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TEST CODE 01239032

FORM TP 2007121 MAY/JUNE 2007

CARIBBEAN EXAMINATIONS COUNCIL

SECONDARY EDUCATION CERTIFICATE
EXAMINATION
PRINCIPLES OF ACCOUNTS
Paper 03/2 - General Proficiency
1~ hours

( 22 MAY 2007 (p.m.) )

1. Answer ALL questions.

2. Answer the questions on the Answer Booklet provided and return it.

3. Silent electronic calculators may be used, but ALL necessary working should be clearly
shown.

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

Copyright © 2006 Caribbean Examinations Council ®.

All rights reserved.
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CASE
Part A

Year!

On March 1, 2006 Lambert Grill, a retired Agricultural Worker of Grand Anse Valley decided to start his
own business selling sugar-cane juice on the outskirts of the Grand Anse Shopping Centre. Market
Research had shown that there was a growing demand for local juices in the area and so Mr. Grill thought
that natural sugar-cane juice would do well.

In order to start the business, Mr. Grill invested $10 000 of his personal monies together with a Bank Loan
of $20 000 from Caribbean Second Bank. He also brought his pick-up van, which was valued at $12 000,
into the business.

On March 7, Mr. Grill used the proceeds from the Bank Loan and his personal savings to purchase the
following items in order to get the business started:

Manual sugar-cane juicer $16 000

Ice containers/coolers $ 4500
Plastic cups and covers $ 800
Straws $ 75
2 Sterilized 10 gallon storage tanks 5 3 500 each
Stock of sugar-cane s 625

Balance of monies was held as cash for the day-to-day operations of the business.

Mr. Grill purchased sugar-cane from farmers in the area at $0.75 each and sold his juice at $1.50 per cup.
On average, one sugar-cane produced 1 i- cups of juice. In his first year of operation, Mr. Grill sold on
average, three hundred cups of juice per day (assume 360 days in the year).

At the end of the first year of operations Mr. Grill had a stock of sugar-cane valued at $600.

1. Calculate Mr. Grill' s opening capital? (Show workings). (3marks)

2. How much of the start-up capital did Mr. Grill contribute? (Show working.s).
(2marks)

3. Identify Mr. Grill's most liquid asset and his most permanent t1xed asset on March 8.
(2marks)

4. List the books of original entry in which Mr. Grill will record the following:

(i) Cash sales

(ii) Purchase of the sugar-cane juicer . (2marks)

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5. If Mr. Grill decides to merge his business with a sugar-cane farmer, what type of business entity
would they be operating? (1 mark )

6. Give TWO possible reasons why Mr. Grill would want to merge with a sugar-cane farmer?
(2 marks)

7. Name ONE revenue expenditure and ONE capital expenditure item incurred by Mr. Grill on
March 7. (2 marks)

8. Prepare Mr. Grill's Balance Sheet as at March 7 , 2006 after the week' s transactions occurred.
(9 marks)

9. Calculate total sales in the first year of operations. (2 marks)

PartB

Year2

In the second year of operations, the demand for the sugar-cane juice grew significantly. Mr. Grill paid
himself a salary of $50 per day and employed an assistant whom he paid $35 per day. (Assume 360 days
in the year). He also acquired an improved sugar-cane juicer at a cost of $25 000.

Mr. Grill rented a spot from the Shopping Center and erected a booth paying $300 per month. He also paid
loan interest of $250 during the year.

Mr. Grill increased his selling price to $1.75 per cup and his sales grew to an average of 450 cups per day.
During the second year, Mr. Grill made purchases of sugar-cane valued at $85 000 and at the end of the
year he had stock valued at $850.

10. Calculate total sales in the second year of operation. (2 marks)

11. Calculate the percentage increase in total sales in the second year over the first year (show working).
(2 marks)

12. Calculate Mr. Grill' s average stock for the second year of operations. (Show workings.)
(1 mark)

13. Prepare the Trading and Profit and Loss Account for the end of the second year of operations.
(8 marks)

14. Calculate Mr. Grill' s return on his investment at the end of the sec ond year. (2 marks)

Total 40 marks

END OF TEST

01 239032/F 2007