SHSS 2023 Prelims 4E5N POA P1

Answer all questions. 1 Harris owns a trading business. The following shows transactions between the business and Caddy Co. for the month of August 2022. 2022 Aug 5 Purchased fixtures from Caddy Co. at list price $9 400 with 10% trade discount 6 Caddy Co. charged Harris $250 net for additional packaging 7 Returned fixtures with list price $800 bought on 5 August, as they were unsuitable for the business use 19 Paid Caddy Co. a cheque $7 900 in full settlement for amount owing REQUIRED (a) State the source document used for transactions on the following dates: Source document (i) 6 August 2022 (ii) 7 August 2022 (iii) 19 August 2022 [3] (b) State and explain the accounting theory applied when source document is use for recording. [2] (c) State one difference between cash and trade discounts. [1] (d) Prepare the journal entries to record the transaction on 19 August 2022. Narrations are not required. This paper consists of 9 printed pages including the cover page. [Turn over

Page 2 of 9 [3] [Total: 9] SHSS2023/PRELIM/4E5N/POA/7087/1

Page 3 of 9 2 Auni Trading provided the following information for year ended 31 December 2021 and 2022: 31 December 2021 $ 31 December 2022 $ Trade receivables 36 400 28 300 Allowance for impairment of trade receivables 1 820 ? Kirby, a credit customer’s cheque of $2 100 deposited into the business bank account was returned by the bank on 4 November 2021. On 2 February 2022, Kirby was declared bankrupt and the amount owing was written off. Auni Trading estimate 5% of trade receivables to be uncollectible at the end of each financial year. REQUIRED (a) Prepare the journal entries for the transactions on the following dates. Narrations are not required. (i) 4 November 2021 (ii) 2 February 2022 [4] SHSS2023/PRELIM/4E5N/POA/7087/1 [Turn Over

Page 4 of 9 (b) Calculate the adjustment for allowance for impairment of trade receivables for year ended 31 December 2022. Indicate if allowance for impairment of trade receiveables needed to be increased or decreased and amount in your answer. [2] (c) Prepare an extract of the statement of financial performace for year ended 31 December 2022, showing the relevant section. [1] [Total: 7] SHSS2023/PRELIM/4E5N/POA/7087/1

Page 5 of 9 3 Arjun started a furniture business and presented a profit of $16 500 for his first year of operation. He revealed the following double entries in his books which he was unsure about: Account debited Account credited (i) Purchase of furniture $1200 for office use on credit Inventory Trade payable (ii) Arjun took furniture $2 300 from business’s inventory for office use Furniture Inventory (iii) Cost of $590 to install equipment paid by cheque Repairs Cash at bank REQUIRED (a) Explain the difference between furniture and inventory accounts in Arjun’s books. [2] (b) Identify one correct double entry from above. Indicate (i), (ii) or (iii). Transaction …………………………. [1] (c) State the double entries to correct the other two transactions from above that were wrongly recorded. [4] SHSS2023/PRELIM/4E5N/POA/7087/1 [Turn Over

Page 6 of 9 (d) Calculate the adjusted profit or loss after the corrections of errors has been made. Show your working clearly. [1] [Total: 8] SHSS2023/PRELIM/4E5N/POA/7087/1

Page 7 of 9 4 Kwek Ltd provided the following information about its business for the two years ended 31 September 2021 and 2022. 31 Sep 2021 31 Sep 2022 $ $ Net sales revenue 583 700 691 600 Gross profit 145 925 200 564 Total operating expenses 75 880 138 320 Shareholders’ equity 500 000 546 000 REQUIRED (a) Caculate the following for the year ended 31 September 2022: (i) gross profit margin (ii) profit margin (iii) return on equity Show your answer to two decimal places. [5] SHSS2023/PRELIM/4E5N/POA/7087/1 [Turn Over

Page 8 of 9 The information for year ended 31 September 2021 are as follows: Gross profit margin 25% Profit margin 12% Return on equity 16% (b) Explain how the return on equity helps potenital shareholders’ decision making. [2] (c) Comment on the profitability of Kwek Ltd over the two years ended 31 September 2021 and 2022. [6] SHSS2023/PRELIM/4E5N/POA/7087/1

Page 9 of 9 In January 2023, Kwek Ltd sold one of its machine costing $25 000 for $15 000, proceeds was received by cheque. The machine was depreciated for 2 years at 25% using straight-line method. REQUIRED (d) Calculate the gain or loss on sale of non-current assets from the sale of the machine. [1] (e) State the effect of the sale of non-current assets on the profitability and liquidity of Kwek Ltd. [2] [Total: 16] SHSS2023/PRELIM/4E5N/POA/7087/1 [Turn Over End of Paper