Cambridge International AS & A Level: ACCOUNTING 9706/22
Cambridge International AS & A Level: ACCOUNTING 9706/22
Cambridge International AS & A Level: ACCOUNTING 9706/22
* 9 0 4 9 2 7 5 2 8 5 *
ACCOUNTING 9706/22
Paper 2 Fundamentals of Accounting October/November 2023
1 hour 45 minutes
INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.
INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].
DC (RW) 316872/3
© UCLES 2023 [Turn over
2
At At
Balances 31 July 2023 1 August 2022
$ $
8% debenture (2026) 36 000 –
Inventory 43 190 36 800
Other payables: administrative expenses – 960
Other receivables: administrative expenses 160 1 820
Other receivables: distribution costs 1 490 –
Trade payables 25 250 29 610
$
Payments
To credit suppliers 122 050
Administrative expenses 66 920
Distribution costs 51 730
Receipts
From customers 284 200
2 Inventory at 31 July 2023 included damaged items that had cost $3600. One half of these
items will be scrapped and have no value. The remaining items will be sold for $900 after
repairs costing $420.
(a) Prepare the statement of profit or loss for the year ended 31 July 2023. Use the space
provided to show your workings.
P Limited
Statement of profit or loss for the year ended 31 July 2023
Workings:
Cost of sales
Administrative expenses
Distribution costs
[15]
Additional information
$
Share capital (ordinary shares of $0.50 each) 120 000
Share premium 19 000
Retained earnings 23 560
2 On 1 September 2022, a bonus issue of shares was made of one ordinary share for every six
shares held. Reserves were maintained in their most flexible form.
3 On 1 January 2023, a final dividend of $0.07 per share was paid on all shares in issue at
1 August 2022.
4 On 31 March 2023, a rights issue of one ordinary share for every four shares held was made
at a premium of $0.15 per share. The issue was fully subscribed.
(b) Prepare the statement of changes in equity for the year ended 31 July 2023.
P Limited
Statement of changes in equity for the year ended 31 July 2023
[6]
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2 ................................................................................................................................................
[2]
(d) Advise the directors whether or not they were correct to make a bonus issue of shares rather
than make a new issue of shares. Justify your answer.
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[Total: 30]
On 1 July 2021, he purchased a delivery vehicle for $29 000 from his business bank account.
He decided to depreciate delivery vehicles on a monthly basis using the straight‑line method. He
estimated that the delivery vehicle would have a useful working life of four years and would have a
residual value of $5000.
On 1 November 2022, a new delivery vehicle was purchased at a cost of $44 000. The old delivery
vehicle was part exchanged at a value of $16 800. The balance was settled by a bank loan
repayable over two years.
He estimated that the new delivery vehicle would have a useful working life of five years and
would have a residual value of $8000.
(a) State two factors that cause the value of non‑current assets to depreciate.
1 ................................................................................................................................................
2 ................................................................................................................................................
[2]
(b) Prepare the following accounts for the year ended 30 June 2023. Use the space provided to
show your workings.
Workings:
[8]
(c) Calculate the profit or loss on disposal of the delivery vehicle sold on 1 November 2022.
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(d) Explain why it may be more appropriate to depreciate motor vehicles using the reducing
balance method rather than the straight‑line method.
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[Total: 15]
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3 Malik prepared a sales ledger control account for July 2023. However, the balance of the control
account did not agree with the total of customers’ account balances in the sales ledger.
$
At 1 July 2023
Sales ledger control account balance 76 250
For the month of July 2023
Contra purchases ledger 420
Sales journal 69 634
Cash book: customer cheques dishonoured 22
Cash book: discounts allowed 892
Journal: irrecoverable debts 410
Cash book: receipts from credit customers 74 118
Sales returns journal 2 090
The following errors were discovered which accounted for the difference.
1 The balance of a sales ledger customer’s account had been undercast by $300.
2 The total of the sales returns journal had been overcast by $580.
3 A journal entry to write off a customer account balance of $95 as irrecoverable had been
correctly entered in the general ledger but had been posted to the debit side of the customer’s
account.
4 A cheque received from a customer, $320, had been correctly entered in the cash book but
had been posted to the debit side of the customer’s account as $230.
5 A further dishonoured cheque from a customer, $215, had not been entered in the cash book
but had been correctly entered in the customer’s account.
The list of customer account balances extracted from the sales ledger totalled $69 211.
(a) Prepare the sales ledger control account for the month of July 2023, taking into account the
errors discovered. Dates are not required.
Details $ Details $
[9]
Corrected balances
[4]
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[2]
[Total: 15]
4 Andreas owns a business manufacturing bicycles. The business operates two production
departments, Machining and Assembly, and two service departments, Stores and Maintenance.
Total budgeted overheads for the year ended 31 August 2023 are as follows:
$
Indirect wages 420 000
Factory rent and rates 30 000
Machine overheads 22 000
(a) Complete the table to show the apportionment of the budgeted overheads for the year ended
31 August 2023.
Apportion Stores
Subtotal
Apportion Maintenance
[6]
(b) Calculate, to two decimal places, an overhead absorption rate for each production
department, using a suitable basis.
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Additional information
The actual results for the year ended 31 August 2023 were as follows:
Machining Assembly
Total overheads $226 952 $267 465
Direct labour hours 28 450 72 580
Machine hours 44 120 15 270
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Additional information
Andreas has been approached by a new customer wishing to make a special order for 120 bicycles
with modifications to the customer’s own specification. In order to complete the order, the following
would apply for the manufacture of one bicycle.
2 The direct labour hours in the machinery department would increase by 50% and an additional
15 minutes of direct labour hours would be required in the assembly department.
3 Due to workers in the assembly department already working at full capacity, these workers
would have to work overtime to complete the order at a premium of 25% on the usual direct
labour rate.
(d) Calculate the direct cost of producing one bicycle for the special order.
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Additional information
In order to remain competitive, Andreas wishes to achieve a 30% gross profit margin on all work.
(e) Prepare a statement to show the total selling price that Andreas should quote to the customer
in order to achieve a 30% gross profit margin on the order.
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Additional information
Having received the quotation from Andreas, the customer has stated that he will commit to a
regular monthly order of 100 of the special bicycles if Andreas will offer a 10% discount on the
quoted price and allow 2 months’ credit.
(f) Advise Andreas whether he should accept the terms offered by the customer. Justify your
answer.
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[Total: 30]
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