MSS Prelim 2022 4E5N P1 with ANS

Marsiling Secondary School GCE O-Level Preliminary Examination 2022 This question paper consists of 10 printed pages, including the cover page. Candidates answer on the Question Paper. No Additional materials are required. READ THESE INSTRUCTIONS FIRST Write your name, index number and class on all the work you hand in. Write in dark blue or black ink. All calculations must be shown adjacent to the answer. Do not use staples, paper clips, highlighters, glue or correction fluid. The use of an approved calculator is allowed. Answer all questions. The businesses described in this question paper are entirely fictitious. The number of marks is given in brackets [ ] at the end of each question or part question. For Examiner’s Use Question Marks 1 2 3 4 Setter: Mr Alfred Wee Total Subject: Principles of Accounts Level: Sec 4 / 5 Stream: Express / Normal (Academic) Paper 1 (7087/01) Date: 22 August 2022 Duration: 1 hour Name: Index No: Class: 40 40

2 Answer all questions. 1 Kenny Li is a sole trader. The financial year of his business, Lucky Best, ends on 31 December. On 1 January 2021, the balance on the capital was $54 800. During the year the following took place. 2021 Feb 15 Cash drawings $480. Mar 22 Kenny took inventory with a selling price $500 for own use. The business applies a 25% mark-up on cost to its goods. May 12 Kenny brought into the business his private car valued at $7 600. Sep 16 Drawings by cheque $652. Profit for the year ended 31 December 2021 was $8 500. REQUIRED (a) Prepare Kenny’s drawings account for the year ended 31 December 2021. Close off the account by a transfer on that date. [3] Drawings (b) Prepare Kenny’s capital account for the year ended 31 December 2021. Bring down the balance on 1 January 2022. [4] Capital

[Turn over 3 (c) Name and explain the accounting theory applied when recording Kenny’s drawings. [2] Name ________________________________________________________ Explanation ___________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ [Total: 9]

4 2 LuvCar Rental Pte Ltd started its business on 1 July 2019 and purchased two identical cars costing $75 000 each by cheque. On 9 December 2021, the business sold one of the cars for $39 500 on credit to Yolo Trading. On the same day, it bought a new van for $60 000 by cheque. LuvCar Rental Pte Ltd depreciates its 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 is charged in the year of sale. The business financial year ends on 31 December. REQUIRED (a) Define ‘depreciation’. [1] (b) Prepare the motor vehicles account for the year ended 31 December 2021. [3]

[Turn over 5 (c) Calculate depreciation expense for each of the two years ended 31 December 2020 and 2021. [2] (d) Calculate the gain or loss on the sale of the motor vehicle. [2] [Total: 8]

6 3 Kyle runs a wholesale business, Kyle Trading, selling kitchen products. On 1 October 2021, Kyle’s business had no opening inventory. The following information is available for the month of October 2021. Oct 2 Purchased goods on credit from Er Hon, $35 700. 10 Sold goods to P Tom for $45 600. These goods cost $15 200. 16 Purchased goods by cheque, $22 000. 21 P Tom returned goods, $9 600, to Kyle Trading. The cost of these goods was $3 200. 25 Sold goods costing $7 300 for cash $21 900. REQUIRED (a) Prepare the sales revenue account for the month of October 2021, including the appropriate closing entry of the account. Sales revenue [3] (b) Calculate the cost of sales for the month ended 30 October 2021. [1] (c) Calculate the gross profit for the month ended 30 October 2021. [2]

[Turn over 7 The following information is extracted from Kyle Trading for the year ended 31 December 2021. $ Net sales revenue 660 000 Cost of sales 240 000 Inventory 48 600 The inventory as at 31 December 2020 is $30 000. (d) Calculate, correct to two decimal places, the following for the year ended 31 December 2021. [3] (i) Rate of inventory turnover (ii) Days sales in inventory Tyler (Pte) Ltd is a competitor of Kyle Trading. The Tyler (Pte) Ltd’s rate of inventory turnover and the days sales in inventory are 10 times and 36.50 days respectively for the year ended 31 December 2021. (e) Evaluate Kyle Trading’s efficiency in inventory management against its competitor, Tyler (Pte) Ltd, based on your calculation in (d) and the additional information given above. [4]

8 (f) Give one possible reason for Kyle Trading’s lower inventory turnover relative to that of Tyler (Pte) Ltd. [1] (g) Suggest one way to improve Kyle Trading’s efficiency in inventory management. [1] [Total: 15]

[Turn over 9 4 Celeste runs a trading business. The following errors were discovered after the business’ trial balance was prepared. 1 Credit note of $550 received from Zico Supplies has been omitted from the books. 2 Insurance on the purchase of goods, $800, has been debited to insurance account. These goods were recently purchased and are still included the ending inventory of the business. 3 Credit sale of goods at $3 500 to Tricia has been recorded on the wrong sides of the correct ledger accounts. REQUIRED (a) Explain the limitation of a trial balance. [1] The profit for the year had been calculated as $19 270. (b) Complete the following table, by writing the amount in the relevant boxes, to calculate the adjusted profit after correcting errors 1 to 3. If there is no effect place a tick (✓) in the ‘No effect’ column. [3] No effect Increase $ Decrease $ $ Profit for the year before correction of errors 19 270 Error 1 Error 2 Error 3 Adjusted profit for the year

10 (c) State two possible reasons why the supplier issues credit notes. [2] (d) Name and explain the accounting theory applied in the use of source document to record financial transactions. [2] Name : _______________________________________________________ Explanation : __________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ [Total: 8] END OF PAPER