test cope 01239020 FORM TP 2008115 MAY/JUNE 2008 2 3. 5. CARIBBEAN EXAMINATIONS COUNCIL SECONDARY EDUCATION CERTIFICATE EXAMINATION PRINCIPLES OF ACCOUNTS Paper 02 — General Proficiency 3 hours 19 MAY 2008 ( “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. All rights reserved.SECTION Answer the THREE questions in this section. 1. The following balances remained on the Trial Balance of Alvin Preston, a wholesaler, AFTER the preparation of the Trading Account on December 31, 2007: Debit Credit 8 s Gross profit 19500 ‘Accumulated depreciation on motor vehicles 7500 Capital (January 1, 2007) 4200 Creditors 5.000 Cash at bank 100 Debtors 8350 Drawings 5500 Office expenses 6300 Provision for bad debts 300 Rates 750 Closing inventory (Stock) 3.000 ‘Motor vehicles at cost 12.500 36 500 36 500 Additional notes: 1. Debtors included a certain bad debt of $250. 2. The Provision for bad debts is to be increased to $400. 3. No entry had been made in the books of account for a cheque received from a debtor on December 31, 2007 made payable to Preston for $200. 4. AtDecember 31, 2007 Preston owed $150 for Insurance. 5. Rates prepaid at December 31, 2007 amounted to $50. 6. Preston uses the reducing balance method of depreciation on motor vehicles at a rate of 30% per annum. There were no purchases or sales of motor vehicles during the year. (a) Prepare Alvin Preston’s Profit and Loss Account for the year ended December 31, 2007. (8 marks) (b) Prepare Alvin Preston’s classified Balance Sheet in vertical style, as at December 31, 2007, (12 marks) Total 20 marks GO ON TO THE NEXT PAGE 01239020/F 2008oar 2, The following cash transactions were made by A. Khan for the month of March: March Overdrawn balance at bank $700. Cash balance $300. March2 Cash sales amounted to $550. Paid T. Ali by cheque amount owing of $700 less 5% cash discount. March5 Paid sundry expenses of $120 by cash. March8 Received cheque for $1 800 from P. Shivers after he had deducted 3% cash discount to which he was entitled. Cashed cheque of $1 000 for office use. March 12 Received a cheque for $680 from S. Thompson in full settlement for goods sold valued at $700. March 16 Cash sales amounted to $400. ‘Wages of $800 paid by cash. March 20 Cash of $1 000 paid into the bank. March 27 Cheque of $500 drawn for personal use. (a) Write up the Three Column Cash Book of A. Khan. Balance the cash book and brit P ing down the balances. (14 marks) (b) On April 2, 2007, A. Khan received a bank statement from his bank for the month of March which showed an overdrawn balance of $1 405. On careful examination, the following discrepancies were found: 1, The bank had charges of $20 which were not recorded in the Cash Book. 2. The cheque of $1 800 received from P. Shivers on March 8 had been dishonoured. 3. Standing orders for insurance premiums of $700 had been paid by the bank. This had not been recorded in the cash book. 4. The cheque for $500 drawn for personal use on March 27 was not among the cancelled cheques returned by the bank with the statement. There was also no record of it on the bank statement. (Update Khan’s Cash Book, starting with the closing bank balance in his cash book from (a) above. (4 marks) (i) Prepare Khan’s Bank Reconciliation Statement as at March 31, 2008. (2 marks) ‘Total 20 marks GO ON TO THE NEXT PAGE 01239020/F 2008,3. Smith and Wheaton, separate sole traders, agreed to close their individual businesses and form a partnership. They named the business Smith & Wheaton Lid. It was located on Wheaton’s premises, using his assets, ‘Wheaton brought to the new business the following assets: s Cash 10 000 Fixtures 15.000 Equipment 25.000 Land and buildings 40.000 ‘Smith sold his assets and brought to the new business cash of $100 000. (@) Prepare opening journal entries to show the capitals of the partners on January 1, 2007. (7 marks) (b) After a successful year of trading, the partnership made a net profit of $75 000. The partnership agreement provides for the following: Interest on drawings is to be charged at the rate of 3% per annum. Interest on capital is to be paid at the rate of 5% per annum. A salary of $3 000 monthly is to be paid to Wheaton. Profits or losses are to be shared equally. Beye Wheaton withdrew $6 000 on March 1, 2007 and Smith withdrew $7 000 on September 1, 2007. (i) Prepare the partners’ Profit and Loss Appropriation Account for the year ended December 31, 2007, (8 marks) (ii) Prepare the partners’ Current Accounts as at December 31, 2007. ( Smarks) Total 20 marks GO ON TO THE NEXT PAGE 01239020/F 2008-5- SECTION II Answer any TWO questions in this section. 4, The financial year of L. McLeod ended March 31, 2008. The data below provides information ‘on general expenses, insurance, rent revenue and commissions revenue. a) Q) GB) 4) General expenses: Amount owing at April 1, 2007 was $35. Amount paid during the year was $1 500, Amount owing at March 31, 2008 was $47. Insurance: Amount prepaid at April 1, 2007 was $200. Amount paid during the year ‘was $3 200. Amount prepaid at March 31, 2008 (included in the $3 200) was $240, Rent revenue: Amount received in advance at April 1, 2007 was $300. Further rent received during the year was $1.200. Rent received in advance at March 31, 2008 (included in the $1 200) was $250. ‘Commissions revenue: Amount owing at April 1, 2007 was $700. Commissions received during the year was $3 500. Commissions revenue owing at March 31, 2008 ‘was $800. Required: @) (b) Use journal entries OR ledger accounts to record the information above showing clearly the amounts which will be transferred to the Profit and Loss Account (Income Statement). Narrations are not required for journal entries. (19 marks) Identify the Balance Sheet item under which commissions revenue owing at March 31, 2008 in (4) above, will appear. (Amark ) ‘Total 20 marks GO ONTO THE NEXT PAGE 01239020/F 2008-6- 5. T.Terrelounge Manufacturing had the following balances as at April 30, 2008. s Inventory (Stock) at May 1, 2007 Raw material 36520. Work in progress~ 45.920 Finished goods 36.200 Purchases: Raw material 130720, Finished goods 50.600 Carriage inwards: Raw material 3.600 Carriage outwards: Finished goods - 2.400 Direct labour a - “134 600 Office salaries. __— 34 800 Utilities : 15.000 Depreciation — factory equipment. 15800 Depreciation office equipment 3.400 Rent————- ~~ : 29.000 Sales— -———_-_- ---—~ — 500.000 Inventory (Stock) at April 30, 2008 Raw material——~ = 39.000 Work in progress: 33 800 Finished goods 47.000 ‘Overheads are to be apportioned as follows: Utilities: factory 70%; office 30% Rent: factory 50%; office 50% (a) Prepare the Manufacturing, Trading and Profit and Loss Account of T. Terrelounge ‘Manufacturing for the year ended April 30, 2008. Costs must be clearly identified (18 marks) (6) Calculate the unit cost of items produced, if 25 000 units were produced during the period. (Show workings). (2 marks) Total 20 marks GO ON TO THE NEXT PAGE 01239020/F 20086 The following information is a summary of K. Ramish’s bank account for the year ended December 31, 2007. Cash Book Summary $ Sy Balance b/f 97 Payments to creditors + 59556 Cash sales 58 296 Salaries 9335 Receipts from debtors 28 567 Rent 2759 Rates 875 General expenses 5691 ‘New equipment 3.500 Drawings 3780 Balance c/f 2284 87780 87.780 Additional information: December 31, 2006 December 31, 2007 s $ Equipment 15750 2 Inventory (Stock) 7560 8613 Debtors 5698 6510 Creditors 3010 3.234 Rates paid in advance 5 175 Rent accrued - 875 General expenses accrued 420 - Depreciation on equipment is to be provided at the rate of 10% per annum on the straight line method, (@) Prepare K. Ramish’s opening Statement of Affairs (5 marks) (6) Prepare accounts or statements to show credit purchases and credit sales, (6 marks) (©) Prepare K. Ramish’s Trading and Profit and Loss Account for the year ended December 31, 2007, (9 marks) Total 20 marks GO ON TO THE NEXT PAGE 01239020/F 20087. The LBB Ltd issued 40 000 ordinary shares at $3 cach, 20 000 8% preference shares at $10 ‘each and $150 000 12% debentures. These were all subscribed and fully paid up on March 15, 2007. (a) Prepare an opening classified Balance Sheet for the L B B Ltd as at March 15, 2007. (Show your workings for cash or bank amount). (7 marks) (b) summary of the financial statements for S. Christie Ltd is presented below. S. Christie Ltd ‘Trading and Profit and Loss Account For year ended April 30, 2008 $ s Sales 35.000 Opening inventory 2.500 Add purchases 26.750 29.250 Less closing inventory 3.000 26.250 Gross profit 8 750 Expenses 3.550 Net profit 5.200 S. Christie Ltd Balance Sheet as at April 30, 2 s s ixed Assets 525 Current Assets Inventory 3.000 Debtors, 3.450 Bank 1.000 7450 Current Liabilities Creditors 218 7175 7700 Capital 5000 Add net profit 5.200 10 200 Less drawings 2.500 GO ON TO THE NEXT PAGE 01239020/F 2008ai) Use the above financial statements for S. Christie Ltd to calculate the following profitability and financial ratios: (Show workings). + Gross profit margin + Net profit margin + Return on capital invested + Current ratio + Acid test (Quick) ratio é + Stock turnover (11 marks) Explain briefly what EACH of the following indicates about a business: + A“good” current ratio (Amark ) + A“bad” acid test ratio. (1 mark ) Total 20 marks END OF TEST 01239020/F 2008