ACCOUNTING AllPapers

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONSGeneral Certificate of Education Advanced Subsidiary Level and Advanced Level 9706/11 ACCOUNTING Paper 1 Multiple Choice October/November 2013 1 hour Additional Materials: *3288750289* Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended) READ THESE INSTRUCTIONS FIRST Write in soft pencil. Do not use staples, paper clips, highlighters, glue or correction fluid. Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you. DO NOT WRITE IN ANY BARCODES. There are thirty questions on this paper. Answer all questions. For each question there are four possible answers A, B, C and D. Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet. Read the instructions on the Answer Sheet very carefully. Each correct answer will score one mark. A mark will not be deducted for a wrong answer. Any rough working should be done in this booklet. Calculators may be used. This document consists of 10 printed pages and 2 blank pages. IB13 11_9706_11/2RP © UCLES 2013 [Turn over 2 1 A non-current asset costs $250 000 and has a useful economic life of 25 years. The estimated residual value is $10 000. Depreciation is provided on a straight line basis. After 10 years the asset is sold for $120 000. Disposal costs of $20 000 are incurred. What is the loss on disposal? A 2 $30 000 B C $34 000 $50 000 D $54 000 Goods that had previously been purchased on credit have been returned to the supplier. How should this be recorded in the purchaser’s books of account? account to be debited A bank purchases returns B trade payable bank C creditor purchases returns D 3 account to be credited purchases returns trade payable On 1 January 2012 a business had prepaid rent of $50. During 2012, it made three rent payments of $250 each. On 31 December 2012, the business owed $200 rent for 2012. The business owner only charged the rent payments made during 2012 in the income statement. What is the effect on profit for the year? A B $200 understated C $250 overstated D 4 $200 overstated $250 understated A computer used for demonstration to customers was treated as capital expenditure. The following year a customer purchased the computer in the ordinary course of business. Which entries are needed to adjust the cost of sales? account to be debited account to be credited A inventory computers B purchases computers C sales inventory D selling expenses sales © UCLES 2013 9706/11/O/N/13 3 5 The table shows information about a business. $ provision for doubtful debts at 1 January 2012 700 trade receivables at 31 December 2012 (after writing off a bad debt of $30) charge to income statement for bad and doubtful debts for year ended 31 December 2012 (including the bad debt written off) 15 000 200 What is the total percentage provision that has been made for doubtful debts at 31 December 2012? A 6 3.5% B 4.7% C 5.8% D 6.0% The following information is extracted from the statement of financial position of a business. $ bank loan (repayable 2019) bank loan interest owing 16 200 1 880 bank overdraft 11 600 capital 20 710 drawings 19 100 inventory 14 610 prepayments 1 420 trade payables 14 110 trade receivables 9 050 What is the value of the net current liabilities? A 7 $1590 B $2510 C $18 710 D $20 320 A business sells computers. When they value their inventory they exclude the value of the inventory that is over one year old, as they may be obsolete. Which accounting principle does this demonstrate? A going concern B historical cost C prudence D realisation © UCLES 2013 9706/11/O/N/13 [Turn over 4 8 When preparing a bank reconciliation statement. Which entry must be made to the discount received account to correct the error? A credit $280 © UCLES 2013 B credit $560 C debit $280 9706/11/O/N/13 D debit $560 . the following information is available. $ bank balance shown by the cash book 20 000 debit unpresented cheques 2 500 uncleared bankings 1 400 standing order shown on the bank statement (not in the cash book) 300 What is the balance on the bank statement? A 9 $18 600 B $19 200 C $20 800 D $21 400 The following financial information has been extracted from the books of account. $ bad debts written off 7 000 cash from credit customers 925 000 credit sales 900 000 opening trade receivables 300 000 discounts allowed 10 000 discounts received 25 000 increase in provision for doubtful debts 9 000 returns inwards 8 000 returns outwards 5 000 What is the closing balance on the sales ledger control account? A $235 000 B $241 000 C $250 000 D $253 000 10 Discount received of $280 has been incorrectly posted to the credit of the discount allowed account. $ direct costs 210 000 indirect costs 55 000 increase in work in progress 7 000 raw materials taken for own use 2 000 Which figures should appear in the manufacturing account? prime cost $ overheads $ transfer to trading account of income statement $ A 208 000 55 000 256 000 B 208 000 55 000 270 000 C 210 000 53 000 256 000 D 210 000 53 000 270 000 12 Which item appears in a company’s income statement? A dividends B inventory C trade payables D transfer to reserves 13 The table shows the following balances for a business. start of year $ end of year $ inventory 6 000 9 000 trade payables 8 000 10 000 Total payments to trade payables were $20 000.5 11 A trader provides the following financial information for the year. What is the cost of sales for the year? A $15 000 © UCLES 2013 B $19 000 C $21 000 9706/11/O/N/13 D $25 000 [Turn over . Profit for the year was $200 000. The partners agree that the goodwill is now worth $40 000 and they agree to share future profits equally. sharing profits. Y $60 000. Existing goodwill is shown in the ledger as $10 000.6 14 X and Y are in partnership sharing residual profits and losses in the ratio 7 : 3. What was the division of profits between the partners? X $ Y $ A 137 000 63 000 B 140 000 60 000 C 149 000 51 000 D 152 000 48 000 15 X. They also agree that. X 40%. goodwill is not to appear in the ledger. in future. Interest is allowed on these at the rate of 10% per year. Which journal entry will record this change? debit $ A B C D © UCLES 2013 X Y Z goodwill 1 334 7 333 1 333 X Y Z goodwill 10 000 10 000 10 000 X Y Z goodwill 12 000 6 000 12 000 X Y Z goodwill credit $ 13 334 13 333 13 333 10 000 30 000 30 000 40 000 9706/11/O/N/13 . Their fixed capital accounts have balances of X $40 000. Y 20% and Z 40%. Y and Z are in partnership. X is paid a salary of $40 000 per year. The following information is available. What was the sales figure for the trading period? A $16 250 B $18 750 C D $20 400 $21 250 17 A club supplies refreshments for its members at a uniform gross profit margin of 30%. $ opening inventory 6 000 closing inventory 4 000 purchases 15 000 He uses a uniform gross profit margin of 20%. $ receipts 62 000 opening inventory 10 000 purchases 45 000 What is the value of closing inventory? A $10 000 B $11 600 C $16 500 D $18 600 18 Y sells goods to X on credit. Details of X’s account are as follows.7 16 A trader provides the following information. $ trade discount 250 closing balance 750 opening balance 1500 payment received 2000 contra to purchases ledger 2500 What was the value of sales? A $3500 © UCLES 2013 B $3750 C $4000 9706/11/O/N/13 D $5250 [Turn over . Profit from operations for the year was $465 000. The directors paid an 8% ordinary dividend during the year. What is the retained profit for the year? A $250 000 B $370 000 C D $385 000 $400 000 21 The following information was extracted from the books of a trader. $ revenue for the year purchases for the year 126 000 87 000 opening inventory 9 000 closing inventory 12 000 What is the rate of inventory turnover? A 4 times B 6 times C 8 times D 12 times 22 A company wishes to improve its current ratio and its liquid (acid test) ratio. How can this be done? A increasing discounts to trade receivables B increasing the provision for doubtful debts C purchasing additional inventory on credit D selling non-current assets © UCLES 2013 9706/11/O/N/13 .8 19 The following information has been taken from the books of accounts of a limited company for the year ended 31 December 2012.50. $ bank loan interest for the year 1 650 bank overdraft interest for the year 2 150 ordinary dividends paid during the year 900 8% debenture taken out on 1 October 2012 30 000 What are the total finance costs in the income statement for the year ended 31 December 2012? A $4400 B $4700 C D $5300 $6200 20 A company has 1 000 000 ordinary shares of $1 issued at $2. It also has a 5% debenture of $300 000. B Total fixed costs decrease as production increases. $ purchases of raw materials during the year 53 000 wages and salaries: production staff 110 000 administration staff 56 000 production overheads 16 000 administration expenses excluding wages 42 000 selling and distribution overheads 34 000 What is the total indirect cost for the year? A $132 000 B $148 000 C $163 000 D $258 000 26 Which statement is correct? A Fixed costs per unit decrease as production increases. C Total variable costs decrease as production increases. D Variable costs per unit decrease as production increases. © UCLES 2013 9706/11/O/N/13 [Turn over .9 23 Which of the following measures a business’ average credit period? A current ratio B inventory turnover C liquid (acid test) ratio D trade receivables turnover 24 Which expense would be classified as a variable cost of a furniture manufacturer? A factory manager’s salary B plant depreciation C royalties D vehicle insurance 25 A company has the following annual costs. 5 million C $7 million D $9 million 29 Which statement best describes job costing? A a costing method that calculates the cost of meeting a specific customer order B a costing method that calculates the cost of producing a number of identical units for a customer C a costing method that enables overheads to be absorbed into the cost of the product D a costing method that separates fixed costs from variable costs 30 Which item would appear in a cash budget? A bad debts B cash discounts C depreciation D loan repayments © UCLES 2013 9706/11/O/N/13 . B 1. Which profit can be anticipated at this level? A $2. It is used by management for make or buy decisions. sales revenue 10 budget 8 total costs costs 6 and revenues 4 ($m) fixed costs 2 0 0 1 2 3 4 5 sales volume (millions of units) The budgeted sales volume is 4. 2 and 3 1 and 3 only C D 2 and 4 only 3 and 4 only 28 An accountant prepared the following break-even chart.5 million units.10 27 Which statements about absorption costing are correct? 1 2 It enables a company to know its break-even level of production.5 million B $4. 3 It leads to higher inventory valuations than marginal costing. 4 A It apportions overheads between production and service departments. 11 BLANK PAGE © UCLES 2013 9706/11/O/N/13 . but if any items requiring clearance have unwittingly been included. © UCLES 2013 9706/11/O/N/13 .12 BLANK PAGE Permission to reproduce items where third party owned material protected by copyright is included has been sought and cleared where possible. which is itself a department of the University of Cambridge. University of Cambridge International Examinations is part of the Cambridge Assessment Group. the publisher will be pleased to make amends at the earliest possible opportunity. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES). Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders. Do not use staples. B. highlighters. Calculators may be used. Read the instructions on the Answer Sheet very carefully. DO NOT WRITE IN ANY BARCODES. IB13 11_9706_12/5RP © UCLES 2013 [Turn over . paper clips. For each question there are four possible answers A. This document consists of 11 printed pages and 1 blank page. C and D. Each correct answer will score one mark. Answer all questions. There are thirty questions on this paper. glue or correction fluid.UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Subsidiary Level and Advanced Level 9706/12 ACCOUNTING Paper 1 Multiple Choice October/November 2013 1 hour Additional Materials: *1011372598* Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended) READ THESE INSTRUCTIONS FIRST Write in soft pencil. A mark will not be deducted for a wrong answer. Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet. Any rough working should be done in this booklet. Write your name. Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you. Which effect will this have in the financial statements of the business? in the income statement A increase profit increase current assets B increase profit reduce current liabilities C reduce profit increase current liabilities D 3 in the statement of financial position reduce profit reduce current assets Anna owns a plumbing business. $ non-current assets 80 000 capital at start of year 75 000 drawings 16 000 profit for the year 13 000 non-current liability current assets 6 000 12 700 What is the amount of trade payables? A 2 B $8700 $11 700 C $14 700 D $26 700 A business wishes to create a new provision for doubtful debts.2 1 The following information is taken from a trader’s statement of financial position. The accumulated depreciation on the building was $47 600. These included $2200 labour and $540 materials used by Anna in the extension of the business premises. What was Anna’s total revenue expenditure for the year? A 4 $141 310 B $141 760 C $142 300 D $144 500 A building cost $340 000. Additional planning and legal costs of the extension were $450. Costs for the year were $49 500 for wages and $95 000 for materials. It was decided to revalue the building to its market value of $560 000. What is the balance on the revaluation reserve? A $172 400 © UCLES 2013 B $220 000 C $267 600 9706/12/O/N/13 D $512 400 . What is the amount of rent to be charged in the income statement in Year 2? A $121 000 © UCLES 2013 B $154 100 C $160 300 9706/12/O/N/13 D $193 400 [Turn over . 2011 $ 190 000 245 000 75 000 90 000 115 000 non-current assets (at cost) 2012 $ 155 000 less accumulated depreciation Other information for the financial year 2012 is as follows. were $157 200. to 31 March Year 3. During Year 2 payments made for 12 months’ rent. At 31 December Year 1 the company carried forward a debit balance of $36 200 on the rent account. In which section of the statement of financial position would this item appear? A B current assets C current liabilities D 7 capital non-current assets A company’s financial year ends on 31 December.3 5 The table shows extracts from the statements of financial position of a business. $ depreciation charged 40 000 new non-current assets purchased (at cost) loss on sale of non-current assets 105 000 10 000 Which amount was received from the sales of the non-current assets? A 6 $15 000 B $25 000 C $30 000 D $35 000 An item can be converted easily into cash. plus $1949 C plus $3190. which had both been entered on the incorrect sides of the respective ledger accounts. minus $1949 B minus $3190. He is entitled to trade discount at 10% and cash discount of 5%. Which adjustments should be made to the cash book balance to reconcile it to the bank statement? A minus $3190. On the same day he discovers that he can only sell the inventory for $5000. minus $1949 D plus $3190. plus $1949 10 A company’s trial balance includes a suspense account.4 8 A trader buys inventory costing $6000. What is the double entry required to clear the suspense account balance? account A B C D © UCLES 2013 debit $ discounts allowed discounts received suspense 312 discounts allowed discounts received suspense 624 discounts received suspense discounts allowed 240 72 discounts received suspense discounts allowed credit $ 480 144 240 72 480 144 312 624 9706/12/O/N/13 . Which amount should he record as the purchase price of the inventory? A 9 $5000 B C $5130 D $5400 $6000 A business is preparing a bank reconciliation and finds the following. $ unpresented cheques 3190 uncredited bankings 1949 The cash book has a debit balance of $5000. It was found that the only errors were discounts received of $240 and discounts allowed of $312. What was the cost of the inventory lost in the burglary? A B $4000 $5000 C $9000 D $13 000 12 During the financial year a business receives $620 000 from its trade receivables after allowing cash discounts of $30 000. At the start of the year trade receivables owed $47 000. What was the corrected profit? A $435 000 © UCLES 2013 B $445 000 C $475 000 9706/12/O/N/13 D $495 000 [Turn over . at cost 30 000 purchases 210 000 revenue 330 000 closing trading inventory. At the end of the year trade receivables owed $40 000. 1 Closing inventory was undervalued by $15 000. The table shows the company’s results for the month. 2 Sales returns of $5000 had been recorded as purchases returns. at cost 4 000 A gross profit on all sales of 30% has been achieved. What was the amount of credit sales made during the year? A $613 000 B $627 000 C $643 000 D $657 000 13 A business had a profit for the year of $450 000 before correcting the following errors.5 11 During the month a company lost a quantity of inventory in a burglary. 3 The charge for depreciation was overstated by $20 000. $ opening trading inventory. department X $ department Y $ revenue 810 000 515 000 cost of sales 470 000 265 000 gross profit 340 000 250 000 overheads 210 000 295 000 profit / (loss) for the year 130 000 (45 000) The following errors have been found. What is the corrected profit for the year for department X? A B $80 000 $90 000 C $100 000 D $170 000 15 A company has the following expenses for the year. $ directors’ salaries 140 000 depreciation of delivery vehicles 87 000 office salaries 90 000 loan interest 33 000 discounts allowed 12 000 What is the total of the administration overheads? A $242 000 B $263 000 C $329 000 D $362 000 16 Which items appear in the manufacturing account of a business? 1 2 closing inventory of work in progress 3 carriage inwards 4 A closing inventory of finished goods carriage outwards 1 and 2 © UCLES 2013 B 1 and 3 C 2 and 3 9706/12/O/N/13 D 2 and 4 .6 14 The following departmental accounts have been prepared for a limited company for the year ended 30 September 2013. 1 Department X overheads include $10 000 for the purchase of goods for resale of department X. 2 Revenue of $40 000 has been credited to department X when it should have been credited to department Y. The club charges an annual subscription of $240 per member. What was the cost of sales? A $85 700 © UCLES 2013 B $86 900 C $89 000 9706/12/O/N/13 D $97 100 [Turn over . What is the balance on X’s capital account. The goodwill of the business is valued at $40 000. 8 members had paid their subscriptions for the next year in advance. At the start of the year. $ purchases 95 000 returns inwards 3 300 returns outwards 2 100 inventory withdrawn for personal use 5 000 Inventory on 31 December 2012 was valued at $1000 more than on 1 January 2012. Which figures are recorded in the current year? income and expenditure account $ receipts and payments account $ A 44 160 45 600 B 45 600 44 160 C 45 600 41 760 D 41 760 45 600 19 The following financial information was provided at 31 December 2012.7 17 X becomes a partner in a business receiving a 25% share in the profits. He pays in $60 000 as his capital. but 3 members had not yet paid their current year subscriptions. At the end of the year. 11 members had paid their subscriptions for the current year in advance. if goodwill is not included in the books? A $20 000 B C $50 000 $60 000 D $70 000 18 A club has 190 members. C The customer always pays their debt on time. What would result in a customer’s credit limit being reduced? A Cash discounts are always taken by the customer. B Sales have increased to that customer. It cost $5000 and $3000 depreciation had been provided on it. $ ordinary share capital 20 000 share premium 40 000 long-term loan (repayable 2022) 30 000 bank overdraft 60 000 4% non-redeemable preference share capital 50 000 7% debentures 2017 70 000 What is the total of non-current liabilities in the statement of financial position? A $100 000 © UCLES 2013 B $150 000 C $160 000 9706/12/O/N/13 D $210 000 . D The customer has lost a major contract.8 20 A vehicle is sold for $1500. Which entry is needed to close the disposal account? debit $ credit $ A disposal account 500 income statement 500 B disposal account 3500 income statement 3500 C income statement 500 disposal account 500 D income statement 3500 disposal account 3500 21 A business is reviewing credit limits for its customers. 22 The table shows extracts from the trial balance of a business at 31 December 2012. C Credit suppliers are being paid earlier. 3 © UCLES 2013 B 1. 2 C 2. D Credit suppliers are being paid later. 2. with no change in the sales revenue.9 23 The trade receivables turnover for a company was 100 days in 2011.6 product 3 8 2. 3. contribution per unit $ contribution per hour $ product 1 14 2. Which statement explains this change? A Credit customers are paying earlier. In what order should the products be produced to maximise profit? A 1.4 Total available labour hours are insufficient to make enough of each product to meet demand.1 product 2 13 2. 1 9706/12/O/N/13 D 3. 3. $ trade payables at start of year 38 000 trade payables at end of year 49 000 payments to credit suppliers 210 000 cost of sales 250 000 What was the trade payables turnover? A 72 days B 81 days C 86 days D 90 days 25 A company makes three products. 24 A company provides the following information. 2. 1 [Turn over . B Credit customers are paying later. This reduced to 90 days in 2012. 10 26 The cost of using a mobile phone is made up of a monthly rental charge and the cost of individual phone calls. how many extra units need to be sold to break-even? A B 495 825 C 1320 D 2200 29 A company is asked to make a new machine for a customer. What type of cost is this? A fixed B semi-variable C stepped D variable 27 A business sells its product for $10 per unit and has variable costs of $6 per unit. materials will cost $1100 labour will be 30 hours at a cost of $14 per hour The company charges overheads at $10 per labour hour and has a mark up of 30% on total cost. It provides the following estimates. $ factory rent 30 000 other fixed costs 70 000 What is the break-even point? A 10 000 units B 16 667 units C D 17 500 units 25 000 units 28 A company’s financial information is as follows. The table shows the fixed costs for the year. What is the price on the job cost sheet? A $1520 © UCLES 2013 B $1820 C $1976 9706/12/O/N/13 D $2366 . $ selling price per unit 55 variable costs per unit 15 total fixed costs 33 000 If the selling price is reduced to $40. He intends to pay half in cash at the time of purchase and to take out a loan at 6% interest a year to finance the balance. This will be repaid on 1 November 2014. Which figures does Ted include in his cash budget for 2014? May $ November $ A 6 000 6 000 B 6 000 6 180 C 12 000 0 D 12 000 180 © UCLES 2013 9706/12/O/N/13 .11 30 Ted plans to buy a motor vehicle for $12 000 on 1 May 2014. 12 BLANK PAGE Permission to reproduce items where third party owned material protected by copyright is included has been sought and cleared where possible. Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES). © UCLES 2013 9706/12/O/N/13 . which is itself a department of the University of Cambridge. the publisher will be pleased to make amends at the earliest possible opportunity. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders. but if any items requiring clearance have unwittingly been included. Answer all questions. For each question there are four possible answers A. glue or correction fluid. Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you. highlighters. C and D. Read the instructions on the Answer Sheet very carefully. Each correct answer will score one mark. DO NOT WRITE IN ANY BARCODES. Calculators may be used. There are thirty questions on this paper. paper clips. B. Write your name.UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Subsidiary Level and Advanced Level 9706/13 ACCOUNTING Paper 1 Multiple Choice October/November 2013 1 hour Additional Materials: *5023155209* Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended) READ THESE INSTRUCTIONS FIRST Write in soft pencil. Any rough working should be done in this booklet. This document consists of 9 printed pages and 3 blank pages. IB13 11_9706_13/2RP © UCLES 2013 [Turn over . Do not use staples. Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet. A mark will not be deducted for a wrong answer. How should this be recorded in the seller’s books? debit A cash customer B cash sales C customer cash D 2 credit customer sales A company calculates a draft profit for the year of $98 000. $ prepaid rates at 1 October 2012 400 rent and rates paid during the year 16 200 accrued rates at 30 September 2013 600 prepaid rent at 30 September 2013 1 200 Which charge for rent and rates appears in the income statement for the year ended 30 September 2013? A 4 $15 200 B $16 000 C $16 400 D $17 200 A business wishes to record the following transactions in its books of account. contra between sales ledger control account and purchases ledger control account depreciation charge for the year increase in provision for doubtful debts purchase of non-current asset on credit How many transactions require an entry in the general journal? A 1 © UCLES 2013 B 2 C 3 9706/13/O/N/13 D 4 . It also includes $500 profit taken on goods sold to a customer on a sale or return basis. What is the correct gross profit? A 3 $94 500 B $95 000 C $97 500 D $98 000 A trader provides the following information. This includes the profit margin of $3000 on goods sold on credit but not yet paid for.2 1 A customer paid a deposit in advance for goods to be supplied at a later date. Ryan traded the vehicle in on 1 July 2013 for a $6150 reduction on the cost of a new vehicle. What was the total of current assets on 2 October 2012? A 9 $27 680 B $28 080 C $29 520 D $29 600 The table shows information from the books of a business at 30 April 2013. What was the profit or loss made on the disposal of the van? A 8 $600 loss B $1725 loss C $150 profit D $2150 profit On 30 September 2012 a manufacturer’s current assets totalled $28 000. 1 Inventory was bought for cash. The next day. details $ credit sales invoiced during financial year 79 000 goods sent to customers on 28 April 2013 and invoiced 4 May 2013 6 100 goods sent to customers during April 2013 on sale or return basis but not sold by 30 April 2013 8 300 What is the value of sales for the year ended 30 April 2013? A $76 800 © UCLES 2013 B $85 100 C $87 300 9706/13/O/N/13 D $93 400 [Turn over . It is his policy to apply 25% per annum reducing balance depreciation for each part of the year the asset is held.3 5 At the beginning of the year a company has a provision for doubtful debts of $1000. 2 A bad debt of $400 was written off. Payment was made immediately. The price of $2000 was subject to a trade discount of 20% and a cash discount of 5%. During the year debts of $1500 are written off and $100 is received in respect of a debt written off many years ago. What is the net amount charged to the income statement for bad and doubtful debts? A 6 B $1500 C $2500 $2900 D $3000 What would be treated as part of the capital cost of the purchase of a building? 1 2 7 redecoration of the building 3 A legal costs of the purchase installation of air conditioning needed for the machinery in the building B 1 only 1. 2 and 3 C 1 and 3 only D 2 and 3 only Ryan purchased a van for $16 000 on 31 December 2010. only two transactions took place. At the end of the year the required provision is $2500. What is the opening balance on the suspense account? A credit $690 © UCLES 2013 B credit $740 C debit $690 9706/13/O/N/13 D debit $740 . 1 The debit balance of $450 on the carriage outwards account has been brought down as $540. 3 A cheque for $50 received from Alan Green has been posted to the credit account of Brian Green.4 10 The following information relates to a company’s non-current assets at 31 December. 3 It locates all errors. 4 A Cleared cheques are excluded. What is the total value for non-current assets in the company’s statement of financial position at 31 December? A B $26 000 $59 000 C $85 000 D $144 000 D 2 and 3 only 11 Which statements about a bank reconciliation are correct? 1 2 It can be computerised. 1. Uncredited deposits are included. the following errors are found. On investigation. 4 Rent received of $350 has been posted to the debit of rent paid account. cost price $ disposal value $ motor vehicles 25 000 18 000 equipment 48 000 36 000 fixtures and fittings 12 000 5 000 The company has a serious cash shortage and will cease to trade within the next two months. 3 and 4 12 A trial balance does not balance and a suspense account is opened. 2 and 4 B 1 and 2 only C 2. 2 The purchases returns journal has been overcast by $100. purchases of raw materials.5 13 In reconciling the sales ledger control account with the balances in the sales ledger. This had been overcast by $740. it was noticed that there was an error in the sales journal. purchases of raw materials. indirect wages 16 A business provides the following information for the year. $ prime cost 165 000 factory overheads 43 000 opening work in progress 6 000 closing work in progress 15 000 What is the cost of goods transferred to the trading account of the income statement? A $113 000 © UCLES 2013 B $199 000 C $208 000 9706/13/O/N/13 D $217 000 [Turn over . direct wages B inventories of raw materials. the total receipts from customers of $940 were recorded in the control account as $490. In addition. purchases of raw materials. Which correcting entry must be made? control account list of balances A $290 credit increase by $290 B $290 debit no effect C $1190 credit decrease by $1190 D $1190 credit no effect 14 Which error would give rise to a difference in a trial balance? A bringing forward an opening balance of $9590 instead of $9950 B debiting interest paid in the cash book and crediting it to ‘interest received’ account C debiting ‘repair to motor vehicles’ account with $11 250 for a new motor vehicle D entering the sale of an item for $300 in the books as $3000 15 Which group of items are included in the prime cost? A inventories of finished goods. indirect wages D inventories of work in progress. purchases of raw materials. direct wages C inventories of raw materials. Y and Z are in partnership. B Purchased goodwill should be classed as a tangible non-current asset. D The value of goodwill should never be included in the statement of financial position. During the year $2010 was spent on purchasing new loose tools. 18 W.6 17 Which statement about goodwill is correct? A Internally generated goodwill should be omitted from the statement of financial position. C Purchased goodwill should be omitted from the statement of financial position. X. Which amount was charged to the income statement? A $890 B $1120 C $2010 D $3130 20 What is the reason for providing depreciation on non-current assets? A to provide sufficient funds to replace the non-current assets B to show the assets at replacement cost on the statement of financial position C to show the fall in value of the assets in the income statement D to spread the cost of the assets over their estimated useful lives 21 When is a share premium account opened? A when shares are issued at a price above nominal value B when shares are issued at a price below nominal value C when shares are sold by a shareholder at a price above their nominal value D when shares are sold by a shareholder at a price below their nominal value © UCLES 2013 9706/13/O/N/13 . What would be shown in the partnership appropriation account? A drawings made by W B goods taken for the personal use of Y C interest on a loan made by Z D interest on drawings made by X 19 A trader uses the revaluation method of depreciation for loose tools. On 1 January loose tools were valued at $4620 and on 31 December at $5740. 13 times B 2.20 times 25 Which cost will fall as production is reduced? A fixed costs per unit B total fixed costs C total variable costs D variable costs per unit © UCLES 2013 9706/13/O/N/13 [Turn over . based on non-current assets valued at $250 000 at the end of 2011.40 times C 2.7 22 On 1 May. The company uses the reducing balance method to depreciate its non-current assets at 25% per annum. Which ratio should he use? A gross profit percentage B net profit percentage C trade payables turnover D trade receivables turnover 23 The following information is available about two similar businesses.67 times D 3. He has figures for sales and purchases and wishes to calculate the value of the inventory lost. What is the non-current asset turnover for 2012? A 2. In 2012 sales revenue increased by 20%. X Y $30 000 $35 000 gross profit percentage 60% 62% net profit percentage 30% 8% sales Which business is better at controlling its costs? cost of sales expenses A X X B X Y C Y X D Y Y 24 A business has a non-current asset turnover of two times. There were no purchases or disposals of non-current assets during the year. a trader lost all of his inventory in a fire. $ direct material 50 000 assembly labour factory overheads 100 000 70 000 The normal selling price of each unit is $50.8 26 A company makes and sells one product incurring the following costs. 12 kilos of material at $3 per kilo 4. If it was reduced to $35. The following information is available. how many more units need to be sold to break-even? A 1500 units © UCLES 2013 B 2000 units C 3500 units 9706/13/O/N/13 D 5000 units . units produced per machine hour 500 labour costs per machine hour $25 raw material cost per unit $2 overheads recovered per machine hour $40 What is the cost of production? A $11 300 B $21 300 C D $33 500 $52 500 28 The costs of a company that annually sells 10 000 units are as follows.5 labour hours at $12 per hour production overheads $6 per unit selling overheads $5 per unit What is the total direct cost per unit? A $36 B C $42 D $90 $101 27 A company receives an order for 10 000 units. which product should be discontinued? A Gamma B Rho C Theta D Zeta 30 Sales for January 2014 are expected to be $10 000 and these are expected to increase by $2000 each month. 10% of sales will be cash sales. Gamma Rho Theta Zeta contribution per unit ($) 10 12 14 16 material required (litres) 5 4 6 7 If there is only enough material to make three of the products. Which amount will be shown in the cash budget for receipts from customers in March 2014? A $12 000 © UCLES 2013 B $12 200 C $13 800 9706/13/O/N/13 D $14 000 .9 29 A company manufactures four products. Credit customers are expected to pay after one month. 10 BLANK PAGE © UCLES 2013 9706/13/O/N/13 . 11 BLANK PAGE © UCLES 2013 9706/13/O/N/13 . 12 BLANK PAGE Permission to reproduce items where third party owned material protected by copyright is included has been sought and cleared where possible. but if any items requiring clearance have unwittingly been included. University of Cambridge International Examinations is part of the Cambridge Assessment Group. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders. the publisher will be pleased to make amends at the earliest possible opportunity. © UCLES 2013 9706/13/O/N/13 . which is itself a department of the University of Cambridge. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES). highlighters. paper clips. You may use a calculator. glue or correction fluid. READ THESE INSTRUCTIONS FIRST Write your Centre number. Workings must be shown. You may use a soft pencil for rough working. The number of marks is given in brackets [ ] at the end of each question or part question. Answer all questions. DO NOT WRITE IN ANY BARCODES. Write in dark blue or black pen. fasten all your work securely together. IB13 11_9706_21/4RP © UCLES 2013 [Turn over . International accounting terms and formats should be used as appropriate. No Additional Materials are required.UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Subsidiary Level and Advanced Level *6483509957* 9706/21 ACCOUNTING Paper 2 Structured Questions October/November 2013 1 hour 30 minutes Candidates answer on the Question Paper. This document consists of 11 printed pages and 1 blank page. At the end of the examination. Do not use staples. candidate number and name on all the work you hand in. All accounting statements are to be presented in good style. Depreciation was provided on motor vehicles at 12½% on cost and on shop fittings at 10% on net book value. Rent paid in advance was $8000.2 1 Booksellers Limited prepared the following trial balance for the year ended 31 December 2012: $000 Gross profit for the year Wages and salaries Rent Heating and lighting Motor expenses Office expenses Insurance Discount allowed Other expenses Inventory at 31 December 2012 Trade receivables Provision for doubtful receivables Bank Trade payables Goodwill Motor vehicles at cost Shop fittings at cost Office fittings at cost Provision for depreciation on motor vehicles Provision for depreciation on shop fittings Provision for depreciation on office fittings 5% Debentures Ordinary share capital Retained earnings $000 415 127 44 15 50 19 15 2 53 37 45 4 37 15 44 176 42 25 731 46 12 3 20 190 26 731 Additional information: 1 2 3 4 5 6 7 Wages owing amounted to $23 000 at 31 December 2012. The provision for doubtful receivables was to be 5% of trade receivables. Bad debts of $5000 were to be written off. Debenture interest for the year had not been paid. © UCLES 2013 9706/21/O/N/13 . Office fittings had been revalued at $19 000. 3 REQUIRED For Examiner's Use (a) (i) Prepare an income statement for the year ended 31 December 2012. [12] © UCLES 2013 9706/21/O/N/13 [Turn over . a statement of financial position at 31 December 2012.4 (ii) Calculate the retained earnings of Booksellers Limited at 31 December 2012. in as much detail as possible. For Examiner's Use [2] (b) Prepare. © UCLES 2013 9706/21/O/N/13 . [2] (ii) State the advantages and disadvantages to the company of the two sources of finance you have chosen. [6] [Total: 30] © UCLES 2013 9706/21/O/N/13 [Turn over . State two sources of finance they could use.5 For Examiner's Use [8] (c) (i) The directors wish to raise funds to expand the business. Ratio Formula What the ratio measures Why the ratio may change Gross profit ratio Inventory turnover Quick (acid test) ratio Return on capital employed Trade receivables turnover [20] © UCLES 2013 9706/21/O/N/13 For Examiner's Use . what the ratio measures and reasons why it may change.6 2 (a) Complete the following table stating the formula used to calculate the ratio. 7 (b) State and explain five limitations of using ratio analysis as an indicator of business performance. For Examiner's Use 1 2 3 4 5 [10] [Total: 30] © UCLES 2013 9706/21/O/N/13 [Turn over . Fugues and Sonatas. At present they use the FIFO method of inventory valuation but are considering a change. The following information is also available at 31 March 2013: 1 2 Different methods of inventory valuation for the three closing inventory values: FIFO $ Preludes 4600 Fugues 3900 Sonatas 1700 products provide the following AVCO $ 4300 3750 1500 Owing to a flood during the financial year it has been found that the total inventory of Sonatas has been damaged. [4] © UCLES 2013 9706/21/O/N/13 For Examiner's Use . Shostakovich Limited provisionally calculated its profit for the year at $86 300 using closing inventory valued at $10 200 under the FIFO method.8 3 Shostakovich Limited is a wholesale business selling three products: Preludes. REQUIRED (a) (i) Calculate the revised inventory valuation at 31 March 2013 using FIFO and AVCO. This adjustment has not been accounted for in the inventory calculated above. At 31 March 2013. It is estimated that the inventory could be sold by Shostakovich Limited at a selling price of $1200. For Examiner's Use [6] (b) Explain three reasons why a business cannot normally use the latest selling price of its products to value the inventory. 1 2 3 [6] © UCLES 2013 9706/21/O/N/13 [Turn over .9 (ii) Calculate the revised profit for the year at 31 March 2013 using FIFO and AVCO. [6] Shostakovich Limited’s statement of financial position at 31 March 2013 showed the following: Property Accumulated depreciation $ 200 000 14 000 The value of the property is split equally between land and buildings. [3] (ii) Name the section in Shostakovich Limited’s financial statements where the surplus will appear. [1] © UCLES 2013 9706/21/O/N/13 For Examiner's Use .10 (c) Advise Shostakovich Limited on why the distinction between capital and revenue expenditure is important when preparing financial statements. REQUIRED (d) (i) Prepare the journal entry to record this revaluation. On 1 April 2013 its property was revalued at $315 000. They had been owned for 7 years. A narrative is not required. 11 (iii) Shostakovich Limited will continue to use the same rate of straight line depreciation for its buildings. Calculate the depreciation charge for the year on buildings after the revaluation. [4] [Total: 30] © UCLES 2013 9706/21/O/N/13 For Examiner's Use . 12 BLANK PAGE Permission to reproduce items where third party owned material protected by copyright is included has been sought and cleared where possible. but if any items requiring clearance have unwittingly been included. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES). which is itself a department of the University of Cambridge. the publisher will be pleased to make amends at the earliest possible opportunity. © UCLES 2013 9706/21/O/N/13 . University of Cambridge International Examinations is part of the Cambridge Assessment Group. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders. DO NOT WRITE IN ANY BARCODES. Answer all questions. IB13 11_9706_22/4RP © UCLES 2013 [Turn over .UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Subsidiary Level and Advanced Level *0271924287* 9706/22 ACCOUNTING Paper 2 Structured Questions October/November 2013 1 hour 30 minutes Candidates answer on the Question Paper. Write in dark blue or black pen. READ THESE INSTRUCTIONS FIRST Write your Centre number. glue or correction fluid. You may use a calculator. International accounting terms and formats should be used as appropriate. paper clips. highlighters. Workings must be shown. All accounting statements are to be presented in good style. This document consists of 10 printed pages and 2 blank pages. You may use a soft pencil for rough working. At the end of the examination. No Additional Materials are required. The number of marks is given in brackets [ ] at the end of each question or part question. Do not use staples. candidate number and name on all the work you hand in. fasten all your work securely together. Other expenses in the ratio of sales. Electricity in the ratio 4:1:1 between fuel. Revenue Inventory at 1 January 2012 Purchases Inventory at 31 December 2012 Direct wages Non-current assets at cost Accumulated depreciation Fuel $ 735 600 38 700 454 320 39 760 36 000 120 000 6 000 Car wash $ 30 650 3 650 7 240 2 480 3 000 15 000 1 200 Cafe $ 61 300 4 725 9 620 4 820 12 000 2 760 850 Additional information Depreciation rate Depreciation method Floor area (square metres) 10% Straight line 3 400 15% Reducing balance 850 Other expenses for the year are: $ Rent of premises 46 288 Electricity 18 300 Administration charges 17 119 Other expenses 54 023 The expenses are split between the departments on the following basis: Rent of premises in the ratio of floor area.2 1 Joe Brown has a petrol station which has three departments. Administration charges in the ratio of wages. car wash and café. © UCLES 2013 9706/22/O/N/13 15% Straight line 425 . car wash and café. fuel. The following information is available for the year ended 31 December 2012. [18] © UCLES 2013 9706/22/O/N/13 [Turn over .3 REQUIRED For Examiner's Use (a) Prepare a departmental income statement for the year ended 31 December 2012. 4 (b) Joe is considering closing the car wash department due to its poor profitability. Explain three differences between a bank loan and an overdraft. [6] (c) Joe is looking for funds to improve the business. [6] [Total: 30] © UCLES 2013 9706/22/O/N/13 For Examiner's Use . Advise Joe on the long term effects of this decision. He is considering applying for either a bank loan or an overdraft. For Examiner's Use On 31 May 2013 Alec had a credit balance on his current account of $3000 and Jean had a credit balance on her current account of $340.5 2 Alec and Jean were in partnership with capitals of $90 000 and $60 000 respectively. Alec withdrew $20 000 and Jean $22 000 during the year. The partnership agreement stated: 1 Interest on capital is payable at 5% per annum. 3 Annual partnership salaries were Alec $14 000 and Jean $12 000. 2 Interest on drawings is charged at 8% per annum. On 1 June 2012 Alec had a debit balance on his current account of $2900 and Jean had a credit balance on her current account of $3100. REQUIRED (a) Prepare the current account of each partner for the year ended 31 May 2013. 4 Profits and losses are to be shared in the ratio of capital invested. [10] © UCLES 2013 9706/22/O/N/13 [Turn over . For Examiner's Use [6] (c) Explain the term goodwill.6 (b) Calculate the profit for the year ended 31 May 2013 before appropriation. [4] © UCLES 2013 9706/22/O/N/13 . No goodwill account is to be maintained on the books. REQUIRED (d) Prepare the capital accounts of Alec. Jean and Chris in the ratio of 3:2:1. [10] [Total: 30] © UCLES 2013 9706/22/O/N/13 [Turn over . For Examiner's Use Goodwill was valued at $36 000.7 On 1 June 2013 Alec and Jean agreed to admit Chris as a new partner. The partners agreed that profits and losses are to be shared between Alec. In addition Chris also introduced a motor vehicle valued at $12 150 and inventory of $5850. It was agreed that Chris would pay cash into the business for goodwill. Jean and Chris after Chris’s admission to the partnership. [3] (ii) Calculate the weekly breakeven point in revenue.50 1.00 Kirkton produces and sells 800 Kirks a week.50 3. The following information relates to one unit of Kirk: Per unit Selling price Variable production costs Fixed production costs Variable selling costs Fixed selling costs $ 35. REQUIRED (a) (i) Calculate the weekly breakeven point in units. [3] (iv) Calculate the margin of safety as a percentage. the Kirk.50 1.8 3 Kirkton manufactures a single product. [2] (iii) Calculate the margin of safety in revenue.00 13. [2] © UCLES 2013 9706/22/O/N/13 For Examiner's Use . causing production to stop completely. Production will reduce from the current level of 800 units each week to 500 units each week. REQUIRED (b) Calculate the profit for the four weeks if Kirkton decide to lease a machine. The company will be without the machine for a period of four weeks and the owners have two alternatives. Buy in the Kirks from a competitor.25.00 delivery for each 100 units. [9] © UCLES 2013 9706/22/O/N/13 [Turn over . 1 2 For Examiner's Use Lease a machine at a cost of $2000 per week. This will cost $3000. Each Kirk will cost $26. Staff will need to be trained on the new machine.9 Additional information: Kirkton has four different machines that are used in the production of the Kirk. The competitor is able to supply 800 units each week and will charge Kirkton $50. One of the machines has broken down. [7] (d) State two advantages if Kirkton decides to buy the Kirks from the competitor rather than lease the machine. [2] (e) State two disadvantages if Kirkton decides to buy the Kirks from the competitor rather than lease the machine. [2] [Total: 30] © UCLES 2013 9706/22/O/N/13 For Examiner's Use .10 (c) Calculate the profit for the four weeks if Kirkton decide to buy the Kirks from the competitor. 11 BLANK PAGE © UCLES 2013 9706/22/O/N/13 . Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders. © UCLES 2013 9706/22/O/N/13 .12 BLANK PAGE Permission to reproduce items where third party owned material protected by copyright is included has been sought and cleared where possible. 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). the publisher will be pleased to make amends at the earliest possible opportunity. which is itself a department of the University of Cambridge. but if any items requiring clearance have unwittingly been included. Do not use staples. International accounting terms and formats should be used as appropriate. This document consists of 12 printed pages. You may use a calculator. paper clips. IB13 11_9706_23/5RP © UCLES 2013 [Turn over . 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. The number of marks is given in brackets [ ] at the end of each question or part question. READ THESE INSTRUCTIONS FIRST Write your Centre number. No Additional Materials are required.UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Subsidiary Level and Advanced Level *9854853085* 9706/23 ACCOUNTING October/November 2013 Paper 2 Structured Questions 1 hour 30 minutes Candidates answer on the Question Paper. Answer all questions. fasten all your work securely together. highlighters. Workings must be shown. glue or correction fluid. DO NOT WRITE IN ANY BARCODES. All accounting statements are to be presented in good style. At the end of the examination. Donations are treated as revenue. © UCLES 2013 9706/23/O/N/13 . The loan from the sports association was received on 1 December 2012. Insurance and heating and lighting are apportioned 80:20 between the fitness club and the shop. During the year interest amounting to $90 had been credited to the bank deposit account. 1 June 2012 $ Premises Sports equipment (at cost) Sports equipment – depreciation provision Shop inventory Cash Bank (current account) Bank (deposit account) Subscriptions outstanding Subscriptions paid in advance Shop staff wages accrued Insurance paid in advance Loan from sports association 100 000 30 000 5 000 8 500 250 10 000 2 000 4 200 4 000 1 000 31 May 2013 $ 100 000 115 000 14 400 4 800 250 ? ? 5 600 3 500 3 000 1 000 40 000 The receipts and payments in the bank current account for the year ended 31 May 2013 were: Receipts Shop revenue Subscriptions Loan from sports association Donations Payments Wages of fitness coaches Sports equipment Printing and stationery Transfer to deposit account Sundry expenses Insurance Heating and lighting Wages of shop staff Shop purchases for resale $ 120 000 44 000 40 000 450 $ 16 000 85 000 5 500 300 800 12 000 20 000 27 000 32 500 Additional information 1 2 3 4 5 The wages of shop staff are treated as a direct cost. Interest is payable at 6% per year.2 1 The Cardio Health Club operates a fitness centre and a shop and has the following assets and liabilities. 3 REQUIRED For Examiner's Use (a) Prepare the shop income statement for the year ended 31 May 2013. [8] © UCLES 2013 9706/23/O/N/13 [Turn over . 4 (b) Prepare the income and expenditure account of the Cardio Health Club for year ended 31 May 2013. [14] © UCLES 2013 9706/23/O/N/13 For Examiner's Use . For Examiner's Use [8] [Total: 30] © UCLES 2013 9706/23/O/N/13 [Turn over .5 (c) Prepare the statement of financial position of the Cardio Health Club at 31 May 2013. 6 2 Luing Limited’s financial information for the year ended 31 December 2012 revealed the following: Gross profit ratio Net profit ratio Rate of inventory turnover Trade payables turnover Trade receivables turnover Current ratio Inventory at 1 January 2012 Total revenue (all on credit) for 2012 35% 14% 10 times 42 days 58 days 3:1 $7 800 000 $85 000 000 All purchases were on credit. calculate (i) Gross profit [2] (ii) Cost of sales [2] (iii) Closing inventory [4] (iv) Ordinary goods purchased [3] © UCLES 2013 9706/23/O/N/13 For Examiner's Use . REQUIRED (a) For the year ended 31 December 2012. 7 (v) Profit for the year For Examiner's Use [2] (vi) Expenses [2] (vii) Trade payables [3] (viii) Trade receivables [3] © UCLES 2013 9706/23/O/N/13 [Turn over . 8 (b) Identify three possible users of accounting ratios other than the directors of the company. State what information the users would obtain from the ratios. 1 2 3 [9] [Total: 30] © UCLES 2013 9706/23/O/N/13 For Examiner's Use . finishing and stores. Clearly state the basis you have used. machining.9 3 Argon is a manufacturing business divided into three separate departments. [5] © UCLES 2013 9706/23/O/N/13 [Turn over . For Examiner's Use The total estimated costs for the three months ending 31 October 2013 are as follows: Depreciation of plant Lighting and heating Plant insurance Rent Supervision $ 6 000 4 500 4 800 18 000 25 000 The following information is available for the three departments: Floor area (sq metres) Number of employees Value of plant ($000’s) Number of orders from Stores Budgeted machine hours Budgeted direct labour hours Machining 5000 12 86 3600 4250 1200 Finishing 4500 8 8 1480 820 4950 Stores 500 5 2 - REQUIRED (a) (i) Apportion the costs to the three departments using the most suitable basis. 10 (ii) Re-apportion stores costs to each production department on the basis of the number of orders. [6] © UCLES 2013 9706/23/O/N/13 For Examiner's Use . [5] (b) Calculate to two decimal places the forecast overhead absorption rate for the machining and finishing departments for the three months ending 31 October 2013. 11 Actual figures for the three months ended 31 October 2013 are: Direct labour hours Machine hours Overheads incurred Machining 1 430 6 000 $48 340 For Examiner's Use Finishing 5 000 805 $22 780 REQUIRED (c) Calculate the amount of overhead absorbed for each production department for the three months ended 31 October 2013. [6] (d) Calculate the amount of under or over absorption for each production department. [4] © UCLES 2013 9706/23/O/N/13 [Turn over . but if any items requiring clearance have unwittingly been included. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES). which is itself a department of the University of Cambridge. University of Cambridge International Examinations is part of the Cambridge Assessment Group. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders. For Examiner's Use [4] [Total: 30] Permission to reproduce items where third party owned material protected by copyright is included has been sought and cleared where possible. the publisher will be pleased to make amends at the earliest possible opportunity. © UCLES 2013 9706/23/O/N/13 .12 (e) Explain what is meant by over and under absorption of overheads and how each will arise. glue or correction fluid. highlighters. Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet. Each correct answer will score one mark. Any rough working should be done in this booklet. DO NOT WRITE IN ANY BARCODES. B. Calculators may be used. A mark will not be deducted for a wrong answer. paper clips.UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Level 9706/31 ACCOUNTING Paper 3 Multiple Choice October/November 2013 1 hour Additional Materials: *3428434152* Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended) READ THESE INSTRUCTIONS FIRST Write in soft pencil. There are thirty questions on this paper. Do not use staples. For each question there are four possible answers A. Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you. Answer all questions. Write your name. IB13 11_9706_31/4RP © UCLES 2013 [Turn over . Read the instructions on the Answer Sheet very carefully. This document consists of 12 printed pages. C and D. $ property 400 000 fixtures and fittings 350 000 closing inventory 25 000 trade receivables 45 000 bank overdraft 22 000 The partnership was dissolved on the following terms. Y and Z are in partnership and they have the following assets and liabilities. 1 January 31 December $2400 $3000 inventory of finished goods at cost plus 20% How much should be deducted from the closing inventory of finished goods for unrealised profit? A 2 $100 B C $400 $600 Which item would be included in a company’s income statement? A depreciation B goodwill C provision for doubtful debts D 3 D $500 trade receivables X. The following information is available. X took the property and half the fixtures and fittings at a valuation of $560 000. The total cost of dissolution was $2500. What was the loss on dissolution of the partnership? A $57 700 © UCLES 2013 B $60 200 C $77 500 9706/31/O/N/13 D $82 200 .2 1 The financial year of a manufacturer ends on 31 December. Finished goods are valued at factory cost plus 20%. The remaining fixtures and fittings and the entire inventory were sold for $140 000. The trade receivables paid in full with the exception of one debt of $4700. 1 The shares must have been issued as redeemable. 2 The preference shares were redeemed at a premium of 5%. the company must have at least one shareholder. the company must have other shares in issue. What was the bank balance after the transactions took place? A 6 $23 000 B $48 000 C $50 000 D $63 000 A private limited company is considering purchasing some of its own shares. 2 After the purchase. 1 There was an issue of 25 000 ordinary shares at par. $ ordinary share capital (at $1 each) 120 000 redeemable preference shares 40 000 retained earnings 65 000 share premium 8 000 balance at bank 65 000 The following transactions took place. 4 The purchase cannot be financed by a new issue of shares. 3 After the purchase. Which statements are correct? A 1 and 2 © UCLES 2013 B 1 and 4 C 2 and 3 9706/31/O/N/13 D 3 and 4 [Turn over .3 4 What type of capital must all limited companies have? A B debentures C ordinary shares D 5 convertible loan stock preference shares The following information is included in a company’s financial statement. X $ Y $ 20 000 35 000 current assets 7 000 10 000 current liabilities 3 000 5 000 goodwill 5 000 6 000 non-current liability nil 8 000 non-current assets They wish to commence business with a total capital of $66 000 shared in the ratio 1 : 2. Which bank adjustment will each have to carry out to complete this arrangement? X Y A pays in $7000 withdraws $6000 B withdraws $2000 pays in $12 000 C withdraws $7000 pays in $6000 D withdraws $13 000 withdraws $4000 © UCLES 2013 9706/31/O/N/13 . the price paid is sometimes less than the fair value of the net assets acquired.4 7 When a business is purchased. What is the difference known as? A B a share premium account C negative purchased goodwill D 8 a revaluation reserve positive purchased goodwill X and Y agree to merge their businesses and show the following balances on their books. The inventory at the year end was valued at $45 000 but it is now discovered that. $ million ordinary share capital 500 retained earnings 200 The company results for the year to 31 December included the following. There is an unpaid legal charge of $10 000 which will have to be paid if the case is lost. $ million profit before taxation 50 taxation 15 dividends proposed 10 revaluation surplus on land 12 What are the retained earnings at 31 December? A $225 million B $235 million C $237 million D $247 million 10 Which items will be shown in the statement of changes in equity? 1 2 interest paid on debentures 3 issues of share capital 4 A dividends proposed transfers to reserves 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4 11 At the year end a company had total net assets of $230 000. The financial statements have not yet been approved by the directors and the following matters have come to light. What will be the value of the net assets after any necessary adjustments have been made? A $175 000 © UCLES 2013 B $185 000 C $213 000 9706/31/O/N/13 D $223 000 [Turn over .5 9 A company’s statement of financial position at 1 January included the following. it should have been $38 000. due to damage. D Write it off through impairment provision. to be amortised. 13 A limited company has the following capital at 31 December.0% C 6.5% preference shares of $1 each fully paid 200 The market price of the company’s ordinary shares at 31 December is $1.4 B 15.45.6 D 18. $000 ordinary shares of $1 each fully paid 5000 7.0% © UCLES 2013 B 4. C Include it in the statement of financial position as an asset. per share $ dividends paid during the year 3 dividends proposed at the year end 1 market price 50 nominal price 100 What is the company’s dividend yield? A 3.0% .0 14 The following information relates to a company. Other financial information is as follows.0% 9706/31/O/N/13 D 8.9 C 16. $000 $000 profit after tax 470 preference dividend 15 ordinary dividend 52 67 retained profit for the year 403 What is the price earnings (P / E) ratio at 31 December? A 15.6 12 What is the correct treatment of non-purchased goodwill? A Do not recognise it as an asset. B Include it in the statement of financial position as an asset at valuation. 50 [Turn over . D There is a transfer to the general reserves.7 15 Which transaction will increase a company’s working capital? A The bank overdraft is increased. 16 Which action will increase company profits in the short term? A accepting deposits for customers’ orders B decreasing rates of depreciation C increasing the value of opening inventory D writing down the value of closing inventory 17 A company values its work in progress and finished goods in the way set out by IAS2. C There is a rights issue. The following information is available for the year.50 9706/31/O/N/13 D $32. $ direct material 67 500 direct labour 22 500 production overheads 11 250 non-production overheads 45 000 How much per unit should the closing inventory be valued? A $15 © UCLES 2013 B $20 C $22. B There is a bonus share issue. 1 4000 items manufactured and sold in the year 2 400 fully completed items of inventory at the end of the year 3 200 items half complete in respect of direct materials and direct labour at the end of the year Costs incurred during the year were as follows. 8 18 A company issues a debenture. Which row shows the impact of this on the company’s financial statements? gearing return on capital employed working capital A decrease decrease no effect B increase decrease increase C increase no effect increase D no effect decrease decrease 19 The equity section of the statement of financial position of a company at 1 May 2013 is as follows. What is the number of bonus shares issued? A 60 000 B C 120 000 D 240 000 806 667 20 A company has fixed costs of $5000.50 each fully paid 220 000 share premium 110 250 retained earnings 44 000 374 250 On 31 May 2013. $ selling price 26 variable costs 19 fixed costs 2 profit 5 At what minimum price should an order for 200 additional units be accepted in order to break even? A $19 © UCLES 2013 B $23 C $24 9706/31/O/N/13 D $26 . The budgeted unit details are as follows. $ ordinary shares of $0. the directors made a bonus issue of ordinary shares on the basis of six new shares for every eleven existing shares held. Sales for 600 units have been made. 400 units were complete as to 100% of materials and 50% labour. What was the total value of the closing inventory of work-in-progress? A B $2080 $2880 C $10 080 D $10 880 23 Which objectives are achieved by the introduction of a budgetary control system? 1 co-ordinating of the businesses activities 2 encouraging communications between departments 3 ensuring wage rises do not occur 4 setting standard costs for the period A 1. 3 and 4 © UCLES 2013 9706/31/O/N/13 [Turn over . 2 and 4 only C 1. $ production transferred from process 1 (2000 units) 40 000 added material 2 400 labour 16 000 overheads (based on 50% of labour) 8 000 At the end of the period. 3 and 4 only D 1. Information for process 2 is given. Which cost will not be relevant to the decision? A a consultancy fee of $1000 that has been paid to a market research company for advising on the proposed new division B fixed overheads of $2000 per month on an office building that will be sold immediately if the company opens the new division C running costs of $5000 per month for equipment in the new division D the salary of $30 000 per annum for a manager appointed to run the new division 22 A product passes through two processes. 2 and 3 only B 1. 2.9 21 A company is considering opening a new division of the business. 10 24 A unit of a product uses 3 kilos of raw material. 26 Which factor could account for an adverse labour rate variance and a favourable material usage variance occurring at the same time? A Cheaper labour was used and less material utilised. This resulted in a favourable labour efficiency variance of $20 000. C The budget should always be set at an ideal level of performance. 27 A company uses 3000 direct labour hours. B The company purchased cheaper material and the workforce has been awarded a pay increase. at a standard cost of $10 per hour. The year’s production budget is shown: 12 000 units budgeted sales increase in raw materials inventory 2 000 kilos decrease in finished goods inventory 1 000 units What are the budgeted purchases of raw materials for the year? A 35 000 kilos B 36 000 kilos C 38 000 kilos D 39 000 kilos 25 Which statement about budgeting is correct? A A budget should always be produced based on last year’s actual results. How many standard hours were produced? A 1000 hours © UCLES 2013 B 2000 hours C 3000 hours 9706/31/O/N/13 D 5000 hours . D Workers are more highly skilled than expected and have used less material. B Evaluation of performance should take actual operating conditions into account. D The budget should not be changed once agreed. C The company purchased cheaper material and the workforce has taken more time. C Use of the payback method always considers the time value of money. © UCLES 2013 9706/31/O/N/13 [Turn over .11 28 A company produces a single product and details of the production and budget are as follows. 10 000 units actual output standard material cost 2 kilos × $4 actual usage of material total material variance $80 000 18 000 kilos $6200 favourable What are the direct material price and direct material usage variances? material price variance material usage variance A $1800 adverse $8000 favourable B $1800 favourable $8000 favourable C $8000 adverse $1800 favourable D $8000 favourable $1800 adverse 29 A business uses a range of investment appraisal techniques for individual projects. Which statement is correct? A Projects with a negative net present value should not be rejected. B The internal rate of return for an acceptable project is always zero. D Use of the payback method can lead to projects with negative net present values being selected. A decrease in the cost of capital will make the project viable.12 30 The following information relates to a capital investment. year cash flow $ discounted cash flow at 6% $ discounted cash flow at 8% $ 0 (900) (900) (900) 1 400 377 370 2 600 534 514 100 11 (16) The company has a cost of capital of 8%. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES). © UCLES 2013 9706/31/O/N/13 . Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders. costing $900 000. 3 An increase in the cost of capital will make the project viable. Which statements about the project are correct? 1 2 The project has an internal rate of return less than the cost of capital. which is itself a department of the University of Cambridge. 4 A The project has an internal rate of return greater than the cost of the capital. 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. but if any items requiring clearance have unwittingly been included. 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4 Permission to reproduce items where third party owned material protected by copyright is included has been sought and cleared where possible. C and D. Write your name. There are thirty questions on this paper. DO NOT WRITE IN ANY BARCODES. Read the instructions on the Answer Sheet very carefully. For each question there are four possible answers A. A mark will not be deducted for a wrong answer. Each correct answer will score one mark. IB13 11_9706_32/2RP © UCLES 2013 [Turn over . Answer all questions. Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Level 9706/32 ACCOUNTING Paper 3 Multiple Choice October/November 2013 1 hour Additional Materials: *8995523676* Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended) READ THESE INSTRUCTIONS FIRST Write in soft pencil. B. Any rough working should be done in this booklet. glue or correction fluid. Do not use staples. This document consists of 10 printed pages and 2 blank pages. paper clips. highlighters. Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you. Calculators may be used. 2 1 What will not appear in a statement of cash flows? A B interest payable C issue of bonus shares D 2 changes in inventory levels purchase of plant and machinery A market trader has not kept any books of account. Which formula should be used to establish his profit or loss for the year? A B net assets at end of year – net assets at start of year + new capital – drawings C net assets at start of year – net assets at end of year – new capital + drawings D 3 net assets at end of year – net assets at start of year – new capital + drawings net assets at start of year – net assets at end of year + new capital – drawings A company transfers manufactured items from factory to warehouse at cost plus 10%. This year the transfer value was $93 500 and at the end of the year the closing inventory was 20% of the year’s production. How will the inventory of finished goods be shown? trading account $ A 17 000 17 000 B 18 700 16 830 C 18 700 17 000 D 4 statement of financial position $ 18 700 18 700 Which list contains only items that appear in the equity section of the statement of financial position? A share capital, retained earnings and long-term loans B share capital, share premium and long-term loans C share premium, retained earnings and debentures D share premium, share capital and retained earnings © UCLES 2013 9706/32/O/N/13 3 5 A company’s statement of financial position shows the following. $000 $1 ordinary shares 500 retained earnings 400 10% debentures 300 1 200 net assets 1 200 A fully subscribed 1 for 4 rights issue at $2 per share is made and 50% of the debentures are repaid at par. What are the net assets following these changes? A 6 $1 100 000 B $1 175 000 C $1 225 000 D $1 300 000 When must a capital redemption reserve be set up? A B ordinary shares are redeemed without a new issue of shares C preference shares are issued at a premium D 7 ordinary shares are issued at a premium preference shares are redeemed from the proceeds of a new issue of shares A company purchases the business of a sole trader for $5 000 000. The value of the assets and liabilities are shown. assets $ liabilities $ at book value 5 000 000 3 000 000 at fair value 5 300 000 3 100 000 How much did the company pay for goodwill? A 8 $2 700 000 B $2 800 000 C $3 000 000 D $3 100 000 What is included in the directors’ report? A directors’ salaries B principal activities of the company C trade receivables D turnover © UCLES 2013 9706/32/O/N/13 [Turn over 4 9 A company is carrying out an impairment review of its plant and machinery. The following information is revealed. 1 Original cost of plant and machinery $50 000. Accumulated depreciation $15 000. 2 Undiscounted value of future cash flows from using the machinery $60 000. Present value of future cash flows from using the machinery $40 000. 3 Sales proceeds from disposing of the plant and machinery $48 000. Cost of disposing of the plant and machinery $10 000. At what value should the plant and machinery be shown in the statement of financial position? A B $35 000 $38 000 C $40 000 D $50 000 10 A company’s directors have been advised that there is a 40% chance that they will lose a legal case over the sale of faulty goods to a customer. How should the directors treat this in the financial statements? A Ignore it by not including a contingency or explaining it with a note to the financial statements. B Include an amount as a contingency in the accounts but do not include a note to the financial statements. C Include an amount in the accounts as a contingency and explain this by a note to the financial statements. D Include a note to the financial statements, but not include an amount as a contingency. 11 An ordinary share in a company has a nominal value of $0.50. The latest financial statements show earnings per share of $0.10 and a price-earnings ratio of 15. What is the market value of an ordinary share? A B $0.50 $1.50 C $2.00 D $2.50 12 The directors of a company want to reduce the company’s gearing ratio. They can take the following actions. 1 make a rights issue of ordinary shares 2 make a bonus issue of five new shares for every six currently held 3 transfer $90 000 to the general reserve 4 repay a debenture of $600 000 Which combination of measures will reduce the company’s gearing ratio? A 1, 2 and 3 © UCLES 2013 B 1 and 2 only C 1, 3 and 4 9706/32/O/N/13 D 1 and 4 only 5 13 A business experienced the following events during the year. 1 an increased level of bad debts written off 2 an increase in the bank overdraft 3 an increase in inventory levels 4 trade payables were paid more quickly Which combination of events would cause cash flow from operating activities to fall? A 1, 2, 3 and 4 B 1, 3 and 4 only C 2, 3 and 4 only D 3 and 4 only 14 A company makes a rights issue of 10 000 ordinary shares of $1 each at a premium of $0.50. The issue is fully subscribed. What is the effect of this transaction on the following ratios? gearing return on capital employed A decrease decrease B decrease increase C increase decrease D increase increase 15 Which transaction will cause an increase in shareholders’ capital? A disposal of a non-current asset for more than its book value B increase the provision for doubtful debts C receipt of a loan D receipt of payment from a trade receivable in cash © UCLES 2013 9706/32/O/N/13 [Turn over 6 16 The net assets of X Limited are shown below. Y Limited applies a ten year economic life to goodwill. What will the annual goodwill amortisation charge be? A $2 million B $3 million C D $5 million $7 million 17 How is inventory valued under IAS2? A purchase cost B purchase cost + carriage in C purchase cost + carriage in + conversion costs D purchase cost + carriage in + conversion costs + storage costs 18 A company installing a new machine has the following costs. $ purchase price 200 000 delivery charges 5 000 preparing the site 35 000 training the workers 4 500 assembly and testing 8 000 advertising the new product 10 000 What is the total cost of the asset under IAS16? A $240 000 © UCLES 2013 B $248 000 C $252 500 9706/32/O/N/13 D $262 500 . $ million net assets at original cost 100 net book value 50 fair value 70 Y Limited pays $100 million cash plus $20 million in shares for all the net assets. $ selling price per unit 8 direct material and direct labour per unit 3 production overheads at 10 000 units 40 000 production overheads at 15 000 units 55 000 other factory fixed costs 8 000 What is the break even point in units? A 3600 B 4000 C 9000 D 11 500 21 A cost centre uses an overhead absorption rate of $5 per direct labour hour based on a budgeted level of 6000 direct labour hours per month. In a period it put 600 kilos of material into a process at a cost of $2. What is the price per kilo of the normal output? A $3. Last month. actual direct labour hours worked were 3% more than budget and the actual overhead incurred was $32 000. The normal loss is 20% with no scrap value.85 D $3. The output was 470 kilos.08 B $3. What was the total over or under absorption of overheads for the month? A $1100 over absorbed B $1100 under absorbed C $2000 over absorbed D $2000 under absorbed © UCLES 2013 9706/32/O/N/13 [Turn over .7 19 A company produces a product using a single process.93 20 The following information relates to the sales and production of a product.50 per kilo.23 C $3. There was no opening and no closing work-in-progress. and conversion costs were $348. How many units must be produced in month 2? A 2000 units B 2200 units C 2400 units D 2900 units 24 What is a flexed budget? A a budget based on expected level of production B a budget based on past performance but updated to take account of present conditions C a budget that reflects changes in activity levels D a budget that links fixed overheads to production 25 The production of an item in March has a budgeted total cost of $43 200 for 2400 units. The company requires that the closing inventory at the end of each month should be equal to one third of the sales for the following month. What is the expected expenditure for March if actual production is 2200 units? A $30 096 © UCLES 2013 B $39 600 C $40 464 9706/32/O/N/13 D $43 200 . month units 1 2000 2 2100 3 2400 At the start of month 1 there were 300 units of inventory.8 22 The following information is provided by a business. budgeted output for the month 1000 units actual output for the month 1150 units direct material cost per unit $15 total actual direct material costs for the month $18 400 What was the total direct material variance for the month? A $1150 adverse B $1150 favourable C $3400 adverse D $3400 favourable 23 A company has forecast the following sales for the first three months of next year. The fixed costs make up 24% of the total cost and the balance is variable. C The company installed more efficient manufacturing machinery. B Fewer labour hours were worked than budget. D The company over-estimated the quantity of material to be used. C Wage rates were higher than budget. B Several new. employees started during the period leading to wastage of material. 28 What will give an adverse labour rate variance? A Actual production was more than budget. What is a valid reason for the variance? A Material was purchased from an alternative supplier who charged higher prices. kilos cost per kilo $ total cost $ standard 1500 5. untrained.9 26 The following material costs relate to the manufacture of 100 units of a product. During an operating period there has been an adverse materials usage variance of $15 000. © UCLES 2013 9706/32/O/N/13 [Turn over . D Wage rates were lower than budget.50 – actual 1650 – 9570 What is the material price variance? A $495 adverse B $495 favourable C $1320 adverse D $1320 favourable 27 A company uses standard costing. The budgeted costs and revenues of the investment are as follows.10 29 A company is considering an investment costing $20 000. What is the payback for the project? A 1 year 55 days B 1 year 332 days C 2 years 122 days D 2 years 261 days 30 A business changes its depreciation policy. Which investment appraisal measure will this change affect? A accounting rate of return B discounted payback C internal rate of return D payback © UCLES 2013 9706/32/O/N/13 . year 1 $ year 2 $ year 3 $ sales income 17 000 20 000 22 000 variable costs 7 000 9 000 12 000 Fixed costs are $3000 per year. 11 BLANK PAGE © UCLES 2013 9706/32/O/N/13 . 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.12 BLANK PAGE Permission to reproduce items where third party owned material protected by copyright is included has been sought and cleared where possible. 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 2013 9706/32/O/N/13 . Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you. B. Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet. Any rough working should be done in this booklet. For each question there are four possible answers A. Calculators may be used. glue or correction fluid. paper clips. Do not use staples. There are thirty questions on this paper. Write your name. Each correct answer will score one mark. Read the instructions on the Answer Sheet very carefully. Answer all questions. C and D. A mark will not be deducted for a wrong answer.UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Level 9706/33 ACCOUNTING Paper 3 Multiple Choice October/November 2013 1 hour Additional Materials: *9295143993* Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended) READ THESE INSTRUCTIONS FIRST Write in soft pencil. DO NOT WRITE IN ANY BARCODES. highlighters. IB13 11_9706_33/3RP © UCLES 2013 [Turn over . This document consists of 13 printed pages and 3 blank pages. inclusive of a 50% mark-up on cost. 3 Goods at transfer price have been entered in the income statement at their transfer value of $120 000. at cost 15 000 storage costs 5 000 ten tractors 120 000 Which valuation for inventory should be included in the company’s statement of financial position? A 3 $95 000 B $100 000 C $135 000 D $140 000 A manufacturing company’s income statement shows a profit from operations of $9000. 2 Closing inventory of finished goods has been valued at transfer price of $6000. Each tractor is sold for $12 000. The following errors are then discovered.2 1 A trade receivable’s balance of $720 has been set-off against the purchase ledger. At the year end. What is the correct balance on the purchase ledger control account? A 2 $91 020 B $91 740 C D $93 180 $93 900 A company manufactures tractors. No adjustment has been made in respect of factory profit. costs relevant to the company’s inventory were: $ components. What is the correct profit from operations? A $28 000 © UCLES 2013 B $29 000 C $30 000 9706/33/O/N/13 D $31 000 . 1 Opening inventory of finished goods has been valued at transfer price of $12 000. The purchase ledger control account had a closing balance of $92 460 before correcting the error. It has been entered on the wrong side of the purchase ledger control account. 4 The company transfers goods from the factory to finished goods at cost plus 20%. $ non-current assets 85 000 bank 14 000 other net current assets 24 000 8% debentures (4 000) 119 000 ordinary share capital 100 000 share premium 2 000 retained earnings 17 000 119 000 The 8% debentures are redeemed at a premium of 20%. What is the total equity balance after the redemption? A $114 200 © UCLES 2013 B $115 000 C $118 200 9706/33/O/N/13 D $119 000 [Turn over . $000 retained earnings at the start of the year 43 profit from operations 14 ordinary dividends paid during the year 5 dividends on redeemable preference shares paid during the year 2 proposed final dividend on ordinary shares 8 What is the figure for retained earnings at the end of the year? A 5 $42 000 B $50 000 C $57 000 How can a company increase its liquidity? A by making a bonus issue B by making a rights issue C by transfers from the general reserve D 6 D $52 000 by transfers from the share premium account The statement of financial position of a company is as follows.3 4 The financial statements of a public limited company includes the following information. inventory and trade receivables of another business. The table shows details of three businesses available for purchase. It pays more than the book value for these items.20. business purchase price $ estimated future profits $ 1 50 000 8 500 2 70 000 10 500 3 90 000 12 600 Funds not used in the purchase of a business are invested at an interest rate of 13% per annum. Which course of action will give the highest annual return? A B purchasing business 1 C purchasing business 2 D 8 investing $100 000 purchasing business 3 A company purchases the non-current assets.4 7 $100 000 is available for investment. The balance is paid by the issue of ordinary shares of $1 each at a premium of $0. The purchase price is paid partly by a debenture. Which row shows the effect of these transactions in the financial statements of the purchaser? non-current assets working capital equity A decrease decrease decrease B increase decrease increase C increase increase increase D increase no effect decrease © UCLES 2013 9706/33/O/N/13 . The purchase price of the business is to be settled as follows. By how much will the company’s share premium account increase as a result of the purchase? A $23 000 B $30 000 C $37 500 D $42 000 10 Which is an example of an adjusting event? A change in interest rates B the insolvency of a major customer C the issue of loan stock D the purchase of a new vehicle 11 Which item will not be shown in the statement of changes in equity? A debenture interest paid B ordinary share dividends paid C profit for the year D revaluation surplus © UCLES 2013 9706/33/O/N/13 [Turn over .5 9 A company agrees to purchase the assets and liabilities of another business. The book value of the net assets acquired was: $ non-current assets 140 000 current assets 50 000 current liabilities 15 000 It is agreed that the fair value of the non-current assets is $155 000 and goodwill is valued at $20 000. $ cash 40 000 5% debenture 20 000 The balance of the purchase price is to be settled by the issue of $1 ordinary shares at a premium of 25%. 52% © UCLES 2013 B 21.62% C 27. $ additional memory 750 carriage inwards 250 computer hardware 5000 maintenance contract 1200 residual value 1000 Which amount should be capitalised in the statement of financial position? A $5000 B $6000 C D $7200 $8200 13 The table shows extracts from a company’s income statement for 2011 and 2012. 2011 $ 2012 $ sales 50 000 100 000 cost of sales 15 000 34 000 What might explain the change in the gross profit margin? A a cut in unit selling price B an increase in unit sales C the loss of a major customer D use of cheaper suppliers 14 The financial statements of a company show the following. as follows. $m non-current assets 210 non-current liabilities 15 ordinary share capital 100 preference share capital 25 reserves 45 What is the gearing ratio? A 10.58% 9706/33/O/N/13 D 28.6 12 A company has purchased a computer with associated costs.57% . $ profit attributable to equity holders 2 000 000 ordinary share dividend paid 200 000 non-redeemable preference share dividend paid 100 000 10% non-redeemable preference share capital 1 000 000 ordinary shares of $1 each 5 000 000 What are the earnings per share for the year to the nearest cent? A B $0.34 $0.32 C D $0. $ share premium account 240 000 10% debentures 100 000 retained earnings 180 000 The company redeems the debentures at a premium of 10%. Which values will the statement of financial position show after this transaction? retained earnings $ share premium account $ A 70 000 240 000 B 80 000 230 000 C 170 000 240 000 D 180 000 230 000 © UCLES 2013 9706/33/O/N/13 [Turn over .7 15 The following information is taken from the financial statements of a company.38 16 The information relates to a company.28 $0. How will this affect the following accounts? ordinary share capital share premium bank A increase decrease no effect B increase increase increase C increase no effect increase D no effect decrease no effect 18 The non-current assets of a company include a machine which has the following values. 16 000 overheads 20 000 $214 000 machine hours $230 000 What is the amount of fixed overheads? A $16 000 © UCLES 2013 B $64 000 C $150 000 9706/33/O/N/13 D $198 000 . $ bank 8 500 issued ordinary shares of $1 each 50 000 share premium 20 000 The company makes a bonus issue of one share for every five held. $ carrying amount 55 000 fair value 60 000 costs of sale 6 000 value in use 42 000 Which value will be shown in the statement of financial position? A $42 000 B $54 000 C $55 000 D $60 000 19 The data relates to two different levels of output in a department.8 17 The following are extracts from the statement of financial position of a company. 9 20 A company currently manufactures and sells 2000 units of a product. The following are the selling price and costs of the product. $ selling price per unit 20 variable costs per unit 12 fixed costs 8000 The company has received a request for a special order for 200 units. The customer will pay $15 per unit. To manufacture the order the company will have to hire a machine at a cost of $1500. What is the profit the company will earn if it accepts the order? A $7100 B $8000 C D $8600 $9500 21 A company has no work in progress at the start of the month. During the month, 4000 completed units were produced. At the end of the month, there was work in progress of 400 units. The following information is available. total cost $ percentage completion of work in progress materials and labour 8640 80% overheads 6360 60% What is the total value of work in progress at the end of the month? A $1000 © UCLES 2013 B $1073 C $1363 9706/33/O/N/13 D $1500 [Turn over 10 22 A business has an opening bank balance of $10 000 and makes the following forecasts for the next three months. per month $ credit sales 2000 cash sales 5000 expenses 1000 depreciation of non-current assets 1000 Credit customers pay in the month following the sale. Expenses are paid one month in arrears. Which row shows the forecast net profit for the three months and the closing bank balance at the end of month 3? forecast net profit $ closing bank balance $ A 15 000 24 000 B 15 000 27 000 C 18 000 17 000 D 18 000 27 000 23 A company adjusts its budget to take account of changes in costs as a result of changes in the level of activity. Which type of budget is the company using? A fixed budget B flexed budget C incremental budget D zero based budget © UCLES 2013 9706/33/O/N/13 11 24 A business is preparing its budget. The following information is available for month 1. 10 800 units budgeted sales opening inventory 2 000 units budgeted closing inventory 1 080 units normal loss in the production process 5% What is the budgeted production for month 1? A 9880 units B 10 374 units C 10 400 units D 11 720 units 25 The cost of sales for a business comprises direct materials and direct labour. At the end of a trading period the following variances are calculated. $ direct materials price variance 800 adverse direct materials usage variance 700 favourable direct labour rate variance 650 favourable direct labour efficiency variance 750 adverse If the actual cost of sales was $12 220, what is the standard cost of sales? A $12 020 B $12 120 C $12 320 D $12 420 26 Which formula would be used to calculate the labour efficiency variance? A (actual hours less standard hours) × standard rate B (actual rate less standard rate) × actual hours C (standard hours less actual hours) × standard rate D (standard rate less actual rate) × actual hours 27 A company uses standard costing. During an operating period there has been a favourable material usage variance of $20 000. What is a valid reason for this variance? A the actual cost of material purchased decreased B the actual cost of material purchased increased C the company used less material per unit than budgeted D the company used more material per unit than budgeted © UCLES 2013 9706/33/O/N/13 [Turn over 1 2 A false false B false true C true false D true true © UCLES 2013 9706/33/O/N/13 . budget actual selling price $38 $40 units sold 9500 9000 Which row shows the sales price and sales volume variances? sales price variance $ sales volume variance $ A 18 000 adverse 19 000 adverse B 18 000 adverse 19 000 favourable C 18 000 favourable 19 000 adverse D 18 000 favourable 19 000 favourable 29 Which statements about investment appraisal are correct? 1 The internal rate of return is the discount rate that gives a positive net present value of a project.12 28 The figures for the budgeted and actual sales per unit are as follows. 2 The accounting rate of return takes interest rates into account. 48 m 9706/33/O/N/13 D $6.91 2 0.83 3 0.13 30 Discounted cash flow has been used to evaluate an investment project over a three year life.75 Total 2.38 m . Discount factors at 10% are as follows. The project will produce annual net cash inflows of $2 m.36 m C $5.98 m © UCLES 2013 B $5. year discount factor 1 0. $500 000 of the initial investment can be recovered at the end of the third year.49 What is the present value of project cash inflows correct to two decimal places? A $4. 14 BLANK PAGE © UCLES 2013 9706/33/O/N/13 . 15 BLANK PAGE © UCLES 2013 9706/33/O/N/13 . © UCLES 2013 9706/33/O/N/13 . Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES). but if any items requiring clearance have unwittingly been included. the publisher will be pleased to make amends at the earliest possible opportunity. which is itself a department of the University of Cambridge. University of Cambridge International Examinations is part of the Cambridge Assessment Group.16 BLANK PAGE 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. UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Level 9706/41 ACCOUNTING Paper 4 Problem Solving (Supplementary Topics) October/November 2013 2 hours Additional Materials: Answer Booklet/Paper *7392798573* READ THESE INSTRUCTIONS FIRST If you have been given an Answer Booklet. Write your Centre number. The number of marks is given in brackets [ ] at the end of each question or part question. Answer all questions. All accounting statements are to be presented in good style. fasten all your work securely together. You may use a soft pencil for any diagrams. paper clips. Do not use staples. Workings should be shown. This document consists of 6 printed pages and 2 blank pages. At the end of the examination. Write in dark blue or black pen. IB13 11_9706_41/5RP © UCLES 2013 [Turn over . follow the instructions on the front cover of the Booklet. You may use a calculator. highlighters. graphs or rough working. International accounting terms and formats should be used as appropriate. candidate number and name on all the work you hand in. glue or correction fluid. Statements of Financial Position at 30 September 2013 (actual) $000 2014 (budgeted) $000 3050 400 300 3750 3190 450 240 3880 Total assets 750 460 210 1420 5170 790 425 574 1789 5669 Equity Ordinary shares Non-redeemable preference shares Revaluation reserve Retained earnings Total equity 1200 500 300 930 2930 1400 500 400 834 3134 1000 1300 Total liabilities 960 280 1240 2240 1075 160 1235 2535 Total equity and liabilities 5170 5669 Assets Non-current assets Property plant and equipment Goodwill Investments Current assets Inventories Trade and other receivables Cash and cash equivalents Liabilities Non-current liabilities 7% debentures Current liabilities Trade and other payables Current tax liabilities Budgeted Statement of Changes in Equity For Year Ending 30 September 2014 Retained earnings at 1 October 2013 Budgeted profit for year Dividends payable Transfer to share capital (bonus issue) Retained earnings at 30 September 2014 © UCLES 2013 9706/41/O/N/13 $000 930 214 1144 (110) (200) 834 . They provide the following information.2 1 Manchi plc are preparing their budgets for the forthcoming year ending 30 September 2014. 3 Additional information 1 The tax charge for the year ending 30 September 2014 has been budgeted as $160 000. 10 An impairment review has shown that the carrying value of the investments should be $240 000 at 30 September 2014. [25] (c) Prepare the property. REQUIRED (a) Calculate the company’s budgeted profit from operations for the year ending 30 September 2014. motor vehicles $30 000 and goodwill $50 000. 7 Budgeted capital expenditure for the year on buildings is $80 000. plant and equipment $255 000 and motor vehicles $25 000. plant and equipment section of the non-current assets note to the budgeted statement of financial position at 30 September 2014. [5] (b) Prepare a budgeted statement of cash flows for the year ending 30 September 2014 in accordance with IAS 7. Interest for the year will be paid on all the issued debentures on 30 September 2014. 8 Budgeted depreciation for the year on buildings is $50 000. 4 A bonus issue of 1 new ordinary share for every 6 held is budgeted for 1 April 2014. 3 Manchi plc issued additional 7% debentures on 1 October 2013. [10] [Total: 40] © UCLES 2013 9706/41/O/N/13 [Turn over . Non-current assets Property plant and equipment Land Buildings Plant and equipment Motor vehicles Total Cost $000 Depreciation $000 Net book value $000 1500 800 1500 150 3950 – 250 600 50 900 1500 550 900 100 3050 6 The land is expected to increase in value by $100 000 during the year. 9 Plant and equipment with an original cost of $35 000 and depreciation of $15 000 is budgeted to be disposed of for proceeds of $10 000. 5 The following note was extracted from the financial statements at 30 September 2013. plant and equipment $280 000. 2 Income from investments is budgeted at $40 000. The other vehicles realised $18 500. © UCLES 2013 9706/41/O/N/13 .4 2 Dilip. 3 The inventories realised $21 000. Fonzie took over a motor vehicle at a valuation of $7500. 2 Ephraim took over a motor vehicle at an agreed valuation of $10 000. 5 The dissolution costs totalled $3450. Fixtures and fittings realised 80% of their net book value. Due to declining profits they decided to dissolve the partnership on 30 June 2013. 6 The partners closed the business bank account by drawing the balances due to them after the above took place. Statement of Financial Position at 30 June 2013 $ Non-current assets Land and buildings Motor vehicles Fixtures and fittings 195 000 43 750 32 645 271 395 Current assets Inventories Trade receivables Cash and cash equivalents 29 875 19 765 6 850 56 490 327 885 Total assets Capital account $ Dilip Ephraim Fonzie $ 60 000 50 000 40 000 $ 150 000 Current account Dilip Ephraim Fonzie 33 865 24 910 (1 875) 56 900 Non-current liabilities Bank loan Current liabilities Trade payables Bank interest accrual 100 000 14 650 6 335 20 985 327 885 The terms of the dissolution were: 1 The land and buildings were sold for 10% above their net book value. Ephraim and Fonzie have been in partnership for many years preparing accounts to 30 June and sharing profits and losses in the ratio 3:2:1. 4 The trade receivables raised $15 750 whilst the partners were able to settle the trade payables in full for $12 500. [10] (d) State three other reasons why a partnership may be dissolved apart from a decline in profit. [14] (b) Prepare the partnership bank account. [10] (c) Prepare the partners’ capital accounts. [6] [Total: 40] © UCLES 2013 9706/41/O/N/13 [Turn over .5 REQUIRED (a) Prepare the partnership realisation account for the dissolution. [8] (b) Calculate the quantity of raw materials in kilos normally purchased each month. Therefore each unit required 2. The selling price had risen by $0. selling the required raw material at $1. Monthly standard data is as follows. Assume inventory levels remain constant.6 kilos and labour took 40% longer than usual to produce each unit. [4] [Total: 40] © UCLES 2013 9706/41/O/N/13 . REQUIRED (c) Calculate the following variances for April 2013: (i) Sales price (ii) Direct materials usage (iii) Direct materials price (iv) Total direct materials (v) Direct labour efficiency (vi) Direct labour rate (vii) Total direct labour [14] (d) Starting with the original expected total contribution from (a) use these variances to calculate the actual total contribution.5 hours of direct labour time costing $7 an hour REQUIRED (a) Calculate the expected monthly contribution per unit and in total. [7] (e) Calculate the change in contribution for Honeybush Limited arising from its decision to change supplier. Overtime premiums caused the average wage rate to rise to $7. This raw material was more difficult to work with. Sales are 6000 units with a selling price of $26 per unit Each unit requires 2.4 kilos of raw material costing $3 per kilo Each unit requires 1.80 per kilo.6 3 Honeybush Limited operates a standard costing system. Honeybush Limited managed to produce and sell the usual 6000 units. In April Honeybush Limited bought all its raw material from this new supplier. [2] Early in 2013 a new supplier entered the market.50 per unit.80 an hour. [5] (f) Explain what is meant by the expression ‘flexing a budget’. 7 BLANK PAGE © UCLES 2013 9706/41/O/N/13 . which is itself a department of the University of Cambridge. © UCLES 2013 9706/41/O/N/13 . Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES). but if any items requiring clearance have unwittingly been included. the publisher will be pleased to make amends at the earliest possible opportunity.8 BLANK PAGE 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. University of Cambridge International Examinations is part of the Cambridge Assessment Group. You may use a calculator. glue or correction fluid. graphs or rough working. This document consists of 6 printed pages and 2 blank pages. International accounting terms and formats should be used as appropriate. You may use a soft pencil for any diagrams. The number of marks is given in brackets [ ] at the end of each question or part question. All accounting statements are to be presented in good style. fasten all your work securely together. Write your Centre number. Answer all questions.UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Level 9706/43 ACCOUNTING Paper 4 Problem Solving (Supplementary Topics) October/November 2013 2 hours Additional Materials: Answer Booklet/Paper *3618881357* READ THESE INSTRUCTIONS FIRST If you have been given an Answer Booklet. IB13 11_9706_43/4RP © UCLES 2013 [Turn over . At the end of the examination. follow the instructions on the front cover of the Booklet. candidate number and name on all the work you hand in. Do not use staples. paper clips. Workings should be shown. Write in dark blue or black pen. highlighters. 2 BLANK PAGE © UCLES 2013 9706/43/O/N/13 . 3 The balance on Chandra’s account was transferred to a loan account. The balances on their capital accounts at 1 July 2012 were: $ 45 000 35 000 27 500 Alicia Beatrice Chandra Chandra decided to retire on 31 March 2013. Interest on capital was charged at 9%. 4 In the new partnership Alicia and Beatrice share profits in the ratio 3:2. The following amounts were paid during the year: Wages Rent Heat and light Sundries $ 150 000 30 000 12 000 3 000 At 30 June 2013 rent of $2500 had been prepaid and $600 for heat and light was accrued. Interest is to be paid quarterly at 8% per annum commencing on 30 June 2013. REQUIRED (a) Prepare the partners’ capital accounts at 31 March 2013 in columnar form. [22] (c) State three advantages to Alicia and Beatrice of replacing Chandra with another partner. 2 All of the assets were revalued to reflect a fall of $7500. Beatrice and Chandra have been in partnership for many years sharing profits in the ratio 3:2:1. REQUIRED (b) Prepare the partnership income statement and appropriation account for the year ended 30 June 2013. At that date: 1 Goodwill was valued at $24 000.3 1 Alicia. interest on capital is paid at 8% per annum and no salaries are paid. Goodwill is not maintained in the books of account. They prepare their annual accounts to 30 June. [12] Additional information 1 A debt of $6000 which had been written off in the previous year was received on 1 February 2013. 2 The gross profit for the year ended 30 June 2013 was $318 000 and this accrued evenly throughout the year. [6] [Total: 40] © UCLES 2013 9706/43/O/N/13 [Turn over . Retained earnings. REQUIRED (a) Calculate the amounts which will be included in the company’s statement of financial position at 30 June 2012 for each of the following: Ordinary share capital. The rights issue was fully subscribed.4 2 On 1 July 2011 Voronez plc issued 120 000 ordinary shares of $1 each at a premium of $0. On 30 June 2012 the company: 1 paid the dividend on the redeemable preference shares (treated as a financing cost). © UCLES 2013 9706/43/O/N/13 .125 each and cancelled them. Share premium. The company made a profit for the year ended 30 June 2012 of $100 000. [17] Additional information The company made a profit for the year ended 30 June 2013 of $86 000 before paying any dividends. 4 made a rights issue of one new ordinary share for every 6 shares held after the bonus issue at a price of $1. Preference share capital.60 per share. On 30 June 2013 the company: 1 paid the dividend on the redeemable preference shares.10 per share on the ordinary shares.10 per share and 40 000 5% redeemable preference shares of $1 each at a premium of $0.15 per share. 3 made a bonus issue of one new fully paid ordinary share for every 4 shares held. 2 paid a dividend of $0. 2 purchased 80 000 of its own ordinary shares at a price of $1. [12] (c) Explain the circumstances in which the directors of a company would be unable to pay a dividend on ordinary shares.5 REQUIRED (b) Calculate the amounts which will be included in the company’s statement of financial position at 30 June 2013 for each of the following: Ordinary share capital. [2] [Total: 40] © UCLES 2013 9706/43/O/N/13 [Turn over . [2] (ii) Explain the way in which you have created the capital redemption reserve. [5] (d) (i) State one reason why a capital redemption reserve is created. [2] (iii) State for what purposes a capital redemption reserve may be used. Share premium. Capital redemption reserve. Retained earnings. 30 Purchases (units) Unit purchase price 4700 $1. Statement of Financial Position at 31 May 2013 $ $ $ Cost 19 200 15 100 34 300 Assets Non-current assets Fixtures and fittings Vehicle Depreciation 7 100 11 200 18 300 Net book value 12 100 3 900 16 000 Current assets Inventories Trade receivables Other receivables (insurance) Cash and cash equivalents Total assets 4 800 11 900 350 6 600 23 650 39 650 Capital Total capital 25 550 Liabilities Non-current liabilities Bank loan (6%) Current liabilities Trade payables Total liabilities 6 100 14 100 Total capital and liabilities 39 650 8 000 He prepares budgets using three month periods as follows: Period 1 2 3 4 1 June to 31 August 1 September to 30 November 1 December to 28 February 1 March to 31 May He provides the following budgeted information for the year ending 31 May 2014. He provides the following information.30 4500 $1.30 4500 $1.20 4600 $1. a retailer.6 3 Riffatulah.10 2 4800 $3.40 4 4500 $3. Period Sales (units) Unit selling price 1 4200 $3.20 3 4600 $3.40 © UCLES 2013 9706/43/O/N/13 . is preparing his budgets for the year ending 31 May 2014. [7] (d) Suggest three ways Riffatulah could improve his working capital cycle and reduce his bank overdraft. Bad debts are expected to be 1% of total sales. calculate Riffatulah’s working capital cycle. [3] [Total: 40] © UCLES 2013 9706/43/O/N/13 . 4 Riffatulah depreciates vehicles at a rate of 40% a year on the reducing balance basis. [17] (c) Using only figures from your answers to (a) and (b). REQUIRED (a) Prepare a budgeted income statement for the year ending 31 May 2014. 3 Discount received is expected to be 1% of purchases. He provides a full year’s depreciation in the year of purchase and none in the year of disposal. He depreciates fixtures and fittings at a rate of 10% a year on cost. [13] (b) Prepare a budgeted statement of financial position at 31 May 2014.7 Schedule of receipts and payments 1 $ Receipts Customer receipts Proceeds of vehicle sale Legacy from uncle Total receipts Payments Supplier payments Purchase of new vehicle Purchase of fixtures Rent Loan interest Drawings Insurance Administration costs Total payments 2 $ 3 $ 16 500 14 200 14 000 3 400 15 000 16 500 5 000 19 200 17 400 15 000 5 800 5 700 5 200 18 000 4 000 2 500 2 500 3 000 5 000 2 600 31 300 2 700 14 200 2 500 3 000 2 400 13 700 3 800 2 500 240 4 000 2 000 2 600 20 840 4 $ Additional information 1 Inventory on 31 May 2014 is expected to have a value of $5100. 2 Discount allowed for the year is expected to be 2% of total sales. He only keeps one vehicle at a time. 5 The insurance policy runs from 1 September to 31 August each year. which is itself a department of the University of Cambridge. © UCLES 2013 9706/43/O/N/13 . Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES). Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders. the publisher will be pleased to make amends at the earliest possible opportunity.8 BLANK PAGE Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. University of Cambridge International Examinations is part of the Cambridge Assessment Group. but if any items requiring clearance have unwittingly been included.