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FORM TP 2016I 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.

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

J Do not be concerned 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 belo*.

Samole ltem

The cost of an asset consumed in the generation of

revenue is treated in the books as'
Sample Answer
(A) a galn
(B)
(c)
a liability
an expense
@@o@
(D) an allowance

The best answer to this item is "an expense", so (C) 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.
If you cannot answer an item, go on to the next one. You may return to that item later.
8 You may do any rough work in this booklet.
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I 9 You may use a silent, non-programmable calculator to answer items.
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DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.
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Copyright @ 2014 Caribbean Examinations Council

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All rights reserved.
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 -) -

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.?
reports.
(C) Different principles are used from (A) Deferred revenue
those in a manual accounting (B) Deferred expense
system. (c) Accrued revenue
(D) Both large and small companies (D) Accrued expense
can realize the benefits of such
a system.
6 What would be the advantage of having
all countries adopt and follow the same
3. One of the major objectives of the accounting standards?
Intemational Financial Reporting
Standards is to (A) Comparability
(B) Consistency
(A) ensure that all companies prepare (C) Absorbed preparation costs
financial statements (D) Eliminating the need for external
(B) harmonize financial reporting auditing
among different countries
(C) insist that all accountants are
registered with an intemational
board
(D) highlight the dysfunction between
financial and management
accounting

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.

Receipts from sales $286 r20

Payments made to suppliers for goods $r03 404
Payments made for operating expenses $ 23 615
Accrued operating expenses $ 7 218
Depreciation expense $ 1200

7, 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 $2 s00 000

Ordinary shares $3 par value, 50 000 shares issued

and outstanding $ 4s0 000

Share premium $2 2s0 000

Totaldividends declared and paid

During 2015 $ 170 000

During 2016 $ 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) $ s le2
(c) $ e 200
(D) Sl0 000
9 Assuming that the preference shares were non-cumulative, how much ofthe 2016 dividends would
be distributed to the preference shareholders?

(A) $ 2 000
(B) $100 962
(c) $il0 s26
(D) $200 000
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 -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 Cr
$s
(A) Cash 80 000
Loss on sale of temporary investment r0 000
Temporary stock investments 90 000

(B) Cash 90 000

Gain on sale of temporary investment l0 000
Temporary stock investments 80 000

(c) Cash 90 000

Temporary stock investments 90 000

(D) Temporary stock investments 80 000

Loss on sale of temporary investments r0 000
Cash 90 000

11. Wallace Auto Repairs follows the revenue 13 Stephen's Inc. issues 3000 ordinary shares
recognition principle. Wallace services a of $10 par value for $45 000. How should
car and prepares the invoice on 3l March. this be treated in the financial statements?
The customer collected the car on 0l April
and mailed the payment to Wallace's Auto (A) Cash should be debited for$15 000.
Repairs on 05 April. Wallace Auto Repairs (B) Ordinary share capital should be
received the cheque on 06 April. On what credited for $45 000.
date should Wallace recognize the revenue? (c) Paid-in capital in excess of par
(share premium) should be
(A) 3l March debited for $ l0 000.
(B) 0l April (D) Paid-in capital in excess of par
(C) 05 April (share premium) should be
(D) 06 April credited for $15 000.

t2 Which of the following is an example of a t4 DBG Ltd acquired for cash, the business
data security procedure in a computerized of Singer Inc. on 22 June 2015, at a price
accounting env ironment? of$14 500 000. The bookvalue ofthe net
assets at the time of the transaction was
(A) Division of responsibilities $l I 000 000. Independentappraisers valued
(B) Reguiar maintenance Singer's net assets at a fair market value of
(C) The use of passwords $13 000 000. What amount should DBG
(D) Virus scanning debit in the goodwill account?

(A)$0
(B) $ 200 000
(c) $l s00 000
(D) $3 s00 000
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 5

15. The conceptual framework of accounting 16 Which of the following disadvantages are
starts with a set of associated with a public company?

(A) principles for guiding accountants I. Externally regulated

(B) assumptions about the accounting II. Ownership cannot be transferred
profession III. Investments are not refunded
(c) objectives of financial reporting
(D) conventions for recording fi nanc ial (A) I and II only
information (B) I and III only
(c) Il and III only
(D) I, II and III

Item l7 refers to the following information.

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) $40 800

(B) $34 680
(c) $27 880
(D) $26 680

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

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 -6-
19 For which of the following types of Items 22-23 refer to the following
business organizations is the ability to information.
raise funds from the stock exchange a
distinguishing feature? See-off Golf Club has a restaurant for its
members. For the year just ended, the
(A) Statutory corporation following were reported
(B) Public corporation
(C) Private company a

(D) Partnership Beginning balance of inventory 2 080 ,

Ending balance of inventory 2345 t
a

Paid to creditors for inventory 38 620 t

20. Which of the following is a feature of a Owing to creditors 925

co-operative?
22 The restaurant has a mark-up of 20%o. What
(A) Separation ofownership and control were sales for the year?
(B) Free transfer ofshares
(c) Unlimited liability (A) $46 026
(D) Democratic control (B) $46344
(c) s47 136
(D) $47 4s4

2l The Rampaul Company estimated at

0l January 2015 that its income beforetaxes 23 What was the cost of goods sold for the
forthe yearended 3 I December2O I 5 would year?
be $5 500 000. The Rampaul Company's
tax rate for the year is 42 per cent. The (A) $38 3ss i

company made quarterly tax payments (B) $38 620

on 30 April, 30 June, 30 September and (c) $39 280
:'

15 December. The actual income for (D) $39 54s

the year ended 3l December 2015 was
$5 700 000. The amount of income tax
payable at 3l December 201 5 was 24. Bridgeview Limited's share ownership is
as follows:
(A)$0
(B) $ 84 0oo 50olo shares - owned by government
I

(c) $100 000 50oZ shares - owned by multiple small

(D) $144 000 investors

Bridgeview Limited is MOST likely a

(A) state-owned corporation

(B) statutory corporation
(C) private company
(D) public company

r:N ON TO THE
 -7 -

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 88 697
r
(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 21 850
Finance cost 7 475
Taxation expenses 5 750
Other comprehensive income:
Gains on property revaluation 20 000

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

(A) $ 8 62s
(B) $28 62s
(c) $36 100
(D) $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) II, IV III, I

(B) III, IV, I, II
(C) I, II,III, V
(D) II,I,IV III

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 -8-
28 At the end of December 2015, Emily and 29, Which of the following standards provide
Emile are partners with capital balances of guidance for determining the cost of
$200 000 and $ I 20 000 respectively. They inventories?
share profit and losses in the ratio of 2:1.
In January 2016, Kakum invests $100 000 (A) IAS I (IFRS Section 3)
forone-fifth interest in the newpartnership. (B) IAS 2 (IFRS Section l3)
The partners agree that goodwill will (c) IAS l6 (IFRS Section l7)
be recorded on the date of admission of (D) IAS l8 (IFRS Section 23)
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

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) $20 400

(B) $16 400
(c) $ls 400
(D) $ e 2oo

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 -9-
31 In preparing the statement of cash flows, 35. The change in cash for the year for a particular
which of the following transactions would company is $4500. Ifcash flow from investing
be considered an investing activity? activities is $46 200 and cash flow from
financing activities $34 400, what is the cash
(A) Issuance of a note payable flow from operating activities?
(B) Sale of merchandise on credit
(C) Sale of equipment at book value (A) ($70 100)
(D) Declaration of a cash dividend (B) ($76 100)
(c) ($80 100)
I
(D) ($8s 100)
Which of the following is the correct
I

32.
equation for the acid-test (quick) ratio?
36. Which ofthe following statements relating
Cunent assets - inventory to the liquidation of a firm is FALSE?
(A)
Total liability
(A) In a liquidation the receiver
Current assets - inventory represents a secured creditor
(B)
Current liability who has appointed him.
(B) The receiverrecovers money owing
Current assets to the creditor who appointed
(c)
Total liability . him.
'A liquidator is appointed to sell all
(C)
Current assets - stocks the assets and pay the debts.
(D)
long-term liability
(D) After the receiver recovers
the money, he takes over
management of the firm.

33 Property and equipment are classified in 37. An example of a contingent liability is

the balance sheet as
(A) an unrealized loss from the
(A) current assets reduction in the market price of
(B) intangible assets a long-term liability
(c) non-current assets (B) a bond which can be converted into
(D) owners'equity ordinary shares
(c) any interest bearing liability
(D) a lawsuit being filed against the
34. Which ofthe following should be disclosed company
in the summary of significant accounting
policies?
38 Dominica Company reported net income
Pol icy of accounting for short-term of $45 000, net sales of $650 000, and
investments averageassets of$400 000 for 201 5. What
II. Depreciation method(s) applied is Dominica Company's percentage return
III. The method(s) of revenue on assets for 2015?
recognition
(A) 6.92
(A) I and ll only (B) n.2s
(B) I and III only (c) 65.54
(c) II and III only (D) t62.s0
(D) [, II and Ill

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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
are published only for the three
years prior to the report date
(D) it adds and subtracts dollars
with different purchasing power
without adjusting for those
differences
43. In the preparation of financial statements,
accountants in practice must ensure that
(A) only timely information on the
reporting company is presented
(B) the interest of management of the
reporting company is preserved
(C) true and fair information on the
reporting firm is provided to l
F
decision makers
(D) the interest of the shareholders
of the reporting company is
preserved
44. Liquidity is determined by the use of the

40 A runaway truck crashed into a firm's (A) investment turnover ratio

warehouse and destroyed inventory costing (B) acid-test ratio
$ I 00 000. The firm does not have insurance. (C) debt to equity ratio
How should this event be recorded in (D) earnings per share
the firm's statement of comprehensive
:.
income?
tgryl! refers to the following information. I
t:
(A) Other loss $ 100 000 !:
(B) Selling expense $100 000 Alata's financial position at the end of the i
(c) Increase cost ofsale by $50 000 year is given as follows: I
'.
(D) Decrease cost of sale by $50 000 :l

$ t_

Cash l0 000 :
41. One MAJOR disadvantage of traditional Accounts receivable ls 000 t
,3
financial statements is their emphas.is on Inventory 25 000 &
sf
Accounts payable 20 000 I
(A) short'term profi tabi I ity Long-term notes payable 150 000 *
H
(B) long-term growth b
*
(c) t;
relevance
(D) historical cost 45. What is the current ratio? ,t,.

F
t.
t
(A) 0.20:l i
42 Which element of published financial (B) 0.30: I E
E
statements affempts to provide information (c) 1.25:l
on a company's social responsibility? (D) 2:50:l

(A) The auditor's report

(B) The director's report
(C) The stock market report
(D) Notes to the financial statements

END OF TEST

IS CALLED, CIIECI( YOUR. \I/OR.K ON TIIIS TEST.

IF YOU FINISII BEFORE TIME