Cambridge A Level Accounting 9706 — 2018 Oct/Nov Paper 1 · Variant 1

Question 1

1 Which accounting concept is being applied when goods taken by an owner for own use are treated as drawings? A business entity B materiality C realisation D substance over form

Accepted Answer

A

Question 2

2 Why is an expense for depreciation included in the financial statements? A to charge the wear and tear on non-current assets against profits B to make cash available to replace non-current assets C to set cash aside for future repairs of non-current assets D to show the current market values of non-current assets

Accepted Answer

A

Question 3

3 A company incurred the following expenditures on a motor van. $ year 1 purchase of motor van 80 000 year 2 purchase of new tyres 2 000 year 2 purchase of trailer attached to the motor van 10 000 Depreciation to all vehicles is 20% on cost. A full year’s depreciation is charged in the year of purchase. What was the depreciation charge on vehicles for year 2? A $16 000 B $16 400 C $18 000 D $18 400

Accepted Answer

C

Question 4

4 Which items will be debited to accounts in the purchases ledger? 1 discount allowed 2 payments to suppliers 3 purchases 4 purchases returns A 1 and 2 B 1 and 4 C 2 and 3 D 2 and 4

Accepted Answer

D

Question 5

5 A business keeps a separate sales ledger. Its nominal ledger includes a sales ledger control account. Which entry corrects the nominal ledger when the sales journal is undercast? account to debit account to credit A sales suspense B sales trade receivables C suspense sales D trade receivables sales

Accepted Answer

D

Question 6

6 Which statement is correct? A The balance on the irrecoverable debts account is carried down to the next accounting period. B The balance on the irrecoverable debts account is treated as an expense in the income statement. C The balance on the provision for doubtful debts account is calculated before the deduction of irrecoverable debts. D The balance on the provision for doubtful debts account is not included in a trial balance.

Accepted Answer

B

Question 7

7 What would result in cash coming into a business? A a transfer to general reserve B an issue of bonus shares C proceeds from the sale of a non-current asset D the revaluation of an asset

Accepted Answer

C

Question 8

8 A sole trader has the following information available for rent and rates for a year. $ opening accrual 750 bank payments during the year 2650 closing prepayment 850 What is the rent and rates expense to be included in the income statement for the year? A $1050 B $2550 C $2750 D $4250

Accepted Answer

A

Question 9

9 A company sells goods at a mark-up of 25%. The following information was available at the end of the financial year. goods in warehouse $300 000 (cost) goods sent on sale or return $200 000 (at invoice price) What was the value of closing inventory in the financial statements? A $300 000 B $450 000 C $460 000 D $500 000

Accepted Answer

C

Question 10

10 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 asset with a net book value of $4000. How much capital did he start the business with? A $67 000 B $115 000 C $123 000 D $158 000

Accepted Answer

C

Question 11

11 When is a revaluation account prepared? 1 when a new partner is admitted 2 when an existing partner retires 3 when the partnership is sold A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

Accepted Answer

B

Question 12

12 P and Q are in partnership sharing profits and losses equally. The following information is available in respect of P. $ current account credit balance at start of the year 20 150 share of asset revaluation 10 000 drawings 10 200 The total partnership profit for the year was $130 000. Partnership salaries were P $20 000, Q $30 000. What was the balance on the current account of P at the end of the year? A $10 350 B $69 950 C $79 950 D $90 350

Accepted Answer

B

Question 13

13 Dele and Iyabo are partners in a business and share profits in the ratio of 3 : 1. Their profit for the year is $80 000. The following information is available. Dele Iyabo $ $ interest on capital 3000 2500 interest on drawings 500 1000 How will the residual profit be shared? Dele Iyabo $ $ A 57 000 19 000 B 57 500 18 500 C 62 500 21 500 D 63 000 21 000

Accepted Answer

A

Question 14

14 Which items only appear on the credit side of a partner’s capital account? 1 goodwill in an agreed ratio split 2 opening balances 3 profit on revaluation of assets 4 transfers from current accounts A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4

Accepted Answer

C

Question 15

15 Which statements about limited companies are correct? 1 Debenture interest is recorded in the income statement. 2 Director’s remuneration is recorded in the statement of changes in equity. 3 Share premium is a revenue reserve. A 1 and 2 B 1 only C 2 and 3 D 3 only

Accepted Answer

B

Question 16

16 A company has the following capital and reserves. $ ordinary shares of $1 each 400 000 share premium account 60 000 revaluation reserve 120 000 general reserve 300 000 retained earnings 90 000 970 000 The company plans to make a bonus issue of one share for every four held. What will be the maximum amount of distributable reserves for the company after the bonus issue? A $290 000 B $300 000 C $350 000 D $390 000

Accepted Answer

D

Question 17

17 A company provided the following information. $ total assets 160 000 non-current assets 124 000 equity 92 000 non-current liabilities 45 000 What was the amount of working capital? A $13 000 B $23 000 C $79 000 D $115 000

Accepted Answer

A

Question 18

18 Which items would not appear in the income statement? 1 finance costs 2 loss on sale of non-current assets 3 ordinary share dividends A 1 only B 1 and 2 C 2 and 3 D 3 only

Accepted Answer

D

Question 19

19 A business provides the following extract from its income statement. $ opening inventory 15 000 purchases 180 000 closing inventory (18 750) cost of sales 176 250 What is the rate of inventory turnover? A 9.4 times B 9.6 times C 10.4 times D 10.7 times

Accepted Answer

C

Question 20

20 Which actions would, in general, improve the liquid (acid test) ratio of a business in the short term? 1 delaying trade payables 2 selling inventory 3 selling surplus non-current assets 4 trade receivables paying their debts A 1 and 4 B 2 and 3 C 3 only D 4 only

Accepted Answer

B

Question 21

21 Why is inventory excluded from the calculation of the quick ratio? A Business can choose either FIFO and AVCO for inventory valuation. B Inventory can become obsolete easily. C Inventory is the slowest current asset to be converted into cash. D The value of inventory fluctuates.

Accepted Answer

C

Question 22

22 A business uses absorption costing and applies an overhead absorption rate based on direct labour hours. Why does the business distinguish between direct and indirect labour? 1 to aid the preparation of a quote 2 to assist when planning production 3 to help when purchasing materials A 1 only B 1, 2 and 3 C 2 and 3 only D 3 only

Accepted Answer

A

Question 23

23 A business values its inventory using the FIFO method. The following transactions took place. month units April opening inventory 700 at $190 each May purchases 500 at $220 each June sales 400 at $400 each What was the value of the closing inventory at the end of June? A $152 000 B $162 000 C $167 000 D $176 000

Accepted Answer

C

Question 24

24 The unit cost of a product is as follows. $ direct materials 30 direct labour 25 variable manufacturing overhead 20 fixed manufacturing overhead 18 sales commission (1.5% of sales) 4 administrative staff salaries 15 112 What is the total variable cost per unit of the product? A $75 B $79 C $94 D $97

Accepted Answer

B

Question 25

25 A business absorbs overheads based on machine hours. During last month it had the following results. actual overheads $158 200 actual machine hours 7310 budgeted overheads $168 200 budgeted machine hours 8410 Which statement is correct? A Overheads were over-absorbed by $10 000. B Overheads were over-absorbed by $12 000. C Overheads were under-absorbed by $10 000. D Overheads were under-absorbed by $12 000.

Accepted Answer

D

Question 26

26 The diagram shows a break-even chart. 100 sales revenue 90 total costs 80 70 60 $000 50 40 30 20 10 0 0 1000 2000 3000 4000 5000 number of units sold What is the margin of safety? A $10 000 B $15 000 C $40 000 D $60 000

Accepted Answer

D

Question 27

27 The following information applies to a business. output sales profits (units) $ $ 375 750 000 100 000 500 1 000 000 250 000 What is the contribution to sales ratio? A 25% B 50% C 60% D 83%

Accepted Answer

C

Question 28

28 What does the diagram show about costs? sales revenue profit revenue and costs $000 fixed costs 1 2 3 4 5 years A Fixed costs are increasing. B Total costs as a percentage of sales are decreasing. C Variable costs per unit are decreasing. D Variable costs per unit are increasing.

Accepted Answer

D

Question 29

29 A business makes and sells three products: X, Y and Z. There will be a maximum of 3000 hours of labour time available in January. The following information for the three products is available: X Y Z contribution per unit $50 $60 $70 maximum demand per month (units) 1000 500 800 labour time per unit 1 hour 1.5 hours 2 hours What will be the optimal sales mix of products in January? X Y Z A 825 500 800 B 1000 325 800 C 1000 500 625 D 1000 500 800

Accepted Answer

C

Question 30

30 In which way can a budget be used to help the management of a company? A ascertain actual profit B compare the company’s budget with its competitors C implement strategic planning D increase the company’s public image

Accepted Answer

C

Cambridge A Level Accounting 9706 — 2018 Oct/Nov Paper 1 · Variant 1

Question paper12 pages

Mark scheme3 pages

Questions as text

Q1 · Which accounting concept is being applied when goods taken by an owner for own use are…

Q2 · Why is an expense for depreciation included in the financial statements?

Q3 · A company incurred the following expenditures on a motor van

Q4 · Which items will be debited to accounts in the purchases ledger?

Q5 · A business keeps a separate sales ledger

Q6 · Which statement is correct?

Q7 · What would result in cash coming into a business?

Q8 · A sole trader has the following information available for rent and rates for a year

Q9 · A company sells goods at a mark-up of 25%

Q10 · X started a business 3 years ago and now has a capital of $175 000

Q11 · When is a revaluation account prepared?

Q12 · P and Q are in partnership sharing profits and losses equally

Q13 · Dele and Iyabo are partners in a business and share profits in the ratio of 3 : 1

Q14 · Which items only appear on the credit side of a partner’s capital account?

Q15 · Which statements about limited companies are correct?

Q16 · A company has the following capital and reserves

Q17 · A company provided the following information

Q18 · Which items would not appear in the income statement?

Q19 · A business provides the following extract from its income statement

Q20 · Which actions would, in general, improve the liquid (acid test) ratio of a business in…

Q21 · Why is inventory excluded from the calculation of the quick ratio?

Q22 · A business uses absorption costing and applies an overhead absorption rate based on…

Q23 · A business values its inventory using the FIFO method

Q24 · The unit cost of a product is as follows

Q25 · A business absorbs overheads based on machine hours

Q26 · The diagram shows a break-even chart

Q27 · The following information applies to a business

Q28 · What does the diagram show about costs?

Q29 · A business makes and sells three products: X, Y and Z

Q30 · In which way can a budget be used to help the management of a company?

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