Outram Sec Prelim 2022 Paper

1 Answer all questions 1 The cash at bank column of Busan’s cash book and her bank statement for the month of July 2022 were as follows. Cash at bank account 2022 DR ($) CR ($) Balance ($) Jul 1 Balance b/d 5 000 DR 5 Gwangju (Cheque No. 334361) 2 810 2 190 DR 11 Sales revenue 3 600 5 790 DR 13 Anyang 2 220 8 010 DR 18 Equipment (Cheque No: 334362) 880 7 130 DR 26 Pohang 1 350 8 480 DR 31 Sejong Trading (Cheque No. 334363) 450 8 030 DR Aug 1 Balance b/d 8 030 DR Bank statement for the month of July 2022 2022 Withdrawal Deposit Balance $$ $ Jul 1 Balance b/d 4 300 CR 4 Cheque 334359 700 5 000 CR 8 Cash deposit 3 600 8 600 CR 9 Cheque 334361 2 810 5 790 CR 14 Cheque deposit 2 220 8 010 CR 16 Refer to drawer (deposited: 14 Jul) 2 220 5 790 CR 19 Cheque 334362 800 4 990 CR 27 Cheque deposit 1 350 6 340 CR 31 Direct payment – Utilities 170 6 170 CR 31 Bank charges 60 6 110 CR Additional information It was discovered that Busan had incorrectly recorded the transaction on 18 July for cheque no. 334362. (32$6$ 2XWUDP www.KiasuExamPaper.com 246 2 REQUIRED (a) Update the cash at bank account for 31 July 2022. Cash at bank account [5] (b) Prepare the bank reconciliation statement as at 31 July 2022. Busan Bank reconciliation statement as at 31 July 2022 [3] (c) Explain why a debit balance in the cash at bank account is presented as a credit balance in the bank statement. [2] [Total: 10] www.KiasuExamPaper.com 247

3 2 Itaewon runs a business selling bicycles. All sales are made on credit. The standard credit terms are payment within 30 days. The following information has also been provided. Net sales revenue for the year ended: $ 31 August 2021 178 000 31 August 2022 198 000 Net trade receivables at: $ 31 August 2020 12 000 31 August 2021 16 000 31 August 2022 22 000 REQUIRED (a) Calculate the trade receivables collection period for the years ended 31 August 2021 and 31 August 2022. Show your answers to two decimal places. 31 August 2021 31 August 2022 Workings Trade receivables collection period (days) [4] (b) Evaluate the management of trade receivables by Itaewon’s business over the two years ended 31 August 2021 and 31 August 2022. [3] (c) Suggest two ways in which Itaewon could improve the trade receivables www.KiasuExamPaper.com 248 4 collection period of the business. 1 2 [2] (d) State two sources of non-accounting information that a business might use when deciding whether to grant credit to a customer. 1 2 [2] (e) Name the accounting theory which is applied when a business makes an allowance for impairment of trade receivables. [1] [Total: 12] www.KiasuExamPaper.com 249

5 3 Oksu Trading sublets out its excess shop space for additional income. The monthly rental income is $3 000. The rent is paid for 6 months, once on 1 March and once on 1 September. The following was extracted from the books of Oksu Trading. Rental income account Date Particulars Debit ($) Credit ($) Bal ($) 2021 Jan 1 Rental income received in advance 6 000 6 000 Cr Mar 1 Cash at bank 18 000 Sep 1 Cash at bank 18 000 Dec 31 (i) Rental income received in advance ? Dec 31 (ii) Income summary ? - REQUIRED (a) Explain both entries on 31 December 2021 and state the amounts to be shown in (i) and (ii). (i) Rental income received in advance ___________________________ _________________________________________________________ _________________________________________________________ (ii) Income summary _________________________________________ _________________________________________________________ _________________________________________________________ [4] (b) For the items listed, complete the following table by placing a tick ( 3) in the appropriate column to indicate how not adjusting for the rental income received in advance at the end of the year will affect Oksu Trading’s business. Overstated Understated No effect Profit for the year Current assets Current liabilities [3] REQUIRED (c) State the accounting theory applied when businesses make adjustments to its income and expenses at the end of a financial year. ____________________________________________________________ [1] [Total: 8] www.KiasuExamPaper.com 250 6 4 Chungmuro runs a business selling handbags. She had the following entries in her inventory account in June 2022. Inventory account Date Particulars Debit ($) Credit ($) Bal ($) 2022 Jun 1 Balance b/d 3 800 Dr 4 Trade payable, Hongik 4 500 9 Cost of sales 3 800 15 Drawings 1 200 24 Cash in hand 300 28 Impairment loss on inventory ? REQUIRED (a) Interpret each of the entries in the inventory account. (i) Trade payable, Hongik ____________________________________________________________ ____________________________________________________________ [1] (ii) Cost of sales ____________________________________________________________ ____________________________________________________________ [1] (iii) Drawings ____________________________________________________________ ____________________________________________________________ [1] (iv) Cash in hand ____________________________________________________________ ____________________________________________________________ [1] (b) On 30 June 2022, the net realisable value of the inventory was $2 910. Calculate the amount of impairment loss on inventory on this date. ____________________________________________________________ [1] www.KiasuExamPaper.com 251

7 After preparing the financial statements for the financial year ended 30 June 2022, Chungmuro discovered an error. An invoice, $2 000 issued to Sinchon was wrongly recorded in Simchon’s account. REQUIRED (c) Using an accounting theory, explain the purpose of an invoice. [2] (d) Prepare the journal entries to correct the error. Narrations are not required.Journal Date Particulars Debit ($) Credit ($) [2] Chungmuro’s profit for the year ended 30 June 2022 before correcting the errors was $55 824. (e) State the effect on Chungmuro’s profit for the year, after correcting the above error. If there is no effect, write ‘No effect’. [1] [Total: 10] - END OF PAPER - www.KiasuExamPaper.com 252 1 OSS POA MYE 5N PAPER 2 2021 Answer all questions. 1 The following balance were extracted from the books of Incheon Limited on 30 June 2022. $ Issued share capital, 50 000 ordinary shares 50 000 Retained earnings 25 600 Motor vehicles at cost 48 000 Accumulated depreciation of motor vehicles 4 800 Property 50 000 Inventory 15 600 3% Bank loan 30 000 Commission income 1 540 Trade payables 13 890 Trade receivables 35 400 Bank overdraft 3 400 Sales revenue 171 330 Sales returns 9 850 Cost of sales 74 150 Interest expense 300 Utilities expense 15 400 Wages and salaries 49 890 Stationery 4 870 Discount received 2 600 Allowance for impairment of trade receivables 300 Additional information 1 Unused stationery for the year amounted to $800. 2 Annual wages and salaries amounted to $54 000. 3 The allowance for impairment of trade receivables is to be maintained at 5% of trade receivables. 4 Motor vehicles are to be depreciated at 10% per annum using the reducing- balance method. 5 Interest on bank loan had not been fully paid. 6 25% of the loan is repayable on 31 December 2022. 7 The company declared a dividend of $0.10 per share. The dividend will be paid on 31 August 2022. REQUIRED (a) Prepare the statement of financial performance for the year ended 30 June 2022. [8] (b) Prepare the statement of financial position as at 30 June 2022. [12] [Total: 20] www.KiasuExamPaper.com 253

2 OSS POA MYE 5N PAPER 2 2021 2 Gangnam sells goods to Namsan on credit. He allows Namsan a trade discount of 10% on all purchases and also a cash discount of 2% if invoices are paid within 15 days. There was no outstanding balance owed by Namsan to Gangnam on 1 May 2022. The following transactions took place during May 2022. May 5 Namsan purchased goods, list price $2 500