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ZIMSEC A Level · 9197/3 · N2014

Accounting Paper 3 November 2014

Questions
46
Total marks
100
Syllabus code
9197/3

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Questions
46
Pass mark
28
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Answer every question in the printed order, get marked at the end, then see the answers.

The questions

Question 101

[1 marks]business purchase, share issues and statement of financial position
Digits Ltd had 160,000 ordinary shares of $1 each in issue when, on 16 September 2005, it made a one for four bonus issue. Calculate the nominal value of the bonus shares issued.

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Question 102

[2 marks]business purchase, share issues and statement of financial position
A company with a share premium account of $100,000 and a profit and loss balance of $35,000 makes a bonus issue of $40,000. Its policy is to leave its reserves in their most flexible form. The bonus issue is charged against:
  1. Aan equal share of the share premium and profit and loss balances
  2. Bthe share premium account, which is the least flexible reserve
  3. Cthe profit and loss account, which is a distributable reserve
  4. Dthe trade payables balance, since it is settled during the year

Question 103

[3 marks]business purchase, share issues and statement of financial position
Digits Ltd acquired assets and liabilities of another business for a purchase price of $164,000. The fair values agreed for the Digits Ltd accounts were: non-current assets $120,000, inventory $44,000, trade receivables $16,000 and trade payables $20,000. Calculate the goodwill arising on the acquisition.

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Question 104

[2 marks]business purchase, share issues and statement of financial position
A purchase price of $164,000 was settled by issuing 60,000 ordinary shares of 1each,issuing1 each, issuing 50,000 of 6% loan stock and paying $10,000 in cash. Calculate the share premium arising on the shares issued.

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Question 105

[2 marks]business purchase, share issues and statement of financial position
Digits Ltd began the year with 160,000 ordinary shares of $1 each in issue. It then issued 40,000 bonus shares and 60,000 shares as part of the price of a business it acquired. On 1 March 2006 it made a rights issue of one share for every five held. Calculate the number of shares issued under the rights issue.

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Question 106

[2 marks]business purchase, share issues and statement of financial position
On 1 March 2006 Digits Ltd issued 52,000 ordinary shares of $1 each in a rights issue at a price of $1.40 a share. Calculate the cash received from the rights issue.

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Question 107

[1 marks]business purchase, share issues and statement of financial position
On 1 August 2006 Digits Ltd sold non-current assets for $30,000. Their net book value at that date was $34,000. Calculate the loss on disposal.

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Question 108

[3 marks]business purchase, share issues and statement of financial position
During the year ended 31 August 2006 a company with 160,000 ordinary shares of $1 each in issue made a bonus issue of 40,000 shares, issued 60,000 shares to acquire a business and issued 52,000 shares in a rights issue. Calculate its ordinary share capital at 31 August 2006.

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Question 109

[3 marks]business purchase, share issues and statement of financial position
A company's share premium account stood at $100,000 at 1 September 2005. During the year $40,000 of it was used for a bonus issue, shares issued to acquire a business carried a premium of $44,000 and a rights issue carried a premium of $20,800. Calculate the share premium account balance at 31 August 2006.

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Question 110

[3 marks]business purchase, share issues and statement of financial position
Digits Ltd held cash and cash equivalents of $84,000 at 1 September 2005. During the year to 31 August 2006 it paid $25,000 to settle its opening trade payables, paid $10,000 as part of the price of a business it acquired, received $72,800 from a rights issue and received $30,000 from the sale of non-current assets. Calculate its cash and cash equivalents at 31 August 2006.

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Question 111

[2 marks]business purchase, share issues and statement of financial position
A company's non-current assets other than goodwill stood at $110,000 at 1 September 2005. During the year it acquired non-current assets at a fair value of $120,000 with a business it bought, and disposed of non-current assets with a net book value of $34,000. Calculate its non-current assets other than goodwill at 31 August 2006.

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Question 112

[3 marks]business purchase, share issues and statement of financial position
At 31 August 2006 a company's ordinary share capital was $312,000 and its share premium account $124,800. Its profit and loss balance was $35,000 at the start of the year, and the only entry in it during the year was a $4,000 loss on the disposal of non-current assets. Calculate its total share capital and reserves at 31 August 2006.

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Question 113

[2 marks]business purchase, share issues and statement of financial position
A business is sold and the seller takes part of the price as 6% loan stock in the buying company. An advantage of loan stock to the seller is that it gives:
  1. Ainterest payable whether or not the company makes a profit
  2. Ba dividend that rises whenever the company's profits rise
  3. Ca share of any growth in the value of the enlarged company
  4. Dvoting rights at the general meetings of the enlarged company

Question 114

[2 marks]business purchase, share issues and statement of financial position
A business is sold and the seller takes part of the price in cash. A disadvantage of cash to the seller is that:
  1. Athe amount received is uncertain until the sale is completed
  2. Bcash ranks behind the shareholders if the company is wound up
  3. Cthe seller must pay interest on the sum until it is repaid
  4. Dthe seller shares in none of the future profits of the business

Question 201

[2 marks]inventory valuation and trading account
In August 2007 Digits Ltd sent goods costing $65,000 to an agent on a sale or return basis, and 90% of them had been sold by 31 August 2007. Calculate the cost of the goods sold through the agent.

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Question 202

[2 marks]inventory valuation and trading account
Digits Ltd earns a gross profit of 35% on all sales. Goods costing $58,500 were sold on its behalf by an agent during the year ended 31 August 2007. Calculate the selling price of those goods.

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Question 203

[1 marks]inventory valuation and trading account
An agent selling goods on a sale or return basis for Digits Ltd is paid a commission of 10% on the selling price of all such sales. Goods with a selling price of $90,000 were sold through the agent in the year ended 31 August 2007. Calculate the commission payable to the agent.

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Question 204

[2 marks]inventory valuation and trading account
Digits Ltd recorded sales of $860,000 and sales returns of $40,000 for the year ended 31 August 2007, and it earns a gross profit of 35% on all sales. Calculate the cost of sales on those recorded sales.

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Question 205

[2 marks]inventory valuation and trading account
Digits Ltd held inventory of $170,000 at 1 September 2006 and for the year ended 31 August 2007 recorded purchases of $540,000 and purchases returns of $45,000. Calculate the cost of goods available for sale during the year.

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Question 206

[3 marks]inventory valuation and trading account
Digits Ltd could not count its inventory at 31 August 2007. Goods available for sale during the year cost $665,000. Inventory costing $10,000 was stolen in July 2007 and inventory costing $3,700 was found to be valueless in August 2007. The cost of goods sold for the year was $591,500. Calculate the inventory at 31 August 2007.

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Question 207

[2 marks]inventory valuation and trading account
Digits Ltd recorded sales of $860,000 and sales returns of $40,000 for the year ended 31 August 2007. In addition, goods with a selling price of $90,000 were sold on its behalf by an agent on a sale or return basis and were not included in the recorded sales. Calculate the net sales for the trading account.

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Question 208

[3 marks]inventory valuation and trading account
Digits Ltd's net sales for the year ended 31 August 2007 were $910,000 and its cost of sales was $591,500. Calculate the gross profit for the year.

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Question 209

[1 marks]inventory valuation and trading account
Inventory costing $10,000 was stolen from Digits Ltd in July 2007 and the insurance company settled the claim in full at $4,500. Calculate the net loss on the theft to be charged in the profit and loss account.

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Question 210

[2 marks]inventory valuation and trading account
Inventory is usually valued at cost in the annual accounts because:
  1. Acost is always lower than the net realisable value of the goods
  2. Bthe tax authorities require the use of purchase invoices
  3. Cprofit is recognised only when the goods are actually sold
  4. Dselling prices are fixed and never change during a financial year

Question 211

[2 marks]inventory valuation and trading account
The alternative to cost when valuing inventory, and the circumstance in which it is used, is:
  1. Anet realisable value, used when it is lower than the cost
  2. Breplacement cost, used whenever prices are expected to rise
  3. Cselling price, used whenever the goods are certain to be sold
  4. Doriginal list price, used before any trade discount is taken off

Question 301

[2 marks]capital reduction and reconstruction scheme
Under a capital reduction scheme a company's 200,000 ordinary shares of $1 each are to be reduced to $0.125 per share. Calculate the reduction in ordinary share capital credited to the capital reconstruction account.

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Question 302

[2 marks]capital reduction and reconstruction scheme
Under a capital reduction scheme a company's 150,000 6% cumulative preference shares of $1 each are to be reduced to $0.75 per share. Calculate the reduction in preference share capital credited to the capital reconstruction account.

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Question 303

[2 marks]capital reduction and reconstruction scheme
A company has 150,000 6% cumulative preference shares of $1 each in issue and the dividends on them are three years in arrears. Calculate the gross preference dividend in arrears.

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Question 304

[2 marks]capital reduction and reconstruction scheme
Under a capital reduction scheme one ordinary share of $0.125 is to be issued for each $1 of gross preference dividend in arrears, and the arrears amount to $27,000. Calculate the nominal value of the ordinary shares issued for the arrears.

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Question 305

[1 marks]capital reduction and reconstruction scheme
Under a capital reduction scheme plant and machinery with a net book value of $147,500 is to be written down to $75,000. Calculate the amount written off the plant and machinery.

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Question 306

[3 marks]capital reduction and reconstruction scheme
A capital reconstruction account is debited with goodwill written off of $62,250, plant and machinery written down by $72,500, a debit balance on profit and loss of $114,375 and ordinary shares of $3,375 issued for preference dividend arrears. Calculate the total of the debit side of the account.

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Question 307

[2 marks]capital reduction and reconstruction scheme
Under a capital reduction scheme a company makes a rights issue of 1,000,000 ordinary shares at par for cash, the nominal value of an ordinary share having just been reduced to $0.125. Calculate the cash received from the rights issue.

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Question 308

[3 marks]capital reduction and reconstruction scheme
Immediately before a capital reduction scheme a company had a bank overdraft of $51,000. Under the scheme it receives $125,000 from a rights issue and repays $50,000 of debentures. Calculate the bank balance immediately after the scheme, and state it as a positive figure if the company is in funds.

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Question 309

[3 marks]capital reduction and reconstruction scheme
Under a capital reduction scheme a company's ordinary share capital is first reduced to $25,000, then increased by $3,375 of shares issued for preference dividend arrears and by a rights issue raising $125,000 at par. Calculate the ordinary share capital immediately after the scheme.

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Question 310

[2 marks]capital reduction and reconstruction scheme
A company with heavy accumulated losses asks its ordinary shareholders to accept a reduction in the nominal value of their shares. A sound reason for accepting is that:
  1. Athe reduction converts their shares into secured loan stock
  2. Bin a liquidation they would rank last and receive nothing
  3. Cthe company would then have to pay them a fixed dividend
  4. Dthe reduction increases the number of shares each of them holds

Question 401

[3 marks]marginal and absorption costing
A factory makes three toys. Selling price and unit costs are: gun, selling price $10.00, direct materials $3.20, direct labour $1.60, variable overheads $1.60, fixed costs 1.70;car,1.70; car, 25.00, 7.00,7.00, 2.90, 3.20,3.20, 4.00; cellphone, 50.00,50.00, 10.00, 5.30,5.30, 5.80, $6.00. Output was 6,000 guns, 2,000 cars and 300 cellphones, and all production was sold. Calculate the total profit for the year.

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Question 402

[1 marks]marginal and absorption costing
A factory absorbs fixed costs at 1.70agun,1.70 a gun, 4.00 a car and $6.00 a cellphone, and it produced 6,000 guns, 2,000 cars and 300 cellphones in the year ended 31 August 2011. Calculate the total fixed overheads absorbed for that year.

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Question 403

[2 marks]marginal and absorption costing
In costing, contribution is:
  1. Asales revenue less all the costs of the period, fixed and variable
  2. Bsales revenue less the variable costs of the units sold
  3. Cthe profit made on a unit after fixed costs are absorbed
  4. Dthe fixed costs of a period divided by the units produced

Question 404

[2 marks]marginal and absorption costing
A car toy sells for $25.00 and its unit costs are direct materials $7.00, direct labour $2.90, variable overheads $3.20 and fixed costs $4.00. Calculate the contribution per car.

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Question 405

[2 marks]marginal and absorption costing
A factory's fixed overheads for the year ended 31 August 2011 were $20,000. In the year ended 31 August 2012 they increased by 2% as a direct result of opening a new production line. Calculate the fixed overheads for the year ended 31 August 2012.

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Question 406

[2 marks]marginal and absorption costing
A factory's fixed overheads rose by $400 as a direct result of opening a new production line, on which 4,000 whistles were produced. Production of the other toys was unchanged, so they keep their existing rates. Calculate the fixed overhead absorption rate per whistle.

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Question 407

[3 marks]marginal and absorption costing
In the year ended 31 August 2012 a factory sold 5,620 guns at a contribution of $3.60 each, 1,945 cars at $11.90 each, 278 cellphones at $28.90 each and 3,060 whistles at $1.00 each. Calculate the total contribution for the year.

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Question 408

[3 marks]marginal and absorption costing
A factory's total contribution for the year ended 31 August 2012 was $54,471.70 and its fixed overheads for the period were $20,400. Calculate the profit for the year under marginal costing.

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Question 409

[3 marks]marginal and absorption costing
In the year ended 31 August 2012 a factory sold 5,620 guns, 1,945 cars, 278 cellphones and 3,060 whistles. Under absorption costing the profit a unit was 1.90agun,1.90 a gun, 7.90 a car, $22.90 a cellphone and $0.90 a whistle. Calculate the profit for the year under absorption costing.

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Question 410

[2 marks]marginal and absorption costing
At 31 August 2012 a factory held closing inventory of 380 guns, 55 cars, 22 cellphones and 940 whistles, and it absorbs fixed overheads at 1.70agun,1.70 a gun, 4.00 a car, $6.00 a cellphone and $0.10 a whistle. Calculate the fixed overhead carried forward in the closing inventory under absorption costing.

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Question 411

[2 marks]marginal and absorption costing
A factory has closing inventory but no opening inventory. Its profit under absorption costing is higher than its profit under marginal costing because:
  1. Amarginal costing ignores the variable costs of the unsold units
  2. Babsorption costing charges a lower fixed overhead for the period
  3. Cmarginal costing values the closing inventory at selling price
  4. Dabsorption costing carries fixed overhead forward in the inventory

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