SGSS 4N Prelim P2

1 Answerallquestions. 1 ThefollowingbalanceswereextractedfromthebooksofGBTradingon 30June2022. $Salesrevenue 100560Salesreturns 5920Costofsales 76990Equipmentatcost 48000Motorvehiclesatcost 146200Accumulateddepreciation - Equipment 21600- Motorvehicles 31200Tradereceivables 20800Tradepayables 10100Cashatbank(credit) 6200Inventory 19100Allowanceforimpairmentoftradereceivables 800Wagesandsalaries 19800Motorvehiclesexpenses 3900Insurance 4960Discountreceived 1210Commissionincome 6000Rentexpense 141004%Bankloan(repayable2025) 50000Drawings 13200Capital,1July2021 145300 Additionalinformation 1 $560ofinsurancewasprepaid.2 Rentof$2500waspayableforthemonthofJune2022.3 Commissionincomeof$500wasstilloutstanding.4 Basedon objectiveevidence,it wasestimatedthat5%of thetradereceivableswillbedeemedtobeuncollectible.5 Itisthebusiness’policytoprovidedepreciationasfollows: - Equipmentat10%perannumusingthereducingbalancemethod.- Motorvehiclesat20%perannumusingthestraightlinemethod.[TurnoverSGSS/POAP2/4N/Prelim/2022

2 6 Interestfortheloanwasyettobepaidon30June2022.7 10%ofthebankloantoberepaidon10July2022. REQUIRED (a) Preparethestatementoffinancialperformancefortheyearended30June2022. [10] (b) Preparethestatementoffinancialpositionasat30June2022. [10] [Total:20] [TurnoverSGSS/POAP2/4N/Prelim/2022

3 2 ThefollowingwastheallowanceforimpairmentoftradereceivablesaccountofSGTradingfortheyearended31July2021. Allowanceforimpairmentoftradereceivablesaccount 2020 Debit$ Credit$ Balance$Aug 1 Balanceb/d 640Cr2021July31 Impairmentlossontradereceivables 140 500Cr Aug 1 Balanceb/d 500Cr REQUIRED (a) Explaintheentryon31July2021intheallowanceforimpairmentoftradereceivablesaccount. [2] Acreditcustomer, JJLtd,whoowedSGTrading$800wasdeclaredabankrupt.On15July2022,SGTradingreceived,incash,$0.60foreachdollarowedbyJJLtd.Onthesameday, thebalancewaswrittenoffasuncollectible. REQUIRED (b) Preparejournalentryto recordthetransactionon15July2022.Narrationisnotrequired. [4] ThetradereceivablesbalanceofSGTradingfortheyearended31July2022was$12400. It is SGTrading’s policyto provideallowanceforimpairmentlossof tradereceivablesat5%ontradereceivables. REQUIRED (c) Calculatetheimpairmentlosson tradereceivablesfortheyearended31July2022. [2] (d) Preparejournalentrytorecord(c)on31July2022.Narrationisrequired. [2] (e) Stateandexplaintheaccountingtheoryneededfortherecordingofallowanceforimpairmentlossontradereceivables. [2] [Total:12] [TurnoverSGSS/POAP2/4N/Prelim/2022

4 3 3RCConsultancyprovidesthefollowingaccountbalancesfromitsbookson30June2022. $Officeequipment 23000Accumulateddepreciationofofficeequipment 9800Depreciationofofficeequipment 345Capital,1July2021 ?Drawings 6700Cashatbank 4640Consultancyfeesrevenue 96995Utilities 8800WagesandSalaries 25000Rentexpense 42000Tradereceivables 24330Allowanceforimpairmentoftradereceivables 330 REQUIRED (a) Calculatethecapitalbalanceon1July2021. [3] (b) Calculate3RCConsultancy’s profitfor theyearended30June2022. [1] Thefollowingerrorswerediscoveredon30June2022bytheaccountantof3RCConsultancy. 1 Chequereceivedof $12000forconsultancyservicewasrecordedasdebitconsultancyfeesrevenueandcreditcashatbank. [TurnoverSGSS/POAP2/4N/Prelim/2022

5 2 Depreciationofofficeequipment,$354,waswronglyrecordedas$345. REQUIRED (c) Preparejournalentriestocorrecterrors1and2.Narrationsarenotrequired. [6] (d) Statetheeffectandamountoferror1on3RCConsultancy’sprofitfortheyearended30June2022. [2] (e) Calculate3RCConsultancy’s adjustedprofitfor theyearended30June2022. [3] [Total:15] [TurnoverSGSS/POAP2/4N/Prelim/2022

6 4 GITradingbuysandsellsequipmentoncredit.Ithasbeenthebusiness’policytorecorditsinventoryona“Firstin,Firstout’basis.GITradinghadthefollowingcredittransactionsforthemonthofJune2022. 2022June1 BalancefromMay2022,10unitsat$8000.5 Bought30unitat$24600.11 Sold10unitsfor$10200.17 Bought40unitsat$36800.22 Sold30unitsfor$29000. REQUIRED (a) CalculatethecostofsalesforthemonthofJune2022. [2] (b) Statethebasisofinventoryvaluation. [1] (c) Statetheinventoryamounton30June2022. [1] Dueto a pipeleakageon 25June2022,equipmentcosting$20000wasdamagedandrepaircostof$5000wasincurred.Theseequipmentisexpectedtobesoldfor$23200afterrepair. REQUIRED (d) CalculatetheimpairmentlossoninventoryforthemonthofJune2022. [2] (e) Preparejournalentrytorecordtheimpairmentlossoninventoryinpart(d). Narrationisnotrequired. [2] [TurnoverSGSS/POAP2/4N/Prelim/2022

7 Scenario-BasedQtn:Whichcreditcustomertoextendcreditto? TwocreditcustomershaveapproachedGITradingrequestingforalongercredittermsfrom20daysto30days.Duetotheuncertaintyoftheworldsituationsonthelocaleconomy, GITradingisonlywillingtoextendthecredittermofoneofthecreditcustomersonly. CreditcustomerHoSdnBhd- Malaysiancustomer.- Maincustomerforfiveyearswithannualsalesrevenueof$200000.- Wasonlylate6timesoverthelastfiveyears.- Averagerepaymenttimeof27daysforthelastaccountingperiod.- Goodreputationintheindustryandgoodonlinereviewratingof4.2outof5. CreditcustomerGenTrading- Localcustomer,startedoperationsinoneandahalfyearsago.- Customerfor justoneanda halfyearswithannualsalesrevenueof$120000,expectingupwardtrendinsalesrevenue.- Wasonlylate4timesoverthelastoneandahalfyears.- Averagerepaymenttimeof23daysforthelastaccountingperiod.- Popularamongyoungstersandpositiveonlinereviewratingof4.7outof5. REQUIRED (f) AdviseGITradingwhichcreditcustomeritshouldextendthecreditterm.Justifyyourdecisionwithtworeasons. [5] [Total:13] EndofPaper [TurnoverSGSS/POAP2/4N/Prelim/2022

8 Q1 20marks(a) 10marks GBTradingStatementoffinancialperformancefortheyearended30June2022$ $Salesrevenue 100560LessSalesreturns (5920)Netsalesrevenue 94640 ✔ LessCostofsales (76990)Grossprofit 17650 ✔ AddOtherincome [TurnoverSGSS/POAP2/4N/Prelim/2022

9 Discountreceived ✔ 1210Commissionincome(6000+500)✔ ✔ 6500 7710Totalincome 25360 LessOtherexpensesWagesandsalaries 19800✔Motorvehiclesexpenses 3900Insurance (4960-560)✔ ✔ 4400 Rentexpense(14100+2500)✔ ✔ 16600ImpairmentlossonTR(1040-800)✔ ✔ 240Depreciationofequipment10%(48000-21600)✔ ✔ 2640DepreciationofMotorvehicles20%(146200)✔ ✔ 29240Interestexpense4%(50000)✔ ✔ 2000 78820 Lossfortheyear ✔OFunlessalien (53460) Format✔ (b) 10marks GBTradingStatementoffinancialpositionasat30June2022 Cost Accumulateddepreciation NetbookvalueAssets $ $ $Non-currentassetsEquipment 48000 ✔ 24240 23760Motorvehicles 146200 ✔ 60440 85760 [TurnoverSGSS/POAP2/4N/Prelim/2022

10 Totalnon-currentassets 194200 84680 ✔ 109520 CurrentassetsTradereceivables ✔ 20800LessAllowanceforimpairmentofTR ✔(1040)Nettradereceivables ✔ 19760Inventory ✔ 19100Prepaidinsurance ✔ 560Commissionincomereceivable ✔ 500Totalcurrentassets 39920Totalassets 149440 EquityandliabilitiesOwner'sEquityCapital(145300-53460-13200)✔✔ 78640Totalequity 78640 Non-currentliabilityLongtermborrowing ✔(50000-5000) ✔ 45000Totalnon-currentliability 45000 CurrentliabilitiesTradepayables ✔ 10100Bankoverdraft ✔ 6200rentpayable ✔ 2500interestpayable ✔ 2000currentportionofLongTermBorrowing ✔10%(50000) ✔ 5000Totalcurrentliabilities 25800Totalequityandliabilities 149440Format✔2 12marks (a) 2marks$140represents-thereversalofimpairmentlossontradereceivablesor-decreaseinallowanceforimpairmentoftradereceivables✔-leadingtotheallowanceforimpairmentoftradereceivablesof$500asat31July2022 ✔ . [TurnoverSGSS/POAP2/4N/Prelim/2022