Cambridge A Level Accounting 9706 — 2012 May/June Paper 3 · Variant 2
9706/32/M/J/12 · 30 questions · 30 marks · ≈34 min
The question paper and its mark scheme, free to read here and free to download. This is Cambridge’s own paper, exactly as it was sat.
Question paper12 pages
Mark scheme2 pages
Answers below. Sit the paper first if you are practising.
Questions as text
Q1 · X, Y & Z are in partnership sharing the profits and losses equally
1 X, Y & Z are in partnership sharing the profits and losses equally. The balances on their capital accounts are $40 000, $35 000 and $32 000 respectively. Z retires and as part of his settlement takes a car at an agreed value of $4000. The car has a book value of $4600. Goodwill is valued at $15 000. How much cash will Z receive when he leaves the partnership? A $32 400 B $32 800 C $33 000 D $37 000
Mark scheme: B
Q2 · When goodwill is not adjusted in the books which of the following statements are correct?
2 When goodwill is not adjusted in the books which of the following statements are correct? 1 A new partner does not have to introduce an amount as capital. 2 Non-current assets are undervalued. 3 Partners do not receive credit for their efforts in building up the business. 4 Retiring partners will receive a lower amount of money when leaving the business. A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4
Mark scheme: D
Q3 · A company’s year end is 30 April
3 A company’s year end is 30 April. It purchases a factory in May 2009 at a cost of $200 000. The factory will be depreciated over 20 years. A full year’s depreciation is charged in the year of purchase. In May 2012 the factory is re-valued at $300 000. How much should be included in the revaluation reserve account? A $100 000 B $120 000 C $130 000 D $140 000
Mark scheme: C
Q4 · The table shows an extract from the financial statements of a limited company
4 The table shows an extract from the financial statements of a limited company. $ ordinary share capital 500 000 (500 000 × $1 shares) share premium account 150 000 revaluation reserve 200 000 retained earnings 250 000 What is the maximum dividend per share that can be paid? A $0.50 B $0.80 C $0.90 D $1.20
Mark scheme: A
Q5 · An extract from a company’s statement of financial position is shown below
5 An extract from a company’s statement of financial position is shown below. $ ordinary shares at $0.50 500 000 share premium account 100 000 retained earnings 300 000 900 000 The day after this statement was prepared the company made a 1 for 4 rights issue at a price that was at 20 % below the current market price of $1 per share. What was the balance on the share premium account after the rights issue? A $100 000 B $137 500 C $175 000 D $200 000
Mark scheme: C
Q6 · A company makes a 1 for 2 bonus issue
6 A company makes a 1 for 2 bonus issue. What effect will this have? A improve cash flow B increase shareholders’ funds C reduce an ordinary shareholder’s percentage holding D reduce the value of an ordinary share
Mark scheme: D
Q7 · A limited company purchases a partnership
7 A limited company purchases a partnership. It issues to the partners 10 % debentures and pays them cash in full settlement of the purchase price. Which of the following statements is correct? A The company's gearing is reduced. B The company intended to expand its business. C The company's reserves are reduced. D The partners now own some of the equity in the company.
Mark scheme: B
Q8 · A company buys a business by issuing shares in full payment
8 A company buys a business by issuing shares in full payment. The shares have a par value of $1.00 each and an agreed market value of $2.50 each. The assets and liabilities of the business together with the agreed values are as follows. net book value $ agreed valuation $ plant and machinery 15 000 22 000 motor vehicles 17 500 13 250 inventory 24 000 21 500 trade receivables 2 500 2 250 trade payables 8 000 9 000 How many shares will be issued to satisfy the purchase of the business? A 20 000 B 20 100 C 20 400 D 51 000
Mark scheme: A
Q9 · How may a company improve its profit by window dressing?
9 How may a company improve its profit by window dressing? A applying an impairment test to goodwill B making a provision for obsolete stock C increasing the bad debts provision D reducing the rates of depreciation
Mark scheme: D
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Q10 · Which item will increase a company’s earnings per share?
10 Which item will increase a company’s earnings per share? A a correction of an under-valuation of closing inventory B an increase of redeemable debentures C an issue of bonus shares D a surplus arising on the revaluation of assets
Mark scheme: A
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Q11 · A company provided the following financial information for the year
11 A company provided the following financial information for the year. $000 profit from operations 570 depreciation charge for the year 250 increase in working capital for the year 60 purchase of non-current assets during the year 125 repayment of a debenture during the year 30 What was the increase in cash and cash equivalents for the year? A $225 000 B $355 000 C $475 000 D $605 000
Mark scheme: D
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Q12 · A company is preparing its statement of cash flows
12 A company is preparing its statement of cash flows. During the year, it sells a non-current asset for $1500. This results in a loss on disposal of $1000. What is the effect of this on the statement of cash flows? cash from cash from operating activities investing activities A decreases by $1000 decreases by $1500 B no effect increases by $1500 C increases by $1000 no effect D increases by $1000 increases by $1500
Mark scheme: D
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Q13 · A company has three non-current assets in use
13 A company has three non-current assets in use. At the end of its financial year, details of their valuations are as shown. carrying fair value less value in use asset amount costs to sell $ $ $ 1 20 000 25 000 28 000 2 30 000 26 000 24 000 3 25 000 32 000 20 000 How much should the total non-current assets be shown in the statement of financial position? A $64 000 B $66 000 C $71 000 D $75 000
Mark scheme: C
Q14 · Which item must be included in the director’s report of a limited company?
14 Which item must be included in the director’s report of a limited company? A basis of depreciation of non-current assets B details of dividends C losses on disposal of non-current assets D respective responsibilities of the directors
Mark scheme: B
Q15 · The following information is taken from the financial statements of a limited company
15 The following information is taken from the financial statements of a limited company. $000 retained earnings at the start of the year 50 profit attributable to equity holders 30 dividends paid during the year 15 dividends proposed payable in the next financial year 10 surplus on revaluation of land during the year 20 What are the retained earnings at the end of the year? A $55 000 B $65 000 C $80 000 D $100 000
Mark scheme: B
Q16 · Which two actions would both increase a company’s working capital cycle?
16 Which two actions would both increase 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 4 D 3 and 4
Mark scheme: C
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Q17 · The following information is taken from the Income statement of a limited company
17 The following information is taken from the Income statement of a limited company. $ $ revenue 650 000 less cost of sales opening inventory 19 000 purchases 508 000 527 000 closing inventory 25 000 502 000 gross profit 148 000 Inventory turnover 16 days Trade receivables at the end of the year $48 082 Trade payables at the end of the year $44 537 What is the working capital cycle? A 11 days B 21 days C 43 days D 75 days
Mark scheme: A
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Q18 · A company redeems its preference shares and makes a bonus issue of one ordinary share for…
18 A company redeems its preference shares and makes a bonus issue of one ordinary share for every four held. How will these transactions affect the statement of financial position? ordinary shares reserves bank A decrease no effect increase B increase decrease decrease C increase decrease no effect D increase increase decrease
Mark scheme: B
Q19 · A company discovers the following information in respect of its carriage costs
19 A company discovers the following information in respect of its carriage costs. units carried total cost 2 000 $ 6 000 5 000 $13 500 It has been advised by the carrier that when more than 5000 units are carried the cost will increase the fixed charge by a further $2000. What will be the cost to carry 6000 units? A $15 500 B $16 200 C $18 000 D $20 000
Mark scheme: C
Q20 · A manufacturing company adds 10 % to the factory cost of goods produced to determine the…
20 A manufacturing company adds 10 % to the factory cost of goods produced to determine the price at which goods are transferred from factory to warehouse. The table shows information taken from the company’s income statement at the end of the financial year. $ opening inventory of finished goods 137 500 closing inventory of finished goods 159 500 How much should be debited in the income statement for the year for the provision for unrealised profit on stock? A $2000 B $2200 C $14 500 D $20 000
Mark scheme: A
Q21 · A company manufactures three products
21 A company manufactures three products. The following information is obtained in respect of next month’s budgeted production. product X product Y product Z contribution per unit $7 $6 $8 contribution per kilo $3 $4 $6 kilos of material required 400 600 1000 for production Due to problems with suppliers, the company has been advised that only 1800 kilos of material will be available for production next month. What is the maximum contribution the company can earn? A $9000 B $9600 C $13 000 D $13 200
Mark scheme: A
Q22 · A process has an input of 6000 kilos at a cost of $118 200
22 A process has an input of 6000 kilos at a cost of $118 200. Normal wastage is 10 % of input and this is sold for $6 per kilo. There are no abnormal gains or losses. What is the cost per kilo of output from the process, to the nearest cent? A $19.10 B $19.70 C $21.22 D $21.89
Mark scheme: C
Q23 · The following relates to the production and costs of a manufacturer
23 The following relates to the production and costs of a manufacturer. production for the period 2400 units closing stock 400 units direct material costs $12 000 direct labour costs $6 000 factory fixed expenses $4 080 Closing stock is valued at marginal cost. What is the marginal cost per unit of the finished goods? A $7.50 B $9.00 C $9.20 D $11.04
Mark scheme: A
Q24 · The details of a planned college course are shown below
24 The details of a planned college course are shown below. $ course fee per student 100 variable course cost per student 20 total fixed costs of the course 480 The budgeted number of students is 10. However, if a lower fee is charged 20 students would take the course. What is the maximum reduction in the course fee of $100, to earn the same total profit from either 10 or 20 students? A $16 B $24 C $40 D $50
Mark scheme: C
Q25 · A company uses flexible budgetary control
25 A company uses flexible budgetary control. The following information relates to budgeted and actual data for the month. budgeted units 1000 1200 actual units 1100 1000 units 1200 units actual units costs $ $ $ direct material 2000 2400 2200 direct labour 500 600 600 fixed overheads 800 800 800 total cost 3300 3800 3700 What is the difference between the actual total cost and the flexed total budgeted cost? A $0 B $150 C $400 D $500
Mark scheme: B
Q26 · A production department used 7000 direct labour hours in a period, at a standard cost of…
26 A production department used 7000 direct labour hours in a period, at a standard cost of $10 per hour. This resulted in a favourable labour efficiency variance of $40 000. What was the standard time taken for production? A 3000 hours B 4000 hours C 7000 hours D 11 000 hours
Mark scheme: D
Q27 · Budgeted and actual sales of a product are given
27 Budgeted and actual sales of a product are given. budget actual sales in units 2 000 1 800 selling price per unit $15 ? sales revenue $30 000 $28 800 What is the sales price variance? A $1200 adverse B $1200 favourable C $1800 adverse D $1800 favourable
Mark scheme: D
Q28 · The graph shows the cost and usage of a material
28 The graph shows the cost and usage of a material. $ actual price of material standard price of material quantity What does the shaded area represent? A adverse price variance B adverse usage variance C favourable price variance D favourable usage variance
Mark scheme: A
Q29 · Which will cause a capital investment project to be more acceptable to a business?
29 Which will cause a capital investment project to be more acceptable to a business? 1 a decrease in the discount rate applied to the project 2 a decrease in the operating costs of the project 3 an increase in the discount rate applied to the project 4 an increase in the total depreciation charged to the project A 1 and 2 B 1 and 4 C 2 and 3 D 2 and 4
Mark scheme: A
Q30 · A business is operating under conditions of capital rationing and is considering…
30 A business is operating under conditions of capital rationing and is considering investing in the following projects. investment NPV project $ $ X 500 000 80 000 Y 400 000 72 000 Z 450 000 67 500 In order to maximise the overall value of the business how should these three projects be ranked? A XYZ B XZY C YXZ D ZYX
Mark scheme: C
What was in this paper
The subtopics covered by these 30 questions, and how many questions each got. Open one in a new tab to see every Cambridge question on it.
6Analysis and communication of accounting information4Traditional costing methods4Standard costing3Analysis and communication of accounting information2Business acquisition and merger2Costs and cost behaviour2Investment appraisal2Types of business entity2Accounting for non-current assets1Budgeting and budgetary control1Regulatory and ethical considerations1What you needed in this session
Cambridge’s own grade thresholds for 2012 May/June, Paper 3 · Variant 2. A higher threshold means an easier paper — the bar moves with how the cohort did.