Cambridge Assessment International Education

Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/11
Paper 1 Multiple Choice May/June 2019
1 hour
Additional Materials: Multiple Choice Answer Sheet
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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 11 printed pages and 1 blank page.

IB19 06_9706_11/4RP
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1 A business has a practice of not conducting a physical count of unused stationery at the year
end.

Which accounting concept has been applied for this practice?

A matching
B materiality
C money measurement
D prudence

2 Why is depreciation provided on non-current assets?

1 to ensure funds are available to replace the item

2 to ensure the profits of the business are not overstated
3 to match the cost of the asset with the revenue it earns

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

3 The net book value of motor vehicles of a business was as follows:

31 December 31 December
2017 2018

motor vehicles $238 000 $243 000

During the year ended 31 December 2018, a new motor vehicle was purchased for $47 000. A
motor vehicle costing $53 000 with accumulated depreciation $31 000 was sold for $7000.

What was the depreciation charge for motor vehicles for the year ended 31 December 2018?

A $11 000 B $20 000 C $35 000 D $42 000

4 A business with a year-end of 31 December purchased a motor vehicle on 1 January 2015 for
$24 000. The estimated useful life of the motor vehicle was four years and the estimated residual
value at the end of four years was $8000.

The business depreciates motor vehicles at 25% per annum using the reducing balance method.
No depreciation is charged in the year of disposal.

The motor vehicle was sold on 31 July 2018 for $12 000.

What was the profit on the sale of the motor vehicle?

A $1875 B $4000 C $5250 D $6000

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5 A bank statement shows a credit balance of $1500.

A payment of $500 and a receipt of $1250 were included in the cash book but have not yet
appeared on the bank statement.

Bank interest payable of $1100 had been correctly recorded in the cash book but due to a bank
error had been recorded in the bank statement as $1000.

What is the cash book balance?

A $650 B $850 C $2150 D $3350

6 A sales invoice to Jane has not been recorded in the books of prime entry.

Which accounts are affected by this error?

sales ledger control Jane

A no no
B no yes
C yes no
D yes yes

7 A business’s suspense account appears as follows:

$ $

discount allowed 150 opening balance 100

sales 50
150 150

Which statements are correct?

1 Total debits had been $100 less than total credits in the trial balance.
2 The sales account had been overcast by $50.
3 The discount allowed account had been overcast by $150.

A 1 and 2 B 1 only C 2 and 3 D 3 only

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8 The following information is available for a business.

The balance on its purchases ledger control account was $5900.

The total of the balances in its purchases ledger was $5510.

The following errors were discovered.

1 The purchases journal had been overcast by $250.

2 A sales ledger contra of $340 had been omitted from the purchases ledger control
account.
3 A supplier was paid $400 which was correctly entered in the cash book but had
been entered in the supplier’s account as $200.

What is the correct value of trade payables?

A $5110 B $5250 C $5310 D $5510

9 Brian sent goods to Ravi on a sale or return basis at a selling price of $5000. His selling price is
based on a mark-up of 25%. Ravi returned goods with a selling price of $1000 and purchased the
remainder.

What was the net effect on Brian’s inventory value?

A $800 increase
B $1000 increase
C $3200 decrease
D $4000 decrease

10 A business has provided the following information about its inventory.

cost price 18 750

cost of repairs required to bring 3 750
the inventory to a saleable condition
selling price after the repairs 21 000

Which valuation should be used for inventory in the financial statements?

A $15 000 B $17 250 C $22 500 D $24 750

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11 A business provided the following information about telephone expenses for the year ended
31 December 2018.

prepaid at 1 January 2018 975

accrued at 1 January 2018 650
bank payments during the year 4875
prepaid at 31 December 2018 1175
accrued at 31 December 2018 545

What was the telephone expense to be included in the income statement for the year ended
31 December 2018?

A $3920 B $4570 C $5180 D $5830

12 L and M are in partnership.

Which item should appear in the partnership appropriation account?

A additional capital contributed by M

B cash drawings of L and M during the year
C salary due to L
D salary paid to M’s sister

13 X and Y had been in partnership sharing profits and losses equally.

On 1 July 2018, Z was admitted as partner and the three partners shared profits and losses
equally.

On that date assets were revalued and there was a profit on revaluation, $36 000.

What were the accounting entries to record the profit on revaluation?

A credit X current account $18 000, credit Y current account $18 000
B credit X current account $12 000, credit Y current account $12 000, credit Z current account
$12 000
C credit X capital account $18 000, credit Y capital account $18 000
D credit X capital account $12 000, credit Y capital account $12 000, credit Z capital account
$12 000

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14 P, Q and R are in partnership.

Q is retiring and the following terms have been agreed.

Goodwill is valued at $35 000 but will not be retained in the books of account.

Net assets are revalued downwards.

Which entries in the capital account of Q record these adjustments?

revaluation
goodwill
of assets

A credit credit
B credit debit
C debit credit
D debit debit

15 A company issued $1 ordinary shares for $1.20 each. The total proceeds were recorded in the
ordinary share capital account.

Which journal entry completes the entries for the share issue?

account to debit account to credit

A suspense ordinary share capital

B ordinary share capital suspense
C ordinary share capital share premium
D share premium ordinary share capital

16 An extract from a company’s statement of financial position showed the following information.

$000

issued capital: 2 million ordinary shares of $0.50 each 1000

share premium 600
retained earnings 2400

The directors have agreed to make a bonus issue of 3 ordinary shares for 4 shares held. They
wish to maintain reserves in their most flexible form.

Which debit entry should be made in the retained earnings account?

A $150 000 B $750 000 C $900 000 D $1 500 000

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17 A company issues 500 000 $1 ordinary shares for $3 each and $250 000 debentures of 6%.

By which amount will the net assets of the company increase?

A $750 000
B $1 250 000
C $1 500 000
D $1 750 000

18 Which ratio calculates the average time a business takes to pay its credit suppliers?

A current ratio
B liquid (acid test) ratio
C trade payables turnover
D trade receivables turnover

19 The financial statements of a company include the following:

profit for the year 245 000

finance costs 120 000
preference share capital 220 000
ordinary share capital 850 000
general reserves 140 000
retained earnings 260 000

What is the return on capital employed (ROCE)?

A 16.67% B 22.90% C 24.83% D 34.11%

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20 A business has prepared the following information for the year ended 30 April 2019.

$ $

revenue 220 000

opening inventory 25 000
purchases 120 000
closing inventory (31 000)
cost of goods sold 114 000
gross profit 106 000

What was the inventory turnover?

A 86 days
B 90 days
C 95 days
D 100 days

21 Eight employees work in a team. Each employee is paid $16 an hour and the team share a group
bonus between them, which is based on their output of product. For any production in excess of
500 units the team, as a group, is paid a bonus of $8 per unit. The bonus is shared equally and
paid on a weekly basis.

Last week each member of the team worked 40 hours, and the team as a whole produced
560 units.

What is the pay of each member of the team?

A $700 B $760 C $1120 D $1200

22 A company uses the weighted average cost (AVCO) method to value its inventory.

The following information is available for an item of inventory.

February 1 Balance 20 units at $4 each

14 Purchased 40 units at $5 each
April 1 Purchased 40 units at $8 each
May 22 Issued 55 units

What was the total cost of the units issued?

A $255 B $270 C $330 D $345

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23 A factory employs a large number of staff who pack different products for different customers.

What would be the most suitable basis to absorb the packing department overheads?

A customer
B labour hours
C machine hours
D product

24 The following information is available.

budget actual

overhead cost $ 60 000 66 000

direct labour hours 30 000 35 000

Overheads are absorbed on the basis of direct labour hours.

What was the amount of over absorption or under absorption of overheads?

A $4000 over
B $4000 under
C $6000 over
D $6000 under

25 A business employs machinists to make a single product.

As demand increases more machinists are employed. Every time eight extra machinists are
employed, one extra supervisor is needed.

How are total labour costs best described?

machinists supervisors

A fixed variable
B stepped variable
C variable fixed
D variable stepped

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26 A company makes two products.

product
X Y

selling price $10 $12

variable costs per unit $4 $8
maximum sales (units) 4000 14 000

Total fixed costs are $44 700.

4000 units of X are sold.

How many units of Y must be sold to break even?

A 3450 B 3725 C 5175 D 11 175

27 A company has fixed costs of $30 000. It sells 10 000 units of a single product for $20 per unit and
has a contribution to sales ratio of 75%.

What is the increase in profit if total sales are 15 000 units?

A $45 000 B $75 000 C $195 000 D $225 000

28 A company’s budget shows figures for costs and sales for the month ended 31 March 2019.

variable costs per unit $20

selling price per unit $35
volume sold 2000 units
fixed costs $10 000

In March the actual sales volume was 10% lower than budgeted.

By how much was actual profit lower than budgeted profit?

A $2000 B $3000 C $5700 D $7000

29 A business changed from using absorption costing to marginal costing. This had no effect on
profit for the month.

What had happened in the month?

A Production was stopped during the period.

B Units produced and sold were equal.
C Units produced were greater than units sold.
D Units produced were less than units sold.

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30 Why might a business prepare budgets?

1 to improve coordination between departments

2 to encourage planning and decision-making
3 to monitor and control costs

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

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