CSEC Principles of Accounts Paper 2 January 2017 - Free CXC Past Paper with Answers

Mhalal and Jack operate a business trading in bicycle tyres. They disagree on the inventory valuation that should be used. Mhalal only knows the FIFO method and he insists that FIFO should be used to determine the value of the ending inventory for the three months ended 31 March 2016.

The following information is presented to you by Mhalal and Jack.

2016		Units	Cost Price Per Unit $
1 January	Beginning inventory	100	20
17 January	Purchased	200	22
29 January	Sold	240	40
1 February	Purchased	400	25
1 March	Sold	260	42
10 March	Purchased	130	26
31 March	Sold	250	45

[12 marks]

(a)

Jack prefers the LIFO method of inventory valuation. Explain to Mhalal, in ONE sentence, how LIFO differs from the FIFO method.

[1 mark]

(b)

Complete the inventory form provided on pages 9 and 10, using the FIFO method, and in the space below state the value of inventory as at 31 March 2016.

[11 marks]

(c)

Using the information from the inventory form, prepare the Trading Account for Mhalal and Jack for the three months ended 31 March 2016.

[7 marks]

(d)

Describe, in ONE sentence, the effect on cost of goods sold and gross profit if Mhalal and Jack had used the LIFO method which gives a lower valuation for closing inventory.

[1 mark]

Question 3 (11 marks)

Stress Ease Enterprises provides a service called “Client Rescue” to its clients by collecting them from locations where their vehicles are stalled and delivering them to their destinations. The firm owns two vehicles worth $210 000 in total.

The following information is provided for Stress Ease for the year ended 31 March 2016.

Forty-three hundred (4 300) clients pay a retainer fee of $100 per year.
There is a charge of $35 per kilometre for “Client Rescue”.

(a)

Prepare Stress Ease Enterprises’ Income Statement for the year ended 31 March 2016.

(b)

For the month ended 30 April 2016, Stress Ease Enterprises recorded the following cash and bank transactions.

2016 April	$
1 Balance at Bank	3 570
1 Cash	1 140
3 Insurance payment made by cheque	2 500
5 Client Rescue fees received in cash of which $25 000 was sent immediately to the bank	25 690
6 Petty cashier withdraws cash from cash in hand	130
7 Purchases of spare parts paid by cheque	10 470
8 Engine repair paid by cheque	5 000
9 Owner withdraws cash from bank for house rent	8 000
10 Client Rescue fees received in cash	31 110
11 Deposited cash in bank	30 000
15 Payment to Creditor — J. Davis by cheque after discount of 10%	9 900
18 Client Rescue fees paid for by credit card — clients were refunded $200 in cash	19 200
23 Cleaning materials paid in cash	370
25 Client Rescue fees deposited immediately in bank account	6 840
30 Wages paid by cheque	14 500

Using the form provided on pages 15 and 16, prepare the Cash Book of Stress Ease Enterprises for the month ended 30 April 2016.

[11 marks]

(i)(i)

Quarter	Kms
1	1 923
2	2 680
3	3 175
4	1 848

Stress Ease Enterprises incurred the following costs during the same year.

Driver’s salaries $160 600
Fuel $198 500
Vehicle usage costs $ 27 430
Depreciation on vehicles 30% straight line method

Question 5 (20 marks)

Authentic Sandals is the manufacturer of sturdy leather and fibre sandals which are popular with tourists. Each pair of sandals is packaged in a unique three-colour string bag, designed and made especially for Authentic Sandals. The following information was taken from the books for the period 1 June 2015 to 31 May 2016.

	Leather ($)	Fibre ($)	Bags ($)
Opening stock	14 600	22 300	2 500
Purchases	471 300	47 100	8 000
Closing stock	16 500	11 900	2 300

Other costs were as follows:

Bag designer wages: $5 per bag purchased
Sandals stitchers' wages: $111 000
Accrued stitchers' wages: $11 500
Insurance on factory equipment: $4 200
Factory equipment at cost: $34 000
Factory building at cost: $160 000

Additional information include the following:

All factory assets are to be depreciated at the rate of 20% per annum.
Half of the insurance is a prepayment for next year.

(a) (i) Using the worksheet set out below, prepare a statement to show the cost of raw materials consumed by Authentic Sandals for EACH raw material. (7 marks) (ii) Prepare a statement to show the total direct expenses incurred for bags. (3 marks)

(b) Beginning with the total cost of raw materials consumed, prepare the Manufacturing Account for Authentic Sandals for the period ending 31 May 2016, showing a separate amount for

total direct labour cost
total indirect costs
total cost of production. (10 marks)

[20 marks]

(a)

Additional information include the following:

All factory assets are to be depreciated at the rate of 20% per annum.
Half of the insurance is a prepayment for next year.

(i) Using the worksheet set out below, prepare a statement to show the cost of raw materials consumed by Authentic Sandals for EACH raw material. (7 marks) (ii) Prepare a statement to show the total direct expenses incurred for bags. (3 marks)

[10 marks]

(a)(i)

Using the worksheet set out below, prepare a statement to show the cost of raw materials consumed by Authentic Sandals for EACH raw material.

[7 marks]

(a)(ii)

Prepare a statement to show the total direct expenses incurred for bags.

[3 marks]

(b)

Beginning with the total cost of raw materials consumed, prepare the Manufacturing Account for Authentic Sandals for the period ending 31 May 2016, showing a separate amount for

total direct labour cost
total indirect costs
total cost of production.

[10 marks]

Question 6 (24 marks)

Miracle Charity Group is a non-trading organization which provides temporary shelter for persons who have lost their homes. On 1 September 2015, the 300 members of Miracle Charity Group owned the following assets and liabilities.

	$
Bank overdraft	13 400
Foodstuff inventory	16 375
Shelter furniture	48 555
Government grants owing to the group	23 595
Shelter building	120 000
15 members with subscriptions in arrears	12 150
Wages owing	15 205

(a)

Prepare a Classified Balance Sheet of Miracle Charity Group as at 1 September 2015.

[5 marks]

(b)

During the year ended 31 August 2016, Miracle Charity Group recorded the following cash-based activities.

	$
Purchased foodstuff	93 680
Received full subscriptions from 275 members	222 750
Received arrears from 10 members	8 100
Received government grants	83 595
Purchased new furniture	12 445
Added ten rooms to building	98 000
Paid wages	45 865
Paid for painting of old rooms	1 675

Prepare a Receipts and Payments Account for Miracle Charity Group for the year ended 31 August 2016.

[10 marks]

(c)

At the end of the year, members requested a report on the financial position of the group. Additional information which will affect the report include the following:

Foodstuff in the amount of $17 110 on hand as at 30 June.
Building and furniture owned at the end of the year are depreciated at 20% of original costs plus all capital expenditure costs per year.

Prepare part of the report for the members of the Miracle Charity Group for the year ended 31 August 2016 to show the following amounts. (Show all working clearly.)

[9 marks]

(c)(i)

The amount of foodstuff consumed for the year

[3 marks]

(c)(ii)

The total depreciation expense to be subtracted

[3 marks]

(c)(iii)

The amount of subscriptions paid per member

[3 marks]

(c)(iv)

The amount of subscriptions outstanding from all members at year end

CSEC Principles of Accounts Paper 2 January 2017 Questions

Question 1 (20 marks)

Question 2

Question 3 (11 marks)

Question 5 (20 marks)

Question 6 (24 marks)

Question 7 (18 marks)