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MAY/JUNE 20I4
FORM TP 2OL4I
CARIBBEAN EXAMINATIONS COUNCIL
CARIBBEANADVANCEDPROFICIENCYEXAMINATIoN'!,
ACCOUNTING

Unitl-PaPer0l
I hour 30 minutes

12 JUNE 2014 (a.m-)

READTHEFoLLowINGINSTRUCTIoNSCAREFULLY.

.
I Ihis test bonsists of 45 items. You will have I hour and 30 minutes to answer them'

tn addition to this test book|et, you should have an answer

sheet.
2.
Do not be concerned that the answer sheet provides spaces
fof more answers than there are
3.
items in this test.
(A), (B), (C), (D). Read each item
4. Each item in this test has four suggested answers lettered
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
5. item below.
having the same letter as the answer you have chosen. Look at the sample

Sample ltem

The cost of an asset coniumed in the generation of .

revenue is treated in the books as

SamPle Answer
(A) a gain
1 (B) a liability @@o@
(C) an exPense
(D) an allowance

The best answer to this item is "an expense", so answer space

(C) has been shaded'

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

as you can.
7. When you are told to begin, turn the page and work as quickly and as carefully
lf you 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 rnay do any rough work in this booklet'

- 9. You rnay use a silent. non-programnrable calculator to answer items'
,-
-il
-{I DO NOT TURN THIS PAGE IJXTTL YOU Ary
- Copyright O 2012 Caribbean Examinations Council
 2-

a business to
., One clerk is responsible for keeping
l. lnternal controls are used in inn"n,o.y records and another for receiving
and issuing inventory items' This
is an
( A) produce correct financial statemens of
example
and deter emPloYee dishonestY
(B) enhancetheaccuracyandreliability
and to (A) division of labour
of, its accounting records' segregation of duties
prevent fraud
igl
conduct iCi mJniioring inventory levels
(C)
\- / esiablish responsibility and (D) inventorYvaluation
independent checks on employee
Perfbrmance
(D) --;";
\v' sai'eguard the business' assets
the accuracY and
enhance
reliability of accounting records

of the following would

5 000.of tli::: shares at $4 per share' Which
3. A corporation re-acquired
record this transaction?
be thejournal entry to

Dr $20 000
(A) Treasury Stock Cr $20 000
Cash

Dr $20 000
(B) Share CaPital Cr $20 000
Cash

Dr $20 000
(c) Cash Cr $20 000
Treasury Stock

Dr $20 000
(D) Treasury Stock Cr $20 000
Share CaPital

(benefit) of
What would be the advantage
Stock' is the term used to describe all countries adopt and follow the
4. 'Treasury ;;;i;g
shares that are ,"rn. u""ounting standards?

(A) fullY Paid-uP (A) ComparabilitY

(B) sold above Par (B) ConsistencY
ici paid in excess of Par Absorbed PreParation costs
(c)
6i re-acquired bY issuing firms (D) Eliminating the need tbr external
auditing
on
The MAJOR impact of computerization
nnur,.itt accounting is increased

(A) sPeed
(B) access
(C) securitY
(D) emPloYment

N\I Tr\'FIJE \ItrYT PANtr

^N
 3-

8. A summary of the procedures (principles)

1. The historical cost principle states that
for controlling accounts receivable includes
(A) assets should be recorded initially at
l. segregation of duties
cost and then adjusted as market
value changes
ll. establishmentofresponsibilities
(B) the private activities of the owner
III. proper documentation

of a business should not be (A) I and ll onlY

incorPorated into the activities
ofthe business
(B) I and lll onlY
(e) transactions involving asscts are
(C) ll and lllonlY
recorded attheir acquisition cost
(D) I, ll and lll
(D) only transactions that are capable
of being exPressed in monetary
terms should be included in the
accounting records

was acquired at a cost of $5 700' The

9. Two+hirds of an insurance policy has expired. The policy
adjusting entry to record the expired portion would involve
a

(A) credit of $ | 900 to prepaid insurance

(B) credit of $3 800 to prepaid insurance
(C) debit of $ | 900 to insurance expense
(D) debit of $3 800 to insurance expense

a temporaly investment' The

10. Balmain Corporation sold I 000 ordinary shares which were held as
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?
$$
(A) Cash 80 000
Loss on sale of temporary investment t0 000
Temporary stock investments 90 000

(B) Cash 90 000

r0 000
Gain on sale of temporary investment
Temporary stock investments 80 000

(c) Cash 90 000

90 000
Temporary stock investments

(D) Temporary stock investments 80 000

Loss on sale of temporary investments l0 000
Cash
90 000

(a^ (')N TO THtr Ntr.X'T PAGE

 4-

annualsales of 14. DBG Ltd acquired for cash' the business

u. Memo lnc., acompany with oiSing.,Inc. on 22 June 2013' at a price
ooo, purchased computer
software of the net
SiJ ooo
to be of $t4iOO 000. The book value
ilis50. T'his software is expected was
assets at the time of the transaction
u.li t'ot tttt next l0 years' The accountant
as an Sf f 000 000. lndependent
appraisers
of fr4"to Inc. recorded the software ualued Singer's net assets at a fair market
;;;;t;. which concept can be used to value of $tf OOO OOO' What amount
justify this treatment? rft*i.f DBG debit in the goodwillaccount?
(A) Prudence (A)$0
(B) MaterialitY (B) $ 200 000
(C) Historicalcost (c) $l s00 000
(D) C.ring concern (D) $3 500 000

NOT a feature
12. Which of the following is 15. The conceptual framework of
accounting
.i tetizedaccounting system? stans with a set of
" ""tp"
\''l The recording of
1a) business
(A) principles for guiding accountants
transactions is more efficient' (B) assumPtions about the accounttng
from
rB)
\-/ Different principles are used orofession
those in a manual accounttng (c) objectives of financial reporting. .
sYstem' (D) for recording fi nancial
access to
(C) lt Provides faster "onn"ntions
information
accounrlng information and
rePorts'
(D) - large
\v' Both and small comPanles
16. Which of the following is NOT
a feature
,"iliu the benefits of such of not-for-Profi t organizations?
"*
a system'
(A) Provide services to make a profit'
i;i organization is owned bv all of its
ordinary shares
t3. Stephen's lnc' issues 3 000 members'
;;Tio ;"t value for $4s ooo' How should (C) Source of revenue is donations
and
statements?
it,ir L"l*""d in the financial subscriPtions'
(D) Activitiei are usually spread to
(A) Cashshouldbedebitedfor$15000'
be
cover rural areas'
iei ordinary share capital should
credited for $45 000'
(C) Paid-in caPital in t**:t :f, P"t
(share Premium; should be
debited for $10 000'
put
(D) Paid-in capital in elce.ss :l
(share Premium) should be
credited for $ l5 000'
!'

5-

from the records of the Belmopan

Item 17 ref'ers to the following infbrmation rvhich was extracted
Cricket Club tbr 2012.

The club has 75 members who pay an annual strbscription

of $150 each' Profits made fiom social
events amounted to $ l2 500.

2013 2014

Subscripttons .$ I 5 Subscriptions paid $70

paid tbr 20 | 3 fbr 20l4

should the Belmopan Cricket Club

17. What amount of net income from subscriptions and social events
report in 2012?

(A) $ll 2s0

(B) $23 000
(c) $23 7s0
(D) szs 2s0

18. Ashley Manufacturing Company received 20. An event that is classified on the income
net proceeds of $82 000 on the sale of statement as an extraordinary item should be
an investment that cost $69 500. This (A) unusual in natute, infrequent and
transaction should be reported in the income
material in amount
statement as a
(B) unusual in nature, infrequent and
immaterial in amount
(A) loss of $12 500 under OPerating
(C) infrequent and material in amount
Expenses
but not unusual
(B) gain of $12 500 under OPerating
(D) unusual in nature, material in
Revenues
amount but not infrequent
(C) gain of $ 12 500 under Other
Revenues and Cains
(D) loss of $12 500 under OPerating
2t. The Rampaul ComPanY estim ated at
Expenses and Losses
I January 2013 that its income before taxes for
the year ended 3 I December 2013 would be
$5 500 000. The Rampaul Company's tax
19. The ability to raise t'unds fiom the stock
rate for the year is 42%o. The company
exchange is a distinguishing feature of
made quarterly tax payments on 30 April,
which of the following types of business
30 June, 30 September and 15 December.
organizations? '[he actual income for the year ended

(A) StatutorycorPoration
ll December 2013 was $5 700 000. The
amount of income tax payable at 3 l December
(B) Public corporation
20l3 is
(C) Private comPany
(D) PartnershiP (A)$0
(B) $ 84 0oo
(c) $100000
(D) $144 000
 6-

in the Items 24-a5 refbr to the fbllowing

71 Computer software is classified
information.
balance sheet as

Savi commenced business on I January

with
(A) a current asset
$ I 00 000 together with a credit union
loan of
(B) an intangible asset
$2 000. Savi's assets and liabilities as
at 3 l
(C) a long-term investment
December were as follows'
(D) ProPert/, Plant and equiPment
Building $400 000
Motor van $ 20 000
23. Which of the fbllowing is NOT a feature $ 5000
lnventory
of a statutorY corPoration'? $ l5 000
Loan from credit union
Accounts payable s l0 000
(A) Formed bY an Act of Parliament
(B) Established for a special purpose
24. Savi's capital at I January is
ici Managed bv private ind-liduals
iOi Managed bY a Board of Directors
(A) $ 30 000
(B) $100 000
(c) $120 000
(D) sls0 000

25. Savi's capital at 3l December is

(A) $ 2s 000
(B) $ 50 000
(c) $400 000
(D) $425 000

The customer pays

of accounting and tax services for a customer'
26. An accountingfirm provides $6 500
$2 000 and agrees to pay the balance
in two *".[r.How should this ffansaction be recorded?

Debit Credit
$ $

2 000
(A) Cash 2 000
Service Revenue

2 000
(B) Service Revenue
2 000
Cash

2 000
(C) Cash
4 500
Service Revenue 6 500
Accounts Receivable
2 000
(D) Cash
4 500
Accounts Receivable
6 500
Service Revenue

CO ON TO THE NEXT PACE

02 l0 l0lO/CAPE 2014
 31. In preparing the statement of cash flows'
t1 Cash, accounts receivable and inventory
as which'of th- following transactions would
are classified in the balance sheet
be considered an investing activity?

(A) culrent assets

(A) lssuance of a note PaYable
(B) intangible assets
(B) Sale of merchandise on credit
(C) non-current assets
(C) Sale of equiPment at book value
(D) owner's equitY
iOl Declaration of a cash dividend

28. At December2012, Emily and Emile are

000
partners rvith capitalbalances of $200
Which of the fbllowing is a t'eature of
a
It
.urd $120 000 respectively' flrey
share
contingency liabilitY?
front unO losses in the ratio of 2: l ' this
On
rlate. Kakum invests $ 100 000 for one-fifth
partners (A) ls not of interest to non-readers of
interest in the new paftnership' The financial statements
recorded on the
agree that goodwillwillbe
of admission of Kakum' Calculate
(B) A potential liabiliry that depends
die on a future event arising out of
iit tot"f goodwill after the admission of a past transaction
Kakum. (C) Can alwaYs be calculated with
great Precision and alwaYs has
(A) $ 80 000
u d"finit" amount recorded
(B) $ eo ooo
(D) Must be disclosed in the bodY of
(c) $l20 ooo financial statements, including
(D) $200 000 the exPected dollar amount

Items 29-30 refer to the following

information. Which of the following is the correct
33.
equation for the acid-test (Quick) ratio?
Will Smith, a new partner, is admined to
the
the Labell and Ross Partnership under / a \ r-,,*ont acccfs less invehtOlY
ionu, method. He contributes cash of Total liabilities
izo OOo and equiPment with a market
value of $30 000 in exchange for a
70o/o
partnership'
(B) Current qssell less inventory
ownership interest in the new Current liabilities
is
The capiial of the existing partnership
profits
$130 0b0. Labell and Ross share (C) Current asseF Plus bad debt
and losses in the ratio 80:20 respectively'
Total liabilities

What is the new partnership capital?

29. (D) Current assg.ts, [9* stock
Long.term liabilities
(A) $140 000
(B) $150 000
(c) $ 160 000
(D) $180 000

30. What is Smith's caPital balance'?

(A) $30 000

(B) s35 000
(c) $36 000
(D) $50 000
GO ONTO THE NEXT PAGE
 8-

Regarding issued share capital in financial 38. Dominica Company reported net income
34.
statements, a company is required to of $45 000; net sales of $650 000; and
average assets of $400 000 for 2013. What
disclose the
is Dominica Company's percentage return
(A) par value on assets for2013?
(B) market value
(C) names of the shareholders (A) 6.e2
(D) numberofsharesheldbyemployees (B) rt.25
(c) 6s.s4
(D) t62.s0
35. The change in cash for the Year for a
particular company is $4 500. If cash
flow from investing activities is M6 200 39. During periods of infl ation and defl ation, the
and cash flow from financing activitie" is historical cost model forfi nancial reporting
$34 400, what is the cash fl ow from oporating is deficient because
activities?
(A) it uses numerous estimates for
(A) ($70 loo) revenues and exPenses
(B) ($76 l0o) (B) itrecognizesrevenuesandexpenses
(c) ($80 100) before they are usuallY realized
(D) ($8s loo) (C) comparative financial statements
are published only for the three
years prior to the rePort date
Item 36 refers tothe following information' (D) it adds and subtacts dollars with
different purchasing Power
Alata's financial position at the end of the without adjusting for those
year is given as follows: differences
$
Cash l0 000
Accounts Receivable 15 000 40. A runaway truck crashed into a firm's
Inventory 25 000 warehouse and destroyed inventory costing
Accounts Payable 20 000 $ I 00 000. Thefirm does nothave insurance.
Long-term Notes PaYable 150 000 How should this event be recorded in
the firm's Statement of Comprehensive
Income?
36. What is the current ratio?
(A) Other loss $100 000
(A) 0.20:l (B) Selling expense $100 000
(B) 0.30:l (C) Increase cost of sale by $50 000
(c) r.25:l (D) Decrease cost of sale by $50 000
(D) 2.50:l

37. The MAJOR disadvantage of traditional

financial statements is their emphasis on

(A) historicalcost
(B) long-term growth
(C) short-term growth
(D) relevance

CO ON TO THE NEXT PAGE

02101010/cAPE2014
;r

I 9-

In the preparation of financial statements,

Revenue from the sale pf merchandise
43.
41.
accountants in practice must ensure that
inventory is recorded in the Statement of
Comprehensive Income as the
(A) only timelY information on the
reporting comPany is Presented
(A) fair value of cash received only
(B) the interest of management of the
(B) fair value of cash and amounts
reporting comPany is Preserved
receivable onlY
(C) fair value of cash and amounts (C) true and fair information on the
reporting firm is Provided to
receivable net of settlement,
decision makers
discounts and rebates
(D) fair value of cash, amounts (D) theinterestoftheshareholdersofthe
reporting company is Preserved
receivable and VAT/sales
tax PaYable net of settlement
discounts and rebates
44. Liquidity is determined by the use of the

42. Which of the following should NOT be

(A) investment turnover ratio
disclosed in a summary of significant
(B) acid-test ratio

accounting Policies?
(C) debt to equitY ratio
(D) earnings Per share

I. DePreciation method
II. MinoritY interest claims
45. The Mangoes-by-the-Sea Company had net
lll. Valuation basis followed
credit sales of$8 800 000 and cost ofgoods
sold totalling $6 600 000 for the year' The
(A) I onlY
average inventory for the year amounted
(B) Il onlY
to $2 640 000. What was the inventory
(C) I and II onlY
turnover ratio for the Year?
(D) Il and III onlY
(A) 2 times
(B) 2.5 times
(C) 3.3 times
(D) l0 times

END OF TEST

YOUR WORK ON THIS TEST'

IF YOU FINISH BEFORE TIME IS CALLED' CHECK