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ZIMSEC A Level · 6001/3 · N2010

Accounting Paper 3 November 2010

Questions
48
Total marks
100
Syllabus code
6001/3

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Questions
48
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]club receipts and payments, income and expenditure account
A social club paid $26,500 to its bar suppliers during the year ended 31 May 2007. Amounts owing to bar suppliers were $6,400 at 1 June 2006 and $3,200 at 31 May 2007. Calculate the bar purchases for the year.

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Question 102

[3 marks]club receipts and payments, income and expenditure account
A social club's bar had sales of $58,700 for the year ended 31 May 2007. Opening bar stock was $7,000, bar purchases for the year were $23,300 and closing bar stock, after obsolete stock had been written off, was $5,150. Bar wages of $17,000 were paid. Calculate the bar profit carried to the income and expenditure account.

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Question 103

[2 marks]club receipts and payments, income and expenditure account
A social club received $24,000 in subscriptions during the year ended 31 May 2007. At 1 June 2006 subscriptions of $400 had been paid in advance and subscriptions of $500 were in arrears, and those arrears were written off as irrecoverable. At 31 May 2007 subscriptions of $650 were in arrears and $700 had been paid in advance. Calculate the subscriptions income credited to the income and expenditure account.

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Question 104

[2 marks]club receipts and payments, income and expenditure account
A social club's assets at 31 May 2006 were buildings at cost $40,000, pool tables $3,000, motor vehicles $10,000, investments $4,500, subscriptions due $500, bar stock $7,000 and bank $2,500. Its liabilities were bar suppliers $6,400 and subscriptions in advance $400. Calculate the accumulated fund at 31 May 2006.

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Question 105

[2 marks]club receipts and payments, income and expenditure account
A club traded in an old motor vehicle, which stood in its books at $10,000, against a new one. A trade-in allowance of $15,000 was given and a further $30,000 was paid in cash. What is the result of the disposal, and what is the cost of the new vehicle?
  1. AA loss of $5,000 on disposal and a cost of $45,000 for the new vehicle
  2. BA profit of $5,000 on disposal and a cost of $30,000 for the new vehicle
  3. CNo profit or loss on disposal and a cost of $40,000 for the new vehicle
  4. DA profit of $5,000 on disposal and a cost of $45,000 for the new vehicle

Question 106

[2 marks]club receipts and payments, income and expenditure account
A club bought a new motor vehicle, paying $30,000 in cash and receiving a trade-in allowance of $15,000 on its old vehicle. Motor vehicles are depreciated at 20% per annum on cost and a full year's charge is made in the year of purchase. Calculate the depreciation charge on the new vehicle for the year.

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Question 107

[1 marks]club receipts and payments, income and expenditure account
A club's pool tables stood in its books at $3,000 at the start of the year. Pool tables are depreciated at 25% per annum on the reducing balance. Calculate the depreciation charge on the pool tables for the year.

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Question 108

[2 marks]club receipts and payments, income and expenditure account
A club's bank balance at 1 June 2006 was $2,500. Receipts for the year to 31 May 2007 totalled $93,750 and payments totalled $100,150. What is the club's bank position at 31 May 2007?
  1. AA bank overdraft of $6,400
  2. BA balance at bank of $3,900
  3. CA balance at bank of $6,400
  4. DA bank overdraft of $3,900

Question 109

[3 marks]club receipts and payments, income and expenditure account
A social club's income for the year ended 31 May 2007 was bar profit $16,550, subscriptions $24,350, surplus on the annual dance $500, surplus on competitions $450, pool table takings $650, dividends receivable $450 and profit on the disposal of a motor vehicle $5,000. Its expenditure was groundsman's wages $16,500, maintenance $2,200, subscriptions written off $500, depreciation of pool tables $750 and depreciation of the motor vehicle $9,000. Calculate the surplus of income over expenditure for the year.

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Question 110

[2 marks]club receipts and payments, income and expenditure account
A social club received a donation of $6,000 which the donor stated was to be invested so that the interest could pay for a named annual prize in future years. How should the club treat the donation?
  1. AAdd it to the accumulated fund as part of the surplus for the year
  2. BDeduct it from the club's expenditure on prizes for the year of receipt
  3. CCredit it to a separate prize fund shown on the balance sheet, not to income
  4. DCredit it to the income and expenditure account as income of the year of receipt

Question 111

[3 marks]club receipts and payments, income and expenditure account
A club's balance sheet at 31 May 2007 shows fixed assets of buildings $40,000, pool tables $2,250, motor vehicle $36,000 and investments $4,500. Its current assets are bar stock $5,150, subscriptions in arrears $650, dividends receivable $450 and a bank deposit account $6,000. Its current liabilities are creditors for bar stock $3,200, wages owing $1,500, subscriptions in advance $700 and a bank overdraft $3,900. Calculate the net assets at 31 May 2007.

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Question 112

[1 marks]club receipts and payments, income and expenditure account
A club paid its groundsman $15,000 during the year ended 31 May 2007 and owed him a further $1,500 at that date. Calculate the groundsman's wages charged to the income and expenditure account for the year.

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Question 113

[2 marks]club receipts and payments, income and expenditure account
How does a club's income and expenditure account differ from its receipts and payments account?
  1. AIt always opens and closes with the balance at the bank
  2. BIt is prepared on the accruals basis and excludes capital items
  3. CIt records only cash actually received and paid in the year
  4. DIt includes the purchase of fixed assets as an expense

Question 201

[2 marks]correction of a cash flow statement
Four vehicles were bought on 1 April 2004 for $92,000 in total. Their estimated residual value at that date was $20,000 and they were expected to be disposed of on 31 March 2008. Depreciation is straight line. Calculate the annual depreciation charge on these vehicles.

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Question 202

[2 marks]correction of a cash flow statement
Four vehicles bought on 1 April 2004 for $92,000 are depreciated by $18,000 a year on the straight line basis. Calculate their net book value on 30 September 2006.

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Question 203

[1 marks]correction of a cash flow statement
Four vehicles with a net book value of $47,000 were sold for $10,000 each. What is the result of the disposal?
  1. AA loss on disposal of $37,000
  2. BA profit on disposal of $7,000
  3. CA loss on disposal of $7,000
  4. DA profit on disposal of $40,000

Question 204

[2 marks]correction of a cash flow statement
Four new vehicles costing $170,000 in total were bought on 30 September 2006. They are depreciated at 20% per annum on cost, charged from the date of purchase. Calculate the depreciation on these vehicles for the year ended 31 March 2007.

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Question 205

[1 marks]correction of a cash flow statement
A company's closing stock has been included in its draft accounts at its net realisable value of $189,000, although it cost $160,000. What correction is required?
  1. AIncrease closing stock and profit by $29,000
  2. BReduce closing stock by $29,000 but leave the profit unchanged
  3. CNone, net realisable value is the more prudent figure to use
  4. DReduce closing stock and the profit for the year by $29,000

Question 206

[2 marks]correction of a cash flow statement
A bonus issue of 20,000 ordinary shares of $1 each was wrongly recorded in the books as a rights issue at par. How must the cash flow statement be corrected?
  1. AMove the $20,000 from financing activities to investing activities
  2. BReduce the shares issued under financing activities by $20,000
  3. CLeave financing activities alone and add the $20,000 back to profit
  4. DIncrease the shares issued under financing activities by $20,000

Question 207

[2 marks]correction of a cash flow statement
A draft cash flow statement adds back an increase in the provision for doubtful debts of $1,000, taking the provision to $2,500 at the year end. The provision at the year end should in fact be $3,400. Calculate the corrected increase in the provision to be added back to profit.

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Question 208

[2 marks]correction of a cash flow statement
Cash sales of $3,000 were made and banked on 30 March 2007 but were recorded in the books as having taken place on 1 April 2007. What effect does correcting this have on the accounts for the year ended 31 March 2007?
  1. ABoth the profit and the closing bank balance rise by $3,000
  2. BProfit rises by $3,000 and trade debtors rise by $3,000
  3. CProfit is unchanged and the closing bank balance rises by $3,000
  4. DProfit rises by $3,000 but the closing bank balance is unchanged

Question 209

[1 marks]correction of a cash flow statement
A draft cash flow statement shows a decrease in creditors of $9,000. Goods costing $7,000 bought on credit on the last day of the year were included in closing stock, but no entry was made in the purchases or creditors accounts. Calculate the corrected movement in creditors.

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Question 210

[3 marks]correction of a cash flow statement
A corrected cash flow statement for a year shows net profit $233,100, depreciation $122,500, increase in the provision for doubtful debts $1,900, loss on the sale of motor vehicles $7,000, increase in stock $141,000, increase in debtors $35,000, decrease in creditors $2,000 and dividends paid $120,000. Calculate the net cash inflow from operating activities.

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Question 211

[2 marks]correction of a cash flow statement
During a year a company paid $160,000 for freehold property and $155,000 in cash for new motor vehicles, and received $40,000 from the sale of old motor vehicles. Calculate the net cash outflow from investing activities.

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Question 212

[3 marks]correction of a cash flow statement
A company's corrected cash flow statement shows a net cash inflow from operating activities of $66,500, a net cash outflow from investing activities of $275,000 and a net cash inflow from financing activities of $130,000. Cash and bank at the start of the year stood at $20,000. What is the cash and bank position at the end of the year?
  1. AA balance of $78,500
  2. BAn overdraft of $98,500
  3. CAn overdraft of $58,500
  4. DA balance of $58,500

Question 213

[1 marks]correction of a cash flow statement
Which statement describes a difference between a profit and loss account and a cash flow statement?
  1. AA cash flow statement is prepared only by companies and a profit and loss by traders
  2. BA cash flow statement is prepared monthly but a profit and loss account is yearly
  3. CA cash flow statement must be audited but a profit and loss account need not be
  4. DA profit and loss account charges depreciation but a cash flow statement does not

Question 301

[2 marks]purchase of a partnership by a limited company
A partner's 10% loan of $4,000 to his partnership is replaced, when the business is sold, by 8% debentures in the purchasing company, so that he receives exactly the same annual interest as before. Calculate the nominal value of the debentures he must receive.

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Question 302

[3 marks]purchase of a partnership by a limited company
A company buys a business for a purchase consideration of $82,000, settled by issuing $5,000 of debentures, paying $12,000 in cash, and issuing ordinary shares of $1 each at $1.30 per share for the balance. Calculate the number of ordinary shares issued.

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Question 303

[2 marks]purchase of a partnership by a limited company
A company issues 50,000 ordinary shares of $1 each at a price of $1.30 per share. Calculate the amount credited to the share premium account.

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Question 304

[3 marks]purchase of a partnership by a limited company
A company buys a partnership for $82,000. It takes over the assets at their agreed values of freehold land $20,000, freehold buildings $16,000, equipment $15,000, stock $9,000 and debtors $5,000, and it also takes over creditors of $3,000. The partnership's bank balance is not taken over. Calculate the goodwill arising on the purchase.

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Question 305

[3 marks]purchase of a partnership by a limited company
Before buying a partnership, a company's current assets were stock $120,000, debtors $112,000 and bank $24,000. On the purchase it took over stock valued at $9,000 and debtors of $5,000, and it paid $12,000 out of its bank account as part of the consideration. Calculate the company's total current assets immediately after the purchase.

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Question 306

[2 marks]purchase of a partnership by a limited company
A company is choosing between raising long term finance by issuing ordinary shares and raising it by issuing debentures. Which is a disadvantage of the ordinary share issue?
  1. AThe finance must be repaid on a fixed date in the future
  2. BThe company must give security over its assets to the investors
  3. CControl and future profits are shared with the new shareholders
  4. DThe dividend must be paid whether or not a profit is earned

Question 307

[2 marks]purchase of a partnership by a limited company
Which is an advantage to a company of raising finance by issuing debentures rather than ordinary shares?
  1. AThere is no obligation to repay the money raised
  2. BDebenture interest is charged against profit, unlike a dividend
  3. CNothing is paid out in a year when no profit is made
  4. DDebenture holders carry the risk of the business

Question 308

[2 marks]purchase of a partnership by a limited company
After buying a business, a company's ordinary share capital is $250,000, its share premium account is $15,000 and its profit and loss account balance is $64,000. Calculate the total shareholders' funds.

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Question 309

[1 marks]purchase of a partnership by a limited company
How is goodwill arising when a company buys an existing business shown in that company's balance sheet?
  1. AAs an intangible fixed asset
  2. BAs a reserve within shareholders' funds
  3. CAs a current asset
  4. DAs a long term liability

Question 401

[1 marks]absorption and marginal costing
A company's budgeted fixed production overheads are $36,000 for a quarter at its normal activity level of 120,000 units. Calculate the fixed production overhead absorption rate per unit.

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Question 402

[1 marks]absorption and marginal costing
A company's budgeted fixed selling overheads are $24,000 for a quarter at its normal activity level of 120,000 units. Calculate the fixed selling overhead absorption rate per unit.

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Question 403

[2 marks]absorption and marginal costing
A company held 30,000 units in stock at the start of a quarter, produced 150,000 units during it and held 50,000 units in stock at the end. Calculate the number of units sold in the quarter.

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Question 404

[2 marks]absorption and marginal costing
A company absorbs fixed production overhead at $0.30 per unit and produced 150,000 units in a quarter. The fixed production overhead actually incurred was $36,000. What is the position on absorption?
  1. AOver absorbed by $9,000
  2. BOver absorbed by $45,000
  3. CUnder absorbed by $9,000
  4. DUnder absorbed by $45,000

Question 405

[1 marks]absorption and marginal costing
A product's variable material and labour cost is $2.00 a unit, its variable production overhead is $0.60 a unit and fixed production overhead is absorbed at $0.30 a unit. Calculate the value of one unit of closing stock under absorption costing.

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Question 406

[1 marks]absorption and marginal costing
A product's variable material and labour cost is $2.00 a unit, its variable production overhead is $0.60 a unit, its variable selling overhead is $0.40 a unit and fixed production overhead is absorbed at $0.30 a unit. Calculate the value of one unit of closing stock under marginal costing.

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Question 407

[3 marks]absorption and marginal costing
Under absorption costing a company values its chairs at a full production cost of $2.90 each. It held 30,000 chairs at the start of the quarter, produced 150,000 chairs during it and held 50,000 chairs at the end. Calculate the cost of sales for the quarter.

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Question 408

[3 marks]absorption and marginal costing
A company's absorption costing profit and loss account for a quarter shows sales of $650,000, cost of sales of $377,000, fixed production overhead over absorbed of $9,000, variable selling overheads of $52,000 and fixed selling overheads of $24,000. Calculate the net profit for the quarter.

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Question 409

[2 marks]absorption and marginal costing
Under marginal costing a company values its chairs at a marginal production cost of $2.60 each. It held 30,000 chairs at the start of the quarter, produced 150,000 chairs during it and held 50,000 chairs at the end. Calculate the variable cost of sales for the quarter.

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Question 410

[3 marks]absorption and marginal costing
Under marginal costing a company's sales for a quarter were $650,000, its variable cost of sales was $338,000 and its variable selling overheads were $52,000. Calculate the contribution for the quarter.

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Question 411

[1 marks]absorption and marginal costing
A company's contribution for a quarter is $260,000. Its fixed production overhead is $36,000 and its fixed selling overhead is $24,000. Calculate the net profit under marginal costing.

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Question 412

[3 marks]absorption and marginal costing
A company's profit for a quarter is $206,000 under absorption costing and $200,000 under marginal costing. Stock rose from 30,000 units to 50,000 units during the quarter and fixed production overhead is absorbed at $0.30 a unit. Why do the two profits differ by $6,000?
  1. AAbsorption costing carries $6,000 of fixed production overhead in stock
  2. BMarginal costing charges the variable selling overhead twice in the period
  3. CAbsorption costing charges $6,000 more fixed selling overhead in the period
  4. DMarginal costing values the extra 20,000 units of stock at selling price

Question 413

[2 marks]absorption and marginal costing
Which is an advantage of absorption costing over marginal costing?
  1. AIt shows the contribution each product makes towards fixed costs
  2. BIt values stock at full production cost, as reporting standards require
  3. CIt makes short term decisions on accepting extra orders easier
  4. DIt keeps profit free of any effect from a change in stock levels

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