Anderson Sec Prelim 2022 P1 - ANSWER SCHEME

Setter: Mdm June Liau O ANDERSON SECONDARY SCHOOL Preliminary Examination 2022 Secondary Five Normal Academic CANDIDATE NAME: ANSWER SCHEME CLASS: / INDEX NUMBER: PRINCIPLES OF ACCOUNTS Paper 1 Candidates answer on the Question Paper. 7087/01 25 August 2022 1 hour No Additional Materials are required. READ THESE INSTRUCTIONS FIRST Write your name, class and index number on all the work you hand in. Write in dark blue or black pen on both sides of the paper. Do not use staples, paper clips, highlighters, glue or correction fluid/tape. The use of an approved calculator is allowed. Answer all the questions. Where layouts are to be completed, you may not need all the lines for your answers. The businesses described in this question paper are entirely fictitious. 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. This document consists of __ printed pages. 40

2 PRELIM 5NA POA 2022 7087/01 Qn 1 (a) (i) Amounts owing from credit customers. [1] (ii) Amount of debts estimated to be uncollectible from credit customers. [1] (b) Prudence theory states that the accounting treatment chosen should be the one that least overstates assets and profits. Recording allowance for impairment of trade receivables as a deduction against trade receivables will ensure that trade receivables balance (asset) is not overstated. OR Matching theory states that expenses incurred must be matched against income earned in the same period to determine profit for that period. The business is to record the impairment loss on trade receivables (expense) in the same financial period as the credit sales revenue earned. [2] (c) Date Dr Cr 2021 $ $ Aug 10 Cash at bank (3500 x 20%) [1] 700 Allowance for impairment of trade receivables [1] 2 800 Trade receivable – Jacky Trading [1] 3 500 OR Date Dr Cr 2021 $ $ Aug 10 Cash at bank (3500 x 20%) [1] 700 Trade receivable – Jacky Trading [0.5] 700 Aug 10 Allowance for impairment of trade receivables [1] 2 800 Trade receivable – Jacky Trading [0.5] 2 800 [3] (d) Allowance for impairment of trade receivables = 22 700 x 10% = 2 270 Impairment loss on trade receivables = 2 270 – (3 450 – 2 800) = 2 270 – 650 = 1 620 Date Dr Cr 2021 $ $ Sep 30 Impairment loss on trade receivables [1] 1 620 Allowance for impairment of trade receivables [1] 1 620 [2] [Total: 9]

3 PRELIM 5NA POA 2022 7087/01 Qn 2 (a) Explain the difference between a trading business and a service business. [2] A trading business earns its main income from buying and selling goods while a service business earns its main income from providing services (b) Prepare the journal entry to adjust service fee revenue received in advance on 31 May 2022. A narration is not required. [2] Journal Date Particulars Dr $ Cr $ 2022 May 31 Service fee revenue 5 600 Service fee revenue received in advance 5 600 (c) Calculate the service fee revenue earned for the year ended 31 May 2022. [1] 88600 – 8800 – 5600 = $74 200 (d) Explain the revenue recognition theory. [1] Revenue recognition theory states that revenue is earned when goods are sold and delivered or when services have been provided. (e) (f) (e) Calculate the rental expense incurred for the year ended 31 May 2021. [1] 5500x12 = $66000 (e) (f) (f) Prepaid rental expense. $5 500. Current Asset. [3] [Total: 10] (g) (h)

4 PRELIM 5NA POA 2022 7087/01 Qn 3 (a) Prepare journal entries to record interest for the year ended 31 December 2021, including the closing entries. Narrations are not required. [6] Journal Date Particulars Dr $ Cr $ 2021 Sep 30 Interest expense (100000x4%x6/12) 2 000 Cash at bank 2 000 Dec 31 Interest expense (90000x4%x3/12) 900 Interest expense payable 900 Dec 31 Income summary 2 900 Interest expense 2 900 (b) Prepare an extract of the statement of financial performance for the year ended 31 December 2021 to show the expenses section. [1] John Bakery Statement of financial performance for the year ended 31 December 2021 (extract) Less expenses $ Interest expense 2900 (c) Prepare an extract of the statement of financial position as at 31 December 202 1 to show the liabilities section. [3] John Bakery Statement of financial position as at 31 December 2021 (extract) Non-current liabilities $ Long term borrowings (100000-10000-20000) 70 000 Current Liabilities Current portion of long term borrowings 20 000 Interest expense payable 900 (d) Accrual basis of accounting. [1] [Total: 11]

5 PRELIM 5NA POA 2022 7087/01 Qn 4 (a) (i) On 18 January 2022, the business purchased inventory costing $1 200 and paid by cheque. (ii) On 23 January 2022, the business withdrew $100 cash from the business bank account for office use. [2] (b) Cash at bank Date Particulars Debit Credit Balance 2022 $ $ $ Jan 31 Balance b/d 7 190 Dr 31 Insurance Expense 600 6 590 Dr 31 Commission income 230 6 820 Dr 31 Trade receivable – Indra (Dishonoured Cheque) 400 6 420 Dr Feb 1 Balance b/d 6 420 Dr [4] (b) Shahid Bank reconciliation statement as at 31 January 2022 $ $ Balance as per bank statement 5 530 Add: deposits in transit Trade receivable - Ken 1 150 Less: Cheque not yet presented Trade payable - Edward (260) Balance as per updated cash at bank account 6 420 [4] [Total:10]