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University Of Phoenix
Cambridge International AS and A Level Accounting (9706)
UOPX -ACC 290 Multiple choice & answers with Explanation
May/ June Year 2010 (9706/12)

Questions
1
...
What is the effect of this
error on the accounts of the business?
Assets
Profit
A Overstated
Overstated
B Overstated
Understated
C Understated
Overstated
D Understated
Understated

Answers
Capital expenses are charged for long
term period and have no effect on
business revenue compared to revenue
expenses which are day to day
expenses that reduce business revenue
...

Answer: D

Page1 of 21

2
...
It pays for materials invoiced
at $3000 less a trade discount of 20%
and a settlement discount of 5%
...
What is the bank balance after
these transactions?
A $2020 overdraft
B $6580 overdraft
C $7150 overdraft
D $7580 overdraft

Amount paid for the purchase of
Material after deducting trade
discount
Trade discount = $3000* 20%
= $600
Deducting the trade discount
3000 (-) 600 =2400
Settlement discount= $2400 * 5%
= $120
Deducting the settlement discount
= $2400(-) $120=$2280
Bank a/c
Dr
Cr
$
$
Customer 500
Open
4800
bank
balance
Closing
6580 Supplier 2280
bank
balance
7080
7080

Answer: B

Page2 of 21

3
...

Identifying each item:
Discount allowed: it does not enter in
the purchases ledger as it is given to
customer to persuade those who owe
money to cover up within the given
timeframe provided by the
organization
...

Payments to suppliers are debited in
supplier account and are credited to
cashbook
...
It has nothing to do
with this question,
Purchases returns are debited in
supplier account and are credited to
return outwards one
...
The personal spending of the
owner of a business is not recognised
as a business expense
...
An owner's transaction
and his business transaction are
independent and distinct
...
It has nothing to do
with this question
...
It has nothing to do with
this question
...
It is not
related to this question
...
A business obtained a machine by
means of a hire purchase agreement
...
Which accounting principle is
involved?
A accruals
B materiality
C prudence
D substance over form

Accruals- It accounts for income and
expenditures which have been
collected or spent but whereby the
corresponding cash sums still have
not been received or paid out
...
It is not
concerned
...
It is not related to this
question
...
The table shows information from
the books of a business at 30 April
2010
...

So far it concerns, the good sent to
customer on sale or return basis, this
must not be considered as a sale until
the goods are sold by the salesperson
...
Which item will be entered in a
purchase ledger control account?
A discount allowed
B discount received
C prepaid rent
D returns inwards

Discount allowed enters in the sales
ledger control account
...

Return inwards- enters in the sales
ledger control account
...
(It is
debited in the purchases ledger
control account)
Answer: B

Page7 of 21

8
...

When listing the individual suppliers’
accounts a credit balance had been
shown as a debit balance
...
The
effect would be doubled
D increase by twice the amount of
the credit balance
Answer: D
9 Which error will cause an entry in
the suspense account?
A a transposition error when
transferring a ledger account balance
to the trial balance
B an error of commission where the
wrong account is used for a
transaction but it is the correct type of
account
C an error of omission
D an error of principle

Option A is the only one that cause an
entry in the suspense accounts
Concern the six errors for example an
error of commission, an error of
omission, an error of principle, an
error of complete reversal, an error of
books of original entry, an error of
compensating do not affect the trial
balance
...


Answer: A

Page8 of 21

10
...

What is the correct figure for trade
receivables (debtors) in the balance
sheet at 31 December?
A $46 500
B $49 400
C $51 200
D $53 000
11
...

The following further information is
available
...
What
we can conclude is that he owes
money to the business that why this
transaction should be included in the
trade receivables (debtors) in the
statement of financial at 31
December
...

Answer: C

12
...
The following figures are
known
...
We need
to find the profit for the year
So, we need to make profit for the
year become subject of formular
Profit for year= Closing
capital+drawing(-) open capital at
start
• $30000+$7000(-) $20000
= $17000

Answer: B

Page10 of 21

13
...
The following
information is available
...

number of per unit
units
bought
100
cost $16
sold
60
selling
price $25

As per ISA 2, Inventory should be
value lower of cost and NRV (Net
realisable value)
Closing inventory = (100 (-) 60)
= 40
What we should understand is that
out of the 40 units, 20 will be value at
cost ($16) and the other 20 units
which are damaged will be value at
$10 (NRV)

Of the remaining units, 20 are
damaged and can only be sold for $10
So, inventory = (20*$16) +(20 *$10)
each
...
X, Y and Z are in partnership
Working:
sharing profits and losses in the ratio
partner's capital
5: 2: 3
...
Partners receive interest at Z= 6%*20000= 1200
6 % per annum on their capital
account balances at the start of the
To obtain Residual profit =
year
...

Share of profit for Y
2/10 * 117680= $23536
What is Y’s share of the total profits? Share of total profit for
A $23 536
Y=$23536+1320+18000
B $28 000
=$42856
C $42 856
D $46 000
Answer: C
Page12 of 21

16 L and M are in partnership
...
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 wife

Additional capital contributed by M
do not enter appropriation account
instead it enters in capital accounts
Cash drawing do not enter in
appropriation account but interest of
drawing enters
...
=$1000000 + $100000+$800000
It plans to purchase immediately a
=$1900000
factory for $1 million
...
It will also
require new equipment costing $600
000 in 12 months' time
...
At 1 January 2009 the capital
structure of a company was as
follows
...
On 1 June 2009 a
bonus issue of one share for every six
in issue was made
...

What is the balance on the share
premium account at 31 December
2009?
A $26 000
B $34 000
C $46 000
D $56 000
19
...

• A share premium account can
be defined as a capital reserve
which is created when a
company issues shares at a
price which is exceed the
nominal\par\face value
...
Share
premium account is credited
with the total premium
received (Premium per share *
total number of shares issued)
Answer: A

Page14 of 21

20 A company buys and re-sells
goods
...
Which reason
could explain this?
A Rival companies pay less for
goods than the company
...


Concern the rest option for example
option 1 reducing the cost of good
will just improve gross profit but will
not have any effect on sales

C The Company charges a higher
selling price than its rivals
...
Its current ratio is
2: 1 and its quick (acid test) ratio is
1
...

What is the value of its inventory
(stock)?
A $4000
B $5000
C $28 000
D $35 000

Current liabilities =
$8000+$2000=$10000
Inventory is the difference between
current ratio and quick ratio
...
5 :1
Make Inventory becomes subject of
formular
Inventory/10000= 0
...
5
= 5000
Answer: B

22 A company’s sales during a 365day year are shown in the table
...
What is the end-of-year trade
receivables (debtors) balance?
A $22 074
B $98 460
C $106 680
D $127 344

Trade receivables turnover
= trade receivables/ credit sales
*365
Make trade receivables become
subject of formular
42 days = TR/$927100*365 days
TR= 42days/365 days*$927100
TR= $106680

Answer: C

Page16 of 21

23 The following information is given
about four products
...
A soup manufacturer uses batch
costing
...
Direct labour involved
200 hours at a cost of $2000, and
overheads are absorbed at the rate of
$15 per direct labour hour
...
25
B $0
...
55
D $0
...
The table shows costs at three
activity levels
...
75

Answer:D

Variable cost per unit
=Change in total cost/change in
activity
($21200(-) $19600)/ (100(-)90)
=$1600/10=160
Total variable cost for 100 units
= 100*$160
= $16000
Fixed cost= Total cost (-) variable
cost
= $21200(-) $16000
=$5200
Answer:C

Page18 of 21

26
...
Which costing method
will the supplier use to price the
order?
A batch
B job
C marginal
D unit

Job costing is a cost-control technique
that applies production costs to each
item, allowing managers to monitor
expenditures
...

Out of these four options only batch
will be appropriate as it is used when
a business receives an order
consisting of producing an item in
large quantities
...
What
is its total cost to make 20 000 units?
A $1000
B $10 000
C $11 000
D $12 000

$6000/10000units= $0
...
54
The unit cost is not the same, hence
the total cost will apply a fixed
component also in this transaction
Variable cost per unit
($13000(-) $6000/ (24000(-)10000)
=$0
...
5*10000
=$5000
Fixed cost= $6000(-) $5000
=$1000
Total cost for 20000 units
= (20000*$0
...
Each machinist is paid $30 a
day and each supervisor $40 a day
...
If
95 wedding dresses a day are
produced, what is the daily labour
cost?
A $2850 B $3210 C $3230 D $3250

Number of machinists required per
day to produce 95 dresses
=95 dress/1 machinist
Cost of machinist for 95 dresses =
95 machinists * $30=$2850

29 The graphs show projected sales and

What we can notice is that break even
for product Y is higher
...


The presence of a supervisor can
supervise 10 machinists, therefore to
supervise 95 machinists
...


Which statement most accurately
interprets the graphs?
A Product X breaks even at a higher
number of units sold than product Y
...

C Product X has a lower selling price
per unit than product Y
...


Answer:D

Page20 of 21

30 A business purchases a vehicle for
$10 000
...

What is the depreciation charge for
year 2?
A $1600
B $2000
C $6400
D $8000

Reducing Balance Method=
(Cost of asset- Provision for
depreciation of the asset) *100
Depreciation for Year 1
=20%*($10000(-) $0)
=$2000
Depreciation for Year 2
=20%*(10000(-)2000)
=$1600

Answer:A

Page21 of 21



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