4E5N Fajar PRELIMS 2022 PAPER 2 ANSWERS

1 4E5N PRELIMS 2022 PAPER 2 1(a) TYH Trading Statement of financial performance for the year ended 31 July 2022 $ $ Sales revenue 289 400 Less: sales returns 10 000 Net sales revenue 279 400 1 Less: cost of sales 180 500 Gross profit 98 900 1 Other income Commission income 5 200 Less: other expense Rent expense (12/16 X 19200) 14 400 1 Salaries expense 28 900 Advertising expense (+700) 4 700 1 Interest expense (5% X 20000) 1 000 1 Depreciation of fixtures and fittings (60000-4000)/10 5 800 1 Depreciation of motor vehicles 10% X (90000-34000) 5 600 1 Reversal of Impairment loss on trade receivables 395-(900-500) (5) 1 Impairment loss on inventory (8400-7000) 1 400 61795 1 Profit for the year 42305 1

2 1(b) TYH Trading Statement of financial position as at 31 July 2022 Assets Cost Accumulated depreciation Net book value Non-current assets $ $ $ Fixtures and fittings 60 000 17 400 42 600 1 Motor vehicles 90 000 39 600 50 400 1 93 000 Current assets Inventory 7 000 1 Trade receivables (-500) 7 900 1 Less: allowance for impairment of trade receivables 395 7 505 1 Prepaid rent 4 800 1 Cash at bank 6 200 25 505 Total assets 118 505 Equity and Liabilities Owner's equity Capital 51950+42305-4500 89 755 2 Non-current liabilities Long term borrowings 20 000 Current liabilities Trade payables 7 850 Advertising payable 700 1 Interest payable 200 8 750 1 Total equity and liabilities 118 505

3 2(a) i. Cost of sales = 4000 + 5000 + 5600 + 7 500 = $22 100 [1] ii. Ending inventory = 6200 + 3000 = 9 200 [1] iii. Gross profit = 50100 – 22100 = $28 000 [1] iv. Rate of inventory turnover = 22100 / 6600 = 3.35 times [1] v. Days sales in inventory = (6600 / 22100) X 365 = 109 days [1] 2(b) The rate of inventory turnover has worsened from 5.50 times in 2022 to 3.35 times in 2022. [1] The days sales of inventory has worsened from 85.15 days in 2021 to 109 days in 2022. [1] This means that the business is selling their goods at a slower rate in 2022. [1] The business is becoming less efficient at managing their inventory over the years. [1] 2(c) Reduce selling price of slow-moving goods [1] Give trade discounts to encourage bulk purchases [1] 2(d) The business is selling goods at a slower rate which could mean that they are generating less sales. [1] This would cause profitability to worsen. [1] 2(e) Gross profit margin, profit margin, mark-up on cost, return on equity. [any 2] 3(a) Motor vehicles Date Particulars Debit Credit Balance 2021 $ $ $ Jul 1 Balance b/d [1] 120 000 Dr 2022 Mar 3 Sale of non-current asset [1] 50 000 Apr 1