4E5N CHIJ Katong Prelim 2022 P2 QP

CHIJ KATONG CONVENT PRELIMINARY EXAMINATION 2022 SECONDARY 4 EXPRESS / 5 NORMAL (ACADEMIC) PRINCIPLES OF ACCOUNTS 7087/02 Paper 2 August/September 2022 2 hours Additional Materials: Writing paper (7 sheets) READ THESE INSTRUCTIONS FIRST Write your class, index number and name on all the work you hand in. Write in dark blue or black pen on both sides of the paper. Do all your rough work in pen. Do not use staples, paper clips, glue or correction fluid / tape. The use of an approved calculator is allowed. Answer all questions. The businesses described in this question paper are entirely fictitious. Start each question on a separate page. All calculations must be shown adjacent to the answer. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. This question paper consists of 6 printed pages. [Turn over

2 CHIJ Katong Convent Preliminary Examination 2022 Principles of Accounts Paper 2 Sec 4E/5N Answer all questions 1 The following balances were extracted from the books of Mario Limited on 31 March 2022. $ Share capital, 80 000 ordinary shares 96 000 Retained earnings, 1 April 2021 3 900 Trade payables 5 340 4% Bank loan (repayable 30 June 2026) 80 000 Machinery (at cost) 120 000 Fixtures and fittings (at cost) 19 000 Accumulated depreciation – machinery 6 000 Cash at bank 12 900 Inventory 21 000 Trade receivables 42 120 Allowance for impairment of trade receivables 1 500 Sales revenue 180 950 Sales returns 17 200 Cost of sales 92 100 Commission income 5 450 Interest on loan 2 800 Rent expense 18 000 General expenses 13 460 Wages and salaries 20 560 Additional Information: 1. At 31 March 2022: (i) Commission income, $1 000 was earned but not received. (ii) Annual rent expense is $16 000. 2. $800 received by cheque from a credit customer was not recorded in the books. 3. It was decided that the allowance for impairment of trade receivables on 31 March 2022 should be 5% of trade receivables. 4. Machinery is to be depreciated at 10% per annum using the reducing-balance method. 5. Fixtures and fittings are estimated to last over five years with a scrap value of $2 000. Mario Limited decided to depreciate its fixtures and fittings using the straight-line method. 6. Interest on bank loan was not fully paid up. One -quarter of the bank loan was due to be repaid on 31 December 2022. 7. 10 000 shares were issued at $1.50 per share on 1 March 2022. The proceeds were deposited into the business bank account. The transaction has yet to be recorded. 8. The company declared a divided of $0.03 per share. The dividend will be paid on 11 April 2022.

3 CHIJ Katong Convent Preliminary Examination 2022 Principles of Accounts Paper 2 Sec 4E/5N REQUIRED (a) Prepare the statement of financial performance for the year ended 31 March 2022. [8] (b) Prepare the statement of financial position as at 31 March 2022. [12] [Total: 20] 2 Bright Wellness Spa provides massage and spa services to customers on credit. The following balances relate to the business on 30 June 2021. $ Trade receivables 15 000 Allowance for impairment of trade receivables 1 200 Bright Wellness Spa reviewed its list of trade receivables at the end of every financial year and estimates that 6% of its trade receivables are likely to be uncollectible. The trade receivables balance as at 30 June 2022 is as follows: $ Trade receivables 12 000 The following transaction was not recorded in the books: On 15 May 2022, one of the credit customers, Eden, who owed Bright Wellness Spa $1 600, was declared bankrupt. However, she could pay $0.30 in a dollar by cheque and the remainder was written off as irrecoverable. REQUIRED (a) Prepare the journal entries, without narrations, to record the following: (i) the entry for 15 May 2022 (ii) adjustment to the balance of allowance for impairment of trade receivables for the year ended 30 June 2022. [4] (b) State the amount shown in the statement of financial position as at 30 June 2022 for: (i) Trade receivables (ii) Allowance for impairment of trade receivables. [2] (c) How would the adjustment in (a) (ii) affect profit for the year ended 30 June 2022? State the effect and the amount. [2] (d) State and explain the accounting theory that supports the adjustment for allowance of impairment of trade receivables. [2] [Total: 10]

4 CHIJ Katong Convent Preliminary Examination 2022 Principles of Accounts Paper 2 Sec 4E/5N 3 The following information relates to Cindy’s business as at 31 July 2020, 2021 and 2022. 2020 2021 2022 $ $ $ Motor vehicles 95 640 90 200 105 400 Inventory 42 800 44 400 56 500 Trade receivables 32 050 17 800 47 000 Cash at bank 18 200 5 000 − Prepaid advertising expense 6 100 5 400 7 230 Trade payables 22 400 22 430 33 000 Bank overdraft − − 28 040 Working capital 76 750 50 170 ? Current ratio 4.43 3.24 ? Quick ratio 2.24 1.02 ? REQUIRED (a) Calculate the following as at 31 July 2022. Show your answers to two decimal places. (i) Working capital (ii) Current ratio (iii) Quick ratio [5] (b) Comment on the trend in liquidity of the business over the three years ended 31 July 2020, 2021 and 2022. [6] (c) State two reasons why liquidity is important to a business. [2] (d) Suggest two ways to improve the liquidity of Cindy’s business. [2] [Total:15]

5 CHIJ Katong Convent Preliminary Examination 2022 Principles of Accounts Paper 2 Sec 4E/5N 4 Adam is the owner of a food catering business. The financial year of Adam’s business ends on 30 June. The following balances were available on 1 July 2021. $ Motor vehicles 150 000 Accumulated depreciation of motor vehicles 76 500 On 1 April 2022, the business purchased a new motor vehicle for $60 000 on credit from Hooever Motors. On the same date, one of the motor vehicles was sold for $30 000 on credit to Eva. This motor vehicle was purchased on 1 October 2020 for $50 000. It is the company’s policy to depreciate motor vehicles at 30% per annum using the reducing - balance method. A full year’s depreciation is charged in the year of purchase and no depreciation in the year of sale. REQUIRED (a) Prepare journal entries to record the sale of non-current assets for the year ended 30 June 2022. [6] (b) State whether it is a gain or loss on sale of motor vehicle and where it will appear in the statement of financial performance. [2]

6 CHIJ Katong Convent Preliminary Examination 2022 Principles of Accounts Paper 2 Sec 4E/5N Adam’s food catering business is expanding, and he needs to purchase an additional delivery van to transport his food to more places at a shorter time. Adam is considering purchasing the delivery van from one of the companies below. He is planning to use the delivery van for 10 years. Vonda (Model: 888X) Jissan (Model: 777Y) Price $98 000 $110 000 Features ▪ Able to carry up to 1 500 kgs of food. ▪ Fuel efficiency at 10 litres per 100 km ▪ Vehicle’s height is suitable for entering carparks in housing estates around Singapore. ▪ Estimated scrap value of $20 000 at the end of 10 years. ▪ Able to carry up to 2 000 kgs of food. ▪ Fuel efficiency at 12 litres per 100 km. ▪ Estimated scrap value of $28 000 at the end of 10 years. Servicing and maintenance ▪ F