2022 MSHS Prelims S4 POA Paper 2 QP

Class/ Index Number / Centre Number/ ‘O’ Level Index Number / Name MARIS STELLA HIGH SCHOOL PRELIMINARY EXAMINATION SECONDARY FOUR PRINCIPLES OF ACCOUNTS 7087/02 Paper 2 24 August 2022 2 hours Additional Materials : Multi-column accounting paper (5 sheets) READ THESE INSTRUCTIONS FIRST Write your class, index number, Centre number, O level index number and name in the spaces at the top of this page. Write in dark blue or black pen. You may use a HB pencil for any diagrams or graphs. Do not use staples, paper clips, glue or correction fluid. Answer all the questions. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. The total number of marks for this paper is 60. For Examiner’s Use This document consists of 7 printed pages. 60

2 Answer all questions. 1 The following balances were extracted from the books of Spencer Pte Ltd on 30 June 2021. $ Issued share capital, 100 000 ordinary shares 140 000 Retained earnings 49 400 7% bank loan repayable 30 June 2028 40 000 Sales revenue 85 800 Sales returns 4 300 Cost of sales 57 700 Office equipment Motor vehicles 80 000 105 000 Accumulated depreciation: Office equipment 5 000 Motor vehicles 17 000 General expenses 3 600 Wages and salaries 11 800 Rent income 6 000 Trade receivables 23 800 Trade payables 17 700 Cash at bank 31 500 Allowance for impairment of trade receivables 1 700 Inventory 44 900 Additional information 1 Wages and salaries , $900 we re prepaid and general expenses, $2 700 were owing. 2 Rent income received during the year was for 15 months ended 30 September 2021. 3 Office equipment is to be depreciated at 15% per annum using the straight -line method. 4 Motor vehicles are to be depreciated at 20% per annum using the reducing- balance method. 5 Interest on the bank loan for the year ended 30 June 2021 had not yet been paid.

3 6 The allowance for impairment of trade rece ivables is to be maintained at 3 % of trade receivables. 7 Dividend of $0.08 per share was declared on 15 June 2021. The dividends would be paid on 31 July 2021. REQUIRED (a) Prepare the statement of financial performance for the year ended 30 June 2021. [10] (b) Prepare the statement of financial position as at 30 June 2021 . [10] [Total: 20]

4 2 On 1 April 20 19, Jackson Enterprise bought two identical motor vehicles costing $38 000 each by cheque. On 30 June 2021 , one of the motor vehicles was sold for $ 23 700 and a cheque was received. The business provides depreciation on motor vehicles at a rate of 20% per annum using the reducing -balance method. Depreciation is not provided in the year of sale. The business financial year ends on 31 March. REQUIRED (a) Calculate the gain or loss on the sale of the motor vehicle. [2] (b) Prepare the journal entr ies to record the sale of the motor vehicle on 30 June 2021. Narrations are not required. [6] (c) Prepare an extract of the statement of financial performance for the year ended 31 March 2022, showing only the other expenses section. [2] (d) Using a relevant accounting theory, explain why a business should depreciate its non-current assets. [2] (e) Explain why Jackson Enterprise chose the reducing -balance method to depreciate the motor vehicles. [2] [Total: 14]

5 3 Kongcha and Leeho are two businesses in the same industry. The following information was available from both businesses for the year ended 31 December 2021. Kongcha ($) Leeho ($) Net sales revenue 132 000 109 000 Gross profit 28 500 19 400 Profit for the year 12 345 11 565 REQUIRED (a) Calculate the following profitabil ity ratios for both businesses for the year ended 31 December 2021. Show your answers to two decimal places. (i) Mark-up on cost (ii) Gross profit margin (iii) Profit margin [6] (b) Using your answers in (a), compare and comment on the profitability of the two business es. [6] (c) Suggest two ways to improve the profitability of a business . [2] [Total: 14]

6 4 Wilfred buys and sells machinery parts to businesses all over the world. Recently, two of his customers, Nam Seng and Boon Heng, requested for a longer repayment period, from 30 to 40 days. Wilfred intends to extend a longer repayment period to only one customer. Wilfred gathered the following information about the two customers. Nam Seng Boon Heng Location Located in Country A, a developing country with fluctuating economic growth Located in Country B, a developed country with a stable economy Industry outlook In the manufacturing industry which is expected to grow by 50% over the next 2 years Demand for machinery parts has increased in recent years Average trade receivables balance $65 000 $88 000 History of repayment Average collection period of 36 days with 5 occurrences of late payment Average collection period of 21 days with 2 occurrences of late payment Reputation Been in business for 10 years and has received many positive reviews from customers Relatively n ew business so no review available REQUIRED (a) If you are Wilfred, which customer would you give a longer repayment period to? Justify your decision with three reasons. [7] The following ledger account is provided by Wilfred. The financial year of his business ends on 31 December. Rent expense account 2021 Dr ($) Cr ($) Balance ($) Jan 1 Prepaid rent expense 900 900 Dr Aug 31 Cash at bank 4 000 4 900 Dr Dec 31 Prepaid rent expense 1 300 3 600 Dr 31 Income summary 3 600 –

7 REQUIRED (b) Interpret the following entries in the rent expense account on: (i) 1 January 2021 (ii) 31 August 2021 (iii) 31 December 2021 [4] (c) Explain the accrual basis of accounting theory. [1] [Total: 12] END OF PAPER