4E5N CHIJ Katong Prelim 2022 Sol

CHIJ KATONG CONVENT Prelim Examination 2022 Secondary 4 Express / 5 Normal Suggested Answer Scheme – Paper 1 & 2 P1 / Q1 Total [12] (a) Wages expense reported on the statement of financial performance = 25200 [1] – 850 [1] + 1030 [1] = $25 380 [3] (b) Journal 2022 DR ($) CR ($) Apr 30 Wages expense E+ 1 030 [1] Wages payable L+ 1 030 [1] [2] (c) Working If wages owed to staff is adjusted If wages owed to staff is NOT adjusted Journal entries raised: Dr Cr Wages expense E+ 1030 Wages payable L+ 1030 Profit = Income – Expenses = 0 – (+1030) = -1030 No journal entries are raised. Profit = Income – Expenses = 0 – 0 = 0 Profit will be overstated [1] by $1030 [1] if wages owed to staff on 30 April 2022 is not adjusted. [2] (d)(i) The business had provided the service in the last period but had not yet received the payment in the last period. Hence, the commission receivable of $570 adjusted in the last period is reversed in this period. [1] (d)(i) The business received a cheque of $9760 for commission income. [1] (d)(iii) The business had provided the service in this period but would be receiving the payment in the next period. [1] (e) [Any one of the following] Accrual basis of accounting [1] Business activities are to be recorded in the accounting period they occur regardless of whether cash is paid or received in the same period or not [or the definition found in the TB ]. Hence, commission for services already provided this year but not received yet should be included in this year’s income. [1] OR Revenue recognition [1] Revenue is earned when goods have been delivered, or services have been provided. Hence, commission for services already provided this year should be included in this year’s income. [1] OR Matching concept [1] Income should be recorded in the period it is earned and expenses recorded in the period it is incurred. Hence, commission for services earned this year should be included in this year’s income. [1] [2]

P1 / Q2 Total [5] (a) [Trend] Gross profit margin has worsened by 7% from 2021 to 2022. The business has become less efficient in trading in 2022. [Cause] This could be because the business reduced its selling price in 2022 to clear slow- moving goods. The business also might have bought goods at a higher price in 2022 when Pitas reduced amount bought and did not enjoy trade discount. [3] (b) [Trend] Profit margin has improved by 3% from 2021 to 2022. The business has become more efficient in managing its expenses. [Cause] The improvement in profit is not caused by higher gross profit since gross profit margin has worsened. The improvement is therefore due to a better management of expenses in 2022. The business could have laid off excess staff in 2022 to reduce salaries / relocated to a location with cheaper rental, etc. [2]

P1 / Q3 Total [9] (a) Invoice [1] (b) Pieces of yoga pants sold in May 2022 = 36 Applying FIFO, these yoga pants sold were from the beginning inventory (22 pieces) and inventory bought on 4 May (14 pieces). Thus, cost of sales in May 2022 = 528 [1] + 364 [1] = $892 [2] (c) Gross profit = 1115 - 892 = $223 [1] Gross profit margin = Gross profit / Sales revenue = 223 / 1115 x 100 = 20% [1] [2] (d) Cost of damaged yoga mats = $224 NRV of damaged yoga mats = $136 Since cost > NRV, therefore value of damaged yoga mats should be $136 (NRV). Cost of undamaged yoga mats = $2160 NRV of undamaged yoga mats = $2592 Since cost < NRV, therefore value of undamaged yoga mats should be $2160 (Cost). Thus, value of yoga mats on 31 Dec 2021 = 136 [1] + 2160 [1] = $2296 [2] (e) If adjustment to damaged goods is made If adjustment to damaged goods is NOT made Journal entry raised: Dr Cr Impairment loss on inventory E+ 88 Inventory L+ 88 Cost 224 – NRV 136 = $88 Equity = Beginning capital + (Income – Expenses) – Drawings Equity = 0 + 0 – (+88) – 0 = - 88 Equity = Beginning capital + (Income – Expenses) – Drawings Equity = 0 + 0 – 0 – 0 = - 0 If the damaged yoga mats are not adjusted, equity will be overstated [1] by $88 [1]. [2]

P1 / Q4 Total [14] (a) [3] Updated Cash at Bank Account DR ($) CR ($) Balance ($) 2021 July 31 Balance b/d 42 Cr [1] July 31 Bicol [860 – 680] 180 [1] July 31 Bank charges 35 [1] 103 Dr 2021 Aug 1 Balance b/d 103 Dr (b) [4] Macleod Bank Reconciliation Statement as at 31 July 2021 $ Balance as per bank statement 257 add: Cheques in-transit Sales revenue 172 [1] less: Cheques not presented yet Yamal (cheque 1249) (326) [1] Balance as per updated cash at bank 103 [1] [1] for correcting identify both cheques in transit and cheques not presented yet. (c) Transactions should be recorded at their original cost. [1] (d) [Any one of the following] ▪ To ensure that cash and assets are not stolen or damaged ▪ To ensure transactions related to cash and assets are recorded accurately ▪ To comply with law and regulations [Note: Accept ‘To deter fraud’ but not to detect fraud.] [1] (e) Loan on 1.1.21 = $20 000 Loan on 1.4.21 = 20000 – 5000 (repayment on 31.3.21) = $15 000 Interest from 1.1.21 to 31.3.21 = 3/12 [1] x 20000 [1] x 4% [1] = $200 Interest from 1.4.21 to 31.12.21 = 9/12 [1] x 15000 [1] x 4% = $450 Interest expense for year ended 31.12.21 = 200 + 450 = $650 [5]

P2 / Q1 (a) Total – 8 marks Mario Limited Statement of financial performance for the year ended 31 March 2022 $ $ Sales revenue 180950 Less: Sales returns 17200 Net sales revenue 163750 Less: Cost of sales 92100 Gross Profit 71650✔ Add: Other income Commission income [5450 + 1000] ✔ 6450 Less: Other expenses Interest on loan [4% x 80000] or [3200 + 400] ✔ 3200 Rent expense [18000 - 2000] ✔ 16000 General expenses 13460 Wages and salaries 20560 Impairment loss on trade receivables [2066 - 1500] ✔ 566 Depreciation on machinery [10% x (120000 - 6000)] ✔ 11400 Depreciation on fixtures and fittings [(19000 - 2000) / 5 ] ✔ 3400 68586 Profit for the year 9514

P2 / Q1 (b) Total – 12 marks Mario Limited Statement of financial position as at 31 March 2021 $ $ $ Cost Accumulated Depreciation Net book value ASSETS Non-current assets Machinery (-6000 - 11400) 120000 17400 102600 Fixtures and Fittings 19000 3400 15600 118200 ✔ Current assets Inventory 21000 Trade receivables [42120 – 800] ✔ 41320 Less: Allowance for impairment of trade receivables (5% x 41320) ✔ 2066 39254 Cash at bank (12900 + 800 + 15000) ✔ 28700 Commission income receivable 1000 ✔ Prepaid rent expense 2000 ✔ 91954 Total assets 210154 EQUITY AND LIABILITIES Shareholders' equity Share capital, 90 000 ordinary shares [96000 + (10000 x 1.5)] ✔ 111000 Retained earnings (3900 + 9514 OF - 2700) ✔ 10714 121714 Non-current liabilities Long-term borrowing (80000 x 3/4) 60000 ✔ Current liabilities Trade payables 5340 Interest on loan payable (3200 - 2800) 400 ✔ Dividends payable (90000 x 0.03) 2700 ✔ Current portion of long-term borrowing (80000 x 1/4) 20000 ✔ 28440 Total equity and liabilities 210154

P2 / Q2 (a)(i) 2022 Dr ($) Cr ($) May 15 Cash at bank (1600 x 0.3) A+ 480 ✔ Trade receivable – Eden A- 480 Allowance for impairment of trade receivables A+ (1600 - 480) 1120 ✔ Trade receivable – Eden A- 1120 (a)(ii) 2022 Dr ($) Cr ($) Jun 30 Impairment loss on trade receivables E+ 544 ✔ Allowance for impairment on trade receivables A- 544 ✔ Working 1 Jul 2021 30 Jun 2022 Allowance = - 1200 Adjusted beginning allowance = -1200 + 1120 (Eden written-off) = -80 Adj beginning allow + change = Ending allow -80 = change = -624 change = -544 Allowance becomes