Angels International

College Canal campus, Faisalabad

Advanced Subsidiary Level and Advanced Level

Candidate Name

ACCOUNTING 9706/01

Paper 01 - Multiple Choice Mock Exam 2012

1 hour

Additional Materials: Multiple Choice Answer Key

Soft clean eraser
Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write your name and section on the Answer Sheet in the spaces provided unless this has been done for you.

Write in soft pencil.

Do not use staples, paper clips, highlighters, and glue or correction fluid.
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 09 printed pages and 01 blank page

Angels International College
Mock Exam 2012

1 A vehicle cost $30 000. The vehicle was later sold for $9000 and the profit on disposal was $1500.

What was the accumulated depreciation of the vehicle on disposal?

A $7500 B $9000 C $21 000 D $22 500

2 A transport business owned by a sole proprietor purchases a motor vehicle.

This is charged to the Motor expenses account.

What are the effects of this on the end-of-year balance sheet?

A Non-current assets understated current assets understated

B Non-current assets overstated current assets overstated

C Non-current assets overstated capital account overstated
D Non-current assets understated capital account understated

3 A business buys a computer for $2200 on 1 January 2007. The computer will be used for four years, after
which time it will be sold for $280. The business uses the straight-line method of depreciation.

What is the depreciation charge for the year ended 31 December 2008?

A $480 B $550 C $960 D $1100

4 The following information is taken from the stationery account of a business.

Stock of stationery at beginning of the year 600

Cash paid for stationery during the year 7000

Amount owing for stationery at end of year 480

Stock of stationery at end of year 800

How much should be debited to the profit and loss account for stationery?

A $6680 B $6800 C $7280 D $8080

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Angels International College
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5 A business that purchases a shop incurs the following costs.

Purchase price of the shop 680 000

Legal fees incurred in the purchase of the shop 7200
Cost of initial inventory 12500
Cost of installing air conditioning 47300

Which amount will be capitalized as the cost of the shop?

A $680 000 B $687 200 C $734 500 D $747 000

6 Which of the following is the definition of a business as a going concern?

A The assets owned by the business exceed its liabilities.

B The business has accumulated revenue reserves.
C The business is currently liquid and able to pay its trade payables.
D The business will continue in operational existence for the foreseeable future.

7 A sole trader pays private expenses from the business bank account and records them as drawings.

Which accounting principle is applied?

A business entity B going concern C matching D prudence

8 The table shows information from the books of a business at 30 April 2002.
Invoiced $
Credit sales invoiced during financial year 79000
Goods sent to customers on 28 April 2002 and invoiced 4 May 2002 6100

Goods sent to customers during April 2002 on sale or return basis but not sold by 30 April 2002 8300

What is the amount to be credited to the Trading Account as sales for the year ended 30 April 2002?

A $76800 B $85100 C $85300 D $93400

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Mock Exam 2012
9 A trade payable for $720 transferred from the purchases ledger has been entered on the wrong side of the
sales ledger control account.

The sales ledger control account has a closing balance of $92 460, before correcting the transfer.
A provision for doubtful debts of $1 000 is to be made.

What is the correct balance on the sales ledger control account?

A $90 020
B $91 020
C $91 740
D $92 180

10 Closing inventory has been undervalued.

What is the effect on the financial statements?

net current assets net profit

A no effect understated
B overstated overstated
C understated no effect
D understated understated

11 A trader’s cash book shows a debit balance of $12 460 at 30 April. Bank charges of $4500 have not been
entered in the cash book.

A cheque for $14 470 received from a trade receivable and a cheque for $1740 paid to a trade payable
appear in the cash book but not on the bank statement.

What is the balance shown on the bank statement at 30 April?

A $4 770 credit
B $4 770 debit
C $20 690 credit
D $20 690 debit

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12 A company’s capital expenditure of $200 000 has been debited in error to the purchases account.
Depreciation is provided at the rate of 15 % per annum on the cost of all non-current assets held at each
year end.

How will this affect the net profit?

A $170 000 understated
B $200 000 overstated
C $200 000 understated
D $230 000 overstated

13 A business sells some of its inventory for $80 on credit to a customer. The inventory originally cost $50.

Which statement reflects the effect of this transaction on the balance sheet?

current assets owner’s capital

A decrease by $30 decreases by $30
B decrease by $30 increases by $30
C increase by $30 decreases by $30
D increase by $30 increases by $30

14 Which transaction would appear in both the receipts and payments account and the income and
expenditure account of a cricket club?

A the club bank balance

B the depreciation of the club pavilion
C the purchase of a motorized lawn mower
D the rent of the cricket ground

15 The inventory records of a business show the following information for product X.

amount in units cost per unit ($)

1 January opening balance 100 3

3 January receipts into inventory 50 4
8 January inventory issued 120 -

What is the value of the inventory issued on 8 January using the First in First out (FIFO) method?
A $360 B $380 C $410 D $420

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Angels International College
Mock Exam 2012
16 Which item would not be found in the accounts of clubs and societies?
A. accumulated fund
B. income and expenditure
C. drawings
D. surpluses and deficits

17 What appears as a credit entry in the appropriation account of a partnership?

A. interest on partner’s loan
B. interest on capital
C. interest on drawings
D. partnership salaries

18 The wages of staff employed in manufacturing goods have been debited in the income statement.
What is the effect of this error?

gross profit net profit

A overstated no effect
B overstated overstated
C understated no effect
D understated understated

19 What is the effect on a company’s balance sheet of issuing bonus shares?

A. the bank balance will be increased

B. the long term liabilities will be increased
C. the reserves will be reduced
D. the share capital will be reduced

20 A company, with an existing issued share capital of 200 000 ordinary shares of $0.50 each, made a one for
four bonus issue. This was later followed by a one for two rights issue at $1.20 per share.

What will be the balance on the share capital account after these transactions?

A $125 000 B $187 500 C $270 000 D $375 000

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Angels International College
Mock Exam 2012
21 A company’s capital is:
$

Ordinary shares of $1.00 each 200000

Share premium account 80000
Revenue reserves 160000

Changes now to be made (in the order given)

 A one for one bonus issue

 A rights issue of 100 000 ordinary shares of $1.00 each at $1.40 per share
The company wishes to maximize the amounts available to pay dividends.

What will be the ordinary capital and reserves of the company?

Ordinary share capital Share premium Revenue reserves

$ $ $
A 500 000 40 000 40 000

B 500 000 80 000 nil

C 540 000 nil 40 000
D 540 000 40 000 40 000

22 Which of the following correctly shows the effect of a company increasing the value of its freehold property?

Asset use ratio Capital employed

A decrease decrease
B decrease increase
C increase decrease
D increase increase

23 What might cause working capital to fall?

A. an amount owing by a customer has turned out to be a bad debt
B. an old delivery van has been given in full exchange for a new computer
C. a payment of cash has been made to a trade payable
D. new inventory has been purchased on credit

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Angels International College
Mock Exam 2012
24 Which of the following is a benefit of absorption costing?

A It allows a business to calculate the break-even point for production.

B It allows a business to calculate the total cost of goods produced.
C It allows a business to calculate the profit to be made on a product.
D It allows decision making on utilizing spare capacity by increasing production.

25 The diagram shows costs and revenues of a business.

Which line represents total cost?

A

B
$
Costs and
Revenues
C

0 number of units

26 Which of the following are major assumptions in profit/volume (p/v) analysis?

1 Variable cost per unit fluctuates with the volume of activity.

2 Costs can be identified as either variable or fixed.
3 Fixed cost per unit is constant as activity rises.
4 Volume of activity is the only factor that affects revenue and costs.

A 1 and 3 only B 2 and 3 only C 2 and 4 only D 3 and 4 only

27 What best describes cost of direct materials plus direct labour costs?
A absorption cost
B marginal cost
C prime cost
D total cost

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28 A manufacturer has 700 units of finished goods in inventory on 1 March.

On 31 March the total number of units in inventory is 770.

At present, inventory is valued using the total costing method.

What would be the effect on the operating profit if the marginal costing method is used for
inventory valuation?

A increase operating profit

B no change in operating profit

C no change in operating profit but a 10 % increase in gross profit

D reduce operating profit

29 A job cost sheet showed the following estimates.

$
Materials 680
Labour at $20 per hour 200
Overheads at $10 per labour hour 100
Profit 280
Price of job 1 260

The job actually took 25 % more labour hours than were estimated. What was the profit?

A $205 B $230 C $330 D $355

30 A business makes wedding dresses.

Each machinist is paid $30 a day and each supervisor $40 a day.
Each supervisor can work with up to 10 machinists and each machinist can produce one wedding
dress a day.

If 95 wedding dresses a day are produced, what is the daily labour cost?

A $2850 B $3210 C $3230 D$3250

The END of Question Paper

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