Cambridge A Level Accounting 9706 — 2013 May/June Paper 3 · Variant 1

Question 1

1 When do revenue reserves arise? A following the revaluation of non-current assets B from a rights issue C from an issue of bonus shares D from the trading activities of a company

Accepted Answer

D

Question 2

2 A company purchases a new machine. The costs involved in the purchase are as follows. $ purchase price of machine 70 000 professional fees for negotiating the purchase 3 000 legal agreement with selling company selling the machine 5 000 increase in inventory to use on the new machine 1 000 wages paid to technician to assemble machine 2 000 The company depreciates its plant and machinery at 20% per annum on cost. A full year’s depreciation is charged in the year of purchase. What is the depreciation charge for the year? A $14 000 B $15 400 C $16 000 D $16 200

Accepted Answer

C

Question 3

3 How should proposed ordinary dividends be accounted for when preparing statements of cash flows? A as part of the cash from operating activities B as part of the financing activities C as part of the investing activities D not included in the statement

Accepted Answer

D

Question 4

4 Which item will not appear on the income statement of a company? A finance costs B impairment costs C ordinary share dividends paid D taxation

Accepted Answer

C

Question 5

5 Which item would be included as equity in a company’s statement of financial position? A debenture stock B loan from a director C retained earnings D trade payables

Accepted Answer

C

Question 6

6 X Ltd is considering the purchase of two different businesses. The details of the purchase of each are as follows. book value fair value of assets to of assets to business terms of purchase purchase purchase $ $ shares in X Ltd of $1 each Y 96 000 120 000 issued at a premium of $0.20 shares in X Ltd of $1 each Z 180 000 225 000 issued at a premium of $0.50 How many more shares must X Ltd issue if it decides to purchase Z instead of Y? A 20 000 B 30 000 C 40 000 D 50 000

Accepted Answer

D

Question 7

7 The capital structure of a company is shown below. $ 700 000 ordinary shares of $0.25 each 175 000 8% loan 160 000 During the year the company made profits before finance charges of $105 000. What is the maximum dividend per share? A $0.1317 B $0.15 C $0.5268 D $0.60

Accepted Answer

A

Question 8

8 A Ltd acquires the assets and liabilities of B Ltd. Their values are as follows. $ assets 120 000 liabilities 15 000 A Ltd will issue a debenture of $50 000 and 10 000 $1 ordinary shares for the balance of the consideration. What will be the credit to the share premium account? A $45 000 B $55 000 C $60 000 D $95 000

Accepted Answer

A

Question 9

9 A company has prepared its financial statements for the year ended 31 December 2012. The following items occurred in January 2013 before they were authorised for issue. 1 A major customer was declared bankrupt. He owed $11 000 on 31 December 2012. No provision for this had been made in the accounts. 2 There was a fire at the company’s premises resulting in uninsured losses of $15 000. 3 An impairment review identified the carrying value of non-current assets exceeded their recoverable amount by $20 000. 4 A court case was settled which resulted in the company being liable to pay damages of $18 000. In accordance with IAS 10, by which amount should the profit for the year be reduced? A $44 000 B $46 000 C $49 000 D $53 000

Accepted Answer

C

Question 10

10 A company is preparing the statement of changes in equity for the year. The following information is available. $ retained earnings at the beginning of the year 420 000 interest paid on debentures 45 000 interim dividends paid 20 000 proposed dividends for the year 35 000 issue of shares 40 000 profit for the year attributable to equity holders 145 000 What is the balance of retained earnings at the end of the year? A $465 000 B $505 000 C $545 000 D $550 000

Accepted Answer

C

Question 11

11 Information from a company’s financial statements at 31 December 2012 is as follows. $ ordinary share capital ($1 each) 70 000 retained earnings 6 200 6% debentures repayable 2016 10 000 trade payables 5 200 other payables 2 700 other receivables 4 100 bank overdraft 20 200 What amount is shown as current liabilities at 31 December 2012? A $24 000 B $28 100 C $38 100 D $40 200

Accepted Answer

B

Question 12

12 Extracts from a company’s statement of financial position are as follows. $ non-current liabilities 50 000 ordinary shares ($1 each) 100 000 redeemable preference shares 25 000 retained earnings 200 000 What is the gearing ratio? A 14% B 17% C 20% D 21%

Accepted Answer

C

Question 13

13 A company converts some debentures into shares on 1 January 2012. What is the impact on the following ratios in the 2012 financial statements? gearing interest cover A decrease decrease B decrease increase C increase decrease D increase increase

Accepted Answer

B

Question 14

14 A company’s capital comprises 200 000 ordinary shares of $1 each. It also has a loan of $50 000. At the end of the year its current ratio is 1.5 : 1 and its current liabilities are $30 000. What is the value of the company’s non-current assets at the end of the year? A $135 000 B $185 000 C $205 000 D $235 000

Accepted Answer

D

Question 15

15 A company has a Price Earnings ratio of 15. This is 20% less than the average for this type of business. Its earnings per share are $0.20. What is the company’s share price? A $0.60 B $2.40 C $3.00 D $3.60

Accepted Answer

C

Question 16

16 The following information is for two non-current assets. fair value less net book value value in use costs to sell $ $ $ asset 1 50 000 45 000 48 000 asset 2 20 000 18 000 21 000 What is the total impairment loss? A $2000 B $4000 C $5000 D $7000

Accepted Answer

A

Question 17

17 Which is an example of window dressing in financial statements? A amortising goodwill as soon as it arises B failure to write down freehold property following a revaluation shortly after the year end C omitting to write down inventory which has been stolen after the year end D writing off debts before they have become bad

Accepted Answer

B

Question 18

18 The financial statements of a company shows the following. $ ordinary shares of $1 each 1 200 000 share premium 100 000 retained earnings 150 000 10% debenture 150 000 The directors of the company carry out the following actions. 1 issue 50 000 ordinary shares of $1 each at a premium of $0.20 2 repay $100 000 of the debenture at a premium of 20% What is the equity of the company after these transactions have taken place? A $1 490 000 B $1 500 000 C $1 510 000 D $1 540 000

Accepted Answer

A

Question 19

19 The directors of a company carry out the following transactions. 1 A debenture of $10 000 is redeemed at par. 2 A long term loan of $25 000 is obtained. 3 The property is sold for $50 000. What will be the improvement in working capital? A $15 000 B $25 000 C $65 000 D $75 000

Accepted Answer

C

Question 20

20 A company’s annual sales this year are $200 000. This gives a contribution to sales ratio of 40%. Fixed overheads are $25 000. The company expects that sales volume will fall next year by 10%. What must the fixed overheads be to achieve the same level of profit as this year? A $5000 B $9800 C $17 000 D $22 500

Accepted Answer

C

Question 21

21 The manufacture of a product involves two processes. The costs for the processes for one month are given. process 1 process 2 $ $ materials used 4000 additional materials 2000 other variable costs 5000 1000 fixed costs 3000 nil There were no opening or closing inventories of materials or work in progress at the beginning or end of the month. All process 1 production was passed to process 2 in the month. What is the value of the materials used in process 2 during the month? A $2000 B $6000 C $12 000 D $14 000

Accepted Answer

D

Question 22

22 A company’s trade receivables are $27 000. There is a collection period of 30 days. The budget for the coming year provides for an increased turnover of 50% with the relevant collection period being increased to 60 days. What are the budgeted trade receivables? A $13 500 B $27 000 C $40 500 D $81 000

Accepted Answer

D

Question 23

23 A manufacturing business is preparing its budget for the next year. It has identified that there will be a shortage of direct materials which will affect its level of output. Which budget should the business produce first? A cash B overheads C production D purchase of materials

Accepted Answer

C

Question 24

24 A budgetary control statement shows the following: original budget revised budget actual units made 48 000 40 000 44 000 semi-variable costs heat / light $ 62 000 54 000 66 800 If the budget is flexed, what is the variance? A $8800 adverse B $8800 favourable C $16 800 adverse D $16 800 favourable

Accepted Answer

A

Question 25

25 During the year a company produces 10 000 units. The cost data relating to the production is shown. actual cost total variance $ $ direct materials 22 000 (2000) A direct labour 32 000 4000 F What was the standard prime cost per unit? A $5.20 B $5.40 C $5.60 D $6.00

Accepted Answer

C

Question 26

26 During a month the following data was collected. direct labour efficiency variance $2000 favourable budgeted direct labour rate per hour $8 actual direct labour rate per hour $10 actual direct labour hours worked 15 000 What were the standard labour hours? A 14 750 B 14 800 C 15 200 D 15 250

Accepted Answer

D

Question 27

27 A company is having difficulty buying materials to complete a contract. It buys some inferior quality materials at higher than the usual price. Which variances are likely to arise because of this action? materials usage materials price variance variance A adverse adverse B adverse favourable C favourable adverse D favourable favourable

Accepted Answer

A

Question 28

28 Details of a capital investment project with a life of four years are as follows. $ cost of project (50 000) net cash flow year 1 15 000 net cash flow year 2 20 000 net cash flow year 3 25 000 net cash flow year 4 10 000 What is the accounting rate of return of the project? A 10% B 20% C 35% D 70%

Accepted Answer

B

Question 29

29 A company, operating under conditions of capital rationing, is considering investing in the following three projects. investment NPV project $ $ X 300 000 60 000 Y 350 000 52 500 Z 400 000 70 000 In which order should the projects be undertaken? A X → Z → Y B Y → Z → X C Z → X → Y D Z → Y → X

Accepted Answer

A

Question 30

30 Which system of costing is most appropriate for companies such as petroleum and oil refining industries? A batch costing B job costing C process costing D unit costing

Accepted Answer

C

Cambridge A Level Accounting 9706 — 2013 May/June Paper 3 · Variant 1

Question paper12 pages

Mark scheme2 pages

Questions as text

Q1 · When do revenue reserves arise?

Q2 · A company purchases a new machine

Q3 · How should proposed ordinary dividends be accounted for when preparing statements of cash…

Q4 · Which item will not appear on the income statement of a company?

Q5 · Which item would be included as equity in a company’s statement of financial position?

Q6 · X Ltd is considering the purchase of two different businesses

Q7 · The capital structure of a company is shown below

Q8 · A Ltd acquires the assets and liabilities of B Ltd

Q9 · A company has prepared its financial statements for the year ended 31 December 2012

Q10 · A company is preparing the statement of changes in equity for the year

Q11 · Information from a company’s financial statements at 31 December 2012 is as follows

Q12 · Extracts from a company’s statement of financial position are as follows

Q13 · A company converts some debentures into shares on 1 January 2012

Q14 · A company’s capital comprises 200 000 ordinary shares of $1 each

Q15 · A company has a Price Earnings ratio of 15

Q16 · The following information is for two non-current assets

Q17 · Which is an example of window dressing in financial statements?

Q18 · The financial statements of a company shows the following

Q19 · The directors of a company carry out the following transactions

Q20 · A company’s annual sales this year are $200 000

Q21 · The manufacture of a product involves two processes

Q22 · A company’s trade receivables are $27 000

Q23 · A manufacturing business is preparing its budget for the next year

Q24 · A budgetary control statement shows the following: original budget revised budget actual…

Q25 · During the year a company produces 10 000 units

Q26 · During a month the following data was collected

Q27 · A company is having difficulty buying materials to complete a contract

Q28 · Details of a capital investment project with a life of four years are as follows

Q29 · A company, operating under conditions of capital rationing, is considering investing in…

Q30 · Which system of costing is most appropriate for companies such as petroleum and oil…

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