MJR 4E5N PRE POA P2 2023 ANSWER

2023 MJR 4E5N PRELIM PAPER 2 Qi Qi Trading Q1(a) Statement of financial performance for the year ended 30 April 2023 $ $ Sales revenue 294,650 Less Sales returns 11,250 Net sales revenue 283,400 [1] Less Cost of sales 78,230 Gross profit 205,170 [1]OF Add: Other Income Commission income (2150+1200) 3,350 [1] 208,520 Less: Other Expenses Wages and salaries 20,300 Motor vehicle expenses (8960-1600) 7,360 [1] Rent and rates (2500x12) 30,000 [1] Discount allowed 10,630 Insurance expense (19800/15 x 12) 15,840 [1] Depreciation on equipment (20%x80000) 16,000 [1] Depreciation on motor vehicles (25%x[40000-10000]) 7,500 [1] Impairment loss on trade receivables 2,802 [1] (6%x46700) 110,432 Profit for the year 98,088 [1] [10] Qi Qi Trading Q1(b) Statement of financial position as at 30 April 2023 Assets Non-current assets Cost Accumulated Depreciation Net book value Equipment 80,000 28,000 52,000 [1] Motor vehicles 40,000 17,500 22,500 [1] 120,000 45,500 74,500 Current assets Trade receivables 46,700 Less Allowance for impairment of TR 2,802 43,898 [1] Cash at bank 2,890 Inventory 36,200 Prepaid insurance expense (3/15x19,800) 3,960 [1] Commission income receivable 1,200 88,148 [1] Total assets 162,648 Equity and liabilities Owner's equity Capital (40,470+98,088-[15600+1,600]) 121,358 [4] Current liabilities Trade payables 36,290 Rent and rates expense payable 5,000 41,290 [1] Total liabilities and equity 162,648 [10] [20]

2023 MJR 4E5N PRELIM PAPER 2 Q2 Cost of sales is calculated as follows: (a) Units sold Cost of sales $ 80 20,000 [1] 130 29,900 [1] 150 33,000 [1] 110 26,400 [1] 470 109,300 (b) Inventory at 31 March 2023 (90 units unsold) = $22,950 [1] (c) Rate of inventory turnover = Cost of sales/Average inventory '= $109,300 OF from (a) (20,000+22,950)/2 OF from (a) '= $109,300 / 21,475 = 5.09 times [1] (d) The rate of inventory turnover has worsened from 9.25 times in 2021 to 7.17 times in 2022 and 5.09 times in 2023. [1] (e) Decrease in the rate of inventory turnover may be caused by: (i) Decrease in sales quantity , possibly due to high selling price, fall in demand for goods, increased competition (any one possible reason, 1 mark each) (ii) Increase inventory quantity, possibly due to poor inventory control [1] [2] (any two of the above or any reasonable alternative, max 2 marks) (f)(i) Dr Cash at bank $12,100 [1] Cr Sale of non-current asset $12,100 [1] [2] (f)(ii) Dr Motor vehicles $30,000 [1] Cr Trade payable - Siaw Hung Motoring [1] [2] (g) Profit for the year would decrease [1] by $3,260 [1] [2] (h) Materiality theory [1] [16]

2023 MJR 4E5N PRELIM PAPER 2 Q3 (a)(i) Mark-up on cost = Gross profit / Cost of sales x 100 = [45,000 -15,000] - 18,000 [1] /18,000 x 100 = 12,000 / 18,000 x 100 = 66.67% [1] [2] (a)(ii) Gross profit margin = Gross profit / Net sales revenue x 100 = 12,000 / 30,000 x 100 = 40.00% [1] (a)(iii)Profit margin = Profit / Net sales revenue x 100 =