%.

TEST CODE O21O1O1O

FORM TP 2OI3I MAY/ruNE 2013
CARIBBEAN EXAMINATIONS COUNCIL
CARIBBEAN A-DVANCED PROFICIENCY EXAMINATION@
ACCOTJNTING

Unitl-Paper0l
t hour 30 minutes
13 JUNE 2013 (a.m.)

READ TI.IR poILOWING INSTRUCTIONS CAREFULLY.

E 1. This test consists of 45 items. You will have I hour and 30 minutes to answer them.
a
L. In addition to this test booklet, you should have an answer sheet.

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

4. 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.

5. 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 below.

Sample Item

The cost of an asset consumed in the generation of

revenue is treated in the books as
Samole Answer
(A) again
(B)
(C)
a liability
an allowance
@@co
(D) an expense

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

6. If you want to change your answer, erase it completely before you fill in your new choice.
7. When you are told to begin, turn the'page and work as quickly and as carefully as you can.
Ifyou cannot answer an item, go on to the next one. You may return to this item later. Your
score will be the total number of correct answers.

8. You may do any rough work in this booklet.

I

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

-
-
I

DO NOT TURI.I THIS PAGE UNTIL YOU ARE TOLD TO DO SO.

-
I
I

I Copyn ght @ 20 LZ Caribbean Examinations Counci I

I . All rights reserved.

02101010/CAPE 2013
 I

1. The idea that a business will continue to 2. The MAIN duty of the external auditor, from
operate for the indefinite future or until the the point of view of the shareholders, is to
beirefits of its non-current assets .can be
realized in the norrnal course ofoperations (A) express an opinion on the reliability
is knowh as the of the financial statements
(B) plan and perform the audit using
(A) objectivity principle statistical techniques
(B) . business entity principle (C) adhere to generally accepted
(C) going concern principle auditing standards
(D) revenue recognition principle (D) exercise accuracy in conducting the
audit of financial statements

3. A corporation re-acquired 5 000 of its own shares at $4 per share. Which of the following would be 'i
rl
thejournal entry to record this tansaction? :l
I

(A) Treasury stock Dr. $20 000

_l
I

' Cash Cr.' $20 000

(B) Share capital Dr. $20 000

Cash Cr. $20 000

(c) Cash Dr. s20 000

Treasury stock Cr. $20 000

(D) Treasury stock Dr. $20 000

Share capital Cr. $20 000

4. Generally accepted accounting principles J. The historical cost principle states that
are described as
(A) assetsshouldberecordedinitiallyat
(A) truths derived from the laws of cost and then adjusted as market
nature value changes
(B) a set of rules recognized as a guide (B) the private activities of the owner
for financial reporting of a business should not be
(c) the guidelines that professionals incorporated into the activities
use to solve ethical dilemmas of the business t
(D) rules establishedby the deparfrnent (C) transactions' involving assets are
ofoverseas trade ofa countrv' . recordedattheiracquisitioncost
(D) only tansactions that are. capable
of being expressed in monetary
terms should be included in the
accounting records

GO ON TO TTIE NEXT PAGE

_ 02r01010/CAPE20t3
 3-

6. Internal controls are used in a business to
(A) produce correct financial statements
and deter employee dishonesty
(B) enhance the accuracy and reliability
of its accounting records, and to
' prevent fraud
(C) . establish responsibility and conduct
independent checks on employee
performance
(D) safeguard the business' assets
and enhance the accuracy and
reliability of accounting records
8. ABC Corporation issued 3 000 ordinary
shares of$20 par value at$24 per share.
In recording the transaction, credits are
recorded as
(A) ordinary share capital $60 0OO and
net savings $12 000
(B) ordinary share capital $60 00O and
retained earnings $12 000
(C) ordinary share capital $60 00O and
share premium $12 000
(D) ordinary share capital $60 000 and
profit and loss $12 000

One clerk is responsible for keeping

inventory records and another for receiving
and issuing inventory items. This is an
example of
(A) minipisllen of labour
(B) segregation of duties
(C) inventory valuation
(D) inventory allocation

g. A firm issued 35 000 no par ordinary shares in exchange for a building which had a fair market
value of $525 000. The entry to record this transaction is

(A) Dr. Building ss25 000

Cr. Ordinary share capital $s25 000

(B) Dr. Cash $525 000

Cr. Ordinary share capital $525 000

(C) Dr. Ordinary share capital $525 000

Cr. Building $525 000

(D) share capital

' Dr.Cr.Ordinary
Cash
$525 000
$525 000

GO ON TO THE NEXT PAGE

- 02101010/cAPE20r3
 t

-4-
10. Stephens Inc issues 3 000 ordinary shares of 14. Having the same personresponsible forthe
$ l0 par value for $45 000. How should this ordering, paying and receiving ofgoods has
be neated in the financial statements? the effect of

(A) Cash should be debited for $ 1 5 000. (A) improvingorganizationalefficiency

(B) Ordinary share capital should be (B) increasing the potential for errors
credited for $45 000. and fraud
(C) . Paid-in capital in excess of par (C) providing a good example of
(share premium) should be segregation ofduties
debited for $10 000. (D) providing a good example of how
(D) Paid-in capital in excess of par to safeguard the comPanY's assets
(share premium) should be
credited for $15 000.
15. DBG Ltd acquired for cash the business
of Singer Inc on 22 June 2O10, at a price
1,1. The MAIOR effect of computerization in of $14 500 000. The book value of the
financial accounting is increased net assets at the time of the transaction was
$ I 1 000 000. Independentappraisers valued
(A) speed Singer Inc's net assets at a fairmarket value
(B) fraud of $ 13 000 000. What amount should DBG
(C) security debit in the goodwill account?
(D) employment
(A) $0
(B) $ 200 000
12. Which of the following relationships (c) $1 s00 000
CANNOT be derived from the firndamental (D) s3 s00 000
accounting equation?

(A) Assets - Liabilities : Owners' 16. Apartner who assumes unlimited liability of
Equity the debts of the partnership is known as
(B) Owners' Equity + Liabilities :
Assets (A) a limited partner
(C) Assets- Owners' Equity : (B) a mutual partner
Liabilities (C) an active partner
(D) Liabilities * Assets : Owners' (D) a general parhrer
Equity

13. What would be an advantage (benefit) of

having all countries adopt and follow the
same accounting standards?

(A) Comparability
(B) Consistency
(c) Absorbed preparation costs
(D) Eliminating the need for external
auditing

GO ON TO THE NEXT PAGE

- 02101010/0APE2013
 17. Ashley Manufacturing Co. received net
proceedsof $82 '000 on the sale of an
investmentthat cost$69 500, This transaction
should be reported in the income statement
asa
20. Which of the following reports is NOT a
component offinancial statements according
to IAS I (Sec.3 of IFRS for SMEs)?
(A) Financial ratios

(A) @) Statement of financial position

gain of $12 500 under Other
. Revenues and Gains
CB) gain of $12 500 under Operating
Revenues
(C) loss of $12 500 under Operating
Expenses and Losses
(D) loss of $12 500 under Operaring
Expenses
Items 18-19 referto the following information.
(C) Statement of changes in equity
(D) Notes to the financial staternents
21. Which ofthe following is/are characterisrics
of a privately owned corporation?
I. Shares are sold to the public.
IL Shares are not sold to the public.
III. The company can be owned Sy
family members only.

.Will Smith, a new partner, is admitted to (A) I oniy

the Labell and Ross Partrership under the (B) I and III only
bonus method. He contributes cash of (C) II and III only
$20 000 and equipment with a market (D) I, II and III
value of S30 000 in exchange for a 20%o
ownershiF interest in the new partnership.
The.capital of the existing partnership is 22. The ability to raise funds from the Stock
$130 000. Labell and Ross share pr6fits Exchange Market is a distinguishing feanrre
and losses in the ratio 80:20 respectively.
of which of the following types of business
organization?
r8. What is the new partnership capital?
(A) Statutory corporation
(A) $140 000 (B) Public corporation
(B) $150 000 (C) Private corporation
(c) $160 000 (D) Parbrership
(D) $180 000

23. An extraordinary item in financial

19. What is Smith's capital balance? accounting is an income or an expense that
arises from events that are distinct from
(A) $30 000 ordinary activities of the entity and are
(B) $35 000
(c) $36 000 (A) usual in nature
(D) $so ooo (B) not distinct in.narure
(C) expected to recur frequently
(D) not expected to recur frequently

GO ON TO THE NEXT PAGE

.02101010/CAPE 2013
 -6-
24. Which ofthe following statements isNOT Item 26 refers to the following information
tueregarding ordinary shares orpreference whichwas extracted from the records ofthe
shares? Belrnopan Cricket Club on 1April2007.

(A) Ordinary shares are the most basic The Club has 75 members who pay an
and common fype of shares. annual subscription of $150 each. Profits
(B) All companies issue ordinary made from social events amounted to
. shares. $12 500.
(C) Withpreference shares the amount
2008 2009
ofdividend is generally specifi ed
and increases every year. Subscriptions $is Subscriptions $70
(D) 'Withpreference shares the holders paid for 2008 paid for 2009
have priority over ordinary
'shareholders
in dividend and
assets distribution. 26. What amount of net income from
subscriptions and social events should the
Belmopan Cricket Club report :n2007?
25. Which of the following accounts would
be entered in the liabilities section of the (A) $112s0
Balance Sheet (Statement of Financial (B) $23 000
Position)? (c) $23 7s0
(D) $2s 2s0
(A) Accounts Payable, Notes Payable
and Loans Pavable
(B) Cash, Accounts Receivable and 27. A statutory corporation is an entity that has
Inventory been established by an Act of Parliament.
(c) Common Stock, Retained Eannings It is owned by the
and Paid-in Capital
(D) Retained Earnings, Cornmon Stock (A) employees
and Long-Term Invesfinent CB) government
(C) board of directors
(D) co-operative society

28. The Rampaul Company estimated at

I January 2010 that its income before
taxes for the year ended 31 December
2010 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 31 December
2010 was $5 700 000. The amount of
income tax payable at 31 December 2010
is

(A) $0
(B) $ 84 000
(c) s100 000
(D) s144 000

GO ON TO THE NEXT PAGE

- 02101010/CAPE 2013
 1

29. At 3l December 2006, Emily and Emile

32. Operating activities of a business organiza_
are- partners with capital balances of $200
0U0 and $120 000 respectively.
tion include
They share
profits and losses in the ratio if zl
date, Kalnrm invests $100 000 fo,
. bo ,t i, (A) acquisition of long-term assets
oo"_nni q) cash receipts from sale of goods
interest in the new partnership. fn. p".to"r,
agree that goodwill will be recorded
(C) long-term borrowings of an
on the enterprise
date of admission of Kakum. Calculate
total goodwill after the admission
the (D) a new issue of ordinary shares
ofKakum.

(A) $ 80 000 Item 33 refers to the following information.

(B) $ 90 000
(c) $120 000 Alata's financial position at the end of the
(D) $200 000 year is given as follows:

30. A single step income statement shows $

Cash 10 000
Accounts Receivable 15 000
(A) revenue and expenses
'(B) Inventory 25 000
revenue and cost ofsales
Accounts Payable 20 000
(c) gross income and expenses
Long-term notes payable 150 000
(D) revenue, cost ofsales and expenses

33. What is the current ratio?

31. Which of the following statements is TRUE
regarding information that is provided by (A) 0.20:r
financial reporting? (B) 0.30:1

I. It
(C) r.25:r
increases the value of the (D) 2:50:r
company.
II. It is useful for making investment
and credit decisions. 34. In preparing a statement of cash flows which
m. It identifies what is owned, what is of the following transactions would be
owed and the ownership interest considered an investing activity?
in the company.
(A) Issuance of a note payable
(A) Iandtronly (B) Sale of equipment ar book value
(B) I and III only (C) Sale of merchandise on credit
(C) II and III only (D) Declaration of a cash dividend
(D) I,II and III

GO ON TO THE NEXT PAGE

_02101010/GAPE 2013
 -8

particular 38. During periods of inflation or deflation' the

35. The change in cash for the year for a
nistoricat cost model forfi-nancial reporting
company is 54'500. If cash flow from
is deficient because
inveiting activities is $46 200 and cash flow
from financing activities is S34 400, what is estimates for
the cash flow from operating activities?
(A) it uses numerous
revenue and exPenses
(A) ($70 lo0) (B) it recognises revenue and expenses
before theY are realised
(B) . ($76 100)
(c) ($80 loo) (C) its statements are published thre6
years Prior to the rePort date
(D) ($8s 100)
(D) it adds and substract dollars
with different Purchasing Power
36. Which ofthe following statements relating without adjusting for those
to the liquidation of afirm is FAISE? differences

(A) In a liquidation the receiver

represents a secured creditor 39. An example of a contingent liability is
who has appointed him.
(B) The receiver recovers moneY owing (A) abondwhich canbe converted into
to the creditor who aPPointed ordinary shares
him. (B) any interest bearing liabilitY
(c) A liquidator is appointed to sell all (c) the unrealized loss from the
the assets and PaY the debts- reduction in the market Price of
(D) After the receiver recovers a long-term liabilitY
the money, he takes over (D) a lawsuit being filed against the
management of the firm. company

40. What is the effect of the following

37. Financial statements that are prepared
transaction on the cash position of a finn
based on a stable monetary unit are
in terms of cash flow?
(A) current value financial statements
'Granting of Christmas loans to staff'
(B) fair value financial statements
(c) historical dollar financial statements
(D) general price level financial
(A) Reduction in cash
statements
(B) Increase in cash
(C) No effect on cash
CD) Multiple effect on cash

GO ON TO THE NEXT PAGE

02 | o70ro/cAPE 2073
 9-
41. The Mangoes-by-the-Sea Company had 44. Liquidity is determined by the use of the
net credit sales of$8 800 000 and cost of
goods sold totalling $6 600 000 for the
year. The average inventory for the year
(A) investment turnover ratio
(B) acid tesr ratio
amountdd to $2 640 000. What was the
(C) debt to equiry ratio
inventory tumover.ratio for the year? (D) eamings per share
(A) . 2 times
(B) 2.5 rimes 45. The ChiefExecutive Officer of a company
(C) 3.3 times suggests that the ending inventory
(D) l0 times
for the
current financial period should be shown at
prices exceeding their actual cost. Which
of the following BEST reffects the status
42. The MAJOR disadvantage of taditional of this suggestion in terms of legality and
financial statements is their emphasis on compliance with accounting standards?
(A) historical cost Legality Compliance with
(B) long-term gowth
standards
(C) short-term profitability
(D) relevance (A) Legal Complies
@) Legal Does not comply
(C) Illegal Complies
43. In assessing the solvency of a firrn at a (D) Illegal Does not comply
specific date, THREE useful ratios are

(A) current ratio, quick ratio and

defensive interval ratio
(B) inventory turnover ratio, accounts
receivable ratio and accounts
payable ratio
(c) earnings per share, profit margin
ratio and retum on assets ratio
(D) debt ratio, interest coverand debt
to equity ratio

END OF TEST

IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK

ON TIIIS TEST.

GO ON TO THE NEXT PAGE

-02t0r010/cAPE 20i3