ZIMBABWE SCHOOL EXAMINATIONS COUNCIL

General Certificate of Education Advanced Level

ACCOUNTING 6001/2
PAPER 2: Structured Questions

SPECIMEN PAPER 1 hour 45 minutes

Candidates answer on the question paper
Additional materials:
No additional materials are required

TIME 1 hour 45 minutes

INSTRUCTIONS TO CANDIDATES
Write your name, Centre number and candidate number in the spaces at the top of this page.

Answer all questions.

Write your answers in the spaces provided on the question paper. If you require extra paper,
ask the supervisor for supplementary answer paper.
FOR EXAMINER’S USE

INFORMATION FOR CANDIDATES 1

The number of marks is given in brackets [ ] at the end of
each question or part question. 2

You may use a calculator. 3

The businesses in this paper are intended to be fictitious. 4

TOTAL

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This question paper consists of 14 printed pages and 2 blank pages.
Copyright: Zimbabwe School Examinations Council, Specimen paper.
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1. The Deluxe Club provides social and leisure activities for its members.

The following was its Statement of Financial Position at 31 August 2014.

Non-Current Assets $ $
Bar fixtures and equipment at cost 13 250
Less: Depreciation 4 375 8 875

Current Assets
Inventory 5 250
Cash at bank 8 000
Cash in hand 150 13 400
22 275

Financed by:
Accumulated fund 17 000

Current liabilities
Trade payables 2 525
Rent accrual 2 750 5 275
22 275

The cash transactions for the year ended 31 August 2015 were as follows:

$
Bar sales for the year 100 000
Less payments
Christmas disco expenses 425
Wages 32 250
Cleaning 255
Purchases 27 500
New bar equipment 500

Additional Information

1. Cash sales totalling $39 070 were banked during the year.
2. Subscriptions amounting to $12 500 were paid directly into the bank.
3. There was no inventory count at the end of the year. The gross profit margin
was 40%.
4. Credit purchases were $35 250.
5. Rent due is 1½% of bar sales.
6. Depreciation for bar fixtures and equipment is 20% per annum on cost.

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7. Cheque payments were as follows:

$

Suppliers for purchases 33 875

Cleaning 650
New display cabinets 3 750
General expenses 9 500
Rent 2 750

Prepare the

(a) Bar Trading Account for the year ended 31 August 2015.
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(b) Income and Expenditure Account for the year ended 31 August 2015.

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(c) Statement of Financial Position as at 31 August 2015.

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2 The following are summarised Statements of Financial Position for two companies as
at 31 May 2014.

Adams Plc Brian Plc

$000 $000
Capital and Reserves
Ordinary shares of $1 each 150 100
10% preference shares of $1 each 100 150
Retained profits 50 50
300 300

Total assets less current liabilities 300 350

Non-current Liabilities
10% Loan __- (50)
300 300

Additional information

1. The market prices per ordinary share at 31 May 2015 were:

Adams Plc $9,50

Brian Plc $10,38

2. The operating profit for the year ended 31 May 2015 was $150 000 for each
company.
3. The rate of corporation tax is 30%.
4. Each company paid an ordinary dividend of $0,20 per share. Preference
dividends for the year were also paid.
5. There were no changes in the capital structure of the two companies during the
year.

(a) Calculate profit after tax for each company.

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(b) Calculate the following accounting ratios for each company:

(i) earnings per share,

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(ii) price earnings,

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(iii) gearing (taken as total borrowings to ordinary shareholders’ funds),

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(iv) dividend yield,

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(c) Using calculations from b(iii) compare and comment on the gearing of the two firms.

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3 Happy Limited’s Statement of the Financial Position as at 31 October 2015 is given

below:

$000 $000
Non-Current Assets at Net Book Value 3 940
Current Assets
Inventory 2 132
Trade receivables 720
Bank 550 3 402
7 342

Share Capital and Reserves

Ordinary shares of $10 each 2 000
8% Preference shares of $5 each 800
Capital reserves 1 260
Revenue reserves 2 252
6 312
Non-Current Liability
10% debenture stock 600
Current liabilities _430
7 342

The following transactions were not included in the draft Statement of Financial
Position.

(1) September 1: A bonus issue was made on the basis of one ordinary share for
every two already held, leaving the reserves in the most flexible form.

(2) October 1: In order to provide funds for the redemption of the preference
shares, a rights issue was made on the basis of one ordinary share for every
three held after (1) above at $13 per share.

(3) October 14: The preference shares were redeemed at a premium of $0,50
each. The shares were originally issued at par.

(4) October 31: Equipment of $80,000 was acquired on hire-purchase. The higher
purchase agreement required 25% of the price to be paid immediately.

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(a) Redraft the Statement of Financial Position as at 31 October 2015 after

transaction 1 to 4 have been recorded.

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(b) Explain two advantages of a rights issue over a public issue of shares to a shareholder.

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(c) Distinguish between ordinary shares and debentures.

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4 Charity Limited is considering to undertake a capital project. The following

information relates to two possible projects of which she has to select one to
invest in. Both projects have an initial outlay of $600 000 each.

Projects A B
Expected Profits $000 $000
Year 1 240 90
2 240 150
3 120 270
4 60 360

Additional Information
(i) Estimated scrap value at the end of year 4 is $120 000 for each project.

(ii) Depreciation is calculated using the straight line method.

(iii) The cost of capital is 16%. The discounting factors for the present value of $1
at 16% are as follows:

Year 1 0,862
2 0,743
3 0,641
4 0,552

For both projects, calculate the following:

(a) Accounting Rate of Return using average investment.

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(b) Payback period.

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(c) Net Present Value.

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(d) Advise Charity Limited with reasons which project should be undertaken
using calculations in (c) above.

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