r FORM TP 2018025

qto TEST CODE OI239O2O

JANUARY 20I8
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CARIBBEAN EXAMINATIONS COUNCIL
CARIBBEAN SECONDARY EDUCATION CERTIFICATE@
EXAMINATION
PRINCIPLES OF ACCOUNTS

Paper 02 - General Proficiency

3 hours

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

I This paper consists of FIVE questions. Answer ALL questions.

2 Write your answers in the spaces provided in this booklet.

J Do NOT write in the margins.

4 Show ALL working clearly.

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

6 You are advised to take some time to read through the paper and plan your answers.

7 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,

8 rf youuse the extra page(s) you MUsr 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.

Copyright @ 2017 Caribbean Examinations Council

All rights reserved.

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0123902003 J
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 r AnswerALL questions.
4
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Write your answers in the spaces provided in this booklet.

I The following is a list of balances extracted from the ledger accounts of Best Bake, a small pastry
shop, at its year end, 3l December 2017.
$

Inventories 25 000
Accounts payable 54 500
Buildings at book value 250 000
Loan payable 2018 35 000

Accounts receivable 22 000

Motor vehicles at book value 89 000

Bank 17 000

Prepaid expenses 4 000

Machinery at book value 120 000

Cash athand 8 000

Capital ?

Wages owing 2 500

Bank loan (2025) 275 000

(a) Prepare a Classified Statement of Financial Position (Balance Sheet) for the year ended
31 December 2017, using the order of liquidity.

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(10 marks)

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 r (b)
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In the table below, state the effect of the following transactions on the balance
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sheet
equation. (Transaction (i) is done for you as an example.)

(i) The owner deposited an additional $7 000 into the business bank account.
(ii) The owner paid accounts payable of$500 from his personal savings.
(iii) The owner took goods valued at $400 for his personal use.
(iv) The owner bought stationery on credit from Paper Plus Limited costing $l 200.

Assets Liabilities Capital

(i) Increase Increase

(ii)

(iiD

(iv)

(4 marks)

(c) The following transactions for the business took place in May. Using the form on
page7, prepare the cash account and balance the account at the end ofthe month.

1-May Transferred $6 000 from the business bank account into a cash account
7-May Paid rent of$l 200 by cash
9-May Made sales of $4 800
l2-May Received cash from an accounts receivable of$3 000
l6-May Deposited $l 400 cash into the business bank account
26-May Brought office supplies for $800 in cash
29-May Paid wages of $5 000 by cash

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2.
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Factory workers at the Sharp-Brake Ltd are paid $40 an hour, Monday to Friday, and time and a half
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on weekend days. The time card below shows the number of hours worked by each employee during
a given week.

U. Marsh I. Stop D. Park II. Drive

Sunday 4 4 4 J
Monday 8 8 8 8
Tuesday 7 7 7 6
Wednesday 7 8 8
Thursday 8 7 7
Friday 6 6 8 8
Saturday 4 4 4

Deductions include the following:

National insurance: 5% ofgross pay

Contribution to pension fund 3% ofgross pay
Income tax: 25% of pay after deducting national insurance and pension
fund contributions

(a) (D Complete the form below by inserting the information for the four employees.

Hours Total Pay Hours Total Pay

Worked (Monday- Worked (Saturday Gross Pay
Employee
(Monday- Friday) (Saturday and Sunday) $
Friday) $ and Sunday) $

U. Marsh

I. Stop

D. Park

H. Drive

(5 marks)

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 r (ii)
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Prepare the payroll for the four employees.

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NI Pension Income
Gross Taxable
Deductions Deduction Tax Net Pay
Employee Pay Income
(5"h) (3"/o) (21Vo) $
$ $
$ $ $

U. Marsh

I. Stop

D. Park

H. Drive

(6 marks)

(b) (i) State ONE example of a statutory deduction.

(1 mark)

(ii) Define the term bonus.

(2 marks)

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 r (c)
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Two former factory employees, Parris and London, created a partnership. They agreed to
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charge l0%o interest on drawings and capital
share any remaining profits equally.

The table below shows the incomplete current accounts for the year ended 31 December
2017 in which the partnership earned a net income of $30 000.

Details Parris London Details Parris London

Balance b/d 800 Balance b/d 12 000

Drawing l8 000 I 100 lnterest on capital 2 000 3 000

Required:

Draw up the Appropriation Account for the partnership of Parris and London for the year
ended 3l December 2017.

(6 marks)

Total20 marks
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Fire destroyed the records of Sweet Serve Company. You were able to ascertain the following records
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for the period up to the fire:

Sales $200 000

Purchases sl25 000
Beginning inventory $ 40 000
Gross profit margin 30%

(a) Prepare a trading account for the Sweet Serve Company for the period, showing clearly
inventories, cost ofgoods sold and gross profit.

Sweet Serve Company

Trading account for the period just ended

$ $

(4 marks)
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 r (b)
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The following is a summary of Sweet Serve's bank account for the year ended 3l
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December
2017.

Bank Account

Bal b/d 20 000 Purchases 120 000

Sales 220 000 Insurance 45 000

Rent received 24 000 Sundry expenses 60 000
Drawings l5 000
Bal c/d 24 000
264 000 264 000
Bal b/d 24 000

The following additional information is also available

3yt2l20t6 3t/12/2017

Rent revenue outstanding 2 000 l 000

Insurance expense owing I 500 700

Using the T:account forma! prepare the following accounts for Sweet Serve for the year ending
December 3l 2017.

(D Rent Revenue a/c

(5 marks)
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 r (ii) lnsurance Expense a/c
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(5 marks)

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A company started business on I January 2015 and decided to maintain a provision for bad
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debts of 4% of its year-end accounts receivable. Accounts receivable for the first three years
of operations were as follows:
$

3l December2015 Accounts Receivable 72 000

3l December2016 Accounts Receivable 84 000

3l December?0lT Accounts Receivable 80 000

Prepare the company's Provision for Bad Debts Account for the three years, 20154017

(6 marks)

Total20 marks
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0I239020|JANUARY 2018

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4. Green Land Ltd specializes in the production of fruits and vegetables. The company has plans to
purchase an additional ten acres of land. The authorized share capital of the company was

I 000 000 ordinary shares @ $l each $l 000 000

500 000 5oZ preference shares @ $2 each $l 000 000

ln order to raise the funds on I January 2017 the company made an issue of: 200 000 ordinary shares
at $1.50 each, and $100 000 in 2olo debentures.

Allthe shares and debentures were fully subscribed.

(a) Preparejournal entries to record the issue ofthe shares and debentures on I January 2017
(Narratives are not required.)

Journal Entries

Details Dr Cr

(5 marks)

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 r (b)
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At the end of the first half of the company's business year, the accountant provided you with
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the following balances.

Retained profits l 50 000

Ordinary shares @ $l each 300 000

5olo preference shares s0 000

General reserve 30 000

2olo debentures I00 000
Share premium 125 000

Net income 140 000

The accountant informs you that debenture interest had not been included in calculating net
lncome.

The board of directors has recommended the following appropriation of profits:

(i) $20 000 to be transferred to general reserve

(ii) $50 000 to be transferred to a fixed assets replacement reserve
(iii) An ordinary dividend of $0.05 per share to be paid
(iv) Payment of the preference dividend

Prepare a statement to show the appropriation of profits for the six months ending 30 June
2017.

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(9 marks)

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 r (c) Prepare the capital reserve section
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of Green Land's Statement of Financial Position

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(Balance Sheet) as at 30 June 2017.

Green Land Ltd

Balance Sheet (extract) as at 30 June 2017

(6 marks)

Total20 marks
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NOTI{ING HAS BEEN OMITTED.

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The Rose Hall Golf Club has been in existence for several years. Members pay an annual
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subscription which entitles them to use the facility for the year. The following is the receipt and
payment account for the year ended 3l December 2017.

Rose HallGolf Club

Receipt and Payment Account
For the year ended 3l December 2017

$ $

Balance b/f l5 000 Rent and rates 3 500

Donations 3 500 Extension to clubhouse 4 000
Members' subscriptions 12 000 Secretarial expenses 5 000

Sales of competition tickets l 300 Suppliers for competition prizes 500

Visitors'fee 600 Stationery 3 500
Equipment purchase 6 000
Refreshments for competition 200
Repairs 5 600
Bal c/f 4 100

32 4oO 2*L
The following information is also available
I Jan 17 3l Dec 17
Subscriptions in advance I 500 800
Subscriptions in arrears r 800 t 200
Equipment 15 200 l9 600
Inventory of competition prizes 300 200
Amount owing to suppliers of competition prizes 150 50

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 r (a) Prepare a Statement of Affairs for the club as at
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I January 2017.
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(5 marks)

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 r (b)
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Using the T-account format, prepare the Subscriptions Account for the year ended
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3l December2017.

(6 marks)

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 r (c)
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Prepare a statement showing the profit or loss made on the competition taking account
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of
the following:

(i) The cost of prizes totalled $400.

(ii) The secretary spent 5olo of her time organizing the competition.

(9 marks)

Total20 marks

END OF TEST

IFYOU FINISH BEFORE TIME IS CALLED, CIIECK YOI'R WORK ON TIIIS TEST.

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