Cambridge International Examinations
Cambridge International Advanced Subsidiary and Advanced Level
ACCOUNTING 9706/11
Paper 1 Multiple Choice May/June 2016
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*4191219389*
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READ THESE INSTRUCTIONS FIRST
Write in soft pencil.
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.
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This document consists of 10 printed pages and 2 blank pages.
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1 X, Y and Z have been in business sharing profits in the ratio 3 : 2 : 1. Y decided to retire at the end of the
year when the balance on his capital account was $39 400.
On that date the assets were revalued upwards by $57 000. The partnership does not account for
goodwill. Y took a car valued at $4800 as part of the amount due to him.
How much cash did Y receive?
A $25 200 B $44 100 C $53 600 D $58 400
2 A company has a bank balance of $20 000.
The company’s equity and reserves are shown.
ordinary shares of $0.50 each 10 000
capital reserves 5 000
revenue reserves 3 000
The directors wish to pay the maximum dividend possible.
How much of the bank balance will be used to pay the dividend?
A $3000 B $5000 C $8000 D $20 000
3 Which statement about rights issues is true?
A Shares can be sold to anyone.
B Shares can only be offered to existing shareholders.
C Shares cannot be sold at a premium.
D Shares cannot be sold at less than the market price.
4 A limited company's financial statements contain the following items.
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1 bonus issue of ordinary shares
2 debenture interest
3 profit for the year
4 profit on disposal of non-current assets
Which items would be found in the statement of changes in equity?
A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4
5 A company issued 25 000 ordinary shares of $0.50 each at a premium of 25%. They had a market value of
$1.50 each.
What is the value of ordinary share capital in the statement of financial position?
A $12 500 B $15 625 C $31 250 D $37 500
6 A company provides the following information.
ordinary share capital 50 000
retained earnings at the end of the year 11 000
8% debentures (2020-2022) 15 000
bank overdraft 8 000
profit from operations 17 700
profit for the year 16 500
What is the return on capital employed?
A 21.07% B 21.71% C 23.29% D 27.05%
7 A business purchases inventory by cash.
Which effects will this have on liquidity ratios?
current ratio liquid (acid test) ratio
A decrease decrease
B decrease increase
C no change decrease
D no change increase
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8 X supplies goods on credit. He looked at the financial statements of two other businesses to see if he
wanted to trade with them. He found the following information.
credit purchases $ trade payables $
business
G 21 800 2320
H 49 500 5750
X only trades with businesses with a trade payables turnover of 42 days or less.
With which business(es) did X decide to trade?
A both G and H
B G only
C H only
D neither G nor H
9 A business pays its employees $2 for each unit of X they assemble and $3.20 for each unit of Y. Monthly
output is 1800 units of X and 1000 units of Y. The factory supervisor is paid $1000 per month.
What is the direct labour cost per month?
A $6800 B $7760 C $7800 D $8760
10 A garage owner paid the following costs.
1 mechanics’ wages
2 garage equipment repairs
3 spare parts used to repair vehicles
4 rent paid for garage premises
Which of these are direct costs?
A 1, 2, 3 and 4
B 1, 2 and 3 only
C 1 and 3 only
D 2 and 4 only
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11 A business incurs the following costs.
1 direct material and direct labour costs
2 indirect factory production overheads
3 administrative expenses
4 distribution costs
Which costs are included in the cost per unit using absorption costing?
A 1, 2, 3 and 4 B 1 and 2 only C 1 only D 2, 3 and 4 only
12 A company absorbs overheads using machine hours. The following information is available.
overheads machine hours
budgeted $200 000 40 000 hours
actual $240 000 60 000 hours
What was the over or under absorption of overheads?
A $40 000 over
B $40 000 under
C $60 000 over
D $60 000 under
13 How is margin of safety calculated?
A actual sales minus break-even sales
B actual sales minus budgeted sales C actual sales minus cost of sales
D budgeted sales minus cost of sales
14 A company incurs total costs of $2200 for producing 100 units and $4600 for 300 units. The selling price
per unit is $20.
What is the total profit or loss at a production level of 200 units?
A $400 loss
B $600 profit
C $933 profit
D $1600 profit
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15 A company provides the following information in respect of its carriage costs.
total cost $
units carried
2 000 6 000
5 000 13 500
When more than 5000 units are carried the cost will increase the fixed charge by a further $2000.
What will be the cost to carry 6000 units?
A $15 500 B $16 200 C $18 000 D $20 000
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