HIHS 2022 4E5N Paper 2 Solutions.xlsx

4Ex5NA Prelim 2022 Solutions Paper 2 1a Charlie and brothers Pte Ltd Statement of financial performance for the year ended 31 March 2021 $ $ Consultancy service revenue 131 360(1) Add: Other Income Commission income $(7 000 + 2 500) 9 500 (1) Less: Expenses Depreciation of motor vehicles $[(60 000 - 12 000) x 20%](9 600)(1) Depreciation of fixtures and fittings $(8 000 x 10%) (800) (1) Reversal of Impairment loss on trade receivables $[1 800 - (33 300 x 4%)]468 (1) Utilities expense (9 700)(1) Rental expense $[(24 000/15) x 12] (19 200)(1) General expenses (39 800) (78 632) Profit for the year 62 228 [7]

1b Charlie and brothers Pte LtdStatement of financial position as at ended 31 March 2021$ $ $Cost Accumulated Net bookdepreciation valueAssetsNon-current assetsMotor vehicles 60 000 (21 600) 38 400(1) OFFixtures and fittings 8 000 (3 200) 4 800(1) OF68 000 (24 800) 43 200 Current assetsTrade receivables 33 300Less: Allowance for impairment of trade receivables $(33 300 x 4%)(1 332)(1) 31 968(1) OFCash at bank $(117 240 + (2 x 20 000)] 157 240(1)Prepaid rent $[(24 000/15) x 3] 4 800 (1)Commission income receivable 2 500 (1) 196 508 Total assets 239 708 Shareholder's equity Share capital, 60 000 ordinary shares (1) $[40 000 + (2 x 20 000)] 80 000(1) Retained earnings $(47 480 + 62 228 - 2 400) 107 308(1) OF187 308 Non-current liabilities Long-term borrowings $(50 000 - 10 000) 40 000(1) Current liabilities Current portion of long-term borrowings 10 000(1) Dividends payable $(60 000 x 0.04) 2 400 (1) 12 400 Total equity and liabilities 239 708 [13] [Total: 20]

2a According to the matching theory (1) Equipment need to be depreciated so that the portion of the cost of the non-current asset charged as an expense in a given period is matched against the income in the same given period to determine the profit for that period. (1) [2] b Journal Date Particulars Debit Credit 2021 $ $ Feb 15 Sale of non-current aseet 40 000 (1)Equipment 40 000 Feb 15 Accumulated depreciation of equipment8 000 (1)Sale of non-current asset 8 000 Feb 15 Cash at bank 28 000 (1)Sale of non-current asset 28 000 Jun 30 Income summary 4 000 (1)Sale of non-current asset 4 000 [4] c Depreciation expense = (Remaining cost - Remaining accumulated depreciation) x 20% = $[(111 000 - 40 000) - (30 200 - 8 000)] x 20%(1) = $(71 000 - 22 200) x 20% = $9 760 (1) [2]

2d Decision: To buy the equipment (1) Accept any three sets of evidence and explanation Evidence 1: The cost of the equipment is fixed at $50 000. (1) Explanation 1: The business can safely allocate its cashflow to be used to enhance other operations within the business knowing that the $50 000 set aside will be all that is needed to purchase the equipment. (1) Evidence 2: The business will not have to pay any interest charges if it takes up a loan with the b