ACSBR 2022 4E POA Prelims P2

Anglo-ChineseSchool (Barker Road) Answer all questions.1 Thefollowingbalanceswereextractedfromthebooksof RuthPteLimitedon31July2022.$Machineryat cost 196000Motor vehiclesat cost 84000Accumulateddepreciation:Machinery 98000Motor vehicles 30240Salesrevenue 337000Salesreturns 12400Cost of sales 93300Wagesandsalaries 79960Machineryrepairs 7600General expenses 37700Interest income 1000Tradereceivables 21000Tradepayables 12480Cashat bank(debit balance) 24300Allowancefor impairment of tradereceivables 600Inventory 41320Sharecapital, 100000ordinaryshares 100000Retainedearningsat 1August 2021 Additional information 18260 1 General expenses, $250, wereprepaidandwagesandsalaries, $460, wereowing. 2 Interest incomeowingtothecompanywas$800. 3 Machineryrepairs, $2000, hadbeenincorrectlydebitedtothemachineryaccount.0 4 Machineryisdepreciatedat 25%per annumusingthestraight-linemethod.Motor vehiclesaredepreciatedat 20%per annumusingthereducing-balancemethod. 5 The allowance for impairment of trade receivables is tobemaintainedat 5%of tradereceivables. 6 The company declared a dividend of $0.10 per share. The dividendwill bepaidon1September 2022. REQUIRED (a) Prepare the statement of financial performance for the year ended 31 July 2022.[10] (b) Prepare the statement of financial position as at 31 July 2022.[10] [Total: 20] PreliminaryExamination20222Secondary4Express/ 5Normal (Academic)Principlesof Accounts7087Paper 2

Anglo-ChineseSchool (Barker Road) 2 Javier runs an advertising agency. His business has a financial year end of 31 July. Thefollowinginformationhasbeenprovided. $Account balancesat 1August 2021Utilitiespayable 582Rental incomereceivable 600 Duringtheyear ended31July2022Paymentsmadefor utilities 9500Rental incomereceived 8000 Additional information 1 Includedinthepaymentsfor utilitieswasthesumof $384inrespect of August 2022. 2 Rental income, $700, hadnot beenreceivedon31July2022. REQUIRED (a) Calculate the amounts (showing all workings) to be included in the statement offinancial performanceof thebusinessfor theyear ended31July2022for: (i) utilitiesexpense[4](ii) rental income[4] (b) State the accounting theory which is being applied when calculating the amounts forutilities expense and rental income for the year ended 31 July 2022.[1] (c) State two ways of internal control a business may use to safeguard cash balances.[2] (d) State two types of item paid or received directly through the bank for which a bankstatement may be used as proof.[2] [Total: 13] PreliminaryExamination20223Secondary4Express/ 5Normal (Academic)Principlesof Accounts7087Paper 2

Anglo-ChineseSchool (Barker Road) 3 The following information relates to Lynette’s business at 30 September 2019, 2020 and2021. 2019 2020 2021$ $ $Current assetsInventory 40625 45800 59850Tradereceivables 27000 35700 44900Cashat bank 13125 8100 –80750 89600 104750Current liabilitiesTradepayables 20000 27950 27750Cashat bank – – 3050Expensespayable 3750 4800 3045Current portionof long-termborrowings – – 2250023750 32750 56345 Current ratio REQUIRED 3.40 ? ? (a) Explain what is meant by the liquidity of a business.[2] (b) Calculate the current ratio of the business for each of the two years ended 30September 2020 and 2021. Show your answer to two decimal places.[2] (c) Evaluate the trend in liquidity of the business over the three years ended 30September 2019, 2020 and 2021. Use the given information and your answer to (b).[6] The business profit has remained the same over the three years ended 30 September2019, 2020and2021. REQUIRED (d) AdviseLynettewhytheliquidityof thebusinesshaschangedeventhoughprofit hasremainedthesameover thethreeyears.[2] Lynetteisconsideringcomparingtheprofitabilityof her businesswiththat of acompetitor. REQUIRED PreliminaryExamination20224Secondary4Express/ 5Normal (Academic)Principlesof Accounts7087Paper 2

Anglo-ChineseSchool (Barker Road) (e) NameoneprofitabilityratiowhichLynettecoulduse. [1] [Total: 13]4 Jasonrunsatradingbusiness. Hehasprovidedthefollowinginformation. 1 All salesaremadeoncredit. 2 Thebusiness’stermsof tradewithcustomersarefor payment infull within30days. 3 Nodiscount isofferedfor earlysettlement. 4 Thebusiness’stradereceivablescollectionperiodis35daysonaverage. Jenny is a prospective newcustomer. The following information has been made availableabout Jenny’sbusiness. 1 Jennyoperatesher businessoverseas. 2 Jenny opened her business selling mobile phoneaccessoriesninemonthsago. Asasuccessful business, sheexpectstodoubleher salesrevenuewithinoneyear. 3 Jenny’sbusinesspaysitssuppliersonaveragewithin36days. Jenny can provide details of twoof her current supplierswhoarewillingtogiveareferenceastoher reliabilityandpayment history. REQUIRED (a) Recommend whether or not Jason should agree to make sales on credit to Jenny.Justify your decision with three reasons.[7] Additional informationThefollowingtransactionstookplaceduringJuly2021withacredit customer, Tam.2021July7 Goods, $900, weresuppliedtoTam14 Tamreturnedfaultygoods, cost $30020 TampaidSim$35028 TampaidSimtheoutstandingbalanceonhisaccount bycheque30 ThebankreturnedTam’schequeduetoinsufficient funds The balance on Tam’s account wasstill outstandingat theendof Lim’sbusinessfinancialyear on31December 2021. Limdecidedtowritethisbalanceoff infull. REQUIRED(b) Prepare the journal entrytowriteoff theoutstandingbalanceat 31December 2021. Anarrationisrequired. [4] (c) Explain why a business may decide to make an allowance for impairment of tradereceivables.[2] (d) Name one accounting theory which is applied when making an allowance forimpairment of trade receivables. PreliminaryExamination20225Secondary4Express/ 5Normal (Academic)Principlesof Accounts7087Paper 2

Anglo-ChineseSchool (Barker Road) [1] [Total: 14]Endof Paper PreliminaryExamination20226Secondary4Express/ 5Normal (Academic)Principlesof Accounts7087Paper 2

Anglo-ChineseSchool (Barker Road) [Typehere][Typehere][Typehere]