Principles of Accounts for CSEC®

2nd edition

Chapter 11: Accounting for the entrepreneur

The following test paper contains four multiple-choice questions, to help you prepare for
Paper 1, and one problem question, to help you prepare for Paper 2. If you decide to complete
the paper under exam conditions, you should give yourself no longer than 40 minutes to
complete all questions.

1. Which of the following is a statutory deduction?

(A) Life insurance premium
(B) Credit union dues
(C) Income tax
(D) Bank loan
(1 mark)

2. The following is the payroll information for Nalini for the week:
Hourly rate Regular Overtime Overtime Income tax Contribution to
hours rate hours rate pension plan
$15 40 1
12 10 20% 10% of gross pay

What is Nalini’s net pay?

(A) $600
(B) $825
(C) $577.50
(D) $225
(1 mark)

3. Inventors Co. Ltd is planning its annual sales budget. The following is the anticipated sales
forecast:
Q1 Q2 Q3 Q4
Expected sales in units 2 000 3 000 3 500 4 000
Unit selling price $90 $90 $90 $90

Sales will be on credit for one month.

What is the amount to be received at the end of Q4?
(A) $1 125 000
(B) $945 000
(C) $810 000
(D) $765 000
(1 mark)

1 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019
Chapter 11: Accounting for the entrepreneur

4. An entrepreneur prepares a business plan with the intention of:

(A) meeting target profits
(B) figuring out how the business is going to operate
(C) determining target market
(D) goal planning.
(1 mark)

5. LifeSavers Inc. is a manufacturing firm for water safety products. They are in the process of
preparing their quarterly production budget for the year ending 31 December 2019 and have
provided the following information:
Q1 Q2 Q3 Q4
Estimated sales 5 000 6 000 7 000 6 500
Ending inventory 1 000 1 500 2 000 1 700

Beginning inventory at 1 January 2018 was 4 000 units.

(a) Prepare the required production budget for LifeSavers Inc. at the end of the financial year
31 December 2018 showing clearly the figures for each quarter and totals for the year.

(8 marks)

(b) Sanford Construction Company hires staff on a temporary basis. For the first week of
August 2018, it has provided the following pay sheet information for 3 of its employees:
Employee Regular hours Regular rate/ Overtime Overtime rate/
worked hour hours hour
Alex 40 $30 10 1½
Katie 40 $30 12 1½
Ravi 40 $30 18 1½

(i) Calculate for each employee his or her gross pay for the first week of August 2018.
Show all workings.

2 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019
Chapter 11: Accounting for the entrepreneur

(3 marks)

At the end of August, their total gross earnings were as follows:

Alex $7 000
Katie $8 700
Ravi $8 040
The payroll clerk has to use the following additional information to calculate their net
pay:
Income tax schedule First $1–$5 000 10%
Balances over $5 000 20%
National insurance 5% on gross pay before tax deductions
Alex Credit union dues $300
Katie Life insurance premium $250
Ravi Bank savings account $200

(ii) Using the form below, calculate the net pay for each of the 3 employees for the month of
August 2018.
Show all workings.
Sanford Construction Company
Payroll: August 2019
Gross pay Statutory deductions Non-statutory Total deductions Net pay
Income National deductions
tax insurance
Employee

Alex

Katie

Ravi

(9 marks)

(Total 24 marks)

3 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019