UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

General Certificate of Education

Advanced Subsidiary Level and Advanced Level
* 2 1 2 0 4 3 7 0 8 5 *

ACCOUNTING 9706/22
Paper 2 Structured Questions May/June 2011
1 hour 30 minutes
Candidates answer on the Question Paper.
No Additional Materials are required.

READ THESE INSTRUCTIONS FIRST

Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.

Answer all questions.

All accounting statements are to be presented in good style.
International accounting terms and formats should be used as appropriate.
Workings must be shown.
You may use a calculator.

At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.

For Examiner’s Use

Total

This document consists of 12 printed pages.

DC (NH) 31866/3
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1 Marcel owns a wholesale business supplying shops, hotels and restaurants with tea and For
coffee. He does not keep formal accounting records but is able to supply the following Examiner’s
information for the year ended 30 April 2011. Use

30 April 2011 1 May 2010

$ $
Trade receivables 17 000 18 200
Trade payables 14 800 16 600
Inventories 20 600 33 000
Wages accrued 9 350 9 200
General expenses prepaid – 900
General expenses owing 800 –

Transactions during the year ended 30 April 2011 were as follows:

$
Cash received from credit customers 103 160
Cash paid to credit suppliers 88 400
Cash sales to staff 10 750
Sales returns from credit customers 9 200
Discounts allowed 9 540
Discounts received 9 000
Bad debts 8 200
Wages 13 650
General expenses 12 300

REQUIRED

(a) (i) Prepare a purchases ledger control account to find out the total amount of credit
purchases for the year ended 30 April 2011.

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(ii) Prepare a sales ledger control account to find out the amount of credit sales for the For
year ended 30 April 2011. Examiner’s
Use

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Additional information:

1 The normal gross profit to sales margin is 33.33%.

2 Staff are permitted to buy goods at cost plus 25%.

3 Goods sold in the annual clearance sale, $29 700, were sold at cost price.

4 On 8 March 2011 an unknown quantity of goods was destroyed by fire.

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REQUIRED For
Examiner’s
(b) There were no further losses of goods during the year. Starting with the opening Use

inventory, calculate the value of the goods destroyed by the fire on 8 March 2011.

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(c) Prepare the income statement (trading account only) for the year ended 30 April 2011. For
Examiner’s
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[Total: 30]

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2 The following information is available for the Northern Division of Blackford Industrial Ltd: For
Examiner’s
Statement of financial position at 30 April 2011 Use

$000 $000 $000

Non-current assets at net book value 180

Current assets
Inventory 40
Trade receivables 35
Bank 43
118
Current liabilities
Trade payables 55
Other payables 23
78
Net current assets 40
Capital employed 220

Equity
Ordinary share capital – $1 each 190
Share premium 10
Retained earnings 20
30
Total shareholders’ funds 220

Additional information for year ended 30 April 2011

$000
Total revenue (sales) 480
Cash purchases 240
Cash paid to credit suppliers 60
Operating expenses 120

At 30 April 2010, the following balances were reported: $000

Inventory 28
Trade payables 15

REQUIRED

(a) Calculate the following amounts for the year ended 30 April 2011:

(i) cost of sales

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(ii) gross profit and profit for the year (net profit). For
Examiner’s
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An analysis of the Southern Division of Blackford Industrial Ltd for the year ended 30 April
2011 yielded the following results.

Southern Division

1 Mark-up 40%
2 Gross profit percentage 28.57%
3 Expenses to sales 20%
4 Net profit percentage 8.57%
5 Return on capital employed 18.00%
6 Rate of inventory (stock) turnover 8.95 times
7 Liquid ratio (acid test) 1.1:1

REQUIRED

Northern Division

(b) Calculate each of the same ratios for the Northern Division of Blackford Industrial Ltd,
for the year ended 30 April 2011. The calculations should be correct to two decimal
places.

(i) Mark-up

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(ii) Gross profit percentage

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(iii) Expenses to sales For

Examiner’s
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(iv) Net profit percentage

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(v) Return on capital employed

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(vi) Rate of inventory (stock) turnover

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(vii) Liquid ratio (acid test)

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(c) Using the profitability ratios (i) – (v) compare the performance of the Northern and For
Southern Divisions of Blackford Industries and explain the significance of each ratio. Examiner’s
Use

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3 Ventana Ltd produce three different types of slatted wooden blinds, Pine, Teak and Oak. The For
company’s forecast figures for the year ended 30 April 2012 were: Examiner’s
Use

Pine Teak Oak

$ $ $

Selling price (per unit) 61 158 170

Costs (per unit)

Direct material 30 60 80
Direct labour 15 46 24
Variable overhead 6 12 16

Fixed overhead is absorbed on the basis of 50% of direct material cost.

Annual production and sales are forecast to be:

Pine 2000 units

Teak 1600 units
Oak 1000 units

REQUIRED

(a) For the year ended 30 April 2012:

(i) Prepare a statement to show the contribution per unit for each product.

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(ii) Calculate the total forecast fixed cost for the year.

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(iii) Prepare a statement to show the break-even point for each type of blind in units For
and dollars. Examiner’s
Use

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(b) Prepare a statement, using the contribution per unit, to show the total profit or loss
made by each type of blind for the year.

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One of the directors wishes to stop production of the pine blinds. For
Examiner’s
This would increase the total forecast fixed costs by 25%. However, the director estimates Use

that sales of the teak and the oak blinds would increase by 50%.

REQUIRED

(c) Prepare a detailed marginal cost statement, using the contribution per unit, to show the
effect on total profit of stopping production of the pine blinds.

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2011 9706/22/M/J/11