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ZIMSEC A Level · 9197/2 · J2010

Accounting Paper 2 June 2010

Questions
48
Total marks
100
Time allowed
105 min
Syllabus code
9197/2

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Questions
48
Pass mark
29
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Answer every question in the printed order, get marked at the end, then see the answers.

The questions

Question 101

[2 marks]partnership manufacturing accounts
A manufacturer completed 3 000 units during the year at a unit cost of $100. Completed goods are transferred to the trading account at a mark up of 20% on cost. Calculate the profit on manufacture for the year.

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Question 102

[3 marks]partnership manufacturing accounts
A business sold 2 950 units for $442 500. Its opening inventory of finished goods at transfer value was $24 000, goods transferred in from the factory during the year were $360 000, and closing inventory of finished goods at transfer value was $30 000. Calculate the gross profit for the year.
  1. A$28 500
  2. B$76 500
  3. C$82 500
  4. D$88 500

Question 103

[2 marks]partnership manufacturing accounts
Goods are transferred from the factory to the warehouse at cost plus 20%. Closing inventory of finished goods at transfer value is $30 000 and the provision for unrealised profit already carried in the books is $4 000. Calculate the increase in the provision for unrealised profit charged for the year.

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Question 104

[2 marks]partnership manufacturing accounts
Debtors total $46 500 at the year end. A debtor owing $6 500 cannot pay and that debt is to be written off. A provision for bad debts equal to 5% of the remaining debtors is then to be created. Calculate the provision for bad debts.

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Question 105

[3 marks]partnership manufacturing accounts
A partnership's trading account shows a gross profit of $88 500 and a profit on manufacture of $60 000, and the provision for unrealised profit is increased by $1 000 during the year. Expenses for the year are office salaries $24 000, rent, rates and insurance $16 000, selling and distribution costs $28 000, a bad debt written off $6 500, a provision for bad debts $2 000 and loan interest $5 000. Calculate the net profit for the year.
  1. A$6 000
  2. B$66 000
  3. C$68 000
  4. D$71 000

Question 106

[3 marks]partnership manufacturing accounts
A partnership's net profit for the year is $66 000. The partnership agreement provides interest on capital of $18 000 to Oliver and $12 000 to Twist, a salary of $16 000 to Twist, and a residual profit sharing ratio of 3 : 2 for Oliver and Twist. Calculate Oliver's share of the residual profit.
  1. A$8 000
  2. B$10 000
  3. C$12 000
  4. D$39 600

Question 107

[3 marks]partnership manufacturing accounts
A partner's current account had an opening credit balance of $24 000. During the year he was credited with interest on capital of $18 000 and a share of profit of $12 000, and his drawings were $47 000. Calculate the closing balance on his current account.

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Question 108

[3 marks]partnership manufacturing accounts
A partner's current account had an opening credit balance of $32 000. During the year he was credited with interest on capital of $12 000, a partnership salary of $16 000 and a share of profit of $8 000. His drawings, which do not include the $12 000 of his salary he had already taken during the year, were $41 000. Calculate the closing balance on his current account.

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Question 109

[2 marks]partnership manufacturing accounts
Partners are considering converting their business into a private limited company. Which of the following is an advantage they would gain?
  1. AThe company would pay no tax on its profits
  2. BFewer legal formalities would have to be met
  3. CThe owners would keep full personal control
  4. DMembers' liability for the debts is limited

Question 110

[2 marks]partnership manufacturing accounts
A partnership is converted into a limited company. What is the effect on the life of the business?
  1. AIt continues even if a member dies or leaves
  2. BIt must be wound up when a director retires
  3. CIt ends when any one member sells his shares
  4. DIt has to be renewed by the members each year

Question 201

[2 marks]acquisition of a partnership by a company
Which of the following best describes goodwill?
  1. AThe price paid for a business above its net assets
  2. BThe amount by which a business's assets exceed its liabilities
  3. CThe total market value of a business's fixed assets
  4. DThe profit a business expects to earn in future years

Question 202

[2 marks]acquisition of a partnership by a company
How is purchased goodwill treated in the accounts of a limited company?
  1. AWritten off against sales in the year of purchase
  2. BShown as a current asset and revalued every year
  3. CLeft out of the accounts because it cannot be sold
  4. DCapitalised as an intangible asset, then amortised or impaired

Question 203

[2 marks]acquisition of a partnership by a company
A company acquires another business for an agreed price of $600 000, settled by issuing ordinary shares of $1 each at $1.50 per share. Calculate the number of ordinary shares issued.

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Question 204

[3 marks]acquisition of a partnership by a company
A company pays an agreed price of $600 000 for another business, taking over its fixed assets at a valuation of $350 000 and its net current assets at $170 000. Calculate the goodwill arising on the acquisition.
  1. A$80 000
  2. B$250 000
  3. C$430 000
  4. D$520 000

Question 205

[2 marks]acquisition of a partnership by a company
A company redeems $200 000 of preference shares at par out of its existing cash resources. What must it do in its reserves?
  1. ATransfer $200 000 to a capital redemption reserve
  2. BTransfer $200 000 from share premium to cash
  3. CMake no transfer, as cash resources were used
  4. DTransfer $200 000 from retained profit to share premium

Question 206

[2 marks]acquisition of a partnership by a company
A company's retained profit is $700 000. It redeems $200 000 of preference shares at par out of existing cash resources and makes the reserve transfer this requires. Calculate the retained profit remaining.

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Question 207

[2 marks]acquisition of a partnership by a company
A company with 400 000 ordinary shares of $1 each in issue makes a bonus issue of one for four, capitalising its capital redemption reserve of $200 000. Calculate the balance left on the capital redemption reserve.
  1. A$0
  2. B$100 000
  3. C$200 000
  4. D$300 000

Question 208

[2 marks]acquisition of a partnership by a company
A company with 500 000 ordinary shares of $1 each in issue makes a rights issue of one for two at $1.30 per share, and it is taken up in full. Calculate the cash received from the rights issue.

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Question 209

[3 marks]acquisition of a partnership by a company
A company had 400 000 ordinary shares of $1 each in issue. It then made a bonus issue of one for four, a rights issue of one for two, and a further issue of 400 000 shares to buy another business. Calculate its ordinary share capital after all three issues.
  1. A$900 000
  2. B$1 000 000
  3. C$1 100 000
  4. D$1 150 000

Question 210

[3 marks]acquisition of a partnership by a company
A company's net current assets were $500 000. It then redeemed $200 000 of preference shares at par for cash, received $325 000 cash from a rights issue, and took over net current assets valued at $170 000 when it bought another business. Calculate its net current assets after these transactions.
  1. A$470 000
  2. B$625 000
  3. C$795 000
  4. D$1 195 000

Question 211

[2 marks]acquisition of a partnership by a company
Which of the following is a likely reason why a limited company buys an existing partnership business?
  1. ATo avoid having to pay tax on its own profits
  2. BTo gain its established customers and trade
  3. CTo reduce its own issued ordinary share capital
  4. DTo remove the need to keep accounting records

Question 301

[1 marks]company appropriation account and investment ratios
A company makes an operating profit of $10 080 000 for the year and has 12% debentures of $24 000 000 in issue. Calculate the net profit for the year after debenture interest.

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Question 302

[2 marks]company appropriation account and investment ratios
A company's net profit after debenture interest is $7 200 000. It transfers $1 200 000 to a general reserve and pays a preference dividend of $1 440 000 and an ordinary dividend of $3 600 000. Calculate the retained profit for the year.

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Question 303

[1 marks]company appropriation account and investment ratios
A company's profit and loss account had a balance brought forward of $7 440 000 and it retained $960 000 out of the current year's profit. Calculate the balance carried forward on the profit and loss account.

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Question 304

[3 marks]company appropriation account and investment ratios
A company earned $5 760 000 attributable to its ordinary shareholders. At the year end its ordinary share capital was $36 000 000, its general reserve $4 800 000 and its profit and loss account balance $8 400 000, and it also had 8% preference shares of $18 000 000 and 12% debentures of $24 000 000 in issue. Calculate the return on ordinary shareholders' funds.
  1. A6.32%
  2. B11.71%
  3. C12.97%
  4. D16.00%

Question 305

[3 marks]company appropriation account and investment ratios
A company has 8% preference shares of $18 000 000 and 12% debentures of $24 000 000 in issue, and its ordinary shareholders' funds are $49 200 000. Calculate its gearing, measured as fixed return capital as a percentage of total long term capital.
  1. A26.32%
  2. B46.05%
  3. C53.95%
  4. D85.37%

Question 306

[2 marks]company appropriation account and investment ratios
A company earned $5 760 000 attributable to its ordinary shareholders and paid an ordinary dividend of $3 600 000. Its ordinary share capital is $36 000 000 made up of shares of $2 each, and its net profit after debenture interest was $7 200 000. Calculate the earnings per share.
  1. A$0.16
  2. B$0.20
  3. C$0.32
  4. D$0.40

Question 307

[2 marks]company appropriation account and investment ratios
A company's operating profit before interest is $10 080 000. It pays debenture interest of $2 880 000 and a preference dividend of $1 440 000. Calculate the interest cover.
  1. A2.33 times
  2. B2.5 times
  3. C3.5 times
  4. D7 times

Question 308

[2 marks]company appropriation account and investment ratios
A company's earnings attributable to its ordinary shareholders are $5 760 000 and its ordinary dividend for the year is $3 600 000. Calculate the dividend cover.

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Question 309

[2 marks]company appropriation account and investment ratios
The ordinary shares of a company have a market value of $4.80 and its earnings per share are $0.32. Calculate the price/earnings ratio.

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Question 310

[2 marks]company appropriation account and investment ratios
The ordinary shares of a company have a nominal value of $2 and a market value of $4.80. The dividend for the year is 20 cents per share and earnings per share are $0.32. Calculate the dividend yield.
  1. A4.17%
  2. B6.67%
  3. C10.00%
  4. D24.00%

Question 311

[2 marks]company appropriation account and investment ratios
Which of the following would directors take into account in deciding how large a dividend to pay?
  1. AThe nominal value printed on the share certificates
  2. BThe number of directors serving on the board
  3. CThe cash available and the profit it needs to retain
  4. DThe original cost of the company's oldest fixed asset

Question 312

[2 marks]company appropriation account and investment ratios
A company's gearing ratio has risen sharply. What does this tell a potential investor?
  1. AReturns to ordinary shareholders become more volatile
  2. BThe market price of its shares must have risen
  3. CIt has repaid part of its long term borrowing
  4. DIts ordinary share capital has grown faster than its debt

Question 313

[1 marks]company appropriation account and investment ratios
A company's price/earnings ratio has risen. What does this suggest?
  1. AIts shares are about to be redeemed at par
  2. BIts earnings per share must have fallen
  3. CInvestors expect its earnings to grow
  4. DIt has just paid an unusually large dividend

Question 401

[1 marks]overhead absorption and job costing
What is meant by the allocation of an overhead?
  1. ASharing a cost between several cost centres fairly
  2. BTransferring a service centre's costs to production
  3. CAdding overhead to a job at a preset hourly rate
  4. DCharging a whole cost to the centre that caused it

Question 402

[1 marks]overhead absorption and job costing
Which of the following is an example of overhead apportionment?
  1. ASharing factory rent between departments on floor area
  2. BCharging the canteen manager's wage to the canteen
  3. CAdding overhead to a job at $1 250 per machine hour
  4. DWriting an under absorption off to the profit and loss account

Question 403

[1 marks]overhead absorption and job costing
Why are the costs of a service department such as a canteen reapportioned to the production departments?
  1. ABecause a canteen's costs are always a direct cost
  2. BBecause it makes no product to absorb its costs
  3. CBecause service departments are not given a budget
  4. DBecause a canteen's costs are charged to head office

Question 404

[2 marks]overhead absorption and job costing
Canteen costs of $3 000 000 are reapportioned to two production departments on the number of employees. Machining has 100 employees and Assembly has 300. Calculate the amount reapportioned to Machining.

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Question 405

[2 marks]overhead absorption and job costing
A department's budgeted overheads are $8 000 000, to which a $750 000 share of canteen costs is added. Its budgeted machine hours are 7 000 and its budgeted direct labour hours are 1 400. Overheads are absorbed on a machine hour basis. Calculate the overhead absorption rate.
  1. A$1 142.86
  2. B$1 250
  3. C$5 714.29
  4. D$6 250

Question 406

[2 marks]overhead absorption and job costing
A department's budgeted overheads are $9 750 000, to which a $2 250 000 share of canteen costs is added. Its budgeted direct labour hours are 12 000 and overheads are absorbed on a direct labour hour basis. Calculate the overhead absorption rate per direct labour hour.

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Question 407

[3 marks]overhead absorption and job costing
Job 36 uses, in the Machining department, 2 kg of material at $3 000 per kg and half a direct labour hour at $5 000 per hour. In the Assembly department it uses 1 kg of material at $4 000 per kg and 2 direct labour hours at $4 000 per hour. Calculate the total direct cost of Job 36.

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Question 408

[3 marks]overhead absorption and job costing
Job 36 uses 2 machine hours and half a direct labour hour in the Machining department, and half a machine hour and 2 direct labour hours in the Assembly department. Machining absorbs overhead at $1 250 per machine hour and Assembly at $1 000 per direct labour hour. Calculate the overhead absorbed by Job 36.
  1. A$1 125
  2. B$3 000
  3. C$4 500
  4. D$5 625

Question 409

[1 marks]overhead absorption and job costing
A job carries direct materials of $10 000, direct labour of $10 500 and absorbed overheads of $4 500. Calculate the total cost of the job.

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Question 410

[2 marks]overhead absorption and job costing
The total cost of a job is $25 000 and the company applies a margin of 20% to its jobs. Calculate the selling price of the job.
  1. A$20 000
  2. B$20 833.33
  3. C$30 000
  4. D$31 250

Question 411

[2 marks]overhead absorption and job costing
A department absorbs overhead at $1 250 per machine hour. During the year it worked 6 250 machine hours and its actual overheads were $8 500 000. Calculate the under absorption of overheads in the department.

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Question 412

[1 marks]overhead absorption and job costing
A department absorbs overhead at $1 000 per direct labour hour. During the year it worked 12 300 direct labour hours and its actual overheads were $12 177 000. Calculate the over absorption of overheads in the department.

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Question 413

[2 marks]overhead absorption and job costing
One department under absorbed its overheads by $687 500 during the year while another over absorbed by $123 000. Calculate the total under or over absorption for the year.
  1. A$564 500 under absorbed
  2. B$564 500 over absorbed
  3. C$810 500 under absorbed
  4. D$810 500 over absorbed

Question 414

[2 marks]overhead absorption and job costing
How is an under absorption of overheads dealt with in the financial statements?
  1. AAdded to the value of closing stock in the balance sheet
  2. BCarried forward and absorbed by next year's jobs
  3. CCredited to the profit and loss account for the year
  4. DDebited to the profit and loss account for the year

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