Accounting 9706/12 May/June 2019: question paper and mark scheme

Question

Which concept is identified by the accounting equation assets = capital + liabilities? A business entity B duality C going concern D realisation

Question

What are causes of depreciation on non-current assets? 1 change in its cost of repair 2 change in its market value 3 changes in technology A 1 and 2 B 1 only C 2 and 3 D 3 only

Question

June purchased a new machine. She depreciated it at a rate of 40% per annum using the reducing balance method. After two years its net book value was $3600. What was the purchase price of the machine? A $7056 B $9216 C $10 000 D $22 500

Question

The following information relates to the motor vehicles of a business. 1 January 2018 31 December 2018 $ $ net book value 398 000 480 000 During 2018 the following occurred. 1 Additional motor vehicles costing $195 000 were purchased. 2 A motor vehicle (original cost $80 000) was sold for $24 000 at a profit of $2000. What was the depreciation charge for 2018? A $87 000 B $89 000 C $91 000 D $113 000

Question

A book-keeper compared the business bank statement with the cash book. He then updated the cash book and finally prepared a bank reconciliation statement. Why was the bank reconciliation statement prepared? A to ensure no transactions had been omitted from the cash book B to establish the value of unpresented cheques C to explain the difference between the cash book balance and the bank statement balance D to find out if any cheques had been dishonoured

Question

On 31 December 2018, a business had the following balances. $ sales ledger 12 800 sales ledger control account 15 200 Which error explains the difference between the two figures? A A credit balance of $1200 was brought forward as a debit balance in the sales ledger control account. B An irrecoverable debt of $2400 was omitted in a customer’s personal account in the sales ledger. C Purchases returns, $1200, were wrongly entered on the debit side of the sales ledger control account. D Sales returns, $1200, were entered twice in a customer’s personal account in the sales ledger.

Question

The provision for doubtful debts at 1 January 2018 was $1580. Trade receivables at 31 December 2018 were $44 750. This included a debt of $12 500, considered irrecoverable. The provision for doubtful debts was to be maintained at a rate of 5%. Which entry for doubtful debts was included in the income statement for the year ended 31 December 2018? A $32.50 expense B $32.50 income C $657.50 expense D $657.50 income

Question

Which statements about valuing inventory are correct? 1 Any charges for carriage inwards should be included in its cost. 2 Cost should always be compared with the net realisable value. 3 Cost should always be compared with replacement price. A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

Question

A sole trader calculated a draft profit for the year of $56 750. He then discovered that discounts received of $580 and discounts allowed of $665 had been recorded on the wrong sides of their respective accounts. What is the correct profit for the year? A $56 580 B $56 665 C $56 835 D $56 920

Question

Which item will not appear in the income statement of a sole trader? A accounting charges B bank loan interest C director’s fee D rental charge for machinery

Question

X and Y are in partnership sharing profits and losses in the ratio 2 : 1. Z will be admitted with the following new arrangements. Profit and loss sharing ratio will be 2 : 1 : 2 respectively. Goodwill is valued at $90 000. Z will pay the partners for his share of the goodwill. How much will Z pay X? A $18 000 B $24 000 C $45 000 D $60 000

Question

D, E and F are in partnership, sharing profits in the ratio 2 : 2 : 1. D is allowed an annual salary of $10 000. E has made a loan to the partnership on which the partnership pays interest of $5000 each year. Profit for the year before appropriation was $150 000. What was F’s total share of profit for the year? A $27 000 B $28 000 C $29 000 D $30 000

Question

L and M had been in partnership sharing profits and losses equally. P was admitted to the partnership and the partners continued to share profits and losses equally. Goodwill was valued at $48 000 but the partners agreed that no goodwill account would be retained in the books of account. What were the accounting entries to record the goodwill? A debit L capital account $16 000, debit M capital account $16 000, credit P capital account $32 000 B debit P capital account $32 000, credit L capital account $16 000, credit M capital account $16 000 C debit L capital account $8000, debit M capital account $8000, credit P capital account $16 000 D debit P capital account $16 000, credit L capital account $8000, credit M capital account $8000

Question

Which items do not appear in a statement of changes in equity? 1 dividend paid 2 dividend proposed 3 loan interest A 1 and 2 only B 1, 2 and 3 C 1 only D 2 and 3 only

Question

On 1 January a company’s equity included 100 000 $1 ordinary shares. The directors of the company then did the following: 1 March Made a rights issue of 20 000 ordinary shares at $1.25 each. The rights issue was fully subscribed. 1 June Made a bonus issue of 5000 ordinary shares. 1 July Paid an interim dividend of $0.10 on all of the shares in issue at that date. By how much did the bank account increase as a result of these transactions? A $12 500 B $17 500 C $30 000 D $37 000

Question

The following balances are extracted from the books of J Limited. 30 April 2019 30 April 2018 $ $ ordinary shares of $0.50 each 700 000 500 000 share premium 90 000 50 000 How many ordinary shares have been issued during the year ended 30 April 2019? A 200 000 B 240 000 C 400 000 D 480 000

Question

Which action will increase a company’s current ratio? A making an issue of bonus shares B making a rights issue of shares C increasing the provision for doubtful debts D reducing the rate of depreciation on non-current assets

Question

A trader wishes to set a selling price. How does he use a mark-up? A by adding a percentage to the cost B by adding a percentage to the selling price C by deducting a percentage from the cost D by deducting a percentage from the selling price

Question

The following information is available for the year ended 31 December 2018. $ revenue 800 000 cost of sales (175 000) gross profit 625 000 distribution costs (95 000) administrative expenses (35 000) profit from operations 495 000 finance costs (5 000) profit for the year 490 000 What was the operating expenses to revenue ratio? A 16.25% B 16.88% C 21.88% D 38.13%

Question

On 1 January 2018 a business expected to have sales for the year ended 31 December 2018 of $450 000. Its non-current assets at that date were $306 000. On 1 July 2018 it purchased new machinery at a cost of $180 000, in order to increase its sales by an extra $20 000 each month. What was the rate of non-current asset turnover in 2018? (Ignore depreciation.) A 1.17 times B 1.42 times C 1.44 times D 1.74 times

Question

A business uses the First In First Out (FIFO) method to value its inventory. The following inventory transactions took place during a month. There was no opening balance. receipts issues date units $ per unit units 1 July 100 15.50 6 July 100 15.60 10 July 80 20 July 50 15.80 25 July 100 What was the value of inventory at the end of the month? A $1085 B $1092 C $1102 D $1106

Question

A business has two production departments: assembly and machinery. The following budgeted information is available. assembly machinery labour hours 5600 1350 machine hours 1200 6900 overheads $75 000 $80 000 What is the overhead absorption rate for the assembly department? A $13.39 per labour hour B $19.14 per machine hour C $22.30 per labour hour D $62.50 per machine hour

Question

A shortage caused a business to pay more for its purchases of raw materials. What is the effect of this? break-even point marginal cost contribution A decrease decrease increase B decrease decrease decrease C increase decrease increase D increase increase decrease

Question

Which statement best describes a stepped fixed cost? A It changes in direct proportion to changes in output. B It changes in proportion to changes in prime cost. C It remains at a constant amount until output changes significantly. D It represents a constant amount of total cost.

Question

A company produces less than it sells in a particular period. Which statement is correct? A Reported profit is the same whether absorption or marginal costing is used. B Reported profit is the difference between absorption and marginal costing closing inventories. C Reported profit is lower using absorption costing. D Reported profit is lower using marginal costing.

Question

Which statements are true about the preparation of a break-even chart? 1 Costs are easily classified into fixed and variable. 2 Fixed costs always change as output changes. 3 The break-even point is clearly seen. A 1 and 2 only B 1, 2 and 3 C 2 and 3 only D 3 only

Question

When a company had sales revenue of $600 000, its variable costs were $300 000. At the break-even point, its sales were $400 000. How much profit did it make when sales were $600 000? A $100 000 B $200 000 C $300 000 D $400 000

Question

A company provided the following information. total sales $400 000 production and sales (units) 10 000 total costs $250 000 total fixed costs $60 000 What was the contribution to sales ratio? A 37.5% B 47.5% C 52.5% D 62.5%

Question

Last year a company sold 2000 units and made a contribution of $50 per unit. Profit, after deducting total fixed costs, was $60 000. This year: sales volume increased by 10% contribution per unit decreased by 5% total fixed costs increased by 25%. What was the company’s profit this year? A $45 000 B $54 500 C $60 000 D $64 500

Question

Why do businesses prepare budgets? 1 to communicate plans 2 to control activities 3 to improve co-ordination 4 to prepare their annual financial statements A 1, 2 and 3 B 1, 2 and 4 C 1, 3 and 4 D 2, 3 and 4