2022 PLMGS 4E5N POA Prelim P2 - Question Booklet

Name: ___________________________ ( ) Class: _______ Centre Number S Index Number PRINCIPLES OF ACCOUNTS 7087/02 Paper 2 25 August 2022 Additional Materials: Writing paper (4 sheets) 2 hours READ THESE INSTRUCTIONS FIRST Write your name, index number and class on all the work you hand in. Write in dark blue or black pen. You may use an HB pencil for any diagrams or graphs. Do not use paper clips, glue or correction fluid. The use of an approved calculator is allowed. Answer all questions. The businesses described in this question paper are entirely fictitious. The number of marks is given in brackets [ ] at the end of each question or part question. At the end of the examination, submit your answers and the question booklet separately. This document consists of 7 printed pages and 1 blank page. Paya Lebar Methodist Girls’ School (Secondary) Preliminary Examination 2022 Secondary 4 Express / 5 Normal (Academic) Calculator Model: (if applicable)

2 Answer all questions. 1 The following balances were extracted from the books of Tiffani Pte Limited on 31 August 2021. $ Motor vehicles at cost 63 000 Equipment at cost 204 000 Accumulated depreciation: Motor vehicles 22 680 Equipment 73 600 Sales revenue 340 370 Cost of sales 182 400 Sales returns 3 920 Wages and salaries 86 910 Equipment repairs 18 810 Advertisement 19 810 Selling expenses 10 990 Commission received 1 960 Trade receivables 41 400 Trade payables 25 200 Cash at bank (credit balance) 1 220 Allowance for impairment of trade receivables 2 870 Inventory 70 000 10% bank loan repayable 2025 30 000 Interest paid on 10% bank loan 1 380 Share capital 180 000 Retained earnings at 1 September 2020 24 720 Additional information 1 Share capital consists of 150 000 ordinary shares. 2 Advertisement relates to a fourteen-month period ending on 31 October 2021. 3 A sales invoice, $5600, had been completely omitted from the books of account. 4 The allowance for impairment of trade receivables is to be maintained at 4% of trade receivables. 5 Equipment repairs of $8000 had been incorrectly debited to the equipment account. 6 Motor vehicles are to be depreciated at 20% per annum using reducing-balance method. 7 Equipment is depreciated at 10% per annum using the straight-line method. 8 Interest on the bank loan for the year was not fully paid up. 9 The company declared a dividend of $0.03 per share. The dividend will be paid on 1 October 2021.

3 [Turn over REQUIRED (a) Prepare the statement of financial performance for the year ended 31 August 2021. [9] (b) Prepare the statement of financial position as at 31 August 2021. [11] [Total: 20]

4 2 Tyra runs a bakery business. She has provided the following information at 31 March 2020, 2021 and 2022. 2020 2021 2022 $ $ $ Current assets Inventory 21 350 29,870 41,200 Trade receivables 15 300 20,295 30,095 Prepaid expenses – 2,500 8,975 Cash at bank 6 500 1,300 – Cash in hand 1 100 845 500 44 250 54,810 80,770 Current liabilities Trade payables 16 300 19 215 19 990 Income received in advance 3 950 5 980 3 815 Cash at bank – – 5 000 Current portion of long-term borrowings – – 30 000 20 250 25 195 58 805 Current ratio 2.19 2.18 ? Quick ratio 1.13 0.89 ? REQUIRED (a) Explain what is meant by the liquidity of a business. [1] (b) State one reason why liquidity is important to a business. [1] (c) Calculate, to two decimal places, the following for the year ended 31 March 2022: (i) current ratio [1] (ii) quick ratio. [1] (d) Evaluate the trend in liquidity of the business over the three years ended 31 March 2020, 2021 and 2022. Use the given information and your answer to (c). [6] (e) Advise Tyra on two measures she may take to improve her liquidity position. [2] The business profit has remained the same over the three years ended 31 March 2020, 2021 and 2022. REQUIRED (f) Suggest why the liquidity of the business has changed even though profit has remained the same over the three years. [2] [Total: 14]

5 [Turn over 3 Vienna has a business whose financial year ends on 31 May. Her business makes an average annual profit of over $500 000. She has decided that her business should treat purchases of equipment costing less than $450 as revenue expenditure. REQUIRED (a) State the meaning of: (i) capital expenditure [1] (ii) revenue expenditure. [1] (b) Name and explain the accounting theory applied by Vienna when recording the purchase of equipment of low value as revenue expenditure. [2] Vienna’s business has recently purchased new equipment from overseas and trained staff to operate it. REQUIRED (c) Copy the following table on to your answer paper and insert a tick (✓) to show which items are capital expenditure and which are revenue expenditure. Capital expenditure Revenue expenditure 1 Staff training 2 Utilities to run the equipment [2] The following ledger has been prepared at 31 May 2022. Sale of equipment Date Particulars Debit Credit Balance 2022 $ $ $ March 28 Equipment 13 200 13 200 Dr March 28 Accumulated depreciation of equipment 7 920 5 280 Dr March 28 Other receivable – Alishah Equip 5 500 220 Cr May 31 Income summary 220 – REQUIRED (d) Interpret each of the entries in the sale of equipment account. [4] [Total: 10]

6 4 Joanne owns a business which buys and sells beauty products. The business uses the FIFO method to calculate the cost of sales and to value ending inventory. On 1 June 2022, the business had a balance of $90 000 in its inventory account. The following information is available for the month of June 2022. Jun 3 Sold goods costing $60 000 to Annette for cash, $80 800. 13 Purchased goods on credit from Jocelyn, $45 000. 16 Purchased goods by cheque, $83 500. 29 Sold goods costing $79 100 to Creda on credit for $121 350. REQUIRED (a) Explain what is meant by the FIFO method of inventory valuation. [2] (b) Prepare following ledger accounts for the month of June 2022: (i) inventory account [4] (ii) sales revenue account. [2] (c) State how ending inventory must be valued in the financial statements. [1]

7 [Turn over As the weather in Singapore is getting hotter, there is an increase in the demand for sunscreen. Applying sunscreen is important as it protects the skin from the sun’s damaging UV radiation, which can cause skin cancer. Hence, Joanne’s business wants to order sunscreen from Korea to s