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 benchma