GESS 5NA Prelim P1 2023 sharing

1 GESS S5NA POA P1 PRELIM 2023 LSY7087/01/A/S/2023[Turn over Answer all questions.1Elliot owns a tailor business which has purchased a new automated display cabinet on wheels on credit from Bright Furnishings for $50 000 on 2 February 2023. The following costs were incurred on the same day:$Installation of the automated cabinet on wheels6 900Annual insurance premium of the automated cabinet1 200Delivery fee for transportation of the cabinet to an exhibition venue to promote the tailor business1 000REQUIRED(a)Calculate the cost of the automated cabinet on wheels. [2](b)Prepare the journal entry to record the transaction on 2 February 2023. Narration is not required. JournalDate2023Debit$Credit$ [2](c)State the accounting theory applied by a business to record revenue and capital expenditure.[1]

The business policy is to provide a full year’s depreciation in the year of purchase and no depreciation is provided in the year of sale. Its financial year ends on 31 May. The original cost of two motor vans purchased as at 1 June 2020 is $100 000 each. On 3 March 2023, the business sold one of the motor vans for $80 000.The business provided the following accumulated depreciation of motor vehicles account on 31 May 2023:Accumulated depreciation of motor vehicles accountDateParticularsDebitCreditBalance2021$$$May 31Depreciation of motor vehicles40 00040 000CrJun 1Balance b/d40 000Cr2022May 31Depreciation of motor vehicles32 00072 000CrJun 1Balance b/d72 000Cr2023Mar 3Sale of non-current assets (e)(i)36 00036 000CrMay 31Depreciation of motor vehicles? (e)(ii)?CrJun 1Balance b/d?CrREQUIRED(d)Calculate the rate of depreciation used to depreciate the motor vehicles. [1](e)Interpret the entries on:(i)3 March 2023 [1](ii)31 May 2023 and state the amount of depreciation on 31 May 2023 [2]

3 GESS S5NA POA P1 PRELIM 2023 LSY7087/01/A/S/2023[Turn over [Total: 9]2

Elizabeth is considering investing in one the businesses in the food catering industry. The two businesses, Good Food Catering Pte Ltd and Delicious Delicacy Pte Ltd, provided the following information from their books for the year ended 30 April 2023: Good Food Catering Pte LtdDelicious Delicacy Pte Ltd$$Net sales revenue880 800720 090Cost of sales660 600500 780Rental expenses80 80050 380Salaries expenses50 50065 200REQUIRED(a)Calculate the profit margin for each business at 30 April 2023. Show your answers to two decimal places. [2] (b)Evaluate the profitability of Good Food Catering Pte Ltd and Delicious Delicacy Pte Ltd for the year ended 30 April 2023. Use the given information and your answer to (a). [5]

5 GESS S5NA POA P1 PRELIM 2023 LSY7087/01/A/S/2023[Turn over (c)On 30 April 2023, Delicious Delicacy Pte Ltd issued additional 200 000 ordinary shares at $1.80 each. In addition, it declared a dividend of $0.05 per share payable in June 2023 based on the profit for the year ended 30 April 2023. Prepare the equity section of the statement of financial position at 30 April 2023 using the given information and your answers in (a). The share capital (comprising 100 000 ordinary shares) and retained earnings balance on 1 May 2022 is $100 000 and $20 000 respectively. Delicious Delicacy Pte Ltd [4](d)Distinguish two differences between a sole proprietorship and a private limited company. [4][Total: 15]

3Wen Ling has started a sole proprietorship business trading in fashion clothing. She is seeking an understanding on how transactions of her business are recorded. In addition, she has requested her accountant to record her talent in fashion design as an asset of the business.REQUIRED(a)State the expanded accounting equation that governs the recording of transactions. [1](b)Advise Wen Lin if her talent in fashion design can be recorded as an asset of the business. Elaborate your advice with an explanation of an accounting theory that governs the recording of this transaction. [2](c)For each transaction below, show the effect (“+” for an increase and “-’’ for a decrease) on the accounting equation. Write “No effect” if the transaction does not affect the accounting equation. Item (i) has been done for you as an example. ItemTransaction Effect onAssetLiability Equity(i)Wen Ling contributed $5 000 cash into the business bank account to start the business. Cash at bank+$5 000No effectCapital+$5 000(ii)Business sold fashion clothing for $1200 on credit to Beautiful Boutique. The cost of the fashion clothing is $600.(iii)The business bought fashion clothing for resale on credit at a list price of $3 800 with a trade discount of 5%. [6]

7 GESS S5NA POA P1 PRELIM 2023 LSY7087/01/A/S/2023 In an accounting information system, Wen Ling was told that an accountant first records transactions based on source documents.REQUIRED(d)State and explain the importance of source documents using an accounting theory. [2](e)State two differences between cash and trade discounts.12 [2](f)State three reasons why the business cash at bank balance differed from the balance in the bank statement received from the bank.123 [3][Total: 16]End of paper

9 GESS S5NA POA P1 PRELIM 2023 LSY7087/01/A/S/2023 Sec 5NA Preliminary Examination Paper 1 2023Marking scheme1a) $Installation of the automated cabinet on wheels6 900Annual insurance premium of the automated cabinet1 200Delivery fee for transportation of the cabinet to an exhibition venue to promote the tailor business1 000Calculate the cost of the automated cabinet on wheels. Cost of automated cabinet on wheels = $50 000 + 6900 [1] = $56 900 [1]1b) JournalDate2023Debit$Credit$Feb 2Fixtures and fittings56 900 1 OF Trade payable – Bright Furnishings56 900 1 OF1c)Materiality theory [1]1d) Rate of depreciation = $40 000/$200 000 ×100 = 20%[1]1e) Interpret the entries on:(i)3 March 2023 On 3 March 2023, the business sold one of its motor vehicles costing $100 000 on credit for $80 000. It has depreciated the motor vehicle by $36 000 since it was purchased on 1 June 2020. [1](ii)31 May 2023 and state the amount of depreciation on 31 May 2023 For the year ended 31 May 2023, the annual depreciation of the motor vehicle was $12 800 [1] and as a result, the accumulated depreciation will increase by $12 800. [1]Hence, the net book value of the motor vehicle will decrease by $12 800.

2a) Good Catering Pte LtdDelicious Delicacy Pte LtdProfit margin = 88900/880800 ×100 = 10.09% [1] = 103 730 / 720 090 ×100 = 14.41% [1]2b) Good Catering Pte LtdDelicious Delicacy Pte LtdGross profit margin25%30.46%Profit margin= 88900/880800 ×100[1] = 10.09% [1]= 103 730 / 720 090 ×100 [1] = 14.41% [1]Delicious Delicacy Pte Ltd gross profit margin of 30.46% is better than Good Catering Pte Ltd’s gross profit margin of 25%. [1] This indicates that Delicious Delicacy Pte Ltd sells its food at a higher selling price or buys its ingredients at a lower cost price as compared to Good Catering Pte Ltd. [1]The profit margin of Delicious Delicacy Pte Ltd of 14.41% is also better than Good Catering Pte Ltd’s profit margin of 10.09% [1] This shows that Delicious Delicacy Pte Ltd is more efficient in managing its operating expenses than Good Catering Pte Ltd. [1] This could be due to Delicious Delicacy Pte Ltd is able to secure a lower rent of $50 380 for its premises as compared to Good Catering Pte Ltd’s rental expenses of $80 800. [1] Therefore, Delicious Delicacy Pte Ltd is more profitable than Good Catering Pte Ltd. [1]1 mark per suitable comment to a maximum of 5 marks2c)Delicious Delicacy Pte LtdStatement of financial position as at 30 April 2023 (extract)Equity and liabilitiesShareholders’ equity[1] $Share capital, 300 000 ordinary shares ($100 000 + 360 000) 460 000 [1]Retained earnings ($20 000 + 103 730 – 15 000[1 OF]) 108 730 [1 OF] 568 730