CSEC Principles of Accounts Paper 2 January 2018 - Free CXC Past Paper with Answers

Free CXC Principles of Accounts Paper 2 January 2018 past paper from 2018. Includes a worked answer key. Open the PDF, take a timed test, and study with AI on Caribbean AI.

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CSEC Principles of Accounts Paper 2 January 2018 Questions

Every question from this paper as text. See the answers and worked solutions. Questions are the property of the Caribbean Examinations Council; Caribbean AI is not affiliated with CXC.

Question 1 (34 marks)

(a)

The following is a list of balances extracted from the ledger accounts of Best Bake, a small pastry shop, at its year end, 31 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 at hand	8 000
Capital	?
Wages owing	2 500
Bank loan (2025)	275 000

CSEC Principles of Accounts Paper 2 January 2018 - Free CXC Past Paper with Answers

(b)

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

	Assets	Capital
(i)	Increase	Increase
(ii)
(iii)
(iv)

(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 $1 200.

[4 marks]

Question 2 (20 marks)

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

Deductions include the following:

National insurance: 5% of gross pay
Contribution to pension fund: 3% of gross pay
Income tax: 25% of pay after deducting national insurance and pension fund contributions

[25 marks]

(a)(i)

	U. Marsh	I. Stop	D. Park	H. Drive
Sunday	4	4	4	3
Monday	8	8	8	8
Tuesday	7	7	7	6
Wednesday	7	7	8	7
Thursday	8	7	7	7
Friday	6	6	8	8
Saturday	4	4	4	4

Deductions include the following:

National insurance: 5% of gross pay
Contribution to pension fund: 3% of gross pay
Income tax: 25% of pay after deducting national insurance and pension fund contributions

Complete the form below by inserting the information for the four employees.

[5 marks]

(a)(ii)

Prepare the payroll for the four employees.

Employee	Gross Pay $	NI Deductions (5%) $	Pension Deduction (3%) $	Taxable Income $	Income Tax (20%) $	Net Pay $
U. Marsh
I. Stop
D. Park
H. Drive

[6 marks]

(b)(i)

State ONE example of a statutory deduction.

[1 mark]

(b)(ii)

Define the term bonus.

[2 marks]

(c)

Two former factory employees, Parris and London, created a partnership. They agreed to

charge 10% 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	18 000	1 100	Interest on capital	2 000	3 000

Required: Draw up the Appropriation Account for the partnership of Parris and London for the year ended 31 December 2017.

[6 marks]

Question 3 (20 marks)

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

Sales: $200 000
Purchases: $125 000
Beginning inventory: $40 000
Gross profit margin: 30%

[4 marks]

(a)

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

Sweet Serve Company

Trading account for the period just ended

[4 marks]

(b)

The following is a summary of Sweet Serve’s bank account for the year ended 31 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	15 000
Bal c/d	24 000
	264 000		264 000
Bal b/d	24 000

The following additional information is also available:

	31/12/2016	31/12/2017
Rent revenue outstanding	2 000	1 000
Insurance expense owing	1 500	700

Using the T-account format, prepare the following accounts for Sweet Serve for the year ending December 31 2017.

[10 marks]

(b)(i)

Rent Revenue a/c

[5 marks]

(b)(ii)

Insurance Expense a/c

[5 marks]

(c)

A company started business on 1 January 2015 and decided to maintain a provision for bad debts of 4% of its year-end accounts receivable. Accounts receivable for the first three years of operations were as follows:

31 December 2015 Accounts Receivable $72 000
31 December 2016 Accounts Receivable $84 000
31 December 2017 Accounts Receivable $80 000

Prepare the company’s Provision for Bad Debts Account for the three years, 2015–2017.

[6 marks]

Question 4 (20 marks)

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

	$
1 000 000 ordinary shares @ $1 each	1 000 000
500 000 5% preference shares @ $2 each	1 000 000

In order to raise the funds on 1 January 2017 the company made an issue of: 200 000 ordinary shares at $1.50 each, and $100 000 in 2% debentures.

All the shares and debentures were fully subscribed.

[14 marks]

(a)

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 1 000 000 ordinary shares @ $1 each $1 000 000 500 000 5% preference shares @ $2 each $1 000 000 In order to raise the funds on 1 January 2017 the company made an issue of: 200 000 ordinary shares at $1.50 each, and $100 000 in 2% debentures.

All the shares and debentures were fully subscribed.

Prepare journal entries to record the issue of the shares and debentures on 1 January 2017. (Narratives are not required.)

Journal Entries

Details	Dr	Cr

[5 marks]

(b)

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

	$
Retained profits	150 000
Ordinary shares @ $1 each	300 000
5% preference shares	50 000
General reserve	30 000
2% debentures	100 000
Share premium	125 000
Net income	140 000

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

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.

[9 marks]

(c)

Prepare the capital reserve section of Green Land's Statement of Financial Position (Balance Sheet) as at 30 June 2017.

Green Land Ltd Balance Sheet (extract) as at 30 June 2017

[6 marks]

Question 5 (20 marks)

(a)

The Rose Hall Golf Club has been in existence for several years. Members pay an annual subscription which entitles them to use the facility for the year. The following is the receipt and payment account for the year ended 31 December 2017.

Rose Hall Golf Club Receipt and Payment Account For the year ended 31 December 2017

	$		$
Balance b/f	15 000	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	1 300	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
	32 400		32 400

The following information is also available.

	1 Jan 17	31 Dec 17
Subscriptions in advance	1 500	800
Subscriptions in arrears	1 800	1 200
Equipment	15 200	19 600
Inventory of competition prizes	300	200
Amount owing to suppliers of competition prizes	150	50

Prepare a Statement of Affairs for the club as at 1 January 2017.

[5 marks]

(b)

Using the T-account format, prepare the Subscriptions Account for the year ended 31 December 2017.

[6 marks]

(c)

Prepare a statement showing the profit or loss made on the competition taking account of the following: (i) The cost of prizes totalled $400. (ii) The secretary spent 5% of her time organizing the competition.

[9 marks]