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ZIMSEC A Level · 9197/2 · N2016

Accounting Paper 2 November 2016

Questions
46
Total marks
100
Time allowed
105 min
Syllabus code
9197/2

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Questions
46
Pass mark
28
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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]club accounts and incomplete records
A club's receipts and payments account for the year ended 31 December 2013 shows a debit balance of $79 978. A subscription of $60 that had been credited in the bank account was not entered in the receipts and payments account, and a direct debit of $245 for stationery was also omitted. Calculate the updated cash and bank balance at 31 December 2013.

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Question 102

[3 marks]club accounts and incomplete records
A club's subscriptions for the year ended 31 December 2013 were: in arrears at 1 January $270 and prepaid at 1 January $400; received during the year $860; in arrears at 31 December $140 and prepaid at 31 December $200. Calculate the subscriptions income for the year.
  1. A$530
  2. B$860
  3. C$930
  4. D$1 190

Question 103

[2 marks]club accounts and incomplete records
A club's bar had trade payables of $9 500 at 1 January 2013 and $7 300 at 31 December 2013. Payments to suppliers during the year were $10 000. Calculate the credit purchases of refreshments for the year.

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Question 104

[3 marks]club accounts and incomplete records
A club's bar records for the year ended 31 December 2013 show sales of refreshments $128 200, opening inventory $40 000, cash purchases $68 000, credit purchases $7 800 and closing inventory $18 000. Calculate the gross profit of the bar.
  1. A$12 400
  2. B$30 400
  3. C$38 200
  4. D$74 400

Question 105

[2 marks]club accounts and incomplete records
A club's bar made a gross profit of $30 400 for the year ended 31 December 2013 and paid the barman wages of $2 400. Calculate the bar profit carried to the income and expenditure account.

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Question 106

[3 marks]club accounts and incomplete records
Equipment costing $5 000 was bought on 1 January 2012 and sold on 30 September 2013 for $3 850. Depreciation is charged at 10% per annum on cost for each month of ownership. Calculate the profit or loss on the disposal.
  1. ALoss of $150
  2. BLoss of $275
  3. CLoss of $650
  4. DLoss of $1 150

Question 107

[2 marks]club accounts and incomplete records
A club held equipment costing $25 000 at 1 January 2013. Equipment that had cost $5 000 was sold on 30 September 2013. Depreciation is charged at 10% per annum on cost for each month of ownership. Calculate the depreciation charge on equipment for the year ended 31 December 2013.

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Question 108

[2 marks]club accounts and incomplete records
A club paid general expenses of $167 during the year ended 31 December 2013. General expenses of $134 had been prepaid at 1 January 2013 and general expenses of $70 were owing at 31 December 2013. Calculate the general expenses charged in the income and expenditure account.
  1. A$103
  2. B$167
  3. C$231
  4. D$371

Question 109

[2 marks]club accounts and incomplete records
A club received a 4% loan of $15 000 on 1 April 2013 and paid interest of $365 during the year. Calculate the loan interest to be charged in the income and expenditure account for the year ended 31 December 2013.

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Question 110

[1 marks]club accounts and incomplete records
A club sold dance tickets for $1 200 during the year and paid dance expenses of $740. How is the dance shown in the income and expenditure account?
  1. AIncome $1 200 only
  2. BLoss on dance $460
  3. CExpenditure $740 only
  4. DProfit on dance $460

Question 111

[3 marks]club accounts and incomplete records
A club's income and expenditure account for the year ended 31 December 2013 shows bar profit $28 000, subscriptions $930 and profit on the annual dance $460, against general expenses $371, loan interest 450,stationery450, stationery 245, depreciation of equipment $2 375 and loss on disposal of equipment $275. Calculate the surplus of income over expenditure.
  1. A$25 674
  2. B$25 949
  3. C$26 224
  4. D$28 049

Question 112

[2 marks]club accounts and incomplete records
A club banked subscriptions of $860 during the year ended 31 December 2013 but charged $930 as subscriptions income in its income and expenditure account. Which statement best explains this treatment?
  1. AIncome must be measured on the same basis every year
  2. BIncome belongs to the period in which it is earned
  3. CIncome belongs to the period in which cash is received
  4. DIncome is reduced whenever its recovery is uncertain

Question 201

[2 marks]ratio analysis and interpretation
A company's revenue for the year ended 31 December 2011 was $1 420 000 and its gross profit was $494 000. Calculate the gross profit percentage, correct to 2 decimal places.

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Question 202

[2 marks]ratio analysis and interpretation
A company's revenue for the year ended 31 December 2011 was $1 050 000 and its profit for the year was $190 000. Calculate the net profit percentage, correct to 2 decimal places.

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Question 203

[3 marks]ratio analysis and interpretation
A company's profit for the year ended 31 December 2011 was $460 000 after finance costs of $11 000. At that date its equity was $763 000 and it had a loan repayable in 2016 of $80 000. Calculate the return on capital employed, correct to 2 decimal places.
  1. A54.57%
  2. B55.87%
  3. C60.29%
  4. D61.73%

Question 204

[2 marks]ratio analysis and interpretation
Which amount is the capital employed used in calculating the return on capital employed?
  1. ATotal assets less equity
  2. BNon-current assets only
  3. CEquity plus long term borrowings
  4. DEquity less current liabilities

Question 205

[3 marks]ratio analysis and interpretation
A company's cost of sales for the year ended 31 December 2011 was $816 000. Its inventory was $14 000 at 1 January 2011 and $16 000 at 31 December 2011. Using average inventory, calculate the rate of inventory turnover, correct to 2 decimal places.

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Question 206

[2 marks]ratio analysis and interpretation
A company's revenue for the year ended 31 December 2011 was $1 420 000 and its trade receivables at that date were $21 000. Calculate the trade receivables collection period in days, using a 365 day year, correct to 2 decimal places.

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Question 207

[2 marks]ratio analysis and interpretation
A company's current assets at 31 December 2011 were inventory $16 000, trade receivables $22 000 and cash $18 000. Its current liabilities were trade payables $16 000 and expenses owing $12 000. Calculate the acid test (quick) ratio, correct to 2 decimal places.
  1. A2.50 : 1
  2. B1.21 : 1
  3. C1.43 : 1
  4. D2.00 : 1

Question 208

[3 marks]ratio analysis and interpretation
Two companies report for the same year. Company X: gross profit percentage 34.79%, net profit percentage 32.39%, return on capital employed 55.87%. Company Y: gross profit percentage 22.29%, net profit percentage 18.10%, return on capital employed 24.21%. Which conclusion do these ratios support?
  1. AX is the more profitable on every measure
  2. BX is more profitable only on its trading margin
  3. CY controls its expenses better than X
  4. DY earns more on each dollar invested

Question 209

[2 marks]ratio analysis and interpretation
Two companies of similar size report trade receivables collection periods of 5.40 days and 7.65 days respectively. What does the shorter period show about the first company?
  1. AIt ties up more cash in receivables
  2. BIt recovers its cash from its customers sooner
  3. CIt charges a higher mark-up on its goods
  4. DIt sells more of its goods on credit

Question 210

[2 marks]ratio analysis and interpretation
Why can a comparison of two companies' ratios be misleading?
  1. ATheir published accounts are not audited
  2. BA ratio cannot be expressed as a percentage
  3. CTheir depreciation and inventory policies may differ
  4. DRatios of businesses of different sizes cannot be compared

Question 211

[2 marks]ratio analysis and interpretation
Why is inventory left out of the acid test (quick) ratio?
  1. AIt is valued at selling price, not cost
  2. BIt is not owned until it has been sold
  3. CIt is the least liquid current asset
  4. DIt is charged to the income statement when it is bought

Question 301

[1 marks]cash budgets
What is the principal budget factor?
  1. AThe constraint that limits the level of activity
  2. BThe budget prepared last in the cycle
  3. CThe largest single cost in the budget
  4. DThe gap between budget and actual

Question 302

[2 marks]cash budgets
A trading company applies a mark-up of 25% and buys only what it sells, so its purchases equal its cost of sales. Budgeted sales for May are $150 000. Calculate the budgeted purchases for May.

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Question 303

[2 marks]cash budgets
A company budgets sales of $140 000 for April 2013, of which 60% is received in the month of sale. The trade receivables of $70 000 outstanding at 31 March 2013 are all received in April. Calculate the total cash receipts budgeted for April.
  1. A$84 000
  2. B$140 000
  3. C$154 000
  4. D$210 000

Question 304

[2 marks]cash budgets
A company receives 60% of each month's sales in the month of sale and the balance in two equal instalments in the two following months. Two percent of the final instalment proves irrecoverable. What percentage of a month's sales is actually received two months after the sale?
  1. A18.0%
  2. B19.6%
  3. C20.0%
  4. D39.2%

Question 305

[3 marks]cash budgets
A company receives 60% of each month's sales in the month of sale, 20% in the following month and 19.6% two months after the sale, the remaining 0.4% being irrecoverable. Sales are budgeted at $140 000 for April, $150 000 for May and $130 000 for June. Calculate the total cash receipts budgeted for June.

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Question 306

[3 marks]cash budgets
A company pays its suppliers 40% at the time of purchase and the balance in three equal monthly instalments thereafter. Budgeted purchases for April 2013 are $112 000. The trade payables of $60 000 outstanding at 31 March 2013 are all paid in April, and operating expenses of $6 000 a month are paid in the month they arise. Calculate the total cash payments budgeted for April.
  1. A$50 800
  2. B$104 800
  3. C$110 800
  4. D$178 000

Question 307

[2 marks]cash budgets
A company pays its suppliers 40% at the time of purchase and the balance in three equal monthly instalments thereafter. Budgeted purchases are $112 000 for April and $120 000 for May, and operating expenses of $6 000 a month are paid in the month they arise. Calculate the total cash payments budgeted for May.

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Question 308

[1 marks]cash budgets
A company will buy equipment costing $5 000 on 1 June 2013, paying 30% on purchase and the balance in four equal monthly instalments thereafter. How much is paid for the equipment in June 2013?
  1. A$1 250
  2. B$1 500
  3. C$2 000
  4. D$5 000

Question 309

[2 marks]cash budgets
A company's cash budget for April 2013 shows an opening bank balance of $28 600, total receipts of $154 000 and total payments of $110 800. Calculate the budgeted bank balance at 30 April 2013.

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Question 310

[3 marks]cash budgets
A company's cash budget shows a bank balance of $113 400 at 31 May 2013. Budgeted receipts for June are $135 440 and budgeted payments for June are $95 500. Calculate the budgeted bank balance at 30 June 2013.
  1. A$39 940
  2. B$73 460
  3. C$153 340
  4. D$344 340

Question 311

[2 marks]cash budgets
Equipment bought by a business is to be depreciated at 10% per annum on cost. How does that depreciation appear in the cash budget?
  1. AIt is shown as a payment each month
  2. BIt is shown as a receipt each month
  3. CIt is deducted from the closing bank balance
  4. DIt is not shown, as no cash moves

Question 312

[2 marks]cash budgets
Which of the following is a benefit a business gains from preparing a cash budget?
  1. AIt guarantees the profit forecast is met
  2. BIt removes the need for a bank account
  3. CIt replaces the cash book
  4. DA cash shortage can be arranged for in advance

Question 401

[2 marks]company share capital and reserves
Why might a company raise finance by issuing redeemable preference shares rather than ordinary shares?
  1. AThe shares can never be bought back by the company later
  2. BThe existing shareholders keep full voting control
  3. CThe dividend is a legally enforceable charge
  4. DThe company avoids paying any dividend at all

Question 402

[2 marks]company share capital and reserves
A company had 120 000 ordinary shares of $1 each and a general reserve of $40 000. On 28 February 2013 it made a bonus issue of one ordinary share for every five held, using the general reserve. Calculate the balance on the general reserve after the bonus issue.

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Question 403

[2 marks]company share capital and reserves
A company had 80 000 redeemable preference shares of $1 each. On 13 April 2013 one fifth of them were redeemed at a premium of 10%. Calculate the cash paid on the redemption.

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Question 404

[3 marks]company share capital and reserves
A company paid $17 600 to redeem preference shares, funding the redemption by an issue of ordinary shares of $1 each at $1.25 per share. How many ordinary shares were issued, and how much was credited to share premium?
  1. A14 080 shares, premium $4 400
  2. B17 600 shares, premium $4 400
  3. C22 000 shares, premium $5 500
  4. D14 080 shares, premium $3 520

Question 405

[2 marks]company share capital and reserves
Preference shares with a nominal value of $16 000 were redeemed, and ordinary shares with a nominal value of $14 080 were issued to fund the redemption. Calculate the transfer that must be made to the capital redemption reserve.
  1. A$1 600
  2. B$1 920
  3. C$14 080
  4. D$16 000

Question 406

[2 marks]company share capital and reserves
A company's share premium account stood at $12 000. It then issued ordinary shares at a premium totalling $3 520, and wrote off against the account the $1 600 premium paid on redeeming preference shares. Calculate the balance on the share premium account after these entries.

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Question 407

[3 marks]company share capital and reserves
A company with 158 080 ordinary shares of $1 each made a rights issue on 24 June 2013 of one share for every eight held, at a premium of 20 cents per share. Calculate the total proceeds of the rights issue.

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Question 408

[2 marks]company share capital and reserves
A company held cash of $6 000 on 1 January 2013. During the following seven months it received $23 712 from a rights issue and $25 000 from an issue of 8% debentures at par. Its redemption of preference shares was funded in full by a simultaneous issue of ordinary shares, so no cash moved on it. Calculate the cash held at 31 July 2013.

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Question 409

[2 marks]company share capital and reserves
A company began 2013 with 120 000 ordinary shares of $1 each. It then made a bonus issue of 24 000 shares, an issue of 14 080 shares to fund a redemption of preference shares, and a rights issue of 19 760 shares. Calculate the ordinary share capital at 31 July 2013.

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Question 410

[2 marks]company share capital and reserves
A company made a rights issue at $1.20 per share at a time when the market value of its shares was $1.30. How is the market value of $1.30 treated in the accounts?
  1. AIt is not recorded anywhere
  2. BIt is credited to the revaluation reserve
  3. CIt is recorded as the issue price of the shares
  4. DIt is credited to share premium

Question 411

[1 marks]company share capital and reserves
What effect does a bonus issue of ordinary shares have on a company's bank balance?
  1. ANo effect
  2. BIt increases it by the market value
  3. CIt increases it by the nominal value
  4. DIt reduces it by the nominal value

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