Csec Poa January 2013 p2
Csec Poa January 2013 p2
Csec Poa January 2013 p2
PRINCIPLES OF ACCOUNTS
3 hours
1. Answer ALL questions in Sections I and TWO questions from Section II.
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SECTION I
1. (a) On 1 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.
$ $
ASSETS CAPITAL
$ $
ASSETS CAPITAL
Bank 72 500 Capital 80 000
Equipment 7 500
80 000 80 000
$ $
ASSETS CAPITAL
Equipment 7 500
75 000 75 000
(i)
2 May (2 marks)
(b) 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
Vehicles 48 500
Inventory 14 200
Cash 3 200
Bank 2 600
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)
(c) 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. (5 marks)
Total 20 marks
2. The following information has been extracted from the books of Threaker and Waitley who have
been in partnership for several years.
Threaker $4 800 Cr
Waitley $7 300 Dr
Net profit for the year ended 31 December 2012 = $172 000.
The partnership agreement between Threaker and Waitley provides for the following:
(i)
Partners are to receive interest at a rate of 10% per annum on their opening capital
account balances.
(ii) Interest at a rate of 5% per annum is to be charged on partners’ drawings during
the year.
(a) Prepare the partnership Profit and Loss Appropriation Account for the year ended
31 December 2012. (8 marks)
(b) Prepare Current Accounts for the partnership as at 31 December 2012. (10 marks)
(c) Share the profit of the business between Threaker and Waitley as if there was no partnership
agreement. (2 marks)
Total 20 marks
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
$ $
Balance b/d 12 800 Drawings 6 500
Receipts from debtors 190 500 Wages 21 200
Rent 16 000
Payment to creditors 136 100
Sundry expenses 7 000
Balance c/d 16 500
203 300 203 300
(a) Using all relevant information prepare James Johnson’s Statement of Affairs as at
31 December 2011 to determine his capital. (7 marks)
(c) Prepare James Johnson’s Income Statement for the year ended 31 December 2012.
(7 marks)
Total 20 marks
SECTION II
4. K.A.M. Enterprise provided the following summary of their income statement for the year ended
31 December 2012.
K.A.M. Enterprise
Income Statement for the year ending 31 December 2012
$ $
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
Capital 50 000
Buildings 26 500
Inventory 8 000
Cash 6 500
(a) Using the vertical style of presentation, prepare a classified Balance Sheet for K.A.M.
Enterprise as at 31 December 2012. (10 marks)
(b) Using the income statement given and the classified balance sheet prepared, calculate the
following ratios:
• Net income margin
• Return on capital invested
• Current ratio (5 marks)
(c) Using the current ratio, comment on the liquidity position of K.A.M. Enterprise.
(1 mark)
(d) The following ratios were provided for TRU Brothers Enterprise, which operates a similar
business:
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)
(e) TRU Brothers Enterprise has recorded the following changes in stock during December
2012.
Purchases
4 December 500 10
10 December 700 12
14 December 300 11
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
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.
Opening stock $ $
Purchases
Closing stock
Fresh fruits 2 850
Notes:
(i) 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.
(a) Prepare the Manufacturing Account of Glen Co. for the year ended 31 December 2012
showing clearly:
(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
6. The Merry Men Sports and Social Club presented the following information regarding their
business.
$ $
41 950 41 950
Additional information:
1 Sept 2011 31 Oct 2012
$ $
Note: The list of balances does not include the lawn mower bought during the year
which is depreciated at 10% per annum on cost.
(a) Prepare the Subscriptions Account for the year ended 31 October 2012. (5 marks)
(b) Prepare the Creditors’ Account for the bar to determine purchases. (3 marks)
(c) Prepare the club’s Income and Expenditure Account for the year ended 31 October 2012.
(9 marks)
(d) (i) State the name of the section of the balance sheet in which subscriptions in arrears
appears. (1 mark)
(ii) 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
7. 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:
(a) (i) Prepare the journal entry to record the issue of the shares. (5 marks)
(ii) State ONE difference between ordinary shares and preference shares. (1 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
follows:
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)
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. (2 marks)
Total 20 marks
END OF TEST
IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.
01239020/JANUARY/F 2013