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ZIMSEC A Level · 9197/3 · N2005

Accounting Paper 3 November 2005

Questions
44
Total marks
100
Syllabus code
9197/3

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Questions
44
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]cash flow statement under IAS 7
A company had 300 000 ordinary shares of $1 each in issue at the start of the year. In January it made a bonus issue of one ordinary share for every five held, and in April it made a rights issue of one ordinary share for every four then held, fully subscribed at $1.50 per share. Calculate the cash raised by the rights issue.

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Question 102

[2 marks]cash flow statement under IAS 7
A company redeemed 30 000 12% redeemable preference shares of $1 each at a premium of 60%. Calculate the cash paid out to redeem them.

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Question 103

[2 marks]cash flow statement under IAS 7
Plant and equipment stood in the books at a cost of $414 000 at the start of the year and $387 000 at the end of the year. During the year plant that had cost $105 000 was disposed of. What did the company spend on new plant during the year?
  1. A$27 000
  2. B$78 000
  3. C$105 000
  4. D$132 000

Question 104

[3 marks]cash flow statement under IAS 7
Plant that had cost $105 000, and had a net book value of $21 000 at that date, was sold during the year. The provision for depreciation on plant was $189 000 at the start of the year and $144 300 at the end of the year. Calculate the depreciation charged on plant for the year.

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Question 105

[2 marks]cash flow statement under IAS 7
Plant with a net book value of $21 000 was sold during the year at a profit on disposal of $9 000. What figure appears under investing activities in the cash flow statement for this sale?
  1. A$9 000
  2. B$12 000
  3. C$21 000
  4. D$30 000

Question 106

[2 marks]cash flow statement under IAS 7
For the year a company had sales of $720 000, cost of sales $471 000, overhead expenses $117 000 and a profit on the disposal of plant of $9 000. Calculate the net profit for the year.

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Question 107

[3 marks]cash flow statement under IAS 7
A company's net profit for the year is $141 000. Depreciation of $39 300 was charged for the year and a profit of $9 000 was made on the disposal of plant. Stock rose from $108 000 to $219 000, trade debtors rose from $72 000 to $165 000 and trade creditors rose from $6 900 to $12 000. Calculate the net cash flow from operating activities.
  1. A$106 200 net outflow
  2. B$171 300 net inflow
  3. C$27 600 net outflow
  4. D$37 800 net outflow

Question 108

[2 marks]cash flow statement under IAS 7
At the start of the year a company had proposed an ordinary final dividend of $18 000 and a preference dividend of $3 600, and both were paid during the year. It also paid an ordinary interim dividend of $12 000 during the year, and proposed no dividend at the year end. Calculate the dividends paid, as shown in the cash flow statement for the year.

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Question 201

[3 marks]correction of errors, journal entries and a corrected balance sheet
Freehold property stands in a company's books at a cost of $400 000 with accumulated depreciation of $80 000 against it. In December the property is revalued at $500 000. What amount is credited to the revaluation reserve?
  1. A$20 000
  2. B$100 000
  3. C$180 000
  4. D$500 000

Question 202

[3 marks]correction of errors, journal entries and a corrected balance sheet
Plant and equipment costing $580 000 has been depreciated for the year at 10% per year on cost, but the company's policy is 15% per year on cost. In addition, a machine costing $50 000 was brought into plant and equipment in January of the same year and has not been depreciated at all, although it needs a full year at 15%. Calculate the additional depreciation to be charged for the year.

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Question 203

[2 marks]correction of errors, journal entries and a corrected balance sheet
Goods sent to a customer on a sale or return basis, and still unsold at the year end, were wrongly recorded as a sale of $11 200. All goods are sold at a mark up of 40%. Calculate the cost of these goods.

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Question 204

[2 marks]correction of errors, journal entries and a corrected balance sheet
A draft balance sheet shows stock of $296 000. That figure still includes a machine costing $50 000 which was transferred out of stock and into plant and equipment during the year, and it leaves out goods costing $8 000 which were sent to a customer on a sale or return basis and are still unsold. Calculate the corrected stock figure.

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Question 205

[2 marks]correction of errors, journal entries and a corrected balance sheet
A draft balance sheet shows debtors of $418 000. That figure includes $11 200 charged to a customer for goods sent on a sale or return basis which the customer has not yet sold or accepted. Calculate the corrected figure for debtors.

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Question 206

[2 marks]correction of errors, journal entries and a corrected balance sheet
A company let part of a warehouse to a tenant from 1 April 2002 at an annual rental of $8 000. The tenant had paid nothing by 31 December 2002. Calculate the rent receivable to be brought into the accounts for the year ended 31 December 2002.

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Question 207

[2 marks]correction of errors, journal entries and a corrected balance sheet
A company had 600 000 ordinary shares of $1 each in issue and made a bonus issue in February of one ordinary share for every ten previously held. No record of the issue has been made. What figure for ordinary share capital should appear in the corrected balance sheet?

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Question 208

[3 marks]correction of errors, journal entries and a corrected balance sheet
A company had 600 000 ordinary shares of $1 each in issue and then made a bonus issue of one ordinary share for every ten previously held. A final dividend of 15 cents per share is proposed for the year and no interim dividend was paid. Calculate the proposed dividend to be provided for.

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Question 209

[3 marks]correction of errors, journal entries and a corrected balance sheet
Plant and equipment stands at a cost of $580 000 with accumulated depreciation of $272 000. A machine costing $50 000 must still be brought in from stock, and a further $36 500 of depreciation must still be charged for the year. Calculate the corrected net book value of plant and equipment.

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Question 210

[3 marks]correction of errors, journal entries and a corrected balance sheet
A draft balance sheet shows retained income of $248 000. The following corrections are still needed: rent receivable of $6 000 to be brought in as income, additional depreciation of $36 500 to be charged, the reversal of $3 200 of profit wrongly taken on goods sent out on a sale or return basis, a bonus issue of $60 000 to be capitalised out of retained income, and a proposed dividend of $99 000 to be provided for. Calculate the corrected retained income.

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Question 211

[2 marks]correction of errors, journal entries and a corrected balance sheet
A company takes a machine out of its trading stock and brings it into plant and equipment for use in its own workshops. The machine cost $50 000 and would have sold for $70 000. At what amount is the machine brought into plant and equipment?
  1. A$20 000
  2. B$50 000
  3. C$70 000
  4. D$120 000

Question 212

[2 marks]correction of errors, journal entries and a corrected balance sheet
A corrected balance sheet shows current assets of stock $254 000, debtors $406 800, rent receivable $6 000 and bank $38 000, and current liabilities of creditors $132 000 and a proposed dividend of $99 000. Calculate the net current assets.

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Question 213

[2 marks]correction of errors, journal entries and a corrected balance sheet
A consignment of goods sent to a customer on a sale or return basis, and still unsold, had been recorded as a sale, and a machine taken out of stock for the company's own use had been brought in at its selling price rather than at its cost. Reversing both treatments applies which accounting principle?
  1. APrudence
  2. BConsistency
  3. CGoing concern
  4. DMateriality

Question 214

[2 marks]correction of errors, journal entries and a corrected balance sheet
Nine months' rent of $6 000, due from a tenant but still unpaid at the year end, is brought into the accounts as income of the year just ended. Which accounting principle requires this?
  1. AAccruals
  2. BGoing concern
  3. CMateriality
  4. DPrudence

Question 215

[2 marks]correction of errors, journal entries and a corrected balance sheet
What are accounting policies, as the term is used in IAS 1?
  1. AThe rules that company law lays down for the layout every published balance sheet must follow, and the dates by which each set of accounts has to be filed.
  2. BThe decisions the auditors take about which parts of the accounting records they will test during the annual audit.
  3. CThe internal rules that decide which member of staff may authorise a payment and up to what limit.
  4. DThe specific bases, conventions and rules a business adopts in preparing its financial statements, such as its basis of valuing stock and its depreciation rates.

Question 301

[3 marks]control accounts and stock loss from incomplete records
A sales ledger control account opens the year with debit balances of $60 750 and credit balances of $1 775, and closes it with credit balances of $1 325. During the year credit sales were $780 000, sales returns $36 500, bad debts written off $2 400, discount allowed $2 750 and cash received from customers $717 750. Calculate the closing debit balances on the sales ledger.

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Question 302

[3 marks]control accounts and stock loss from incomplete records
A purchases ledger control account opens the year with credit balances of $84 750 and debit balances of $2 750, and closes it with debit balances of $975. During the year credit purchases were $864 000, purchases returns $58 500, discount received $7 275 and cheques paid to suppliers $858 000. Calculate the closing credit balances on the purchases ledger.

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Question 303

[2 marks]control accounts and stock loss from incomplete records
A trader normally sells at a margin of 25% on selling price. Stock costing $22 500 had become obsolete and was sold at half the normal retail price. Calculate the amount received for this obsolete stock.

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Question 304

[3 marks]control accounts and stock loss from incomplete records
Net sales for the year were $743 500. Of that, $15 000 was the proceeds of obsolete stock that had cost $22 500 and was sold off cheaply, and every other sale was made at the normal margin of 25%. Calculate the cost of the goods sold during the year.

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Question 305

[2 marks]control accounts and stock loss from incomplete records
A trader's stock at the start of the year cost $80 250. During the year purchases were $864 000 and purchases returns were $58 500. Calculate the cost of the goods available for sale during the year.

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Question 306

[3 marks]control accounts and stock loss from incomplete records
Goods available for sale during the year cost $885 750 and the cost of the goods actually sold was $568 875. Stock on hand at the year end, after a burglary, was $95 500 at cost. Calculate the cost of the stock stolen.

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Question 307

[2 marks]control accounts and stock loss from incomplete records
A trader's net sales for the year were $743 500 and the cost of the goods sold was $568 875. Calculate the gross profit for the year.

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Question 308

[2 marks]control accounts and stock loss from incomplete records
Stock costing $221 375 was stolen in a burglary and the insurers agreed to pay $100 000 in settlement of the claim. What amount is charged as a loss in the profit and loss account for the year?
  1. A$100 000
  2. B$121 375
  3. C$221 375
  4. D$321 375

Question 401

[2 marks]marginal and absorption costing profit statements
A new product has a direct material cost of $10 a unit, a direct labour cost of $12 a unit and variable expenses of $7.50 a unit. Calculate the variable cost of one unit.

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Question 402

[2 marks]marginal and absorption costing profit statements
A company's total fixed costs for the year are $120 000 and it produced 25 000 units of its only product. Calculate the fixed overhead absorption rate per unit.

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Question 403

[1 marks]marginal and absorption costing profit statements
A product has a variable cost of $29.50 a unit and absorbs fixed overhead at $4.80 a unit. Calculate the full production cost of one unit under absorption costing.

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Question 404

[1 marks]marginal and absorption costing profit statements
A company launched a new product during the year, so it held no opening stock of it. During the year 25 000 units were produced and 20 000 units were sold. Calculate the number of units in closing stock.

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Question 405

[3 marks]marginal and absorption costing profit statements
A new product sells for $50 a unit and has a variable cost of $29.50 a unit. During the year 25 000 units were made and 20 000 were sold, and there was no opening stock. Calculate the total contribution for the year under marginal costing.

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Question 406

[2 marks]marginal and absorption costing profit statements
A marginal costing statement shows a contribution of $410 000 for the year, and the company's total fixed costs for the year were $120 000. Calculate the profit for the year under marginal costing.

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Question 407

[2 marks]marginal and absorption costing profit statements
Under absorption costing a product carries a full production cost of $34.30 a unit. Closing stock is 5 000 units. Calculate the value of the closing stock under absorption costing.

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Question 408

[2 marks]marginal and absorption costing profit statements
Under absorption costing, sales for the year are $1 000 000, the cost of producing 25 000 units at a full cost of $34.30 a unit is $857 500 and the closing stock of 5 000 units is valued at $171 500. There is no under or over absorption of overhead. Calculate the profit for the year.
  1. A$142 500
  2. B$290 000
  3. C$314 000
  4. D$410 000

Question 409

[2 marks]marginal and absorption costing profit statements
A company's closing stock of 5 000 units is valued at $147 500 under marginal costing and at $171 500 under absorption costing. By how much does the profit reported under absorption costing exceed the profit reported under marginal costing?

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Question 410

[3 marks]marginal and absorption costing profit statements
A company reports a profit of $290 000 under marginal costing and $314 000 under absorption costing for the same year, in which 25 000 units were made and 20 000 sold. Why do the two figures differ?
  1. AAbsorption costing carries $4.80 of fixed overhead on each of the 5 000 unsold units forward in closing stock, while marginal costing charges all of the fixed cost against the year.
  2. BOne of the two statements must have understated the year's fixed costs by $24 000, since the same output sold at the same price cannot honestly produce two different profits for a year.
  3. CAbsorption costing values the closing stock at its selling price while marginal costing values it at cost.
  4. DMarginal costing charges the variable cost of all 25 000 units made against the sales of the 20 000 units sold.

Question 411

[2 marks]marginal and absorption costing profit statements
In a year in which a company's sales exceed its production, so that its stocks fall, how does the profit reported under marginal costing compare with the profit reported under absorption costing?
  1. AThe two report the same profit, because the difference between the methods depends on the selling price rather than on the level of stock.
  2. BMarginal costing reports the higher profit, because the fixed overhead brought forward in opening stock is released into cost of sales under absorption costing.
  3. CMarginal costing reports the lower profit, because it charges the whole of the year's fixed cost against a smaller number of units.
  4. DAbsorption costing reports the higher profit, because a fall in stock means more fixed overhead is carried forward into the following year's accounts.

Question 412

[2 marks]marginal and absorption costing profit statements
What is a merit of a marginal costing system?
  1. AIt reports a higher profit whenever production exceeds sales, which makes a good year easier to explain to the shareholders.
  2. BIt gives the contribution per unit, which is the figure a short term decision on pricing or on a special order turns on.
  3. CIt values closing stock at full production cost, which is what IAS 2 requires for published financial statements.
  4. DIt spreads the fixed overhead over the units made, so that a price built on the resulting unit cost recovers every cost the business has incurred.

Question 413

[2 marks]marginal and absorption costing profit statements
What is a merit of an absorption costing system?
  1. AIt shows the contribution each product makes, which is the figure needed when a scarce resource has to be shared between competing products.
  2. BIt stops reported profit from rising when a factory makes more units than it manages to sell.
  3. CIt values stock at full production cost, including a share of fixed production overhead, which is what IAS 2 requires for published accounts.
  4. DIt avoids the apportionment of fixed overheads altogether, so that no unit cost is distorted by the basis on which an overhead happened to be shared out.

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