Anderson Sec Prelim 2022 P2 - Qns

Setter: Mdm June Liau O ANDERSON SECONDARY SCHOOL Preliminary Examination 2022 Secondary Five Normal Academic CANDIDATE NAME: CLASS: / INDEX NUMBER: PRINCIPLES OF ACCOUNTS Paper 2 7087/02 26 August 2022 2 hours 0800 – 1000h No Additional Materials are required. READ THESE INSTRUCTIONS FIRST Answer booklet will be provided with this question paper. You should follow the instructions on the front cover of the answer booklet. If you need additional answer paper ask the invigilator for a continuation booklet. Answer all the questions. The number of marks is given in brackets [ ] at the end of each question or part question. 60

2 PRELIM 5NA POA 2022 7087/02 This document consists of 5 printed pages and 1 blank page. Answer all questions. 1 The following balances were extracted from the books of Xin Yi Pte Ltd on 31 March 2022. Dr Cr $ $ Sales revenue 184 470 Sales returns 11 000 Cost of sales 78 050 Trade receivables 108 500 Trade payables 59 510 Issued share capital, 160 000 ordinary shares 160 000 Retained Earnings 36 870 Motor vehicle expense 12 000 Motor vehicles 152 000 Accumulated depreciation for motor vehicles 50 000 Allowance for impairment of trade receivables 5 000 Interest on loan 8 000 Discounts 2 050 3 850 Wages expense 30 800 Bank loan 50 000 Cash at bank 51 200 Rent expense 6 000 Inventory 90 100 549 700 549 700 Additional information: 1 The net realisable value of inventory is $89 000. 2 The payment for wages expense was for 14 months up to 31 May 2022. 3 Depreciation on motor vehicle is at 15% per annum on net book value. 4 During the year, trade receivable of $3 500 became bankrupt. The amount has yet to be written off. 5 A review of the trade receivables at the end of the year found that 5% of trade receivables are estimated to be uncollectible. 6 20 000 shares at $1.00 were issued and paid on 1 February 2022. This was not recorded. 7 A dividend of $0.05 per share was declared on 29 March 2022. The dividend will be paid on 4 April 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] (c) State two purposes of having internal controls in a business. [2] [Total: 22]

3 PRELIM 5NA POA 2022 7087/02 2 The following information relates to Farhana’ business as at 30 June 2022. $ Premises 220 000 Trade payables 10 600 Other payables 5 000 Bank overdraft 900 Accrued expenses 400 Current portion of long-term borrowings 5 000 Long term bank loan 130 000 Inventory 18 000 Trade receivables 6 400 Prepaid expenses 500 REQUIRED (a) Explain what is meant by liquidity of a business. [1] (b) Calculate the following: (i) Working capital [2] (ii) Current ratio to two decimal places. [2] (iii) Quick ratio to two decimal places. [2] Farhana provided the following details about the business performance for the years ended 30 June 2020, 2021 and 2022. 2020 2021 2022 Current ratio 3.52 2.32 ? Quick ratio 1.83 1.05 ? (c) (i) Comment on the changes in liquidity over the three years ended 30 June 2022. Use the information provided and your answer to part (b). [4] (ii) Suggest one possible reason for the trend. [1] Farhana also provided the following details about the business for the years ended 30 June 2020, 2021 and 2022. 2020 2021 2022 Inventory turnover ratio 8.46 6.78 4.46 (d) Comment on the inventory turnover rates for the three years ended 30 June 2022. [2] [Total: 14]

4 PRELIM 5NA POA 2022 7087/02 3 After preparing the statement of financial performance for the business for the year ended 31 May 2022, Syahirah Sweets Pte Ltd discovered the following errors. 1 Cheque payment of $660 for marketing expenses has been wrongly recorded in the books as $600. 2 Credit sale of $400 has been debited to the sales revenue account and credited to the trade receivable account. 3 A cheque of $265 received from Tata Store had been recorded in the account of Kaka Store. 4 Purchase of fixtures and fittings worth $120, has been debited to the stationery account. The loss for the year before discovering the errors was $450. REQUIRED (a) Prepare journal entries to correct the errors. Narrations are not required. [8] (b) Prepare a statement to show adjusted profit for the year ended 31 May 2022. [5] [Total: 13]

5 PRELIM 5NA POA 2022 7087/02 4 Shanice is the owner of FinePrint, a printing business. The business is doing very well and she needs to increase her printing capacity. She is planning to rent or buy a photocopy machine for use for the next 5 years. Shanice is unable to decide if she should buy or rent the photocopy machine. If she buys the photocopy machine, she owns it and can sell it when it is no longer suitable, and then buy another one. If she rents the photocopy machine, she can rent another one when the rental agreement ends. Shanice gathered the following information about the two options: Buy Rent Cost of Machine $5 000 Monthly rental per year: $1 500 Other cost $250 for servicing annually Rental cost includes servicing. Condition Brand new machine Machine has been rented out for the past 6 months. Customization option Can be customized to print ● In bulk ● With scheduling function Can be customized to fit in certain size No customization allowed Warranty 2 years Part of contract Availability Delivery in 3 months Immediate delivery Other Information Machine can last for about 5 years. Terms and conditions for rental: Contract is renewed annually and terms and conditions may change. REQUIRED (a) Make a recommendation on whether Shanice should buy or rent the new photocopy machine. Justify your answer using the available accounting and non-accounting information. [7] On 1 January 2019, Celeste bought a machine for $4 000 by cheque. On 1 July 2021, this machine was sold for $2800 by cheque. On the same day, a new machine was bought for $5 000 by cheque. Celeste’s financial year ends on 31 December each year. The machine is depreciated at 10% per annum using the reducing balance method. A full year’s depreciation is charged in the year of purchase and none in the year of sale. REQUIRED

6 PRELIM 5NA POA 2022 7087/02 (b) Calculate the depreciation expense for each of the two years ended 31 December 2020 and 2021. [2] (c) Calculate the gain or loss on the sale of the machine. [2] [Total: 11] END OF PAPER BLANK PAGE BLANK PAGE