UNIVERSITY COLLEGE OF THE CARIBBEAN

Incorporating Institute Of Management Sciences &

Institute Of Management & Production
A Member of the Commonwealth & OAS Consortia of Universities

School of Business & Management

Department of Professional Studies
Bachelor of Science Degree
in
Business Administration

END OF MODULE EXAMINATION

CENTRE : OXFORD TERRACE, MANDEVILLE, OCHO RIOS AND SAV CAMPUSES

MODULE : FINANCIAL ACCOUNTING [ACT 100]

DATE : APRIL 10, 2014

TIME : 9:30 AM

DURATION : 3 Hours

INSTRUCTIONS:
1. Please read all instructions carefully before attempting any question.
2. This paper consists of nine (9) printed pages and two (2) Sections A & B
3. Answer ALL questions from Section A and ANY THREE (3) questions from Section B.
4. The total marks for this Paper is 100.
• All questions must be answered in the answer booklet provided
• Please ensure that you number your questions correctly.
• Clearly write the number of the question on each of the relevant pages.
• Where questions have multiple parts, all parts must be answered.
• Start the response to each question on a new page.

Write your REGISTRATION NUMBER clearly on each page of your answer booklet.
DO NOT WRITE YOUR NAME.
NB. Your script will not be marked if it has your name.
DO NOT TURN OVER UNTIL YOU ARE TOLD TO DO SO
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 SECTION A: (COMPULSORY - 40 %)

INSTRUCTIONS: Answer ALL questions from this section.

Question 1

Jenkel Ltd is a manufacturer of paint for the local market. The following Trial Balance was
extracted from the company’s books on August 31, 2011:
Trial Balance as at December 31, 2012
Details/Accounts Dr $ Cr $
Purchase of direct raw materials 25,100,000
Rent 3,000,000
Direct raw materials, September 1, 2010 5,000,000
Direct raw materials returned to suppliers 100,000
Motor vehicles 10,000,000
Provision for depreciation on motor vehicles 2,000,000
Factory wages 6,000,000
Work- in-progress, September 1, 2010 2,000,000
Insurance 1,200,000
Commission payable and receivable 3,500,000 1,800,000
Office furniture and fittings 3,600,000
Carriage inwards on direct raw materials 1,000,000
Wages incurred in manufacturing goods 10,000,000
Discounts 2,000,000 1,500,000
Accounts receivable 7,000,000
Direct expenses 2,500,000
Interest received 1,700,000
Provision for bad and doubtful debts 140,000
Sales 72,200,000
Accounts payable 5,500,000
Goods returned by credit customers 200,000
Finished goods, September 1, 2010 8,000,000
Cash at bank 2,000,000
Cash drawings 450,000
Electricity 2,800,000
Salaries 9,000,000
Machinery 24,000,000
Provision for depreciation on machinery 16,000,000
Provision for unrealized profits 700,000
Cash in hand 400,000
Capital 23,110,000
126,750,000 126,750,000
Notes:
(i) Factory wages owed as at August 31, 2011 amounted to $250,000.
(ii) Rent payable is to be apportioned 60% factory; 40% office.
(iii) Motor vehicles are used 80% of the time by the factory.

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 (iv) Insurance of $150,000 relates to the succeeding period.
(v) Apportion insurance ¾ factory; ¼ offices; and electricity 70% factory, 40% office.
(vi) The provision for bad and doubtful debts is to be adjusted to 3% of debtors.
(vii) The company adds 10% mark up to its cost of production.
(viii) Depreciation is to b e charged as follows: Motor vehicles, 10% Reducing Balance
Method; Office Furniture, 10% Straight Line Method; and Machinery 20% Reducing
Balance Method.
(ix) Stocks on August 31, 2010 were as follows: Finished goods, $6,600,000; work- in-
progress, $1,600,000; direct raw materials, $6,000,000.

Required:

A. Prepare the company’s Manufacturing, Trading and Profit and Loss Account for the year
ended August 31, 2011. (25 marks)

B. A Balance Sheet as at August 31, 2011. (15 marks)

SECTION B: (60 %)

INSTRUCTIONS: Answer ANY THREE (3) questions from this Section. Each question is
worth 20 %.

Question 2

Mike and Miguel are in partnership and their capital and current accounts as at Jan 1st, 2013
show:

Capital Current Account

$ $
Mike 50,000 Cr 2,500 Cr
Miguel 20,000 Cr 3,000 Cr

The partnership agreement provides for the following:

(a) Profits and losses are shared between Mike and Miguel in the percentages 60 and 40.
(b) Interest on capital at 10% per annum is allowed.
(c) Interest on drawings is charged at 12% per annum.
Drawings for the year to December 31st, 2013 are:

Mike Miguel
$ $
1st February 2013 5,000 2,000
30th, September 2013 2,000 5,000

The profit for the year is $20,000.

Required:

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A. Prepare the appropriation account for the year ended December 31st, 2013. (10 Marks)

B. Prepare the partner’s current accounts for the year ended December 31st, 2013.
(10 Marks)

Question 3

Required:

From the table below calculate the following ratios:

A. Gross profit margin (3 Marks)

B. Net profit margin (3 Marks)

C. Current ratio (3 Marks)

D. Quick ratio (3 Marks)

E. Inventory ratio (3 Marks)

$
Turnover 900,000
Cost of sales 780,000
Opening stock 100,000
Closing stock 80,000
Current assets 200,000
Current liabilities 100,000
Operating expenses 100,000

F. Briefly explain the following ratios:

(i) Return on common equity. (1 Mark)

(ii) Dividend Yield. (1 Mark)

(iii) Earnings per share. (1 mark)

(iv) Inventory turnover. (1 Mark)

(v) Quick ratio. (1 Mark)

4
Question 4

On Jan 1 2013, the Hype Life Sports Club had the following assets and liabilities:
$
Machinery 50,000
Prepaid subscriptions 1,000
Cash at bank 800
Bar stock 3,200

The following is the receipts and payments account for the year ended December 31, 2013:
Receipts $ Payments $
Subscriptions 14,000 rent and rates 6,000
Bar sales 24,000 wages 10,000
Donations 22,000 bar purchases 15,000
Profits from social 7,000 machinery 8,000
Miscellaneous expenses 480
Repairs to machinery 560
Balance c/d 26,960
67,000 67,000

Additional information:
a. All machinery should be depreciated at 10% per annum.

b. Subscriptions owing at 31 December 2013, $1,400.

c. Bar stocks at 31 December 2013 $4000.

d. Rent prepaid at December 31, 2013, $700.

e. $2,400 of the wages relate to the bar.

Required:

A. Calculate the Accumulated Fund as at January 1, 2013. (5 marks)

B. A bar trading account for the year ended 31 December 2013. (5 marks)

C. An income and expenditure account for the year ended 31 December 2013. (10 marks)

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Question 5

The following information has been made available for the month of March 2014:
Mar 1 Purchases ledger balances 354,361Cr
Sales ledger balances 872 Cr
Purchases ledger balances 1,208 Dr
Sales ledger balances 533,190 Dr
Mar 31 Credit sales 781,900
Credit purchases 626,850
Receipts from debtors 509,845
Discounts received 8,190
Payments to creditors 349,300
Discounts allowed 6,755
Interest debited to the accounts of overdue debtors 3,360
Bad debts 4,375
Returns inwards 8,190
Refunds to credit customers 945
Interest on overdue suppliers accounts 1,800
Cash received to clear suppliers debit balances 595
Returns outwards 6,440
Set off-contra 270
Dishonoured cheques 3728
Sales ledger balances 602 Cr
Purchase ledger balances 585 Dr

Required:

A. Prepare a Sales Ledger Control Account for March 2014. (9 marks)

B. Prepare a Purchases Ledger Control Account for March 2014. (8 marks)

C. List three advantages of control accounts. (3 marks)

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Question 6

Hyrax Ltd provided the following balances as at December 31, 2001:

$ $
General Reserves 127,700 Provision for bad debt 8,000
Ordinary Shares @ $2.00 450,000 Rent Receivable 6700
10 % Preference Shares @ $2 100,000 Sales 1,950,000
Cash and bank 220,600 Cost of Sales 1,100,000
Premises 550,000 Fixtures & Fittings 80,000
10 % Debenture 200,000 Prov. For Dep'n: Fix & Fit 16,000
Retained Earnings Jan. 1,2001 45,500 Stock at Dec. 31,2001 193,000
Goodwill 300,000 Commissions Receivable 29,000
Debtors 87,000 Debenture Interest Paid 7,000
Interim dividends on Ord.
Creditors 41,200 Shares 12,000
Administrative Expenses 175,500 Motor Van 140,000
Selling & Distribution Costs 120,000 Prov. For Dep’n: Motor Van 28,000
Other Operating Expenses 17,000

Additional Information:
a. Fixtures and fittings are to be depreciated at 10% on the reducing balance basis and Motor
Van at 10% on cost. Depreciation is to be shared equally between Administrative
expenses and Selling and Distribution costs.

b. In addition to preference share dividend, account for a further proposed ordinary share
dividends at $0.25 per share

c. Corporation tax is estimated at $60, 000

d. Transfer $20,000 to the general reserves

e. 10% of Goodwill is to be written off

f. Increase provision for bad debts to $9000.

Required:

A. Prepare Hyrax Ltd, Income Statement for the financial year. (10 marks)

B. Prepare a Statement of Financial Position for the financial year. (10 marks)

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Question 7

The following list of balances was extracted from the unadjusted trial balance for Santo Arzola a
sole trader for the year ended April 30th, 2013:

$
Capital 83,887
Sales 259,870
Creditors 19,840
Returns outwards 13,407
Provision for bad debt 512
Discount allowed 2,306
Discount received 1,750
Purchases 135,680
Returns inwards 5,624
Carriage outwards 4,562
Drawings 18,440
Carriage inwards 11,830
Rent, rates, and insurance 25,973
Heating and lighting 11,010
Postage, stationery and telephone 2,410
Advertising 5,980
Salaries and wages 38,521
Bad debts 2,008
Cash 534
Bank 4,440
Stock as at May 1st 2012 15,654
Debtors 24,500
Fixtures and fittings at cost 120,740
Provision for depreciation – fixtures and fittings 4/30/2013 63,020
Depreciation 12,074

The following additional information was also made available:

a. Stock at April 30th, 2013 $17,750

b. Insurance has been prepaid by $1,120

c. Heating and lighting owed amounted to $1,360

d. Rent and rates have been prepaid by $5,435

e. Provision for bad debt is to be adjusted to 3% of debtors.

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Required:

A. Prepare Santo Arzola’s income statement for the year ended April 30th, 2013. (12 Marks)

B. Prepare Santo Arzola’s Balance Sheet as at April 30th, 2013. (8 Marks)

Question 8

Ann-Marie Lexus works as an Accounts Executive at a popular commercial bank. She earns
annual salary of $3,240,000. In addition she is paid taxable travelling and meal allowance of
$24,000 and $12,000 respectively per month. During the month of March, 2013, she worked
overtime amounting to $36,000. Monthly personal deductions are as follows: Personal insurance,
$20,000; Credit Union savings, $30,000; Car loan, $25,000. Contribution of 7 ½ % of basic
income is made to the company’s pension fund.

Income tax and other statutory deductions are paid at the rates prescribed by Jamaican law which
are as follows:

Deductions Employee’s Rate Employer’s Rate

Income tax 25% of taxable income
NIS 2.5% of gross income 2.5% of gross income
Education Tax 2.25% of statutory income 3.5% of statutory income
NHT 2% of gross income 3% of gross income

Note: NIS is paid at 2.5% of gross income up to $1,500,000 p.a. after that the “flat rate” applies.
Income tax threshold $507,312 annually.

Required:

A. Calculate Ann-Marie Lexus’ net income for the month of March 2013. (12 marks)

B. Prepare a summary showing the total amount deducted from Ann-Marie Lexus’ salary as
statutory deduction for March, 2013. (4 marks)

C. Prepare a summary showing the total amount to be paid by the employer as statutory
deduction for March, 2013. (4 marks)

END OF QUESTION PAPER