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ZIMSEC A Level · 9197/2 · N2012

Accounting Paper 2 November 2012

Questions
47
Total marks
100
Time allowed
105 min
Syllabus code
9197/2

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Questions
47
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]company final accounts
State what the prudence concept requires a business to do when it prepares its financial statements.
  1. ARecord every item at the amount actually paid for it
  2. BBring every expected future profit into this year's accounts at once
  3. CTreat every item the same way from one year to the next
  4. DProvide for all foreseeable losses, but take no unrealised profit

Question 102

[2 marks]company final accounts
A company's closing inventory cost $10 150 and its net realisable value is $9 000. State, in dollars, the value at which the closing inventory should appear in the financial statements.

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Question 103

[1 marks]company final accounts
Furniture cost $5 400 and is depreciated at 8% per annum on the straight line basis. Calculate the depreciation charge on the furniture for the year, in dollars.

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Question 104

[2 marks]company final accounts
Machinery cost $37 000 and the provision for depreciation on machinery brought forward is $9 000. Machinery is depreciated at 5% per annum on the reducing balance basis. Calculate the depreciation charge on the machinery for the year, in dollars.

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Question 105

[2 marks]company final accounts
Trade receivables at the year end are $42 000 and the provision for bad and doubtful debts brought forward is $500. The provision is to be maintained at 4% of trade receivables. Calculate the amount charged to the income statement for the year in respect of the provision, in dollars.

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Question 106

[2 marks]company final accounts
A 6% loan of $50 000 was outstanding for the whole of the year, and interest of $2 000 on it was paid during the year. Calculate the loan interest accrued at the year end, in dollars.

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Question 107

[2 marks]company final accounts
A company's issued ordinary share capital is $165 000, made up of shares of $1 each. A final dividend of 5% is recommended. Calculate the proposed final dividend, in dollars.

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Question 108

[3 marks]company final accounts
A company's net profit for the year is $37 888 and the retained profit brought forward is $15 600. During the year $7 000 was transferred to the general reserve, an interim dividend of $7 800 was paid, and a final dividend of $8 250 is proposed. Calculate the retained profit carried forward, in dollars.

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Question 109

[3 marks]company final accounts
At 31 December 2009 a company had trade payables of $18 000, accrued loan interest of $1 000, a proposed final dividend of $8 250 which it provides for as a liability, a bank balance of $19 100 in hand and a 6% loan of $50 000 repayable in 2020. Calculate the total of the current liabilities section of the statement of financial position, in dollars.

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Question 110

[2 marks]company final accounts
A company has a 6% loan of $50 000 repayable in 2020, and $1 000 of interest on that loan is accrued at the year end of 31 December 2009. How are these two amounts classified in the statement of financial position?
  1. ABoth are current liabilities
  2. BThe loan is non-current and the interest is current
  3. CBoth are non-current liabilities
  4. DThe loan is current and the interest is non-current

Question 111

[2 marks]company final accounts
A motor vehicle that cost $5 000 and carries accumulated depreciation of $1 500 is destroyed in an accident and is a complete write-off. How is this dealt with in the accounts?
  1. AThe full $5 000 cost is charged as a loss for the year
  2. BOnly the $1 500 depreciation is charged for the year
  3. CCost and depreciation go, and $3 500 is a loss
  4. DThe vehicle stays in the books until the insurer pays

Question 112

[2 marks]company final accounts
Where does a transfer of $7 000 to the general reserve appear in a company's final accounts?
  1. AAs an appropriation of profit after net profit
  2. BAs an expense in the income statement
  3. CAs a current liability at the year end
  4. DAs a deduction from ordinary share capital

Question 201

[2 marks]ratio analysis
Which information does a banker most want from a company's published accounts before granting it a loan?
  1. AThe names and addresses of the ordinary shareholders
  2. BThe market share held by each of its products
  3. CLiquidity and the assets offered as security
  4. DThe wage rate paid to each grade of employee

Question 202

[2 marks]ratio analysis
Which information does a supplier of goods on credit most want from a company's accounts?
  1. AThe earnings per share and price earnings ratio
  2. BThe corporation tax the company has paid
  3. CThe proportion of shares held by directors
  4. DHow quickly the company pays its creditors

Question 203

[2 marks]ratio analysis
A company has inventory of $340 000, trade receivables of $52 000 and a bank overdraft of $12 000. Its trade payables are $98 000, taxation due is $2 500 and dividend due is $23 000. Calculate the current ratio.
  1. A0.35 : 1
  2. B2.89 : 1
  3. C3.17 : 1
  4. D3.27 : 1

Question 204

[2 marks]ratio analysis
A company has current assets of $392 000, of which inventory is $340 000, and current liabilities of $135 500. Calculate the acid test ratio, correct to two decimal places.

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Question 205

[2 marks]ratio analysis
Sales for the year were $1 200 000 and gross profit was $200 000. Inventory was $260 000 at the start of the year and $290 000 at the end. Calculate the rate of inventory (stock) turnover, correct to two decimal places.

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Question 206

[2 marks]ratio analysis
A company is financed by ordinary shareholders' funds of $486 000, 8% redeemable preference shares of $100 000 and 7% debentures of $36 000. Calculate the gearing ratio.
  1. A6.90%
  2. B17.06%
  3. C21.86%
  4. D27.98%

Question 207

[2 marks]ratio analysis
An ordinary share has a market price of $1.10 and the dividend paid on it for the year was $0.06 per share. Calculate the dividend yield, correct to two decimal places.

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Question 208

[2 marks]ratio analysis
A company's net profit for the year is $96 000, out of which a preference dividend of $8 000 must be paid. There are 700 000 ordinary shares in issue. Calculate the earnings per share.
  1. A$0.1257
  2. B$0.1371
  3. C$0.2514
  4. D$0.2743

Question 209

[2 marks]ratio analysis
An ordinary share has a market price of $1.10 and earnings per share of $0.1067. Calculate the price earnings ratio, correct to two decimal places.

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Question 210

[2 marks]ratio analysis
Sales for the year were $1 300 000 and the net profit was $96 000. Calculate the net profit percentage, correct to two decimal places.

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Question 211

[2 marks]ratio analysis
A company earned a net profit of $96 000 and paid a preference dividend of $8 000. Its ordinary share capital is $350 000, its share premium is $98 000 and its retained profits are $38 000. Calculate the return on ordinary shareholders' funds.
  1. A18.11%
  2. B19.75%
  3. C25.14%
  4. D27.43%

Question 212

[3 marks]ratio analysis
A general dealer's current ratio fell from 3.96 : 1 to 2.89 : 1 over a year, its acid test ratio fell from 0.86 : 1 to 0.38 : 1, its bank swung from $20 000 in hand to a $12 000 overdraft and its inventory rose from $290 000 to $340 000. What do these figures show about its liquidity?
  1. ALiquidity is sound, as the current ratio is above 2 : 1
  2. BLiquidity has worsened and cash is now tied up in inventory
  3. CLiquidity is unchanged, since both ratios moved together
  4. DLiquidity has improved because inventory has grown

Question 301

[2 marks]process costing
In Process 1 the materials used cost $45 000 at $1.50 per kg, and each unit of output needs 3 kg of material. Calculate the number of units produced in Process 1.

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Question 302

[2 marks]process costing
A process produced 10 000 units. Each unit takes 30 minutes of direct labour and labour is paid $20 per hour. Calculate the direct labour cost of the process, in dollars.

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Question 303

[1 marks]process costing
A process used 5 000 direct labour hours and overhead is absorbed at $8 per direct labour hour. Calculate the overhead charged to the process, in dollars.

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Question 304

[2 marks]process costing
Scrap arising in a manufacturing process was sold for $5 000. How is this dealt with in the process account?
  1. ADebited to the process account as a further cost
  2. BCredited to the next process account instead
  3. CCredited to the process account, reducing the cost of output
  4. DShown as income in the statement of financial position

Question 305

[2 marks]process costing
A process account is charged with materials $45 000, direct labour $100 000 and overhead $40 000, and the scrap arising was sold for $5 000. The 10 000 units produced were all transferred to the next process. Calculate the cost of one completed unit, in dollars.

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Question 306

[2 marks]process costing
Process 2 received 10 000 units from Process 1. There was no opening work in progress, and the closing work in progress was 1 000 units. Calculate the number of units completed and transferred out of Process 2.

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Question 307

[2 marks]process costing
In a process, 9 000 units were completed and the closing work in progress of 1 000 units was 80% complete as to materials. There was no opening work in progress. Calculate the equivalent units for materials.

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Question 308

[3 marks]process costing
A unit passed into Process 2 carries a cost of $18 from the previous process. Process 2 adds 4 litres of material at $0.50 a litre, 20 minutes of direct labour at $15 an hour, and overhead absorbed at $12 per direct labour hour. Calculate the total cost of one completed unit of Process 2, in dollars.

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Question 309

[3 marks]process costing
Closing work in progress is 1 000 units. They are complete as to the $18 a unit transferred in from the previous process, 80% complete as to materials at $2 a unit, and 60% complete as to labour at $5 a unit and overhead at $4 a unit. Calculate the value of the closing work in progress, in dollars.

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Question 310

[3 marks]process costing
A process account is debited with 10 000 units transferred in at $18 each, materials on 9 800 equivalent units at $2 each, direct labour on 9 600 equivalent units at $5 each and overhead on 9 600 equivalent units at $4 each. Calculate the total cost debited to the process account, in dollars.

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Question 311

[2 marks]process costing
What is a by-product in process costing?
  1. AA product made in a separate process from waste
  2. BA product that has failed the quality check
  3. CA product of equal value made in the same process
  4. DA minor product arising alongside the main one

Question 312

[1 marks]process costing
How is the net realisable value of a by-product treated in process costing?
  1. ADebited to the process account it arises in
  2. BCredited to the process account it arises in
  3. CAdded to the value of the closing work in progress
  4. DCarried forward until the by-product is sold

Question 401

[2 marks]partnership sale to a limited company
Partners sold their business to a limited company. The company took over the sundry assets of $40 000 but not the bank balance of $1 000 and not the creditors of $5 000. Which amount is debited to the realisation account?
  1. A$40 000, the sundry assets only
  2. B$41 000, the sundry assets and bank
  3. C$45 000, the sundry assets and creditors
  4. D$46 000, the assets, bank and creditors

Question 402

[3 marks]partnership sale to a limited company
A partnership's sundry assets of $40 000 were taken over by a limited company for a purchase consideration of $46 000. The partners Exx and Wye share profits and losses 3 : 2. Calculate Exx's share of the profit on realisation, in dollars.

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Question 403

[2 marks]partnership sale to a limited company
A partner had made a loan of $8 000 to the partnership. On the sale of the business he was given $5 000 of debentures in the purchasing company, and the rest of the loan was paid in cash. Calculate the cash paid to settle the loan, in dollars.

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Question 404

[2 marks]partnership sale to a limited company
A limited company buying a partnership takes over the assets but not the creditors of $5 000. How are those creditors dealt with?
  1. ADebited to the realisation account
  2. BTaken over as part of the consideration
  3. CCharged to the partners' capital accounts
  4. DPaid out of the partnership bank account

Question 405

[2 marks]partnership sale to a limited company
On the sale of a partnership, one partner's current account has a debit balance of $2 000. How is that balance dealt with?
  1. ACredited to that partner's capital account
  2. BDebited to that partner's capital account
  3. CDebited to the realisation account
  4. DWritten off against the profit on realisation

Question 406

[2 marks]partnership sale to a limited company
Part of the purchase consideration for a partnership was settled in $30 000 worth of ordinary shares, shared between the partners Exx and Wye in their profit sharing ratio of 3 : 2. Calculate the value of the shares Wye receives, in dollars.

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Question 407

[3 marks]partnership sale to a limited company
On the sale of a partnership, Exx's capital account stood at $15 000, his current account had a debit balance of $2 000 and his share of the profit on realisation was $3 600. He was allotted shares worth $18 000. Calculate the amount Exx must pay into the partnership bank account, in dollars.

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Question 408

[3 marks]partnership sale to a limited company
On the sale of a partnership, Wye's capital account stood at $12 000, his current account had a credit balance of $3 000 and his share of the profit on realisation was $2 400. He was allotted shares worth $12 000. Calculate the cash Wye receives in final settlement, in dollars.

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Question 409

[2 marks]partnership sale to a limited company
A partner's loan of $8 000 to his partnership carried interest at 5% per annum. On the sale of the business he took enough 8% debentures in the purchasing company to earn him the same interest as before. Calculate the nominal value of the debentures he received, in dollars.

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Question 410

[2 marks]partnership sale to a limited company
Ordinary shares of $1 each were issued at a premium of 25 cents to settle $30 000 of a purchase consideration, and were shared between Exx and Wye in the ratio 3 : 2. Calculate the number of shares Exx receives.

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Question 411

[2 marks]partnership sale to a limited company
Why might partners decide to sell their business to a limited company?
  1. ATo avoid having to keep accounting records
  2. BTo escape paying the creditors of the firm
  3. CTo gain limited liability
  4. DTo keep the whole of the profit for themselves

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