CHIJ STC POA 4E5N Prelim 2023 Paper 2 (7087)

____________________________________________________________________________ PRINCIPLES OF ACCOUNTS 7087/02 Paper 2 25 August 2023 2 hours Additional Materials: Writing paper (4 sheets) ____________________________________________________________________________ READ THESE INSTRUCTIONS FIRST Write your name, class and index number clearly on the writing papers. Write in dark blue or black ink. Write your answers on the writing papers. Use both sides of the paper. Please leave two blank lines in between your answers to each question. Write the number of the question you are responding to in the first margin. All work must be handed in. Do not use paper clips, glue or correction fluid. The use of an approved calculator is allowed. Answer all questions. The number of marks is given in brackets [ ] at the end of each question or part question. ____________________________________________________________________________ This document consists of 6 printed pages. CHIJ ST. THERESA’S CONVENT PRELIMINARY EXAMINATION 2023 SECONDARY 4 EXPRESS / 5 NORMAL ACADEMIC

2 CHIJ ST. THERESA’S CONVENT SECONDARY FOUR EXPRESS / FIVE NORMAL ACADEMIC 2023 PRELIMINARY EXAMINATION PRINCIPLES OF ACCOUNTS PAPER 2 Section A Answer all questions. 1 The following balances were extracted from Heidi Pte Ltd on 31 July 2023. Debit Credit $ $ Issued share capital, 25 000 shares 50 000 Retained earnings, 1 August 2022 24 020 Bank loan 20 000 Motor vehicles 55 300 Fixtures and fittings 4 800 Accumulated depreciation: Motor vehicles 11 060 Fixtures and fittings 960 Sales revenue 125 100 Sales returns 535 Cost of sales 52 480 Inventory 6 900 Trade receivables 17 100 Trade payables 5 980 Salaries 28 980 Rental expense 4 550 General expenses 10 890 Commission income 280 Allowance for impairment of trade receivables 470 Discount allowed 830 Discount received 540 Cash at bank 56 045 238 410 238 410 The following information is available. 1 As at 31 July 2023, (i) Salaries of $900 for the month of July 2023 were still outstanding. (ii) Rental expense included $1200 which has been paid for three months’ rental ending 30 September 2023. (iii) Commission income receivable was $180. 2 $4000 of the bank loan is due on 31 January 2024. 3 A debt of $ 350 owed by a customer was found to be irrecoverable. The company decided to write this amount off.

3 CHIJ ST. THERESA’S CONVENT SECONDARY FOUR EXPRESS / FIVE NORMAL ACADEMIC 2023 PRELIMINARY EXAMINATION PRINCIPLES OF ACCOUNTS PAPER 2 4 A review of the trade receivables listing showed that 4% of the trade receivables may be irrecoverable. 5 Depreciation policy: (i) Motor vehicles are to be depreciated at 20% per annum on the net book value. (ii) Fixtures and fittings are to be depreciated equally over ten years, without providing for any scrap value. 6 Part of the inventory, bought at $1 400, has a net realisable value of only $ 1160 on 31 July 2023. 7 A dividend at $0.05 per ordinary share was declared on 22 July 2023, payable on 22 October 2023. REQUIRED (a) Prepare the statement of financial performance for the year ended 31 July 2023. [ 8 ] (b) Prepare the statement of financial position as at 31 July 2023. [12] [Total: 20]

4 CHIJ ST. THERESA’S CONVENT SECONDARY FOUR EXPRESS / FIVE NORMAL ACADEMIC 2023 PRELIMINARY EXAMINATION PRINCIPLES OF ACCOUNTS PAPER 2 2 Gayathri’s financial year ends on 30 June. The following information is available: 2021 2022 2023 $ $ $ Current assets Inventory 14 100 24 500 47 400 Trade receivables 8 200 11 120 19 900 Prepayments - 450 4 380 Cash at bank 7 800 7 300 - Total current assets 30 100 43 370 71 680 Current liabilities Trade payables 3 700 5 290 8 170 Other payables - 300 950 Bank overdraft - - 16 500 Total current liabilities 3 700 5 590 25 620 REQUIRED (a) Explain the importance of being liquid. [2] (b) Calculate, for 30 June 2023, and correct your answers to one decimal place, (i) Current ratio [2] (ii) Quick ratio [2] The following information relates to 30 June. 2021 2022 Current ratio 8.1 7.8 Quick ratio 4.3 3.3 REQUIRED (c) Taking into account the above information and your answers to part (b), comment on the changes that have taken place in Gayathri’s liquidity position over the three years. [7] (d) Suggest two ways for Gayathri to improve her business’ liquidity. [2] [Total: 15]

5 CHIJ ST. THERESA’S CONVENT SECONDARY FOUR EXPRESS / FIVE NORMAL ACADEMIC 2023 PRELIMINARY EXAMINATION PRINCIPLES OF ACCOUNTS PAPER 2 3 Kate is a trader. On 1 April 202 2, her capital account had a balance of $ 48 000. The following transactions took place in her business for the year ended 31 March 2023: 2022 Jun 24 Kate took out some goods costing $570 from the business for personal use. Aug 13 Kate contributed $10 000 to the business bank account. Dec 25 Kate contributed her personal car worth $ 42 400 to the business for delivery purposes. 2023 Mar 16 Kate paid for her personal insurance costing $2510 from her business bank account. Mar 31 Profit for the financial year was $27 300. REQUIRED (a) State and explain the accounting theory which is applied when accounting for drawings. [2] (b) Define drawings. State the effect of drawings on the profit for the year and the equity of a business. [3] (c) Prepare the drawings account for the year ended 31 March 2023, including the closing entry. [3] (d) Prepare the capital account for the year ended 31 March 2023. [5] [Total: 13]

6 CHIJ ST. THERESA’S CONVENT SECONDARY FOUR EXPRESS / FIVE NORMAL ACADEMIC 2023 PRELIMINARY EXAMINATION PRINCIPLES OF ACCOUNTS PAPER 2 4 Lydia owns a business providing printing services . She has four printing machines in her business. REQUIRED (a) Define depreciation. [1] (b) State two causes of depreciation. [2] (c) Explain the need to charge depreciation on the printing machines using a suitable accounting theory. [2] Lydia’s business requires one more printing machine as she expects higher sales in the coming years. She is deciding between buying or renting the machine. The details of each option are listed in the table below: Buy Rent Financial charges ▪ Downpayment: $2000 ▪ Monthly instalment (including interest): $200 for 3 years ▪ No downpayment is required ▪ Rental charges: $400 per month Other costs ▪ Need to pay for yearly servicing and maintenance of about $150 ▪ Need to pay for repairs, whenever needed ▪ Free servicing and maintenance ▪ No need to pay for repairs, unless it is due to negligent use (failure to take proper care) Condition Brand new Has been rented to other customers for the past one year but the condition is still good Additional information ▪ Useful life is estimated to be 5 years ▪ Scrap value is $500 Minimum rental period is 6 months. Lydia has to pay a penalty of $1000 if she chooses to end the contract prematurely. REQUIRED (d) Advise Lydia if she should buy or rent the printing machine. [7] [Total: 12] END OF PAPER 2

7 CHIJ ST. THERESA’S CONVENT SECONDARY FOUR EXPRESS / FIVE NORMAL ACADEMIC 2023 PRELIMINARY EXAMINATION PRINCIPLES OF ACCOUNTS PAPER 2 CHIJ ST. THERESA’S CONVENT SECONDARY FOUR EXPRESS / FIVE NORMAL ACADEMIC 2023 PRELIMINARY EXAMINATION PRINCIPLES OF ACCOUNTS PAPER 2 MARK SCHEME 1(a) Heidi Pte Ltd Statement of Financial Performance for the year ended 31 July 2023 Sales revenue 125,100 Less: Sales returns (535) Net sales revenue 124,565 Less: Cost of sales (52,480) Gross profit 72,085 [1] Other income Commission inco