& test cope 02101020 FORM TP 02025146 MAY/JUNE 2025 CARIBBEAN EXAMINATIONS COUNCIL CARIBBEAN ADVANCED PROFICIENCY EXAMINATION® ACCOUNTING UNIT 1 — Paper 02 2 hours 45 minutes 15 MAY 2025 (a.m.) 2 READ THE FOLLOWING INSTRUCTIONS CAREFULLY. 1. This paper comprises THREE questions. Answer ALL questions. 2. Write your answers in the booklet provided. 3. You may use a silent, non-programmable calculator to answer questions. 4. ALL working must be clearly shown, L 8 2 DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO. =. Copyright © 2024 Caribbean Examinations Council All rights reserved. 02101020/MJ/CAPE 2025744 1 MODULE 1 ACCOUNTING THEORY, RECORDING AND CONTROL SYSTEMS Caribbean Travels Company Limited makes flight and hotel reservations for its customers. The company currently uses a manual accounting system but is actively researching a computerized accounting system. The company has hired you as the consultant to work with the system developer to help design and implement the accounting system, (a) (i) Define the term ‘accrual accounting’. [2 marks] (i) State ONE need that EACH of the following users of an accounting information system would have. * Managers + External auditors * Government [3 marks} (iii) The following are the six steps of the accounting cycle for revenue transaction, randomly ordered. Complete the table in your answer booklet by inserting the numbers 1-6 to show the sequential steps of the accounting cycle for the process. *+ Bill customers and prepare sales invoice + Make adjustments for sales allowances + Prepare trial balance + Prepare sales orders from customers orders + Prepare the financial statements + Post to the accounts receivables ledger [3 marks] GO ON TO THE NEXT PAGE 02101020/MJ/CAPE 2025‘A000 (&) ©) @) “Be ‘The following is a list of balances brought forward and transactions that occurred from January to December 2023 for Caribbean Travels Company Limited. $ Fees earned 2.044 800 Cash received 1746 200 Opening cash balance 248 750 Wages paid 434 000 (quarterly expense is $117 000) Office expenses 650 500 Insurance paid for 15 months 120 000 Provision for depreciation 350 000 (1 January 2023) Provision for depreciation 425 000 (31 December 2023) From the data given above, the income and balances for the period has to be reported into the computerized accounting system. The required information must be based on the accrual accounting method. However, the system developer is unsure of how to arrive at the information. (Determine the amount of income that should be reported for the period. [6 marks] (ii) Determine the current assets and current liabilities balances for EACH item that is to be reported in the statement of financial position as at 31 December 2023. [6 marks] The system developer wants to have a better understanding of the accounting standard setting process in order to incorporate the required system controls. (i) State TWO advantages of IFRS for SMEs. [2 marks] (ii) Identify THREE controls that are necessary in the electronic data processing (EDP) environment. [3 marks] ‘The West Indies Corporation was incorporated on | January 2018. The company has been authorized to issue 100 000 shares of preferred stock at $12 par and 500 000 shares of ‘common stock at $16 par. On 1 January 2018, the company issued 20 000 preferred stock at $12 for cash and 80.000 common stock at $22 for cash. The preference stocks are redeemable at a premium. of 10%. ‘Two-fifths of the preference issue was redeemed on 30 September 2023, out of retained earnings. Prepare the journal entries (without narratives) to record the transactions above. [10 marks] Total 35 marks GO ON TO THE NEXT PAGE, (02101020/MJ/CAPE 2025744 4000 2. is MODULE 2 PREPARATION OF FINANCIAL STATEMENTS (@) David is contemplating opening a business to manufacture generic prescription drugs, He has asked you to assist him in understanding the attributes of two forms of business organizations, Complete the table in your answer booklet to distinguish between a sole trader and a public company as they relate to EACH of the following features. Ownership Legal status Continuity of business Acquisition of captial Taxation [10 marks} GO ON TO THE NEXT PAGE 02101020/MJ/CAPE 2025744 ‘A000 (>) “Sie Bruno and Shereen are partners operating Serge Enterprise. Profits and losses are shared ina ratio of 3:2. They decided to dissolve the partnership effective 1 April 2024. The statement of financial position as at 31 March 2024 was as follows. Serge Enterprise ‘Statement of Financial Position As At 31 March 2024 ‘Non-Current Assets Cost Accum. Dep’n NBV s & s Land and building 710 000 710 000 Equipment 620 000 383.000 237 000 Motor vehicle 796 000 425 000 371.000_ 2 126 000 808 000 1318000 Current Assets Inventory 156 000 Accounts receivable 92 000 Cash at bank 152.000 400.000 TOTAL ASSETS, $1718 000 Equity Capital account Bruno 700 000 Shereen 300.000 1.000 000 Current account Bruno 223 550 Shereen 194 780. 418 330 1418330 Loan 100 000 Current Liabilit Creditors 112.000 ‘Wages accrued 87.670 199 670 TOTAL EQUITY AND LIABILITIES. $1718.00 GO ON TO THE NEXT PAGE 02101020/MJ/CAPE 2025744 mat * The land and building, motor vehicle and inventory were sold for $980 000, $350 000 and $140 000 respectively. * Accounts payable were settled at a 15% discount, and 10% of accounts receivable was written off as bad debt. * Bruno agreed to take over half of the loan. + Shereen took over equipment at an agreed value of $125 000. + Dissolution expenses amounted to $45 000. Required (Prepare the realization account. [14 marks] (ii) Prepare the capital account. [5 marks] (©) Company X historically pays annual dividends. Due to cash flow challenges this year, no cash dividends can be paid. However, the company wishes to continue its policy of paying annual dividends. Explain TWO options available to Company X in order for itto make a non-cash dividend payment. [6 marks} ‘Total 35 marks GO ON TO THE NEXT PAGE 02101 020/MJ/CAPE 202574 ‘A000 MODULE 3 FINANCIAL REPORTING AND INTERPRETATION (a) __ Explain the term ‘integrity’ as it relates to the conduct of professional accountants. [5 marks] (b) The following financial information was taken from the books of Gardener Corporation. Statement of Financial Position as at 31 December Non-Current Assets Property, plant and equipment at cost Less accumulated depreciation Investments Current Assets Inventory Trade receivables Investments Bank Cash TOTAL ASSETS Sai ennai Capital and Reserves Ordinary shares General reserves Retained earnings Non-Current Liabilities 10% Debenture Current Liabilit ‘Trade payables Tax Interest TOTAL EQUITY AND LIABILITIES. 02101020/MJ/CAPE 2025, 2024 2023 s000 $000 $000 $000 800 650 (252) 15) 848 435 352 410 1100 845 163 182 us 85 61 44 2 15 46 __ 467 38424 $1567 $1269 580 550 88 68 496 1164210828, 130 200 233 220 10 1s 10 __253 6 241 $1567 $1269 GO ON TO THE NEXT PAGE4 ‘A000 ed () -8- Additional information for the year ended 31 December 2024 S000 Operating profit 423 Interest (i) Profit before tax 408 Tax (102) Profit after tax 306 Dividends paid 0 ‘Transfer to reserves 20) Profit for the year 286 Retained earnings b/d 210 Retained earnings e/d $496 During the year, the company sold equipment for $16 000. The costing of the equipment was $30 000 with a net book value of $12 000. Required Using the indirect method, prepare the statement of cash flow (extract) for the year ended 31 December 2024, showing the cash flow from operating activities ONLY. [12 marks] A business is insolvent if it ceases to pay its current obligations in the ordinary course of business as they become due. In such situations, a secured creditor may file a petition in the courts for a receiver to be appointed. (i) Define the term ‘secured creditor’, [2 marks} the receivership process. [2 marks] (ii) Identify TWO step: (ii) Outline TWO roles of a receiver. [4 marks] GO ON TO THE NEXT PAGE, 02101020/Mi/CAPE 2025() The following data was extracted from the books of Langston Corporation for the year ended 31 December 2024. Trade payables Sales revenue Land at cost Equipment Building Bank Provision for depreciation: Equipment Buildings Retained eamings Administrative expenses Selling and distribution costs Goodwill Cash Cost of sales 8% Mortgage Trade receivables Mortgage interest Ordinary shares @ $0.75 General reserves 744 Interim dividends ‘A000 02101020/MJ/CAPE 2025 290 000 160 000 420 000 186 000 125 000 200 000 42.000 350 000 95 000 5500 6.500 ‘$1 880 000 $ 22500 970 000 24.000 40 000 120.000 296 500 100 000 240 000 67000 “$1 880 000 GO ON TO THE NEXT PAGE748 ‘A000 -10- Additional Information + Provide for depreciation on the building at 5% using the reducing balance method and equipment at 10% using the straight-line method, Depreciation is apportioned equally between administrative expenses and selling and distribution costs. + Goodwill impairment was $20 000. + The land was revalued at $440 000. + Corporation tax is charged at 25%. Required Prepare a single statement of comprehensive income for the year ending 31 December 2024, in accordance with the provisions of Section 5 of the IFRS for SMEs, as far as the information permits. [10 marks} Total 35 marks END OF TEST IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST. 02101020/MJ/CAPE 2025890 ‘Ago rest cope 02101020 eel FORM TP 02025146 & MAY/JUNE 2025 CARIBBEAN EXAMINATIONS COUNCIL CARIBBEAN ADVANCED PROFICIENCY EXAMINATION® ACCOUNTING UNIT 1 — Paper 02 CANDIDATE ANSWER BOOKLET 2 hours 45 minutes READ THE FOLLOWING INSTRUCTIONS CAREFULLY. Write your answers to the THREE questions in the designated areas provided in this booklet. Do NOT write in the margins of this booklet. You may use a silent, non-programmable calculator to answer questions. ALL working must be clearly shown in the booklet. If you need to rewrite any answer and there is not enough space to do so on the original page, you must use the extra lined page(s) provided at the back of this | booklet. Remember to draw a line through your original answer. Ifyou use the extra page(s), you MUST write the question number clearly in the box provided at the top of the extra page(s) and, where relevant, include the question part beside the answer. DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO. ——— 2 02101020/MI/CAPE 2025 0 010 Copyright © 2024 Caribbean Examinations Council All rights reserved.90 ‘A000 r “Bimarks] Write your answer to Question 1 (a) (iii) in the table below. [3 marks] Accounting Cycle for Revenue Transactions Steps 1-6 in Correct Order Bill customers and prepare sales invoices Make adjustments for sales allowances Prepare trial balance Prepare sales orders from customer orders Prepare the financial statements, Post to the accounts receivables ledger 02101020/MJ/CAPE 2025 Es [3 marks] GO ON TO THE NEXT PAGE, Lal L EWrite your answer to Question 1 (b) (i) on the lines below. ‘Write your answer to Question 1 (b) (ii) on the lines below. ‘A000 [6 marks] (Miinrinemigeiatasiieeseieansitissatioe terrane rtteerea tease GO ON TO THE NEXT PAGE _| 02101020/MJ/CAPE 2025 Le890 ‘4000 if - Write your answer to Question 1 (c) (i) on the lines below. Write your answer to Question 1 (c) (ii) on the lines below. Write your answer to Question 1 (d) on the lines below. 02101020/MJ/CAPE 2025 LL 0 0 GO ON TO THE NEXT PAGE, etl‘[10 marks] Total 35 marks GO ON TO THE NEXT PAGE 02101020/M,/CAPE 2025 sony Ta a eT oan Ce a eo ara nner -8- Write your answer to Question 2 (a) in the table below. Features Sole Trader Public Company Ownership Legal status Continuity of business 890 Acquisition of capital ‘Taxation ‘A000 02101020/MJ/CAPE 2025 L ig pga [10 marks} GO ON TO THE NEXT PAGE elr * 7 Write your answer to Question 2 (b) (i) on the lines below. [14 marks} GO ON TO THE NEXT PAGE a | 02101020/MJ/CAPE 2025 L unfc -10- | Write your answer to Question 2 (b) (ii) on the lines below. [5 marks} Write your answer to Question 2 (c) on the lines below. [6 marks] Total 35 marks GO ON TO THE NEXT PAGE 02101020/MJ/CAPE 2025 L[a 21s ~] Write your answer to Question 3 (a) on the lines below. ‘890 GO ON TO THE NEXT PAGE | 02101020/MJ/CAPE 2025 L ‘mage i290 ‘n000 I -12- Write your answer to Question 3 (b) on the lines below. 02101020/MJ/CAPE 2025 LL 0 . GO ON TO THE NEXT PAG cial— -13- 7] ~ 880 GO ON TO THE NEXT PAGE 02101020/MJ/CAPE 2025 i neon I90 [- -14- Write your answer to Question 3 (c) (i) on the lines below. Write your answer to Question 3 (c) (ii) on the Write your answer to Question 3 (c) (iii) on the lines below. [2 marks] 02101020/MJ/CAPE 2025, L [4 marks} GO ON TO THE NEXT PAGE, =|ia -15- “| Write your answer to Question 3 (d) on the lines below. [10 marks} Total 35 marks END OF ANSWER BOOKLET IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST. 02101020/MJ/CAPE 2025 L me a90 ‘A000 EE -16- ~] EXTRA SPACE Ifyou use this extra page, you MUST write the question number clearly in the box provided. Question No. 02101020/MJ/CAPE 2025 |