PCSS 2022 POA P2

PEICAI SECONDARY SCHOOL SECONDARY FOUR EXPRESS/FIVE NORMAL ACADEMIC PRELIMINARY EXAMINATION 2022 CANDIDATE NAME CLASS REGISTER NUMBER PRINCIPLES OF ACCOUNTS 7087/02 Paper 2 29 August 2022 2 hours No Additional Materials are required. READ THESE INSTRUCTIONS FIRST An 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 questions. The use of an approved calculator is allowed. 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. This document consists of 7 printed pages and 1 blank page. Setter: Mdm Soo Sio Koon

2 1 The following balances were extracted from the books of Toys Paradise Pte Limited, a business that sells action and toy figures, on 31 July 2022. $ Share capital, 20 000 ordinary shares 20 000 Retained earnings 19 000 Fixtures and fittings at cost 35 000 Accumulated depreciation of fixtures and fittings 1 450 Trade receivables 43 000 Allowance for impairment of trade receivables 1 000 Sales revenue 80 000 Inventory 37 000 Cost of sales 26 300 Sales returns 7 650 Trade payables 17 700 8% Bank loan repayable 2030 40 000 Cash at bank (Cr) 7 900 General expenses 10 200 Commission income 3 700 Wages and salaries 16 600 Rent expense 15 000 Additional information 1 Rent expense of $9 000 was paid for 15 months up to 31 October 2022. 2 Commission of $140 was earned but not yet received. 3 Payment to trade supplier of $1 200 has been debited to the cash at bank account and credited to the trade payables account. 4 A review of the trade receivables revealed that 5% of the trade receivables are likely to be uncollectible. 5 Interest on the bank loan was outstanding. The loan was taken out on 1 November 2021. 6 Fixtures and fittings are to be depreciated at 5% per annum using the straight-line method. The fixtures and fittings have a residual value of $1 000. 7 A dividend of $0.10 per share had been declared and will be paid on 5 August 2022. REQUIRED (a) Prepare the statement of financial performance for the year ended 31 July 2022. [8] (b) Prepare the statement of financial position as at 31 July 2022. [12] [Total: 20]

3 2 Top In Tech and TechnoTrends are both traders selling mini portable projectors. The following account balances were extracted from the books of the two businesses as at 31 March 2022: $ $ Top In Tech TechnoTrends Motor vehicles 15 090 16 300 Fixtures and fittings 23 400 26 400 Inventory 17 200 25 600 Cash in hand 10 100 5 400 Accumulated depreciation of motor vehicles 3 500 4 200 Accumulated depreciation of fixtures and fittings 4 800 6 700 Trade receivables 16 500 19 300 Trade payables 11 200 24 300 Cash at bank 20 800 7 800 Allowance for impairment of trade receivables 6 300 3 300 Current portion of long-term borrowings 3 000 5 000 Long-term borrowings 30 000 50 000 Prepaid advertising 800 1 200 Rent income received in advance 730 2 550 Current ratio 3.96 ? Quick ratio 2.75 ? REQUIRED (a) Explain the term liquidity. [1] (b) Calculate the following for TechnoTrends as at 31 March 2022, rounding off to 2 decimal places: (i) Current ratio (ii) Quick ratio [2] [1] (c) Taking into account the information given and your answers to b(i) and (ii), compare and comment on the liquidity position of the two businesses. [6] (d) Suggest two measures TechnoTrends may take to improve its cash flow position. [2] (e) State the valuation methods for (i) non-current assets and (ii) trade receivables in the Statement of Financial Position. [2] [Total:14]

4 3 The following allowance for impairment of trade receivables is extracted from the books of Puzzle Palace for the year ended 30 November 2020. Allowance for impairment of trade receivables account 2019 Dr ($) Cr ($) Balance ($) Dec 1 Balance b/d 1 800 Cr 2020 Nov 30 Impairment loss on trade receivables 2 500 4 300 Cr Dec 1 Balance b/d 4 300 Cr REQUIRED (a) State the meaning of allowance for impairment of trade receivables. [1] (b) Name and explain the accounting theory applied when recording allowance for impairment of trade receivables. [2] (c) Interpret the entries in the allowance for impairment of trade receivables account on: (i) 1 December 2019 (ii) 30 November 2020 [1] [1] The business maintains an allowance for impairment of trade receivables at 9% of the trade receivables balance at the end of every financial year. On 14 July 2021, a customer, Rainbow who owed $6 300, was declared bankrupt and could only pay $0.40 for every dollar owed by cheque . On the same day, a cheque was received from Rainbow. The trade receivables balance for the year ended 30 November 2021 was $40 000. REQUIRED (d) Prepare journal entries to record the following transactions. Narrations are not required. (i) Write off the debt owed by Rainbow (ii) Adjustment of allowance for impairment of trade receivables for the financial year ended 30 November 2021. [2] [2] (e) What is the effect of adjustment (d)(ii) on the profit for the year ended 30 November 2021. [1]

5 REQUIRED (f) There are five stages in the accounting information system. State the name of the two missing stages in the correct order. Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Source documents ? ? Trial Balance Financial Statements [2] [Total: 12]

6 4 Roman runs Baker’s Delight with a financial year end of 28 February. The following balances were taken from the books of Baker’s Delight at the start of the financial year on 1 March 2021. $ Motor vehicles 50 000 Accumulated depreciation of motor vehicles 20 000 Baker’s Delight provides depreciation at a rate of 10% per annum on net book value. A full year’s depreciation is provided in the year of purchase and no depreciation is provided in the year of sale. On 22 August 2021, Baker’s Delight sold one of its motor vehicles which cost $15 000 for $13 000 by cheque. The motor vehicle was bought on 1 April 2019. On 18 October 2021, Baker’s Delight bought a new motor car for $19 000 by cheque. REQUIRED (a) Calculate the gain or loss on the sale of motor vehicles for the year ended 28 February 2022. [2] (b) Calculate the depreciation expense for the year ended 28 February 2022. [2] (c) Prepare the motor vehicles account for the year ended 28 February 2022. [3]

7 4 Roman decides to offer photocopying service in view of the strong demand for such service in a young neighbourhood. Roman is unable to decide whether she should buy or rent the photocopier. He estimates that Baker’s Delight prints about 2 000 sheets of black and white documents and 500 sheets of documents in colour per month. Buy Photocopier Rent Photocopier Cost/ Deposit $4 500 $200 Other cost Free servicing for the first year. Subsequently $150 per year. Free local delivery Toner cost for each black and white print: $0.01 per sheet Toner cost for each colour print: $0.10 per sheet Monthly rental fee for a year: $300 Copy charges: $0.15 per sheet Local delivery $50 Features Print, copy, scan and fax Prints 25 pages per minute Collate, staple and hole-punch Print, copy and scan Prints 35 pages per minute Collate and staple Condition New Has been rented out for the past 1 year Other Information Photocopier is expected to last for 6 years. Any replacement of toner or parts varies There i