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THE COUNCIL OF COMMUNITY COLLEGES OF JAMAICA
BACHELOR OF SCIENCE EXAMINATION
SEMESTER I – 2020 DECEMBER
PROGRAMME: BUSINESS ADMINISTRATION
COURSE NAME: FINANCIAL ACCOUNTING II
CODE: ACCT3801
YEAR GROUP: THREE
DATE ADMINISTERED: FRIDAY, 2020 DECEMBER 18
DURATION: 72 HOURS
ASSESSMENT TYPE: FINAL
This Assessment has 8 pages
INSTRUCTIONS:
1. ANSWER ALL QUESTIONS FROM SECTION A
2. SECTION B CONSISTS OF TWO (2) QUESTIONS. ANSWER ALL QUESTIONS
3. ATTACH THE SIGNED CCCJ ASSIGNMENT COVERSHEET TO THE FRONT
OF YOUR ASSIGNMENT BEFORE SUBMITTING
4. ATTACH THE TURNITIN RECEIPT TO YOUR ASSIGNMENT BEFORE
SUBMITTING
NOTE: YOUR ASSIGNMENT WILL NOT BE ACCEPTED IF 3. AND 4. ABOVE IS
NOT ATTACHED
YOUR COMPLETED WORK MUST BE SUBMITTED WITHIN THE SPECIFIED
DURATION OUTLINED ABOVE TO PREVENT PENALTIES
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SECTION A
Instruction: Type the letter that corresponds with the CORRECT response for each of the
following. GIVE JUSTIFICATION FOR THE SELECTED RESPONSE.
1. A and B are in partnership sharing profits and losses equally. They admit C as a partner
and adjusted the profit-sharing ratio to 2:2:1 for A, B, C, respectively. Goodwill is valued
at $10 000 but no goodwill is to be recorded in the books. What will the entries in the
capital accounts be?
A. Debit A and B with $1000 each and credit C with $2000
B. Credit A and B with $1000 each and debit C with $2000
C. Debit A and C with $1000 each credit B with $2000
D. Credit B and C with $1000 each and debit A with $1000
Justification:
2. If a company wishes to raise capital without increasing its debt, it should issue
A. Ordinary shares
B. Bonus Shares
C. Debenture
D. Mortgage
Justification:
3. S and A are in partnership sharing profits and losses equally. They admit was a partner
and conducted a revaluation of the assets which resulted in a loss of $18000. The new
profit-sharing ratio is 2:2:1 for S, A, and W, respectively. How will the revaluation loss
be recorded in the capital accounts?
A. Debit S and A with $9000 each
B. Credit S and A with $9000 each
C. Debit S and A with $9000 each and credit W with $18000
D. Credit S and A with $9000 each and debit W with $18000
Justification:
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4. What is the authorised share capital of a limited company?
A. The amount of shares issued to shareholders
B. The amount paid for shares by the shareholders
C. The maximum amount of shares that can be issued
D. The minimum amount of shares that can be issued
Justification:
5. Preference shareholders unlike ordinary shareholders, are unable to do which of the
following?
A. Receive dividend above the amount paid to ordinary shareholders
B. Receive dividend pay-out above the percentage stated during the issuance
C. Have priority of dividend payment before the ordinary shareholders
D. Vote in the General Meeting of the company
Justification:
6. What is the reward of profit received by a shareholder of a limited company called?
A. Dividend
B. Commission
C. Interest
D. Drawings
Justification:
7. In a cash flow statement, which item is a cash outflow?
A. A $5000 decrease in inventory
B. A $8000 decrease in Accounts Receivables
C. A decrease in Accounts payable of $8,500
D. An issue of bonus shares, $50,000
Justification:
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8. Which of the following is NOT a cash outflow for the firm?
A. Dividends
B. Provision for bad debts
C. Interest payments
D. Taxes
Justification:
9. Which of the following is TRUE regarding the purpose of the statement of cash flows?
i. Determining the company’s ability to pay dividends and
interest expense
ii. Predicting future cash flows
iii. Evaluating management decisions
iv. Reporting net income
A. i and iv only
B. ii and iii only
C. i, ii and iv only
D. i, ii and iii only
Justification:
10. Why is depreciation added back when arriving at the cash flow from operating activities?
A. It is only an estimated amount
B. It does not affect profit
C. It only affects the non-current assets
D. It does not result in a flow of cash
Justification:
(2 marks each – 1 for correct response; 1 for justification)
(Total 20 marks)
END OF SECTION A
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SECTION B
Instruction: Complete the TWO (2) questions from this section.
Question 1
Analysis of Financial Performance
Archer Company is a retailer and trades through its stores on the high street, selling high quality
goods. The company has recently been suffering from rising costs, which it has been unable to
pass on to its customers.
In response to the number of people shopping via the internet, Archer Company has
implemented a cost cutting strategy in the prior year, and in the current year asked shareholders
for funds to help reduce its debt burden. The following financial information for the current year
is available.
Archer Company Ltd
Statement of Comprehensive Income for the year ended March 31, 2019
2019 2018
$$$ $$$
Turnover/Revenue 2642479 2920514
Cost of Sales (1225963) (1272422)
Gross Profit 1416516 1648092
Operating/Admin expense (1402929) (1608981)
13587 39111
Other operating income 0 8
Operating income 13587 39119
Non-operating income (interest) (7957) (1567)
Profit before Interest & Tax 21544 40686
Interest payable & Charges (4421) (22392)
Profit before tax 17123 18294
Tax on profit on Ordinary Activities (2045) (6248)
Profit for the financial year 15078 12046
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Archer Company Ltd
Statement of financial Position as at March 31, 2019
2019 2018
$$$ $$$
Non- Current Assets
Tangible Assets 71857 149354
Current Assets
Stocks 51908 73677
Debtors 489990 327768
Liquid Assets (Cash & Bank) 282580 497180
824478 898625
Less Current Liabilities: Accounts payables (563960) (702343)
Net Current Assets 260518 196282
Total Assets= (Tangible + Net Assets) 332,375 345636
Capital , Reserves & Long term Liabilities:
Capital 317297 305251
Profit 15078 12046
Long term Creditors 0 28339
332375 345636
Required
A. Calculate the following ratios:
i. Profitability: Net Profit as a percentage of Sales
ii. Liquidity: Acid test or Quick ratio
iii. Efficiency: Debtors day (6 marks)
B. State the benefits of using ratio analysis to interpret financial performance compared with
just relying on the financial statements to make decisions. (8 marks)
C. Use the information provided from the ratios calculated to do a comparative analysis over
the two years on the profitability, liquidity, and efficiency of the business. (16 marks)
(Total 30 marks)
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Question 2
Partnership Dissolution
Chest, Legs and Abs have been in partnership for several years, sharing profits and losses in the
ratio 3: 2: 1. Despite making good profits during recent years they had become increasingly
dependent on one credit customer, Jim, and in order to retain his custom they had gradually
increased his credit limit until he owed the partnership $18,000. It has now been discovered that
Jim is insolvent and that he is unlikely to repay any of the money owed by him to the
partnership. Reluctantly Chest, Legs and Abs have agreed to dissolve the partnership on the
following terms:
i. The stock is to be sold to Nelson Ltd for $4,000
ii. The fixed assets will be sold for $8,000 except for certain items with a book value of
$5,000 which will be taken over by Chest at an agreed valuation of $7,000
iii. The debtors, except for Jim, are expected to pay their accounts in full
iv. The costs of dissolution will be $800 and discounts received from creditors will be $500
ABS is unable to meet his liability to the partnership out of his personal funds. Their last balance
sheet which was prepared on 31 October 2019 is as follows:
Balance Sheet of Chest, Legs and Abs as at 31 October 2019
$ $ $ $ $ $
Fixed assets
At cost 20,000
Less Depreciation ( 6,000)
14,000
Current assets
Stock 5,000
Debtors 21,000
26,000
Current liabilities
Bank 13,000
Creditors 17,000
(30,000)
( 4,000)
10,000
Capital
Chest 4,000
Legs 4,000
Abs 2,000
10,000
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Required:
A. Prepare the realization account (8 marks)
B. Prepare the Bank and capital accounts to the partners accounts to record the dissolution of
the partnership (12 marks)
C. Discuss the circumstances which may lead to dissolution of a partnership and the process
involved. What major issue identified that resulted in the dissolving of this partnership
and gives a recommendation to address this issue. (10 marks)
(Total 30 marks)
END OF ASSESSMENT
