CARIBBEAN EXAMINATIONS COUNCIL
SECONDARY EDUCATION CERTIFICATE
PRINCIPLES OF ACCOUNTS
Paper 02–General Proficiency
16 May 2011 (am)
- Answer ALL the questions in Section I and TWO questions from Section II.
- Begin EACH answer on a separate page.
- Keep ALL parts of EACH answer together.
- Silent, electronic calculators may be used, but ALL necessary working should be clearly shown.
- EACH question is worth 20 marks.
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO
Answer the THREE questions in this section.
1. Mikail Jack is a music artiste. On March 31, 2011, he provided the following information about his assets and liabilities:
1. He owns recording equipment valued at $40,000.
2. He owns musical instruments worth $15,000.
3. He owns a car which was bought at cost of $65,000. The car was bought with the help of a five year loan of $30,000 from Easy Finance Company. Accumulated depreciation as at MArch 31, 2011 is $18,000.
4. There is an inventory of pre-recorded CDs on hand, valued at $5,700.
5. He sold $300 worth of his pre-recorded CDs to a fan, who promised to pay in April 2011.
6. The Cancer Society owes him $8,000 for performing at a public function.
7. He paid $650 in advance to Star Advertising Company which is working on his new advertising campaign.
8. He holds a bank account of $8,925, and has petty cash on hand of $50.
9. He owes $2,500 in interest charges on a loan from Easy Finance Company.
10. He rents a recording studio for $1500 a month–three months’ rent remains unpaid at March 31, 2011.
Prepare a classified Statement of Financial Position (Balance Sheet) for Mikail Jack, as at March 31, 2011. (Use the order of permanence in classifying assets.)
Total 20 marks
2. Chester and Norbert have been in partnership for several years. Their partnership agreement provides the following:
1. Partners are to receive interest at the rate of 10% per annum on their opening capital balances.
2. Interest at a rate of 5% per annum is to be paid on partners’ drawings during the year.
3. Norbert is to receive salary of $1,500 per month.
4. Profits and losses are to be shared equally.
The following information has been extracted from their books:
Partners’ Capital Accounts at January 1, 2010:
Partners’ Current Account at January 1 2010:
On July 1, 2010, halfway through the year, Chester and Norbert admitted Telford to the partnership. Telford brought $40,000 in cash, a motor car valued at $35,000 and equipment valued at $25,000.
(a) Prepare the journal entry to record the admission of Telford into the partnership.
Between January 1, 2010 and December 31, 2010 the following activities occurred:
Net Income of $122, 330 was earned evenly throughout the year.
The ONLY CHANGE in the partnership agreement provides for profit or loss to be shared among the partners in the ratio of Chester 3: Norbert 2: Telford 1. Note all other provisions remain the same.
(b) Prepare an extract of the Partnership Appropriation Account up to the share of remaining profit for the year ended December 31, 2010.
(c) Complete the worksheet provided to arrive at the share of remaining income or profit earned by EACH partner.
(d) Prepare the current accounts of the partners as at December 31, 2010.
Total 20 marks
3. Chris Luder and Sons maintains both a three-column cash book and a Petty Cash Book. The Petty Cash Account should start with $400 in hand every month. All payments for office supplies and cleaning expenses are recorded in the Petty Cash Book.
The balances at April 1, 2011 were as follows:
Petty Cash $75
During the month of April, the following transactions were recorded in the books, as indicated.
April 1 Restored imprest by cash to petty cash book.
6 Paid wages of $2100 by cheque
7 Received cash of $1900 from P. Rice to settle amount of $2000
9 Purchased postage stamps at a cost of $50.10; mop and broom $34.60.
11 Bought copying paper at a cost of $40.80.
15 Bought cleaning supplies at a cost of $25.50; and staples for stapling machine at $31.20
16 Deposited $1200 (cash) into the bank.
16 S. John paid his debt of $1000 cheque, less 5% discount.
18 Chris Luder, owner, withdrew $500 in cash for private expenses.
22 Bought envelopes at a cost of $63.30.
26 Paid debt of $2900 to K. Band Enterprises by cheque less 2% discount.
27 Cleaner’s wages was $128.30
30 S, John’s cheque received on April 16 was returned marked “return to drawer”
(a) Draw up the three-column Cash Book for Chris Luder and Sons for the month of April 2011.
(b) Using the worksheet provided, draw up the Petty Cash Book for Christ Luder and Sons for the month of April 2011.
(c) Post the TOTALS of office supplies and cleaning expenses columns in the appropriate ledger.
Total 20 marks
Answer any TWO questions in this section.
4. B.C. Yen recorded the following Trial Balance after calculating gross profit.
- Advertising expense includes $800 prepayment
- Bank interest of $480 was owing at December 31 2010.
- Commissions received in advance, that is, not yet earned, $300.
- Bad debts of $900 are to be written off from accounts receivable.
- Premises are to be depreciated at 5% using the straight line method.
- Fixtures and fittings are to be depreciated at 20% using the reducing balance method.
- Provision for doubtful debts is to be $2100.
(a) Compete the worksheet provided for the required adjustments numbered 2 to 7 above by
(i) entering EACH item from B.C. Yen’s Trial Balance which requires adjustment
(ii) Showing how EACH item is to be adjusted and the amount of the adjustment.
(b) Prepare the Fixed and Current Assets sections of B.C. Yen’s Balance sheet as at December 31, 2010 showing clearly any changes taken into account.
Total 20 marks
5. Martha’s Cakes & Confectionery is a manufacturer producing a variety of baked goods for sale to supermarkets. At December 31, 2010, the following information became available:
(a) Prepare the Manufacturing Account for Martha’s Cakes & Confectionery, showing clearly:
(i) Prime cost
(ii) Factory overheads
(iiI) Total cost of production
(b) Prepare the Income Statement for Martha’s Cakes & Confectionery for the year ended December 31 2010, classifying costs appropriately.
(c) Martha reports an average unit cost of $10 per baked item. Compute the number of baked items produced for the year ended December 31, 2010. (Show all working clearly)
Total 20 marks
6. Fifty housewives int he Goodlands community started a buying cooperative. On May 1 2009, they paid a $6.00 registration fee, and agreed that each member would buy 25 shares at $10.00 each.
(a) Prepare the journal entries to record the monies collected for:
- Registration fees
- Share purchase
At the end of the second year of operation, total share capital was $25000. The following figures were extracted from the books as at April 30, 2011:
(b) Prepare the Appropriation Account for the Goodlands Housewives Cooperative for the year ended April 30. 2011.
(c) Mrs. Susan Cunningham, a Co-operative member who now owns 42 shares, has receipts totaling $3845 in respect of her purchases from the Goodlands Housewives Cooperative during the last year.
(i) Calculate the amount of the patronage refund due to Mrs. Cunningham. (Show all working clearly.)
(ii) Calculate the TOTAL amount that should be paid to her, by the cooperative, out of this years surplus. (Show all working clearly)
(d) State ONE benefit, to the housewives, of joining the Goodlands Cooperative Housewives Society.
Total 20 marks
7. (a) Cartel Vee sells leather sandals. His transactions for the month ended July 31, 2010 were as follows:
Show workings for all calculations.
(i) Calculate the amount of units held as unsold stock at year end.
(ii) Calculate the value of the closing stock using the
- FIFO method
- LIFO method
(iii) Calculate the gross profit for Cartel Vee using the LIFO value for closing stock.
(iv) State the MAIN reason why it is necessary to know the stock valuation method being used by a firm.
(v) Calculate the cost price that would be used for the AVCO method in valuing closing stock.
(vi) What ratio can be calculated to measure how quickly Cartel Vee sells his stock?
(b) At the end of Cartel Vee’s first year of operation his accountant presents the following ratios comparing the performance of Cartel Vee with a competitor:
(i) Which of the ratios above measures control of costs?
(ii) Which of the ratios above measures a firm’s ability to meet its short-term debts?
(iii) Prepare a short report, using both ratios, comparing Cartel Vee’s performance with that of his competitor.
( 2 marks)
Total 20 marks
END OF TEST