TEST CODE 01239032

FORM TP 2016104 MAY/JUNE 2016

CARIBBEAN E XAM I NAT I O N S COUNCIL

CARIBBEAN SECONDARY EDUCATION CERTIFICATE®

EXAMINATION

PRINCIPLES OF ACCOUNTS

Paper 032 – General Proficiency

1 hour 30 minutes

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

1. Answer ALL questions.

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

3. DO NOT write in the margins or above or below the page.

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. If you 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.

Copyright © 2015 Caribbean Examinations Council

All rights reserved.
‘‘*’’Barcode Area”*”
01239032/F 2016 Sequential Bar Code
 -4-

DO NOT WRITE IN THIS AREA  

Instructions: This paper consists of a case study and ELEVEN questions. Read the case study
and answer ALL the questions that follow in the spaces provided in this booklet.

Case Study

Peter Outridge is an expert in occupational health and safety and is the only investor in his firm which
is called POOHS Enterprises. Information is provided for the operations of POOHS Enterprises for a
period of three years.

1. Name the type of business formed by Peter Outridge.

.............................................................................................................................................................
(1 mark)

2. Name ONE ledger which Peter Outridge would use to record his transactions.

.............................................................................................................................................................
(1 mark)

DO NOT WRITE IN THIS AREA

Peter started the company with cash totalling $30 000 from his personal and family savings. In addition,
he brought in $45 000 worth of inventory which he purchased from Levelfield Limited and paid for in
cash. He also brought in a signed lease for premises at a rate of $5 000 per month. Peter paid six months
rent in advance by cash. On the same day, the firm borrowed $70 000 from Prime Rate Loan Company
at an interest rate of 5% per annum.

3. Prepare the opening entry for POOHS Enterprises on 01 January 2013. (Be sure to include the
proper heading in your answer.)

POOHS Enterprises
General Journal

Date Details f $ $

DO NOT WRITE IN THIS AREA

(7 marks)
GO ON TO THE NEXT PAGE
01239032/F 2016
‘‘*’’Barcode Area”*”
Sequential Bar Code
 -5-
DO NOT WRITE IN THIS AREA  

During the year ended 31 December 2014, POOHS Enterprises recorded the following information about
its business in safety and security equipment.

Type of Good Opening Inventory Purchases Sales

Smoke alarms 200 @ $140 each 2000 @ $150 each 1900 @ $190 each

Sprinkler systems 12 @ $4 000 each 25 @ $4 250 each 32 @ $6 000 each

Fire extinguishers 17 @ $260 each 45 @ $230 each 48 @ $350 each

Personal safety equipment 12 boxes @ $120 per box 175 @ $110 per box 180 @ $100 per box

TOTAL VALUE $81 860

4. Use the LIFO method of inventory valuation to calculate POOHS closing inventory on 31 December
2014. An inventory valuation form is provided below for you.
DO NOT WRITE IN THIS AREA

INVENTORY VALUATION FORM — LIFO

BALANCE
Opening
Type of Good Purchases Sales
Inventory Cost Price Value
Units
($) ($)

Smoke alarms

Sprinkler systems

Fire extinguishers

Personal safety equipment

DO NOT WRITE IN THIS AREA

(7 marks)

5. Name another method of valuing inventory which POOHS could have used.

.............................................................................................................................................................
(1 mark)

GO ON TO THE NEXT PAGE

01239032/F 2016
‘‘*’’Barcode Area”*”
Sequential Bar Code
 -6-

DO NOT WRITE IN THIS AREA  

6. Calculate the TOTAL value of sales for EACH item in POOHS Enterprises’ list of safety items
sold for the year ended 31 December 2014.

.............................................................................................................................................................

.............................................................................................................................................................

.............................................................................................................................................................

.............................................................................................................................................................

.............................................................................................................................................................

.............................................................................................................................................................

.............................................................................................................................................................

.............................................................................................................................................................
(2 marks)

DO NOT WRITE IN THIS AREA

7. Draw up a Trading Account to show the gross profit made by POOHS Enterprises for the year
ended 31 December 2014.

.............................................................................................................................................................

.............................................................................................................................................................

.............................................................................................................................................................

.............................................................................................................................................................

.............................................................................................................................................................

.............................................................................................................................................................

.............................................................................................................................................................
DO NOT WRITE IN THIS AREA
.............................................................................................................................................................
(5 marks)

8. Calculate POOHS Enterprises’ gross profit margin for the year ended 31 December 2014. (Show
working and round off answer to one decimal place.)

.............................................................................................................................................................
(2 marks)

GO ON TO THE NEXT PAGE

01239032/F 2016
‘‘*’’Barcode Area”*”
Sequential Bar Code
 -7-
DO NOT WRITE IN THIS AREA  

9. Peter Outridge, the owner of POOHS Enterprises, thinks that his gross profit margin percentage
is low.

(a) What can Peter use to determine whether his profit margin is low or not?

..............................................................................................................................................

..............................................................................................................................................

..............................................................................................................................................
(1 mark)

(b) Use information on inventory provided on page 5 to indicate to Peter Outridge what may
be ONE cause of his low profit margin.

..............................................................................................................................................

..............................................................................................................................................
DO NOT WRITE IN THIS AREA

..............................................................................................................................................
(1 mark)

(c) Name ONE other ratio that Peter Outridge can use to measure the performance of his
business.

..............................................................................................................................................

..............................................................................................................................................

..............................................................................................................................................
(1 mark)
DO NOT WRITE IN THIS AREA

GO ON TO THE NEXT PAGE

01239032/F 2016
‘‘*’’Barcode Area”*”
Sequential Bar Code
 -8-

DO NOT WRITE IN THIS AREA  

POOHS Enterprises provides the following information for the six months ended 30 June 2015. All
receipts and payments are by cheque.

01 January Opening balance $45 600.

01 January Paid $30 000 for rent for the period by 01 January 2015 – 30 June 2015.

20 February Owner cashed $12 900 cheque for personal use.

14 March Credit sales to Farrell Business Solutions amounted to $191 000. The terms agreed on
were net 5% discount if bill paid within three months.

24 May Cash sales amounted to $86 200 of which $85 200 was sent to the bank. POOHS Enterprises
paid Executive Security $7 750 to transport cash to bank.

01 June Received amount in full settlement from Farrell Business Solutions.

30 June Cash sales of $42 800 sent to bank. Transport cost of $2 150 paid to Executive Security.

DO NOT WRITE IN THIS AREA

30 June Paid two years’ worth of annual interest in advance to Prime Rate Loan Company.

DO NOT WRITE IN THIS AREA

GO ON TO THE NEXT PAGE

01239032/F 2016
‘‘*’’Barcode Area”*”
Sequential Bar Code
 -9-
DO NOT WRITE IN THIS AREA  

10. Using the information provided on page 8, as well as the information for Question 3, prepare the
summarized bank account for POOHS Enterprises for the six months ended 30 June 2015.
DO NOT WRITE IN THIS AREA
DO NOT WRITE IN THIS AREA

(9 marks)

GO ON TO THE NEXT PAGE

01239032/F 2016
‘‘*’’Barcode Area”*”
Sequential Bar Code
 - 10 -

DO NOT WRITE IN THIS AREA  

11. Assuming no additional money was paid for Rent Expense, prepare the adjusting entry as at
31 December 2015 in POOHS Enterprises’ General Journal.

..............................................................................................................................................................

..............................................................................................................................................................

..............................................................................................................................................................

..............................................................................................................................................................
(2 marks)

Total 40 marks

DO NOT WRITE IN THIS AREA

DO NOT WRITE IN THIS AREA

END OF TEST

IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.

01239032/F 2016
‘‘*’’Barcode Area”*”
Sequential Bar Code