Cambridge A Level Accounting 9706 — 2013 Oct/Nov Paper 3 · Variant 1

Question 1

1 The financial year of a manufacturer ends on 31 December. Finished goods are valued at factory cost plus 20%. The following information is available. 1 January 31 December inventory of finished goods at cost plus 20% $2400 $3000 How much should be deducted from the closing inventory of finished goods for unrealised profit? A $100 B $400 C $500 D $600

Accepted Answer

C

Question 2

2 Which item would be included in a company’s income statement? A depreciation B goodwill C provision for doubtful debts D trade receivables

Accepted Answer

A

Question 3

3 X, Y and Z are in partnership and they have the following assets and liabilities. $ property 400 000 fixtures and fittings 350 000 closing inventory 25 000 trade receivables 45 000 bank overdraft 22 000 The partnership was dissolved on the following terms. X took the property and half the fixtures and fittings at a valuation of $560 000. The remaining fixtures and fittings and the entire inventory were sold for $140 000. The trade receivables paid in full with the exception of one debt of $4700. The total cost of dissolution was $2500. What was the loss on dissolution of the partnership? A $57 700 B $60 200 C $77 500 D $82 200

Accepted Answer

D

Question 4

4 What type of capital must all limited companies have? A convertible loan stock B debentures C ordinary shares D preference shares

Accepted Answer

C

Question 5

5 The following information is included in a company’s financial statement. $ ordinary share capital (at $1 each) 120 000 redeemable preference shares 40 000 retained earnings 65 000 share premium 8 000 balance at bank 65 000 The following transactions took place. 1 There was an issue of 25 000 ordinary shares at par. 2 The preference shares were redeemed at a premium of 5%. What was the bank balance after the transactions took place? A $23 000 B $48 000 C $50 000 D $63 000

Accepted Answer

B

Question 6

6 A private limited company is considering purchasing some of its own shares. 1 The shares must have been issued as redeemable. 2 After the purchase, the company must have other shares in issue. 3 After the purchase, the company must have at least one shareholder. 4 The purchase cannot be financed by a new issue of shares. Which statements are correct? A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

Accepted Answer

C

Question 7

7 When a business is purchased, the price paid is sometimes less than the fair value of the net assets acquired. What is the difference known as? A a revaluation reserve B a share premium account C negative purchased goodwill D positive purchased goodwill

Accepted Answer

C

Question 8

8 X and Y agree to merge their businesses and show the following balances on their books. X Y $ $ non-current assets 20 000 35 000 current assets 7 000 10 000 current liabilities 3 000 5 000 goodwill 5 000 6 000 non-current liability nil 8 000 They wish to commence business with a total capital of $66 000 shared in the ratio 1 : 2. Which bank adjustment will each have to carry out to complete this arrangement? X Y A pays in $7000 withdraws $6000 B withdraws $2000 pays in $12 000 C withdraws $7000 pays in $6000 D withdraws $13 000 withdraws $4000

Accepted Answer

C

Question 9

9 A company’s statement of financial position at 1 January included the following. $ million ordinary share capital 500 retained earnings 200 The company results for the year to 31 December included the following. $ million profit before taxation 50 taxation 15 dividends proposed 10 revaluation surplus on land 12 What are the retained earnings at 31 December? A $225 million B $235 million C $237 million D $247 million

Accepted Answer

B

Question 10

10 Which items will be shown in the statement of changes in equity? 1 dividends proposed 2 interest paid on debentures 3 issues of share capital 4 transfers to reserves A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

Accepted Answer

D

Question 11

11 At the year end a company had total net assets of $230 000. The financial statements have not yet been approved by the directors and the following matters have come to light. There is an unpaid legal charge of $10 000 which will have to be paid if the case is lost. The inventory at the year end was valued at $45 000 but it is now discovered that, due to damage, it should have been $38 000. What will be the value of the net assets after any necessary adjustments have been made? A $175 000 B $185 000 C $213 000 D $223 000

Accepted Answer

D

Question 12

12 What is the correct treatment of non-purchased goodwill? A Do not recognise it as an asset. B Include it in the statement of financial position as an asset at valuation. C Include it in the statement of financial position as an asset, to be amortised. D Write it off through impairment provision.

Accepted Answer

A

Question 13

13 A limited company has the following capital at 31 December. $000 ordinary shares of $1 each fully paid 5000 7.5% preference shares of $1 each fully paid 200 The market price of the company’s ordinary shares at 31 December is $1.45. Other financial information is as follows. $000 $000 profit after tax 470 preference dividend 15 ordinary dividend 52 67 retained profit for the year 403 What is the price earnings (P / E) ratio at 31 December? A 15.4 B 15.9 C 16.6 D 18.0

Accepted Answer

B

Question 14

14 The following information relates to a company. per share $ dividends paid during the year 3 dividends proposed at the year end 1 market price 50 nominal price 100 What is the company’s dividend yield? A 3.0% B 4.0% C 6.0% D 8.0%

Accepted Answer

D

Question 15

15 Which transaction will increase a company’s working capital? A The bank overdraft is increased. B There is a bonus share issue. C There is a rights issue. D There is a transfer to the general reserves.

Accepted Answer

C

Question 16

16 Which action will increase company profits in the short term? A accepting deposits for customers’ orders B decreasing rates of depreciation C increasing the value of opening inventory D writing down the value of closing inventory

Accepted Answer

B

Question 17

17 A company values its work in progress and finished goods in the way set out by IAS2. The following information is available for the year. 1 4000 items manufactured and sold in the year 2 400 fully completed items of inventory at the end of the year 3 200 items half complete in respect of direct materials and direct labour at the end of the year Costs incurred during the year were as follows. $ direct material 67 500 direct labour 22 500 production overheads 11 250 non-production overheads 45 000 How much per unit should the closing inventory be valued? A $15 B $20 C $22.50 D $32.50

Accepted Answer

C

Question 18

18 A company issues a debenture. Which row shows the impact of this on the company’s financial statements? return on capital gearing working capital employed A decrease decrease no effect B increase decrease increase C increase no effect increase D no effect decrease decrease

Accepted Answer

B

Question 19

19 The equity section of the statement of financial position of a company at 1 May 2013 is as follows. $ ordinary shares of $0.50 each fully paid 220 000 share premium 110 250 retained earnings 44 000 374 250 On 31 May 2013, the directors made a bonus issue of ordinary shares on the basis of six new shares for every eleven existing shares held. What is the number of bonus shares issued? A 60 000 B 120 000 C 240 000 D 806 667

Accepted Answer

C

Question 20

20 A company has fixed costs of $5000. Sales for 600 units have been made. The budgeted unit details are as follows. $ selling price 26 variable costs 19 fixed costs 2 profit 5 At what minimum price should an order for 200 additional units be accepted in order to break even? A $19 B $23 C $24 D $26

Accepted Answer

B

Question 21

21 A company is considering opening a new division of the business. Which cost will not be relevant to the decision? A a consultancy fee of $1000 that has been paid to a market research company for advising on the proposed new division B fixed overheads of $2000 per month on an office building that will be sold immediately if the company opens the new division C running costs of $5000 per month for equipment in the new division D the salary of $30 000 per annum for a manager appointed to run the new division

Accepted Answer

A

Question 22

22 A product passes through two processes. Information for process 2 is given. $ production transferred from process 1 (2000 units) 40 000 added material 2 400 labour 16 000 overheads (based on 50% of labour) 8 000 At the end of the period, 400 units were complete as to 100% of materials and 50% labour. What was the total value of the closing inventory of work-in-progress? A $2080 B $2880 C $10 080 D $10 880

Accepted Answer

D

Question 23

23 Which objectives are achieved by the introduction of a budgetary control system? 1 co-ordinating of the businesses activities 2 encouraging communications between departments 3 ensuring wage rises do not occur 4 setting standard costs for the period A 1, 2 and 3 only B 1, 2 and 4 only C 1, 3 and 4 only D 1, 2, 3 and 4

Accepted Answer

B

Question 24

24 A unit of a product uses 3 kilos of raw material. The year’s production budget is shown: budgeted sales 12 000 units increase in raw materials inventory 2 000 kilos decrease in finished goods inventory 1 000 units What are the budgeted purchases of raw materials for the year? A 35 000 kilos B 36 000 kilos C 38 000 kilos D 39 000 kilos

Accepted Answer

A

Question 25

25 Which statement about budgeting is correct? A A budget should always be produced based on last year’s actual results. B Evaluation of performance should take actual operating conditions into account. C The budget should always be set at an ideal level of performance. D The budget should not be changed once agreed.

Accepted Answer

B

Question 26

26 Which factor could account for an adverse labour rate variance and a favourable material usage variance occurring at the same time? A Cheaper labour was used and less material utilised. B The company purchased cheaper material and the workforce has been awarded a pay increase. C The company purchased cheaper material and the workforce has taken more time. D Workers are more highly skilled than expected and have used less material.

Accepted Answer

D

Question 27

27 A company uses 3000 direct labour hours, at a standard cost of $10 per hour. This resulted in a favourable labour efficiency variance of $20 000. How many standard hours were produced? A 1000 hours B 2000 hours C 3000 hours D 5000 hours

Accepted Answer

D

Question 28

28 A company produces a single product and details of the production and budget are as follows. actual output 10 000 units standard material cost 2 kilos × $4 $80 000 actual usage of material 18 000 kilos total material variance $6200 favourable What are the direct material price and direct material usage variances? material price material usage variance variance A $1800 adverse $8000 favourable B $1800 favourable $8000 favourable C $8000 adverse $1800 favourable D $8000 favourable $1800 adverse

Accepted Answer

A

Question 29

29 A business uses a range of investment appraisal techniques for individual projects. Which statement is correct? A Projects with a negative net present value should not be rejected. B The internal rate of return for an acceptable project is always zero. C Use of the payback method always considers the time value of money. D Use of the payback method can lead to projects with negative net present values being selected.

Accepted Answer

D

Question 30

30 The following information relates to a capital investment, costing $900 000. discounted cash discounted cash cash flow year flow at 6% flow at 8% $ $ $ 0 (900) (900) (900) 1 400 377 370 2 600 534 514 100 11 (16) The company has a cost of capital of 8%. Which statements about the project are correct? 1 The project has an internal rate of return greater than the cost of the capital. 2 The project has an internal rate of return less than the cost of capital. 3 An increase in the cost of capital will make the project viable. 4 A decrease in the cost of capital will make the project viable. A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

Accepted Answer

D

Cambridge A Level Accounting 9706 — 2013 Oct/Nov Paper 3 · Variant 1

Question paper12 pages

Mark scheme2 pages

Questions as text

Q1 · The financial year of a manufacturer ends on 31 December

Q2 · Which item would be included in a company’s income statement?

Q3 · X, Y and Z are in partnership and they have the following assets and liabilities

Q4 · What type of capital must all limited companies have?

Q5 · The following information is included in a company’s financial statement

Q6 · A private limited company is considering purchasing some of its own shares

Q7 · When a business is purchased, the price paid is sometimes less than the fair value of the…

Q8 · X and Y agree to merge their businesses and show the following balances on their books

Q9 · A company’s statement of financial position at 1 January included the following

Q10 · Which items will be shown in the statement of changes in equity?

Q11 · At the year end a company had total net assets of $230 000

Q12 · What is the correct treatment of non-purchased goodwill?

Q13 · A limited company has the following capital at 31 December

Q14 · The following information relates to a company

Q15 · Which transaction will increase a company’s working capital?

Q16 · Which action will increase company profits in the short term?

Q17 · A company values its work in progress and finished goods in the way set out by IAS2

Q18 · A company issues a debenture

Q19 · The equity section of the statement of financial position of a company at 1 May 2013 is…

Q20 · A company has fixed costs of $5000

Q21 · A company is considering opening a new division of the business

Q22 · A product passes through two processes

Q23 · Which objectives are achieved by the introduction of a budgetary control system?

Q24 · A unit of a product uses 3 kilos of raw material

Q25 · Which statement about budgeting is correct?

Q26 · Which factor could account for an adverse labour rate variance and a favourable material…

Q27 · A company uses 3000 direct labour hours, at a standard cost of $10 per hour

Q28 · A company produces a single product and details of the production and budget are as…

Q29 · A business uses a range of investment appraisal techniques for individual projects

Q30 · The following information relates to a capital investment, costing $900 000

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