ZIMBABWE SCHOOL EXAMINATIONS COUNCIL

General Certificate of Education Advanced Level

ACCOUNTING 9197/2
PAPER 2 Structured Questions

NOVEMBER 2010 1 hours 30 minutes

1. The trial balance of Sunrise Limited at 31 December 2007 is given
below.
Dr Cr
$ $
Ordinary shares of $2 each 500 000
8% Preference shares of $1 each 125 000
Share premium account 65 000
Land and buildings at cost 600 000
Plant and equipment at cost 620 000
Provision for depreciation, plant
and equipment 170 000
Gross profit 891 000
Debtors and creditors 80 000 12 000
Provision for bad debts 7 000
Discount received 6 000
Stock at 31 December 2007 109 000
Bank 6 000
Rent and rates 230 000
Salaries and wages 339 000
Sundry expenses 140 000
Debenture interest 4 000
Preference dividend paid 5 000
10% Debentures (2010) 80 000
General reserve 180 000
Profit and loss account 85 000
2 127 000 2 127 000

Additional information:

1. Rent of $10 000 was prepaid on 31 December 2007.

2. Sundry expenses of $3 000 were outstanding on 31 December
2007.
3. The debentures and share capital were issued several years ago.
4. Depreciation is provided on plant and equipment at 20% using
the reducing balance method.
5. The provision for bad debts is maintained at 5% of debtors each
year.
6. Taxation is to be provided at 30%.
7. The directors declared an ordinary dividend of 6 cents per share
on 31 December 2007.
8. An amount of $20 000 is to be transferred to general reserve.

Required:

(a) (i) What are cumulative preference shares?

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(ii) State three advantages of cumulative preference shares

over ordinary shares.

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(b) (i) Prepare Sunrise Limited’s profit and loss appropriation
account for the year ended 31 December 2007.

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(ii) Prepare the balance sheet of Sunrise Limited at 31 December

2007.
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2. (a) State three reasons for keeping control accounts.

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(b) The following information was extracted from the books of T.

Sakonda for the year ended 31 December 2007:
$
Sales ledger balances on 1 January 2007 22 600
Credit sales for the year 148 000
Cash sales for the year 42 000
Cheques received from debtors 135 300
Discounts allowed to debtors 7 100
Bad debts written off 2 400
Returns from credit customers 3 700
Provisions for bad debts on 1 January 2007 1 130

Required

Prepare T. Sakonda’s Sales Ledger Control account for the year

ended 31 December 2007.

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(c) The total of the balances in Sakonda’s sales ledger amounts to
$14 750, which does not agree with the closing balance in the
control account.

The following errors were then discovered:

1. A sales invoice for $4 500 had been completely omitted

from the books.
2. Cash sales of $1 450 had been recorded in the cash book
as cash received from debtors.
3. A balance of $600 was omitted from the list of debtors.
4. Interest on overdue accounts of $800 charged in the sales
ledger had not been recorded I the control account
5. Cash received from debtors entered in the control
account included $500 in respect of a debt which had
previously been written off.
6. The discount allowed column in the cash book had been
under-cast by $1 000.
7. A receipt of $3 300 from L. Sandako, a customer, had
been treated as a refund from J. Sandako, supplier.
8. A customer’s account in the sales ledger had been
undercast by $100.

Required

(i) Prepare an amended Sales Ledger Control account for the

year ended 31 December 2007.

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(ii) Reconcile the Sales ledger total with the new control account
balance.

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3. Tashinga Ltd uses straight-line depreciation on its motor vehicles.
Depreciation is provided from the date the vehicle is bought until the
date it is sold.

The following information was extracted from Tashinga Ltd’s fixed

asset register on 1 January 2006.

Vehicle number Date of purchase Cost Useful life Residual value

$ (Years) $
AAA 0473 1 January 2004 30 000 4 nil
AAI 8600 1 September 2004 40 000 6 4 000

During the year ended 31 December 2006 the following events occurred:

January 1 The estimated useful life of AAA 0473 was revised from 4
years to 5 years, with no residual value.

June 30 Vehicle number AAK 9530 with an expected useful life of 6

years and a residual value of $2 000 was purchased on credit
from Fuzzy and Wayne for $50 000 to replace AAI 8600. A
trade-in price of $30 000 was agreed for AAI 8600.

(a) (i) the Motor Vehicles account,

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(ii) the Provision for Depreciation of Motor Vehicles account,

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(iii) the Disposals account.

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(b) The accountant for Tashinga Ltd feels that the reducing balance
method is a better method of depreciating motor vehicles.

(i) State two advantages of the reducing balance method.

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(ii) Explain whether it is permissible for Tashinga Ltd to change

from the straight line method to the reducing balance method.

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4. A detergent is made by passing chemicals through two consecutive

processes.

The following details relate to Process 2 for September.

Transferred from Process 1 4 000 units, total cost $640 000

Materials per unit 4 litres
Cost of materials per litre $ 10
Direct labour per unit 2 ½ hours
Hourly labour rate $20
Overhead absorption rate $22 per direct labour hour
Opening work in progress nil

At the end of September, 1000 units were still in progress and they
were 100% complete as to materials but only 60% complete as to
labour and overheads.

Required

(a) Calculate the cost per unit of finished goods.

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(b) Calculate the value of closing work in progress.

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(c) Prepare the Process 2 Account for September.

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(d) (i) Distinguish between joint products and by-products.

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(ii) Explain the accounting treatment for by-products.

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