9706 Accounting: MARK SCHEME For The May/June 2014 Series

CAMBRIDGE INTERNATIONAL EXAMINATIONS
GCE Advanced Subsidiary Level and GCE Advanced Level
MARK SCHEME for the May/June 2014 series
9706 ACCOUNTING
9706/22 Paper 2 (Structured Questions – Core),
maximum raw mark 90
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 2014 series for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level components and some Ordinary Level components.
Page 2 Mark Scheme Syllabus Paper
GCE AS/A LEVEL – May/June 2014 9706 22
1 (a) Sales ledger control account

$ $
1 Jan Balance b/d 33 000 1 Jan–31 Dec Bank 166 660 (1)
Discount allowed 8 600 (1)
Returns inwards 4 200 (1)
Bad debts 2 200 (1)
1 Jan–31 Dec Sales 169 492 (1of) 31 Dec Balance c/d 20 832
202 492 202 492
2014
1 Jan Balance b/d 20 832 (1) [6]
(b) Purchases ledger control account

$ $
1 Jan– Bank 155 690 (1) 1 Jan Balance b/d 18 200
. 31 Dec Discount rec 8 200 (1)
Returns out 4 500 (1) 1 Jan–31 Dec
Balance c/d 14 930 Purchases 165 120 (1of)
183 320 183 320
2014
1 Jan Balance b/d 14 930 (1of)
[5]
(c) Expenses account

$ $
1 Jan Bank 26 100 (1) 1 Jan Balance b/d 5 600 (1)
31 Dec Income statement 18 780 (1)
Balance c/d 1 720
26 100 26 100
2014
1 Jan Balance b/d 1 720 (1) [4]
(d) Charles Altas’s Income Statement for the year ended 31 December 2013
$ $ $
Revenue (169 492 (1of) + 30 000 (1) + 29 000 (1)) 228 492
less sales returns 4 200 (1)
224 292
less cost of sales
Inventory at 1 January 2013 29 600 (1)
Purchases 165 120 (1of)
less returns 4 500 (1) 160 620
190 220
Inventory at 31 December 2013 35 200 (1) 155 020

Gross profit 69 272
add Discount received 8 200 (1)
77 472
Less Discount allowed 8 600 (1)
Expenses 18 780 (1of)
Wages 10 000 (1)
Bad debts 2 200 (1)
Depreciation (60 + 20 – 74) 6 000 (2) 45 580
Profit for the year 31 892 [15]
[Total: 30]
© Cambridge International Examinations 2014

2 (a) Dr Cr
$ $
(i) Equipment 14 000 (1)
Arcadia Limited 14 000 (1) [2]
(ii) Income Statement (1) 51 200 (1)

Provision for depreciation – Fittings & Fixtures (1) 51 200 (1) [4]
(iii) Income Statement (1) 6 100 (1)

Provision for depreciation – Equipment (1) 6 100 (1) [4]
(iv) Disposals 8 000 (1)

Equipment 8 000 (1)
Bank 6 000 (1)
Disposals 6 000 (1)
Provision for depreciation – Equipment 2 600 (1)
Disposal 2 600 (1)
Disposal 600 (1)
Income Statement 600 (1) [8]
(b) (i) It is used to record the double entry (1) of non-routine transactions (1) [2]
(ii) Award 1 mark per correct example:

correction of errors, opening entries, writing off bad debts, sale of non-current assets,
bad debt provision, depreciation, transfers etc.
(maximum 2 marks) [2]
(c) (i) Award 1 mark (max) for a correct example; prudence, matching or consistency [1]
(ii) Straight line depreciation is easy to calculate (1) and therefore there is less chance of
errors (1) whereas reducing (diminishing) balance depreciation is more complex.
Reducing (diminishing) balance depreciation is appropriate for assets that have a

heavier fall in value in earlier years (1) and is therefore appropriate for equipment (1).
Reducing (diminishing) balance depreciation has a higher depreciation charge in earlier
years (1) which more accurately reflects the profit (1) – prudence (1) and matches costs
to revenues (1) – matching / accruals (1). Straight-line depreciation is an equal charge
each year (1)
As equipment gets older maintenance costs increase (1) and with reducing (diminishing)
balance method depreciation will decrease (1) therefore ensuring a more even charge
(1) over the life of the asset.
(Maximum 7 marks) [7]
[Total: 30]

3 (a) $
Direct materials 90 000 (1)
Direct labour 67 500 (1)
Variable production overhead 45 000 (1)
Marginal cost of 15 000 units 202 500
Marginal cost of 1 unit = $202 500 / 15 000 = $13.50 (1)
Alternative answer
Direct materials 6.00 (1)

Direct labour 4.50 (1)
Variable production overhead 3.00 (1)
Marginal cost 13.50 (1) [4]
(b) $
Direct materials 90 000 (1)
Direct labour 67 500 (1)
Variable production overhead 45 000 (1)
Fixed production overhead 60 000 (1)
Absorption cost of 15 000 units 262 500
Absorption cost of 1 unit = $262 500 / 15 000 = $17.50 (1)
Alternative answer
Direct materials 6.00 (1)

Direct labour 4.50 (1)
Variable production overhead
Fixed production overhead 3.00 (1)
4.00 (1)
Marginal cost 13.50 (1) [5]
(c) $
Revenue – 13 000 × $26 338 000 (1)
Variable cost of sales – 13 000 × $13.50 (175 500) (1of)
Contribution 162 500 (1of)
Fixed production overhead (60 000) (1)
Other fixed overheads (25 000) (1)
Profit 77 500 (1of) [6]
(d) $
Revenue – 13 000 × $26 338 000 (1)
Cost of sales – 13 000 × £17.50 (227 500) (1of)
Gross profit 110 500 (1of)
Other fixed overheads (25 000) (1)
Profit 85 500 (1of) [5]

(e) $
Marginal cost profit 77 500
Inventory (1) – 2 000 units @ $4 per unit (1) 8 000
Absorption cost profit 85 500 [2]
(f) In the marginal cost statement, inventory is valued at variable cost (1) resulting in a higher
cost of sales (1) and fixed costs are treated as a period cost (1).
In the absorption cost statement, the inventory value includes an element of fixed overhead
(1) resulting in a lower cost of sales (1). Some of the fixed overheads are carried forward to
the next accounting period (1).
(Maximum 4 marks) [4]
(g) The marginal cost of producing one unit of Esprit will reduce (1) resulting in an increase in
contribution (1). The profit for the year will stay the same (1) because fixed production
overheads will increase (1). [4]
[Total: 30]

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CAMBRIDGE INTERNATIONAL EXAMINATIONS

GCE Advanced Subsidiary Level and GCE Advanced Level

MARK SCHEME for the May/June 2014 series

1 (a) Sales ledger control account

(b) Purchases ledger control account

(c) Expenses account

Inventory at 31 December 2013 35 200 (1) 155 020

© Cambridge International Examinations 2014

(ii) Income Statement (1) 51 200 (1)

(iii) Income Statement (1) 6 100 (1)

(iv) Disposals 8 000 (1)

(ii) Award 1 mark per correct example:

Reducing (diminishing) balance depreciation is appropriate for assets that have a

(Maximum 7 marks) [7]

© Cambridge International Examinations 2014

Marginal cost of 1 unit = $202 500 / 15 000 = $13.50 (1)

Direct materials 6.00 (1)

Absorption cost of 1 unit = $262 500 / 15 000 = $17.50 (1)

Direct materials 6.00 (1)

© Cambridge International Examinations 2014

(Maximum 4 marks) [4]

© Cambridge International Examinations 2014

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