SHSS 2023 Prelims 4E5N POA P2

Answer all questions. 1 The following balances are extracted from the books of Dong Boutique on 31 May 2023. $ Fixtures and fittings at cost 150 000 Equipment at cost 370 000 Accumulated depreciation: Fixtures and fittings 26 000 Equipment 133 200 Capital 110 000 Trade receivables 216 900 Trade payables 165 200 Cash at bank 9 550 Inventory 98 420 Allowance for impairment of trade receivables 9 820 4% Bank loan repayable 2026 100 000 Sales revenue 832 600 Sales returns 6 470 Cost of sales 291 400 Drawings 19 200 Rent expense 42 250 Wages and salaries 132 000 Utilities 16 450 Insurance 22 100 Interest on loan 2 080 Additional information 1 Fixtures and fittings are to be depreciated at 10% per annum using the straight-line method with a scrap value of $2 000. 2 Equipment is to be depreciated at 20% per annum using the reducing-balance method. 3 At 31 May 2023: Commission income $3 200 was receivable Utilities $1 960 were still owing Monthly insurance of the same amount was paid up till June 2023 Interest on loan for the year has not been paid in full 4 Inventory costing $3 100 was damaged owing to poor handling. They can only be resold at $1 300. 5 Wages and salaries included $5 000 paid for owner’s personal expense. 6 The allowance for impairment of trade receivables was to be maintained at 5% of trade receivables. REQUIRED (a) Prepare the statement of financial performance for the year ended [10] SHSS2023/PRELIM/4E5N/POA7087P2

Page 2 of 8 31 May 2023. (b) Prepare the statement of financial position as at 31 May 2023. [10] [Total: 20] SHSS2023/PRELIM/4E5N/POA7087P2 [Turn Over

Page 3 of 8 2 Uma Store prepared the following cash at bank account for the month of May 2023: Cash at bank 2023 Cheque Dr $ Cr $ Bal $ May 1 Balance b/d 5 360 Dr 4 Star Trading 2234 260 5 100 Dr 9 Lab Supplies 5 120 10 220 Dr 10 Nano Tech 2235 1 290 8 930 Dr 12 Rent expense 2236 7 700 1 230 Dr 16 Kele Co. 3 400 4 630 Dr 23 Cash in hand (i) 2237 1 500 3 130 Dr 30 Capital (ii) 4 000 7 130 Dr 30 Salaries 2238 8 300 1 170 Cr Jun 1 Balance b/d 1 170 Cr REQUIRED (a) Interpret the entries (i) and (ii) in the cash at bank account above. [2] (b) State one difference between bank loan and bank overdraft. [1] Uma Store received the following bank statement: Bank Statement for month of May 2023 2023 Cheque Withdrawal $ Deposit $ Bal $ May 1 Balance b/d 5 760 Cr 3 Standing order: Insurance 860 4 900 Cr 6 Cheque 2230 400 4 500 Cr 7 Cheque 2234 260 4 240 Cr 13 Direct credit: Renee Lee 1 260 5 500 Cr 23 Cheque 2237 1 500 4 000 Cr 24 Deposit 5 120 9 120 Cr 27 Cheque 2236 7 900 1 220 Cr 30 Deposit 4 000 5 220 Cr 31 Interest 35 5 255 Cr Jun 1 Balance b/d 5 255 Cr It is confirmed that Uma Store had recorded the cheque no. 2236 wrongly in the cash at bank account. REQUIRED (c) Prepare an updated cash at bank account for the month ended 31 May 2023. [5] (d) Prepare the bank reconciliation statement for the month ended 31 May 2023. [4] SHSS2023/PRELIM/4E5N/POA7087P2 [Turn Over

Page 4 of 8 (e) State and explain one internal control, other than bank reconciliation to safeguard cash in the business. [2] [Total: 14] SHSS2023/PRELIM/4E5N/POA7087P2 [Turn Over

Page 5 of 8 3 Enterprise Ltd rents out office spaces to other businesses and provided the following information about its rent income for two years ended 31 August 2021 and 2022: 31 Aug 2021 $ 31 Aug 2022 $ Rent income received in advance 19 700 Rent income receivable 18 300 Based on all the rental contracts, $92 500 rent income was earned for the year ended 31 August 2022. REQUIRED (a) Calculate the rent income received for the year ended 31 August 2022. [1] (b) Explain the need to adjust for rent income for year ended 31 August 2022 by using revenue recognition theory to support your answer. [2] (c) Prepare an extract of the statement of financial position as at 31 August 2022. [2] SHSS2023/PRELIM/4E5N/POA7087P2 [Turn Over

Page 6 of 8 Enterprise Ltd has the following retained earnings account for year ended 31 August 2022: Retained earnings 2021 Dr $ Cr $ Bal $ Sep 1 Balance b/d 159 200 Cr 2022 Aug 31 Dividends 20 000 31 Income summary 183 900 Additional information The business issued 10 000 new ordinary shares at $1.20 per shares during the year ended 31 August 2022. REQUIRED (d) Define the following terms: (i) retained earnings (ii) dividends [1] [1] (e) Calculate the change in shareholders’ equity from year ended 31 August 2021 to 31 August 2022. [2] (f) Explain one advantage and one disadvantage to set up a private limited business over a sole proprietorship. [2] [Total: 11] SHSS2023/PRELIM/4E5N/POA7087P2 [Turn Over

Page 7 of 8 4 Leroy provides consultation services and offers credit terms for all his customers. He provided the following information about his business for the year ended 30 April 2023: For year ended 30 April 2023 Total consultation service fees Total trade receivables, 1 May 2022 Total trade receivables, 30 April 2023 REQUIRED (a) Calculate the following for the year ended 30 April 2023: (i)rate of trade receivables turnover (ii)trade receivables collection period Show your answer to two decimal places. [1] [1] Leroy provided the following information about the business for the two years ended 30 April 2021 and 2022: 30 April 2021 30 April 2022 Rate of trade receivables turnover 11.37 times 8.13 times Trade receivables collection period 32 days 45 days REQUIRED (b) Comment on the efficiency of managing trade receivables for Leroy’s business over the three years ended 30 April 2021, 2022 and 2023. Suggest possible reasons for the trend. [5] (c) Suggest one action, besides reviewing credit worthiness of customers, that Leroy could take to improve effiency in managing trade receivables. [1] SHSS2023/PRELIM/4E5N/POA7087P2 [Turn Over

Page 8 of 8 To improve his efficiency in managing trade receivables, Leroy determined that his business would offer a maximum of 30 days credit terms to its customers. The following are information of a new customer, Besla requesting for 30-days credit terms: Besla is in the business of selling electric vehicles. It is an overseas business from Europe and looking to selling electric vehicles in Singapore. Besla had been well-established and was reviewed to be the top-selling electric vehicle company in Europe. The Singapore government is encouraging environmentally sustainable transportation and providing additional grants for purchase of electric vehicles. Leroy is expecting to sign a one-year contract with Besla which would ensure an estimated $5 600 consultation service fee every month. This would increase Leroy’s profit margin by 10%. A check on the financial statements of Besla showed that it has a current ratio of 3.5 and a quick ratio of 0.84. Review on the credit repayment trend in Europe showed that businesses normally pay after 40 days and this is likely to worsen owing to poorer economic outlook. REQUIRED (d) Recommend whether Leroy should grant the 30-days credit terms to Besla. Justify your decision with three reasons. [7] [Total: 15] End of Paper SHSS2023/PRELIM/4E5N/POA7087P2 [Turn Over