ce. Test cove 01239020 FORM TP 2013025 JANUARY 2013 ‘@ CARIBBEAN EXAMINATIONS COUNCIL CARIBBEAN SECONDARY EDUCATION CERTIFICATE® EXAMINATION PRINCIPLES OF ACCOUNTS Paper 02 — General Proficiency 3 hours 08 JANUARY 2013 (a.m.) READ THE FOLLOWING INSTRUCTIONS CAREFULLY. 1. Answer ALL questions in Sections I and TWO questions from Section I. 2. Begin EACH answer on a separate page. 3. Keep ALL parts of EACH answer together. 4, You may use a silent, non-programmable calculator to answer questions. 5. Each question is worth 20 marks. DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO. Copyright © 2012 Caribbean Examinations Council All rights reserved. 01239020/JANUARY/F 2013oe SECTION I Answer the THREE questions in this section. 1, (@)_~— On | May 2012, the owner of a business started with $80 000 in the bank. Below are his three Balance Sheets on 1 May, 2 May and 3 May 2012. Balance Sheet as at 1 May 2012 ASSETS, CAPITAL Bank 80000 | Capital 80 000 Balance Sheet as at 2 May 2012 ASSETS . CAPITAL, ‘ Bank 72.500 | Capital 80.000 Equipment 7500 80.000 80.000 | Balance Sheet as at 3 May 2012 $ $ ASSETS CAPITAL Bank 67500 | Capital 75.000 Equipment 7.500 75.000 75.000 Describe the transaction that occurred on () 2May (2 marks) (i) 3 May 2 marks) GO ON TO THE NEXT PAGE 01239020/JANUARY/F 2013(>) R. Robin commenced operation of a small restaurant on 1 June 2011 with an operating capital of $307 800. He did not set up a proper accounting system. However, he provided the following information certified by his accountant: 31 May 2012 s Building 260 000 Furniture and fixtures 15 000 Vehicles 48 500 | “Machinery and equipment 40 000 “Receivables (debtors) 11600 Payables (creditors) 8900 | Inventory 14200 6-month loan 2300 Mortgage 140.000 | Cash 3200 | Using the order of permanence, draw up a classified Balance Sheet (Statement of Financial Position) for R. Robin at the close of the business on 31 May 2012. The closing capital must be included. (11 marks) (©) R. Robin advises that during the first year of operation, he withdrew $65 000 from the business. ‘Using information on closing capital, calculate R. Robin’s profit for the year. Show your working clearly. 01239020/JANUARY/F 2013 (5 marks) Total 20 marks GO ON TO THE NEXT PAGE<4: 2, The following information has been extracted from the books of Threaker and Waitley who have been in partnership for several years. Partners’ Capital Account at 1 January 2012: Threaker $80 000 Waitley $100 000 Partners’ Current Account at 1 January 2012: ‘Threaker $4800. Cr Waitley $7300 Dr Partners’ Drawings for the year ended 31 December 2012: Threaker $44,000 Waitley $36 000 ‘Net profit for the year ended 31 December 2012 = $172 000. The partnership agreement between Threaker and Waitley provides for the following: @__ Partners are to receive interest at a rate of 10% per annum on their opening capital account balances. (i) Interest at a rate of 5% per annum is to be charged on partners’ drawings during, the year. (iii) Waitley is to receive a partnership salary of $1 500 per month. (iv) The balance of the net profit or loss is to be transferred to partners in the ratio 23, (@) Prepare the partnership Profit and Loss Appropriation Account for the year ended 31 December 2012 (8 marks) (6) Prepare Current Accounts for the partnership as at 31 December 2012. (10 marks) (©) Share the profit of the business between Threaker and Waitley as if there was no partnership agreement. (2 marks) ‘Total 20 marks GO ON TO THE NEXT PAGE 01239020/JANUARY/F 2013“5. 3 James Johnson operates a small retail shop next to his home in Spice Town. He does not keep ‘proper accounting records but was able to provide the following information as at 31 December 2012. Bank A/c $s $ Balance b/d 12 800 Drawings 6500 | Receipts from debtors: 190 500 Wages 21200 Rent 16 000, Payment to creditors 136 100 ‘Sundry expenses 7000 Balance c/d 16 500 203 300 203 300 Additional information 31 December 2011 ‘31 December 2012 $ $ Cash in hand 1500 600 Rent prepaid 4000 0 ‘Wages owing 600 1000 Inventory 30 200 28 600 Equipment at cost 75.000 75.000 Accumulated depreciation 20100 27.600 Accounts payable (creditors) 13 200 14.400 Accounts receivable (debtors) 20400 18 100 (@) Using all relevant information prepare James Johnson's Statement of Affairs as at 31 December 2011 to determine his capital. (7 marks) () Calculate by means of an account or statement: (@) Total credit purchases for the year. marks) (ii) Total credit sales for the year. @ marks) (©) Prepare James Johnson's Income Statement for the year ended 31 December 2012. (7 marks) ‘Total 20 marks GO ON TO THE NEXT PAGE 01239020/JANUARY/F 2013-6- SECTION II Answer any TWO questions in this section. 4, K.A.M. Enterprise provided the following summary of their income statement for the year ended 31 December 2012. A.M. Enterprise Income Statement for the year ending 31 December 2012 s $s Sales revenue 75.000 ‘Beginning inventory 12.000 Purchases 40.000 52.000 Less ending inventory (8.000) Cost of goods sold 44.000. Gross profit 31.000 Expenses 21.000 Net income 10 000 ‘The following list of balances was also provided. Capital 50.000 Buildings 26 500 Inventory 8.000 Accounts payable (creditors) 10 000 Cash 6500 Bank overdraft 5.000 Accounts receivable (debtors) 14000 Motor vehicles 20000 GO ON TO THE NEXT PAGE 01239020/J ANUARY/F 2013@ ) © @ © ee Using the vertical style of presentation, prepare a classified Balance Sheet for K.A.M. Enterprise as at 31 December 2012. (0 marks) Using the income statement given and the classified balance sheet prepared, calculate the following ratios: + Net income margin + Retum on capital invested + Current ratio (marks) Using the current ratio, comment on the liquidity position of K.A.M. Enterprise. (1 mark) ‘The following ratios were provided for TRU Brothers Enterprise, which operates a similar business: + Net income margin 15% + Retum on capital invested 18% Using these ratios and those calculated in (b) above, make two different comments ‘comparing the performance of K.A.M. Enterprise and TRU Brothers Enterprise. (2 marks) ‘TRU Brothers Enterprise has recorded the following changes in stock during December 2012. | Units | Cost Price ($) Opening Stock 500 4 | Purchases 4 December 500 10 10 December 700 12 14 December 300 u Sales — 22 December 1400 Calculate the value of TRU Brothers Enterprise's ending inventory, using the First In, First Out method of stock valuation. (N.B. State amount of units in inventory at close.) (2 marks) ‘Total 20 marks GO ON TO THE NEXT PAGE 01239020/JANUARY/F 2013-8- 5. GlenRoy Enterprises consists of two small businesses. Glen Co. which makes fresh fruit juices and Roy Co. which packages dried fruits into different combinations called Fruitysnaks. On 31 December 2012, the following balances were prepared by the two firms. 01239020/ANUARY/F 2013 GLEN CO.| ROY CO. Opening stock 8 $ Fresh fruits 1340 Dried fruits 2.490 Purchases Fresh fruits 145 670 Dried fruits 271 000 Closing stock Fresh fruits 2.850 Dried fruits 5.470 Wages 51800 31500 Salaries of supervisors 30 560 18.900 ‘Transportation-in of fresh fruits 5.950 Insurance 2.430 2.300 Juicing machines 26 900 Packaging machines 30 900 Provision for depreciation: Juicing machines 5380 Packaging machines 6 180 ‘Maintenance expenses 4100 3810 Packaging expenses 17.900 Delivery costs to supermarkets 7520 Advertising expense 2.080 Opening work in progress 3710 Closing work in progress 3100 Sales 406 500 GO ON TO THE NEXT PAGENotes: @ Electricity expense of $10 400 and rent expense of $47 000 are shared equally between the two firms. (ii) Depreciation on all fixed assets is calculated at 10% on cost. (@) Prepare the Manufacturing Account of Glen Co. for the year ended 31 December 2012 showing clearly: the cost of raw materials consumed prime cost factory overheads cost of production (10 marks) (b) Prepare the Income Statement (Trading and Profit and Loss Account) of Roy Co. for the year ended 31 December 2012 showing clearly the cost of sales and total expenses. (10 marks) Total 20 marks GO ON TO THE NEXT PAGE 01239020/JANUARY/F 2013-10- 6. The Merry Men Sports and Social Club presented the following information regarding their business. Merry Men Sports and Social Club Receipts and Payments Account for the year ended 31 October 2012 $ : $ Bal bid 9000 | Rent 2.400 Members’ subscriptions 5.400 | Purchases of bar supplies 12.600 Gifts 200 | Bar expenses 4700 Interest on savings 350 | Luncheon expenses 2.800 Bar takings 22.500 | Lawn mower 5.000 Luncheon tickets 4500 | Other expenses 1.900 Bal c/d 12550 41950 41950 Additional information: 1 Sept 2011 31 Oct 2012 8 8 Subscriptions in arrears 340 460 Subscriptions in advance 290 220 ‘Owing to bar suppliers 3.400 3.650 Bar inventory 1200 1800 Rent owing, 0 200 Valuation of club furniture 26 500 24 200 Note: The list of balances does not include the lawn mower bought during the year which is depreciated at 10% per annum on cost. 01239020/JANUARY/F 2013 GO ON TO THE NEXT PAGE@ i) © @ “Ue Prepare the Subscriptions Account for the year ended 31 October 2012. (S marks) Prepare the Creditors’ Account for the bar to determine purchases. (3 marks) Prepare the club’s Income and Expenditure Account for the year ended 31 October 2012. ( marks) (@ State the name of the section of the balance sheet in which subscriptions in arrears appears. (1 mark) Gi) State the name of the term used in place of ‘Capital’, in non-trading organizations, (1 mark) (iii) Show the total value of the club's non-current assets. (Show working.) (1 mark) Total 20 marks GO ON TO THE NEXT PAGE 01239020/JANUARY/F 2013-12- MMC Company Ltd, has an authorized share capital of 300 000 ordinary shares of $2 each and 100 000 six per cent (6%) preference shares of $3 each. On 1 January 2012, the company issued the following: 200 000. ordinary shares at $2.50 each, 80 000 six per cent preference shares at $3.25 each Alll shares were fully subscribed (sold). (@) — @_ Prepare the journal entry to record the issue of the shares. marks) (ii) State ONE difference between ordinary shares and preference shares. (I mark) (b) | MMC Company Ltd. generated revenue of $755 800 and a.net profit of $302 600 for the year ended 31 December 2012. The company has decided to share the net profit as follow: ‘Transfer to general reserve fund 390 000 Dividends paid: Ordinary shareholders $55 000 Preference shareholders ‘Their entitlement Prepare a statement of MMC Company Ltd’s Profit and Loss Appropriation Account for the year ended 31 December 2012. (6 marks) (© @__ Calculate for MMC Company Ltd: a) Return on the capital invested at 1 January 2012 (2 marks) b) Dividend rate (percentage) for ordinary shareholders (4 marks) (ii) The following ratios are averages of the industry: Company’s return on capital invested 30.82% Ordinary shareholders’ dividend rate 10.5% Compare your answers from the ratios calculated for (c) (i) above, to the industry averages given above, and write a statement on MMC’s performance for EACH. ratio. @ marks) Total 20 marks END OF TEST IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST. 01239020/JANUARY/F 2013