2022 DSS Prelims 4E P1 P2 answers

1 | Page DSS POA 4E MYE PAPER 1 & PAPER 2 2022 MARK SCHEME DUNEARN SECONDARY SCHOOL POA 4E PRELIMS PAPER 1 2022 MARK SCHEME Prelims P1Q1 P1Q2 P1Q3 P1Q4 COE [14] TR ledger/Cash [12] FS Analysis Liquidity [9] Income Interpretation [13] P2Q1 FS [20] P2Q2 DM TR/Equity [12] P2Q3 FS Analysis Profitability [12] P2Q4 Inventory [16] Question 1 (a) Journal Particulars Debit ($) Credit ($) (i) Trade Receivable Lee Lee 1 000 Trade Receivable Le Le 1 000 [1] (ii) Sales Returns 300 Trade Receivable Lee Lee 300 [1] (iii) Insurance expenses (6800 x 2) 13 600 Cash at bank 13 600 [1] (iv) Cash at bank (800-80) 720 Bank interest income 720 [1]

2 | Page DSS POA 4E MYE PAPER 1 & PAPER 2 2022 MARK SCHEME 1(b) Ningxuan Statement of adjusted profit for the year ended 30 June 2021 $ Profit before adjustment 5 858 Add: Interest income understated [1] 720 Less: Sales Returns understated [1] 300 Less: Insurance expenses understated [1] 13 600 Loss after adjustment 7 322 [1] Q1 Total: 8m Q2 (a) Interpret must have dates with amounts and key words [8] (i) April 1 2018 Deon had an estimated [1] amount of debts $800 [1] likely uncollectible from trade receivables. (ii) 14 Dec 2018 Dawn went bankrupt [1] and its debt of $3000 was written off as uncollectible.[1] 31 March 2019 Deon reviewed its trade receivables balance and decreased its allowance for impairment of trade receivables by $100 [1] to $4 900.[1] 31 March 2020 Deon reviewed its trade receivables balance and increased its allowance for impairment of trade receivables by $6000[1] to $7 000.[1] (b) (i) 31 March 2019 profit will understated [1] by $100 [1] (c) (i) 31 March 2020 current asset will decrease [1] by $6000 [1] Q3 (a) 2020 Working Capital = CA- CL = 34 000 2021 Working Capital = CA- CL = 21 300 2020 Current ratio = CA: CL = 4.4:1 2021 Current ratio = 59800:38500 =1.55:1 2020 Quick ratio = QA: CL = 4.1: 1 2021 Quick ratio = 3500: 38500 = 0.09 :1

3 | Page DSS POA 4E MYE PAPER 1 & PAPER 2 2022 MARK SCHEME Daniel’s liquidity has worsened from 2020 to 2021[1] based on all the 3 liquidity figures and ratios as shown above. Absolute working capital worsened from $34 000 in 2020 to $21 300 in 2021. [1] Current ratio also worsened from 4.4:1 from 2020 to 1.55:1 in 2021. [1] This means that the business may have less current assets to pay off its current liabilities. This is caused by cashflow issue shown by the decrease in cash at bank to bank overdraft and increase in current portion of bank loan. [1] Quick ratio worsened in 2021 to 0.09:1.[1] This implied that the business has insufficient quick assets to pay off its liabilities. [1] Potential that business will lose its credibility as it’s unable to pay off its debts when they fall due. [1] Quick ratio benchmark of 1:1 is not met in 2021.[1] Current ratio benchmark of 2:1 is not met in 2021.[1] Must use any liquidity ratios to comment. [2] Causes and explanation [1] max Conclusion: right word used “Worsened” liquidity over the years [1] (b) Daniel Technology Raheem Hi-tech Inventory turnover 12 times 25 times Day sales in inventory =1/12 x 365 days = 30.4 days = 1/25 x 365 days = 14.6 days Raheem Hi-tech has a better inventory management compared to Daniel as he has a higher inventory turnover of 25 times per year compared to Daniel’s inventory turnover of 12 times per year. This means that Raheem is able to sell and replenish his goods at a faster pace comparatively .[1] Raheem day sales in inventory is 14.6 which is better than Daniel’s day sales of 30.4 days, implying that Raheem takes a shorter time of only 14 days to sell his goods while Daniel takes 30 days to sell his goods.[1] Overall, Raheem has better inventory management compared to Daniel.[1] [9m] Question 4 Transaction Description Jan 1 Service Fee income receivable of $1 200 from the previous financial year is reversed [1] and deducted from the rent income account in the current financial year. Payment is to be received in the current year.[1]

4 | Page DSS POA 4E MYE PAPER 1 & PAPER 2 2022 MARK SCHEME Feb 15 Collected cheque [1] of $ 3200 for service fee income. [1] Dec 31 $1 000 of the amount collected during the year was for service fee in the next financial year.[1] Hence, this amount is deducted from the rent income account.[1] 31 Actual service fee income of $8000 is earned for the year[1] and closed off to income summary. [1] Important to have date, amount and key words to get max marks for each question. 4(b) Faye Extract of Statement of Financial Performance for the year ended 31 December 2021 Consultancy Service Fee Income $8000 [1] 4 (c) Faye Extract of Statement of Financial Position as at 31 December 2021 Current Liability Consultancy Service Fee Income Received In advance $1000[1] 4 (d) (i) Profit will be overstated by $1000.[1] (ii) Current assets will not be affected. [1]

5 | Page DSS POA 4E MYE PAPER 1 & PAPER 2 2022 MARK SCHEME DUNEARN SECONDARY SCHOOL POA 4E PRELIMS PAPER 2 2022 MARK SCHEME Question 1 (a) Dunearn Gems Pte Ltd Statement of financial performance for the year ended 30 June 2021 $ $ Sales revenue 388 000 Less: Sales returns (16 700) Net sales revenue 371 300 Less: Cost of sales (138 500) Gross profit 232 800 [1] LESS: Expenses Wages and salaries 85 200 Rent (12/14 x 140 000) 120 000 [1] General expenses (9 200 – 200) 9 000 [1] Advertising expenses (40 700 – 3 000) 37 700 [1] Depreciation – Equipment (10% x 283 000) 28 300 [1] Depreciation – Motor vehicles [20% x (347 000 – 11 800)] 67 040 [1] Reversal of impairment loss on trade receivables (800 -300) (500) [1] Interest on bank loan (5% x 120 000) 6 000 [1] (352 740) Loss for the year (119 940) [8m]

6 | Page DSS POA 4E MYE PAPER 1 & PAPER 2 2022 MARK SCHEME (b) Dunearn Gem Pte Ltd Balance Sheet as at 30 June 2021 ASSETS $ Cost $ Accumulated depreciation $ Net book value Non-current assets Motor vehicles 347 000 (78 840) 268 160 Equipment (+3 000) 283 000[1] (151 300) 131 700 630 000 (230 140) 399 860 [1] Current assets Trade receivables (36 300 – 300) 36 000 [1] Inventory 25 900 Prepaid General expenses 200[1] Prepaid rent expenses 20 000 [1] 82 100 Total Assets 481 960 EQUITY AND LIABILITIES Shareholder’s equity Share capital, 200 000 ordinary shares [1] 200 000 Accumulated loss [1] (26 400-119 940/OF [1]- 4 000 [1]) 97 540 102 460 Non-current liabilities Long term borrowings 120 000[1] 120 000 Current liabilities Trade payables 224 900 Interest expense payable (5% x 120 000) 6 000 [1] Bank Overdraft 28 600 [1] 259 500 Total Equity and Liabilities 481 960 [12m] [Total: 20m]

7 | Page DSS POA 4E MYE PAPER 1 & PAPER 2 2022 MARK SCHEME Question 2 Students can choose either option. Tenny International Raja Singapore The business should extend a longer credit period to Tenny International. [1] The business should extend a longer credit period to Raja Singapore. [1] The financial risk of extending to Tenny International is lower [1] as it is a big international corporation with great reputation and possibly stronger financial standing [1] The financial risk of extending Raja Singapore is lower [1] as the business is able to collect the debt faster [1] by 10 days. Raja Singapore’s average repayment period of 30days is 10 days shorter than Tenny International’s average repayment period of 40 days. Tenny Intern