Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/22
Paper 2 Structured Questions May/June 2016
MARK SCHEME
Maximum Mark: 90

Published

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.

Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report
for Teachers.

Cambridge will not enter into discussions about these mark schemes.
®
Cambridge is publishing the mark schemes for the May/June 2016 series for most Cambridge IGCSE ,
Cambridge International A and AS Level components and some Cambridge O Level components.

® IGCSE is the registered trademark of Cambridge International Examinations.

This document consists of 7 printed pages.

© UCLES 2016 [Turn over

 Page 2 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – May/June 2016 9706 22

1 (a) (i) Sales = 96 300 + 200 (1) + 2250 – 3750 = 95 000 (1) [2]

(ii) Purchases = 73540 + 2480 (1) + 1790 – 3460 = 74 350 (1) [2]

(iii) Jing
Income Statement for the year ended 30 April 2015

$ $ $
Revenue 95 000
Opening inventory 15000
Purchases 74 350
Purchases returns 2 480 (1) 71 870
Carriage inwards 630 (1)
87 500
Closing inventory 11500
Cost of sales 76 000 (1) of
Gross profit 19 000 (1) of
Less:
Rent (5500 + 500 – 400) 5 600 (1)
Carriage outwards 950
Other operating expenses 95
Electricity (345 – 35 (1) + 40 (1)) 350 (2)
Irrecoverable debts 200 (1)
Depreciation – equipment 243 (2) 7 438
Profit for the year 11 562 (1) of
[11]

© Cambridge International Examinations 2016

Page 4 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – May/June 2016 9706 22

© Cambridge International Examinations 2016

Page 5 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – May/June 2016 9706 22

2 (a) Depreciation is the allocation of the cost of a (non-current) asset over its expected working
life. (1)
The allocation of the cost of using the asset over the year (1) [1]

(b) wear and tear

obsolescence
technological advance
passage of time
depletion
economic reasons
Any three points – Max 3 marks [3]

(c) (i) Motor vehicles at cost account

2014 $ 2015 $
Jun 1 Balance b/d 152 000 Mar 1 Motor vehicle disposal 152000
2015
Mar 1 Loan 106 000 (1) May 31 Balance c/d 190 000
Motor vehicle disposal 84000 (1)
342 000 342 000
Jun 1 Balance b/d 190 000
[2]

(ii) Motor vehicles provision for depreciation account

2014 $ 2014 $
May 31 Balance c/d 30400 May 31 Income statement 30400 (1)

30 400 30 400
June 1 Balance b/d 30 400
2015 2015
May 31 Motor vehicle disposal 48 640 (1of) May 31 Income statement 18240 (1)
Balance c/d 9 500 Income statement 9500 (1)
58 140 58 140
June 1 Balance b/d 9 500 (1of)
Marker note
Dates must be correct to award marks [5]

(iii) Loss on disposal 152 000 – (48 640 + 84 000) = 19 360 (1of) [1]

© Cambridge International Examinations 2016

Page 6 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – May/June 2016 9706 22

(d) Income statement:

Loss on sale increases (1) Loan interest increases (1) Profit decreases (1)

Max 2

Statement of financial position:

Amount of loan outstanding is increased (1) Owner’s capital is reduced (1)

3(a) Workings:

Per kilo Issues Total

Date Kilos
$ $ $

March 1 Opening balance 1500 1.90

3 Receipts 3500 1.92

5 Issues 3000 1500 × 1.90 2850

1500 × 1.92 2880
5730

10 Receipts 2000 1.95

17 Receipts 1500 2.00

23 Issues 4500 2000 × 1.92 3840

2000 × 1.95 3900
500 × 2.00 1000
8740

31 Closing balance 1000 × 2.00 2000

4(a)(i) 2850 (1) + 2880 (1) = 5730 2

4(a)(ii) 3840 (1) + 3900 (1) + 1000 (1) = 8740 3

4(a)(iii) 2000 (1) 1

 9706/22 Cambridge International AS/A Level – Mark Scheme May/June 2019
PUBLISHED
Question Answer Marks

3(b) Easy to calculate (1) 2

Inventory value is closer to current market value (1)

An accepted method of valuing inventory for the financial statements (1)

Max 2 marks

Accept other valid points.

3(c) Service cost 6

Production cost centres
centre
Total
$ Machining Assembly Stores
$ $ $

Depreciation 9 760 6 344 1 952 1 464 (1) row

Heat and Light 13 850 8 310 4 155 1 385 (1) row

Machinery maintenance 6 500 5 200 1 300 - (1) row

Total overheads 19 854 7 407 2 849

apportioned
Re-apportionment of stores 2 137  712 (2 849) (1) row

Total overhead cost 21 991 (1) OF 8 119 (1) OF

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 9706/22 Cambridge International AS/A Level – Mark Scheme May/June 2019
PUBLISHED
Question Answer Marks

3(d) Machining 4
Overhead cost $21 991
Machine hours 13 400 = $1.64 (1) OF per machine hour (1)

Assembly
Overhead cost $8 119
Labour hours 6 300 = $1.29 (1) OF per direct labour hour (1)
3(e) $ 7
Direct materials (3 kilos × $2.00 ) 6.00 (1)
Direct labour (2.5 hours × $4) 10.00 (1)
Overheads (machining 1.5 hours × $ 1.64) 2.46 (1) OF
Overheads (assembly 2 hours × $1.29 ) 2.58 (1) OF
Cost per unit 21.04
× 200 units
Total cost 4 208 (1) OF
Mark-up/profit (25%) 1 052 (1) OF
Total selling price 5 260 (1) OF

OR $
Direct materials 1 200 (1)
Direct labour 2 000 (1)
Overheads 492 (1) OF
Overheads 516 (1) OF
Total cost 4 208 (1) OF
Mark-up/profit (25%) 1 052 (1) OF
Total selling price 5 260 (1) OF

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 9706/22 Cambridge International AS/A Level – Mark Scheme
PUBLISHED
Question Answer

3(f) The offer still provides a positive contribution/generates profit (1)

This will result in increased overall profits for the business (1) albeit the offer price will not achieve
(1)

The order will make use of existing spare capacity (1) which could be used to manufacture goods w

Is this a one-off order or will the customer expect future orders at the same price (1). Other custom
at a reduced price (1) , and it could cause ill feeling with other customers (1)

Decision (1)

(1 mark) × any 4 points – Max 4 for comments

4 (a) $ $ 17
Revenue 563 800
Cost of sales
Opening inventory 62 400
Purchases 268 200
330 600
Closing inventory 70 300 260 300 (1)
Gross profit 303 500 (1)OF
Deduct: expenses
Directors remuneration 53 200 (1)
Office costs W1 41 070 (4)
Property costs W2 22 000 (3)
Selling and distribution costs W3 73 500 (4) 189 770
Profit from operations 113 730 (1)OF
Finance costs 5 920 (1)

Profit for the year 107 810 1OF

Workings
W1 Office costs
W2 Property costs
W3 Selling and distribution costs
Depreciation Buildings
Depreciation Fixtures & Fittings
Depreciation Motor vehicles
$18 330 + $1920 (1) + $19 400 (1) + $1420 (1) = $41 070 (1)OF
$21 940 + $1300 (1) – $1240 (1) = $22 000 (1)OF
$36 120 + $5600 (1) + $29 100 (1) + $2680 (1) = $73 500 (1)OF
$65 000 × 2% = $1300
($18 110 – $5310) × 15% = $1920
($41 600 – $19 200) × 25% = $5600

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 9706/22 Cambridge International AS/A Level – Mark Scheme
PUBLISHED
Question Answer

4(b) $
Current assets
Inventory 70 300
Trade and other receivables W1 70 820 (2)
Cash and cash equivalents W2 10 210 (2)

Total 151 330

Workings
W1 Trade and other receivables $71 000 – $1420 (1) + $1240 (1) = $70 820
W2 Cash and cash equivalents $14 040 + $26 400 (1) – $50 000 (1) + $650 = $10 210
Award 1 mark for presentation / labels

4(c) Allowing for depreciation:

To comply with the matching / accruals concept (1)

Accounts for that part of the asset used up in the accounting period (1)
The value of assets falls due to wear and tear, obsolescence, technological change, etc. (1)
Avoids overstating the net assets / non-current assets of the business (1)
Ensures that the statement of financial position shows a true and fair view (1)

Max 4

4(d) Differences:

Ordinary shares carry voting rights (1), preference shares do not carry voting rights (1)
Ordinary shareholders receive a variable dividend (1), preference shareholders receive a fixed rate
of dividend (1)
Ordinary share dividends are discretionary (1), preference share dividend is mandatory if sufficien
Preference shareholders receive dividend before (1) ordinary shareholders (1)
In the event of liquidation preference shareholders are repaid their capital before (1) ordinary shar

Max 4
© Cambridge International Examinations 2016