UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

General Certificate of Education Advanced Level

ACCOUNTING 9706/33
Paper 3 Multiple Choice May/June 2013
1 hour
Additional Materials: Multiple Choice Answer Sheet
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IB13 06_9706_33/4RP
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1 In calculating the net cash flow from operating activities, which item would be included as an
adjustment to profit from operations?

A accumulated depreciation
B bad debts recovered
C bank loan received
D profit on sale of fixed assets

2 A company applies a 20% factory profit to manufacturing cost. Details of its inventory at transfer
price are as follows.

inventory at 31 May 2012 24 000

inventory at 31 May 2013 36 600

What is the correct treatment of unrealised profit in the income statement for the year ended
31 May 2013?

A $2100 expense
B $2100 income
C $6100 expense
D $6100 income

3 The following information is taken from the statement of financial position of a company.

5% debenture 2019 / 2020 50 000

asset revaluation reserve 10 000
goodwill 20 000
issued ordinary share capital 80 000
long-term loan (repayable 2018) 45 000
tangible non-current assets (at nbv) 116 000
retained earnings 36 000
share premium 16 000

What is the figure for equity to be included in the statement of financial position?

A $142 000 B $162 000 C $182 000 D $202 000

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4 What is the effect on a company’s statement of financial position of issuing bonus shares?

A The bank balance will be increased.

B The non-current liabilities will be increased.
C The reserves will be reduced.
D The share capital will be reduced.

5 At the start of the year a company had plant and machinery with a net book value of $160 000.

During the year a machine which had cost $50 000 was disposed of. The sale proceeds were
$60 000 and this resulted in a profit on disposal of $20 000.

The remaining plant and machinery was then revalued at $190 000.

What was the balance on the revaluation reserve at the year end?

A $40 000 B $70 000 C $80 000 D $90 000

6 The directors of a company carry out the following actions.

1 make an issue of 50 000 ordinary shares of $1 each at par

2 make an issue of 20 000 bonus shares of $1 each at par
3 make a repayment of a debenture of $60 000

Which row shows the effect of these actions on the capital of the company?

issued share capital non-current liabilities working capital

A increase decrease decrease

B increase decrease no effect
C increase increase increase
D no effect decrease increase

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7 X and Y are in partnership sharing profits and losses equally. The following information is
available.

X Y
$ $

capital accounts 100 000 100 000

current accounts (10 000) 5 000
10% loan 40 000 –

They agree to sell their business to Z Ltd. The terms of the sale are as follows.

1 The assets and liabilities have a book value of $235 000. They are sold at an agreed
value of $285 000.
2 X will receive an 8% debenture which pays the same amount of interest as his loan.
3 The balance due to each partner will be paid in shares of $1 each in Z Ltd.

How many shares in Z Ltd will X receive?

A 40 000 B 65 000 C 100 000 D 105 000

8 A Ltd has purchased B Ltd for the total purchase price of $834 000. The purchase consideration
being satisfied by:

issue of 90 000 6% preference shares of $2 valued at $2.20,

300 000 ordinary shares par value $1 valued at $1.50,
10% debenture (2022).

What is the value of the debenture?

A $186 000 B $204 000 C $336 000 D $354 000

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9 The summarised statement of financial position of a sole trader shows the following.

non-current assets 200 000

net current assets 10 000
210 000
capital 210 000

He agrees to sell his business to X Ltd. The purchase consideration is $260 000 being made up
of $60 000 cash
$80 000 debentures and
180 000 ordinary shares of $0.50 each.

Which amount will be credited to the share premium account of X Ltd?

A $30 000 B $50 000 C $90 000 D $120 000

10 A company buys a new machine.

Which costs are not allowable as a capital item for the purchase?

1 the cost of additional staff to operate the machine

2 the cost of the machine
3 the cost of additional inventory to use on the machine
4 the cost of a technician to install the machine at the company’s premises

A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4

11 A company’s year end is 30 June 2012. On 27 July 2012 a major fire took place at the company’s
factory. On 8 August 2012 a major debtor at 30 June 2012 went into liquidation.

How should the two events be treated in the financial statements?

fire liquidation

A adjusted in the financial statements adjusted in the financial statements

B adjusted in the financial statements disclosed in notes
C disclosed in notes adjusted in the financial statements
D disclosed in notes disclosed in notes

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12 Which expense is not deducted before arriving at operating profit?

A auditor’s fee
B debenture interest
C directors’ remuneration
D distribution costs

13 The working capital cycle of a business was 100 days in 2012 and 130 days in 2013.

Which statement explains the change?

A Cash and cash equivalents have increased during 2013.

B Inventory increased during 2013.
C The company increased the period taken to pay its suppliers in 2013.
D Trade receivables decreased during 2013.

14 The following information has been obtained for a company.

declared dividend per share 0.05

market price per share 4.00
nominal value of shares 0.50

What is the dividend yield?

A 1.25% B 2.50% C 5.00% D 10.00%

15 A company has a high liquidity ratio.

What will reduce liquidity?

A converting loan stock into shares

B doubling the annual rates of depreciation
C making a bonus issue to existing shareholders
D replacing machinery earlier than planned

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16 The following information is available for a company for the year ended 31 December.

profit from operations 134 000

finance costs 16 000
profit before tax 118 000
taxation 36 000
retained profit for the year 82 000

Issued ordinary share capital 500 000 shares of $0.50 each.

What is the earnings per share for the year ended 31 December?

A $0.117 B $0.164 C $0.169 D $0.236

17 How does IAS 16 define the fair value of an asset?

A the amount a buyer will pay for it

B the amount paid to purchase the asset
C the value after deducting an impairment loss
D the value shown in the statement of financial position after depreciation

18 A company with 36 000 shares of $0.50 each in issue has, as its only reserve, a retained profit of
$25 000. The directors then recommend a bonus issue of 1 for 4.

What is the balance on the profit and loss account after the bonus issue?

A $4500 B $7000 C $20 500 D $25 000

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19 A company makes three products for which the following details are given.

product P product Q product R

$ $ $

selling price per unit 20 24 36

direct material per unit 9 12 15
direct labour per unit 5 3 9

The same material is used by all three products and it costs $3.00 per kilo.

There is a shortage of material.

In which order of priority should the products be made in order to achieve maximum profit from
the available material?

A P→Q→R

B Q→R→P

C R→P→Q

D R→Q→P

20 A product has the following unit costs.

direct materials 14
direct labour 5
variable overheads 3
variable selling costs 1
fixed overheads 6

Inventory is valued at marginal cost.

What is the inventory value of 1500 units?

A $28 500 B $33 000 C $34 500 D $43 500

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21 1500 units costing $2 per unit were input into a process. The normal loss was 20% of the input.
The lost units had a scrap value of $0.40 each.

What will be the cost per unit of output?

A $1.60 B $1.92 C $2.00 D $2.40

22 A businessman starts trading with a bank balance of $124 000. The budget for the first three
months shows the following.

month 1 month 2 month 3

$ $ $

cash sales in month 30 000 40 000 35 000

credit sales (terms 30 days) 20 000 22 000 24 000
purchases (terms 60 days) 25 000 28 000 30 000
expenses paid in month 12 000 13 000 64 000

What is the budgeted opening bank balance at the start of month 3?

A $123 000 B $158 000 C $164 000 D $189 000

23 A company has the following budgeted information.

sales 100 000 units

variable costs $350 000
fixed costs $450 000

Actual sales for the period were 120 000 units.

The company uses flexible budgeting.

What was the total budgeted cost for the period?

A $800 000 B $870 000 C $890 000 D $960 000

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24 A company provides the following budgeted information for next month.

production 16 875 units

raw materials per unit 4 kilos
opening inventory of raw materials 24 000 kilos
closing inventory of raw materials 28 500 kilos
loss of raw materials in production process 10%

What is the budgeted raw material purchases for the month?

A 67 500 kilos
B 70 000 kilos
C 75 000 kilos
D 79 500 kilos

25 840 units of a product are manufactured in a period. 1570 kg of raw material were purchased and
used at a cost of $5820. Raw material price and usage variances were $126 F and $235 A
respectively.

What was the standard raw material cost per unit of the product?

A $6.50 B $6.80 C $7.06 D $7.36

26 The standard time for the job is set at 50 hours. The standard direct labour rate is $8 per hour.

The job was completed in 65 hours at a direct labour cost of $455.

What is the direct labour rate variance?

A $55 adverse
B $55 favourable
C $65 adverse
D $65 favourable

27 Which cost is described by the following?

‘costs which should be achieved under efficient conditions, but allowing for normal wastage’

A basic standard
B currently attainable standard
C flexible standard
D ideal standard

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28 A company produces a single product. Each product uses 12 kilos of materials at $0.50 per kilo.

During the month, the company produced 1650 units. It actually used 19 250 kilos at a total cost
of $9240.

What was the material usage variance for the month?

A favourable $264
B favourable $275
C favourable $385
D favourable $660

29 A company can only invest $1 million in the current period. The table shows five projects.

capital requirement NPV

project
(current period) $m $m

1 1.2 5.0
2 1.0 2.5
3 0.6 1.5
4 0.4 1.2
5 0.4 1.0

Which projects should the company undertake to maximise its shareholders’ wealth?

A 1 only B 2 only C 3 and 4 D 3 and 5

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30 A company is considering replacing its fleet of vehicles. The following information is available.

purchase price of vehicles 165 000

annual running costs 18 000
trade in value of vehicles at the end of year 3 60 000

The company’s cost of capital is 8% and the following discount factors apply.

year 0 1.000
year 1 0.926
year 2 0.857
year 3 0.794

What is the net present value of the project?

A $(99 558) B $(145 674) C $(163 746) D $(211 386)

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