Cambridge A Level Accounting 9706 — 2011 Oct/Nov Paper 3 · Variant 2

Question 1

1 A partnership achieved an average profit during the year of $15 000 per month. Halfway through the year X and Y were joined by a new partner Z and profits were shared equally before and after the change. X’s drawings amounted to $60 000 during the year. By how much would the current account balance of X increase as a result of the years trading? A zero B $15 000 C $30 000 D $75 000

Accepted Answer

B

Question 2

2 During the year a company issued one million ordinary shares at $1.20 per share. It repaid a debenture of $1 000 000 and assets costing $500 000 were purchased. How will these transactions be recorded in the different sections of the company’s statement of cash flow? financing investment $000 $000 A +200 –500 B –200 +500 C +1200 –1500 D –1200 +1500

Accepted Answer

A

Question 3

3 A company has the following items in its statement of financial position. $ ordinary share capital, shares of $0.50 each 900 000 retained earnings 450 000 long-term bank loan 30 000 The company issues 100 000 bonus shares of $0.50 each to its shareholders. What is the total amount of shareholders’ funds after the issue of the bonus shares? A $1 300 000 B $1 350 000 C $1 380 000 D $1 400 000

Accepted Answer

B

Question 4

4 The capital structure of a company is: $ $1 ordinary shares 40 000 convertible loan stock 20 000 share premium 10 000 The loan stock conversion is made on the basis of 1 new ordinary share for every $4 of convertible stock held. What is the capital structure after the conversion? ordinary shares share premium $ $ A 40 000 30 000 B 45 000 25 000 C 50 000 20 000 D 60 000 10 000

Accepted Answer

B

Question 5

5 A company has the following summarised statement of financial position at 31 December. $ ordinary share capital ($1 shares) 500 000 share premium 100 000 retained earnings 150 000 750 000 The company decides to purchase 50 000 of its own shares for $80 000. What reflects the correct position after the purchase? share capital retained earnings $ $ A 420 000 70 000 B 420 000 100 000 C 450 000 70 000 D 450 000 100 000

Accepted Answer

C

Question 6

6 The summarised statement of financial position of company A is as follows. $ $ assets 600 000 capital and reserves 460 000 loan capital 140 000 Company Z agrees to buy the net assets of company A by means of issuing a debenture of $200 000 and 65 000 ordinary shares of $1 each for the balance of the consideration. How much will company Z credit to its share premium account? A $195 000 B $260 000 C $335 000 D $395 000

Accepted Answer

A

Question 7

7 A company is to purchase an unincorporated business by the issue of 120 000 ordinary shares of $0.50, 10 000 $10 8 % debentures and by paying $20 000 cash. The current market value of the ordinary shares is $1.45 and the debentures are each trading at $95. What is the total value of the consideration for the purchase? A $180 000 B $240 000 C $269 000 D $289 000

Accepted Answer

D

Question 8

8 X Ltd purchases the net assets of a partnership for a cash payment of $1 200 000. The agreed values for the partnership at the date of acquisition were as follows. $000 non-current assets 2 000 current assets 600 current liabilities 400 non-current liabilities 800 capital accounts (credit) 1 700 current accounts (debit) 300 Which figure will appear for goodwill in X Ltd’s book of account? A $200 000 negative B $200 000 positive C $800 000 negative D $800 000 positive

Accepted Answer

A

Question 9

9 Which statements are true in relation to International Accounting Standards? 1 They assist investors to understand financial statements. 2 They enable the movement towards global harmonisation of accounting practice. 3 They ensure that errors and fraud are prevented. 4 They restrict the opportunity for creative accounting. A 1, 2 and 3 B 1, 2 and 4 C 1, 3 and 4 D 2, 3 and 4

Accepted Answer

B

Question 10

10 What would not appear in the income statement of a limited company? 1 finance costs 2 revenue 3 ordinary dividends paid 4 ordinary dividends payable A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

Accepted Answer

D

Question 11

11 At the start of the year a company has plant and machinery valued at $20 000. Depreciation policy is to depreciate plant and machinery at 25 % using the reducing balance method. Following an impairment review the fair value of plant and machinery is $16 000 and its value in use is $25 000. At which value should plant and machinery be shown in the year end statement of financial position? A $15 000 B $16 000 C $20 000 D $25 000

Accepted Answer

A

Question 12

12 A company’s statement of financial position shows the following information. $000 ordinary shares of $10 each 120 7 % non-redeemable preference shares of $1 each 80 share premium account 50 general reserve 70 retained earnings 210 530 What is the book value of one ordinary share? A $27.50 B $37.50 C $44.20 D $53.00

Accepted Answer

B

Question 13

13 A company makes annual profits of $50 million, before paying interest of $10 million and ordinary dividends of $20 million. It has in issue 80 million ordinary shares of $0.50 each, with a current market value of $7 each. What is the price-earnings ratio? A 7 B 11.2 C 14 D 28

Accepted Answer

C

Question 14

14 The issued share capital of a company is as follows. 500 000 4 % non-redeemable preference shares of $1.00 each 1 400 000 ordinary shares of $ 0.50 each The company’s profit after interest and tax is $314 000. An appropriate dividend cover for the ordinary shares is 2.0 times. What is the dividend per ordinary share? A $0.105 B $0.112 C $0.210 D $0.224

Accepted Answer

A

Question 15

15 Which action will improve a company’s quick ratio? A collecting all outstanding debtors B using cash at the bank to buy equipment C using cash at the bank to pay creditors D using cash at the bank to repay a loan

Accepted Answer

C

Question 16

16 Which two changes would result in a reduction in a company’s working capital cycle? 1 increase trade payables; reduce trade receivables 2 increase trade receivables; reduce trade payables 3 reduce inventory; increase trade payables 4 reduce trade payables; increase inventory A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4

Accepted Answer

B

Question 17

17 A company revalues its buildings upwards. What is the impact on the following ratios? return on capital gearing employed A decrease decrease B decrease no effect C increase decrease D no effect increase

Accepted Answer

A

Question 18

18 Which effect will a bonus issue of shares have on a company’s gearing ratio and earnings per share? gearing earnings per share A no effect increase B increase decrease C decrease increase D no effect decrease

Accepted Answer

D

Question 19

19 A particular cost is classified as fixed. Which effect will a 20 % increase in activity have on the unit cost? A decrease by 20 % B decrease by less than 20 % C increase by 20 % D increase by more than 20 %

Accepted Answer

B

Question 20

20 A company budgets to produce 110 000 units. Market research shows that the demand for the product will be for 90 000 units. The information below shows the resources required for the budgeted production, and the resources available. resources resources required available per unit material 3.0 335 000 kilos direct labour hours 2.5 300 000 hours machine hours 0.5 110 000 machine hours What is the principal limiting factor in this case? A direct labour B machine hours C material D sales

Accepted Answer

D

Question 21

21 In July, a business had opening inventory of 10 000 units and closing inventory of 16 000 units. The profit calculated on marginal costing principles was $220 000 and that calculated on absorption costing principles was $268 000. What was the fixed overhead absorption rate per unit? A $8.00 B $13.75 C $16.75 D $22.00

Accepted Answer

A

Question 22

22 The following data is taken from a business. budgeted labour hours 16 000 actual labour hours 13 000 budgeted overheads $192 000 actual overheads $188 500 What is the amount of overhead under-absorbed? A $3500 B $32 500 C $36 000 D $43 500

Accepted Answer

B

Question 23

23 A process has an input of 12 000 kg at a cost of $236 400. Normal wastage is 10 % of input, and this is sold for $8 per kg. What is the cost per kg of output from the process? A $18.90 B $19.70 C $21.00 D $21.89

Accepted Answer

C

Question 24

24 A company has the following production and sales budget for the next accounting period. budgeted sales units 200 raw material per unit 2 kg opening inventory of raw materials 20 kg budgeted closing inventory of raw materials 25 kg There is no opening or closing inventory of finished goods. How many kilos of raw material must it purchase to achieve its production budget? A 195 B 205 C 395 D 405

Accepted Answer

D

Question 25

25 The information below shows an annual budget for production of 10 000 units. $ direct materials 60 000 direct labour 35 000 direct expenses 12 000 fixed costs 70 000 total cost 177 000 The actual production is 12 000 units and the company decides to flex its budget. What is the revised total budgeted cost? A $147 500 B $184 000 C $198 400 D $212 400

Accepted Answer

C

Question 26

26 Budgeted and actual sales of a product are shown below. budget actual sales in units 3000 2800 selling price per unit $25 ? sales revenue $75 000 $67 200 What is the sales price variance? A $2800 adverse B $2800 favourable C $3000 adverse D $3000 favourable

Accepted Answer

A

Question 27

27 A company has the following sales data. details $ total actual sales 50 000 sales volume variance (6000) adverse sales price variance 1000 favourable What were the budgeted sales for the month? A $43 000 B $45 000 C $55 000 D $57 000

Accepted Answer

C

Question 28

28 Budgeted and actual results are as shown. budgeted actual materials usage per unit 8 kilos 11 kilo materials price per unit $14 $16 labour hours per unit 6 5 labour rate per hour $20 $21 What is the total variance per unit manufactured? A $22.00 adverse B $22.00 favourable C $49.00 adverse D $49.00 favourable

Accepted Answer

C

Question 29

29 A company is considering investing in a project costing $300 000. Estimates show the project will earn a cash surplus of $120 000 over a five-year period. As a result of the investment depreciation will increase by $6000 per annum. What is the accounting rate of return? A 6 % B 8 % C 12 % D 16 %

Accepted Answer

C

Question 30

30 A company is operating under a capital rationing constraint. How should it rank possible investments in order to achieve the highest possible overall net present value? A by their internal rates of return B by their investment costs C by their net present values D by their profitability indexes

Accepted Answer

D

Cambridge A Level Accounting 9706 — 2011 Oct/Nov Paper 3 · Variant 2

Question paper12 pages

Mark scheme2 pages

Questions as text

Q1 · A partnership achieved an average profit during the year of $15 000 per month

Q2 · During the year a company issued one million ordinary shares at $1.20 per share

Q3 · A company has the following items in its statement of financial position

Q4 · The capital structure of a company is: $ $1 ordinary shares 40 000 convertible loan stock…

Q5 · A company has the following summarised statement of financial position at 31 December

Q6 · The summarised statement of financial position of company A is as follows

Q7 · A company is to purchase an unincorporated business by the issue of 120 000 ordinary…

Q8 · X Ltd purchases the net assets of a partnership for a cash payment of $1 200 000

Q9 · Which statements are true in relation to International Accounting Standards?

Q10 · What would not appear in the income statement of a limited company?

Q11 · At the start of the year a company has plant and machinery valued at $20 000

Q12 · A company’s statement of financial position shows the following information

Q13 · A company makes annual profits of $50 million, before paying interest of $10 million and…

Q14 · The issued share capital of a company is as follows

Q15 · Which action will improve a company’s quick ratio?

Q16 · Which two changes would result in a reduction in a company’s working capital cycle?

Q17 · A company revalues its buildings upwards

Q18 · Which effect will a bonus issue of shares have on a company’s gearing ratio and earnings…

Q19 · A particular cost is classified as fixed

Q20 · A company budgets to produce 110 000 units

Q21 · In July, a business had opening inventory of 10 000 units and closing inventory of 16 000…

Q22 · The following data is taken from a business

Q23 · A process has an input of 12 000 kg at a cost of $236 400

Q24 · A company has the following production and sales budget for the next accounting period

Q25 · The information below shows an annual budget for production of 10 000 units

Q26 · Budgeted and actual sales of a product are shown below

Q27 · A company has the following sales data

Q28 · Budgeted and actual results are as shown

Q29 · A company is considering investing in a project costing $300 000

Q30 · A company is operating under a capital rationing constraint

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