Accounting 0452/21 May/June 2020: question paper and mark scheme
Cambridge IGCSE Accounting (0452), Paper 2, May/June 2020. Read both free below, or download them. Done the paper? Get it marked by AI against this mark scheme.
The ZED Sports Club has a shop which sells sportswear. The following details relate to the shop for the year ended 29 February 2020.
$
Opening inventory 900
Closing inventory 970
Purchases 7600
Mark-up 40%
REQUIRED
(a) Calculate the shop sales for year ended 29 February 2020.
…… [4]
All the shop sales and purchases are for cash. All the club’s receipts are paid into the bank and all payments are made by cheque. On 1 March 2019 the club’s bank balance was overdrawn by
$845.
In addition to the shop sales and purchases, the following receipts and payments were made during the year ended 29 February 2020.
$
Subscriptions received 11 400
Competition fees received 915
Payments for competition prizes 390
Purchases of fittings 4 000
Rent and insurance 4 575
Wages of shop assistant 2 000
REQUIRED
(b) Prepare the receipts and payments account for the ZED Sports Club for the year ended
29 February 2020. Balance the account and bring down the balance on 1 March 2020.
ZED Sports Club
Receipts and Payments Account for the year ended 29 February 2020
Date Details $ Date Details $
[8]
The club’s bank statement at 29 February 2020 showed a positive balance of $7162.
On comparing the bank statement with the cash book, the treasurer found:
1 Competition fees, $260, had not been recorded by the bank.
2 A cheque paid for $25 for competition prizes had been charged twice by the bank.
3 The payment for fittings, $4000, was made on 27 February 2020, and had not been recorded on the bank statement.
REQUIRED
(c) Prepare the bank reconciliation statement for ZED Sports Club at 29 February 2020.
ZED Sports Club
Bank Reconciliation Statement at 29 February 2020
…… [5]
(d) State three differences between a receipts and payments account and an income and expenditure account.
Receipts and payments account Income and expenditure account
1
2
3
[3]
[Total: 20]
PLEASE TURN OVER
Mark scheme
1(a) $ $ 4
Sales 10 542 (2)CF/(1)OF
Cost of sales
Opening inventory 900 *
Purchases 7 600
8 500
Less Closing inventory 970 *(1) 7 530 (1)OF
Gross profit 3 012
* mark for opening and closing inventory
Any format acceptable
1(b) ZED Sports Club 8
Receipts and Payments Account for the year ended 29 February 2020
Date Details $ Date Details $
2020 2019
Feb 29 Shop sales (1)OF 10 542 Mar 1 Balance b/d (1) 845
Subscriptions } 11 400 2020
Competition fees }(1) 915 Feb 29 Shop purchases (1) 7 600
Competition prizes } 390
Fittings }(1) 4 000
Rent and insurance } 4 575
Wages – shop assistant }(1) 2 000
Balance c/d 3 447
22 857 22 857
2020
Mar 1 Balance b/d (1)OF 3 447
(1) Dates
1(c) ZED Sports Club 5
Bank Reconciliation Statement at 29 February 2020
$ $
Balance on bank statement 7 162 (1)
Add: Amount not yet credited – competition fees 260 (1)
Bank error 25 (1) 285
7 447
Less Cheque not yet presented – fittings 4 000 (1)
Balance in cash book 3 447 (1) OF
Alternative presentation
$ $
Balance in cash book 3 447 (1) OF
Add: Cheque not yet presented – fittings 4 000 (1)
7 447
Less: Amount not yet credited – competition fees 260 (1)
Bank error 25 (1) 285
Balance on bank statement 7 162 (1)
1(d) 3
Receipts and payments account Income and expenditure account
Includes all money received and paid Includes income and expenses (1)
No adjustment made for accruals or Adjustments made for accruals and (1)
prepayments prepayments
Includes only monetary items Includes non-monetary items (1)
Includes only revenue receipts and
expenditure
Includes both capital and revenue items Balancing figure represents surplus/deficit (1)
Balancing figure represents bank balance (1)
Accept other valid points
Max (3) for comparative statements
Ame provided the following balances from his books at 31 March 2020.
$
Capital 10 369
Drawings 4 000
Equipment at cost 15 500
Provision for depreciation of equipment 3 100
Inventory at 1 April 2019 1 765
Trade receivables 1 290
Bank overdraft 475
Trade payables 1 600
Sales 31 250
Purchases 18 330
Purchases returns 910
Carriage inwards 640
Discount received 815
Commission receivable 1 500
Rent and insurance 5 700
Office expenses 2 425
REQUIRED
(a) Prepare Ame’s trial balance at 31 March 2020.
Show the difference in the trial balance totals as a suspense account balance.
Ame
Trial Balance at 31 March 2020
Debit Credit
$ $
Provision for depreciation of equipment …… ……
[6]
Ame later discovered several errors had been made in the accounting records.
REQUIRED
(b) Complete the table to show the entries required to correct each error.
The first one has been completed as an example.
Entries required to correct the error
Error Debit Credit
Account $ Account $
No entry had been made for cash Cash 60 Sales 60 sales, $60.
Office expenses, $240, had been …… ………. …… ……
credited to the wages account.
No debit entry had been made. …… ………. …… ……….
The purchases journal total for
March 2020 was $2165. This …… ………. …… ………. amount was incorrectly recorded in the purchases account as …… ………. …… ……….
$2651.
An insurance payment, $375, had been correctly recorded in the …… ………. …… ………. cash book but no other entry had
The purchase of equipment,
$800, was correctly recorded in …… ………. …… ………. the cash book but debited to the office expenses account. …… ………. …… ……….
[9]
(c) Prepare the suspense account. Start with the difference on the trial balance prepared in
Part (a). Balance or total the account as necessary.
Ame
Suspense account
Date Details $ Date Details $
[5]
[Total 20]
Mark scheme
2(a) Ame 6
Trial Balance at 31 March 2020
Debit Credit
$ $
Capital 10 369 }
Drawings 4 000 }(1)
Equipment at cost 15 500 }
Provision for depreciation of equipment 3 100 }(1)
Inventory at 1 April 2019 1 765
Trade receivables 1 290
Bank overdraft 475 (1)
Trade payables 1 600
Sales 31 250
Purchases 18 330
Purchases returns 910 }(1)
Carriage inwards 640 }
Discount received 815 }
Commission receivable 1 500 }(1)
Rent and Insurance 5 700
Office expenses 2 425
Suspense 369
50 019 50 019 (1)OF
2(b) 9
Entries required to correct the error
Error Debit Credit
Account $ Account $
No entry had been made for cash sales, $60. Cash 60 Sales 60
Office expenses 240 (1) Suspense 480 (1)
Office expenses, $240, had been credited to the
wages account. No debit entry had been made.
Wages 240 (1)
The purchases journal total for March 2020 was Suspense 486 (1) Purchases 486 (1)
$2165. This amount was incorrectly recorded in
the purchases account as $2651.
An insurance payment, $375, had been correctly Rent and 375 (1) Suspense 375 (1)
recorded in the cash book but no other entry has insurance
been made.
The purchase of equipment, $800, was correctly Equipment 800 (1) Office expenses 800 (1)
recorded in the cash book but debited to the
office expenses account.
2(c) Ame 5
Suspense account
Date Details $ Date Details $
2020 2020
Mar 31 Difference on trial balance (1) OF 369 Mar 31 Office expenses (1) 240
Wages (1) 240
Purchases (1) 486 Rent and insurance (1) 375
855 855
Chippo owns a manufacturing business which produces product S. She provided the following information for the year ended 30 April 2020.
$
Revenue 254 000
Purchases of raw materials 46 500
Purchases of finished goods 59 000
Wages of factory operatives 38 250
Royalties paid to the inventor of product S 7 690
Factory general expenses 4 500
Factory fuel and power 5 325
Rent and insurance 28 000
Factory machinery at cost 60 000
Provision for depreciation of factory machinery 21 600
Inventory at 1 May 2019: raw materials 3 120 work in progress 5 400 finished goods 8 220
Additional information
1 Factory machinery is depreciated at 20% per annum using the reducing balance method.
2 Rent and insurance is to be split equally between the factory and the office.
3 The annual salary of the factory supervisor is $28 500.
4 Closing inventory at 30 April 2020 was:
$
Raw materials 3000
Work in progress 5590
Finished goods 7885
REQUIRED
(a) Prepare Chippo’s manufacturing account for the year ended 30 April 2020.
Chippo
Manufacturing Account for the year ended 30 April 2020
$ $
[10]
(b) Prepare Chippo’s income statement (trading account section) for the year ended
30 April 2020.
Chippo
Income Statement (Trading Account section) for the year ended 30 April 2020
$ $
[4]
(c) Complete the table by placing a tick (ü) in the correct column, to indicate whether each of the following actions would increase or decrease Chippo’s gross margin.
Action Increase gross margin Decrease gross margin
Increase wages of factory supervisor
Reduce trade discount allowed to customers
[2]
Chippo is considering converting her sole trader business into a limited company because she thinks that this will make it easier for her to obtain finance for future expansion.
REQUIRED
(d) Advise Chippo whether or not she should convert her business to a limited company, in order to obtain finance. Justify your answer by providing advantages and disadvantages.
…… [4]
[Total: 20]
Mark scheme
3(a) Chippo 10
Manufacturing Account for the year ended 30 April 2020
$ $
Cost of material consumed
Opening inventory of raw material 3 120
Purchases of raw material 46 500
49 620
Less Closing inventory of raw material 3 000 46 620 (1)
Direct wages 38 250 (1)
Direct expenses – royalties 7 690 (1)
Prime cost 92 560 (1)OF
Factory overheads
Wages – factory supervisor 28 500 (1)
Factory general expenses 4 500
Factory fuel and power 5 325
Rent and insurance (28 000 × 50%) 14 000 (1)
Depreciation of machinery (60 000 – 21 600) × 20% 7 680 (1) 60 005
152 565 (1)OF
Add opening work in progress 5 400 *
157 965
Less closing work in progress 5 590 *(1) both
Cost of production 152 375 (1) OF
*mark for both opening and closing work-in-progress
3(b) Chippo 4
Income Statement (Trading Account section) for the year ended 30 April 2020
$ $
Revenue 254 000
Less Cost of sales
Opening inventory of finished goods 8 220
Cost of production 152 375 (1)OF
Purchases of finished goods 59 000 (1)
219 595
Less Closing inventory of finished goods 7 885 211 710 (1) OF
Gross profit 42 290 (1)OF
3(c) 2
Action Increase gross profit Decrease gross profit
Increase wages of factory
(1)
supervisor
Reduce trade discount
(1)
allowed to customers
3(d) Advantages 4
A manufacturing business such as Chippo’s, which requires machinery as well as premises, would usually operate as a
limited company (1)
Chippo would be able to raise some money by issuing shares (1)
It may be easier for Chippo to obtain finance for the proposed expansion if the business is a limited company (1)
If Chippo converts the business to a limited company, her personal assets will be safer (1)
If Chippo continues to manufacture as a sole trader, the lender could take her personal assets if the assets of the business
were insufficient to cover any loans (1)
Accept other valid points
Max (2)
Disadvantages
The lender is likely to require security over the company’s assets (1)
The lender could take possession of the assets of the business if payments were not made in accordance with the agreed
terms (1)
There will be costs involved in setting up and running a limited company (1)
Accept other valid points
Max (2)
Max (3) overall for advantages and disadvantages
Recommendation (1)
Rani is a trader. Her financial year ends on 31 March.
She provided the following information about her three types of inventory at 31 March 2020.
Inventory Number Cost Selling price Selling expenses item of units per unit per unit per unit
$ $ $
A 110 17 20 2
B 85 18 19 1
C 90 15 16 2
REQUIRED
(a) Calculate the total value of Rani’s inventory at 31 March 2020.
…… [4]
Rani later discovered that she had an amount of inventory of item D at 31 March 2020. This inventory originally cost $1660. She considered this inventory to be obsolete.
REQUIRED
(b) Explain to Rani how the value of the inventory of item D affected the profit for the year ended
31 March 2020.
…… [2]
(c) Advise Rani whether or not she should stop purchasing item D to avoid having obsolete inventory in the future. Justify your answer by providing advantages and disadvantages.
…… [5]
Rani earns advertising income by placing advertising boards in her shop window. The following details relate to her advertising income.
On 1 April 2019 Rani had received $420 in advance, and $300 was owed to her.
During the year ended 31 March 2020, Rani received cheque payments totalling $6000. She decided to write off the amount of $300 due to her.
On 31 March 2020 Rani had received $500 in advance, and $400 was owed to her.
REQUIRED
(d) Prepare the advertising income account in the ledger of Rani for the year ended 31 March
2020. Balance the account and bring down the balances on 1 April 2020.
Rani
Advertising income account
Date Details $ Date Details $
[7]
(e) Explain to Rani the effect on gross profit of recording sales of inventory as advertising income.
…… [2]
[Total: 20]
PLEASE TURN OVER
Mark scheme
4(a) 4
Item Net realisable Lower of cost and Number of units
value net realisable Total value
value
$ $ $
A 20 – 2 = 18 17 110 1 870 (1)
B 19 – 1 = 18 18 85 1 530 (1)
C 16 – 2 = 14 14 90 1 260 (1)
Total 4 660 (1)
4(b) The net realisable value is lower than the cost so item D should be recorded at its net realisable of zero (1) 2
There will be no effect on profit (1)
4(c) Advantages 5
The obsolete inventory is a loss to Rani’s business (1)
She will wish to avoid such losses in the future (1)
Holding inventory necessitates storage costs (1)
If Rani stops buying item D, she may have funds available for other business opportunities (1)
Rani had difficulty in monitoring four types of inventory (1)
Accept other valid points
Max (2)
Disadvantages
Rani needs to consider that it may be risky to stock only three of the four lines of inventory in the future (1)
There may be customer demand in future for item D (1)
Customers who have to start buying item D from another supplier may also buy items A, B and C from them (1)
Accept other valid points
Max (2)
Recommendation (1)
4(d) Rani 7
Advertising income account
Date Details $ Date Details $
2019 2019
Apl 1 Balance b/d *(1) 300 Apl 1 Balance b/d* 420
2020 2020
Mar 31 Income statement (1)OF 6 320 Mar 31 Bank (1) 6 000
Balance c/d 500 Irrecoverable debts (1) 300
Balance c/d 400
7 120 7 120
2020 2020
Apl 1 Balance b/d (1) 400 Apl 1 Balance b/d (1) 500
(1) Dates
* mark for both balances
4(e) Sales of inventory are included in calculation of the gross profit (1) 2
Advertising income is included as other income after the calculation of the gross profit (1)
If sales of inventory are included as advertising income the gross profit will be understated (1)
Accept other valid points
Max (2)
MPT Limited prepares its financial statements to 30 April each year.
The company’s retained earnings at 1 May 2019 were $14 000. The general reserve was $35 000.
During the year ended 30 April 2020 the following took place.
1 The company made a profit for the year of $28 000 after charging debenture interest.
2 A transfer of $5000 was made to the general reserve.
3 A dividend of $4500 was paid. No other dividends were payable for the year.
MPT Limited provided the following balances at 30 April 2020.
$
Fixtures and equipment at book value 152 000
Motor vehicles at book value 60 400
Inventory 30 330
Bank overdraft 6 200
Trade payables 24 900
Trade receivables 31 500
Provision for doubtful debts 630
5% Debentures (repayable 2025) 20 000
Ordinary share capital 150 000
REQUIRED
(a) Calculate the retained earnings of MPT Limited at 30 April 2020.
…… [3]
(b) Prepare the statement of financial position for MPT Limited at 30 April 2020.
MPT Limited
Statement of Financial Position at 30 April 2020
$ $ $
[7]
The directors of MPT Limited are considering using the general reserve to repay the bank overdraft.
REQUIRED
(c) State why it is not appropriate to use the general reserve to repay the bank overdraft.
…… [1]
(d) Calculate the return on capital employed (ROCE) for the year ended 30 April 2020. The calculation should be correct to two decimal places and should be based on closing capital employed.
…… [4]
The directors are considering increasing dividend in 2021 as a way of increasing return on capital employed (ROCE).
REQUIRED
(e) Advise the directors how the return on capital employed (ROCE) can be increased. Justify your answer by commenting on both profit and capital employed.
…… [5]
[Total: 20]
Mark scheme
5(a) $ $ 3
Retained earnings 1 May 2019 14 000 }
Profit for the year 28 000 } (1)
42 000
Less Transfer to general reserve 5 000 }
Dividend 4 500 }(1) 9 500
Retained earnings 30 April 2020 32 500 (1) OF
Any format acceptable
5(b) MPT Limited 7
Statement of Financial Position at 30 April 2020
$ $
Assets
Non-current Assets
Fixtures and equipment at book value 152 000
Motor vehicles at book value 60 400
212 400 (1)
Current Assets
Inventory 30 330
Trade receivables 31 500
Less Provision for doubtful debts 630 30 870 (1)
61 200 (1)OF
Total assets 273 600
Equity and Liabilities
Equity
Ordinary share capital 150 000
General reserve (35 000 + 5 000) 40 000 (1)
Retained earnings 32 500 (1)OF
222 500
Non-current Liabilities
5% Debentures 20 000 (1)
Current Liabilities
Trade payables 24 900
Bank 6 200
31 100 (1)
Total Equity and Liabilities 273 600
5(c) General reserves may not necessarily be matched by cash balances (1) 1
Accept other valid points
5(d) Either 4
28 000 + 1000 (1) 100
×
150 000 + 40 000 (1)OF + 32 500OF + 20 000 (1) 1
29 000 100
= ×
242 500 1
= 11.96% (1)OF
Or
28 000 + 1000 (1) 100
×
273 600 (1)OF − 31100 (1) 1
= 11.96% (1)OF
5(e) Basic statements – Increase profit for the year (1) 5
Reduce capital employed (1)
Use capital employed more effectively (1)
Max (3)
Expansion of basic statements –
Ways to increase profit for the year – Increase profit by increasing gross profit (1)
Reduce expenses (1)
Increase other income (1)
Max (2)
Ways to reduce capital employed – Increase dividend (so reducing reserves) (1)
Reduce non-current liabilities (1)
Max (2)
Ways to use capital employed more effectively – combine lower costs with higher sales (1)
sell off surplus/inefficient assets that generate little revenue/increase costs (1)
Max (2)
Max (5)
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