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TEST CODE

FORM TP 2015124 MAY/JI.]NE 2015

CARIBBEAN EXAMINATIONS COUNCIL

CARIBBEAN ADVANCED PROFICIENCY EXAMINATION@
ACCOUNTING
UNITI - PaPer02

{ 2 hours and 45 minates

I
u
22M.AY 2015 (a.m.)

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

1. This paper comprises THREE questions'

2. EACH question is worth 35 marks.

3. ALL questions are COMPULSORY.

4. Begin EACH answer on a new Page.

5. You may use a silent, non-programmable calculator to answer questions'

6. ALL working must be clearly shown.

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I DoNoTTURNTHISPAGEUNTILYOUARETOLDToDoSo.
- Copyright @ 2013 Caribbean Examinations Council
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I All rights reserved'
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1. B. Ross started operations on 1 June 2014 with a motor car purchased three years ago for
$120 000. The latest valuation estimated the worth of the cat at $75 000. On the same day,
B. Ross opened a chequing account at a local bank with $20 000, $15 000 of which was proceeds
of a loan from M. Brown.

After the first six months of operations, B. Ross recorded drawings of $17 300 and a loss of
$21 500.

(a) State the meaning of the following accounting concepts:

(i) Historical cost [2 marks]

(ii) Prudence [2 marks]

(b) What amount should B. Ross record for the motor car in the books of the business?
[2 manksl

(c) Identiff and explain the concept which allows B. Ross to record the motor car invested in
the business as a non-current asset. [4 marksl

(d) Show the journal entries required to record the formation of B. Ross' business
on 1 June
2014. 16 marksl

(e) Show the closing entries to record the loss and the drawings for the
period. [3 marksl

and hires a trainee

(f) The management of B. Ross intends to operate in a paperless environment
to be consistently
accountant. Within the first week on the job, the trainee accountant is seen
trainee occasionally logs on
using Blackberry Messenger while working. In addition, the
to Facebook using the computer on which financial information is stored'

integrity of its
outline THREE controls that the management can implement to ensure the
accounting records. 16 marksl

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(g) Using Table 1 provided as an insert, show the effect of EACH of the following transactions
in the Cash Book and Statement of Comprehensive Income of BisNess Ltd for the year
ended 30 June 2014, if the accruals basis of accounting is used. One example has been
done for you on the insert.

(i) Paid rent of $12 000 for six months ending 30 September 2014.

(ii) Bad debts of $ I 500 written off during the accounting year.

(iii) Fixtures purchased for $74 000 on 2 JuJy 2013 by cheque.

(i") Depreciation on fixtures purchased on 2 July 2013 is charged at a rate of l5o/o

using the straight line method.

(v) Invoice for electricity amounting to $3 700 for the month of June 20 14 not received
nor paid.
[10 marks]

Total35 marks

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TEST CODE

FORM TP 2015124 MAY/JUNE 2015

CARIBBEAN EXAMINATIONS COUNCIL

CARIBBEAN ADVANCED PROFICIENCY EXAMINATION@
ACCOUNTING
UNITl - Paper02

Question No. .....1.(e).(i:y)..... Candidate No.

TABLE 1: EFFECTS OF TRANSACTIONS ON CASH BOOK

AND STATEMENT OF COMPREHENSIVE INCOME

Transaction Cash Book Statement of

Comprehensive Income

Paid a monthly salary of S10 500

Example to an employee who quit on Decrease by $10 500 Expense of$10 500
31 December 2Ol4

(D Paid rent of $12 000 for six months

ending 30 September 2014

(ii) Bad debts of $1 500 written off

during the accounting Year

(iiD Fixtures purchased for $74 000

on 2 July 2013 bY cheque

(iu). Depreciation on fixtures purchased

on 2 July 2013 is charged at a
rate of 15% using the straight
line method

(v) Invoice for electricity amounting

to $3 700 for the month of June
2014 not received nor Paid

[10 marks]

TO BE ATTACHED TO YOURANSWER BOOKLET

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2. (a) Amar and Mohan are equal partners in a retail clothing business. They each contributed
$240 000. Afterwards, it was agreed that Lee should join the partnership with all three
partners sharing profits equally. For the purpose of admitting the new partner, the goodwill
in the business was valued at $ 180 000. Goodwill is not to be maintained in the accounts.
Lee brought in cash of $160 000 into the business.

Prepare the capital accounts of the partnership showing clearly the adjusted balances after
the admission of the new partner. [11 marks]

(b) Distinguish between 'corporations' and 'co-operatives' in terms of the following l

characteristics:
I
(i) Transferability of ownership interest

(ii) Voting rights

(iii) Purpose

(iv) Legislation [8 marks]

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(c) An extract of the adjusted Trial Balance for Point Dex Ltd as at 31 May 2014 is provided
below.
$ 000
Sales 7s0 000
Inventory (31 May 2014) 145 300
Gross purchases 34s 700
Retums outwards 34 100
Discounts received I 700
Allowance for doubtful accounts 4 500
T Accounts receivable 10s 000
j Accounts payable 79 750
Property, plant and equipment at cost | 37s 400
Accumulated depreciation 466 800
Selling and distribution cost r25 435
Investment in Aral Ltd 3s0 000
Investment income 3s 000
Depreciation charge 101 000
Administrative cost 234 195
Research cost 15 670

Inventory (1 June 2013) 77 400

Tax payable 7 s00
l5o/o loan (2025) 735 000
General reserve 1 500

Dividends paid 670 000

Retained earnings 825 760

Additional notes:

. the reducing
Point Dex Ltd depreciates all assets at arate of l}Yo per annum using
balance method. bepreciation is normally allocated at4\o/oto distributionand60oh
to administration.

Corporation tax is 25o/o.

(i) Prepare a Statement of Comprehensive Income for Point Dex Ltd for the Year
ended 3lMaY 2014. [11 marks]

(iD Identiff the figures to be included in

a) Current assets
b) Current liabilities

at 31 }'{ay 2014'
which would appear in the Statement of Financial Position as
[5 marks]

Total35 marks

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3. The financial statements for Siscco Ltd for the income year to 30 June 2012 are given below'

Statement of Comprehensive Income

$ 000 $ 000
Revenue t7 234
Cost of sale ( 11 e30)

Gross profit 5 304

Operating expense 3 218
Loss on sale of NCA 30
(3 248)
2 057
Interest on loan 48

Profit before tax 2 009

Tax (1110)
Profit for the Period 899

Statement of Financial Position

$ 000 $ 000

Non-current asset
Property, Plant and equiPment 6181.s0
Current assets
Inventory at close s60
Accounts receivable | 540
Bank | 216
Total current assets 3 316

Total assets 9 497.s0

Equity and liabilitY

Equity
Ordinary share $1 4 250

Share premium
400

Retained earnings 77.50

Total equity 4 727.50

Non-current liabilitY
60/o loan
| 620

Current liabilitY
Trade payables 1 980

Accruals 1 170
3 1s0
9 497.50

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(a) prepare common size statements for Siscco Ltd. From these, prepare a report to analyse
the performance of the company. Your report should focus on liquidity and profitability by
places.
using at least TWO ratios in EACH category. Calculate ratios to two decimal
[.4 marks]

HINT: You may use the following formulae:

Gross profit x 100

Gross profit margin sales revenue

Net profit before interest and tax 100

Net profit margin Sales revenue

Operating Profit
Return on capital emPloYed : -eapi6t
emploted--
x 100

Current assets
Current ratio -currdiiilSiiities

Current assets - stock

Acid test (quick ratio) Current liabilities

[3 marksl
(b) List THREE limitations of ratio analysis'

End of Reporting Period as 'any

(c) Section 32 of the IFRS for SMEs defines Events after the
at the end of the reporting period''
event that provides evidence of conditions that existed

financial statements
(i) outline TWO examples of events that would be disclosed in the
as required by Section 32. [4 marks]

the reporting period'

(iD Explain the meaning of 'conditions that existed at the end of
and give ONE examPle. [4 marksl

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(d) (i) List THREE duties of the receiver in a bankruptcy situation. [3 marksl

(iD In dealing with the claims of an insolvent business, the liquidator must first pay
any outstanding National Insurance/Social Security funds which had been withheld
from wages, followed by claims of secured creditors, claims of partly secured
creditors and lastly unsecured claims, before dealing with shareholders. The list
falls into three categories shown in the headings in Table 2 below.

Copy Table 2 into your answer booklet. Complete the table to show how items
a) to g) should be classified.

a) Unsecured bank loan.

b) Accounts receivable of $40 000 has been pledged as security for a note
payable of$120 000.

c) Wages and salaries PaYable.

d) Robin has used her shares in The Cable Inc. valued at $75 000 as security
for a business loan of$75 000'

e) The utility bill for the Water Authority'

a result of a
0 Davis, Garage has a charge on a car owned by Philip Patel as
high court judgement.

s) Accounts paYable.

TABLE 2

Secured Claims Partly Secured Claims Unsecured Claims

[7 marksl

Total 35 marks

END OF TEST

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