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ZIMSEC A Level · 9197/3 · J2017

Accounting Paper 3 June 2017

Questions
45
Total marks
100
Syllabus code
9197/3

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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]partnership incomplete records, appropriation and final accounts
A trader's trade receivables were $17 000 at the start of the year and $21 000 at the end. During the year $214 000 was received from trade receivables, bad debts of $2 300 were written off, discounts of $1 700 were allowed and customers returned goods worth $3 800. Calculate the sales invoiced to credit customers for the year.

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Question 102

[2 marks]partnership incomplete records, appropriation and final accounts
A trader's trade payables were $9 000 at the start of the year and $15 000 at the end. During the year $110 500 was paid to suppliers and discounts of $2 600 were received. Calculate the credit purchases for the year.

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Question 103

[2 marks]partnership incomplete records, appropriation and final accounts
A business had inventory of $22 000 at the start of the year and $20 000 at the end. Its purchases for the year were $119 100 and its turnover, after deducting goods returned by customers, was $222 000. Calculate the gross profit for the year.

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Question 104

[2 marks]partnership incomplete records, appropriation and final accounts
During the year a business paid rates of $3 500 and insurance of $5 200. At the start of the year rates of $1 200 were owing and insurance of $700 had been paid in advance. Nothing was owing or prepaid on either at the year end. Calculate the total charge for rates and insurance in the income statement.

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Question 105

[2 marks]partnership incomplete records, appropriation and final accounts
A partnership received a bank loan of $50 000 on 1 January 2012 at an interest rate of 5% per annum. No interest had been paid by its year end of 30 June 2012. Calculate the loan interest to be charged in the income statement for the year ended 30 June 2012.

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Question 106

[2 marks]partnership incomplete records, appropriation and final accounts
Equipment with a net book value of $10 000 at 1 July 2011 was sold on 31 December 2011. New equipment costing $62 000 was bought on 1 January 2012. Equipment is depreciated at 15% per annum by the reducing balance method, charged for each month of ownership. Calculate the total depreciation on equipment for the year ended 30 June 2012.

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Question 107

[2 marks]partnership incomplete records, appropriation and final accounts
Equipment with a net book value of $10 000 at the start of the year was sold six months later for $6 500. Depreciation of $750 had been charged on it up to the date of sale. Calculate the loss on disposal.

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Question 108

[3 marks]partnership incomplete records, appropriation and final accounts
A partnership's income statement shows gross profit of $100 900 and discount received of $2 600. Its expenses for the year are insurance $5 900, electricity $3 110, rates $2 300, wages and salaries $40 000, stationery $2 800, loan interest $1 250, sundry expenses $2 900, depreciation of equipment $5 400, loss on disposal of equipment $2 750, discount allowed $1 700 and bad debts $2 300. Calculate the net profit for the year.

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Question 109

[2 marks]partnership incomplete records, appropriation and final accounts
Buildings standing in a partnership's books at a net book value of $79 000 were revalued to $100 000 on the first day of the financial year. Three partners share profits and losses equally. Calculate the amount credited to each partner's capital account for the revaluation.

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Question 110

[2 marks]partnership incomplete records, appropriation and final accounts
A partner's capital account stood at $75 000 and was credited with a revaluation surplus of $7 000 on the first day of the financial year. The partnership agreement allows interest on capital at 8% per annum on the balance of the capital account. Calculate the partner's interest on capital for the year.

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Question 111

[2 marks]partnership incomplete records, appropriation and final accounts
A partnership's net profit for the year is $33 090. Interest on capital of $6 560, $2 480 and $2 000 is allowed to the three partners, and one of them is entitled to a salary of $12 000. The partners then share what is left equally. Calculate each partner's share of the residual profit.

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Question 112

[3 marks]partnership incomplete records, appropriation and final accounts
A partner's current account had a credit balance of $5 000 at the start of the year. During the year she was credited with interest on capital of $6 560, a salary of $12 000 and a share of profit of $3 350, and she withdrew $18 000 in cash for her own use. Calculate the credit balance on her current account at the year end.

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Question 113

[2 marks]partnership incomplete records, appropriation and final accounts
A partner's current account had a debit balance of $3 500 at the start of the year. During the year he was credited with interest on capital of $2 000 and a share of profit of $3 350, and he withdrew $9 000 in cash for his own use. What is the balance on his current account at the year end?
  1. A$7 150 credit
  2. B$150 debit
  3. C$1 850 credit
  4. D$7 150 debit

Question 114

[2 marks]partnership incomplete records, appropriation and final accounts
Which of the following is a disadvantage of trading as a partnership rather than as a limited company?
  1. AProfits are taxed twice, once in the firm and again in the partners' hands.
  2. BCapital can only be raised by selling shares to the public.
  3. CThe partners have unlimited liability for the debts of the firm.
  4. DThe firm must publish its accounts for anyone to inspect.

Question 201

[3 marks]dissolution of a partnership on sale to a company
A partnership is sold to a company for a purchase consideration of $189 000, and the company also takes over the partnership's trade payables of $7 000. The assets transferred stand in the partnership's books at buildings $85 000, equipment $40 000, inventory $12 000 and trade receivables $14 000. The bank balance is not transferred. Calculate the profit on realisation.

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Question 202

[2 marks]dissolution of a partnership on sale to a company
A company buys a partnership for $189 000. The assets and liabilities it takes over are valued at buildings $90 000, equipment $40 000, inventory $10 000, trade receivables $14 000 and trade payables $7 000. Calculate the goodwill included in the purchase price.

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Question 203

[3 marks]dissolution of a partnership on sale to a company
On the dissolution of a partnership, a partner's capital account shows a credit balance of $80 000. Her current account credit balance of $10 000 is transferred to it and she is credited with $15 000 as her share of the profit on realisation. She takes shares in the purchasing company valued at $43 000. Calculate the cash she receives in final settlement.

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Question 204

[2 marks]dissolution of a partnership on sale to a company
On the dissolution of a partnership, a partner's capital account is credited with $42 000 in all, and he is allotted shares in the purchasing company valued at $43 000. What happens when his account is closed?
  1. AThe $1 000 is written off as a loss on realisation.
  2. BHe pays $1 000 into the partnership bank account.
  3. CHe receives $1 000 from the partnership bank account.
  4. DHe is allotted $1 000 fewer shares.

Question 205

[2 marks]dissolution of a partnership on sale to a company
As part of a purchase consideration, a company issues 100 000 ordinary shares of $1 each at a value of $1.29 per share. Calculate the total share premium arising on the issue.

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Question 206

[3 marks]dissolution of a partnership on sale to a company
Three former partners each accept a job with the purchasing company at an annual salary of $10 000. Between them they receive $66 000 in cash, which they can invest at 10% per annum, and 100 000 ordinary shares on which a dividend of $0.0945 a share is expected. Calculate their expected total annual income.

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Question 207

[2 marks]dissolution of a partnership on sale to a company
Three partners are offered jobs, shares and cash by a company that wants to buy their firm. Their expected income under the offer is $46 050 a year between them. The partnership itself earns $50 000 a year and is expected to go on doing so. On financial grounds, what advice should they be given?
  1. AReject, because they would be $3 950 a year worse off.
  2. BReject, because the offer values the firm below its book value.
  3. CAccept, because a salary is more certain than a share of profit.
  4. DAccept, because the shares can be sold later at a profit.

Question 208

[2 marks]dissolution of a partnership on sale to a company
Partners are deciding whether to sell their firm to a company. Which of the following is a non-financial factor in that decision?
  1. AThe dividend expected on the shares they would be given.
  2. BThe annual salary each of them would be paid.
  3. CThey would become employees and lose their independence.
  4. DThe rate of interest they could earn on the cash they receive.

Question 209

[2 marks]dissolution of a partnership on sale to a company
A company buying a partnership agrees to take over its trade payables as part of the deal. How are those trade payables dealt with in the partnership's realisation account?
  1. AThey are left out, since only assets are realised.
  2. BThey are debited to the partners' capital accounts equally.
  3. CThey are debited, alongside the assets transferred.
  4. DThey are credited, because the partnership is relieved of them.

Question 301

[2 marks]statement of cash flows (IAS 7)
Accumulated depreciation on a company's equipment was $147 500 at the start of the year and $160 000 at the end. Depreciation of $50 500 on equipment sold during the year was written back on disposal. Calculate the depreciation charged on equipment for the year.

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Question 302

[2 marks]statement of cash flows (IAS 7)
Equipment which had cost $86 000, and on which depreciation of $50 500 had been provided, was sold for $45 000. Calculate the profit on disposal.

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Question 303

[2 marks]statement of cash flows (IAS 7)
Equipment at cost was $452 500 at the start of the year and $620 000 at the end. Equipment which had cost $86 000 was sold during the year. Calculate the cost of the equipment bought during the year.

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Question 304

[2 marks]statement of cash flows (IAS 7)
A company's income statement charges finance costs of $31 000 for the year. Interest unpaid was $5 500 at the start of the year and $10 500 at the end. Calculate the interest actually paid during the year.

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Question 305

[2 marks]statement of cash flows (IAS 7)
A company's taxation liability was $98 000 at the start of the year and $110 000 at the end, and the tax charge in the income statement for the year was $110 000. Calculate the tax paid during the year.

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Question 306

[2 marks]statement of cash flows (IAS 7)
Land and buildings stood at $940 000 at the start of the year and $1 310 000 at the end. During the year the existing land and buildings were revalued and a revaluation reserve of $350 000 was created. None were sold. Calculate the cash spent on buying land and buildings during the year.

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Question 307

[3 marks]statement of cash flows (IAS 7)
A company's operating profit for the year is $318 000. Depreciation charged was $63 000 and a profit of $9 500 was made on the disposal of equipment. Interest paid was $26 000 and tax paid was $98 000. Inventory fell from $257 000 to $240 000, trade receivables rose from $284 000 to $305 000, trade payables rose from $251 000 to $256 000 and other payables rose by $6 000. Calculate the net cash flow from operating activities.

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Question 308

[2 marks]statement of cash flows (IAS 7)
During the year a company paid $253 500 for equipment and $20 000 for land and buildings, and received $45 000 from the sale of equipment. Calculate the net cash outflow from investing activities.

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Question 309

[2 marks]statement of cash flows (IAS 7)
During the year a company's issued ordinary share capital rose from $600 000 to $750 000 and its debentures rose from $200 000 to $250 000, both fully paid in cash. Dividends of $150 000 were paid. Calculate the net cash inflow from financing activities.

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Question 310

[2 marks]statement of cash flows (IAS 7)
A company transfers $100 000 from retained earnings to a general reserve during the year. How does this transfer appear in the statement of cash flows?
  1. AAs an outflow under investing activities.
  2. BIt does not appear: no cash moves.
  3. CAs a deduction from the operating profit.
  4. DAs an outflow under financing activities.

Question 311

[2 marks]statement of cash flows (IAS 7)
Which of the following is a difference between an income statement and a statement of cash flows?
  1. AThe income statement is prepared only by limited companies; the cash flow statement only by sole traders and partnerships.
  2. BThe income statement uses the accruals basis; the cash flow statement uses cash actually paid and received.
  3. CThe income statement is prepared yearly; the cash flow statement must be prepared every month.
  4. DThe income statement is audited; the cash flow statement is not part of the audited accounts.

Question 312

[2 marks]statement of cash flows (IAS 7)
A company's income statement includes depreciation of $63 000 and a profit of $9 500 on the disposal of equipment. Why are both of these adjusted out when the net cash flow from operating activities is calculated?
  1. ABecause both of them relate to a previous accounting period.
  2. BBecause both of them belong under investing activities instead.
  3. CBecause they are estimates and cannot be verified by an auditor.
  4. DBecause neither of them involves any cash being received or paid.

Question 401

[2 marks]investment appraisal: payback, NPV and IRR
A project costs $50 000 and the equipment bought is expected to be sold for $5 000 at the end of its five year life. Depreciation is charged on the straight line basis. Calculate the annual depreciation charge.

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Question 402

[2 marks]investment appraisal: payback, NPV and IRR
A project is expected to make a profit of $16 000 in year 1, after deducting straight line depreciation of $9 000. Calculate the net cash flow expected in year 1.

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Question 403

[2 marks]investment appraisal: payback, NPV and IRR
A project is expected to make a profit of $11 000 in year 5, after deducting straight line depreciation of $8 400, and the equipment is expected to be sold for $3 000 at the end of that year. Calculate the net cash flow expected in year 5.

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Question 404

[3 marks]investment appraisal: payback, NPV and IRR
A project costing $50 000 is expected to produce net cash flows of $25 000, $24 000, $17 000, $15 000 and $18 000 in years 1 to 5. What is its payback period, to the nearest month?
  1. A2 years 1 month
  2. B2 years 3 months
  3. C2 years 8 months
  4. D3 years 2 months

Question 405

[2 marks]investment appraisal: payback, NPV and IRR
A project costing $45 000 is expected to produce net cash flows of $15 400, $17 400, $18 400, $18 400 and $22 400 in years 1 to 5. What is its payback period, to the nearest month?
  1. A2 years 8 months
  2. B3 years 0 months
  3. C3 years 8 months
  4. D2 years 3 months

Question 406

[3 marks]investment appraisal: payback, NPV and IRR
A project costing $50 000 is expected to produce net cash flows of $25 000, $24 000, $17 000, $15 000 and $18 000 in years 1 to 5. The present value of $1 at the company's cost of capital of 12% is 0.893, 0.797, 0.712, 0.636 and 0.567 for years 1 to 5. Calculate the net present value of the project.

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Question 407

[3 marks]investment appraisal: payback, NPV and IRR
A project costing $45 000 is expected to produce net cash flows of $15 400, $17 400, $18 400, $18 400 and $22 400 in years 1 to 5. The present value of $1 at 12% is 0.893, 0.797, 0.712, 0.636 and 0.567 for years 1 to 5. What is the net present value of the project?
  1. A$20 124
  2. B$24 939
  3. C$47 000
  4. D$65 124

Question 408

[2 marks]investment appraisal: payback, NPV and IRR
Two projects are appraised at a company's cost of capital of 12% and again at 20%. Both still show a positive net present value at 20%. What does this tell you about their internal rates of return?
  1. ABoth internal rates of return are above 20%.
  2. BBoth internal rates of return are below the 12% cost of capital.
  3. CBoth internal rates of return are exactly 20%.
  4. DBoth internal rates of return lie between 12% and 20%.

Question 409

[1 marks]investment appraisal: payback, NPV and IRR
A project shows a positive net present value when its cash flows are discounted at the company's cost of capital. What does that mean?
  1. AThe project will pay for itself within its first year.
  2. BThe project is expected to earn more than the cost of capital.
  3. CThe project carries no risk for the company.
  4. DThe project's profits will be higher than those of any alternative.

Question 410

[3 marks]investment appraisal: payback, NPV and IRR
A company can undertake only one of two projects. Project A has a net present value of $23 303 and a payback period of 2 years 1 month. Project B has a net present value of $20 124 and a payback period of 2 years 8 months. Which project should be chosen, and why?
  1. AProject B, because a longer payback earns interest for longer.
  2. BProject B, because its cash flows are spread more evenly.
  3. CProject A, because it adds more value and recovers its outlay sooner.
  4. DProject A, because it has the lower initial cost of the two.

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