2024 Cambridge IAL Accounting (9706) 模擬試題連答案詳解

To find the total credit purchases, we reconstruct the Trade Payables Control Account: \(\text{Credit Purchases} = \text{Payments to suppliers} + \text{Discounts received} + \text{Returns outwards} + \text{Closing balance} - \text{Opening balance}\). Substituting the given values: \(\text{Credit Purchases} = \$84,300 + \$2,100 + \$1,800 + \$14,600 - \$12,400 = \$90,400\).

- Including payments to suppliers of $84,300 (1 mark)
- Adding discount received of $2,100 (1 mark)
- Adding returns outwards of $1,800 (1 mark)
- Adding closing trade payables of $14,600 (1 mark)
- Subtracting opening trade payables of $12,400 (1 mark)
- Correct final calculation of $90,400 (0.75 mark)

1. Split the profit into two 6-month periods:
- Period 1 (1 Jan - 30 June): \(\$120,000 \times 6/12 = \$60,000\)
- Period 2 (1 July - 31 Dec): \(\$120,000 \times 6/12 = \$60,000\)

2. Period 1 Appropriation:
- Total profit = \(\$60,000\)
- X's share (3/5) = \(\$36,000\)

3. Period 2 Appropriation:
- Total profit = \(\$60,000\)
- X's salary for 6 months = \(\$10,000 \times 6/12 = \$5,000\)
- Residual profit = \(\$60,000 - \$5,000 = \$55,000\)
- X's share of residual profit (1/2) = \(\$27,500\)
- X's total for Period 2 = \(\$5,000 \text{ (salary)} + \$27,500 = \$32,500\)

4. Total share of profit for X:
- \(\$36,000 + \$32,500 = \$68,500\)

- Split profit into two periods of $60,000 each (1 mark)
- X's share for Period 1 of $36,000 (1 mark)
- X's salary for Period 2 of $5,000 (1 mark)
- Period 2 residual profit of $55,000 (1 mark)
- X's share of Period 2 residual profit of $27,500 (1 mark)
- Final total for X of $68,500 (0.75 mark)

1. Calculate adjusted purchases: \(\text{Adjusted Purchases} = \text{Purchases} - \text{Drawings at cost} = \$145,000 - \$4,000 = \$141,000\).
2. Calculate cost of sales: \(\text{Cost of Sales} = \text{Sales} \times (1 - \text{Gross Profit Margin}) = \$180,000 \times 75\% = \$135,000\).
3. Calculate estimated closing inventory before fire: \(\text{Estimated Closing Inventory} = \text{Opening Inventory} + \text{Adjusted Purchases} - \text{Cost of Sales} = \$24,000 + \$141,000 - \$135,000 = \$30,000\).
4. Calculate cost of destroyed inventory: \(\text{Destroyed Inventory} = \text{Estimated Closing Inventory} - \text{Undamaged Inventory} = \$30,000 - \$18,500 = \$11,500\).

- Deducting drawings of goods from purchases to obtain adjusted purchases of $141,000 (1 mark)
- Calculating cost of sales as $135,000 (1 mark)
- Calculating total goods available for sale as $165,000 (1 mark)
- Calculating estimated closing inventory of $30,000 (1 mark)
- Subtracting undamaged inventory of $18,500 (1 mark)
- Correct final cost of destroyed inventory of $11,500 (0.75 mark)

1. Correct profit error and adjust P's share of profit:
- Reverse repairs expense: \(+\$8,000\)
- Charge depreciation on equipment: \(-\$800\) (10% of $8,000)
- Net increase in partnership profit: \(+\$7,200\)
- P's share of profit increase (50%): \(+\$3,600\)

2. Correct omitted interest on capital:
- Credit P's current account: \(+\$3,200\)

3. Correct drawings recording:
- Transfer drawings from capital to current account (debit current account): \(-\$1,500\)

4. Reconcile P's current account balance:
\(\text{Corrected Balance} = \$12,000 \text{ (draft)} + \$3,600 \text{ (profit adjustment)} + \$3,200 \text{ (interest)} - \$1,500 \text{ (drawings)} = \$17,300\).

- Calculate net profit increase of $7,200 (1 mark)
- Calculate P's share of profit increase of $3,600 (1 mark)
- Add omitted interest on capital of $3,200 (1 mark)
- Deduct drawings of $1,500 (1 mark)
- Start with draft current account balance of $12,000 (1 mark)
- Correct final current account balance of $17,300 (0.75 mark)

Benefits of introducing a computerised accounting system:
- Speed and efficiency: Once initial transaction data is inputted, financial statements (Income Statement, Statement of Financial Position, and Partnership Appropriation Account) can be generated automatically and instantly. This eliminates the manual effort of compiling incomplete records at the end of the financial year.
- Accuracy: Minimises human calculation and posting errors. The system automatically ensures that double entry is maintained, reducing trial balance discrepancies.
- Improved decision-making & credit control: Integration of sales and purchase ledgers allows for real-time tracking of trade receivables and trade payables, improving cash flow management and credit control.
- Data security and space: Cloud-based storage reduces physical storage requirements and protects financial data against physical damage (such as fire or flood) that could destroy paper-based incomplete records.

Drawbacks:
- Implementation and maintenance costs: Acquiring hardware, software licences, and paying recurring subscription fees can be a significant financial burden for a small partnership.
- Training and productivity disruption: Partners and any staff will need time and training to become proficient with the new software, leading to temporary drops in productivity.
- Security risks: System vulnerability to cyber-attacks, malware, unauthorized access, or loss of data due to system crashes if proper security protocols and backups are not implemented.
- Data entry errors ('Garbage in, garbage out'): If the original input of data is incorrect, the resulting financial statements and reports will still be inaccurate, meaning careful supervision is still required.

Recommendation/Conclusion:
Andrews and Bell should introduce the system. Although the initial setup costs and training time are significant, the long-term benefits of accurate, timely financial reporting and better business control outweigh these disadvantages, particularly if the partnership aims to grow.

Award marks as follows:

Benefits of computerised accounting system (Max 3 marks):
- 1 mark for each valid point explained (e.g., speed of statement preparation, automatic double-entry/fewer arithmetic errors, better credit control/ledger integration, cloud backups preventing loss of physical records).

Drawbacks of computerised accounting system (Max 3 marks):
- 1 mark for each valid point explained (e.g., high initial setup/software/subscription costs, training time and disruption, risk of cyber threats/malware/crashes, 'garbage in, garbage out' error risk).

Recommendation/Conclusion (1 mark):
- 1 mark for a clear, justified recommendation based on the balance of the points discussed.

1. Analysis of Errors:
* Error 1: Rent received of $1,200 debited to rent receivable account.
* Correct entry: Debit Cash $1,200, Credit Rent Receivable $1,200.
* Incorrect entry made: Debit Cash $1,200, Debit Rent Receivable $1,200.
* To correct this, the Rent Receivable account must be credited with $2,400 (reversing the $1,200 debit and adding the $1,200 credit).
* This adjustment increases rent receivable income, which increases profit by $2,400.
* Error 2: Equipment purchase of $8,000 entered in the purchases account.
* Capital expenditure was wrongly treated as revenue expenditure.
* Correcting entry: Debit Equipment $8,000, Credit Purchases $8,000. This increases profit by $8,000.
* However, depreciation must now be charged on this equipment: \( \$8,000 \times 20\% = \$1,600 \).
* This depreciation expense decreases profit by $1,600.
* Net impact of Error 2: \( +\$8,000 - \$1,600 = +\$6,400 \).

2. Calculation of Corrected Profit:
Draft profit: $45,000
Add: Correction of rent received error: $2,400
Add: Removal of equipment from purchases: $8,000
Less: Depreciation on equipment for the year: ($1,600)
Corrected profit: $53,800

1 mark for draft profit starting point / structure.
1 mark for adding $2,400 for rent received correction.
1 mark for adding $8,000 for removing capital purchase from revenue purchases.
1 mark for deducting $1,600 depreciation expense.
1 mark for correct final profit of $53,800.

1. Analyze the effect of each correction on the suspense account:
* Error 1: A payment of $750 to J. Amin was credited to his account as $570 instead of debited by $750.
* Correction: Debit J. Amin $1,320 (to correct the ledger), Credit Suspense $1,320.
* Impact on Suspense: Credit $1,320.
* Error 2: Sales journal undercast by $1,000.
* Correction: Credit Sales $1,000 (to correct sales account), Debit Suspense $1,000.
* Impact on Suspense: Debit $1,000.
* Error 3: Cash receipt of $450 for commission received not posted to commission received account.
* Correction: Credit Commission Received $450, Debit Suspense $450.
* Impact on Suspense: Debit $450.
* Error 4: Purchase of office stationery of $180 recorded in office equipment.
* Correction: Debit Stationery $180, Credit Office Equipment $180.
* Impact on Suspense: No effect (this is an error of principle and does not affect the trial balance agreement).

2. Reconstruct the Suspense Account:
Let the opening balance be X. Since the debit side of the trial balance exceeded the credit side, a credit balance in the suspense account was required to make the trial balance agree.
Debit entries in Suspense: Sales undercast ($1,000) + Commission received ($450) = $1,450.
Credit entries in Suspense: J. Amin ($1,320) + Opening balance (X).
Since the account must balance to nil: \( 1,000 + 450 = X + 1,320 \) which results in \( X = 130 \). Therefore, the opening balance of the suspense account is a credit balance of $130.

1 mark for identifying J. Amin correction requires $1,320 credit to suspense account.
1 mark for identifying Sales undercast correction requires $1,000 debit to suspense account.
1 mark for identifying Commission received correction requires $450 debit to suspense account.
1 mark for stating that stationery error does not affect the suspense account.
1 mark for final correct opening balance of $130 credit.

A compensating error does not affect the trial balance because the mathematical equality of debits and credits is maintained. An error that decreases or increases the debit side is exactly offset by an unrelated error of the same amount that decreases or increases the credit side (or vice versa). Example: 1) Rent expense account is over-debited by \( \\$100 \). 2) Commission received account is over-credited by \( \\$100 \). Because both debits and credits are overstated by \( \\$100 \), the trial balance remains in agreement.

1 mark for explaining that the errors are equal and on opposite sides, thus cancelling each other out and keeping total debits equal to total credits. 0.5 marks for first error example. 0.5 marks for second error example on the opposite side. 0.5 marks for stating how they cancel each other out.

Error of commission: Entering a transaction in the wrong ledger account of the same type (e.g., debiting trade receiver X instead of trade receiver Y). Error of principle: Entering a transaction in the wrong class of account, violating accounting principles (e.g., entering capital expenditure in a revenue expense account). Neither error affects the trial balance agreement because both debit and credit entries were fully recorded with equal amounts; hence, no suspense account is needed for correction.

0.75 marks for definition/example of error of commission. 0.75 marks for definition/example of error of principle. 0.5 marks for stating that neither requires a suspense account. 0.5 marks for explaining that they do not affect the agreement of the trial balance because equal debits and credits were made.

### Statement of Changes in Equity for the year ended 31 December 2023:

| Details | Ordinary Share Capital ($) | Share Premium ($) | General Reserve ($) | Retained Earnings ($) | Total ($) |
| :--- | :---: | :---: | :---: | :---: | :---: |
| Balances at 1 Jan 2023 | 400,000 | 80,000 | 50,000 | 185,000 | 715,000 |
| Dividend paid | - | - | - | (40,000) | (40,000) |
| Bonus issue (1-for-4) | 100,000 | (80,000) | (20,000) | - | - |
| Share issue (1 Oct) | 50,000 | 30,000 | - | - | 80,000 |
| Profit for the year | - | - | - | 145,000 | 145,000 |
| Transfer to reserve | - | - | 30,000 | (30,000) | - |
| **Balances at 31 Dec 2023** | **550,000** | **30,000** | **60,000** | **260,000** | **900,000** |

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### **(a) Calculations:**

**(i) Share premium closing balance:**
* Opening balance: $80,000
* Less: Utilisation for bonus issue: $(80,000)
* Add: Premium on new share issue \(100,000 \times ($0.80 - $0.50) = $30,000\)
* **Closing balance: $30,000**

**(ii) Retained earnings closing balance:**
* Opening balance: $185,000
* Less: Dividend paid \(800,000 \text{ shares} \times $0.05 = $(40,000)\)
* Add: Profit for the year: $145,000
* Less: Transfer to general reserve: $(30,000)
* **Closing balance: $260,000**

**(iii) Total equity closing balance:**
* Sum of components: \($550,000 + $30,000 + $60,000 + $260,000 = $900,000\)
* *Alternative calculation (Horizontal reconciliation):*
* Opening total: $715,000
* Less: Dividend paid: $(40,000)
* Add: Cash from share issue: $80,000
* Add: Profit for the year: $145,000
* **Closing total: $900,000**

---

### **(b) Evaluation of source of finance:**
* **Arguments for Public Share Issue (instead of Rights Issue):** It allows new investors to buy into the company, widening the ownership base. It also avoids putting financial pressure on existing shareholders to find extra capital to maintain their stake.
* **Arguments for Rights Issue:** Usually cheaper and quicker to organize because it avoids high administrative, legal, and underwriting fees associated with public issues. It does not dilute the voting control or ownership percentages of the existing shareholders.

### **Part (a) (6 marks):**
* **(i) Share premium:** **2 marks**
* 1 mark for correctly deducting $80,000 for the bonus issue.
* 1 mark for adding $30,000 for the premium on the new share issue.
* **(ii) Retained earnings:** **2 marks**
* 0.5 marks for dividend calculation of $40,000.
* 0.5 marks for adding profit of $145,000.
* 0.5 marks for deducting the transfer of $30,000.
* 0.5 marks for the correct final balance of $260,000.
* **(iii) Total Equity:** **2 marks**
* 1 mark for correctly calculating the net cash proceeds of $80,000 from the share issue.
* 1 mark for the correct final total of $900,000 (accept OF/own figure from previous sub-parts).

### **Part (b) (2 marks):**
* **1 mark** for discussing a valid benefit of a rights issue (e.g., lower flotation costs, avoids dilution of control).
* **1 mark** for discussing a valid benefit of a public issue (e.g., widens ownership base, doesn't put financial pressure on existing shareholders).

When a company makes a rights issue of ordinary shares at a premium:

1. **Ordinary Share Capital Column**: This column is increased by the nominal value of the new shares issued (number of shares \(\times\) nominal value per share).
2. **Share Premium Column**: This column is increased by the premium value (number of shares \(\times\) (issue price - nominal value)).
3. **Total Equity Column**: The total column increases by the total cash proceeds received (number of shares \(\times\) issue price), which is the sum of the nominal value and the premium.
4. **Other Reserves (e.g., Retained Earnings, Revaluation Reserve)**: These remain unchanged as this is an external financing transaction with shareholders, not a transfer between internal equity reserves.

1 mark: For explaining that the Ordinary Share Capital column increases by the nominal value of the shares issued.
1 mark: For explaining that the Share Premium column increases by the premium amount (issue price less nominal value).
1 mark: For explaining that the Total Equity column increases by the total cash proceeds (nominal value + premium).
0.5 marks: For stating that other reserves (such as Retained Earnings) are not directly affected by this transaction.

**Evaluation of Option 1 (8% Non-Cumulative Preference Shares):**
* **Financial Risk:** Non-cumulative preference dividends are discretionary. If the company experiences a poor trading year, it can choose not to pay the dividend without facing legal action or liquidation risk. This provides financial safety.
* **Cost:** Dividends are paid out of post-tax profits and are not tax-deductible, making them more expensive than debt.
* **Impact on Gearing:** Preference shares are classified as equity (unless redeemable), so they do not increase the debt-to-equity ratio, maintaining a stronger balance sheet.

**Evaluation of Option 2 (8% Long-term Bank Loan):**
* **Financial Risk:** Interest payments are compulsory regardless of profitability. Failure to meet payments can lead to default and foreclosure, raising the company's financial risk (gearing).
* **Cost:** Interest is tax-deductible. The effective cost of the loan is \(8\% \times (1 - \text{tax rate})\), which is lower than the 8% dividend rate of the preference shares. This leaves more residual profits available for ordinary shareholders.
* **Repayment:** Unlike preference shares (which represent permanent capital), a bank loan must be repaid at maturity, which requires future cash planning.

**Recommendation:**
If the company has highly stable and predictable cash flows, Option 2 (Bank Loan) is recommended as the tax shield maximizes the earnings available to ordinary shareholders. If cash flows are volatile, Option 1 (Preference Shares) is preferred to avoid insolvency risk.

1 mark: For evaluating preference shares (non-cumulative nature reduces financial risk, but dividends are not tax-deductible).
1 mark: For evaluating the bank loan (interest is tax-deductible, reducing effective cost, but interest payments are legally binding, increasing financial risk/gearing).
1 mark: For comparing the impact on ordinary shareholders (e.g., lower cost of debt leaves more profits for ordinary dividends, vs safety of preference shares preserving equity stability).
0.5 marks: For providing a clear, justified recommendation based on cash flow stability.

To find the net financial advantage, we first calculate the relevant cost of making one unit of Beta: Direct materials = $9.00, Direct labor = $5.00, Variable overheads = $3.00, and Avoidable fixed overheads = $6.00 \\times 60\\% = $3.60. Total relevant cost to make = $9.00 + $5.00 + $3.00 + $3.60 = $20.60. The cost to buy from the external supplier is $19.50 per unit. The net savings per unit by outsourcing is $20.60 - $19.50 = $1.10. For 10,000 units, the total net financial advantage of outsourcing is 10,000 units \\times $1.10 = $11,000.

1 mark for calculating avoidable fixed overhead ($3.60 per unit or $36,000 total). 1 mark for calculating total relevant cost to make ($20.60 per unit or $206,000 total). 1.2 marks for final net financial advantage of $11,000.

First, calculate the contribution per unit: Alpha = $50 - $26 = $24; Gamma = $100 - $55 = $45. Next, calculate the contribution per machine hour: Alpha = $24 / 2 hours = $12 per hour; Gamma = $45 / 5 hours = $9 per hour. Since Alpha has a higher contribution per hour, it is ranked 1st and Gamma is ranked 2nd. Allocate the available 5,500 hours: Produce the maximum demand of Alpha first: 1,500 units \\times 2 hours = 3,000 hours. This leaves 5,500 - 3,000 = 2,500 hours for Gamma. Gamma units produced = 2,500 hours / 5 hours = 500 units. Calculate the total contribution: Alpha contribution = 1,500 units \\times $24 = $36,000. Gamma contribution = 500 units \\times $45 = $22,500. Total maximum contribution = $36,000 + $22,500 = $58,500.

1 mark for contribution per machine hour and ranking (Alpha $12, Gamma $9). 1 mark for correct production allocation (1,500 Alpha units, 500 Gamma units). 1.2 marks for calculating total contribution of $58,500.

We determine the relevant costs as follows: 1) Materials: 500 units \\times 2 kg = 1,000 kg needed. Since it is in stock with no other use, the relevant cost is the opportunity cost (scrap value) = 1,000 kg \\times $1.50 = $1,500. 2) Labour: 500 units \\times 3 hours = 1,500 hours needed. 600 hours of idle time are already paid (relevant cost = $0). The remaining 900 hours must be paid at overtime rate = 900 hours \times $18 = $16,200. Total relevant labor cost = $16,200. 3) Variable overheads: 500 units \\times $3 = $1,500. 4) Fixed overheads: $0 because allocated fixed costs are irrelevant. Total minimum price (sum of relevant costs) = $1,500 + $16,200 + $1,500 = $19,200.

1 mark for identifying relevant cost of materials as scrap value ($1,500). 1 mark for calculating relevant labor cost (900 hours at overtime rate = $16,200). 1.2 marks for the correct minimum price of $19,200.

First, find the spare capacity: 20,000 maximum capacity - 18,000 current sales = 2,000 units of spare capacity. To fulfill the 3,000 units special order, the factory must use the 2,000 units of spare capacity and displace 1,000 units of regular sales (3,000 - 2,000 = 1,000 units). Calculate contribution from the special order: 3,000 units \\times ($28 - $20) = $24,000. Calculate contribution lost from regular sales: 1,000 units \times ($35 - $20) = $15,000. The net increase in profit is the special order contribution minus the lost regular contribution: $24,000 - $15,000 = $9,000.

1 mark for calculating special order contribution ($24,000). 1 mark for calculating lost contribution from regular sales ($15,000). 1.2 marks for calculating the net profit increase of $9,000.

Calculate the contribution margin of Department C: Revenue of $120,000 minus Variable expenses of $85,000 = $35,000. Deduct the avoidable fixed expenses of $15,000 to find the segment margin: $35,000 - $15,000 = $20,000. This segment margin of $20,000 is the positive contribution Department C makes towards covering the company's unavoidable fixed expenses. If Department C is discontinued, this $20,000 contribution is lost, while the unavoidable fixed expenses of $30,000 will still continue. Therefore, the total company profit will decrease by $20,000.

1 mark for calculating Department C's contribution margin ($35,000). 1 mark for calculating Department C's segment margin ($20,000). 1.2 marks for concluding that company profit decreases by $20,000.

To make the decision, we compare the relevant cost of making with the cost of buying:

1. **Relevant Cost of Making (per unit):**
- Direct materials: $3.00
- Direct labour: $2.50
- Variable overhead: $1.50
- Avoidable fixed overhead: $0.50
Total relevant cost of making: $3.00 + $2.50 + $1.50 + $0.50 = $7.50 per unit.

2. **Cost of Buying (per unit):**
- Purchase price from external supplier: $7.50 per unit.

3. **Financial Impact:**
- Total cost to make 10,000 units: 10,000 \\times $7.50 = $75,000.
- Total cost to buy 10,000 units: 10,000 \\times $7.50 = $75,000.
- Unavoidable fixed overhead of $1.50 per unit ($15,000 in total) will be incurred in both cases, so it is irrelevant.

4. **Conclusion:**
Financially, there is no difference. The company should consider qualitative factors such as product quality, supplier lead times, and the alternative use of the production facility.

- Calculation of relevant cost of making per unit ($7.50): 1.5 marks
- Comparison with the buying cost of $7.50: 1.0 mark
- Statement that the decision is financially neutral (totaling $75,000 for both): 1.0 mark
- Explanation of at least one qualitative factor (e.g., quality, reliability of delivery, or impact on labor force): 1.1 marks

To optimize profit under a limiting factor, Delta plc must rank products based on their contribution per machine hour.

1. **Contribution per machine hour:**
- Product X: $12 / 2 \text{ hours} = $6 \text{ per machine hour}
- Product Y: $15 / 3 \text{ hours} = $5 \text{ per machine hour}

2. **Ranking:**
- Product X is ranked 1st as it generates a higher contribution per hour of the limiting factor.
- Product Y is ranked 2nd.

3. **Optimal Allocation of Machine Hours:**
- Since demand is unlimited and Product X is more profitable per hour, all 4,000 available machine hours should be allocated to Product X.
- Units of Product X to produce: 4,000 \text{ hours} / 2 \text{ hours per unit} = 2,000 \text{ units}.
- Units of Product Y to produce: 0 \text{ units}.

4. **Total Contribution:**
- 2,000 \text{ units} \\times $12 = $24,000.

- Calculate contribution per machine hour for Product X ($6.00): 1.0 mark
- Calculate contribution per machine hour for Product Y ($5.00): 1.0 mark
- Rank products correctly with explanation (Product X is 1st): 1.0 mark
- Determine optimal allocation (all 4,000 hours to Product X, producing 2,000 units): 1.0 mark
- Calculate maximum total contribution ($24,000): 0.6 marks

To assess the viability of the special order, we evaluate both capacity and incremental contribution:

1. **Capacity Analysis:**
- Current production: 8,000 units represents 80% capacity.
- Full capacity: 8,000 / 0.80 = 10,000 units.
- Spare capacity: 10,000 - 8,000 = 2,000 units.
- The special order of 1,500 units is within the spare capacity, meaning regular sales will not be displaced.

2. **Relevant Contribution Analysis (per unit):**
- Selling price of special order: $18.00
- Less: Variable production cost: ($15.00)
- Less: Additional delivery cost: ($1.50)
- Contribution per unit: $18.00 - $15.00 - $1.50 = $1.50 per unit.

3. **Total Profit Impact:**
- Total additional profit: 1,500 units \times $1.50 = $2,250.

4. **Conclusion:**
- Gamma Ltd should accept the special order as it increases total profit by $2,250. However, they should ensure that this lower pricing does not lead to negative reactions from domestic customers or expectations of long-term price cuts.

- Analyze capacity and confirm spare capacity is sufficient (2,000 units spare > 1,500 units order): 1.0 mark
- Calculate special order contribution per unit ($1.50): 1.5 marks
- Calculate total increase in profit ($2,250): 1.0 mark
- Discuss qualitative factors (e.g., impact on regular pricing or customer relationships): 1.1 marks