ per unit
13.00
7.00
2.10
0.90

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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UCLES 2010

9706/22/O/N/10

For
Examiners
Use

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13
(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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..................................................................................................................................... [2]
[Total: 30]

UCLES 2010

9706/22/O/N/10

For
Examiners
Use

www.sheir.org
14
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UCLES 2010

9706/22/O/N/10

www.sheir.org
15
BLANK PAGE

UCLES 2010

9706/22/O/N/10

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16
BLANK PAGE

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

9706/22/O/N/10

www.sheir.org

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Subsidiary Level and Advanced Level

* 4 3 2 4 1 4 2 7 7 9 *

9706/23

ACCOUNTING
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 Examiners Use


1
2
3
Total

This document consists of 16 printed pages.


DC (AC) 22298/4
UCLES 2010

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2
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
Gemma
Current Accounts
James
Gemma
Inventory (stock)
Non-current (fixed) assets at cost
Loan

90 000
60 000
12 000 (Cr)
9 000 (Cr)
6 300
204 000
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


Revenue (sales) 1 July 2009 31 December 2009
Ordinary goods purchased (purchases) 1 January 2009 30 June 2009
Ordinary goods purchased (purchases) 1 July 2009 31 December 2009

$
90 000
150 000
70 000
104 000

Additional information
1

Mark up was 50% on cost.

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.

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

Drawings for the year were:


James
Gemma

UCLES 2010

$
15 200
18 300

9706/23/O/N/10

For
Examiners
Use

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3
REQUIRED
(a) Assuming each month is of equal length prepare the income statement (profit and loss
account) and appropriation account for
(i)

For
Examiners
Use

the six month period ended 30 June 2009.


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4
(ii)

the six month period ended 31 December 2009.


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UCLES 2010

9706/23/O/N/10

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5
(b) Prepare the current accounts in columnar form for both partners for the year ended
31 December 2009.

For
Examiners
Use

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(c) State three advantages for James and Gemma of trading as a partnership rather than
as sole traders.
1 ........................................................................................................................................
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2 ........................................................................................................................................
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3 ........................................................................................................................................
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[3]

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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%

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

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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UCLES 2010

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7
(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


(purchases)
Quantity
Cost price
(units)
per unit ($)

February 2

2 000

15

3
10

1 500
2 000

2 300

30

1 300

32

2 100

34

18

14
18

Revenue
(sales)
Quantity
Selling price
(units)
per unit ($)

20

19

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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UCLES 2010

9706/23/O/N/10

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9
(b) Prepare the income statement (trading account) for the month of February 2009 using
the FIFO method of inventory (stock) valuation (perpetual).

For
Examiners
Use

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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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10
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.

Information available from Paula Bridgewaters Balance Sheet at 31 October 2009


included:
Non-current (fixed) assets
Fixtures and Fittings
Current
assets
Inventory (stock)
Trade receivables (debtors)

Cost
$
6 000

Depreciation Net Book Value


$
$
2 160
3 840

11 700
2 400

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

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

Paula Bridgewaters 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.

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.

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

UCLES 2010

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11
REQUIRED

For
Examiners
Use

(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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12
(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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Use

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13
3

Mandar Limited manufactures components for the agricultural industry. The following budgeted
information is available for the year ended 30 April 2009.
$
Direct materials
Direct abour:
l
Cutting department
Pressing department
Production department
Assembly department

(76 000 hours)


(72 000 hours)
(104 000 hours)
(44 000 hours)

For
Examiners
Use

$
2 300 000

501 600
450 000
702 000
264 000
1 917 600
4 217 600

Prime cost
Factory verheads:
o
Cutting department
Pressing department
Production department
Assembly department

364 800
439 200
509 600
233 200
1 546 800
5 764 400
1 152 880
6 917 280

Cost of production
Administration costs
Total costs

Additional information
1

Factory overheads are absorbed by departmental direct labour hours.

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.


..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
............................................................................................................................. [4]

UCLES 2010

9706/23/O/N/10

[Turn over

www.sheir.org
14
(ii)

The budgeted factory overhead absorption rate per direct labour hour.
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
............................................................................................................................. [4]

Mandar Limited has received a request for some components, Job Number SMC20.
The following direct costs have been estimated.
$
Direct materials
Direct labour:
Cutting department
Pressing department
Production department
Assembly
depar
tment

13 200
9 000
16 200
06 000
444 400
184 556

Prime cost
The direct labour costs are based on budgeted hourly rates.

UCLES 2010

$
140 156

9706/23/O/N/10

For
Examiners
Use

www.sheir.org
15
REQUIRED

For
Examiners
Use

(b) Prepare a detailed statement showing the total cost of Job Number SMC20.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
................................................................................................................................... [12]

(c) The selling price of Mandar Limiteds components is cost plus 25%.
Calculate the selling price of Job Number SMC20.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [3]

UCLES 2010

9706/23/O/N/10

[Turn over

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16
(d) Explain why Mandar Limited absorbs its overheads using direct labour hours.
..........................................................................................................................................

For
Examiners
Use

..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [5]
(e) State two alternative methods the business could use to absorb their overheads.
1. ......................................................................................................................................
..........................................................................................................................................
2. ......................................................................................................................................
..................................................................................................................................... [2]
[Total 30]

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

9706/23/O/N/10

www.sheir.org

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education Advanced Level

9706/31

ACCOUNTING
Paper 3 Multiple Choice

October/November 2010
1 hour

Additional Materials:

*3796654791*

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.

This document consists of 12 printed pages.


IB10 11_9706_31/6RP
UCLES 2010

[Turn over

www.sheir.org
2
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
2

$321 000

$343 000

$357 000

$361 000

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

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

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

the new partner knows how much they have to introduce as capital

A company prepares internal accounts as follows.


year 1
$

year 2
$

30 000

40 000

240 000

320 000

profits
cost of goods sold

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


$

28 000

238 000

42 000

322 000

28 000

242 000

40 000

320 000

28 000

242 000

42 000

318 000

32 000

238 000

38 000

318 000

UCLES 2010

9706/31/O/N/10

www.sheir.org
3
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 Xs share of net profit for the year?


A
5

$40 000

$60 000

$70 000

$80 000

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

10 000

20 000

15 000

15 000

30 000

20 000

25 000

40 000

5 000

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

UCLES 2010

$160 000

$170 000

9706/31/O/N/10

$250 000

[Turn over

www.sheir.org
4
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
8

$55 000

$70 000

$75 000

$145 000

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

$200 000

$275 000

$500 000

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

UCLES 2010

$25 000

$27 000

9706/31/O/N/10

$35 000

www.sheir.org
5
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

$14 000

$32 000

$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

$16 200

$17 200

$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

manufacturers 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

UCLES 2010

$16 000

$17 000

9706/31/O/N/10

$20 000

[Turn over

www.sheir.org
6
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

$15 780

$39 997

$52 599

14 Which ratio measures the return on an investment in shares which continue to be held?
A

dividend cover

dividend yield

earnings per share

interest cover

15 A companys 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

20

25

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

a large credit sale made just before the year end

a major customer in financial difficulty

poor credit control

UCLES 2010

9706/31/O/N/10

www.sheir.org
7
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

decrease

decrease

decrease

increase

increase

decrease

increase

increase

18 The equity section of a companys 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

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

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

UCLES 2010

$600 000

$630 000

9706/31/O/N/10

$640 000

[Turn over

www.sheir.org
8
19 Which may result in an over-absorption of overheads?
A

absorption based on actual expenditure and actual activity

activity below budget

expenditure below budget

expenditure in excess of budget

20 The table shows the annual results of a companys three departments.


department
X

sales

200 000

280 000

320 000

less: variable costs

130 000

190 000

100 000

80 000

90 000

130 000

210 000

280 000

230 000

(10 000)

90 000

headquarters fixed costs apportioned

net profit (loss)

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.

Close department X only.

Close department Y only.

Keep all departments open.

UCLES 2010

9706/31/O/N/10

www.sheir.org
9
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

machine hours

material

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

decrease of $5.00 per unit

increase of $1.60 per unit

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

to budget for changes in costs arising from price increases

to enable a company to change its budgetary control period

to prepare budgets when selling prices are continuously changing

UCLES 2010

9706/31/O/N/10

[Turn over

www.sheir.org
10
24 A company has the following production budget.
opening inventory (stock)
budgeted sales

600 units
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

$127 400

$130 000

$132 600

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


What does this mean?
A

Variances are investigated between certain limits.

Variances are investigated if managers require it.

Variances are only reported if unfavourable.

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

$100 000 favourable

$115 000 adverse

$115 000 favourable

UCLES 2010

9706/31/O/N/10

www.sheir.org
11
27 A company manufactures a product.
The following standard information per 100 units is available.
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

materials

Production overheads are $1.50 for each direct labour hour.


What is the standard unit cost of production?
A

$0.16

$0.18

$0.19

$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

$10 800 adverse

$24 000 favourable

$10 800 favourable

$24 000 adverse

$24 000 adverse

$10 800 favourable

$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.

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

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

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

UCLES 2010

9706/31/O/N/10

[Turn over

www.sheir.org
12
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 %

12.61 %

14.63 %

15.73 %

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

www.sheir.org

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education Advanced Level

9706/32

ACCOUNTING
Paper 3 Multiple Choice

October/November 2010
1 hour

Additional Materials:

*0430798319*

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.

This document consists of 12 printed pages.


IB10 11_9706_32/RP
UCLES 2010

[Turn over

www.sheir.org
2
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
2

$321 000

$343 000

$357 000

$361 000

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

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

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

the new partner knows how much they have to introduce as capital

A company prepares internal accounts as follows.


year 1
$

year 2
$

30 000

40 000

240 000

320 000

profits
cost of goods sold

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


$

28 000

238 000

42 000

322 000

28 000

242 000

40 000

320 000

28 000

242 000

42 000

318 000

32 000

238 000

38 000

318 000

UCLES 2010

9706/32/O/N/10

www.sheir.org
3
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 Xs share of net profit for the year?


A
5

$40 000

$60 000

$70 000

$80 000

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

10 000

20 000

15 000

15 000

30 000

20 000

25 000

40 000

5 000

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

UCLES 2010

$160 000

$170 000

9706/32/O/N/10

$250 000

[Turn over

www.sheir.org
4
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
8

$55 000

$70 000

$75 000

$145 000

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

$200 000

$275 000

$500 000

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

UCLES 2010

$25 000

$27 000

9706/32/O/N/10

$35 000

www.sheir.org
5
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

$14 000

$32 000

$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

$16 200

$17 200

$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

manufacturers 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

UCLES 2010

$16 000

$17 000

9706/32/O/N/10

$20 000

[Turn over

www.sheir.org
6
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

$15 780

$39 997

$52 599

14 Which ratio measures the return on an investment in shares which continue to be held?
A

dividend cover

dividend yield

earnings per share

interest cover

15 A companys 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

20

25

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

a large credit sale made just before the year end

a major customer in financial difficulty

poor credit control

UCLES 2010

9706/32/O/N/10

www.sheir.org
7
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

decrease

decrease

decrease

increase

increase

decrease

increase

increase

18 The equity section of a companys 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

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

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

UCLES 2010

$600 000

$630 000

9706/32/O/N/10

$640 000

[Turn over

www.sheir.org
8
19 Which may result in an over-absorption of overheads?
A

absorption based on actual expenditure and actual activity

activity below budget

expenditure below budget

expenditure in excess of budget

20 The table shows the annual results of a companys three departments.


department
X

sales

200 000

280 000

320 000

less: variable costs

130 000

190 000

100 000

80 000

90 000

130 000

210 000

280 000

230 000

(10 000)

90 000

headquarters fixed costs apportioned

net profit (loss)

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.

Close department X only.

Close department Y only.

Keep all departments open.

UCLES 2010

9706/32/O/N/10

www.sheir.org
9
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

machine hours

material

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

decrease of $5.00 per unit

increase of $1.60 per unit

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

to budget for changes in costs arising from price increases

to enable a company to change its budgetary control period

to prepare budgets when selling prices are continuously changing

UCLES 2010

9706/32/O/N/10

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10
24 A company has the following production budget.
opening inventory (stock)
budgeted sales

600 units
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

$127 400

$130 000

$132 600

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


What does this mean?
A

Variances are investigated between certain limits.

Variances are investigated if managers require it.

Variances are only reported if unfavourable.

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

$100 000 favourable

$115 000 adverse

$115 000 favourable

UCLES 2010

9706/32/O/N/10

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11
27 A company manufactures a product.
The following standard information per 100 units is available.
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

materials

Production overheads are $1.50 for each direct labour hour.


What is the standard unit cost of production?
A

$0.16

$0.18

$0.19

$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

$10 800 adverse

$24 000 favourable

$10 800 favourable

$24 000 adverse

$24 000 adverse

$10 800 favourable

$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.

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

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

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

UCLES 2010

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12
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 %

12.61 %

14.63 %

15.73 %

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

www.sheir.org

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education Advanced Level

9706/33

ACCOUNTING
Paper 1 Multiple Choice

October/November 2010
1 hour

Additional Materials:

*0752029569*

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.

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


IB10 11_9706_33/3RP
UCLES 2010

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2
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

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

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

the new partner knows how much they have to introduce as capital

A company prepares internal accounts as follows.


year 1
$

year 2
$

30 000

40 000

240 000

320 000

profits
cost of goods sold

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


$

28 000

238 000

42 000

322 000

28 000

242 000

40 000

320 000

28 000

242 000

42 000

318 000

32 000

238 000

38 000

318 000

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 Xs share of net profit for the year?


A

$40 000

UCLES 2010

$60 000

$70 000

9708/33/O/N/10

$80 000

www.sheir.org
3
4

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

10 000

20 000

15 000

15 000

30 000

20 000

25 000

40 000

5 000

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

$160 000

$170 000

$250 000

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

UCLES 2010

$70 000

$75 000

9708/33/O/N/10

$145 000

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4
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

$200 000

$275 000

$500 000

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

$25 000

$27 000

$35 000

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

UCLES 2010

$14 000

$32 000

9708/33/O/N/10

$40 000

www.sheir.org
5
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

$16 200

$17 200

$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

manufacturers 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

$16 000

$17 000

$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

$15 780

$39 997

$52 599

13 Which ratio measures the return on an investment in shares which continue to be held?
A

dividend cover

dividend yield

earnings per share

interest cover

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6
14 A companys 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

20

25

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

a large credit sale made just before the year end

a major customer in financial difficulty

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

decrease

decrease

decrease

increase

increase

decrease

increase

increase

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7
17 The equity section of a companys 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

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

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

$600 000

$630 000

$640 000

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


A

absorption based on actual expenditure and actual activity

activity below budget

expenditure below budget

expenditure in excess of budget

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8
19 The table shows the annual results of a companys three departments.
department
X

sales

200 000

280 000

320 000

less: variable costs

130 000

190 000

100 000

80 000

90 000

130 000

210 000

280 000

230 000

(10 000)

90 000

headquarters fixed costs apportioned

net profit (loss)

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.

Close department X only.

Close department Y only.

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

machine hours

material

sales

UCLES 2010

9708/33/O/N/10

www.sheir.org
9
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

decrease of $5.00 per unit

increase of $1.60 per unit

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

to budget for changes in costs arising from price increases

to enable a company to change its budgetary control period

to prepare budgets when selling prices are continuously changing

23 A company has the following production budget.


opening inventory (stock)
budgeted sales

600 units
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

UCLES 2010

$127 400

$130 000

9708/33/O/N/10

$132 600

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10
24 A standard costing system uses routine exception reporting of variances.
What does this mean?
A

Variances are investigated between certain limits.

Variances are investigated if managers require it.

Variances are only reported if unfavourable.

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

$100 000 favourable

$115 000 adverse

$115 000 favourable

26 A company manufactures a product.


The following standard information per 100 units is available.
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

materials

Production overheads are $1.50 for each direct labour hour.


What is the standard unit cost of production?
A

$0.16

UCLES 2010

$0.18

$0.19

9708/33/O/N/10

$0.20

www.sheir.org
11
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

$10 800 adverse

$24 000 favourable

$10 800 favourable

$24 000 adverse

$24 000 adverse

$10 800 favourable

$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.

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

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

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 %

12.61 %

14.63 %

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

UCLES 2010

$343 000

$357 000

9708/33/O/N/10

$361 000

www.sheir.org
12
BLANK PAGE

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

www.sheir.org

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Level

9706/41

ACCOUNTING
Paper 4 Problem Solving (Supplementary Topics)

October/November 2010
2 hours

Additional Materials:

Answer Booklet/Paper

* 5 7 3 3 7 7 7 8 6 2 *

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.

This document consists of 8 printed pages.


DC (AT/MR) 17090/5
UCLES 2010

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2
1

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

Akram received a partnership salary of $8000 per annum

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

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

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
1 093 000
1 093 000

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3
Additional information
1

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

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

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.

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

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 years 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]

UCLES 2010

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4
2

The balance sheets at 31 March 2010 and 2009 for Costello plc are shown below:
2010
$000

Non-current (fixed) assets (Note 1)

2009
$000

$000

8 080

Current assets
Inventories (stock)
Trade and other receivables (debtors)
Cash and cash equivalents (bank)

948
542

1 490

Current liabilities (creditors: amounts falling due within one year)


Trade and other payables (creditors)
(453)
Tax
(168)
Cash and cash equivalents (bank)
(87)
(708)
Net current assets
Total assets less current liabilities

5 330

920
522
580
2 022

(234)
(306)

(540)
782
8 862

Non-current liabilities (creditors: amounts falling due after more than one year)
(360)
7% debentures (Note 2)
Net assets
8 502
Equity
Ordinary shares of $1 each fully paid (Note 3)
Share premium account
Retained earnings

UCLES 2010

9706/41/O/N/10

$000

3 000
1 000
4 502
8 502

1 482
6 812

(500)
6 312

2 000

4 312
6 312

www.sheir.org
5
The following information is available for the year ended 31 March 2010:
$000
393
(30)
363
(168)
195
(5)
190

Profit from operations (operating profit)


Finance costs (interest paid)
Tax
Dividends paid
Retained profit for the year
Note 1
Non-current (fixed) assets
Land
Cost
Additions
Revaluation
Book value

2010
$000
2 550
450
500
3 500

2009
$000
2 550

2 550

$000
1 530
1 350
(900)
1 980

$000
1 530

(430)
1 100

$000
1 600
620
(130)
(810)
1 280

$000
1 600

(400)
1 200

There were no disposals of land during the year.


Buildings
Cost
Additions
Accumulated depreciation
Net book value
There were no disposals of buildings during the year.
Plant and machinery
Cost
Additions
Disposals
Accumulated depreciation
Net book value

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
Cost
Additions
Disposals
Accumulated depreciation
Net book value

$000
900
1 270
(200)
(650)
1 320

$000
900

(420)
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
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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9706/41/O/N/10

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7
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
Salary year 1
2
3
4
5

$
200 000
30 000
36 000
43 200
51 840
62 208

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

Rent

year 1
2
3
4
5

$
3 600
3 600
4 500
4 500
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
Year
Year
Year
Year

1
2
3
4
5

$0.893
$0.797
$0.712
$0.636
$0.507

REQUIRED
(b) Calculate the net present value for Brad.

[8]

(c) Calculate the discounted payback period for Brad.

[4]

UCLES 2010

9706/41/O/N/10

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8
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]

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

9706/41/O/N/10

www.sheir.org

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Level

9706/42

ACCOUNTING
Paper 4 Problem Solving (Supplementary Topics)

October/November 2010
2 hours

Additional Materials:

Answer Booklet/Paper

* 8 9 1 6 0 6 7 5 8 9 *

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.

This document consists of 8 printed pages.


DC (NF/MR) 36610
UCLES 2010

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2
1

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

Akram received a partnership salary of $8000 per annum

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

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

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
1 093 000
1 093 000

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3
Additional information
1

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

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

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.

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

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 years 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]

UCLES 2010

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4
2

The balance sheets at 31 March 2010 and 2009 for Costello plc are shown below:
2010
$000

Non-current (fixed) assets (Note 1)

2009
$000

$000

8 080

Current assets
Inventories (stock)
Trade and other receivables (debtors)
Cash and cash equivalents (bank)

948
542

1 490

Current liabilities (creditors: amounts falling due within one year)


Trade and other payables (creditors)
(453)
Tax
(168)
Cash and cash equivalents (bank)
(87)
(708)
Net current assets
Total assets less current liabilities

5 330

920
522
580
2 022

(234)
(306)

(540)
782
8 862

Non-current liabilities (creditors: amounts falling due after more than one year)
(360)
7% debentures (Note 2)
Net assets
8 502
Equity
Ordinary shares of $1 each fully paid (Note 3)
Share premium account
Retained earnings

UCLES 2010

9706/42/O/N/10

$000

3 000
1 000
4 502
8 502

1 482
6 812

(500)
6 312

2 000

4 312
6 312

www.sheir.org
5
The following information is available for the year ended 31 March 2010:
$000
393
(30)
363
(168)
195
(5)
190

Profit from operations (operating profit)


Finance costs (interest paid)
Tax
Dividends paid
Retained profit for the year
Note 1
Non-current (fixed) assets
Land
Cost
Additions
Revaluation
Book value

2010
$000
2 550
450
500
3 500

2009
$000
2 550

2 550

$000
1 530
1 350
(900)
1 980

$000
1 530

(430)
1 100

$000
1 600
620
(130)
(810)
1 280

$000
1 600

(400)
1 200

There were no disposals of land during the year.


Buildings
Cost
Additions
Accumulated depreciation
Net book value
There were no disposals of buildings during the year.
Plant and machinery
Cost
Additions
Disposals
Accumulated depreciation
Net book value

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
Cost
Additions
Disposals
Accumulated depreciation
Net book value

$000
900
1 270
(200)
(650)
1 320

$000
900

(420)
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
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]

UCLES 2010

9706/42/O/N/10

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7
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
Salary year 1
2
3
4
5

$
200 000
30 000
36 000
43 200
51 840
62 208

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

Rent

year 1
2
3
4
5

$
3 600
3 600
4 500
4 500
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
Year
Year
Year
Year

1
2
3
4
5

$0.893
$0.797
$0.712
$0.636
$0.507

REQUIRED
(b) Calculate the net present value for Brad.

[8]

(c) Calculate the discounted payback period for Brad.

[4]

UCLES 2010

9706/42/O/N/10

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8
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]

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

9706/42/O/N/10

www.sheir.org

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Level

9706/43

ACCOUNTING
Paper 4 Problem Solving (Supplementary Topics)

October/November 2010
2 hours

Additional Materials:

Answer Booklet/Paper

* 4 5 0 9 8 6 0 8 1 2 *

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.

This document consists of 6 printed pages and 2 blank page.


DC (AC) 23172/5
UCLES 2010

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2
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


Current account balances
Drawings for the year

Boris
Cheong
Boris
Cheong
Boris
Cheong

$
100 000
90 000
9 908 Cr
22 092 Cr
22 000
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.

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.

Goods sold for $3500 on credit had been correctly entered in the debtors account but
had been debited to the sales returns account twice.

The total of the discount received account, $300, had been treated as revenue
expenditure.

A family holiday for Boris costing $3400 had been included as marketing expenses.

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3
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]

UCLES 2010

9706/43/O/N/10

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4
2

The following information is available for Sanaa Malik Ltd at 31 May 2010:
Gross profit ratio margin (gross profit percentage)
Net profit ratio (net profit percentage)
Rate of inventory turnover (stockturn)
Creditors turnover (average payment period)
Debtors turnover (average collection period)
Current ratio
Non-current (fixed) asset turnover

40%
15%
1 month
40 days
45 days
2.5 : 1
2 times

Additional information
1

Inventory (stock) at 1 June 2009 cost $27 000.

Revenue (sales) for the year ended 31 May 2010 was $870 000.

All ordinary goods purchased (purchases) were on credit.

50% of revenue (sales) was on credit.

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% debentures, repayable 2027, had been issued in 2007 for $100 000.

Retained earnings at 31 May 2009 were $93 733.

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.

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
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.
(c)

[13]

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.
(b) (i)
(ii)

Prepare the Process 1 account.


Prepare the scrap account.

[2]
[11]
[2]

(c) Calculate the cost of raw materials for Process 2 for September.
(d) Calculate the cost of work in progress in Process 2.

[7]
[15]

(e) State which characteristics of production would make process costing the most suitable
costing method to use. Give an example.
[3]
[Total: 40]

UCLES 2010

9706/43/O/N/10

www.sheir.org
7
BLANK PAGE

UCLES 2010

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8
BLANK PAGE

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

9706/43/O/N/10