TEST CODE 01239020

FORM TP 2005122 MAY/JUNE 2005

CARIBBEAN EXAMINATIONS COUNCIL
SECONDARY EDUCATION CERTIFICATE
EXAMINATION
PRINCIPLES OF ACCOUNTS
Paper 02 - General Proficiency
3 hours

( 24 MAY 2005 (a.m.) )

1. Answer ALL the questions in Section I and TWO questions from Section II.

2. Begin EACH answer on a separate page.

3. Keep ALL parts of EACH answer together.

4. Silent electronic calculators may be used, but ALL necessa ry working should be clearly
shown.

5. Each question is worth 20 marks.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

Copyright © 2004 Caribbean Examinations Council.

All rights reserved.
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SECTION I

Answer ALL questions in this section.

1. (a) The following Trial Balance (including the heading) has errors.
Trial Balance for year ended December 30, 2004

Dr Cr
$ $
Sales 69 039
Purchases 41 175
Carriage 2 572
Drawings 3 900
Rent 3 311
Salaries and wages 15 375
Bad debts 438
Provision for bad debts 65
Debtors 6060
Creditors 3 235
Stock (January I , 2004) 5 963
Cash at bank 589
Provision for depreciation 9500
Equipment at cost 29 000
Capital

132 939 83 827

Redraft the Trial Balance correctly and include the capital amount. ( 7 marks)

(b) Show the journal entries necessary to record the following items in the books of
M. Ramjeet: (Suitable narrations must be used.)
April! Office furniture bought by Rarnjeet for $3 000 was returned to the supplier,
Furniture & More, as it was the wrong order.
AprilS A water bill of $75 for Ramjeet' s home was incorrectly recorded in the
books of the business. The error is now being corrected.
April 10 L. Townsend, a debtor who owed Ramjeet $300, has been declared
bankrupt. The court ordered Townsend to pay $0.50 for every dollar owed.
Ramjeet received a cheque for the amount.
Aprill3 Ramjeet removed stock valuing $450 from the business for his personal
use.
April20 Motor vehicle valuing $100 000 bought on credit from Y.S . Garage. A
cheque for $30 000 was made to Y.S. Garage as down payment.
(9marks)

(c) State whether the error made on April 05, and each of the transactions on April 10, 13 and
20 would increase, decrease or have no effect on the profit of the business. ( 4 marks)
Total 20 marks

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2. (a) Oliver Bentley maintains control accounts in his general ledger. He prepared a Sales Ledger
Control Account for January 2004, with information derived from his subsidiary books.
The debit balance shown in the Sales Ledger Control Account at January 31, 2004, does not
agree with the list of debtors extracted from the sales ledger at that date. The value of debtors
according to the sales ledger at January 31, 2004, was $14 872.

The following errors were subsequently discovered:

1. K. Boodraj, a bad debtor whose account had been written off in 2003, sent a cheque
for $198. The amount was entered in the sales ledger.

2. In January a page of the sales returns day book had been overcast by $200.

3. Discounts received of $156 had been mistakenly entered in the discounts allowed
column of the cash book in January 2004.

4. A debit balance of $824 on S. McCalla's account in the sales ledger had been set
off against his account in the purchases ledger. This entry had not been recorded
in either control account.

5. A $58 discount allowed to Ram Sookie had been correctly entered in the cash book
but had not been entered in Ram's account.

(i) Calculate the total of the debtors' balances at January 31, 2003, after the
errors have been corrected. (Show your workings.) ( 4 marks)

(ii) Calculate the total debtors' balance in Bentley's Sales Ledger Control
Account for the month of January 2004, before the errors had been
corrected. ( 8 marks)

(b) On April! , 2004, a business purchased a machine costing $224 000. The machine has a
lifeexpectancyofapproximately40months. Attheendofthattimethemachineisexpected
to have a trade-in value of $24 000. The financial year of the business ends on December
31, each year.

(i) Use the formula for calculating annual depreciation on the 'Straight-line Method'
to determine the annual depreciation on the machine. ( 2 marks)

(ii) Calculate the depreciation charge at the end of the first year. ( 1 mark)

(iii) Show the depreciation account for the first two years. (Smarks)

Total 20 marks

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3. Chris and Dorcas are in partnership. Their capital and current accounts as at January I, 2004, are
as follows:

Capital Current Drawings

Balances Balances
$ $ $
Chris 40000 5 000 (Credit) Chris 17 000 (on June 30)
Dorcas 60 000 3 000 (Credit) Chris 17 000 (on December 30)
Dorcas 12 000 (on April 30)
Dorcas 12 000 (on August 31)
Dorcas 12 000 (on December 31)

The partnership agreement provides for the following:

1. Profits and losses are shared between Chris and Dorcas in the same ratio as their capital.

2. Chris is to be credited with a salary of $6 000 per annum.

3. Interest on capital at 8 per cent per annum is allowed.

4. Interest on drawings is charged at 10 per cent per annum.

The profit for the year is $95 950.

(a) Prepare the partnership profit and loss appropriation account for the year ended December
31, 2004. (10 marks)

(b) Prepare the partnership capital and current accounts as at December 31 , 2004.
(9 marks)

(c) Explain the meaning of a debit balance on a partner's current account. ( 1 mark)

Total 20 marks

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SECTION II

Answer any TWO questions in this section.

4. McNaughton Tools is a small manufacturing establishment. At the end of the accounting year,
February 28, 2004, the following information was available.
$
Stocks, March 1, 2003
Raw materials 27 000
Finished goods 35 000
Work-in-progress 7 500
Factory wages (direct) 150 000
Factory salaries 25 700
Purchases of raw materials 36 300
Returns outwards 500
Factory power and fuel 83 200
Sales 532 800
Insurance 4400
Administrative expenses 120 000
Returns inwards on finished goods 3 000
Stocks, 28 February, 2004
Raw materials 15 600
Finished goods 20 000
Work -in-progress 13 200
Machinery at cost 100 000
You are given the following additional information:

1. Machinery is to be depreciated at the rate of 25 per cent per annum

2. Factory power and fuel is in arrears of $720
3. Insurance, which is to be divided in the ratio 3:1 between the factory and the office,
is prepaid in the amount of $200.

(a) Prepare a manufacturing account for the year ended February 28,2004, showing clearly the
following:
(i) The cost of raw materials consumed (used up)
(ii) The prime cost
(iii) Factory overheads
(iv) The total cost of production (14 marks)

(b) Prepare a Trading and Profit and Loss Account for year ended February 28, 2004.
( 4 marks)
(c) (i) Calculate the gross profit to sales ratio. (1 mark)

(ii) Calculate the rate of turnover. (1 mark)

Total 20 marks

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5. The balances below remained in the books of Stanigar Ltd after the preparation of the Trading and
Profit and Loss Account for year ended June 30, 2004.

$
Net profit 319 400
Debtors 86000
Creditors 38 000
Interim dividend paid to ordinary shareholders 20000
Fixed assets at cost 548 000
Accumulated depreciation 27 400
Unappropriated profits bought forward 55 000
Ordinary shares ($2 each) 100 000
5 per cent preference shares ($3 each) 40 000
Stocks (June 30, 2004) 66 000
Bank overdraft 15 000
Prepaid expenses 3 500
Interest on loan outstanding 56000
Cash balance 2 300
Directors fees outstanding 45 000
14 per cent loan 30 000

The directors of Stanigar Ltd recommended the following:

1. That TWO reserves be set up, namely,

(i) a general reserve of $15 000, and

(ii) a reserve of $7 000 for asset replacement.

2. Ordinary shareholders be paid a final dividend of 20 cents per share.

3. Preference shareholders dividend be paid.

(a) Prepare, in vertical format, the Profit and Loss Appropriation Account of Stanigar
Ltd. (?marks)

(b) Prepare, in vertical format, the Balance Sheet of Stanigar Ltd. (12marks)

(c) Explain the meaning of the term '14 percent' beside the word "loan".
( 1 mark)

Total 20 marks

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6. The Bridge Town Cricket Club had the following assets and liabilities at January 1, 2004.

Sports equipment $20 000, stocks of refreshments $1 000, creditors for refreshment $5 500, bank
balance $10 000, subscriptions owing $500.

During the year the following receipts and payments were made by the treasurer of the cricket club.

Receipts $
Subscriptions - Year ended 2003 500
Subscriptions - Year ended 2004 23 000
Subscriptions - Year ended 2005 600
Sale of refreshments 25 800
Sale of raffle tickets 4200

Payments $
Printing of raffle tickets 400
Payment to creditors 15 200
Purchase of sports equipment 12 600
Wages: Groundsman 4000
Sales girl 3 000
Utilities 8000
Rent 12000

Additional information at December 30, 2004, reveals that:

1. Subscriptions owing for year ended 2004 is $440.

2. Utility bills still outstanding $345.
3. Stocks of refreshment at December 30, 2004, was $6 250.
4. Sports equipment is to be depreciated at the rate of I0 per cent per annum.
5. Creditors for refreshment $2 170.
6. Rent prepaid at December 30, 2004, was $300.

(a) Prepare a statement to show the opening capital (Accumulated Fund) of the Bridge
Town Cricket Club. ( 5 marks)

(b) Prepare the following for the Bridge Town Cricket Club:

(i) Subscriptions account (Smarks)

(ii) Refreshment Trading account ( 3 marks)
(iii) Income and Expenditure Account for the year ended December 31, 2004
( 7 marks)

Total 20 marks

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7. (a) James Sigler is a garage mechanic who will visit the customer at home to find the source
of trouble and then, if necessary, advise the customer to send the vehicle to his business
place for repairs. When out on a job James Sigler is paid at the "customer care" rate. When
in the garage he works an eight-hour shift from 8.00 a.m. to 4.00 p.m. with an hour for lunch.
Any additional hours registered by the automatic clock are considered overtime hours.

The following are two documents recording his work for the week ending May 6, 2005.

CAR DOCTOR ENTERPRISES JOB#9

DEPARTMENT: Customer Care
TIMESHEET

MECHANIC: James Sigler Clock# 16 c . l_ _ _ _ ,

Date I time started I ended: May 2, 2005, 8.00 a.m. - I p.m.

Description of work required:
1. Travel to and from customer's premises- 45 mins.
2. Check source of problem- 3 hours
3. Advise customer to send in for repairs - 15 mins

SDale Foster Khan Trev Leeson

Signature: Operator Signature: Customer Signature: Supervisor

Remarks: Hours to be paid at customer care rate of pay.

CLOCK#16
CAR DOCTOR ENTERPRISES NAME : JAMES SIGLER
CLOCK CARD WEEK ENDING MAY 6 2005
IN OUT IN OUT IN OUT
MONDAYMAY2 1.00 4.00
TUESDAY MAY 3 8:00 12:00 1.00 4.00
WEDMAY4 8.00 12.00 1.00 4.00 5.00 7.00
THURSMAY5 8.00 12.00 1.00 4.00 5.00 8.00
FRIDAYMAY6 8.00 12.00 1.00 4.00 5.00 7.00

Additional Information:

1. "Customer Care" rate is $20 an hour.

2. Regular work hours (8:00a.m. to 4:00p.m.) are $12 an hour, and one-and-
!
one-half (12) the regular rate is paid for overtime work done.

3. The firm deducts the following: PAYE 10 per cent; Health Security 5 per
cent and a savings plan contribution of 5 per cent of weekly wages.

(i) Complete the table on the answer sheet provided to arrive at the number of hours
worked by James Sigler in the week ended May 6, 2005. ( 9 marks)

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(ii) Complete the pay slip for James Sigler for the week ended May 6, 2005 , on the
answer sheet provided. ( 7 marks)

(iii) Give TWO possible reasons for charging a higher rate for 'customer care ' jobs.
(2marks)

(c) Write suitable terms for the following definitions:

(i) A long-term loan which companies sometimes offer as a means of raising capital.

(ii) An arrangement with the bank requiring it to pay out from your account, fixed
amounts on specific dates. ( 2 marks)

Total 20 marks

END OF TEST

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 Centre No: _ _ _ _ _ __ Candidate No: _ _ _ _ _ __

Answer Sheet for Question 7 (i)

CAR DOCTOR ENTERPRISES

WEEKLY WORK RECORD
EMPLOYEE NAME FOR WEEK ENDED:
CUSTOMER REPAIR SHOP CLOCK CARD
CARE
JOB TICKET
HRS REGULAR OVERTIME
HOURS HOURS

MONDAY
TUESDAY
WEDNESDAY
THURSDAY
FRIDAY
TOTAL HOURS

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Centre No: _ _ _ _ _ _ __ Candidate No: _ _ _ _ _ _ __

Answer Sheet for Question 7 (ii)

CAR DOCTOR ENTERPRISES

EMPLOYEE PAY SLIP

NAME I
JAMES SIGLER Employee No. 16
WEEKENDED I
CUSTOMER CARE DEP'T REPAIR SHOP

Care Hourly rate Total Regular Reg Overtime Overtime Total Pay
Hours Pay Hours Hourly Hours Hourly Repair Shop
Customer Care Rate Rate

$ $ $ $ $

GROSS PAY $

Income Health Total

Tax Security Savings Deductions

$ $ $ $

NET PAY $

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