Cambridge A Level Accounting 9706 — 2024 May/June Paper 3 · Variant 3

This document has 12 pages. Any blank pages are indicated. [Turn over Cambridge International AS & A Level * 5 0 3 3 3 9 3 5 6 6 * ACCOUNTING 9706/33 Paper 3 Financial Accounting May/June 2024 1 hour 30 minutes You must answer on the question paper. You will need: Insert (enclosed) INSTRUCTIONS ● Answer all questions. ● Use a black or dark blue pen. ● Write your name, centre number and candidate number in the boxes at the top of the page. ● Write your answer to each question in the space provided. ● Do not use an erasable pen or correction fluid. ● Do not write on any bar codes. ● You may use an HB pencil for any diagrams, graphs or rough working. ● You may use a calculator. ● International accounting terms and formats should be used as appropriate. ● You should show your workings. INFORMATION ● The total mark for this paper is 75. ● The number of marks for each question or part question is shown in brackets [ ]. ● The insert contains all of the sources referred to in the questions. DC (PB (GB)) 326878/2 © UCLES 2024 ,

 

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2 9706/33/M/J/24 © UCLES 2024 1 Read Source A in the insert. (a) Identify the costs that may be included in the inventory cost of work in progress. … … … … … … … … [4] * 0019655317002 * ,

 

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3 9706/33/M/J/24 © UCLES 2024 [Turn over (b) Prepare the manufacturing account for the year ended 31 December 2023. … … … … … … … … … … … … … … … … … … … … … … … … … … … [8] * 0019655317003 * ,

 

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4 9706/33/M/J/24 © UCLES 2024 (c) Prepare the statement of profit or loss for the year ended 31 December 2023. … … … … … … … … … … … … … … … … … … … … … … … … … … … [8] * 0019655317004 * ,

 

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5 9706/33/M/J/24 © UCLES 2024 [Turn over Additional information The product of B Limited is well received by the market. The directors plan to incur $100 000 expenditure on researching a new material that will extend the life of the product. (d) Advise the directors whether or not they should incur expenditure on researching a new material. Justify your answer. … … … … … … … … … … … … … … [5] [Total: 25] * 0019655317005 * ,

 

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6 9706/33/M/J/24 © UCLES 2024 2 Read Source B in the insert. (a) Explain the stewardship role of the directors in a public limited company. … … … … … … … … … … [4] (b) Calculate the working capital cycle (in days). Round up the components to the nearest day. … … … … … … … … … … … … … … … [8] * 0019655317006 * ,

 

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7 9706/33/M/J/24 © UCLES 2024 [Turn over (c) Calculate, to two decimal places, the following ratios: (i) price/earnings … … … … [2] (ii) dividend yield … … … … … … [3] (iii) interest cover. … … … … … … [3] * 0019655317107 * ,

 
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8 9706/33/M/J/24 © UCLES 2024 Additional information X plc, a competitor, has a working capital cycle which is shorter than that of M plc. (d) Explain why X plc has performed better than M plc in managing the working capital cycle. … … … … … … … … … … … … [5] [Total: 25] * 0019655317108 * ,

 
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10 9706/33/M/J/24 © UCLES 2024 3 Read Source C in the insert. (a) Prepare the cost section and the accumulated depreciation section of G plc’s schedule of non-current assets at 31 December 2023. The total column is not required. … … … … … … … … … … … … … … … … … … … … … … … … … … * 0019655317110 * ,

 
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11 9706/33/M/J/24 © UCLES 2024 [Turn over Workings: [20] * 0019655317111 * ,

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12 9706/33/M/J/24 © UCLES 2024 Additional information The directors have two options to acquire another machine in the coming year. Option 1: buy a new machine Option 2: buy two used machines The cost of option 1 is $17 000 higher than the cost of option 2. In the first year of use, the maximum capacity of each option is the same. The directors wish to select the option which will maximise profit. (b) Advise the directors which option they should choose. Justify your answer. … … … … … … … … … … … … … [5] [Total: 25] Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cambridgeinternational.org after the live examination series. Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge. * 0019655317112 * ,

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This document consists of 15 printed pages. © Cambridge University Press & Assessment 2024 [Turn over Cambridge International AS & A Level ACCOUNTING 9706/33 Paper 3 Financial Accounting May/June 2024 MARK SCHEME Maximum Mark: 75 Published This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the details of the discussions that took place at an Examiners’ meeting before marking began, which would have considered the acceptability of alternative answers. Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for Teachers. Cambridge International will not enter into discussions about these mark schemes. Cambridge International is publishing the mark schemes for the May/June 2024 series for most Cambridge IGCSE, Cambridge International A and AS Level and Cambridge Pre-U components, and some Cambridge O Level components.

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 2 of 15 Generic Marking Principles These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alongside the specific content of the mark scheme or generic level descriptions for a question. Each question paper and mark scheme will also comply with these marking principles. GENERIC MARKING PRINCIPLE 1: Marks must be awarded in line with:  the specific content of the mark scheme or the generic level descriptors for the question  the specific skills defined in the mark scheme or in the generic level descriptors for the question  the standard of response required by a candidate as exemplified by the standardisation scripts. GENERIC MARKING PRINCIPLE 2: Marks awarded are always whole marks (not half marks, or other fractions). GENERIC MARKING PRINCIPLE 3: Marks must be awarded positively:  marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond the scope of the syllabus and mark scheme, referring to your Team Leader as appropriate  marks are awarded when candidates clearly demonstrate what they know and can do  marks are not deducted for errors  marks are not deducted for omissions  answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assessed by the question as indicated by the mark scheme. The meaning, however, should be unambiguous. GENERIC MARKING PRINCIPLE 4: Rules must be applied consistently, e.g. in situations where candidates have not followed instructions or in the application of generic level descriptors.

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 3 of 15 GENERIC MARKING PRINCIPLE 5: Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the full mark range may be limited according to the quality of the candidate responses seen). GENERIC MARKING PRINCIPLE 6: Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thresholds or grade descriptors in mind.

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 4 of 15 Social Science-Specific Marking Principles (for point-based marking) 1 Components using point-based marking:  Point marking is often used to reward knowledge, understanding and application of skills. We give credit where the candidate’s answer shows relevant knowledge, understanding and application of skills in answering the question. We do not give credit where the answer shows confusion. From this it follows that we: a DO credit answers which are worded differently from the mark scheme if they clearly convey the same meaning (unless the mark scheme requires a specific term) b DO credit alternative answers/examples which are not written in the mark scheme if they are correct c DO credit answers where candidates give more than one correct answer in one prompt/numbered/scaffolded space where extended writing is required rather than list-type answers. For example, questions that require n reasons (e.g. State two reasons …). d DO NOT credit answers simply for using a ‘key term’ unless that is all that is required. (Check for evidence it is understood and not used wrongly.) e DO NOT credit answers which are obviously self-contradicting or trying to cover all possibilities f DO NOT give further credit for what is effectively repetition of a correct point already credited unless the language itself is being tested. This applies equally to ‘mirror statements’ (i.e. polluted/not polluted). g DO NOT require spellings to be correct, unless this is part of the test. However spellings of syllabus terms must allow for clear and unambiguous separation from other syllabus terms with which they may be confused (e.g. Corrasion/Corrosion) 2 Presentation of mark scheme:  Slashes (/) or the word ‘or’ separate alternative ways of making the same point.  Semi colons (;) bullet points (•) or figures in brackets (1) separate different points.  Content in the answer column in brackets is for examiner information/context to clarify the marking but is not required to earn the mark (except Accounting syllabuses where they indicate negative numbers).

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 5 of 15 3 Calculation questions:  The mark scheme will show the steps in the most likely correct method(s), the mark for each step, the correct answer(s) and the mark for each answer  If working/explanation is considered essential for full credit, this will be indicated in the question paper and in the mark scheme. In all other instances, the correct answer to a calculation should be given full credit, even if no supporting working is shown.  Where the candidate uses a valid method which is not covered by the mark scheme, award equivalent marks for reaching equivalent stages.  Where an answer makes use of a candidate’s own incorrect figure from previous working, the ‘own figure rule’ applies: full marks will be given if a correct and complete method is used. Further guidance will be included in the mark scheme where necessary and any exceptions to this general principle will be noted. 4 Annotation:  For point marking, ticks can be used to indicate correct answers and crosses can be used to indicate wrong answers. There is no direct relationship between ticks and marks. Ticks have no defined meaning for levels of response marking.  For levels of response marking, the level awarded should be annotated on the script.  Other annotations will be used by examiners as agreed during standardisation, and the meaning will be understood by all examiners who marked that paper.

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 6 of 15 ANNOTATIONS The following annotations are used in marking this paper and should be used by examiners. Annotation Use or meaning  Correct and relevant point made in answering the question. × Incorrect point or error made. LNK Two statements are linked. REP Repeat A An extraneous figure N0 No working shown AE Attempts evaluation R1 Required item 1 R2 Required item 2 OF Own figure EVAL Evaluation NAQ Not answered question BOD Benefit of the doubt given. SEEN Noted but no credit given Highlight Highlight Off page Comment Off page comment

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 7 of 15 Question Answer Marks 1(a) Identify the costs that may be included in the inventory cost of work in progress. Costs of the purchases of direct materials (1) Delivery cost (1) Direct labour costs (1) Variable production overheads (1) Fixed production overheads (1) Max 4 Accept other valid responses. 4

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 8 of 15 Question Answer Marks 1(b) Prepare the manufacturing account for the year ended 31 December 2023. Manufacturing account for the year ended 31 December 2023 $ $ Direct materials opening inventory 16 000 Purchases 174 300 Direct materials closing inventory (21 400) Cost of direct materials consumed 168 900 (1) Direct labour 158 000 Prime cost 326 900 (1)OF Rent and rates ($105 000+$15 000)  70% 84 000 (1) Depreciation of machinery 51 600 (1) Other indirect production overheads 77 500 540 000 Work in progress opening inventory 47 000 } Work in progress closing inventory (52 000) }(1) Cost of goods manufactured 535 000 Factory profit W1 214 000 (2)OF Transfer price 749 000 (1)OF W1 $25 600/($89 600 – $25 600)=40% (1) 40%  $535 000 = $214 000 (1)OF 8

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 9 of 15 Question Answer Marks 1(c) Prepare the statement of profit or loss for the year ended 31 December 2023. Statement of profit or loss for the year ended 31 December 2023 $ Sales 933 000 Finished goods opening inventory 89 600 Transfer price 749 000 (1)OF Finished goods closing inventory (77 000) Cost of sales 761 600 (1)OF Gross profit 171 400 (1)OF Factory profit 214 000 (1)OF Decrease in unrealised profit W1 3 600 (1) 217 600 389 000 Rent and rates 36 000 (1) Depreciation - office equipment 14 700 (1) Other administrative costs 205 000 255 700 Profit for the year 133 300 (1)OF W1 $25 600 – ($77 000  40/140) = $3 600 (1) 8

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 10 of 15 Question Answer Marks 1(d) Advise the directors whether or not they should incur expenditure on researching a new material. Justify your answer. For. Max (2) New material may be of better quality (1). This will reduce cost of wastage (1). Can charge premium price for improved quality so that sales / revenue / profit can increase (1) Ensures profitability is sustained in the long run / remains competitive (1) Against. Max (2) The research may fail (1) Expenditure on research is written off in the year it is incurred (1) and this will greatly reduce the profit of that year (1) Increased expenditure may increase prices causing loss of customers (1) May need to be financed by loan and the loan interest will reduce profit (1) Decision supported with a comment (1) Accept other valid responses. 5 Question Answer Marks 2(a) Explain the stewardship role of the directors in a public limited company. In a public limited company, the ownership and control are separated (1) so the directors are accountable/responsible to the shareholders (1). Directors are entrusted by the shareholders (1) to manage the assets / resources / the daily operations of the company (1). The directors should act / decide in the best interests of the shareholders (1) so they must exercise their professionalism and integrity and avoid conflict of interest (1). Max 4 (2 marks for basic points + 2 marks for development) Accept other valid responses. 4

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 11 of 15 Question Answer Marks 2(b) Calculate the working capital cycle (in days). Round up the components to the nearest day. Sales revenue $696 000  1.25 = $870 000 (1) Cost of sales $870 000  (100/145) = $600 000 (1)OF Purchases $600 000 + $88 000 – $79 000 = $609 000 (1)OF Trade receivables turnover: ($142 000/$870 000)  365 = 60 days (1)OF Inventory turnover: average turnover ($88 000 + $79 000)/2=$83 500 (1) ($83 500/$600 000)  365 = 51 days (1)OF Trade payables turnover ($125 000/$609 000)  365 = 75 days (1)OF Working capital cycle 60 days + 51 days – 75 days = 36 days (1)OF 8 2(c)(i) Calculate, to two decimal places, the following ratios: (i) price/earnings Earnings per share $140 000/500 000 = $0.28 (1) Price earnings ratio $2.56/$0.28 = 9.14 (1)OF 2 2(c)(ii) (ii) dividend yield Annual ordinary dividend per share ($40 000/500 000)(1) + $0.14 (1) = $0.22 Dividend yield $0.22/$2.56  100% = 8.59% (1)OF 3 2(c)(iii) (iii) interest cover Debentures interest $180 000  6% = $10 800 (1) Profit from operations $140 000 + $10 800 = $150 800 (1) Interest cover $150 800/10 800=13.96 times (1)OF 3

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 12 of 15 Question Answer Marks 2(d) Explain why X plc has performed better than M plc in managing the working capital cycle. X plc is more efficient than M plc in converting net working capital (current assets minus current liabilities) into cash (1). X plc’s credit customers may take a shorter time to settle their trade debts (1). X plc may take a shorter time to sell its goods (1). X plc may take a longer time to pay its credit suppliers (1). They may be in different industries (1) Accept other valid responses. 5

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 13 of 15 3(a) Prepare the cost section and the accumulated depreciation section of G plc’s schedule of non-current assets at 31 December 2023. The total column is not required. Schedule of non-current assets at 31 December 2023 (extract) Land and Plant and Motor buildings machinery vehicles $ $ $ Cost At 1 January 2023 550 000 280 000 135 000 Additions W1 35 000 (1) 46 000 (4) Revaluation 59 000 (1) Disposal W2 (60 000) (1) Impairment loss W3 (14 200) (1) At 31 December 2023 609 000 300 800 121 000 Accumulated depreciation At 1 January 2023 144 000 132 100 81 000 Charge for the year W4 W5 W6 10 800 (3) 27 435 (2) 24 200 (2) Disposal W7 (36 000) (1) Impairment loss W8 (9 261) (4) At 31 December 2023 154 800 150 274 69 200 W1 Cost 60 000 (1)OF Depreciation 60 000  20% (1)  3 (1) (36 000) 24 000 Loss on disposal (3 000) Cheque paid 25 000 22 000 Purchase cost of vehicle 46 000 (1)OF W2 $135 000  100/225 = $60 000 (1) 20

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 14 of 15 Question Answer Marks 3(a) W3 $24 000 – $9800 = $14 200 (1) W4 ($360 000 – $144 000) (1) / 20 years (1) = $10 800 (1)OF W5 ($280 000 + $35 000 – $132 100) (1)  15%=$27 435 (1)OF W6 Cost of vehicle A $135 000  125/225 = $75 000 ($75 000 + $46 000) (1)  20%=$24 200 (1)OF W7 $60 000  60%=$36 000 (1) W8 Carrying value at 31 December 2023 $ Cost in 2021 24 000 Depreciation 2021 3 600 (1) 20 400 Depreciation 2022 3 060 (1) 17 340 Depreciation 2023 2 601 (1) Carrying value 14 739 Accumulated depreciation at 31 December 2023 ($3600 + $3060 + $2601) = $9261 (1)OF

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED May/June 2024 © Cambridge University Press & Assessment 2024 Page 15 of 15 Question Answer Marks 3(b) Advise the directors which option they should choose. Justify your answer. Option 1 Max 2 Depreciation expense is higher. (1) May have a longer useful life. (1) Maintenance cost may be lower. (1) New machine is more efficient. (1) Less chance of breaking down and losing sales. (1) Maximum capacity may be sustained for more years. (1) Option 2 Max 2 Depreciation expense is lower. (1) May have a shorter useful life. (1) Maintenance cost may be higher. (1) Used machines are less efficient. (1) More chance of breaking down and losing sales. (1) Maximum capacity may not be sustained. (1) Decision supported with a comment (1) Accept other valid responses. 5