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MAY/JUNE 2OI6

CARIBBEAN EXAMINATIONS COUNCIL

CARIBBEAN ADVANCED PROFICIENCY EXAMINATION@ ACCOUNTING

Unitl-Paper0l

I hour 30 minutes

09 JUNE 2016 (a.m.)

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

This test consists of 45 items. You will have I hour and 30 minutes to answer them.

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4

5

In addition to this test booklet, you should have an answer sheet.

Do not be concerned that the answer sheet provides spaces for more answers than there are items in this test.

Each item in this test has four suggested answers lettered (A), (B), (C), (D). Read each item you are about to answer and choose the correct answer.

On your answer sheet, find the number which corresponds to your item and shade the space

having the same letter as the answer you have chosen. Look at the sample item belo*.

Samole ltem

The cost of an asset consumed in the generation of revenue is treated in the books as'

(A)

a galn

(B)

a liability

(c)

an expense

(D)

an allowance

Sample Answer

@@o@

The best answer to this item is "an expense", so (C) has been shaded.

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If you want to change your answer, erase it completely before you fill in your new choice.

When you are told to begin, turn the page and work as quickly and as carefully as you can.

If you cannot answer an item, go on to the next one. You may return to that item later.

You may do any rough work in this booklet.

You may use a silent, non-programmable calculator to answer items.

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

Copyright @ 2014 Caribbean Examinations Council

All rights reserved.

-) -

I

Which of the following can be considered

4. Which of the following activities relate to

physical controls in an accounting

the external auditor?

environment?

 
 

Expresses an opinion to the

 

I.

Safes and vaults

 

shareholders

II.

Locked warehouses for inventories

II

Works independently of employees

III. Bank safety deposit boxes

but is dependent on management

 

ill

Conducts audits independently of

 

(A) I and II only

 

company and management

(B)

I and III only

 

(c)

II

and III only

(A)

I and II only

(D)

I,

II and III

(B)

I and III only

 

(c)

II

and III only

(D)

I,

II and Ill

2

Which of the following is NOT a feature of

 

a computerized accounting system?

 

5. Banleff and Co., a law firm, has accepted

(A)

The recording of business

a fee of $30 000 to represent a client in

transactions is more efficient.

a legal suit in the future. Which of the

(B)

It prov ides faster access to

following has arisen from the transaction

accounting information and

for Bartlett and Co.?

(C)

reports.

Different principles are used from

(A)

Deferred revenue

 

those in a manual accounting

(B)

Deferred expense

(D)

system.

(c)

Accrued revenue

Both large and small companies can realize the benefits of such

(D)

Accrued expense

3.

a system.

One of the

major objectives of the

Intemational Financial Reporting

Standards is to

(A)

(B)

(C)

ensure that all companies prepare

financial statements

harmonize financial reporting

among different countries

insist that all accountants are

registered with an intemational

board

(D)

highlight the dysfunction between

financial and management

accounting

6 What would be the advantage of having all countries adopt and follow the same

accounting standards?

(A)

(B)

(C)

(D)

Comparability

Consistency

Absorbed

preparation

costs

Eliminating the need for external

auditing

GO ON TO THE NEXT PAGE

-3-

Item 7 refers to the following information from the books of Orange Vale Inc. for the year ending

30 June 201 5.

7,

Receipts from sales

Payments made to suppliers for goods Payments made for operating expenses

Accrued operating expenses Depreciation expense

$286 r20

$r03 404

$

23 615

$

7 218

$

1200

The net income for the year using the cash basis of accounting is

(A)

$150 683

(B)

$l5l 883

(c)

$159 l0l

(D)

$2s4 087

Items 8-9 refer to the following information.

The Belmopan Company began operations on 0l January 2015. The company has the following items included in the owners' equity section of its balance sheet.

Eight per cent preference shares $100 par value, 25 000 shares issued and outstanding

Ordinary shares $3 par value, 50 000 shares issued

and outstanding

Share premium

Totaldividends declared and paid

During 2015

During 2016

$2 s00 000

$ 4s0 000

$2 2s0 000

$ 170 000

$

210 000

8 Assuming that the preference shares were cumulative, how much of the 2015 dividends would be

distributed to the ordinary shareholders?

(A)$o

(B)

(c)

(D)

$

s le2

$ e 200

Sl0 000

9 Assuming that the preference shares were non-cumulative, how much ofthe 2016 dividends would be distributed to the preference shareholders?

(A)

(B)

(c)

(D)

2 000

$100 962

s26

$200 000

$il0

$

GO ON TO THE NEXT PAGE

-4-

10 Balmain Corporation sold 1000 ordinary shares which were held as a temporary investment. The shares were acquired six months ago at a cost of $90 a share. Balmain sold the shares for $80 a share. What is the entry to record this sale?

Dr

$s

Cr

(A)

Cash

Loss on sale of temporary investment Temporary stock investments

80

000

r0 000

90 000

(B)

(c)

(D)

Cash

90

000

Gain on sale of temporary investment

l0 000

Temporary stock investments

80

000

Cash

90

000

Temporary stock investments

90

000

Temporary stock investments

80

000

Loss on sale of temporary investments

r0 000

 

Cash

90

000

11. Wallace Auto Repairs follows the revenue

recognition principle. Wallace services a car and prepares the invoice on 3l March. The customer collected the car on 0l April

and mailed the payment to Wallace's Auto Repairs on 05 April. Wallace Auto Repairs received the cheque on 06 April. On what date should Wallace recognize the revenue?

t2

(A)

(B)

(C)

(D)

3l March

0l April

05

06

April

April

Which of the following is an example of a

data security procedure in a computerized

accounting env ironment?

(A)

(B)

(C)

(D)

Division of responsibilities

Reguiar maintenance

The use of

Virus scanning

passwords

13 Stephen's Inc. issues 3000 ordinary shares of $10 par value for $45 000. How should

this be treated in the financial statements?

(A) Cash should be debited for$15 000.

(B) Ordinary share capital should be

credited for $45 000.

(c) Paid-in capital in excess of par

(share premium) should be

debited for $ l0 000.

(D) Paid-in capital in excess of par

(share premium) should be

t4

credited for $15 000.

DBG Ltd acquired for cash, the business

of Singer Inc. on 22 June 2015, at a price

of$14 500 000. The bookvalue ofthe net

assets at the time of the transaction was

$l I 000 000. Independentappraisers valued

Singer's net assets at a fair market value of

$13 000 000. What amount should DBG

debit in the goodwill account?

(A)$0

(B)

(c)

(D)

$ 200 000

s00 000

$3 s00 000

$l

GO ON TO THE NEXT PAGE

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15. The conceptual framework of accounting

starts with a set of

(A) principles for guiding accountants

(B) assumptions about the accounting profession

(c) objectives of financial reporting

(D) conventions for recording fi nanc ial

information

Item l7 refers to the following information.

16 Which of the following disadvantages are associated with a public company?

I. Externally regulated

II. Ownership cannot be transferred

III. Investments are not refunded

(A) I and II only

(B) I and III only

(c) Il and III only

(D) I, II and III

On3l December20l4,equipmentwhichcost$60000hadaccumulateddepreciationof$12000

On 3l December 2015, a piece of equipment with a net book value of $8000 was sold for $6000 The company depreciates its assets using a l5olo reducing balance method.

17 .

The net book value of equipment on 3 I December 2015 was

(A)

(B)

(c)

(D)

800

$40

$34 680

$27

$26 680

880

18. Realto Co. Ltd issued 1500 ordinary shares with a par value of $ I .50 for $4.00 each. The journal entry to record the transaction is

 

Dr

Cr

(A)

Cash

$6 000

Ordinary Share Capital

$6 000

(B)

Cash

$22s0

Share Premium

$3 7s0

Ordinary Share Capital

$6 000

(c)

Cash

$6 000

Ordinary Share Capital

s2250

Share Premium

$3 7s0

(D)

Ordinary Share Capital

$6 000

Cash

$6 000

GO ON TO THE NEXT PAGE

-6-

19 For which of the following types of

business organizations is the ability to

raise funds from the stock exchange a

distinguishing feature?

(A)

(B)

(C)

(D)

Statutory corporation Public corporation

Private company

Partnership

20. Which of the following is a feature of a

2l

co-operative?

(A)

(B)

(c)

(D)

Separation ofownership and control Free transfer ofshares

Unlimited liability

Democratic control

The Rampaul Company estimated at

0l January 2015 that its income beforetaxes

forthe yearended 3 I December2O I 5 would

be $5 500 000. The Rampaul Company's

tax rate for the year is 42 per cent. The

company made quarterly tax payments

on 30 April, 30 June, 30 September and

15 December. The actual income for

the year ended 3l December 2015 was $5 700 000. The amount of income tax

payable at 3l December 201 5 was

(A)$0

(B)

(c)

(D)

$ 84 0oo $100 000 $144 000

Items 22-23 refer to the following

information.

See-off Golf Club has a restaurant for its

members. For the year just ended, the

following were reported

Beginning balance of inventory

2 080

Ending balance of inventory

2345

Paid to creditors for inventory

38 620

Owing to creditors

925

22

The restaurant has a mark-up of 20%o. What

were sales for the year?

(A)

(B)

(c)

(D)

$46 026

$46344

s47

$47 4s4

136

23 What was the cost of goods sold for the

year?

(A) $38 3ss

(B) $38 620

(c) $39 280

(D) $39 54s

24. Bridgeview Limited's share ownership is as follows:

50olo shares - owned by government 50oZ shares - owned by multiple small investors

Bridgeview Limited is MOST likely a

(A)

(B)

(C)

(D)

state-owned corporation

statutory corporation

private company

public company

r:N ON TO THE NEXT PAGE

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a

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a

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Item 25 refers to the following information.

Share capital

Share premium

Retained earnings

$

$

$

Balance at 01.01 .2015 25 000

0

l 88 697

25. By year end, $25 000 worth of shares, were issued at a premium of $50 000; profits for the

year were $61 800 and dividends paid $30 000. What would be the balances on the accounts at

3l December2015?

Share capital

$

Share premium

$

Retained earnings

$

(A)

25

000

0

r 88 697

(B)

50

000

50

000

220 497

(c)

50

000

80

000

250

497

(D)

50

000

80

000

250

497

Item 26 refers to the following data extracted from the books of XYZ Ltd.

Operating income Finance cost Taxation expenses Other comprehensive income:

Gains on property revaluation

$

21 850

7 475

5 750

20 000

26. What would be the total comprehensive income of XYZLtd?

(A)

(B)

(c)

(D)

$ 8 62s $28 62s

$36

100

$41 8s0

27. The following steps are usually taken when a partnership is being liquidated:

I.

Distribution

of remaining

cash to partners

II.

Sale ofnon-cash assets for cash

III.

Payments

to creditors

 

IV.

Allocation of gain or loss liquidation to paftners'capital

In which order should the liquidation process take place?

(A)

(B)

(C)

(D)

II, IV III, I III, IV, I, II

I, II,III, V

II,I,IV III

GO ON TO THE NEXT PAGE

-8-

28 At the end of December 2015, Emily and

29,

Emile are partners with capital balances of

$200 000 and $ I 20 000 respectively. They

share profit and losses in the ratio of 2:1.

In January 2016, Kakum invests $100 000 forone-fifth interest in the newpartnership.

The partners agree that goodwill will

be recorded on the date of admission of

Kakum. Calculate the total goodwill after

the admission of Kakum.

(A) $ 80 000

(B) $ 90 000

(c) $120 000

(D) $200 000

Item 30 refers to the following information

Which of the following standards provide guidance for determining the cost of

inventories?

(A) IAS I (IFRS Section 3)

(B) IAS 2 (IFRS Section l3)

(c) IAS l6 (IFRS Section l7)

(D) IAS l8 (IFRS Section 23)

The accounts of Jym Boys Sports Club showed the following balances on 3l December 2015.

Cash in hand

$3 600

Bank overdraft

$l 600

Subscription prepaid

$

e00

Bar stocks

$4 200

Subscription owing

$r r00

Sports equipment

$9 000

30. The club's accumulated fund on 0l January 2016 will be

(A)

(B)

(c)

(D)

$20 400

$16 400

$ls 400

$ e 2oo

GO ON TO THE NEXT PAGE

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-9-

31 In preparing the statement of cash flows,

which of the following transactions would be considered an investing activity?

32.

(A)

(B)

(C)

(D)

Issuance of a note payable Sale of merchandise on credit Sale of equipment at book value Declaration of a cash dividend

Which of the following is the correct

equation for the acid-test (quick) ratio?

(A) Cunent assets - inventory

Total liability

(B) Current assets - inventory

Current liability

(c) Current assets

Total liability

(D) Current assets - stocks

long-term liability

33 Property and equipment are classified in

the balance sheet as

(A) current assets

(B) intangible assets

(c) non-current assets

(D)

owners'equity

34. Which ofthe following should be disclosed in the summary of significant accounting policies?

Pol icy of accounting for short-term investments

II. Depreciation method(s)

III. The method(s)

applied

of revenue

recognition

(A) and ll only

I

(B)

I

and III only

(c) II and III only

(D) [, II and Ill

35. The change in cash for the year for a particular

company is $4500. Ifcash flow from investing

activities is $46 200 and cash flow from

financing activities $34 400, what is the cash flow from operating activities?

(A)

(B)

(c)

(D)

($70

($76 100)

($80 100)

($8s 100)

100)

36. Which ofthe following statements relating

to the liquidation of a firm is FALSE?

(A)

(B)

.

(C)

In a liquidation the receiver

represents a secured creditor

who has appointed him.

The receiverrecovers money owing

to the creditor who appointed

him.

'A liquidator is appointed to sell all

the assets and pay the debts.

(D) After the receiver recovers

the money, he takes over

management of the firm.

37. An example of a contingent liability is

(A) an unrealized loss from the

reduction in the market price of

a long-term liability

(B) a bond which can be converted into

ordinary shares

(c) any interest bearing liability

(D) a lawsuit being filed against the

company

38 Dominica Company

reported net income

of $45 000, net sales of $650 000, and

averageassets of$400 000 for 201 5. What

is Dominica Company's percentage return on assets for 2015?

(A)

(B)

(c)

6.92

n.2s

65.54

(D) t62.s0

GO ON TO THE NEXT PAGE

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39 During periods of infl ation and defl ation, the

historical cost model forfi nancial reporting

is deficient because

(A) it uses numerous estimates for

revenues and expenses

(B) it recognizes revenues and expenses

before they are usually rcalized

(c) comparative financial statements

(D) it

are published only for the three years prior to the report date

adds and subtracts dollars

with different purchasing power

without adjusting for those

differences

40 A runaway truck crashed into a firm's

warehouse and destroyed inventory costing $ I 00 000. The firm does not have insurance.

How should this event be recorded in

the firm's statement of comprehensive income?

(A) Other loss $ 100 000

(B) Selling expense $100 000

(c) Increase cost ofsale by $50 000

(D) Decrease cost of sale by $50 000

41. One MAJOR disadvantage of traditional financial statements is their emphas.is on

(A) short'term profi tabi I ity

(B) long-term growth

(c) relevance

(D) historical cost

42 Which element of published financial

statements affempts to provide information

on a company's social responsibility?

(A)

(B)

(C)

(D)

The auditor's report The director's report

The stock market report

Notes to the financial statements

43. In the preparation of financial statements, accountants in practice must ensure that

(A)

(B)

(C)

(D)

only timely information on the

reporting company is presented

the interest of management of the

reporting company

is preserved

true and fair information on the reporting firm is provided to

decision makers

the interest of the shareholders

of the reporting company is

preserved

l

F

44. Liquidity is determined by the use of the

(A)

(B)

(C)

(D)

investment turnover ratio

acid-test ratio

debt to equity ratio

earnings per share

tgryl! refers to the following information.

Alata's financial position at the end of the

year is given as follows:

:.

I

t:

!:

i

I

'.

:l

$ t_

Cash

l0 000

Accounts receivable

ls 000

Inventory

25

000

Accounts payable

20

000

Long-term notes payable

150 000

45. What is the current ratio?

:

t

,3

&

s f

I

*

H

b

*

t

;

,t,.

F

(A) 0.20:l

(B) 0.30: I

(c) 1.25:l

(D) 2:50:l

t.

t

i

E

E

END OF TEST

IF YOU FINISII BEFORE TIME IS CALLED, CIIECI( YOUR. \I/OR.K ON TIIIS TEST.