SPS Solutions Prelims 2022.xlsx

Issued share capital (100 000 ordinary shares) 150000 Retained earnings 10530 Sales revenue 129920 Sales returns 9500 Inventory 3800 8600 Inventory 22980 Prepaid expenses 4500 7300 Rental income 1250 Trade receivables 5550 11620 Trade payables 13740 Cash in hand 1600 900 Trade receivables 20410 Cash at bank 13600 - Cost of sales 31480 CA 2905028420 Salaries expenses 22960 Interest on loan 1100 Bank overdraft - 6200 Cash at bank 25720 5 year Bank loan 20 00016 000 Rental expenses 30500 Current portion of long-term borrowings - 4000 Fixtures and fittings, at cost 60200 Trade payables 4400 10800 Motor vehicles, at cost 120000 CL 4400 21000 Accumulated depreciation: 12520 Fixtures and fittings 2910 WC Ratio 6.60 1.35 Motor vehicles 16500 Quick Ratio 4.72 0.60 8% bank loan (repayable 30 September 2024) 20000 344850 344850 0

SPS Prelim 2022 Paper 2 Q1a Shane GabrielStatement of Financial Performance for the year ended 31 December 2021 $ $Sales Revenue 129,920 1Less: Sales Returns 9,500 1Net sales Revenue 120,420Less: Cost of sales 31,4801Gross Profit 88,9401 Add: Other Income:Commission income 1,6002 Less: other expensesSalaries expense (22960+2040)25,000 2Interest Expense (8% x 20000)1,600 2Rental Expense (30500-1900)28,600 2Depreciation of fixtures and Fittings (60200 x 10%) 6,020 2Depreciation of motor vehicles (120000-16500) x20% 20,700 2Impairment loss on trade receivables (800+410)1,21083,1302Profit for the year 7,41018 Q 1 b Shane GabrielStatement of Financial Position as at 31 December 2021AssetsNon-current assets CostAccumulated DepreciationNet Book Value$ $ $ ,mn Fixtures and Fittings60,2008,93051,2702Motor vehicle 120,00037,20082,8002Office Equipment 134,070 Current assetsTrade receivables (20410-410)20,000 1Less: Allowance for impairment on trade receivables800Net Trade receivables 19,200 1Inventory 22,980 1Rental expense prepaid 1,900 1Rental income receivable 350 1Cash at bank (25720+80000)105,720150,1502Total assets 284,2201 Equity and liabilitiesShareholders' equityShare Capital 150 000 Ordinary Shares230,0001Retained Earnings (10530+7410-7500)10,4402Total Shareholders Equity 240,440 Non-current liabilitiesLong-term borowings (20000-5000)15,0001 Current liabilitiesTrade Payables 13,740 1Salaries expense payable 2,040 1Interest expenses payable (1600-1100)500 1Current portion of long term borrowing5,000 1Dividens Payable 7,50028,7801Total equity and liabilities 284,220122

SPS Prelim 2022 Paper 2 Q 2a (i)Dr Cash in handCr Sales revenue 1(ii)Dr Trade receivablesCr Sales Revenue 1b Journal(i)Date DrCr2021 $ $Jul-04Allowance for impairment on trade receivables1620 Brandon 16202(ii)31-DecAllowance for impairment of trade receivables475 Impairment loss on trade receivables4752c Statement of Financial Performance for the year ended 31 December 2021Other expensesReversal of impairment loss on trade receivables(475)2d ian estimate of debts that may be uncollectable and is deducted fromtrade receivables 1d iithe change in allowance for impairment of trade receivables and istreated as an expense1e the customers current debt obligations to determine the customer's ability to pay2References on the customers history of repaymenteconomic and specific industry outlook12Q 3 aLiquidity - ability of the business to pay for short term debts when they are due1Q 3 biCurrent Ratio:28420/210001.3513 b iiQuick Ratio: 12520/210000.6013 cThe current ratio has deteriorated from 6.60 in 2020 to 1.35 in 2021 and is below1the acceptable norm of 2.The quick ratio has deteriorated from 4.72 in 2020 to 0.60 in 2021 and is below1the acceptable norm of 1.The cash at bank balance has also deteriorated from a bank balance of $13 600 to1a bank overfraft of $6 200.Inventory has also increased from $3 800 to $8 600 suggesting that the business is 1either overstocking or having difficulty sell its stock.Trade Payables has also increased from $4400 to $10 800 suggesting that the business is1having difficulty paying its trade payables on timeThe trade receivables have also increased from $5 550 to $11 620 indicating that1the business may be selling more on credit but having difficulty collectingthe amount due.3 dThe rate of inventory turnover has been declining and the days in sales inventory has been has increasing over the three years1The trend of both ratios suggest that the business has not been managing the inventory1efficiently efficiently.3 eReducing selling price of slow moving items· Provide trade discounts to encourage customers to buy in bulk and build patronage.· Attract customers through regular sales promotion/marketing campaigns2· Use technology to manage and improve levels of inventory management 134a 1Decision: Add Brew coffee1Basic Point 1: Cost per sachet is $0.4 when compared with New Towns $0.5 per sachet1Development 1: With a lower cost of $0.1 per sachet, Brew Coffee can have a betterr Gross Profit margin if it sells at the same price as New Town.1Basic Point 2: 20% discount is given for orders above 500 packets1Development 2: The business need not overstock to get a trade dicount,1Basic Point 3: Has an expiry period of 1 year1Development 3: Customers are assured that they can store for a longer periodBasic Point :Cash Discount: 8%/10 days & All outstanding balance must be settled within 30 daysDevelopment : As the credit terms are better the business can have higher liquidity1Decision: Add New Town coffee1Basic Point 1: no preservatives are used.1Development 1: This product will appeal to health conscious customers1Basic Point 2: It is available in 4 varieties when compared with New Town's two varieties1Development 2: More varieties may attract more customers resulting in higher sales revenue1Basic Point 3: Several positive reviews especially from younger customers1Development 3: This brand is favourable among the young who may have higher buying power Favourable reviews is an assurance of quality4 bi 2021Cummulative depreciation on all the motor vehicles that are in the business1Jul-01ii 2022depreciation on the motpr vehicle sold1Mar-31iii Annual depreciation on the motor vehicles that are still in the business1Jun-30c 1Prudence Theory 1 - assets should not be overstated in value. It should be recorded at an amount that is more realistic to its current disposable price.Matching Theory - the cost of using a non-current asset, depreciation, must be matched with the income earned for the period to arrive at the profit.d 2Reducing Balance is more suitable for assets that fall in value the greatest in the initial years.e According to the consistency theory the rate and method of depreciation caanot be changed 1as it would affect a fair comparison of the profit over the years.22

POA Prelims 2022 Paper 1Q1 Cash at bank accountqaDate Dr+CrBalance2022 $ $ $Apr-30Balance b/d 331Dr0.5Rental income (Correction)9 1Insurance 450 1Dividends780 1Krishiv (Unpaid cheque)520 1Bank Charges40110Dr1May-01Balance b/d 110Dr0.5b Bank Reconcilation Statement as at 30 April 2022$Balance as per bank statement-300Dr1Add: Deposits in transit-Ouji640 1 - Fawzan770141011110Less: Cheques not presented -Repairs-10001Balance as per cash at bank account110Dr1c From the bank's point of view, deposits by customers into the bank is an amount owing by the bank to the customer.1dCurrent Asset (110 DR)113Q 2 Inventory AccountaDate Dr+Cr-Balance2022 $ $ $Jul-01Balance b/d 1500Dr0.54Cash at bank1800 0.510Cost of sales1500 0.515Cost of sales1800 0.519Cost of sales300 123Trimen Traders2400 0.527Trimen Traders1502550Dr1Aug-01Balance b/d 2550Dr0.5b iCost of sales: 1500+1800-300$3,000) 1b iiNet Sales Renenue: 3500+4500-750$7,250) 1Gp=4250c JournalDate Dr Cr2022 $ $Jul-31Impairment loss on inventory130 Inventory 1302d