Deyi P2 4E5NA Prelim 2022 (sharing)

1 Answer all questions 1 Karen Tours is an agency that specializes in local heritage tours. The following balances were extracted from the books of its business on 31 March 2022. $ Office equipment 195 000 Motor vehicles 190 000 Accumulated depreciation: Office equipment 60 000 Motor vehicles 84 000 Trade receivables 20 700 Trade payables 19 100 Allowance for impairment of trade receivables 4 100 Rent expense 48 000 Service fee revenue 55 140 Wages and salaries 2 400 General expense 1 200 Commission income 3 000 Cash at bank 8 000 Cash in hand 3 200 10% bank loan repayable by 31 March 2027 95 000 Interest paid on 10% bank loan 5 000 Share capital, 100 000 ordinary shares 100 000 Retained earnings 1 April 2021 53 160 Additional information 1 Office equipment is to be depreciated at 10% per annum using straight -line depreciation. Motor vehicles are to be depreciated at 15% using reducing-balance method. 2 One-fifth of the bank loan is to be paid on 30 June 2022. Interest is not yet fully paid. 3 Wages and salaries, $9 000 was paid by cheque and this was not recorded. 4 Commission income, $600, had been received in advance. 5 Rent expense covers the period 1 April 2021 to 30 June 2022. 6 Trade receivable, Wing was declared bankrupt. His debt of $800 has yet to be written off. 7 A review of the trade receivables indicated that 10% of the balance is likely to become uncollectible. 8 A dividend of $0.03 per share had been declared and will be paid on 15 May 2022. REQUIRED (a) Prepare the statement of financial performance for the year ended 31 March 2022. [10] (b) Prepare the statement of financial position as at 31 March 2022. [10] [Total:20]

2 2 The following cash at bank account was extracted from the books of Marcus Trading for the month of April 2022: Cash at bank account Date Particulars Cheque No. Debit Credit Balance 2022 $ $ $ Apr 1 Balance b/d 5 000 Cr 3 Tengku 695811 1 090 6 090 Cr 8 Sammy 695812 420 6 510 Cr 15 Sales revenue 1 200 5 310 Cr 21 Nic & Tom Trading 7 780 2 470 Dr 25 Organic Trading 695813 9 110 6 640 Cr 26 Gilbert Retailer 1 776 4 864 Cr 28 Repair expense 695814 672 5 536 Cr 30 Salaries 695815 4 470 10 006 Cr May 1 Balance b/d 10 006 Cr The bank statement received for April 2022 was as follows: Bank Statement Date Particulars Withdrawal Deposit Balance 2022 $ $ $ Apr 1 Balance b/d 4 000 Dr 5 Cheque no: 695801 1 000 5 000 Dr 6 Cheque no: 695811 1 090 6 090 Dr 10 Cheque no: 695812 402 6 492 Dr 12 Direct deposit- Cliff Success 1 776 4 716 Dr 16 Cash deposit 1 200 3 516 Dr 27 Cheque 1 776 1 740 Dr 27 Cheque no: 695813 9 110 10 850 Dr 28 Direct payment – Insurance expense 105 10 955 Dr 28 Rejected cheque 1 776 12 731 Dr Additional information: It was discovered that the assistant accountant of Marcus Trading had incorrectly recorded the transaction on 8 April 2022. REQUIRED (a) Prepare the adjusted cash at bank account for the month of April 2022. [5] (b) Prepare the bank reconciliation statement as at 30 April 2022. [4] (c) Given profit for the year was $9320. Calculate the adjusted profit for the year, after accounting for the adjustments made from bank reconciliation. [1] [Turn over

3 Marcus Trading provided the following information for its financial year that ends on 30 April 2022. Insurance expense account Date Particulars Debit Credit Balance 2021 $ $ $ May 1 Prepaid insurance expense 900 900 Dr Dec 1 Cash at bank 4 000 4 900Dr 2022 Feb 1 Cash in hand 300 5200 Dr REQUIRED (d) Interpret the entry on 1 May 2021. [1] On 30 April 2022, it was disclosed by the accountant that the business had not been invoiced for $800 of insurance for the financial year. REQUIRED (e) State the amount of insurance expense that should be presented in the statement of financial performance for the year ended 30 April 2022. [1] (f) Explain an accounting theory for the adjustment of insurance on 30 April 2022. [1] (g) Prepare journal entries to record the insurance expense on 1 May 2022. Narrations are not required. [2] [Total:15]

4 3 On 1 May 2020, SA Design provided the following information: $ Office equipment 45 000 Accumulated depreciation of office equipment 9 800 Information to note 1 On 28 February 2021, the business bought one computer for $14 000. 2 On 1 July 2021, it purchased another computer for $5 200. 3 Both purchases were made by cash and the business depreciates its office equipment at 15% per annum using reducing-balance method. REQUIRED (a) Calculate the depreciation of office equipment for each of the two years ended 30 April 2021 and 2022. [2] (b) State the effect on the non-current assets if a revenue expenditure is being recorded as a capital expenditure. [1] The following information relates to SA Design and Great Design for the year ended 30 April 2022. SA Design $ Great Design $ Office equipment 8 500 18 000 Trade receivables 10 000 5 000 Inventory 15 000 4 500 Cash at bank - 3 500 Bank overdraft 3 500 - Transport expense payable 200 490 Prepaid rent expense 800 300 Trade payables 6 800 7 100 Mortgage 50 000 25 000 Current ratio ? 1.75 Quick ratio ? 1.12 Rate of trade receivables turnover 23.25 times 34 times REQUIRED (c) Calculate the following ratios, to two decimal places for SA Design for the year ended 30 April 2022. (i) Current ratio [1] (ii) Quick ratio [1] (d) Evaluate the liquidity of both businesses for the year ended 30 April 2022. [7] [Turn over

5 SA Design has the following credit policy for all his credit customers. 1. No cash discounts 2. Interest period for 10 days for all amount due after the credit period of 30 days. 3. An automatic credit limit of $5 000 REQUIRED (e) Comment on the rate of trade receivables turnover of both businesses for the year ended 30 April 2022. [2] [Total:14]

6 4 Joseph Security trades in surveillance cameras. It buys all his goods on credit. The following transactions took place in the month of June 2022. Date Transaction June 1 Balance owed by Joseph Security to Focus Trading was $3 200. 11 Joseph Security bought cameras from Focus Trading at a list price of $ 3 100, less 5% discount. 15 Joseph Security sent a cheque of $2 800 in full settlement of the amount owed on 1 June. 29 Focus Trading issued a debit note of $50 to Joseph Security for late interest charge. 30 Joseph Security returned goods at a list price of $500. The goods were bought on 11 June. REQUIRED (a) Prepare Focus Trading’s account in the books of J oseph Security for the month of June 2022. [4] Joseph Security is considering buying security cameras from one of the following suppliers. Genesis Ausie Aimee Trading Average list price of a camera $1 200 $1 300 Mode of business operation Online, based in Australia Bricks-and-mortar store in Singapore Credit terms 45 days and a cash discount of 3% within 40 days 30 days and a cash discount of 6% within 25 days Delivery fee per order (i) $30: Less than 100 units (ii) Free: 100 or more units $100 fixed price, regardless of quantity Refund policy Refund made within 14 days. No questions will be asked. Refund within 7 days, Must be supported by photos / video and subject to fi