2022 Broadrick 4E PRELIM P2 with ANS

Name Class Index Number BROADRICK SECONDARY SCHOOL SECONDARY 4 EXPRESS SECONDARY 5 NORMAL ACADEMIC PRELIMINARY EXAMINATION 2022 PRINCIPLES OF ACCOUNTS Paper 2 Additional Materials: answer paper (6 sheets) 7087/02 September 2022 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 on both sides of the paper. You may use a HB pencil for rough working. Do not use staples, paper clips, glue or correction fluid. The use of an approved calculator is allowed. Answer all questions. At the end of the examinations, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. The total of marks for this paper is 60. This document consists of 5 printed pages including the cover page. For Examiner’s Use 60 Actual Grade: Target Grade: Parent’s Signature: ________________________

2 Broadrick Secondary School, Preliminary Examination 2022, Sec 4E5N, Principles of Accounts, Paper 2 Setter(s) : Mr. Lim Shi Hao Answer all questions. 1 The following balances were extracted from Unity Pte Ltd as at 31 May 2022. $ Share capital, 40 000 ordinary shares 40 000 Retained earnings, 1 June 2021 220 100 Consultancy fee income 208 400 Fixtures and fittings 466 000 Accumulated depreciation of fixtures and fittings 128 000 Rent income 29 400 Salary expense 92 400 Trade receivables 64 000 Allowance for impairment of trade receivables 5 000 Cash at bank 162 500 2% Bank loan 100 000 Trade payables 54 000 Additional information 1 $6 000 of rent income was earned but not yet received. $4 000 of salary expense was owing. 2 The allowance for impairment of trade receivables is to be maintained as 5% of trade receivables. 3 Fixtures and fittings are to be depreciated using the straight-line method over a useful life of five years. The estimated scrap value is $2 400. 4 Interest expense has not been paid. 5 20% of the bank loan had to be repaid on 31 December 2022. 6 The company declared a dividend at $0.05 per share. The dividend will be paid on 1 July 2022. REQUIRED (a) Prepare the statement of financial performance for the year ended 31 May 2022. [8] (b) Prepare the statement of financial position as at 31 May 2022. [12] [Total : 20]

3 Broadrick Secondary School, Preliminary Examination 2022, Sec 4E5N, Principles of Accounts, Paper 2 [Turn over 2 Gregory runs a retail business with a financial year end of 31 March. The following ledger account has been prepared at 31 March 2022. Sale of motor vehicles Date 2022 Particulars Debit ($) Credit ($) Balance ($) Mar 31 Motor vehicles 38 000 38 000 Dr 31 Accumulated depreciation of motor vehicle 13 680 24 320 Dr 31 Trade receivables – Goldie (A) 20 000 4 320 Dr 31 Income Summary 4 320 - REQUIRED (a) Interpret each of the entries in the sale of motor vehicles account. (i) Motor vehicle (ii) Accumulated depreciation of motor vehicles (iii) Trade receivables – Goldie (iv) Income summary [4] (b) State the source document used to record the transaction (A). [1] (c) Using an appropriate accounting theory, explain why a business should depreciate its non-current assets. [2] (d) State one cause of depreciation. [1] During the year, Gregory had paid for the installation of his new machinery at a cost of $18 000, which includes $2 800 for repairs to his existing machinery. He had included the total cost in the business’s statement of financial performance. REQUIRED (e) State the effect and amount of including the cost of installation of the new machinery in the statement of financial performance on the following: (i) Profit for the year (ii) Non-current assets [4] (f) Distinguish between capital and revenue expenditure. [1] [Total : 13]

4 Broadrick Secondary School, Preliminary Examination 2022, Sec 4E5N, Principles of Accounts, Paper 2 3 The following information relates to Mervyn’s business at 31 March 2020, 2021 and 2022. 2020 2021 2022 $ $ $ Current assets Inventory 57 350 72 800 135 500 Prepaid Rental expenses - 12 000 24 000 Trade receivables 34 400 50 800 55 200 Cash at bank 36 150 18 500 - 127 900 154 100 214 700 Current liabilities Trade payables 32 200 48 500 65 700 Cash at bank - - 12 300 Expenses payable 4 550 6 600 8 250 Current portion of long term borrowings - - 75 000 36 750 55 100 161 250 Current ratio 3.48 ? ? Quick ratio 1.92 ? ? REQUIRED (a) Explain what is meant by the liquidity of a business. [1] (b) Calculate the following ratios of the business for each of the two years ended 31 March 2021 and 2022. Show your answer to two decimal places. (i) Current ratio (ii) Quick ratio [4] (c) Using the given information and your answer to (b), evaluate the trend in liquidity of the business over the three years ended 31 March 2020, 2021 and 2022. [6] Other than liquidity, Mervyn is also concerned about the profitability of the business. The business profit has worsened over the three years ended 31 March 2020, 2021 and 2022. REQUIRED (d) Suggest two ways to improve profitability of a business. [2] [Total : 13]

5 Broadrick Secondary School, Preliminary Examination 2022, Sec 4E5N, Principles of Accounts, Paper 2 [Turn over 4 Ethel runs a business supplying art supplies. The following information is available for the month of February 2022. Feb 2 Purchased goods by cheque, $32 300 11 Sold goods costing $22 000 to John on credit for $88 800 23 Purchased goods on credit from Roderick, $30 500 28 Sold goods for cash, $50 200. These goods cost $12 050 28 The net realisable value of ending inventory was reduced by $1000 due to flood. REQUIRED (a) Prepare the inventory account for the month of February 2022. [3] (b) Prepare the sales revenue account for the month of February 2022. [2] (c) Name and explain one accounting theory that is applied to the valuation of inventory. [2] Ethel’s sister, Johanna, is a housewife with 3 young children in the family. She enjoys baking for her family and friends. Her food is always well -received, especially her cupcakes. Johanna would like to set up a store selling her cupcakes. However, Johanna does not have any experience in setting up and managing a business. Johanna is also unsure of how she could promote her product. Since Ethel is a business women, she is interested in investing in Johanna’s business. Johanna has sufficient funds from her savings to start the business. She has plans to expand the range of products and would want to be able to make most of the decisions about the business. She hopes to own a chain of stores selling baked goods and wants to leave the business to her children. REQUIRED (d) Recommend whether Johanna should set up a sole proprietor or private limited company. Give three reasons for your choice. [7] [Total : 14] - End of Paper -

6 Broadrick Secondary School, Preliminary Examination 2022, Sec 4E5N, Principles of Accounts, Paper 2 Suggested solution Question 1 a) Unity Pte Ltd Statement of financial performance for the year ended 31 May 2022 [1] $ $ Consultancy fee income 208400 [1] Add: Other income Rent income (29400+6000) 35400 [1] Less: Other expenses Salary expense (92400+4000) 96400 [1] Interest on loan/ Inter