I

CANDIDATE PLEASE NOTE!

TEST CODE 02101010

PRINT your name on the line below and return
this booklet with your answer sheet. Failure to
do so may result in disqualification.
FORM TP 2020145 MAY/JUNE 2020

CARIBBEAN EXAMINATIONS COUNCIL

CARIBBEAN ADVANCED PROFICIENCY EXAMINATION®

ACCOUNTING

UNIT 1 - Paper 01

1 hour 30 minutes

( 10 JUNE 2020 (a.m.))

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

I. 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.

3. 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 decide which choice is best.

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
0
0
0
(A) a gain Sample Answer
(B) a liability
(C) an expense
(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 ~egin, tum the page and work as quickly and as carefu lly 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.

~-[~QJ 9. You may use a silent, non-programmable calculator to answer items.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.
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Copyright © 2019 Caribbean Examinations Council
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All rights reserved.
0210 IO I 0/MJ/CAPE 2020
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1. Which representation of the fundamental 4. Which of the following activities relate to

accounting equation is INCORRECT? the external auditor?

(A) Owners ' Equity + Liabilities = I. Expresses an opmton to the

Assets shareholders
(B) Assets - Liabilities = Owners ' 11. Conducts audits independently of
Equity company and management
(C) Liabilities + Assets = Owners ' Ill. Works independently of employees
Equity but is dependent on management
(D) As sets - Owners ' Equity =
Liabilities (A) I and II only
(B) I and HI only
(C) Hand HI only
2. What would be the advantage (benefit) of (D) I, Hand III
having all countries adopt and follow the
same accounting standards?
5. Which ofthe following reserves is available
(A) Consistency for distribution as cash dividends?
(B) Comparability
(C) Absorbed preparation costs (A) Sinking fund
(D) Elimination ofthe need for external (B) Share premium
auditing (C) General reserve
(D) Revaluation reserve

3. Jazzy Company has the following

information about its fixed assets. 6. On 22 June 2015, DBG Ltd acquired the
business of Singer Inc., for cash, at a price
$ of$14 500 000. The book value of the net
Cost 180 000 assets at the time of the transaction was
Provision for depreciation 92 000 $11000000. Independentappraisersvalued
Market value 60 000 Singer's net assets at a fair market value of
$13 000 000. What amount should DBG
Based on the going concern concept, at what debit in the goodwill account?
book value should the assets be shown in
the statement of :financial position? (A) $ 0
(B) $ 200 000
(A) $28 000 (C) $1500000
(B) $60 000 (D) $3 500 000
(C) $68 000
(D) $88 000
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7. Which of the following can be considered physical controls in an accounting environment?

I. Safes and vaults

II. Bank safety deposit boxes
III. Locked warehouses for inventories

(A) I and II only

(B) I and 111 only
(C) II and 111 only
(D) I, II and III

Items 8- 9 refer to the following information.

The Belmopan Company began operations on 1 January 2018. 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 $2 500 000

Ordinary shares $3 par value, 50 000 shares issued

and outstanding $ 450 000

Share premium $2 250 000

Total dividends declared and paid:

During 2018 $ 170000

During 2019 $ 210 000

8. Assuming that the preference shares were cumulative, how much of the 2018 dividends would be
distributed to ordinary shareholders?

(A) $ 0
(B) $ 5 192
(C) $ 9 200
(D) $IO 000

9. Assuming that the preference shares were non-cumulative, how much of the 2019 div idends would
be distributed to the preference shareholders?

(A) $ 2 000
(B) $100 962
(C) $110526
(D) $200 000

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10. The financial accounting activity which 13. Stephen's Inc. issues 3 000 ordinary shares
will benefit the LEAST from the use of of $1 o par value for $45 000. How should
computers is this be treated in the financial statements?

(A) posting transactions to ledgers (A) Cash should be debited for $15 000.
(B) preparation of the trial balance (B) Paid-in capital in excess of par
(C) preparation of financial statements (share premium) should be
(D) recognition of assets and expenses debited for $10 000.
from a transaction (C) Paid-in capital in excess of par
(share premium) should be
credited for $15 000.
11. Wallace Auto Repairs follows the revenue (D) Ordinary share capital should be
recognition principle. The company credited for $45 000.
services a car and prepares the invoice on
3 I March. The customer collects the car on
I April and mails the payment to Wallace 's 14. Two-thirds of an insurance policy has
Auto Repairs on 5 April. The business expired. The policy was acquired at a cost
receives the cheque on 6 April. On what of $5 700. The adjusting entry to record
date should Wallace Auto Repairs recognize the expired portion would involve a
the revenue?
(A) credit of$ I 900 to prepaid insurance
(A) 31 March (B) debit of $3 800 to prepaid insurance
(B) I April (C) debit of$ I 900 to insurance expense
(C) 5April (D) debitof$3 800toinsuranceexpense
(D) 6April

15. The conceptual framework of accounting

Item 12 refers to the following information. starts with a set of

Goods returned to John for $800 had been (A) objectives of financial reporting
credited to John 's account and debited to the (B) principles for guiding accountants
Returns Outwards account. (C) assumptions about the accounting
profession
12. What is the journal entry to correct the (D) conventions for recording financial
error? information

(A) Dr Returns Outwards $1 600

Cr John $1 600 16. A statutory corporation is owned by

(B) Dr Returns Outwards $800 (A) all nationals of that state

Cr John $800 (B) individuals or small groups
(C) the government on behalf of al I
(C) Dr John $800 nationals
Cr Returns Outwards $800 (D) members of the public who
purchase shares
(D) Dr John $ I 600
Cr Returns Outwards $ I 600

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17. Which of the following reports is NOT 18. A partner who assumes unlimited liability
a component of financial statements for the debts of the partnership is referred
according to IAS I (Sec. 3 of IFRS for to as
SMEs)?
(A) limited
(A) Financial ratios (B) mutual
(B) Statement of financial position (C) active
(C) Statement of changes in equity (D) general
(D) Notes to the financial statements

Item 19 refers to the following information.

Share Capital Share Premium Retained Earnings

$ $ $

Balance at O1 January 2015 25 000 0 188 697

19. By the end of 2015 , $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
31 December 20 15?

Share Capital Share Premium Retained Earnings

$ $ $

(A) 25 000 0 188 697

(B) 50 000 50 000 220 497
(C) 50 000 80 000 220 497
(D) 50 000 80 000 250 497

20. A partner's ability to bind the partnership 21. Which of the follow ing fe atures are
and all the other partners into a contract DlSADVANTAGES associated with a
when acting within the scope ofthe business public company?
is an example of
l. It is externally regulated.
(A) mutual agency II. Ownership cannot be transferred.
(B) limited liability m. lnvestments are not refunded.
(C) unlimited liability
(D) transfer of partnership interest (A) I and II only
(B) I and III only
(C) II and III only
(D) I, II and III

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25. Which control principle applies to the

Items 22-23 refer to the following
preparation of control accoun~s: ~he
information. trial balance and the bank reconc1hat1on
Savi commenced business on 1 January statement?
201 3 with $ J00 000 and a credit union loan
of $20 000. Savi 's assets and liabilities as (A) Proper physical control
at 31 December 2013 were as follows. (B) Independent verification
(C) Adequate control activities
Buildings $400 000 (D) Adequate documents and records
Motor van $ 20 000
Inventory $ 5 000
Loan from credit union $ 15 000 Item 26 refers to the following data
Accounts payable $ JO 000 extracted from the books of XYZ Ltd.

$
22. Savi 's capital as at I January 2013 was Operating income 21 850
Finance cost 7 475
(A) $ 30 000 Taxation expenses 5 750
(B) $ 100 000 Other comprehensive income:
(C) $ 120 000 Gains on property revaluation 20 000
(D) $ 150 000

26. What would be the total comprehensive

23. Savi's capital as at 31 December 2013 was income of XYZ Ltd?

(A) $ 25 000 (A) $ 8 625

(B) $ 50 000 (B) $ 28 625
(C) $400 000 (C) $ 36 100
(D) $425 000 (D) $ 41 850

24. At the end of December 2015, Emily and 27. Which of the following items is NOT
Emile are partners with capital balances of shown in the current liabilities section of
$200 000 and $120 000 respectively. They the balance sheet for a credit union?
share profit and losses in the ratio of 2: 1.
In January 2016, Kakum invests $100 000 (A) Interest payable
for one-fl fth interest in the new partnership. (B) Statutory reserves
The partners agree that goodwill will be (C) Members' deposits
recorded on the date ofadmission ofKakum. (D) Unearned interest received
The total goodwill after the admission of
Kakum is

(A) $ 80 000
(B) $ 90 000
(C) $120 000
(D) $200 000

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28. Realto Co. Ltd issued I 500 ordinary shares with a par value of $1.50 for $4.00 each. The journal
entry to record the transaction is

Dr Cr
$ $

(A) Cash 6 000

Ordinary Share Capital 2 250
Share Premium 3 750

(B) Cash 2 250

Share Premium 3 750
Ordinary Share Capital 6 000

(C) Cash 6 000

Ordinary Share Capital 6 000

(D) Ordinary Share Capital 6 000

Cash 6 000

Item 29 refers to the following information. 30. Which of the following is a feature of a
co-operative?
On I January 2019, Neil Smart, a sole
trader, has assets of$ I 00 000 and liabilities (A) Unlimited liability
of$22 000. During the year 2019, he bought (8) Democratic control
new furniture worth $3 000 for the business (C) Free transfer of shares
from his lottery winnings and withdrew (D) Separation of ownership and
$6 000 for personal use. At the end of the control
year he had working capital of$60 000, fixed
assets of $30 000 and long term-liabilities
of$40 000. 31. Which of the following statements are
TRUE regarding information provided by
29. Neil Smart's income statement for the year financial reporting?
reported a
I. It increase s the value of the
(A) net loss of $31 000 company.
(B) net profit of $36 000 IL It is useful for making investment
(C) net loss of $3 7 000 and credit decisions.
(D) net profit of $42 000 Ill. It identifies what is owned, what is
owed and the ownership interest
in the company.

(A) I and II only

(B) I and III only
(C) II and Ill only
(D) I , II and Ill

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Wh' h of the following statements relating

36.
32. An example of a contingent liability is tot~: liquidation of a firm is FALSE?

(A) outstanding lawsuits A liquidator is appointed to sell all

(A)
(B) any interest-bearing liability . the assets and pay the debts ..
(C) a bond which can be converted mto The receiver recovers money owing
(B)
ordinary shares to the creditor who appointed
(D) the unrealized loss from the him.
reduction in the market price of In a I iquidation the receiver
(C)
a long-term liability represents a secured creditor
who has appointed him.
After the receiver recovers
(D)
33. The Mangoes-by-the-Sea Company had net the money, he takes over
credit sales of $8 800 000. Cost of goods management of the firm.
sold totalled $6 600 000 for the year and
the average inventory for the year amounted
to $2 640 000. What was the inventory What is the effect of the following
turnover ratio for the year? 37.
transaction on the cash position of a firm
in terms of cash flow?
(A) 2 times
(B) 2.5 times
' Granting of Christmas loans to staff'
(C) 3.3 times
(D) IO times
(A) Increase in cash
(B) No effect on cash
Which ofthe following items of information (C) Reduction in cash
34.
on issued share captial is a company required (D) Multiple effect on cash
to disclose in financial statements?

Par value 38. Dominica Company reported net income

(A)
Market value of $45 000, net sales of $650 000 and
(B)
Names of shareholders average assets of $400 000, for 2015.
(C)
(D) Number of shares held by employees What is Dominica Company 's percentage
return on assets for 2015?

35. In accounting for property, plant and (A) 6.92

equipment, which of the following should (8) 11.25
be disclosed in the notes? (C) 65.54
(D) 162.50
I. The financial effect of a change in
useful economic life of the asset
II. Methods of depreciation used 39. Operating activities ofa business organiza-
III. The total depreciation charged for tion include
the period
(A) long-term borrowings
(A) I and II only (B ) a new issue of ordinary shares
(B) I and III only (C) th e acquisition of long-term assets
(C) II and lII only (D ) cash receipts from the sale of goods
(D) I, II and Ill

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40. Which of the following is the correct Item 43 refers to the following information.
equation for the acid-test (quick) ratio?
Dividend per share $ 0.50
Current assets Market price per share $ 15.00
(A) Total liabilities Net income $ 80 000
Number of ordinary shares 30000
Current assets - stock
(B) Long-term liabilities 43. What is the earnings per share (EPS)?

(A) $ 0.33
Current assets - inventory (B) $ 0.50
(C) Current liabilities (C) $ 2.14
(D) $ 2.67
Current assets - inventory
(D) Total liabilities
Item 44 refers to the following information
about the ABC Company.
41. Which element of published financial
statements attempts to provide information The Statement of Comprehensive Income
on a company's social responsibility? is provided for ABC for the year ended
30 June 2016.
(A) The auditor's report
(B) The director's report $ %
(C) The stock market report 300 000 100
Sales
(D) Notes to the financial statements (110 000) 37
Cost of goods sold
Administration (80 000) 27
42. The purchase of treasury stock by a Profit 110 000 37
corporation will reduce the total
44. What analysis of ABC Company has been
(A) number of shares issued conducted?
(B) amount of retained earnings
(C) authorized number of shares (A) Ratio
(D) amount of stockholders' equity (8) Vertical
(C) Horizontal
(D) Comparative

45. Which of the following represents the correct order of payment in liquidation?

(A) Preference shareholders, unsecured creditors, ordinary shareholders

(B) Preference shareholders, ordinary shareholders, unsecured creditors
(C) Unsecured creditors, preference shareholders, ordinary shareholders
(D) Unsecured creditors, ordinary shareholders, preference shareholders

END OF TEST

IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.

02101010/MJ/CAPE 2020