ZIMSEC A Level Accounting Paper 3 November 2011

Read the following

Scenario 1

The Quartet is a partnership which owns a manufacturing firm. The balance sheets of the firm as at 31 December 2004 and 2005 are given in Table 1.

Table 1

As at 31 December	2004 $ 000	2004 $ 000	2005 $ 000	2005 $ 000
Assets
Non-current assets
Premises at cost/valuation	1 000		1 300
Provision for depreciation	(375)	625	(26)	1 274
Plant and equipment at cost	600		1 400
Provision for depreciation	(240)	360	(700)	700
Motor vehicles at cost	840		1 440
Provision for depreciation	(504)	336	(864)	576
		1 321		2 550
Current assets
Stock	750		810
Debtors	649		540
Bank	400	1 799	380	1 730
		3 120		4 280
Equity and liabilities
Partners' capitals at 1 January	2 330		2 600
Add Revaluation	-		675
Net profit	566		739
	2 896		4 014
Less Drawings	(294)	2 600	(334)	3 680
Trade creditors		520		600
		3 120		4 280

Notes

(i) The premises were re-valued on 1 Jul 2005.

(ii) During 2005, motor vehicles which had cost $ 180 000 (net book value $ 36 000) were sold for $ 30 000.

Question 101

[2 marks]cash flow statement

The Quartet made no disposals of plant and equipment during the year ended 31 December 2005. Calculate the depreciation charged on plant and equipment for that year. Give your answer in $ 000.

Answer this when you sit the paper.

Question 102

[2 marks]cash flow statement

The Quartet made no disposals of plant and equipment during the year ended 31 December 2005. Calculate the cost of the plant and equipment bought during that year. Give your answer in $ 000.

Answer this when you sit the paper.

Question 103

[3 marks]cash flow statement

Calculate the depreciation charged on motor vehicles by The Quartet for the year ended 31 December 2005. Give your answer in $ 000.

Answer this when you sit the paper.

Question 104

[2 marks]cash flow statement

Calculate the cost of the motor vehicles bought by The Quartet during the year ended 31 December 2005. Give your answer in $ 000.

Answer this when you sit the paper.

Question 105

[1 marks]cash flow statement

Calculate the loss on the sale of the motor vehicles disposed of by The Quartet during the year ended 31 December 2005. Give your answer in $ 000.

Answer this when you sit the paper.

Question 106

[2 marks]cash flow statement

A partnership revalued its premises upwards during the year and credited the surplus to the partners' capital accounts. How is that surplus dealt with in the cash flow statement for the year?

AIt is shown as a cash inflow under financing activities
BIt is added to net profit as an adjustment for a non-cash item
CIt is not shown at all, because no cash moved
DIt is shown as a negative figure under investing activities

Question 107

[3 marks]cash flow statement

The Quartet charged total depreciation of $990,000 for the year ended 31 December 2005 and made a loss of $6,000 on the sale of motor vehicles. Using the net profit for that year and the movements in stock, debtors and trade creditors, calculate the net cash from operating activities. Give your answer in $ 000.

Answer this when you sit the paper.

Question 108

[2 marks]cash flow statement

During the year ended 31 December 2005 The Quartet bought plant and equipment costing $800,000 and motor vehicles costing $780,000. Calculate the net cash used in investing activities for the year. Give your answer in $ 000.

Answer this when you sit the paper.

Question 109

[2 marks]cash flow statement

The Quartet's cash flow statement for the year ended 31 December 2005 shows net cash from operating activities of $1,864,000 and net cash used in investing activities of $1,550,000. The partners' drawings for the year are its only financing flow. What is the net movement in cash for the year?

AA decrease of $20,000
BAn increase of $314,000
CA decrease of $314,000
DAn increase of $20,000

Question 110

[2 marks]cash flow statement

Why can a cash flow statement show something that a profit and loss account cannot?

AIt reports the value of the business's assets at the end of the year
BIt removes the need to prepare a balance sheet at the year end
CIt states the amount of profit the owners may safely withdraw
DIt shows whether the profit earned actually turned into money in the bank

Question 111

[1 marks]cash flow statement

Which is a benefit of the way a cash flow statement is set out?

AIt separates operating, investing and financing flows
BIt removes the need for an audit of the annual accounts
CIt takes depreciation out of the accounting records
DIt fixes the amount the owners must draw out

Read the following

Scenario 2

The partnership was owned by Anesu, Baye, Chamu and Dahwa. Anesu retired on 1 January 2006 and the remaining partners decided to admit Chipo on the following day. The finance manager was tasked with making the necessary adjustments in the partner's capital accounts using the information in Table 2.

Table 2

Partner's capital accounts as at 31 December 2005	$ 000
Anesu	1 205
Baye	1 070
Chamu	830
Dahwa	575

Additional information

(i) The profit and loss sharing ration were Anesu 3/8, Baye 2/8, Chamu 2/8 and Dahwa 1/8.

(ii) The plant and equipment was re-values at $ 590 000 and the motor vehicles at $ 300 000.

(iii) A provision for doubtful debts of 5 % of debtors at 1 January 2006 was created.

(iv) Goodwill was valued at $ 240 000 but a good will account was not to be opened.

(v) An amount of $ 1 000 000 was transferred from Anesu's capital account to a loan account.

(vi) On 2 January 2006, Chipo introduced $ 830 000 cash as capital and her share of goodwill.

(vii) The new profit and loss sharing ratio was Baye 4/8, Chamu 1/8, Dahwa 1/8 and Chipo 2/8.

Question 201

[2 marks]partnership retirement and admission

The partnership's debtors at 1 January 2006 stood at $540,000. Calculate the provision for doubtful debts created on Anesu's retirement. Give your answer in $ 000.

Answer this when you sit the paper.

Question 202

[3 marks]partnership retirement and admission

At the date of Anesu's retirement the partnership's plant and equipment stood in the books at a net book value of $700,000 and its motor vehicles at $576,000, and a provision for doubtful debts of $27,000 was created. Calculate the total loss on revaluation. Give your answer in $ 000.

Answer this when you sit the paper.

Question 203

[2 marks]partnership retirement and admission

A partnership made a loss on revaluation of $413,000 on Anesu's retirement, and it is shared among the partners in their old profit sharing ratio. Calculate Anesu's share of that loss. Give your answer in $ 000.

Answer this when you sit the paper.

Question 204

[1 marks]partnership retirement and admission

On Anesu's retirement the goodwill of the partnership is credited to the four partners in their old profit sharing ratio. Calculate the amount credited to Anesu. Give your answer in $ 000.

Answer this when you sit the paper.

Question 205

[3 marks]partnership retirement and admission

On his retirement Anesu is credited with his share of goodwill, $90,000, and debited with his share of the loss on revaluation, $154,875. Calculate the balance on his capital account before any transfer to a loan account. Give your answer in $ 000.

Answer this when you sit the paper.

Question 206

[2 marks]partnership retirement and admission

Anesu's capital account stood at $1,140,125 on his retirement, before the transfer to a loan account that the partners agreed. Calculate the amount still owing to him on capital account after that transfer. Give your answer in $ 000.

Answer this when you sit the paper.

Question 207

[3 marks]partnership retirement and admission

On Anesu's retirement no goodwill account is opened, so each partner's capital account is adjusted only by the difference between his share of the $240,000 of goodwill in the old firm and his share of it in the continuing firm. Baye's share moves from 2/8 to 2/5, so he is debited with $36,000. His share of the loss on revaluation is $103,250. Calculate the balance carried down on Baye's capital account. Give your answer in $ 000.

Answer this when you sit the paper.

Question 208

[2 marks]partnership retirement and admission

On Anesu's retirement no goodwill account is opened, so each partner's capital account is adjusted only by the difference between his share of the $240,000 of goodwill in the old firm and his share of it in the continuing firm. Dahwa's share moves from 1/8 to 1/5, so he is debited with $18,000. His share of the loss on revaluation is $51,625. Calculate the balance carried down on Dahwa's capital account. Give your answer in $ 000.

Answer this when you sit the paper.

Question 209

[2 marks]partnership retirement and admission

On Chipo's admission the new profit sharing ratio is Baye 4/8, Chamu 1/8, Dahwa 1/8 and Chipo 2/8, and the goodwill of the partnership is valued at $240,000. Calculate Baye's share of that goodwill in the new partnership. Give your answer in $ 000.

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Question 210

[2 marks]partnership retirement and admission

Baye's capital account stood at $930,750 after Anesu's retirement. On Chipo's admission Baye's share of the $240,000 of goodwill rises from 2/5 to 4/8, and no goodwill account is opened, so his capital account is debited with the increase of $24,000. Calculate the balance carried down on Baye's capital account in the new partnership. Give your answer in $ 000.

Answer this when you sit the paper.

Question 211

[2 marks]partnership retirement and admission

A partnership keeps no goodwill account. On a change of partners, goodwill is raised and credited in the old profit sharing ratio and then written off in the new ratio. Why is it done that way?

ASo goodwill can appear as an intangible asset in the new balance sheet
BSo the incoming partner pays the continuing partners for the share she gains
CSo the total capital of the firm is unchanged before and after
DSo the partners' current accounts are cleared before the new ratio begins

Question 212

[2 marks]partnership retirement and admission

Which of the following best defines goodwill?

AThe value of a firm's patents, trade marks and other registered rights
BThe profit a firm expects to earn in the year after it changes hands
CThe excess of the value of a business as a whole over its separable net assets
DThe amount by which a firm's total assets exceed its total liabilities at a date

Question 213

[1 marks]partnership retirement and admission

In whose ratio is a loss on revaluation shared when a partner retires?

AEqually between all the partners, old and new alike
BIn proportion to the balances on the partners' capital accounts
CThe old profit sharing ratio, before the change
DThe new profit sharing ratio of the continuing partners

Read the following

Scenario 3

On 31 December 2006, the partnership business was taken over by Quartet Ltd. At 31 December 2007 the balance sheet of the company was as shown in Table 3.

Table 3

	$ 000	$ 000	$ 000
Assets	Cost/ Valuation	Depreciation	Net book value
Non-current assets
Freehold premises	1 300	78	1 222
Plant and equipment	2 000	810	1 190
Motor vehicles	1 800	1 440	360
	5 100	2 328	2 772
Current Assets
Stock		836
Trade debtors		562
Bank		600	1 998
Total assets			4 770
Equity and liabilities
Share capital
Ordinary shares of $1 each			2 500
Reserves
Share premium account		570
Profit and loss account		1 000	1 570
Shareholder's funds			4 070
Long-term liabilities
10 % Debentures			500
Current Liabilities
Trade creditors			200
			4 770

After the preparation of the above draft balance sheet, the following matters were discovered:

(i) The plant and equipment had been depreciated for the year at 15 % on the reducing balance basis instead of at 15 % on cost.

(ii) Stock which had cost $ 200 000 had been damaged. It can be sold for $ 150 000 after restorative work costing $ 80 000. it is included in the above draft balance sheet at cost.

(iii) Goods sent on sale or return basis to P. Pfende had been invoiced to him at $ 104 000. Goods are sold at mark up of 30 %

(iv) A bonus issue of one ordinary share for every five held on 1 October 2007 had not been recorded. After the bonus issue, the reserves of the company must be left in their most flexible form.

(v) A rights issue of one ordinary share for every six held, based on the revised share capital, had been made on 1 November 2007 at $ 1,50 per share. This had not been effected in this books of account.

(vi) A debtor who owed the company $ 42 000 was declared bankrupt. It was decided to make a provision for doubtful debts of 5 % on debtors.

(vii) A dividend of 10 % was declared on 31 December 2007. All shares issued during the year do not rank for dividends in the year.

Question 301

[3 marks]limited company balance sheet redraft

In Quartet Ltd's draft balance sheet the plant and equipment had been depreciated for the year on the reducing balance basis instead of on cost. Calculate the additional depreciation charge needed to put this right. Give your answer in $ 000.

Answer this when you sit the paper.

Question 302

[2 marks]limited company balance sheet redraft

Calculate the amount by which Quartet Ltd's damaged stock must be written down. Give your answer in $ 000.

Answer this when you sit the paper.

Question 303

[2 marks]limited company balance sheet redraft

Calculate the cost of the goods Quartet Ltd sent to P. Pfende on a sale or return basis. Give your answer in $ 000.

Answer this when you sit the paper.

Question 304

[3 marks]limited company balance sheet redraft

Quartet Ltd's damaged stock must be written down by $130,000, and the goods sent to P. Pfende on sale or return must be brought back into stock at their cost of $80,000. Calculate the corrected stock figure. Give your answer in $ 000.

Answer this when you sit the paper.

Question 305

[2 marks]limited company balance sheet redraft

The goods invoiced to P. Pfende on sale or return must be taken out of Quartet Ltd's trade debtors, and the debt of the bankrupt debtor must be written off. Calculate the corrected trade debtors figure before any provision for doubtful debts. Give your answer in $ 000.

Answer this when you sit the paper.

Question 306

[3 marks]limited company balance sheet redraft

Calculate the balance on Quartet Ltd's share premium account once both the bonus issue and the rights issue have been recorded. Give your answer in $ 000.

Answer this when you sit the paper.

Question 307

[2 marks]limited company balance sheet redraft

Calculate the cash Quartet Ltd received from its rights issue. Give your answer in $ 000.

Answer this when you sit the paper.

Question 308

[2 marks]limited company balance sheet redraft

A company makes a bonus issue and wants its reserves left in the most flexible form afterwards. Which reserve should it use first to meet the issue?

AA revaluation reserve, because it arises from a non-cash entry
BThe general reserve, because it has no restriction at all on its use
CThe profit and loss account, because it is the largest reserve
DThe share premium account, because its uses are the most restricted

Question 309

[2 marks]limited company balance sheet redraft

Calculate the dividend Quartet Ltd declared on 31 December 2007. Give your answer in $ 000.

Answer this when you sit the paper.

Question 310

[3 marks]limited company balance sheet redraft

The corrections to Quartet Ltd's draft profit and loss account balance are additional depreciation $90,000, damaged stock written down $130,000, unrealised profit on goods sent on sale or return $24,000, a bad debt of $42,000 written off, a provision for doubtful debts of $20,800 created and a dividend of $250,000 declared. Calculate the revised balance on the profit and loss account. Give your answer in $ 000.

Answer this when you sit the paper.

Question 311

[2 marks]limited company balance sheet redraft

Which statement correctly distinguishes a bonus issue from a rights issue?

AA bonus issue increases shareholders' funds while a rights issue leaves them alone
BA bonus issue capitalises reserves while a rights issue brings in fresh cash
CA bonus issue raises cash from existing shareholders and a rights issue does not
DA bonus issue may be refused by a shareholder but a rights issue may not be

Read the following

Scenario 4

The company manufactures three products, Lido, Beta and Sigma, from the same process and the same raw materials. All products can be sold at the split-off point but Lido does not need further processing.

The unit sales values of the three products at the split-off point are:

	$
Lido	10,50
Beta	11,25
Sigma	15,00

After further processing, Beta and Sigma can be sold for $27 and$ 30 per unit respectively.

During the month of February 2008, sales were as follows:

Lido	2 000 units
Beta	2 500 units
Sigma	2 250 units

There were no opening and closing stocks of raw materials and work in progress.

Stocks of finished goods were as follows:

	Lido	Beta	Sigma
Stocks (units) at 1 February	400	550	500
Stocks (units) at 28 February	350	450	300

Costs incurred in February 2008 were as follows:

	$
Joint manufacturing costs	48 000
Additional processing costs for Beta	19 200
Additional processing costs for Sigma	18 450

Assume the first in, first out method of stock valuation.

Question 401

[1 marks]joint product costing

Calculate the number of units of Lido manufactured in February 2008.

Answer this when you sit the paper.

Question 402

[2 marks]joint product costing

Calculate the total number of units of Lido, Beta and Sigma manufactured in February 2008.

Answer this when you sit the paper.

Question 403

[2 marks]joint product costing

What are equivalent units in process costing?

AThe units of output that could have been made had there been no losses
BThe units of each joint product that carry the same share of the joint cost
CThe finished units a process transfers to the next process in the period
DPartly finished units expressed as the number of finished units they equal

Question 404

[1 marks]joint product costing

At the end of a period a process holds 400 units that are 50% complete. Calculate the number of equivalent units in that closing work in progress.

Answer this when you sit the paper.

Question 405

[2 marks]joint product costing

Total production of the three products in February 2008 was 6,400 units. Calculate the joint cost per unit when the joint manufacturing costs are apportioned on the basis of physical quantity produced.

Answer this when you sit the paper.

Question 406

[2 marks]joint product costing

Joint costs are apportioned on the basis of physical quantity produced at $7.50 a unit, and 2,400 units of Beta were made in February 2008. Calculate the cost per unit of Beta after its additional processing.

Answer this when you sit the paper.

Question 407

[1 marks]joint product costing

Lido carries a cost of $7.50 a unit when joint costs are apportioned on physical quantity produced. Calculate the value of the closing stock of Lido at 28 February 2008.

Answer this when you sit the paper.

Question 408

[3 marks]joint product costing

When joint costs are apportioned on the basis of physical quantity produced, the February 2008 unit costs are Lido

7.50, Beta

15.50 and Sigma $16.50. Calculate the total value of the closing stocks of the three products at 28 February 2008.

Answer this when you sit the paper.

Question 409

[2 marks]joint product costing

In February 2008, 1,950 units of Lido, 2,400 units of Beta and 2,050 units of Sigma were manufactured. Calculate the total sales value of that production at the split-off point.

Answer this when you sit the paper.

Question 410

[3 marks]joint product costing

The February 2008 joint manufacturing costs are apportioned on the sales values of the quantities produced at the split-off point. The sales value of Beta's production is $27,000 and the total sales value of all three products at split-off is $78,225. Calculate the joint cost apportioned to Beta, to the nearest cent.

Answer this when you sit the paper.

Question 411

[2 marks]joint product costing

Sigma's share of the February 2008 joint costs, apportioned on the sales value of production at the split-off point, is $18,868.65, and 2,050 units were made. Sigma's additional processing cost for the month was $18,450. Calculate the cost per unit of Sigma after its additional processing, to the nearest cent.

Answer this when you sit the paper.

Question 412

[2 marks]joint product costing

How is a normal loss in a process treated in the cost accounts?

AIts cost is borne by the good output, raising the cost per good unit
BIt is charged to the following period, when the loss is finally identified
CIt is treated as a by-product and given its own share of the process cost
DIt is valued at the full cost per unit and written off to the profit and loss account

Question 413

[2 marks]joint product costing

How is a by-product of a process usually dealt with in the accounts?

AIts sales value is ignored until the by-product is actually sold
BIts net realisable value is credited to the process account before apportionment
CIt is written off as a normal loss of the process in which it arises
DIt is given a share of the joint cost in proportion to its sales value

Accounting Paper 3 November 2011

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The questions

Question 101

Question 102

Question 103

Question 104

Question 105

Question 106

Question 107

Question 108

Question 109

Question 110

Question 111

Question 201

Question 202

Question 203

Question 204

Question 205

Question 206

Question 207

Question 208

Question 209

Question 210

Question 211

Question 212

Question 213

Question 301

Question 302

Question 303

Question 304

Question 305

Question 306

Question 307

Question 308

Question 309

Question 310

Question 311

Question 401

Question 402

Question 403

Question 404

Question 405

Question 406

Question 407

Question 408

Question 409

Question 410

Question 411

Question 412

Question 413

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The answers, and why they are the answers

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