3

Source B for Question 2

K plc’s financial year ends on 31 December. An inexperienced bookkeeper had prepared a draft
statement of cash flows for the year ended 31 December 2023 by only comparing the balance of each
item in the statements of financial position for the years 2022 and 2023.

Draft statement of cash flows for the year ended 31 December 2023
$
Increase in non-current assets at cost (33 000)
Increase in provision for depreciation 22 800
Decrease in inventory 2 000
Increase in trade receivables (7 000)
Decrease in trade payables (1 500)
Increase in accrued loan interest 600
Increase in ordinary shares 20 000
Increase in share premium 5 000
Increase in retained earnings 9 600
Increase in 8% loan 10 000
Net increase in cash and cash equivalents 28 500
Cash and cash equivalents at the start of the year 38 900
Cash and cash equivalents at the end of the year 67 400

Information for the year ended 31 December 2023 is also available.

1 The following balances were on 1 January 2023.

$
Non-current assets
cost 325 000
provision for depreciation 195 000
Ordinary shares 180 000
Share premium 6 000
Retained earnings 25 100
8% Loan 20 000
Accrued loan interest 800

2 A new item of office equipment was purchased to replace equipment which was purchased in
2021. The equipment disposed of had a carrying value of $9000 at the date of disposal and was
sold for $6200. It is the company policy to depreciate office equipment at 20% per annum using
the straight-line method. A full year’s depreciation is charged in the year of purchase but none is
charged in the year of disposal.

3 Loan interest, $1600, was paid.

4 Dividends, $22 000, were paid.

© UCLES 2024 9706/32/INSERT/F/M/24 [Turn over

 4

Source C for Question 3

G Limited manufactures and imports home appliances for local sales. Manufactured goods are for low
income customers, while imported goods are for high income customers.

Information at 31 December 2023 extracted from the books of account was as follows:

$
Inventory at 1 January 2023
Direct materials 46 000
Work in progress 21 000
Finished goods
Imported 36 000
Manufactured (at transfer price) 56 400
Non-current assets at cost
Machinery 225 000
Office equipment 124 000
Provision for depreciation at 1 January 2023
Machinery 107 000
Office equipment 74 000
Revenue
Imported goods 378 400
Manufactured goods 498 000
Purchases
Imported goods 226 000
Direct materials 133 000
Carriage inwards
Imported goods 4 200
Direct materials 6 900
Direct wages 148 000
Manufacturing expenses 45 400
Office expenses 204 000

Further information is also available.

1 G Limited applies a constant rate of factory profit of 20%.

2 Inventory at 31 December 2023 was as follows:

$
Direct materials 36 200
Work in progress 25 800
Finished goods
Imported 39 600
Manufactured (at transfer price) 51 600

3 Machinery and office equipment are depreciated at the rate of 15% per annum using the reducing
balance method.

© UCLES 2024 9706/32/INSERT/F/M/24

 5

2 Read Source B in the insert.

(a) Explain one reason why the information in the statement of cash flows of a business is
important to its shareholders.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(b) Calculate the profit for the year for 2023.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2024 9706/32/F/M/24 [Turn over

 6

(c) Prepare the statement of cash flows for the year ended 31 December 2023 in accordance
with IAS7.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
© UCLES 2024 9706/32/F/M/24
 7

Workings:

[14]
© UCLES 2024 9706/32/F/M/24 [Turn over
 8

(d) Analyse the changes in the cash position of K plc during the year 2023.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [6]

[Total: 25]

© UCLES 2024 9706/32/F/M/24

 9

3 Read Source C in the insert.

(a) Prepare the manufacturing account for the year ended 31 December 2023.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2024 9706/32/F/M/24 [Turn over

 10

Additional information

The profit for the year before office expenses and depreciation of office equipment amounted to
$289 800.

(b) Prepare a statement to calculate, showing clearly the cost of sales, how much of this amount
was derived from:

(i) importing

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [3]

(ii) manufacturing.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [5]

© UCLES 2024 9706/32/F/M/24

 11

(c) Calculate the profit for the year ended 31 December 2023.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

Additional information

A director is of the opinion that the profit for the year for 2023 can be improved by increasing the
rate of factory profit to 25%.

(d) Explain the impact on the profit for the year for 2023 of increasing the rate of factory profit to
25% in 2023.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2024 9706/32/F/M/24 [Turn over

 12

Additional information

G Limited is experiencing serious increases in costs of the imported goods and has increased the
selling price. Many high-income customers are complaining about these increased prices. The
directors are considering manufacturing home appliances for these customers to keep the prices
low and maintain their profits.

(e) Advise the directors whether or not they should manufacture home appliances for the
high-income customers to maintain the profits. Justify your answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 25]

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2024 9706/32/F/M/24