Do not use staples, paper clips, 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.
1 An item is included in the financial statements because it affects their interpretation.
Which accounting concept is being applied?
A consistency B materiality C money measurement D substance over form
2 Why is depreciation provided on non-current assets?
A so that the cost is allocated to periods that benefit from them
B so that the business entity concept is applied C so that there is enough cash in the business to replace them D so that they are shown at market value
3 A company purchased an asset costing $100 000. It had a life of five years and an estimated residual value of $20 000. The company uses straight-line depreciation.
The asset was sold for $5000 at the end of the five-year period.
What is the total effect on year five profits from both depreciating and selling the asset?
cheque paid in 2018 for equipment bought in 2017 15 000
equipment purchased on credit in 2018 42 000 net book value of equipment at 1 January 2018 83 000 net book value of equipment at 31 December 2018 67 000
What was the depreciation charge in the income statement for the year ended 31 December 2018?
A $16 000 B $31 000 C $43 000 D $58 000
5 Daphne buys a non-current asset for $10 000. It has an estimated life of two years and a scrap value of $2000. She is considering whether to depreciate it using the straight-line method or to use the reducing balance method at a rate of 60% per annum.
Which statements are correct?
1 The profit for the year in Year 1 is higher if the reducing balance method is chosen. 2 The profit for the year in Year 1 is higher if the straight-line method is chosen. 3 The profit on disposal at the end of Year 2 is higher if the reducing balance method is chosen. 4 The profit on disposal at the end of Year 2 is higher if the straight-line method is chosen.
A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4
6 What is not a purpose of control accounts?
A to assist in the preparation of financial statements
B to identify all errors where the trial balance agrees C to provide a total for trade receivables and trade payables D to verify the accuracy of the individual ledger accounts
7 The balance on a sales ledger control account was $21 500. This did not agree with the total of the sales ledger account balances.
It was discovered that a credit note for $200 sent to a credit customer had been posted to the debit of the customer’s account.
What was the total of balances in the business’s sales ledger before the error was corrected?
8 During the month of June, a business recorded the following information.
payments to credit suppliers during June 16 380
credit purchases for June 21 650 discount received 850 purchases ledger balances at the start of June 5 730 purchases returns during June 1 200
What was the purchases ledger control account balance at the end of June?
A $8950 B $10 650 C $15 570 D $27 380
9 A business paid an annual rent of $24 000. At 1 January 2018 there was accrued rent of $4000.
Rental payments were as follows.
1 January 2018 12 000
1 July 2018 10 000 1 September 2018 13 000
How was rent recorded in the financial statements at 31 December 2018?
income statement other receivables other payables
$ $ $
A 24 000 7 000 nil
B 24 000 nil 7 000 C 35 000 11 000 nil D 35 000 nil 11 000
10 At the year-end, a business has some damaged goods in inventory. The following information is available.
1 The goods were purchased for $8500.
2 If the goods are repaired, they can be sold for $10 400. The business will have to pay $2000 repairing cost and pay $300 to a salesman. 3 The same quantity of damaged goods can be purchased from the supplier for $8200.
What is the value of the damaged goods at the year-end?
11 A company undervalued the closing inventory for its current accounting period.
How did this affect gross profit?
current period following period
A no effect no effect B understated overstated C understated no effect D understated understated
12 For the year ended 31 December 2018, Sim’s net assets increased by $1210.
The following transactions took place during 2018.
1 Payments out of Sim’s personal bank account: rent for business office $3600, rent for personal residence $2000. 2 Drawing of goods: with a cost $6200 and sales value $7700. 3 Drawing of cash: $9750.
What was the profit for the year ended 31 December 2018?
A $11 560 B $13 560 C $15 060 D $15 160
13 Meena was a sole trader. On 1 July 2018, Hanna entered into a partnership with her sharing profits equally.
Profit for the year ended 31 December 2018 was $168 000 accruing evenly over the year. An irrecoverable debt of $8000 was incurred during March 2018 and it was agreed that this would be paid for by Meena.
14 Z is admitted as a new partner in the partnership of X and Y. He brings the following into the business.
cash 20 000 inventory 6 000 vehicle 11 000
Interest on capital is calculated at 10% per annum. There is no goodwill on Z’s admission.
What is Z’s interest on capital per annum?
A $1700 B $2000 C $3100 D $3700
15 L and M are in partnership sharing the profits equally. No goodwill account is maintained in the accounts. N joins the partnership and pays $30 000 cash for his share of the goodwill.
Profits are to be shared equally between L, M and N.
What are the increases in the capital accounts on the admission of N into the partnership?
capital accounts L M N $ $ $
A 10 000 10 000 10 000
B – – 30 000 C 15 000 15 000 – D – – –
16 During the year a business issued $1 ordinary shares at $1.20 each. The directors proposed a final dividend at the end of the year.
Which balances in the statement of changes in equity were affected by these transactions?
budgeted machine hours 10 450 actual overheads $149 000 actual machine hours 9 300
What was the absorption rate per machine hour?
A $12.15 B $13.66 C $14.26 D $16.02
22 Which costs are stepped costs?
1 Increase in indirect materials cost.
2 Increase in variable overheads. 3 Renting further factory space.
A 1 and 2 B 1 only C 2 and 3 D 3 only
23 An employee worked a normal 35-hour week and was paid $15 per hour. He also worked 5 hours of overtime which was paid at $20 per hour and received a bonus of $50.
What was his total pay for the week?
A $525 B $600 C $625 D $675
24 A company uses machine hours to absorb its overheads.
The following information is provided for a month.
actual budgeted
overheads $237 010 $253 450
machine hours 12 460 13 700
Which statement regarding overheads is correct?
A $6500 over-absorbed B $6500 under-absorbed C $16 440 over-absorbed D $16 440 under-absorbed
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.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cambridgeinternational.org after the live examination series.
Cambridge Assessment International Education is part of the Cambridge Assessment Group.Cambridge Assessment is the brand name of the University of Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.
