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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

General Certificate of Education


Advanced Subsidiary Level and Advanced Level

9706/11

ACCOUNTING
Paper 1 Multiple Choice

October/November 2013
1 hour

Additional Materials:

*3288750289*

Multiple Choice Answer Sheet


Soft clean eraser
Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST


Write in soft pencil.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.
There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.
Read the instructions on the Answer Sheet very carefully.
Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.
Calculators may be used.

This document consists of 10 printed pages and 2 blank pages.


IB13 11_9706_11/2RP
UCLES 2013

[Turn over

2
1

A non-current asset costs $250 000 and has a useful economic life of 25 years. The estimated
residual value is $10 000.
Depreciation is provided on a straight line basis.
After 10 years the asset is sold for $120 000. Disposal costs of $20 000 are incurred.
What is the loss on disposal?
A

$30 000

$34 000

$50 000

$54 000

Goods that had previously been purchased on credit have been returned to the supplier.
How should this be recorded in the purchasers books of account?
account to be debited
A

bank

purchases returns

trade payable

bank

creditor

purchases returns

D
3

account to be credited

purchases returns

trade payable

On 1 January 2012 a business had prepaid rent of $50. During 2012, it made three rent
payments of $250 each. On 31 December 2012, the business owed $200 rent for 2012.
The business owner only charged the rent payments made during 2012 in the income statement.
What is the effect on profit for the year?
A
B

$200 understated

$250 overstated

D
4

$200 overstated

$250 understated

A computer used for demonstration to customers was treated as capital expenditure.


The following year a customer purchased the computer in the ordinary course of business.
Which entries are needed to adjust the cost of sales?
account to be debited

account to be credited

inventory

computers

purchases

computers

sales

inventory

selling expenses

sales

UCLES 2013

9706/11/O/N/13

3
5

The table shows information about a business.


$
provision for doubtful debts at 1 January 2012

700

trade receivables at 31 December 2012 (after writing off a bad


debt of $30)
charge to income statement for bad and doubtful debts for year
ended 31 December 2012 (including the bad debt written off)

15 000
200

What is the total percentage provision that has been made for doubtful debts at
31 December 2012?
A
6

3.5%

4.7%

5.8%

6.0%

The following information is extracted from the statement of financial position of a business.
$
bank loan (repayable 2019)
bank loan interest owing

16 200
1 880

bank overdraft

11 600

capital

20 710

drawings

19 100

inventory

14 610

prepayments

1 420

trade payables

14 110

trade receivables

9 050

What is the value of the net current liabilities?


A
7

$1590

$2510

$18 710

$20 320

A business sells computers. When they value their inventory they exclude the value of the
inventory that is over one year old, as they may be obsolete.
Which accounting principle does this demonstrate?
A

going concern

historical cost

prudence

realisation

UCLES 2013

9706/11/O/N/13

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4
8

When preparing a bank reconciliation statement, the following information is available.


$
bank balance shown by the cash book

20 000 debit

unpresented cheques

2 500

uncleared bankings

1 400

standing order shown on the bank statement


(not in the cash book)

300

What is the balance on the bank statement?


A
9

$18 600

$19 200

$20 800

$21 400

The following financial information has been extracted from the books of account.
$
bad debts written off

7 000

cash from credit customers

925 000

credit sales

900 000

opening trade receivables

300 000

discounts allowed

10 000

discounts received

25 000

increase in provision for doubtful debts

9 000

returns inwards

8 000

returns outwards

5 000

What is the closing balance on the sales ledger control account?


A

$235 000

$241 000

$250 000

$253 000

10 Discount received of $280 has been incorrectly posted to the credit of the discount allowed
account.
Which entry must be made to the discount received account to correct the error?
A

credit $280

UCLES 2013

credit $560

debit $280

9706/11/O/N/13

debit $560

5
11 A trader provides the following financial information for the year.
$
direct costs

210 000

indirect costs

55 000

increase in work in progress

7 000

raw materials taken for own use

2 000

Which figures should appear in the manufacturing account?

prime cost
$

overheads
$

transfer to trading account


of income statement
$

208 000

55 000

256 000

208 000

55 000

270 000

210 000

53 000

256 000

210 000

53 000

270 000

12 Which item appears in a companys income statement?


A

dividends

inventory

trade payables

transfer to reserves

13 The table shows the following balances for a business.


start
of year
$

end
of year
$

inventory

6 000

9 000

trade payables

8 000

10 000

Total payments to trade payables were $20 000.


What is the cost of sales for the year?
A

$15 000

UCLES 2013

$19 000

$21 000

9706/11/O/N/13

$25 000

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6
14 X and Y are in partnership sharing residual profits and losses in the ratio 7 : 3.
Their fixed capital accounts have balances of X $40 000; Y $60 000. Interest is allowed on these
at the rate of 10% per year.
X is paid a salary of $40 000 per year. Profit for the year was $200 000.
What was the division of profits between the partners?
X
$

Y
$

137 000

63 000

140 000

60 000

149 000

51 000

152 000

48 000

15 X, Y and Z are in partnership, sharing profits, X 40%, Y 20% and Z 40%. Existing goodwill is
shown in the ledger as $10 000.
The partners agree that the goodwill is now worth $40 000 and they agree to share future profits
equally. They also agree that, in future, goodwill is not to appear in the ledger.
Which journal entry will record this change?
debit
$
A

UCLES 2013

X
Y
Z
goodwill

1 334
7 333
1 333

X
Y
Z
goodwill

10 000
10 000
10 000

X
Y
Z
goodwill

12 000
6 000
12 000

X
Y
Z
goodwill

credit
$

13 334
13 333
13 333

10 000

30 000

30 000

40 000

9706/11/O/N/13

7
16 A trader provides the following information.
$
opening inventory

6 000

closing inventory

4 000

purchases

15 000

He uses a uniform gross profit margin of 20%.


What was the sales figure for the trading period?
A

$16 250

$18 750

$20 400

$21 250

17 A club supplies refreshments for its members at a uniform gross profit margin of 30%. The
following information is available.
$
receipts

62 000

opening inventory

10 000

purchases

45 000

What is the value of closing inventory?


A

$10 000

$11 600

$16 500

$18 600

18 Y sells goods to X on credit. Details of Xs account are as follows.


$
trade discount

250

closing balance

750

opening balance

1500

payment received

2000

contra to purchases ledger

2500

What was the value of sales?


A

$3500

UCLES 2013

$3750

$4000

9706/11/O/N/13

$5250

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8
19 The following information has been taken from the books of accounts of a limited company for the
year ended 31 December 2012.
$
bank loan interest for the year

1 650

bank overdraft interest for the year

2 150

ordinary dividends paid during the year

900

8% debenture taken out on 1 October 2012

30 000

What are the total finance costs in the income statement for the year ended 31 December 2012?
A

$4400

$4700

$5300

$6200

20 A company has 1 000 000 ordinary shares of $1 issued at $2.50. It also has a 5% debenture of
$300 000.
Profit from operations for the year was $465 000.
The directors paid an 8% ordinary dividend during the year.
What is the retained profit for the year?
A

$250 000

$370 000

$385 000

$400 000

21 The following information was extracted from the books of a trader.


$
revenue for the year
purchases for the year

126 000
87 000

opening inventory

9 000

closing inventory

12 000

What is the rate of inventory turnover?


A

4 times

6 times

8 times

12 times

22 A company wishes to improve its current ratio and its liquid (acid test) ratio.
How can this be done?
A

increasing discounts to trade receivables

increasing the provision for doubtful debts

purchasing additional inventory on credit

selling non-current assets

UCLES 2013

9706/11/O/N/13

9
23 Which of the following measures a business average credit period?
A

current ratio

inventory turnover

liquid (acid test) ratio

trade receivables turnover

24 Which expense would be classified as a variable cost of a furniture manufacturer?


A

factory managers salary

plant depreciation

royalties

vehicle insurance

25 A company has the following annual costs.


$
purchases of raw materials during the year

53 000

wages and salaries: production staff

110 000

administration staff

56 000

production overheads

16 000

administration expenses excluding wages

42 000

selling and distribution overheads

34 000

What is the total indirect cost for the year?


A

$132 000

$148 000

$163 000

$258 000

26 Which statement is correct?


A

Fixed costs per unit decrease as production increases.

Total fixed costs decrease as production increases.

Total variable costs decrease as production increases.

Variable costs per unit decrease as production increases.

UCLES 2013

9706/11/O/N/13

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10
27 Which statements about absorption costing are correct?
1
2

It enables a company to know its break-even level of production.

It leads to higher inventory valuations than marginal costing.

4
A

It apportions overheads between production and service departments.

It is used by management for make or buy decisions.


B

1, 2 and 3

1 and 3 only

2 and 4 only

3 and 4 only

28 An accountant prepared the following break-even chart.

sales revenue

10
budget
8

total costs

costs
6
and
revenues
4
($m)

fixed costs

2
0
0

sales volume (millions of units)


The budgeted sales volume is 4.5 million units.
Which profit can be anticipated at this level?
A

$2.5 million

$4.5 million

$7 million

$9 million

29 Which statement best describes job costing?


A

a costing method that calculates the cost of meeting a specific customer order

a costing method that calculates the cost of producing a number of identical units for a
customer

a costing method that enables overheads to be absorbed into the cost of the product

a costing method that separates fixed costs from variable costs

30 Which item would appear in a cash budget?


A

bad debts

cash discounts

depreciation

loan repayments

UCLES 2013

9706/11/O/N/13

11
BLANK PAGE

UCLES 2013

9706/11/O/N/13

12
BLANK PAGE

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.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

UCLES 2013

9706/11/O/N/13

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Subsidiary Level and Advanced Level

9706/12

ACCOUNTING
Paper 1 Multiple Choice

October/November 2013
1 hour

Additional Materials:

*1011372598*

Multiple Choice Answer Sheet


Soft clean eraser
Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST


Write in soft pencil.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.
There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.
Read the instructions on the Answer Sheet very carefully.
Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.
Calculators may be used.

This document consists of 11 printed pages and 1 blank page.


IB13 11_9706_12/5RP
UCLES 2013

[Turn over

2
1

The following information is taken from a traders statement of financial position.


$
non-current assets

80 000

capital at start of year

75 000

drawings

16 000

profit for the year

13 000

non-current liability
current assets

6 000
12 700

What is the amount of trade payables?


A
2

$8700

$11 700

$14 700

$26 700

A business wishes to create a new provision for doubtful debts.


Which effect will this have in the financial statements of the business?
in the income
statement
A

increase profit

increase current assets

increase profit

reduce current liabilities

reduce profit

increase current liabilities

D
3

in the statement of
financial position

reduce profit

reduce current assets

Anna owns a plumbing business. Costs for the year were $49 500 for wages and $95 000 for
materials. These included $2200 labour and $540 materials used by Anna in the extension of the
business premises. Additional planning and legal costs of the extension were $450.
What was Annas total revenue expenditure for the year?
A

$141 310

$141 760

$142 300

$144 500

A building cost $340 000. The accumulated depreciation on the building was $47 600. It was
decided to revalue the building to its market value of $560 000.
What is the balance on the revaluation reserve?
A

$172 400

UCLES 2013

$220 000

$267 600

9706/12/O/N/13

$512 400

3
5

The table shows extracts from the statements of financial position of a business.
2011
$
190 000

245 000

75 000

90 000

115 000

non-current assets (at cost)

2012
$

155 000

less accumulated depreciation

Other information for the financial year 2012 is as follows.


$
depreciation charged

40 000

new non-current assets purchased (at cost)


loss on sale of non-current assets

105 000
10 000

Which amount was received from the sales of the non-current assets?
A
6

$15 000

$25 000

$30 000

$35 000

An item can be converted easily into cash.


In which section of the statement of financial position would this item appear?
A
B

current assets

current liabilities

D
7

capital

non-current assets

A companys financial year ends on 31 December.


At 31 December Year 1 the company carried forward a debit balance of $36 200 on the rent
account.
During Year 2 payments made for 12 months rent, to 31 March Year 3, were $157 200.
What is the amount of rent to be charged in the income statement in Year 2?
A

$121 000

UCLES 2013

$154 100

$160 300

9706/12/O/N/13

$193 400

[Turn over

4
8

A trader buys inventory costing $6000.


He is entitled to trade discount at 10% and cash discount of 5%.
On the same day he discovers that he can only sell the inventory for $5000.
Which amount should he record as the purchase price of the inventory?
A

$5000

$5130

$5400

$6000

A business is preparing a bank reconciliation and finds the following.


$
unpresented cheques

3190

uncredited bankings

1949

The cash book has a debit balance of $5000.


Which adjustments should be made to the cash book balance to reconcile it to the bank
statement?
A

minus $3190, minus $1949

minus $3190, plus $1949

plus $3190, minus $1949

plus $3190, plus $1949

10 A companys trial balance includes a suspense account. It was found that the only errors were
discounts received of $240 and discounts allowed of $312, which had both been entered on the
incorrect sides of the respective ledger accounts.
What is the double entry required to clear the suspense account balance?
account
A

UCLES 2013

debit
$

discounts allowed
discounts received
suspense

312

discounts allowed
discounts received
suspense

624

discounts received
suspense
discounts allowed

240
72

discounts received
suspense
discounts allowed

credit
$

480
144

240
72
480
144

312

624

9706/12/O/N/13

5
11 During the month a company lost a quantity of inventory in a burglary. The table shows the
companys results for the month.
$
opening trading inventory, at cost

30 000

purchases

210 000

revenue

330 000

closing trading inventory, at cost

4 000

A gross profit on all sales of 30% has been achieved.


What was the cost of the inventory lost in the burglary?
A

$4000

$5000

$9000

$13 000

12 During the financial year a business receives $620 000 from its trade receivables after allowing
cash discounts of $30 000.
At the start of the year trade receivables owed $47 000. At the end of the year trade receivables
owed $40 000.
What was the amount of credit sales made during the year?
A

$613 000

$627 000

$643 000

$657 000

13 A business had a profit for the year of $450 000 before correcting the following errors.
1

Closing inventory was undervalued by $15 000.

Sales returns of $5000 had been recorded as purchases returns.

The charge for depreciation was overstated by $20 000.

What was the corrected profit?


A

$435 000

UCLES 2013

$445 000

$475 000

9706/12/O/N/13

$495 000

[Turn over

6
14 The following departmental accounts have been prepared for a limited company for the year
ended 30 September 2013.
department X
$

department Y
$

revenue

810 000

515 000

cost of sales

470 000

265 000

gross profit

340 000

250 000

overheads

210 000

295 000

profit / (loss) for the year

130 000

(45 000)

The following errors have been found.


1

Department X overheads include $10 000 for the purchase of goods for resale of
department X.

Revenue of $40 000 has been credited to department X when it should have been
credited to department Y.

What is the corrected profit for the year for department X?


A

$80 000

$90 000

$100 000

$170 000

15 A company has the following expenses for the year.


$
directors salaries

140 000

depreciation of delivery vehicles

87 000

office salaries

90 000

loan interest

33 000

discounts allowed

12 000

What is the total of the administration overheads?


A

$242 000

$263 000

$329 000

$362 000

16 Which items appear in the manufacturing account of a business?


1
2

closing inventory of work in progress

carriage inwards

4
A

closing inventory of finished goods

carriage outwards

1 and 2

UCLES 2013

1 and 3

2 and 3

9706/12/O/N/13

2 and 4

7
17 X becomes a partner in a business receiving a 25% share in the profits. He pays in $60 000 as
his capital. The goodwill of the business is valued at $40 000.
What is the balance on Xs capital account, if goodwill is not included in the books?
A

$20 000

$50 000

$60 000

$70 000

18 A club has 190 members. The club charges an annual subscription of $240 per member.
At the start of the year, 11 members had paid their subscriptions for the current year in advance.
At the end of the year, 8 members had paid their subscriptions for the next year in advance, but 3
members had not yet paid their current year subscriptions.
Which figures are recorded in the current year?
income and
expenditure account
$

receipts and
payments account
$

44 160

45 600

45 600

44 160

45 600

41 760

41 760

45 600

19 The following financial information was provided at 31 December 2012.


$
purchases

95 000

returns inwards

3 300

returns outwards

2 100

inventory withdrawn for personal use

5 000

Inventory on 31 December 2012 was valued at $1000 more than on 1 January 2012.
What was the cost of sales?
A

$85 700

UCLES 2013

$86 900

$89 000

9706/12/O/N/13

$97 100

[Turn over

8
20 A vehicle is sold for $1500. It cost $5000 and $3000 depreciation had been provided on it.
Which entry is needed to close the disposal account?
debit

credit

disposal account

500

income statement

500

disposal account

3500

income statement

3500

income statement

500

disposal account

500

income statement

3500

disposal account

3500

21 A business is reviewing credit limits for its customers.


What would result in a customers credit limit being reduced?
A

Cash discounts are always taken by the customer.

Sales have increased to that customer.

The customer always pays their debt on time.

The customer has lost a major contract.

22 The table shows extracts from the trial balance of a business at 31 December 2012.
$
ordinary share capital

20 000

share premium

40 000

long-term loan (repayable 2022)

30 000

bank overdraft

60 000

4% non-redeemable preference share capital

50 000

7% debentures 2017

70 000

What is the total of non-current liabilities in the statement of financial position?


A

$100 000

UCLES 2013

$150 000

$160 000

9706/12/O/N/13

$210 000

9
23 The trade receivables turnover for a company was 100 days in 2011. This reduced to 90 days in
2012, with no change in the sales revenue.
Which statement explains this change?
A

Credit customers are paying earlier.

Credit customers are paying later.

Credit suppliers are being paid earlier.

Credit suppliers are being paid later.

24 A company provides the following information.


$
trade payables at start of year

38 000

trade payables at end of year

49 000

payments to credit suppliers

210 000

cost of sales

250 000

What was the trade payables turnover?


A

72 days

81 days

86 days

90 days

25 A company makes three products.


contribution
per unit $

contribution
per hour $

product 1

14

2.1

product 2

13

2.6

product 3

2.4

Total available labour hours are insufficient to make enough of each product to meet demand.
In what order should the products be produced to maximise profit?
A

1, 2, 3

UCLES 2013

1, 3, 2

2, 3, 1

9706/12/O/N/13

3, 2, 1

[Turn over

10
26 The cost of using a mobile phone is made up of a monthly rental charge and the cost of individual
phone calls.
What type of cost is this?
A

fixed

semi-variable

stepped

variable

27 A business sells its product for $10 per unit and has variable costs of $6 per unit. The table
shows the fixed costs for the year.
$
factory rent

30 000

other fixed costs

70 000

What is the break-even point?


A

10 000 units

16 667 units

17 500 units

25 000 units

28 A companys financial information is as follows.


$
selling price per unit

55

variable costs per unit

15

total fixed costs

33 000

If the selling price is reduced to $40, how many extra units need to be sold to break-even?
A

495

825

1320

2200

29 A company is asked to make a new machine for a customer. It provides the following estimates.
materials will cost $1100
labour will be 30 hours at a cost of $14 per hour
The company charges overheads at $10 per labour hour and has a mark up of 30% on total cost.
What is the price on the job cost sheet?
A

$1520

UCLES 2013

$1820

$1976

9706/12/O/N/13

$2366

11
30 Ted plans to buy a motor vehicle for $12 000 on 1 May 2014. He intends to pay half in cash at the
time of purchase and to take out a loan at 6% interest a year to finance the balance. This will be
repaid on 1 November 2014.
Which figures does Ted include in his cash budget for 2014?
May
$

November
$

6 000

6 000

6 000

6 180

12 000

12 000

180

UCLES 2013

9706/12/O/N/13

12
BLANK PAGE

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.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

UCLES 2013

9706/12/O/N/13

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Subsidiary Level and Advanced Level

9706/13

ACCOUNTING
Paper 1 Multiple Choice

October/November 2013
1 hour

Additional Materials:

*5023155209*

Multiple Choice Answer Sheet


Soft clean eraser
Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST


Write in soft pencil.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.
There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.
Read the instructions on the Answer Sheet very carefully.
Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.
Calculators may be used.

This document consists of 9 printed pages and 3 blank pages.


IB13 11_9706_13/2RP
UCLES 2013

[Turn over

2
1

A customer paid a deposit in advance for goods to be supplied at a later date.


How should this be recorded in the sellers books?
debit
A

cash

customer

cash

sales

customer

cash

D
2

credit

customer

sales

A company calculates a draft profit for the year of $98 000. This includes the profit margin of
$3000 on goods sold on credit but not yet paid for. It also includes $500 profit taken on goods
sold to a customer on a sale or return basis.
What is the correct gross profit?
A

$94 500

$95 000

$97 500

$98 000

A trader provides the following information.


$
prepaid rates at 1 October 2012

400

rent and rates paid during the year

16 200

accrued rates at 30 September 2013

600

prepaid rent at 30 September 2013

1 200

Which charge for rent and rates appears in the income statement for the year ended
30 September 2013?
A
4

$15 200

$16 000

$16 400

$17 200

A business wishes to record the following transactions in its books of account.


contra between sales ledger control account and purchases ledger control account
depreciation charge for the year
increase in provision for doubtful debts
purchase of non-current asset on credit
How many transactions require an entry in the general journal?
A

UCLES 2013

9706/13/O/N/13

3
5

At the beginning of the year a company has a provision for doubtful debts of $1000. At the end of
the year the required provision is $2500. During the year debts of $1500 are written off and $100
is received in respect of a debt written off many years ago.
What is the net amount charged to the income statement for bad and doubtful debts?
A

$1500

$2500

$2900

$3000

What would be treated as part of the capital cost of the purchase of a building?
1
2

redecoration of the building

3
A

legal costs of the purchase

installation of air conditioning needed for the machinery in the building


B

1 only

1, 2 and 3

1 and 3 only

2 and 3 only

Ryan purchased a van for $16 000 on 31 December 2010. It is his policy to apply 25% per annum
reducing balance depreciation for each part of the year the asset is held. Ryan traded the vehicle
in on 1 July 2013 for a $6150 reduction on the cost of a new vehicle.
What was the profit or loss made on the disposal of the van?
A

$600 loss

$1725 loss

$150 profit

$2150 profit

On 30 September 2012 a manufacturers current assets totalled $28 000. The next day, only two
transactions took place.
1

Inventory was bought for cash. The price of $2000 was subject to a trade discount of
20% and a cash discount of 5%. Payment was made immediately.

A bad debt of $400 was written off.

What was the total of current assets on 2 October 2012?


A
9

$27 680

$28 080

$29 520

$29 600

The table shows information from the books of a business at 30 April 2013.
details

credit sales invoiced during financial year

79 000

goods sent to customers on 28 April 2013 and invoiced 4 May 2013

6 100

goods sent to customers during April 2013 on sale or return basis but
not sold by 30 April 2013

8 300

What is the value of sales for the year ended 30 April 2013?
A

$76 800

UCLES 2013

$85 100

$87 300

9706/13/O/N/13

$93 400

[Turn over

4
10 The following information relates to a companys non-current assets at 31 December.
cost price
$

disposal value
$

motor vehicles

25 000

18 000

equipment

48 000

36 000

fixtures and fittings

12 000

5 000

The company has a serious cash shortage and will cease to trade within the next two months.
What is the total value for non-current assets in the companys statement of financial position at
31 December?
A

$26 000

$59 000

$85 000

$144 000

2 and 3 only

11 Which statements about a bank reconciliation are correct?


1
2

It can be computerised.

It locates all errors.

4
A

Cleared cheques are excluded.

Uncredited deposits are included.

1, 2 and 4

1 and 2 only

2, 3 and 4

12 A trial balance does not balance and a suspense account is opened.


On investigation, the following errors are found.
1

The debit balance of $450 on the carriage outwards account has been brought down
as $540.

The purchases returns journal has been overcast by $100.

A cheque for $50 received from Alan Green has been posted to the credit account of
Brian Green.

Rent received of $350 has been posted to the debit of rent paid account.

What is the opening balance on the suspense account?


A

credit $690

UCLES 2013

credit $740

debit $690

9706/13/O/N/13

debit $740

5
13 In reconciling the sales ledger control account with the balances in the sales ledger, it was
noticed that there was an error in the sales journal. This had been overcast by $740. In addition,
the total receipts from customers of $940 were recorded in the control account as $490.
Which correcting entry must be made?
control account

list of balances

$290 credit

increase by $290

$290 debit

no effect

$1190 credit

decrease by $1190

$1190 credit

no effect

14 Which error would give rise to a difference in a trial balance?


A

bringing forward an opening balance of $9590 instead of $9950

debiting interest paid in the cash book and crediting it to interest received account

debiting repair to motor vehicles account with $11 250 for a new motor vehicle

entering the sale of an item for $300 in the books as $3000

15 Which group of items are included in the prime cost?


A

inventories of finished goods, purchases of raw materials, direct wages

inventories of raw materials, purchases of raw materials, direct wages

inventories of raw materials, purchases of raw materials, indirect wages

inventories of work in progress, purchases of raw materials, indirect wages

16 A business provides the following information for the year.


$
prime cost

165 000

factory overheads

43 000

opening work in progress

6 000

closing work in progress

15 000

What is the cost of goods transferred to the trading account of the income statement?
A

$113 000

UCLES 2013

$199 000

$208 000

9706/13/O/N/13

$217 000

[Turn over

6
17 Which statement about goodwill is correct?
A

Internally generated goodwill should be omitted from the statement of financial position.

Purchased goodwill should be classed as a tangible non-current asset.

Purchased goodwill should be omitted from the statement of financial position.

The value of goodwill should never be included in the statement of financial position.

18 W, X, Y and Z are in partnership.


What would be shown in the partnership appropriation account?
A

drawings made by W

goods taken for the personal use of Y

interest on a loan made by Z

interest on drawings made by X

19 A trader uses the revaluation method of depreciation for loose tools.


On 1 January loose tools were valued at $4620 and on 31 December at $5740. During the year
$2010 was spent on purchasing new loose tools.
Which amount was charged to the income statement?
A

$890

$1120

$2010

$3130

20 What is the reason for providing depreciation on non-current assets?


A

to provide sufficient funds to replace the non-current assets

to show the assets at replacement cost on the statement of financial position

to show the fall in value of the assets in the income statement

to spread the cost of the assets over their estimated useful lives

21 When is a share premium account opened?


A

when shares are issued at a price above nominal value

when shares are issued at a price below nominal value

when shares are sold by a shareholder at a price above their nominal value

when shares are sold by a shareholder at a price below their nominal value

UCLES 2013

9706/13/O/N/13

7
22 On 1 May, a trader lost all of his inventory in a fire. He has figures for sales and purchases and
wishes to calculate the value of the inventory lost.
Which ratio should he use?
A

gross profit percentage

net profit percentage

trade payables turnover

trade receivables turnover

23 The following information is available about two similar businesses.


X

$30 000

$35 000

gross profit percentage

60%

62%

net profit percentage

30%

8%

sales

Which business is better at controlling its costs?


cost of sales

expenses

24 A business has a non-current asset turnover of two times, based on non-current assets valued at
$250 000 at the end of 2011. The company uses the reducing balance method to depreciate its
non-current assets at 25% per annum.
In 2012 sales revenue increased by 20%. There were no purchases or disposals of non-current
assets during the year.
What is the non-current asset turnover for 2012?
A

2.13 times

2.40 times

2.67 times

3.20 times

25 Which cost will fall as production is reduced?


A

fixed costs per unit

total fixed costs

total variable costs

variable costs per unit

UCLES 2013

9706/13/O/N/13

[Turn over

8
26 A company makes and sells one product incurring the following costs.
12 kilos of material at $3 per kilo
4.5 labour hours at $12 per hour
production overheads $6 per unit
selling overheads $5 per unit
What is the total direct cost per unit?
A

$36

$42

$90

$101

27 A company receives an order for 10 000 units.


The following information is available.
units produced per machine hour

500

labour costs per machine hour

$25

raw material cost per unit

$2

overheads recovered per machine hour

$40

What is the cost of production?


A

$11 300

$21 300

$33 500

$52 500

28 The costs of a company that annually sells 10 000 units are as follows.
$
direct material

50 000

assembly labour
factory overheads

100 000
70 000

The normal selling price of each unit is $50.


If it was reduced to $35, how many more units need to be sold to break-even?
A

1500 units

UCLES 2013

2000 units

3500 units

9706/13/O/N/13

5000 units

9
29 A company manufactures four products.
Gamma

Rho

Theta

Zeta

contribution per unit ($)

10

12

14

16

material required (litres)

If there is only enough material to make three of the products, which product should be
discontinued?
A

Gamma

Rho

Theta

Zeta

30 Sales for January 2014 are expected to be $10 000 and these are expected to increase by $2000
each month. 10% of sales will be cash sales. Credit customers are expected to pay after one
month.
Which amount will be shown in the cash budget for receipts from customers in March 2014?
A

$12 000

UCLES 2013

$12 200

$13 800

9706/13/O/N/13

$14 000

10
BLANK PAGE

UCLES 2013

9706/13/O/N/13

11
BLANK PAGE

UCLES 2013

9706/13/O/N/13

12
BLANK PAGE

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.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

UCLES 2013

9706/13/O/N/13

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Subsidiary Level and Advanced Level

*6483509957*

9706/21

ACCOUNTING
Paper 2 Structured Questions

October/November 2013
1 hour 30 minutes

Candidates answer on the Question Paper.


No Additional Materials are required.
READ THESE INSTRUCTIONS FIRST
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
Answer all questions.
All accounting statements are to be presented in good style.
International accounting terms and formats should be used as appropriate.
Workings must be shown.
You may use a calculator.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.

This document consists of 11 printed pages and 1 blank page.


IB13 11_9706_21/4RP
UCLES 2013

[Turn over

2
1

Booksellers Limited prepared the following trial balance for the year ended
31 December 2012:
$000
Gross profit for the year
Wages and salaries
Rent
Heating and lighting
Motor expenses
Office expenses
Insurance
Discount allowed
Other expenses
Inventory at 31 December 2012
Trade receivables
Provision for doubtful receivables
Bank
Trade payables
Goodwill
Motor vehicles at cost
Shop fittings at cost
Office fittings at cost
Provision for depreciation on motor vehicles
Provision for depreciation on shop fittings
Provision for depreciation on office fittings
5% Debentures
Ordinary share capital
Retained earnings

$000
415

127
44
15
50
19
15
2
53
37
45
4
37
15
44
176
42
25

731

46
12
3
20
190
26
731

Additional information:
1
2
3
4
5
6
7

Wages owing amounted to $23 000 at 31 December 2012.


Debenture interest for the year had not been paid.
Bad debts of $5000 were to be written off.
The provision for doubtful receivables was to be 5% of trade receivables.
Depreciation was provided on motor vehicles at 12% on cost and on shop fittings at
10% on net book value.
Office fittings had been revalued at $19 000.
Rent paid in advance was $8000.

UCLES 2013

9706/21/O/N/13

3
REQUIRED

For
Examiner's
Use

(a) (i) Prepare an income statement for the year ended 31 December 2012.

[12]

UCLES 2013

9706/21/O/N/13

[Turn over

4
(ii) Calculate the retained earnings of Booksellers Limited at 31 December 2012.
For
Examiner's
Use

[2]

(b) Prepare, in as much detail as possible, a statement of financial position at


31 December 2012.

UCLES 2013

9706/21/O/N/13

5
For
Examiner's
Use

[8]

(c) (i) The directors wish to raise funds to expand the business. State two sources of
finance they could use.

[2]
(ii) State the advantages and disadvantages to the company of the two sources of
finance you have chosen.

[6]
[Total: 30]

UCLES 2013

9706/21/O/N/13

[Turn over

6
2

(a) Complete the following table stating the formula used to calculate the ratio, what the
ratio measures and reasons why it may change.
Ratio

Formula

What the ratio


measures

Why the ratio may


change

Gross profit ratio

Inventory turnover

Quick (acid test)


ratio

Return on capital
employed

Trade receivables
turnover

[20]

UCLES 2013

9706/21/O/N/13

For
Examiner's
Use

7
(b) State and explain five limitations of using ratio analysis as an indicator of business
performance.

For
Examiner's
Use

[10]
[Total: 30]

UCLES 2013

9706/21/O/N/13

[Turn over

8
3

Shostakovich Limited is a wholesale business selling three products: Preludes, Fugues and
Sonatas.
At present they use the FIFO method of inventory valuation but are considering a change.
At 31 March 2013, Shostakovich Limited provisionally calculated its profit for the year at
$86 300 using closing inventory valued at $10 200 under the FIFO method.
The following information is also available at 31 March 2013:
1

Different methods of inventory valuation for the three


closing inventory values:
FIFO
$
Preludes
4600
Fugues
3900
Sonatas
1700

products provide the following


AVCO
$
4300
3750
1500

Owing to a flood during the financial year it has been found that the total inventory of
Sonatas has been damaged. It is estimated that the inventory could be sold by
Shostakovich Limited at a selling price of $1200. This adjustment has not been
accounted for in the inventory calculated above.

REQUIRED
(a) (i) Calculate the revised inventory valuation at 31 March 2013 using FIFO and AVCO.

[4]

UCLES 2013

9706/21/O/N/13

For
Examiner's
Use

9
(ii) Calculate the revised profit for the year at 31 March 2013 using FIFO and AVCO.

For
Examiner's
Use

[6]

(b) Explain three reasons why a business cannot normally use the latest selling price of its
products to value the inventory.
1

[6]

UCLES 2013

9706/21/O/N/13

[Turn over

10
(c) Advise Shostakovich Limited on why the distinction between capital and revenue
expenditure is important when preparing financial statements.

[6]

Shostakovich Limiteds statement of financial position at 31 March 2013 showed the


following:
Property
Accumulated depreciation

$
200 000
14 000

The value of the property is split equally between land and buildings. They had been owned
for 7 years. On 1 April 2013 its property was revalued at $315 000.
REQUIRED
(d) (i) Prepare the journal entry to record this revaluation. A narrative is not required.

[3]

(ii) Name the section in Shostakovich Limiteds financial statements where the surplus
will appear.
[1]

UCLES 2013

9706/21/O/N/13

For
Examiner's
Use

11
(iii) Shostakovich Limited will continue to use the same rate of straight line
depreciation for its buildings. Calculate the depreciation charge for the year on
buildings after the revaluation.

[4]
[Total: 30]

UCLES 2013

9706/21/O/N/13

For
Examiner's
Use

12
BLANK PAGE

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.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

UCLES 2013

9706/21/O/N/13

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Subsidiary Level and Advanced Level

*0271924287*

9706/22

ACCOUNTING
Paper 2 Structured Questions

October/November 2013
1 hour 30 minutes

Candidates answer on the Question Paper.


No Additional Materials are required.
READ THESE INSTRUCTIONS FIRST
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
Answer all questions.
All accounting statements are to be presented in good style.
International accounting terms and formats should be used as appropriate.
Workings must be shown.
You may use a calculator.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.

This document consists of 10 printed pages and 2 blank pages.


IB13 11_9706_22/4RP
UCLES 2013

[Turn over

2
1

Joe Brown has a petrol station which has three departments, fuel, car wash and caf. The
following information is available for the year ended 31 December 2012.

Revenue
Inventory at 1 January 2012
Purchases
Inventory at 31 December 2012
Direct wages
Non-current assets at cost
Accumulated depreciation

Fuel
$
735 600
38 700
454 320
39 760
36 000
120 000
6 000

Car wash
$
30 650
3 650
7 240
2 480
3 000
15 000
1 200

Cafe
$
61 300
4 725
9 620
4 820
12 000
2 760
850

Additional information
Depreciation rate
Depreciation method
Floor area (square metres)

10%
Straight line
3 400

15%
Reducing balance
850

Other expenses for the year are:


$
Rent of premises
46 288
Electricity
18 300
Administration charges
17 119
Other expenses
54 023
The expenses are split between the departments on the following basis:
Rent of premises in the ratio of floor area,
Electricity in the ratio 4:1:1 between fuel, car wash and caf,
Administration charges in the ratio of wages,
Other expenses in the ratio of sales.

UCLES 2013

9706/22/O/N/13

15%
Straight line
425

3
REQUIRED

For
Examiner's
Use

(a) Prepare a departmental income statement for the year ended 31 December 2012.

[18]

UCLES 2013

9706/22/O/N/13

[Turn over

4
(b) Joe is considering closing the car wash department due to its poor profitability. Advise
Joe on the long term effects of this decision.

[6]

(c) Joe is looking for funds to improve the business. He is considering applying for either a
bank loan or an overdraft. Explain three differences between a bank loan and an
overdraft.

[6]
[Total: 30]
UCLES 2013

9706/22/O/N/13

For
Examiner's
Use

5
2

Alec and Jean were in partnership with capitals of $90 000 and $60 000 respectively.
On 1 June 2012 Alec had a debit balance on his current account of $2900 and Jean had a
credit balance on her current account of $3100.

For
Examiner's
Use

On 31 May 2013 Alec had a credit balance on his current account of $3000 and Jean had a
credit balance on her current account of $340.
The partnership agreement stated:
1

Interest on capital is payable at 5% per annum.

Interest on drawings is charged at 8% per annum.

Annual partnership salaries were Alec $14 000 and Jean $12 000.

Profits and losses are to be shared in the ratio of capital invested.

Alec withdrew $20 000 and Jean $22 000 during the year.
REQUIRED
(a) Prepare the current account of each partner for the year ended 31 May 2013.

[10]
UCLES 2013

9706/22/O/N/13

[Turn over

6
(b) Calculate the profit for the year ended 31 May 2013 before appropriation.
For
Examiner's
Use

[6]
(c) Explain the term goodwill.

[4]

UCLES 2013

9706/22/O/N/13

7
On 1 June 2013 Alec and Jean agreed to admit Chris as a new partner. It was agreed that
Chris would pay cash into the business for goodwill.

For
Examiner's
Use

Goodwill was valued at $36 000.


In addition Chris also introduced a motor vehicle valued at $12 150 and inventory of $5850.
The partners agreed that profits and losses are to be shared between Alec, Jean and Chris
in the ratio of 3:2:1. No goodwill account is to be maintained on the books.
REQUIRED
(d) Prepare the capital accounts of Alec, Jean and Chris after Chriss admission to the
partnership.

[10]
[Total: 30]

UCLES 2013

9706/22/O/N/13

[Turn over

8
3

Kirkton manufactures a single product, the Kirk. The following information relates to one unit
of Kirk:
Per unit
Selling price
Variable production costs
Fixed production costs
Variable selling costs
Fixed selling costs

$
35.00
13.50
3.50
1.50
1.00

Kirkton produces and sells 800 Kirks a week.


REQUIRED
(a) (i) Calculate the weekly breakeven point in units.

[3]

(ii) Calculate the weekly breakeven point in revenue.

[2]

(iii) Calculate the margin of safety in revenue.

[3]

(iv) Calculate the margin of safety as a percentage.

[2]

UCLES 2013

9706/22/O/N/13

For
Examiner's
Use

9
Additional information:
Kirkton has four different machines that are used in the production of the Kirk. One of the
machines has broken down, causing production to stop completely. The company will be
without the machine for a period of four weeks and the owners have two alternatives.
1
2

For
Examiner's
Use

Lease a machine at a cost of $2000 per week. Staff will need to be trained on the
new machine. This will cost $3000. Production will reduce from the current level of
800 units each week to 500 units each week.
Buy in the Kirks from a competitor. Each Kirk will cost $26.25. The competitor is able
to supply 800 units each week and will charge Kirkton $50.00 delivery for each 100
units.

REQUIRED
(b) Calculate the profit for the four weeks if Kirkton decide to lease a machine.

[9]

UCLES 2013

9706/22/O/N/13

[Turn over

10
(c) Calculate the profit for the four weeks if Kirkton decide to buy the Kirks from the
competitor.

[7]

(d) State two advantages if Kirkton decides to buy the Kirks from the competitor rather than
lease the machine.

[2]

(e) State two disadvantages if Kirkton decides to buy the Kirks from the competitor rather
than lease the machine.

[2]
[Total: 30]

UCLES 2013

9706/22/O/N/13

For
Examiner's
Use

11
BLANK PAGE

UCLES 2013

9706/22/O/N/13

12
BLANK PAGE

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.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

UCLES 2013

9706/22/O/N/13

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education
Advanced Subsidiary Level and Advanced Level

*9854853085*

9706/23

ACCOUNTING

October/November 2013

Paper 2 Structured Questions

1 hour 30 minutes
Candidates answer on the Question Paper.
No Additional Materials are required.
READ THESE INSTRUCTIONS FIRST
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
Answer all questions.
All accounting statements are to be presented in good style.
International accounting terms and formats should be used as appropriate.
Workings must be shown.
You may use a calculator.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.

This document consists of 12 printed pages.


IB13 11_9706_23/5RP
UCLES 2013

[Turn over

2
1

The Cardio Health Club operates a fitness centre and a shop and has the following assets
and liabilities.
1 June 2012
$
Premises
Sports equipment (at cost)
Sports equipment depreciation provision
Shop inventory
Cash
Bank (current account)
Bank (deposit account)
Subscriptions outstanding
Subscriptions paid in advance
Shop staff wages accrued
Insurance paid in advance
Loan from sports association

100 000
30 000
5 000
8 500
250
10 000
2 000
4 200
4 000
1 000

31 May 2013
$
100 000
115 000
14 400
4 800
250
?
?
5 600
3 500
3 000
1 000
40 000

The receipts and payments in the bank current account for the year ended 31 May 2013
were:
Receipts
Shop revenue
Subscriptions
Loan from sports association
Donations
Payments
Wages of fitness coaches
Sports equipment
Printing and stationery
Transfer to deposit account
Sundry expenses
Insurance
Heating and lighting
Wages of shop staff
Shop purchases for resale

$
120 000
44 000
40 000
450
$
16 000
85 000
5 500
300
800
12 000
20 000
27 000
32 500

Additional information
1
2
3
4
5

The wages of shop staff are treated as a direct cost.


Insurance and heating and lighting are apportioned 80:20 between the fitness club and
the shop.
The loan from the sports association was received on 1 December 2012. Interest is
payable at 6% per year.
Donations are treated as revenue.
During the year interest amounting to $90 had been credited to the bank deposit
account.

UCLES 2013

9706/23/O/N/13

3
REQUIRED

For
Examiner's
Use

(a) Prepare the shop income statement for the year ended 31 May 2013.

[8]

UCLES 2013

9706/23/O/N/13

[Turn over

4
(b) Prepare the income and expenditure account of the Cardio Health Club for year ended
31 May 2013.

[14]

UCLES 2013

9706/23/O/N/13

For
Examiner's
Use

5
(c) Prepare the statement of financial position of the Cardio Health Club at 31 May 2013.

For
Examiner's
Use

[8]
[Total: 30]

UCLES 2013

9706/23/O/N/13

[Turn over

6
2

Luing Limiteds financial information for the year ended 31 December 2012 revealed the
following:
Gross profit ratio
Net profit ratio
Rate of inventory turnover
Trade payables turnover
Trade receivables turnover
Current ratio
Inventory at 1 January 2012
Total revenue (all on credit) for 2012

35%
14%
10 times
42 days
58 days
3:1
$7 800 000
$85 000 000

All purchases were on credit.


REQUIRED
(a) For the year ended 31 December 2012, calculate
(i) Gross profit

[2]

(ii) Cost of sales

[2]

(iii) Closing inventory

[4]

(iv) Ordinary goods purchased

[3]

UCLES 2013

9706/23/O/N/13

For
Examiner's
Use

7
(v) Profit for the year

For
Examiner's
Use

[2]

(vi) Expenses

[2]

(vii) Trade payables

[3]

(viii) Trade receivables

[3]

UCLES 2013

9706/23/O/N/13

[Turn over

8
(b) Identify three possible users of accounting ratios other than the directors of the
company. State what information the users would obtain from the ratios.
1

[9]
[Total: 30]

UCLES 2013

9706/23/O/N/13

For
Examiner's
Use

9
3

Argon is a manufacturing business divided into three separate departments, machining,


finishing and stores.

For
Examiner's
Use

The total estimated costs for the three months ending 31 October 2013 are as follows:
Depreciation of plant
Lighting and heating
Plant insurance
Rent
Supervision

$
6 000
4 500
4 800
18 000
25 000

The following information is available for the three departments:


Floor area (sq metres)
Number of employees
Value of plant ($000s)
Number of orders from Stores
Budgeted machine hours
Budgeted direct labour hours

Machining
5000
12
86
3600
4250
1200

Finishing
4500
8
8
1480
820
4950

Stores
500
5
2
-

REQUIRED
(a) (i) Apportion the costs to the three departments using the most suitable basis. Clearly
state the basis you have used.

[5]

UCLES 2013

9706/23/O/N/13

[Turn over

10
(ii) Re-apportion stores costs to each production department on the basis of the
number of orders.

[5]

(b) Calculate to two decimal places the forecast overhead absorption rate for the
machining and finishing departments for the three months ending 31 October 2013.

[6]

UCLES 2013

9706/23/O/N/13

For
Examiner's
Use

11
Actual figures for the three months ended 31 October 2013 are:
Direct labour hours
Machine hours
Overheads incurred

Machining
1 430
6 000
$48 340

For
Examiner's
Use

Finishing
5 000
805
$22 780

REQUIRED
(c) Calculate the amount of overhead absorbed for each production department for the
three months ended 31 October 2013.

[6]

(d) Calculate the amount of under or over absorption for each production department.

[4]

UCLES 2013

9706/23/O/N/13

[Turn over

12
(e) Explain what is meant by over and under absorption of overheads and how each will
arise.

For
Examiner's
Use

[4]
[Total: 30]

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.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

UCLES 2013

9706/23/O/N/13

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education Advanced Level

9706/31

ACCOUNTING
Paper 3 Multiple Choice

October/November 2013
1 hour

Additional Materials:

*3428434152*

Multiple Choice Answer Sheet


Soft clean eraser
Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST


Write in soft pencil.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.
There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.
Read the instructions on the Answer Sheet very carefully.
Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.
Calculators may be used.

This document consists of 12 printed pages.


IB13 11_9706_31/4RP
UCLES 2013

[Turn over

2
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

$2400

$3000

inventory of finished goods at cost plus 20%

How much should be deducted from the closing inventory of finished goods for unrealised profit?
A
2

$100

$400

$600

Which item would be included in a companys income statement?


A

depreciation

goodwill

provision for doubtful debts

D
3

$500

trade receivables

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

UCLES 2013

$60 200

$77 500

9706/31/O/N/13

$82 200

3
4

What type of capital must all limited companies have?


A
B

debentures

ordinary shares

D
5

convertible loan stock

preference shares

The following information is included in a companys 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.

The preference shares were redeemed at a premium of 5%.

What was the bank balance after the transactions took place?
A
6

$23 000

$48 000

$50 000

$63 000

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


1

The shares must have been issued as redeemable.

After the purchase, the company must have other shares in issue.

After the purchase, the company must have at least one shareholder.

The purchase cannot be financed by a new issue of shares.

Which statements are correct?


A

1 and 2

UCLES 2013

1 and 4

2 and 3

9706/31/O/N/13

3 and 4

[Turn over

4
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
B

a share premium account

negative purchased goodwill

D
8

a revaluation reserve

positive purchased goodwill

X and Y agree to merge their businesses and show the following balances on their books.
X
$

Y
$

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

non-current assets

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

pays in $7000

withdraws $6000

withdraws $2000

pays in $12 000

withdraws $7000

pays in $6000

withdraws $13 000

withdraws $4000

UCLES 2013

9706/31/O/N/13

5
9

A companys 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

$235 million

$237 million

$247 million

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


1
2

interest paid on debentures

issues of share capital

4
A

dividends proposed

transfers to reserves

1 and 2

1 and 4

2 and 3

3 and 4

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

UCLES 2013

$185 000

$213 000

9706/31/O/N/13

$223 000

[Turn over

6
12 What is the correct treatment of non-purchased goodwill?
A

Do not recognise it as an asset.

Include it in the statement of financial position as an asset at valuation.

Include it in the statement of financial position as an asset, to be amortised.

Write it off through impairment provision.

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 companys 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

15.9

16.6

18.0

14 The following information relates to a company.


per share
$
dividends paid during the year

dividends proposed at the year end

market price

50

nominal price

100

What is the companys dividend yield?


A

3.0%

UCLES 2013

4.0%

6.0%

9706/31/O/N/13

8.0%

7
15 Which transaction will increase a companys working capital?
A

The bank overdraft is increased.

There is a bonus share issue.

There is a rights issue.

There is a transfer to the general reserves.

16 Which action will increase company profits in the short term?


A

accepting deposits for customers orders

decreasing rates of depreciation

increasing the value of opening inventory

writing down the value of closing inventory

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

400 fully completed items of inventory at the end of the year

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

UCLES 2013

$20

$22.50

9706/31/O/N/13

$32.50

[Turn over

8
18 A company issues a debenture.
Which row shows the impact of this on the companys financial statements?
gearing

return on capital
employed

working capital

decrease

decrease

no effect

increase

decrease

increase

increase

no effect

increase

no effect

decrease

decrease

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

120 000

240 000

806 667

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

profit

At what minimum price should an order for 200 additional units be accepted in order to break
even?
A

$19

UCLES 2013

$23

$24

9706/31/O/N/13

$26

9
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

fixed overheads of $2000 per month on an office building that will be sold immediately if the
company opens the new division

running costs of $5000 per month for equipment in the new division

the salary of $30 000 per annum for a manager appointed to run the new division

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

$2880

$10 080

$10 880

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


1

co-ordinating of the businesses activities

encouraging communications between departments

ensuring wage rises do not occur

setting standard costs for the period

1, 2 and 3 only

1, 2 and 4 only

1, 3 and 4 only

1, 2, 3 and 4

UCLES 2013

9706/31/O/N/13

[Turn over

10
24 A unit of a product uses 3 kilos of raw material. The years production budget is shown:
12 000 units

budgeted sales
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

36 000 kilos

38 000 kilos

39 000 kilos

25 Which statement about budgeting is correct?


A

A budget should always be produced based on last years actual results.

Evaluation of performance should take actual operating conditions into account.

The budget should always be set at an ideal level of performance.

The budget should not be changed once agreed.

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.

The company purchased cheaper material and the workforce has been awarded a pay
increase.

The company purchased cheaper material and the workforce has taken more time.

Workers are more highly skilled than expected and have used less material.

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

UCLES 2013

2000 hours

3000 hours

9706/31/O/N/13

5000 hours

11
28 A company produces a single product and details of the production and budget are as follows.
10 000 units

actual output
standard material cost 2 kilos $4
actual usage of material
total material variance

$80 000
18 000 kilos
$6200 favourable

What are the direct material price and direct material usage variances?
material price
variance

material usage
variance

$1800 adverse

$8000 favourable

$1800 favourable

$8000 favourable

$8000 adverse

$1800 favourable

$8000 favourable

$1800 adverse

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.

The internal rate of return for an acceptable project is always zero.

Use of the payback method always considers the time value of money.

Use of the payback method can lead to projects with negative net present values being
selected.

UCLES 2013

9706/31/O/N/13

[Turn over

12
30 The following information relates to a capital investment, costing $900 000.

year

cash flow
$

discounted cash
flow at 6%
$

discounted cash
flow at 8%
$

(900)

(900)

(900)

400

377

370

600

534

514

100

11

(16)

The company has a cost of capital of 8%.


Which statements about the project are correct?
1
2

The project has an internal rate of return less than the cost of capital.

An increase in the cost of capital will make the project viable.

4
A

The project has an internal rate of return greater than the cost of the capital.

A decrease in the cost of capital will make the project viable.

1 and 3

1 and 4

2 and 3

2 and 4

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.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

UCLES 2013

9706/31/O/N/13

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education Advanced Level

9706/32

ACCOUNTING
Paper 3 Multiple Choice

October/November 2013
1 hour

Additional Materials:

*8995523676*

Multiple Choice Answer Sheet


Soft clean eraser
Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST


Write in soft pencil.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.
There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.
Read the instructions on the Answer Sheet very carefully.
Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.
Calculators may be used.

This document consists of 10 printed pages and 2 blank pages.


IB13 11_9706_32/2RP
UCLES 2013

[Turn over

2
1

What will not appear in a statement of cash flows?


A
B

interest payable

issue of bonus shares

D
2

changes in inventory levels

purchase of plant and machinery

A market trader has not kept any books of account.


Which formula should be used to establish his profit or loss for the year?
A
B

net assets at end of year net assets at start of year + new capital drawings

net assets at start of year net assets at end of year new capital + drawings

D
3

net assets at end of year net assets at start of year new capital + drawings

net assets at start of year net assets at end of year + new capital drawings

A company transfers manufactured items from factory to warehouse at cost plus 10%. This year
the transfer value was $93 500 and at the end of the year the closing inventory was 20% of the
years production.
How will the inventory of finished goods be shown?
trading account
$
A

17 000

17 000

18 700

16 830

18 700

17 000

D
4

statement of
financial position
$

18 700

18 700

Which list contains only items that appear in the equity section of the statement of financial
position?
A

share capital, retained earnings and long-term loans

share capital, share premium and long-term loans

share premium, retained earnings and debentures

share premium, share capital and retained earnings

UCLES 2013

9706/32/O/N/13

3
5

A companys statement of financial position shows the following.


$000
$1 ordinary shares

500

retained earnings

400

10% debentures

300
1 200

net assets

1 200

A fully subscribed 1 for 4 rights issue at $2 per share is made and 50% of the debentures are
repaid at par.
What are the net assets following these changes?
A
6

$1 100 000

$1 175 000

$1 225 000

$1 300 000

When must a capital redemption reserve be set up?


A
B

ordinary shares are redeemed without a new issue of shares

preference shares are issued at a premium

D
7

ordinary shares are issued at a premium

preference shares are redeemed from the proceeds of a new issue of shares

A company purchases the business of a sole trader for $5 000 000.


The value of the assets and liabilities are shown.
assets
$

liabilities
$

at book value

5 000 000

3 000 000

at fair value

5 300 000

3 100 000

How much did the company pay for goodwill?


A
8

$2 700 000

$2 800 000

$3 000 000

$3 100 000

What is included in the directors report?


A

directors salaries

principal activities of the company

trade receivables

turnover

UCLES 2013

9706/32/O/N/13

[Turn over

4
9

A company is carrying out an impairment review of its plant and machinery. The following
information is revealed.
1

Original cost of plant and machinery $50 000. Accumulated depreciation $15 000.

Undiscounted value of future cash flows from using the machinery $60 000. Present
value of future cash flows from using the machinery $40 000.

Sales proceeds from disposing of the plant and machinery $48 000. Cost of
disposing of the plant and machinery $10 000.

At what value should the plant and machinery be shown in the statement of financial position?
A

$35 000

$38 000

$40 000

$50 000

10 A companys directors have been advised that there is a 40% chance that they will lose a legal
case over the sale of faulty goods to a customer.
How should the directors treat this in the financial statements?
A

Ignore it by not including a contingency or explaining it with a note to the financial


statements.

Include an amount as a contingency in the accounts but do not include a note to the financial
statements.

Include an amount in the accounts as a contingency and explain this by a note to the
financial statements.

Include a note to the financial statements, but not include an amount as a contingency.

11 An ordinary share in a company has a nominal value of $0.50. The latest financial statements
show earnings per share of $0.10 and a price-earnings ratio of 15.
What is the market value of an ordinary share?
A

$0.50

$1.50

$2.00

$2.50

12 The directors of a company want to reduce the companys gearing ratio. They can take the
following actions.
1

make a rights issue of ordinary shares

make a bonus issue of five new shares for every six currently held

transfer $90 000 to the general reserve

repay a debenture of $600 000

Which combination of measures will reduce the companys gearing ratio?


A

1, 2 and 3

UCLES 2013

1 and 2 only

1, 3 and 4

9706/32/O/N/13

1 and 4 only

5
13 A business experienced the following events during the year.
1

an increased level of bad debts written off

an increase in the bank overdraft

an increase in inventory levels

trade payables were paid more quickly

Which combination of events would cause cash flow from operating activities to fall?
A

1, 2, 3 and 4

1, 3 and 4 only

2, 3 and 4 only

3 and 4 only

14 A company makes a rights issue of 10 000 ordinary shares of $1 each at a premium of $0.50. The
issue is fully subscribed.
What is the effect of this transaction on the following ratios?
gearing

return on
capital employed

decrease

decrease

decrease

increase

increase

decrease

increase

increase

15 Which transaction will cause an increase in shareholders capital?


A

disposal of a non-current asset for more than its book value

increase the provision for doubtful debts

receipt of a loan

receipt of payment from a trade receivable in cash

UCLES 2013

9706/32/O/N/13

[Turn over

6
16 The net assets of X Limited are shown below.
$ million
net assets at original cost

100

net book value

50

fair value

70

Y Limited pays $100 million cash plus $20 million in shares for all the net assets.
Y Limited applies a ten year economic life to goodwill.
What will the annual goodwill amortisation charge be?
A

$2 million

$3 million

$5 million

$7 million

17 How is inventory valued under IAS2?


A

purchase cost

purchase cost + carriage in

purchase cost + carriage in + conversion costs

purchase cost + carriage in + conversion costs + storage costs

18 A company installing a new machine has the following costs.


$
purchase price

200 000

delivery charges

5 000

preparing the site

35 000

training the workers

4 500

assembly and testing

8 000

advertising the new product

10 000

What is the total cost of the asset under IAS16?


A

$240 000

UCLES 2013

$248 000

$252 500

9706/32/O/N/13

$262 500

7
19 A company produces a product using a single process. In a period it put 600 kilos of material into
a process at a cost of $2.50 per kilo, and conversion costs were $348.
The normal loss is 20% with no scrap value. The output was 470 kilos. There was no opening
and no closing work-in-progress.
What is the price per kilo of the normal output?
A

$3.08

$3.23

$3.85

$3.93

20 The following information relates to the sales and production of a product.


$
selling price per unit

direct material and direct labour per unit

production overheads at 10 000 units

40 000

production overheads at 15 000 units

55 000

other factory fixed costs

8 000

What is the break even point in units?


A

3600

4000

9000

11 500

21 A cost centre uses an overhead absorption rate of $5 per direct labour hour based on a budgeted
level of 6000 direct labour hours per month.
Last month, actual direct labour hours worked were 3% more than budget and the actual
overhead incurred was $32 000.
What was the total over or under absorption of overheads for the month?
A

$1100 over absorbed

$1100 under absorbed

$2000 over absorbed

$2000 under absorbed

UCLES 2013

9706/32/O/N/13

[Turn over

8
22 The following information is provided by a business.
budgeted output for the month

1000 units

actual output for the month

1150 units

direct material cost per unit

$15

total actual direct material costs for the month

$18 400

What was the total direct material variance for the month?
A

$1150 adverse

$1150 favourable

$3400 adverse

$3400 favourable

23 A company has forecast the following sales for the first three months of next year.
month

units

2000

2100

2400

At the start of month 1 there were 300 units of inventory. The company requires that the closing
inventory at the end of each month should be equal to one third of the sales for the following
month.
How many units must be produced in month 2?
A

2000 units

2200 units

2400 units

2900 units

24 What is a flexed budget?


A

a budget based on expected level of production

a budget based on past performance but updated to take account of present conditions

a budget that reflects changes in activity levels

a budget that links fixed overheads to production

25 The production of an item in March has a budgeted total cost of $43 200 for 2400 units.
The fixed costs make up 24% of the total cost and the balance is variable.
What is the expected expenditure for March if actual production is 2200 units?
A

$30 096

UCLES 2013

$39 600

$40 464

9706/32/O/N/13

$43 200

9
26 The following material costs relate to the manufacture of 100 units of a product.
kilos

cost per kilo


$

total cost
$

standard

1500

5.50

actual

1650

9570

What is the material price variance?


A

$495 adverse

$495 favourable

$1320 adverse

$1320 favourable

27 A company uses standard costing. During an operating period there has been an adverse
materials usage variance of $15 000.
What is a valid reason for the variance?
A

Material was purchased from an alternative supplier who charged higher prices.

Several new, untrained, employees started during the period leading to wastage of material.

The company installed more efficient manufacturing machinery.

The company over-estimated the quantity of material to be used.

28 What will give an adverse labour rate variance?


A

Actual production was more than budget.

Fewer labour hours were worked than budget.

Wage rates were higher than budget.

Wage rates were lower than budget.

UCLES 2013

9706/32/O/N/13

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10
29 A company is considering an investment costing $20 000.
The budgeted costs and revenues of the investment are as follows.
year 1
$

year 2
$

year 3
$

sales income

17 000

20 000

22 000

variable costs

7 000

9 000

12 000

Fixed costs are $3000 per year.


What is the payback for the project?
A

1 year 55 days

1 year 332 days

2 years 122 days

2 years 261 days

30 A business changes its depreciation policy.


Which investment appraisal measure will this change affect?
A

accounting rate of return

discounted payback

internal rate of return

payback

UCLES 2013

9706/32/O/N/13

11
BLANK PAGE

UCLES 2013

9706/32/O/N/13

12
BLANK PAGE

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.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

UCLES 2013

9706/32/O/N/13

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education Advanced Level

9706/33

ACCOUNTING
Paper 3 Multiple Choice

October/November 2013
1 hour

Additional Materials:

*9295143993*

Multiple Choice Answer Sheet


Soft clean eraser
Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST


Write in soft pencil.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.
There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.
Read the instructions on the Answer Sheet very carefully.
Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.
Calculators may be used.

This document consists of 13 printed pages and 3 blank pages.


IB13 11_9706_33/3RP
UCLES 2013

[Turn over

2
1

A trade receivables balance of $720 has been set-off against the purchase ledger. It has been
entered on the wrong side of the purchase ledger control account.
The purchase ledger control account had a closing balance of $92 460 before correcting the error.
What is the correct balance on the purchase ledger control account?
A

$91 020

$91 740

$93 180

$93 900

A company manufactures tractors. Each tractor is sold for $12 000, inclusive of a 50% mark-up on
cost.
At the year end, costs relevant to the companys inventory were:
$
components, at cost

15 000

storage costs

5 000

ten tractors

120 000

Which valuation for inventory should be included in the companys statement of financial
position?
A
3

$95 000

$100 000

$135 000

$140 000

A manufacturing companys income statement shows a profit from operations of $9000. The
following errors are then discovered.
1

Opening inventory of finished goods has been valued at transfer price of $12 000.

Closing inventory of finished goods has been valued at transfer price of $6000.

Goods at transfer price have been entered in the income statement at their transfer
value of $120 000. No adjustment has been made in respect of factory profit.

The company transfers goods from the factory to finished goods at cost plus 20%.

What is the correct profit from operations?


A

$28 000

UCLES 2013

$29 000

$30 000

9706/33/O/N/13

$31 000

3
4

The financial statements of a public limited company includes the following information.
$000
retained earnings at the start of the year

43

profit from operations

14

ordinary dividends paid during the year

dividends on redeemable preference shares paid during the year

proposed final dividend on ordinary shares

What is the figure for retained earnings at the end of the year?
A
5

$42 000

$50 000

$57 000

How can a company increase its liquidity?


A

by making a bonus issue

by making a rights issue

by transfers from the general reserve

D
6

$52 000

by transfers from the share premium account

The statement of financial position of a company is as follows.


$
non-current assets

85 000

bank

14 000

other net current assets

24 000

8% debentures

(4 000)
119 000

ordinary share capital

100 000

share premium

2 000

retained earnings

17 000
119 000

The 8% debentures are redeemed at a premium of 20%.


What is the total equity balance after the redemption?
A

$114 200

UCLES 2013

$115 000

$118 200

9706/33/O/N/13

$119 000

[Turn over

4
7

$100 000 is available for investment.


The table shows details of three businesses available for purchase.

business

purchase price
$

estimated
future profits
$

50 000

8 500

70 000

10 500

90 000

12 600

Funds not used in the purchase of a business are invested at an interest rate of 13% per annum.
Which course of action will give the highest annual return?
A
B

purchasing business 1

purchasing business 2

D
8

investing $100 000

purchasing business 3

A company purchases the non-current assets, inventory and trade receivables of another
business. It pays more than the book value for these items. The purchase price is paid partly by a
debenture. The balance is paid by the issue of ordinary shares of $1 each at a premium of $0.20.
Which row shows the effect of these transactions in the financial statements of the purchaser?
non-current assets

working capital

equity

decrease

decrease

decrease

increase

decrease

increase

increase

increase

increase

increase

no effect

decrease

UCLES 2013

9706/33/O/N/13

5
9

A company agrees to purchase the assets and liabilities of another business.


The book value of the net assets acquired was:
$
non-current assets

140 000

current assets

50 000

current liabilities

15 000

It is agreed that the fair value of the non-current assets is $155 000 and goodwill is valued at
$20 000.
The purchase price of the business is to be settled as follows.
$
cash

40 000

5% debenture

20 000

The balance of the purchase price is to be settled by the issue of $1 ordinary shares at a
premium of 25%.
By how much will the companys share premium account increase as a result of the purchase?
A

$23 000

$30 000

$37 500

$42 000

10 Which is an example of an adjusting event?


A

change in interest rates

the insolvency of a major customer

the issue of loan stock

the purchase of a new vehicle

11 Which item will not be shown in the statement of changes in equity?


A

debenture interest paid

ordinary share dividends paid

profit for the year

revaluation surplus

UCLES 2013

9706/33/O/N/13

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6
12 A company has purchased a computer with associated costs, as follows.
$
additional memory

750

carriage inwards

250

computer hardware

5000

maintenance contract

1200

residual value

1000

Which amount should be capitalised in the statement of financial position?


A

$5000

$6000

$7200

$8200

13 The table shows extracts from a companys income statement for 2011 and 2012.
2011
$

2012
$

sales

50 000

100 000

cost of sales

15 000

34 000

What might explain the change in the gross profit margin?


A

a cut in unit selling price

an increase in unit sales

the loss of a major customer

use of cheaper suppliers

14 The financial statements of a company show the following.


$m
non-current assets

210

non-current liabilities

15

ordinary share capital

100

preference share capital

25

reserves

45

What is the gearing ratio?


A

10.52%

UCLES 2013

21.62%

27.58%

9706/33/O/N/13

28.57%

7
15 The following information is taken from the financial statements of a company.
$
profit attributable to equity holders

2 000 000

ordinary share dividend paid

200 000

non-redeemable preference share dividend paid

100 000

10% non-redeemable preference share capital

1 000 000

ordinary shares of $1 each

5 000 000

What are the earnings per share for the year to the nearest cent?
A

$0.28

$0.32

$0.34

$0.38

16 The information relates to a company.


$
share premium account

240 000

10% debentures

100 000

retained earnings

180 000

The company redeems the debentures at a premium of 10%.


Which values will the statement of financial position show after this transaction?
retained
earnings
$

share premium
account
$

70 000

240 000

80 000

230 000

170 000

240 000

180 000

230 000

UCLES 2013

9706/33/O/N/13

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8
17 The following are extracts from the statement of financial position of a company.
$
bank

8 500

issued ordinary shares of $1 each

50 000

share premium

20 000

The company makes a bonus issue of one share for every five held.
How will this affect the following accounts?
ordinary
share capital

share
premium

bank

increase

decrease

no effect

increase

increase

increase

increase

no effect

increase

no effect

decrease

no effect

18 The non-current assets of a company include a machine which has the following values.
$
carrying amount

55 000

fair value

60 000

costs of sale

6 000

value in use

42 000

Which value will be shown in the statement of financial position?


A

$42 000

$54 000

$55 000

$60 000

19 The data relates to two different levels of output in a department.


16 000

overheads

20 000

$214 000

machine hours

$230 000

What is the amount of fixed overheads?


A

$16 000

UCLES 2013

$64 000

$150 000

9706/33/O/N/13

$198 000

9
20 A company currently manufactures and sells 2000 units of a product. The following are the selling
price and costs of the product.
$
selling price per unit

20

variable costs per unit

12

fixed costs

8000

The company has received a request for a special order for 200 units. The customer will pay $15
per unit. To manufacture the order the company will have to hire a machine at a cost of $1500.
What is the profit the company will earn if it accepts the order?
A

$7100

$8000

$8600

$9500

21 A company has no work in progress at the start of the month.


During the month, 4000 completed units were produced. At the end of the month, there was work
in progress of 400 units.
The following information is available.
total cost
$

percentage completion
of work in progress

materials and labour

8640

80%

overheads

6360

60%

What is the total value of work in progress at the end of the month?
A

$1000

UCLES 2013

$1073

$1363

9706/33/O/N/13

$1500

[Turn over

10
22 A business has an opening bank balance of $10 000 and makes the following forecasts for the
next three months.
per month
$
credit sales

2000

cash sales

5000

expenses

1000

depreciation of non-current assets

1000

Credit customers pay in the month following the sale. Expenses are paid one month in arrears.
Which row shows the forecast net profit for the three months and the closing bank balance at the
end of month 3?
forecast
net profit
$

closing
bank balance
$

15 000

24 000

15 000

27 000

18 000

17 000

18 000

27 000

23 A company adjusts its budget to take account of changes in costs as a result of changes in the
level of activity.
Which type of budget is the company using?
A

fixed budget

flexed budget

incremental budget

zero based budget

UCLES 2013

9706/33/O/N/13

11
24 A business is preparing its budget. The following information is available for month 1.
10 800 units

budgeted sales
opening inventory

2 000 units

budgeted closing inventory

1 080 units

normal loss in the production process

5%

What is the budgeted production for month 1?


A

9880 units

10 374 units

10 400 units

11 720 units

25 The cost of sales for a business comprises direct materials and direct labour. At the end of a
trading period the following variances are calculated.
$
direct materials price variance

800 adverse

direct materials usage variance

700 favourable

direct labour rate variance

650 favourable

direct labour efficiency variance

750 adverse

If the actual cost of sales was $12 220, what is the standard cost of sales?
A

$12 020

$12 120

$12 320

$12 420

26 Which formula would be used to calculate the labour efficiency variance?


A

(actual hours less standard hours) standard rate

(actual rate less standard rate) actual hours

(standard hours less actual hours) standard rate

(standard rate less actual rate) actual hours

27 A company uses standard costing. During an operating period there has been a favourable
material usage variance of $20 000.
What is a valid reason for this variance?
A

the actual cost of material purchased decreased

the actual cost of material purchased increased

the company used less material per unit than budgeted

the company used more material per unit than budgeted

UCLES 2013

9706/33/O/N/13

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12
28 The figures for the budgeted and actual sales per unit are as follows.
budget

actual

selling price

$38

$40

units sold

9500

9000

Which row shows the sales price and sales volume variances?
sales price
variance
$

sales volume
variance
$

18 000 adverse

19 000 adverse

18 000 adverse

19 000 favourable

18 000 favourable

19 000 adverse

18 000 favourable

19 000 favourable

29 Which statements about investment appraisal are correct?


1

The internal rate of return is the discount rate that gives a positive net present value
of a project.

The accounting rate of return takes interest rates into account.


1

false

false

false

true

true

false

true

true

UCLES 2013

9706/33/O/N/13

13
30 Discounted cash flow has been used to evaluate an investment project over a three year life. The
project will produce annual net cash inflows of $2 m.
$500 000 of the initial investment can be recovered at the end of the third year.
Discount factors at 10% are as follows.
year

discount
factor

0.91

0.83

0.75

Total

2.49

What is the present value of project cash inflows correct to two decimal places?
A

$4.98 m

UCLES 2013

$5.36 m

$5.48 m

9706/33/O/N/13

$6.38 m

14
BLANK PAGE

UCLES 2013

9706/33/O/N/13

15
BLANK PAGE

UCLES 2013

9706/33/O/N/13

16
BLANK PAGE

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.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

UCLES 2013

9706/33/O/N/13

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education Advanced Level

9706/41

ACCOUNTING
Paper 4 Problem Solving (Supplementary Topics)

October/November 2013
2 hours

Additional Materials:

Answer Booklet/Paper

*7392798573*

READ THESE INSTRUCTIONS FIRST


If you have been given an Answer Booklet, follow the instructions on the front cover of the Booklet.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Answer all questions.
All accounting statements are to be presented in good style.
International accounting terms and formats should be used as appropriate.
Workings should be shown.
You may use a calculator.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.

This document consists of 6 printed pages and 2 blank pages.


IB13 11_9706_41/5RP
UCLES 2013

[Turn over

2
1

Manchi plc are preparing their budgets for the forthcoming year ending 30 September 2014. They
provide the following information.
Statements of Financial Position at 30 September
2013
(actual)
$000

2014
(budgeted)
$000

3050
400
300
3750

3190
450
240
3880

Total assets

750
460
210
1420
5170

790
425
574
1789
5669

Equity
Ordinary shares
Non-redeemable preference shares
Revaluation reserve
Retained earnings
Total equity

1200
500
300
930
2930

1400
500
400
834
3134

1000

1300

Total liabilities

960
280
1240
2240

1075
160
1235
2535

Total equity and liabilities

5170

5669

Assets
Non-current assets
Property plant and equipment
Goodwill
Investments
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

Liabilities
Non-current liabilities
7% debentures
Current liabilities
Trade and other payables
Current tax liabilities

Budgeted Statement of Changes in Equity


For Year Ending 30 September 2014
Retained earnings at 1 October 2013
Budgeted profit for year
Dividends payable
Transfer to share capital (bonus issue)
Retained earnings at 30 September 2014

UCLES 2013

9706/41/O/N/13

$000
930
214
1144
(110)
(200)
834

3
Additional information
1

The tax charge for the year ending 30 September 2014 has been budgeted as $160 000.

Income from investments is budgeted at $40 000.

Manchi plc issued additional 7% debentures on 1 October 2013. Interest for the year will be
paid on all the issued debentures on 30 September 2014.

A bonus issue of 1 new ordinary share for every 6 held is budgeted for 1 April 2014.

The following note was extracted from the financial statements at 30 September 2013.
Non-current assets
Property plant and equipment
Land
Buildings
Plant and equipment
Motor vehicles
Total

Cost
$000

Depreciation
$000

Net book value


$000

1500
800
1500
150
3950

250
600
50
900

1500
550
900
100
3050

The land is expected to increase in value by $100 000 during the year.

Budgeted capital expenditure for the year on buildings is $80 000; plant and equipment
$280 000; motor vehicles $30 000 and goodwill $50 000.

Budgeted depreciation for the year on buildings is $50 000; plant and equipment $255 000
and motor vehicles $25 000.

Plant and equipment with an original cost of $35 000 and depreciation of $15 000 is budgeted
to be disposed of for proceeds of $10 000.

10 An impairment review has shown that the carrying value of the investments should be
$240 000 at 30 September 2014.
REQUIRED
(a) Calculate the companys budgeted profit from operations for the year ending 30 September
2014.
[5]
(b) Prepare a budgeted statement of cash flows for the year ending 30 September 2014 in
accordance with IAS 7.
[25]
(c) Prepare the property, plant and equipment section of the non-current assets note to the
budgeted statement of financial position at 30 September 2014.
[10]
[Total: 40]

UCLES 2013

9706/41/O/N/13

[Turn over

4
2

Dilip, Ephraim and Fonzie have been in partnership for many years preparing accounts to
30 June and sharing profits and losses in the ratio 3:2:1. Due to declining profits they decided to
dissolve the partnership on 30 June 2013.
Statement of Financial Position at 30 June 2013
$
Non-current assets
Land and buildings
Motor vehicles
Fixtures and fittings

195 000
43 750
32 645
271 395

Current assets
Inventories
Trade receivables
Cash and cash equivalents

29 875
19 765
6 850
56 490
327 885

Total assets
Capital account

Dilip
Ephraim
Fonzie

$
60 000
50 000
40 000

150 000
Current account

Dilip
Ephraim
Fonzie

33 865
24 910
(1 875)
56 900

Non-current liabilities
Bank loan
Current liabilities
Trade payables
Bank interest accrual

100 000
14 650
6 335
20 985
327 885

The terms of the dissolution were:


1 The land and buildings were sold for 10% above their net book value. Fixtures and fittings
realised 80% of their net book value.
2 Ephraim took over a motor vehicle at an agreed valuation of $10 000. Fonzie took over a
motor vehicle at a valuation of $7500. The other vehicles realised $18 500.
3 The inventories realised $21 000.
4 The trade receivables raised $15 750 whilst the partners were able to settle the trade payables
in full for $12 500.
5 The dissolution costs totalled $3450.
6 The partners closed the business bank account by drawing the balances due to them after the
above took place.

UCLES 2013

9706/41/O/N/13

5
REQUIRED
(a) Prepare the partnership realisation account for the dissolution.

[14]

(b) Prepare the partnership bank account.

[10]

(c) Prepare the partners capital accounts.

[10]

(d) State three other reasons why a partnership may be dissolved apart from a decline in profit.
[6]
[Total: 40]

UCLES 2013

9706/41/O/N/13

[Turn over

6
3

Honeybush Limited operates a standard costing system. Monthly standard data is as follows.
Sales are 6000 units with a selling price of $26 per unit
Each unit requires 2.4 kilos of raw material costing $3 per kilo
Each unit requires 1.5 hours of direct labour time costing $7 an hour
REQUIRED
(a) Calculate the expected monthly contribution per unit and in total.

[8]

(b) Calculate the quantity of raw materials in kilos normally purchased each month. Assume
inventory levels remain constant.
[2]
Early in 2013 a new supplier entered the market, selling the required raw material at $1.80 per
kilo. In April Honeybush Limited bought all its raw material from this new supplier.
This raw material was more difficult to work with. Therefore each unit required 2.6 kilos and
labour took 40% longer than usual to produce each unit. Overtime premiums caused the average
wage rate to rise to $7.80 an hour.
Honeybush Limited managed to produce and sell the usual 6000 units. The selling price had
risen by $0.50 per unit.
REQUIRED
(c) Calculate the following variances for April 2013:
(i) Sales price
(ii) Direct materials usage
(iii) Direct materials price
(iv) Total direct materials
(v) Direct labour efficiency
(vi) Direct labour rate
(vii) Total direct labour

[14]

(d) Starting with the original expected total contribution from (a) use these variances to calculate
the actual total contribution.
[7]
(e) Calculate the change in contribution for Honeybush Limited arising from its decision to
change supplier.
[5]
(f) Explain what is meant by the expression flexing a budget.

[4]
[Total: 40]

UCLES 2013

9706/41/O/N/13

7
BLANK PAGE

UCLES 2013

9706/41/O/N/13

8
BLANK PAGE

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.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

UCLES 2013

9706/41/O/N/13

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS


General Certificate of Education Advanced Level

9706/43

ACCOUNTING
Paper 4 Problem Solving (Supplementary Topics)

October/November 2013
2 hours

Additional Materials:

Answer Booklet/Paper

*3618881357*

READ THESE INSTRUCTIONS FIRST


If you have been given an Answer Booklet, follow the instructions on the front cover of the Booklet.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Answer all questions.
All accounting statements are to be presented in good style.
International accounting terms and formats should be used as appropriate.
Workings should be shown.
You may use a calculator.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.

This document consists of 6 printed pages and 2 blank pages.


IB13 11_9706_43/4RP
UCLES 2013

[Turn over

2
BLANK PAGE

UCLES 2013

9706/43/O/N/13

3
1

Alicia, Beatrice and Chandra have been in partnership for many years sharing profits in the ratio
3:2:1. They prepare their annual accounts to 30 June. Interest on capital was charged at 9%.
The balances on their capital accounts at 1 July 2012 were:
$
45 000
35 000
27 500

Alicia
Beatrice
Chandra

Chandra decided to retire on 31 March 2013. At that date:


1

Goodwill was valued at $24 000. Goodwill is not maintained in the books of account.

All of the assets were revalued to reflect a fall of $7500.

The balance on Chandras account was transferred to a loan account. Interest is to be paid
quarterly at 8% per annum commencing on 30 June 2013.

In the new partnership Alicia and Beatrice share profits in the ratio 3:2, interest on capital is
paid at 8% per annum and no salaries are paid.

REQUIRED
(a)

Prepare the partners capital accounts at 31 March 2013 in columnar form.

[12]

Additional information
1

A debt of $6000 which had been written off in the previous year was received on
1 February 2013.

The gross profit for the year ended 30 June 2013 was $318 000 and this accrued evenly
throughout the year. The following amounts were paid during the year:
Wages
Rent
Heat and light
Sundries

$
150 000
30 000
12 000
3 000

At 30 June 2013 rent of $2500 had been prepaid and $600 for heat and light was accrued.
REQUIRED
(b) Prepare the partnership income statement and appropriation account for the year ended
30 June 2013.
[22]
(c)

State three advantages to Alicia and Beatrice of replacing Chandra with another partner. [6]
[Total: 40]

UCLES 2013

9706/43/O/N/13

[Turn over

4
2

On 1 July 2011 Voronez plc issued 120 000 ordinary shares of $1 each at a premium of $0.10
per share and 40 000 5% redeemable preference shares of $1 each at a premium of $0.15 per
share.
The company made a profit for the year ended 30 June 2012 of $100 000.
On 30 June 2012 the company:
1

paid the dividend on the redeemable preference shares (treated as a financing cost);

paid a dividend of $0.10 per share on the ordinary shares;

made a bonus issue of one new fully paid ordinary share for every 4 shares held;

made a rights issue of one new ordinary share for every 6 shares held after the bonus
issue at a price of $1.60 per share. The rights issue was fully subscribed.

REQUIRED
(a) Calculate the amounts which will be included in the companys statement of financial position
at 30 June 2012 for each of the following:
Ordinary share capital,
Preference share capital,
Share premium,
Retained earnings.

[17]

Additional information
The company made a profit for the year ended 30 June 2013 of $86 000 before paying any
dividends.
On 30 June 2013 the company:
1

paid the dividend on the redeemable preference shares;

purchased 80 000 of its own ordinary shares at a price of $1.125 each and cancelled
them.

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REQUIRED
(b) Calculate the amounts which will be included in the companys statement of financial position
at 30 June 2013 for each of the following:
Ordinary share capital,
Share premium,
Capital redemption reserve,
Retained earnings.

[12]

(c) Explain the circumstances in which the directors of a company would be unable to pay a
dividend on ordinary shares.
[5]
(d) (i)

State one reason why a capital redemption reserve is created.

[2]

(ii)

Explain the way in which you have created the capital redemption reserve.

[2]

(iii)

State for what purposes a capital redemption reserve may be used.

[2]
[Total: 40]

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[Turn over

6
3

Riffatulah, a retailer, is preparing his budgets for the year ending 31 May 2014. He provides the
following information.
Statement of Financial Position at 31 May 2013
$

Cost
19 200
15 100
34 300

Assets
Non-current assets
Fixtures and fittings
Vehicle

Depreciation
7 100
11 200
18 300

Net book value


12 100
3 900
16 000

Current assets
Inventories
Trade receivables
Other receivables (insurance)
Cash and cash equivalents
Total assets

4 800
11 900
350
6 600
23 650
39 650

Capital
Total capital

25 550

Liabilities
Non-current liabilities
Bank loan (6%)
Current liabilities
Trade payables
Total liabilities

6 100
14 100

Total capital and liabilities

39 650

8 000

He prepares budgets using three month periods as follows:


Period
1
2
3
4

1 June to 31 August
1 September to 30 November
1 December to 28 February
1 March to 31 May

He provides the following budgeted information for the year ending 31 May 2014.
Period
Sales (units)
Unit selling price

1
4200
$3.10

2
4800
$3.20

3
4600
$3.40

4
4500
$3.30

Purchases (units)
Unit purchase price

4700
$1.20

4600
$1.30

4500
$1.30

4500
$1.40

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Schedule of receipts and payments
1
$
Receipts
Customer receipts
Proceeds of vehicle sale
Legacy from uncle
Total receipts
Payments
Supplier payments
Purchase of new vehicle
Purchase of fixtures
Rent
Loan interest
Drawings
Insurance
Administration costs
Total payments

2
$

3
$

16 500

14 200

14 000
3 400

15 000

16 500

5 000
19 200

17 400

15 000

5 800

5 700

5 200
18 000

4 000

2 500

2 500

3 000

5 000

2 600
31 300

2 700
14 200

2 500
3 000
2 400
13 700

3 800
2 500
240
4 000
2 000
2 600
20 840

4
$

Additional information
1

Inventory on 31 May 2014 is expected to have a value of $5100.

Discount allowed for the year is expected to be 2% of total sales. Bad debts are
expected to be 1% of total sales.

Discount received is expected to be 1% of purchases.

Riffatulah depreciates vehicles at a rate of 40% a year on the reducing balance basis.
He depreciates fixtures and fittings at a rate of 10% a year on cost. He provides a full
years depreciation in the year of purchase and none in the year of disposal. He only
keeps one vehicle at a time.

The insurance policy runs from 1 September to 31 August each year.

REQUIRED
(a) Prepare a budgeted income statement for the year ending 31 May 2014.

[13]

(b) Prepare a budgeted statement of financial position at 31 May 2014.

[17]

(c) Using only figures from your answers to (a) and (b), calculate Riffatulahs working capital
cycle.
[7]
(d) Suggest three ways Riffatulah could improve his working capital cycle and reduce his bank
overdraft.
[3]
[Total: 40]

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BLANK PAGE

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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.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

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