9706 s11 QP 21-22-23

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education

Advanced Subsidiary Level and Advanced Level
* 6 3 0 5 5 1 9 0 5 5 *
9706/21
ACCOUNTING
Paper 2 Structured Questions
May/June 2011
1 hour 30 minutes
Candidates answer on the Question Paper.

No Additional Materials are required.
READ THESE INSTRUCTIONS FIRST
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
Answer all questions.
All accounting statements are to be presented in good style.
International accounting terms and formats should be used as appropriate.
Workings must be shown.
You may use a calculator.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
For Examiners Use

1
2
3
Total
This document consists of 11 printed pages and 1 blank page.

DC (NH) 31862/3
UCLES 2011
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2
1
Henry and Robin are in partnership with capitals of $120 000 and $80 000 respectively.
On 1 June 2010 Henry had a debit balance on his current account of $6 600 and Robin had
a credit balance on his current account of $1 000.
On 31 May 2011 Henry had a credit balance on his current account of $10 400.
The partnership agreement stated:
1
Interest on capital is payable at 8% per annum.
The maximum drawings permitted in any one year is 10% of capital invested.
Interest on drawings is charged at 5% on total drawings for the year.
Annual partnership salaries were Henry: $5 000 and Robin: $4 000.
Profits and losses are to be shared in the ratio of capital invested.
Both partners withdrew the maximum amount permitted during the year.
REQUIRED
(a) Prepare the current account of each partner for the year ended 31 May 2011.
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UCLES 2011
9706/21/M/J/11
For
Examiners
Use
3
(b) Calculate the profit for the year (net profit) made by the partnership for the year ended
31 May 2011.
For
Examiners
Use
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(c) Before forming a partnership both Henry and Robin were sole traders.
State four advantages of a partnership compared to a sole trader.
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[Total: 30]
UCLES 2011
9706/21/M/J/11
[Turn over
4
2
The Welcome Cricket Club has the following assets and liabilities.
Equipment (at cost)

Equipment depreciation provision
Caf inventory
Cash at bank
Subscriptions outstanding
Subscriptions paid in advance
Caf staff wages accrued
Loan from cricket association
Loan interest
30 April 2011
$
104 000
14 400
4 800
?
3 600
3 500
4 000
20 000
?
1 May 2010
$
40 000
4 000
6 500
12 800
2 200
5 000
500
nn
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The receipts and payments for the year ended 30 April 2011 are:
Receipts
Caf revenue (sales)
Subscriptions
Loan from cricket association
Donations
Ticket sales
$
90 000
34 000
20 000
450
14 560
Payments
Equipment
Rent
Heating and lighting
Wages of caf staff
Caf purchases for resale
$
64 000
21 000
18 000
28 800
36 000
Additional information:
1
Wages are a direct cost of the caf and are charged to the trading account.
The rent and heating and lighting are apportioned 40% to the caf and 60% to the
rest of the club.
The loan from the cricket association was received on 1 November 2010. Interest is
payable at 10% per year.
Depreciation is charged to the income and expenditure account.
UCLES 2011
9706/21/M/J/11
For
Examiners
Use
5
REQUIRED
(a) Prepare the caf income statement to show the gross profit and the profit for the year
(net profit) made by the caf during the year ended 30 April 2011.
For
Examiners
Use
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UCLES 2011
9706/21/M/J/11
[Turn over
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(b) Prepare the income and expenditure account of the Welcome Cricket Club for the year
ended 30 April 2011.
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UCLES 2011
9706/21/M/J/11
For
Examiners
Use
7
(c) Prepare the balance sheet of the Welcome Cricket Club at 30 April 2011.
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Examiners
Use
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[Total: 30]
UCLES 2011
9706/21/M/J/11
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3
Largos Ltd produces three types of security camera Ojo 1, Ojo 2 and Ojo 3.
The following forecast data is available for the year ended 30 June 2012.
Ojo 1
Ojo 2
Ojo 3
Forecast demand (units)
1 000
700
400
Selling price (per unit)

Costs (per unit)
Raw materials
Direct labour
Variable overheads
Fixed overheads
$400
$450
$550
$150
$100
$50
$50
$170
$150
$60
$60
$241
$175
$70
$60
Labour is highly skilled and may be used to produce any of the three types of security
camera.
REQUIRED
(a) Prepare a statement to show the forecast contribution and profit or loss made by one
unit of each type of camera produced.
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UCLES 2011
9706/21/M/J/11
For
Examiners
Use
9
(b) Prepare a statement to show the forecast total contribution and profit/loss made by
each product for the year ended 30 June 2012.
For
Examiners
Use
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(c) If the forecast output is produced, calculate the break-even point and the margin of
safety in units for each product. Show your workings.
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UCLES 2011
9706/21/M/J/11
[Turn over
10
Largos Ltd also operates a factory which manufactures and sells underwater cameras.
The following details per unit are available for the quarter ended 30 April 2011.
Sales price
Variable costs
Fixed production overhead
$0
700
400
100
Fixed production overhead is absorbed on forecast production of 40 cameras per month.

Actual production and sales (units)
Sales
Inventory at start of month
Inventory at end of month
February
March
April
30
10
0
40
0
5
45
5
10
REQUIRED
(d) Prepare an income statement to show the profit or loss in each month using marginal
costing.
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UCLES 2011
9706/21/M/J/11
For
Examiners
Use
11
(e) Prepare an income statement to show the profit or loss in each month using absorption
costing.
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[Total: 30]
UCLES 2011
9706/21/M/J/11
For
Examiners
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. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
UCLES 2011
9706/21/M/J/11

* 2 1 2 0 4 3 7 0 8 5 *
9706/22
ACCOUNTING
May/June 2011
1 hour 30 minutes

For Examiners Use

1
2
3
Total
This document consists of 12 printed pages.

DC (NH) 31866/3
UCLES 2011
[Turn over
2
1
Marcel owns a wholesale business supplying shops, hotels and restaurants with tea and
coffee. He does not keep formal accounting records but is able to supply the following
information for the year ended 30 April 2011.
Trade receivables
Trade payables
Inventories
Wages accrued
General expenses prepaid
General expenses owing
30 April 2011
$
17 000
14 800
20 600
9 350
800
1 May 2010
$
18 200
16 600
33 000
9 200
900
Transactions during the year ended 30 April 2011 were as follows:

$
Cash received from credit customers
103 160
Cash paid to credit suppliers
88 400
Cash sales to staff
10 750
Sales returns from credit customers
9 200
Discounts allowed
9 540
Discounts received
9 000
Bad debts
8 200
Wages
13 650
General expenses
12 300
REQUIRED
(a) (i)
Prepare a purchases ledger control account to find out the total amount of credit
purchases for the year ended 30 April 2011.
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UCLES 2011
9706/22/M/J/11
For
Examiners
Use
3
(ii)
Prepare a sales ledger control account to find out the amount of credit sales for the
year ended 30 April 2011.
For
Examiners
Use
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1
The normal gross profit to sales margin is 33.33%.
Staff are permitted to buy goods at cost plus 25%.
Goods sold in the annual clearance sale, $29 700, were sold at cost price.
On 8 March 2011 an unknown quantity of goods was destroyed by fire.
UCLES 2011
9706/22/M/J/11
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REQUIRED
(b) There were no further losses of goods during the year. Starting with the opening
inventory, calculate the value of the goods destroyed by the fire on 8 March 2011.
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UCLES 2011
9706/22/M/J/11
For
Examiners
Use
5
(c) Prepare the income statement (trading account only) for the year ended 30 April 2011.
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For
Examiners
Use
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[Total: 30]
UCLES 2011
9706/22/M/J/11
[Turn over
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2
The following information is available for the Northern Division of Blackford Industrial Ltd:
Statement of financial position at 30 April 2011
$000
$000
Non-current assets at net book value
$000
180
Current assets
Inventory
Trade receivables
Bank
40
35
43
118
Current liabilities
Trade payables
Other payables
55
23
78
Net current assets

Capital employed
40
220
Equity
Ordinary share capital $1 each
Share premium
Retained earnings
190
10
20
30
220
Total shareholders funds

Additional information for year ended 30 April 2011
$000
480
240
60
120
Total revenue (sales)

Cash purchases
Cash paid to credit suppliers
Operating expenses
At 30 April 2010, the following balances were reported:
Inventory
Trade payables
$000
28
15
REQUIRED
(a) Calculate the following amounts for the year ended 30 April 2011:
(i)
cost of sales
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UCLES 2011
9706/22/M/J/11
For
Examiners
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7
(ii)
gross profit and profit for the year (net profit).

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Examiners
Use
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An analysis of the Southern Division of Blackford Industrial Ltd for the year ended 30 April
2011 yielded the following results.
Southern Division
1
2
3
4
5
6
7
Mark-up 40%
Gross profit percentage 28.57%
Expenses to sales 20%
Net profit percentage 8.57%
Return on capital employed 18.00%
Rate of inventory (stock) turnover 8.95 times
Liquid ratio (acid test) 1.1:1
REQUIRED
Northern Division
(b) Calculate each of the same ratios for the Northern Division of Blackford Industrial Ltd,
for the year ended 30 April 2011. The calculations should be correct to two decimal
places.
(i)
Mark-up
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(ii)
Gross profit percentage

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UCLES 2011
9706/22/M/J/11
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(iii)
Expenses to sales
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(iv)
Net profit percentage

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(v)
Return on capital employed

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(vi)
Rate of inventory (stock) turnover

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(vii)
Liquid ratio (acid test)

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UCLES 2011
9706/22/M/J/11
For
Examiners
Use
9
(c) Using the profitability ratios (i) (v) compare the performance of the Northern and
Southern Divisions of Blackford Industries and explain the significance of each ratio.
For
Examiners
Use
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[Total: 30]
UCLES 2011
9706/22/M/J/11
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3
Ventana Ltd produce three different types of slatted wooden blinds, Pine, Teak and Oak. The
companys forecast figures for the year ended 30 April 2012 were:
Pine
$
Teak
$
Oak
$
Selling price (per unit)
61
158
170
Costs (per unit)

Direct material
Direct labour
Variable overhead
30
15
6
60
46
12
80
24
16
Fixed overhead is absorbed on the basis of 50% of direct material cost.

Annual production and sales are forecast to be:
Pine
Teak
Oak
2000 units
1600 units
1000 units
REQUIRED
(a) For the year ended 30 April 2012:
(i)
Prepare a statement to show the contribution per unit for each product.
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(ii)
Calculate the total forecast fixed cost for the year.

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UCLES 2011
9706/22/M/J/11
For
Examiners
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11
(iii)
Prepare a statement to show the break-even point for each type of blind in units
and dollars.
For
Examiners
Use
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(b) Prepare a statement, using the contribution per unit, to show the total profit or loss
made by each type of blind for the year.
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UCLES 2011
9706/22/M/J/11
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One of the directors wishes to stop production of the pine blinds.
This would increase the total forecast fixed costs by 25%. However, the director estimates
that sales of the teak and the oak blinds would increase by 50%.
For
Examiners
Use
REQUIRED
(c) Prepare a detailed marginal cost statement, using the contribution per unit, to show the
effect on total profit of stopping production of the pine blinds.
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[Total: 30]
UCLES 2011
9706/22/M/J/11

* 8 3 8 8 0 9 8 3 9 3 *
9706/23
ACCOUNTING
May/June 2011
1 hour 30 minutes

For Examiners Use

1
2
3
Total
This document consists of 14 printed pages and 2 blank pages.

DC (NH) 31868/4
UCLES 2011
[Turn over
2
1
The following is the draft balance sheet of Marshall Klingsman, a sole trader, at 30 April 2011.
Balance Sheet at 30 April 2011
$
Non-current assets
Buildings at valuation
Equipment at book value
Motor vehicles at book value
300 000
540 000
330 000
1 170 000
Current assets
Inventories
Trade receivables
Other receivables
Cash and cash equivalents
Current liabilities
Trade payables
Other payables
70 000
19 000
2 000
4 000
95 000
57 000
3 000
Net current assets
60 000
35 000
1 205 000
Non-current liabilities
Loan
Net assets
200 000
1 005 000
Financed by:
Capital at start
Add Profit for the year (net profit)
1 000 000
80 000
1 080 000
75 000
1 005 000
Less Drawings
Capital at end
After preparation of the draft balance sheet the following errors were found.
1
Goods in inventory at 30 April 2011, valued at cost $15 000, were found to be
damaged. The estimated net realisable value is $8 000.
Loan interest of 4% per annum had been omitted from the accounts.
No provision for depreciation on equipment had been made for the year. Depreciation
should have been provided at 5% per annum using the reducing balance method.
Motor vehicles are depreciated by 10% per annum. During the year vehicle repairs
of $10 000 had been incorrectly debited to the motor vehicles account.
On 28 April 2011 a credit customer, who owed $3600, was declared bankrupt. It
was decided to write off this amount in full. No record of this has been made in the
accounts.
UCLES 2011
9706/23/M/J/11
For
Examiners
Use
3
REQUIRED
(a) Prepare a statement to show the corrected profit for the year (net profit) ended
30 April 2011.
For
Examiners
Use
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UCLES 2011
9706/23/M/J/11
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(b) Prepare the corrected balance sheet at 30 April 2011.
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UCLES 2011
9706/23/M/J/11
For
Examiners
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5
(c) (i)
Explain two differences between cost and net realisable value.

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Examiners
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(ii)
Discuss the accounting treatment of the damaged inventory in item 1.

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(d) Using your answers to (a) and (b) calculate the following ratios to two decimal places:
(i)
current ratio
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(ii)
liquid ratio (acid test).

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UCLES 2011
9706/23/M/J/11
[Turn over
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(e) State four ways in which Klingsman could improve his working capital.
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(f)
Explain why the liquid ratio (acid test) is a more reliable indicator of liquidity than the
current ratio.
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[Total: 30]
UCLES 2011
9706/23/M/J/11
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7
BLANK PAGE
Question 2 is on the next page.
UCLES 2011
9706/23/M/J/11
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2
Robbie and Liza are in partnership with capitals of $90 000 and $60 000 respectively.
The following information is available for the year ended 30 April 2011.
Revenue
Inventory (30 April 2011)
Gross profit as a percentage of turnover
Inventory turnover
Expenses ratio
$240 000
$9 000
35%
12 times
15%
All purchases and sales of inventory are on credit.

REQUIRED
(a) Prepare a detailed income statement (profit and loss account) showing gross profit and
profit for the year (net profit) for the year ended 30 April 2011.
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UCLES 2011
9706/23/M/J/11
For
Examiners
Use
9
On 1 May 2010 the current account balances were Robbie $5000 (credit) and Liza $2000
(debit).
For
Examiners
Use
The partnership agreement provides for the following:

1
Partners are permitted to withdraw up to a maximum of 20% of capital invested.
Interest is charged on drawings at 8% per year.
Interest on capital is payable at 5% per year.
Liza is to receive a salary of $1250 per month.
Profits and losses are shared in the ratio of capital invested.
Both partners withdrew the maximum amount of drawings permitted during the year.
REQUIRED
(b) Prepare the appropriation account of the partnership for the year ended 30 April 2011.
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UCLES 2011
9706/23/M/J/11
[Turn over
10
At 30 April 2011 Robbie and Liza had a debit balance in the bank column of their cash book
of $12 000. Their bank statement, however, showed that the partnership had $9000 in the
bank at that date.
On comparing the cash book with the bank statement the following differences were found:
1
Bank charges of $250 appeared in the bank statement but had not been entered in
the cash book.
Cheques received from customers amounting to $3750 had been entered in the
cash book but had not been credited by the bank.
A cheque for $600 received from a debtor had been entered in the cash book but
had been returned by the bank marked insufficient funds for payment.
Cheques issued by the business amounting to $1600, recorded in the cash book,
did not appear in Aprils bank statement.
REQUIRED
(c) (i)
Update Robbie and Lizas cash book for the month of April 2011.
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(ii)
Prepare a bank reconciliation statement at 30 April 2011 to reconcile the bank

statement balance with the updated cash book balance.
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UCLES 2011
9706/23/M/J/11
For
Examiners
Use
11
(d) Give three reasons why the bank column balance in the cash book does not always
agree with the balance shown in the bank statement at the same date.
For
Examiners
Use
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UCLES 2011
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3
Paul owns two car wash businesses, called City Centre Car Wash and Suburban Car Wash.
City Centre Car Wash has the following monthly costs:
Per car
Detergent
Electricity
Water costs
Wage costs
$
1.00
0.50
0.05
1.25
Per month
Insurance of site
Lease of equipment
Managers salary
$
800
2040
1000
Both car wash businesses are open for 400 hours every month.
The cars are washed one at a time.
The average time taken to wash each car is 10 minutes.
City Centre Car Wash is currently operating at 80% capacity and Suburban Car Wash at
70% capacity.
REQUIRED
(a) For City Centre Car Wash, calculate the following correct to two decimal places:
(i)
the total number of cars washed per month

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(ii)
the total variable operating cost per month

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UCLES 2011
9706/23/M/J/11
For
Examiners
Use
13
(iii)
the total operating cost per month

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(iv)
the average cost per car wash

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(v)
the price to be charged per car to give a profit margin of 20%

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(vi)
the total profit per month.

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UCLES 2011
9706/23/M/J/11
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(b) Using the price calculated in (a)(v) above, calculate the following for City Centre Car
Wash, correct to two decimal places:
(i)
the contribution per car (per unit)

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(ii)
the break-even point in units

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(iii)
the margin of safety, in dollars, when operating at 80% capacity

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(iv)
the margin of safety, in dollars, if operating efficiency falls to 60% capacity

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(v)
the contribution/sales (C/S) ratio when operating at 80% capacity.

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UCLES 2011
9706/23/M/J/11
For
Examiners
Use
15
Suburban Car Wash charges the same price as City Centre Car Wash.
At that price Suburban Car Wash shows a contribution to sales (C/S) ratio of 40%. Fixed
costs are $3240.
REQUIRED
(c) Calculate, for Suburban Car Wash
(i)
the break-even point in units and in dollars

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(ii)
the total monthly profit when operating at 70% capacity.

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[Total: 30]
UCLES 2011
9706/23/M/J/11
For
Examiners
Use
16
BLANK PAGE
UCLES 2011
9706/23/M/J/11

9706 s11 QP 21-22-23

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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

General Certificate of Education

Candidates answer on the Question Paper.

For Examiners Use

This document consists of 11 printed pages and 1 blank page.

Interest on capital is payable at 8% per annum.

Interest on drawings is charged at 5% on total drawings for the year.

Annual partnership salaries were Henry: $5 000 and Robin: $4 000.

Profits and losses are to be shared in the ratio of capital invested.

Equipment (at cost)

Depreciation is charged to the income and expenditure account.

Forecast demand (units)

Selling price (per unit)

Fixed production overhead is absorbed on forecast production of 40 cameras per month.

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

Candidates answer on the Question Paper.

For Examiners Use

This document consists of 12 printed pages.

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

The normal gross profit to sales margin is 33.33%.

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

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

Net current assets

Total shareholders funds

Total revenue (sales)

gross profit and profit for the year (net profit).

Gross profit percentage

Net profit percentage

Return on capital employed

Rate of inventory (stock) turnover

Liquid ratio (acid test)

Selling price (per unit)

Costs (per unit)

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

Calculate the total forecast fixed cost for the year.

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

Candidates answer on the Question Paper.

For Examiners Use

This document consists of 14 printed pages and 2 blank pages.

Net current assets

Explain two differences between cost and net realisable value.

Discuss the accounting treatment of the damaged inventory in item 1.

liquid ratio (acid test).

Question 2 is on the next page.

All purchases and sales of inventory are on credit.

The partnership agreement provides for the following:

Partners are permitted to withdraw up to a maximum of 20% of capital invested.

Interest is charged on drawings at 8% per year.

Interest on capital is payable at 5% per year.

Liza is to receive a salary of $1250 per month.

Profits and losses are shared in the ratio of capital invested.

Prepare a bank reconciliation statement at 30 April 2011 to reconcile the bank

the total number of cars washed per month

the total variable operating cost per month

the total operating cost per month

the average cost per car wash

the price to be charged per car to give a profit margin of 20%

the total profit per month.

the contribution per car (per unit)

the break-even point in units

the margin of safety, in dollars, when operating at 80% capacity

the margin of safety, in dollars, if operating efficiency falls to 60% capacity