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ZIMSEC A Level · 9197/2 · N2017

Accounting Paper 2 November 2017

Questions
45
Total marks
100
Time allowed
105 min
Syllabus code
9197/2

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Questions
45
Pass mark
27
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Answer every question in the printed order, get marked at the end, then see the answers.

The questions

Question 101

[3 marks]incomplete records
A trader banked $379 360 received from trade receivables during the year ended 31 December 2014 and used a further $96 300 of receipts for cash payments without banking it. Trade receivables were $90 310 at 1 January 2014 and $86 240 at 31 December 2014. Calculate the sales for the year.

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Question 102

[3 marks]incomplete records
A trader paid $294 870 to trade payables through the bank during the year ended 31 December 2014 and a further $29 940 in cash. Trade payables were $56 240 at 1 January 2014 and $73 890 at 31 December 2014. Calculate the purchases for the year.

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Question 103

[2 marks]incomplete records
A trader's revenue for the year ended 31 December 2014 was $471 590 and purchases were $342 460. Inventory was $138 620 at 1 January 2014 and $151 440 at 31 December 2014. Calculate the gross profit for the year.
  1. A$116 310
  2. B$129 130
  3. C$141 950
  4. D$280 570

Question 104

[2 marks]incomplete records
A trader paid rent of $16 500 during the year ended 31 December 2014. Rent of $1 500 was accrued at 1 January 2014 and nothing was accrued or prepaid at 31 December 2014. Calculate the rent charged in the income statement for the year.
  1. A$1 500
  2. B$15 000
  3. C$16 500
  4. D$18 000

Question 105

[2 marks]incomplete records
A trader paid rates of $8 900 during the year ended 31 December 2014. Rates prepaid were $2 100 at 1 January 2014 and $2 250 at 31 December 2014. Calculate the rates charged in the income statement for the year.

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Question 106

[2 marks]incomplete records
A trader's fittings were valued at $25 000 on 1 January 2014 and at $22 500 on 31 December 2014. Fittings costing $7 500 were bought during the year. Calculate the depreciation of fittings for the year.
  1. A$2 500
  2. B$5 000
  3. C$7 500
  4. D$10 000

Question 107

[3 marks]incomplete records
A trader's gross profit for the year ended 31 December 2014 was $141 950. Expenses for the year were wages $54 720, rent $15 000, rates $8 750, sundry expenses $3 750 and depreciation of fittings $10 000. Calculate the profit for the year.

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Question 108

[3 marks]incomplete records
At 1 January 2014 a trader's assets were fittings $25 000, inventory $138 620, trade receivables $90 310, rates prepaid $2 100 and a bank balance of $4 050. His liabilities were trade payables $56 240 and rent accrued $1 500. Calculate his capital at 1 January 2014.
  1. A$202 340
  2. B$203 840
  3. C$260 080
  4. D$317 820

Question 109

[1 marks]incomplete records
During the year ended 31 December 2014 a trader withdrew $57 910 from the business bank account for his own use and also kept $11 640 of cash takings for himself. Calculate the total drawings for the year.

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Question 110

[2 marks]incomplete records
A trader's capital at 1 January 2014 was $202 340. His profit for the year was $49 730 and his drawings for the year were $69 550. Calculate his capital at 31 December 2014.

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Question 111

[2 marks]incomplete records
Why must a business account for accruals and prepayments at the year end?
  1. ASo expenses are matched to the period they belong to
  2. BSo that the bank statement agrees with the cash book at the year end
  3. CSo that the business pays less tax on its profit
  4. DSo that every expense is recorded when it is paid

Question 112

[2 marks]incomplete records
Which of the following is a disadvantage of a computerised accounting system?
  1. AReports can only be produced once a year
  2. BLedger balances have to be added by hand
  3. CA system failure can destroy the records
  4. DArithmetic errors are more likely to occur

Question 201

[2 marks]company share capital and reserves
What distinguishes a capital reserve from a revenue reserve?
  1. AA capital reserve is always larger than a revenue reserve
  2. BA capital reserve arises out of the year's trading profit
  3. CA capital reserve is shown as a liability, not as equity
  4. DA capital reserve cannot be paid out as a cash dividend

Question 202

[2 marks]company share capital and reserves
A company redeemed 10 000 preference shares of $1 each at a premium of 5 cents per share. Calculate the cash paid on the redemption.

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Question 203

[2 marks]company share capital and reserves
A company's capital redemption reserve stood at $25 000. It then redeemed preference shares with a nominal value of $10 000 wholly out of retained earnings, no fresh shares being issued to fund the redemption. Calculate the balance on the capital redemption reserve after the redemption.
  1. A$10 000
  2. B$25 000
  3. C$35 000
  4. D$35 500

Question 204

[3 marks]company share capital and reserves
A company's share premium account stood at $12 500. A premium of $500 paid on the redemption of preference shares was written off against it, and the company then made a rights issue of 25 000 ordinary shares of $1 each at $1.20 per share. Calculate the balance on the share premium account after these transactions.

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Question 205

[2 marks]company share capital and reserves
A company's buildings, carried in the books at $25 000, were revalued to $32 500. How is the surplus treated?
  1. ACredited to share premium
  2. BCredited to retained earnings
  3. CCredited to a revaluation reserve
  4. DCredited to the income statement

Question 206

[2 marks]company share capital and reserves
A company with 100 000 ordinary shares of $1 each made a rights issue of one share for every four held, at $1.20 per share. Calculate the total proceeds of the rights issue.

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Question 207

[2 marks]company share capital and reserves
A company had 125 000 ordinary shares of $1 each in issue and made a bonus issue of one share for every ten held. How many bonus shares were issued and what nominal amount was capitalised?
  1. A12 500 shares, $12 500
  2. B10 000 shares, $10 000
  3. C12 500 shares, $15 000
  4. D13 750 shares, $13 750

Question 208

[3 marks]company share capital and reserves
A company's retained earnings stood at $18 750. It then transferred $10 000 to a capital redemption reserve on redeeming preference shares, and applied a further $6 250 of retained earnings towards a bonus issue. Calculate the retained earnings after these transactions.
  1. A$2 500
  2. B$8 750
  3. C$12 500
  4. D$18 750

Question 209

[2 marks]company share capital and reserves
A company began with 100 000 ordinary shares of $1 each. It then issued 25 000 shares in a rights issue and 12 500 shares in a bonus issue. Calculate the ordinary share capital at 28 February 2014.

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Question 210

[3 marks]company share capital and reserves
A company's current assets were $110 000 at 31 December 2013. It then paid $10 500 to redeem preference shares and received $30 000 from a rights issue. A motor vehicle costing $2 500 was bought on credit. Calculate the current assets at 28 February 2014.

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Question 211

[2 marks]company share capital and reserves
When must a company create a capital redemption reserve?
  1. AWhen shares are redeemed out of distributable profits
  2. BWhen a bonus issue of shares is made
  3. CWhen an asset is revalued upwards
  4. DWhen shares are issued at a premium to their nominal value

Question 301

[2 marks]depreciation and disposal of non-current assets
What is depreciation?
  1. AThe cost of repairing and maintaining an asset
  2. BThe allocation of an asset's cost over its useful life
  3. CThe fall in the market price of an asset
  4. DThe money set aside each year to replace the asset when it wears out

Question 302

[1 marks]depreciation and disposal of non-current assets
Which of these is a cause of depreciation of a non-current asset?
  1. AInflation
  2. BA rights issue
  3. CObsolescence
  4. DA bad debt

Question 303

[2 marks]depreciation and disposal of non-current assets
A bus company's buses stood at $75 000 at cost on 31 December 2013 and consisted of three buses. Bus LB01 had cost $24 000 and bus LB02 had cost $26 000. Calculate the cost of the third bus, LB03.

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Question 304

[3 marks]depreciation and disposal of non-current assets
A company depreciates its buses at 25% per annum on cost, charged for each month of ownership. During the year ended 31 December 2014 it owned bus LB01 (cost $24 000) for 3 months before selling it, bus LB02 (cost $26 000) for 6 months before selling it, bus LB03 (cost $25 000) for the whole year, and bus LB04 (cost $32 000) for the 3 months after buying it. Calculate the depreciation charge for the year.

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Question 305

[2 marks]depreciation and disposal of non-current assets
A bus costing $24 000 was bought on 1 January 2011 and sold on 1 April 2014. Depreciation is charged at 25% per annum on cost for each month of ownership. Calculate the accumulated depreciation on the bus at the date of sale.

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Question 306

[2 marks]depreciation and disposal of non-current assets
A bus costing $26 000 was bought on 1 April 2012 and sold on 1 July 2014. Depreciation is charged at 25% per annum on cost for each month of ownership. Calculate the accumulated depreciation on the bus at the date of sale.
  1. A$11 375
  2. B$13 000
  3. C$14 625
  4. D$16 250

Question 307

[2 marks]depreciation and disposal of non-current assets
A company's buses at cost account opened the year ended 31 December 2014 with a balance of $75 000. Buses costing $24 000 and $26 000 were sold during the year, and a bus costing $32 000 was bought on 1 October 2014. Calculate the balance carried down on the buses at cost account at 31 December 2014.

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Question 308

[3 marks]depreciation and disposal of non-current assets
A company's accumulated depreciation account for buses opened the year with a credit balance of $41 875. The charge for the year was $13 000, and accumulated depreciation of $19 500 and $14 625 was transferred out on the disposal of two buses. Calculate the balance carried down at the year end.
  1. A$7 750
  2. B$20 750
  3. C$54 875
  4. D$89 000

Question 309

[2 marks]depreciation and disposal of non-current assets
A bus that had cost $24 000 carried accumulated depreciation of $19 500 when it was sold for $5 000. Calculate the profit or loss on the disposal.
  1. AProfit of $5 000
  2. BProfit of $500
  3. CLoss of $19 000
  4. DLoss of $500

Question 310

[2 marks]depreciation and disposal of non-current assets
A bus that had cost $26 000 carried accumulated depreciation of $14 625 when it was sold for $10 000. Calculate the loss on the disposal.

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Question 311

[2 marks]depreciation and disposal of non-current assets
A business opens a disposal account when it sells a non-current asset. Which entry removes the accumulated depreciation on the asset sold?
  1. ADebit accumulated depreciation, credit disposal
  2. BDebit disposal, credit accumulated depreciation
  3. CDebit disposal, credit the asset at cost account
  4. DDebit the income statement, credit disposal

Question 312

[2 marks]depreciation and disposal of non-current assets
May a company change its depreciation method from the straight line method to the reducing balance method?
  1. ANo, unless the asset is sold and replaced
  2. BYes, where it gives a fairer presentation and is disclosed
  3. CYes, at any time and without disclosure
  4. DNo, the method chosen at purchase can never be changed

Question 401

[2 marks]investment appraisal
A project is forecast to earn a constant annual profit of $60 000 after charging depreciation of $100 000 a year. Calculate the annual net cash inflow from the project.

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Question 402

[2 marks]investment appraisal
Why is depreciation added back to profit when the cash flows of a project are calculated?
  1. AIt is an expense of a later period
  2. BIt is not a movement of cash
  3. CIt is charged twice in the accounts
  4. DIt is recovered when the asset is sold

Question 403

[3 marks]investment appraisal
A project has an initial outlay of $450 000, a residual value of $50 000 and a constant annual profit of $40 000. Calculate its accounting rate of return using the average investment.
  1. A8.89%
  2. B10.00%
  3. C16.00%
  4. D80.00%

Question 404

[2 marks]investment appraisal
A project has an initial outlay of $530 000, a residual value of $30 000 and a constant annual profit of $60 000. Calculate its accounting rate of return using the average investment, correct to 2 decimal places.

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Question 405

[2 marks]investment appraisal
A project requires an initial outlay of $450 000 and is expected to generate a constant net cash inflow of $90 000 a year. Calculate its pay back period in years.

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Question 406

[3 marks]investment appraisal
A project requires an initial outlay of $530 000 and is expected to generate a constant net cash inflow of $160 000 a year. Calculate its pay back period.
  1. A5 years 4 months
  2. B8 years 10 months
  3. C3 years 2 months
  4. D3 years 4 months

Question 407

[2 marks]investment appraisal
A project generates a net cash inflow of $160 000 a year for five years and has a residual value of $30 000 received at the end of year 5. What cash flow for year 5 is used in the net present value calculation?
  1. A$130 000
  2. B$160 000
  3. C$190 000
  4. D$220 000

Question 408

[3 marks]investment appraisal
A project requires an initial outlay of $530 000 and generates net cash inflows of $160 000 in each of years 1 to 4 and $190 000 in year 5. The cost of capital is 12%, and the present value of $1 at 12% is 0.893 for year 1, 0.797 for year 2, 0.712 for year 3, 0.636 for year 4 and 0.567 for year 5. Calculate the net present value of the project.

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Question 409

[2 marks]investment appraisal
Project A has a net present value of $17 320, an accounting rate of return of 16.00% and a pay back period of 5 years. Project B has a net present value of $63 810, an accounting rate of return of 21.43% and a pay back period of about 3 years 4 months. Which project should be undertaken, and why?
  1. AProject A, since it lasts eight years
  2. BProject A, since its pay back is longer
  3. CProject B, ahead on all three measures
  4. DProject B, since it costs more to start

Question 410

[2 marks]investment appraisal
Two projects are compared by net present value. One has a useful life of five years and the other a useful life of eight years. What qualification should be made to that comparison?
  1. AThe shorter project is always the better one
  2. BNet present value ignores the cost of capital
  3. CThe longer project has the higher net present value
  4. DUnequal lives make the two figures not strictly comparable

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