2024 CCHY 4NA POA Prelim P2 ans

1 Chung Cheng High School (Yishun) Preliminary Examination 2024 Principles of Accounts Paper 2 (7086/02) Secondary 4NA Suggested answers and marking scheme Question 1 (a) Bovy Statement of financial performance for the year ended 30 June 2023 $ $ [m] Service fee revenue 74 000 1 Other income Rental income (6 000 – 2 000) 4 000 1 Discount received 2 200 6 200 1 80 200 Less: Other expenses Salaries 34 000 Repairs expense (3 000 + 400) 3 400 1 Depreciation of office equipment(15% x 40 000) 6 000 1 Depreciation of machinery[(20%x(80 000 – 16 000)) 12 800 1 Advertising expenses (15 000 – 3 000) 12 000 1 Discount allowed 3 500 (71 700) Profit for the year 8 500 1 OF [8m]

2 (b) Bovy [m] Statement of Financial Position as at 30 June 2023 Cost Acc Net book Assets Dep value Non-current assets $ $ $ Office equipment 40 000 18 000 22 000 2 Machinery 80 000 28 800 51 200 2 73 200 Current assets Cash in hand 4 300 Trade receivables 58 000 Prepaid advertising expense 3 000 65 300 1 Total assets 138 500 Equity and Liabilities Capital (57 900 + 8 500 - 1 100 (1)) 65 300 1 OF Non-current liabilities Long-term borrowings 45 000 1 Current liabilities Trade payables 23 000 Rental income received in advance 2 000 1 Repairs expense payable 400 1 Bank Overdraft 2 800 28 200 1 Total equity and liabilities 138 500 1 OF [12m] [Total: 20m] Question 2 (a) Cash at bank account Debit Credit Balance [m] 2023 $ $ $ Nov 30 Balance b/d 2 250 Dr 1 Suzy Sheep, Trade receivable 3 025 1 Utilities expense 270 1 Rebecca Pte Ltd, Trade receivable (dishonoured cheque) 2 500 1 Interest expense 20 2 485 Dr 1 Dec 1 Balance b/d 2 485 Dr 1 [6m]

3 (b) Bank Reconciliation Statement as at 30 November 2023 $ [m] Balance as per bank statement 635 1 Add: Deposits in transit Rental income 3 800 1 4 435 Less: Cheques not yet presented Emily Traders (cheque no. 117236) (1 950) 1 Adjusted Balance as per cash at bank account 2 485 1 [4m] (c) Any 2 causes (i) the payer’s bank account does not have enough money, is closed or frozen; (ii) the cheque is post-dated; (iii) the cheque has expired (over 6 months old); (iv) the cheque may contain errors (eg signature missing, amounts differ). [2m] (d) Any two of the following • Check the cash at bank balance of the business against the bank’s records • Find out the items that caused the difference between the business and bank’s records • Identify errors in the bank statement or cash at bank account • Determine the accurate bank balance after updating the cash at bank account • Acts as deterrence against fraud • A form of internal control of cash [2m] [Total: 14m] Question 3 (a) Journal Date 2023 Particulars Debit $ Credit $ [m] Jun 16 Allowance for impairment of trade receivables 500 1 Trade receivable, Max 500 1 [2m] (b) Date 2023 Particulars Debit $ Credit $ [m] Dec 31 Impairment Loss on trade receivables [(5%x40 000) – (600 – 500)] 1 900 1 Allowance for impairment of trade receivables 1 900 1 [3m]

4 (c) Prudence theory [1m] states that accounting treatment chosen should be the one that least overstate assets and profits and least understate liabilities and losses. Provision of an allowance for impairment of trade receivables it is to ensure that the value of the trade receivables and the profit for the period are not overstated. [1m] [2m] (d) Any 2 factors - economic outlook - specific industry outlook - reputation of customer - customer history of repayment [2m] (e) Immediate payment by cash or cheque is made in a cash sales [1m] Deferred payment is made by the credit customer in a credit sales [1m] [2m] [Total: 11m] Question 4 (a) (1) Given to encourage customer loyalty and patronage 1 (2) Given to encourage bulk purchases 1 [2m] (b) Micole Coffee account, Trade payable Date Particulars Debit Credit Balance [m] 2022 $ $ $ Sep 1 Balance b/d 3 500 Cr 1 9 Inventory (80% x 5 000) 4 000 7 500 Cr 1 11 Inventory (80% x 1 000) 800 6 700 Cr 1 30 Cash at bank 3 500 3 200 Cr 1 Oct 1 Balance b/d 3 200 Cr 1 [5m] (c) Angela Extract of Statement of Financial Position as at 31 December 2022 $ $ $ [m] Non-current liabilities Long-term borrowings 400 000 1 Current liabilities Current portion of long term borrowings 100 000 1 Interest expense payable 6 250 1 [3m]

5 (d) [1m for decision + 4m for 2 sets of evidence and explanation] Decision: The business should buy from Micole Coffee. [1] Reasons for buying from Micole Coffee (any two): 1. Since the business has always ordered from Micole Coffee, they have formed a long-term relationship (1 basic statement) and are satisfied with the quality of the goods and level of service provided. (1 development). 2. No relationship has been established with the new overseas supplier, Kopi House (1 basic statement). Moreover there is a greater risk of the relationship not getting established with an overseas supplier. (1 development) 3. Micole Coffee made refunds 8 days earlier than Kopi House. (1 basic statement). If need to make a refund, Angela will be able to receive the amount refunded earlier, therefore will be more able to pay the business’ debts when they are due. (1 development). 4. If there is a need to order or return spoilt coffee powder, Micole Coffee delivers or replaces coffee powders five days earlier than Kopi House with no additional cost. (1 basic statement). If the coffee powder is running low, Angela will be able to restock faster to prevent loss of sales. (1 development). Decision: The business should buy from Kopi House. [1] Reasons for buying from Kopi House (any two): 1. The overall price of 600 kilograms of coffee powder, including delivery fees is more expensive by $2 940 of buying from Micole Coffee/cheaper from Kopi House. (1 basic statement). Workings: a. Micole Coffee: 600 kilograms × $80 per unit + (600/50 x 30) = $48 360 b. Kopi House: 600 kilograms × $75 per unit + (600/50 x 35) = $45 420 c. Difference: $48 360 – $45 420 = $2 940 Assuming that sales revenue remain constant, this will result in a decrease in gross profit. (1 development). 2. Kopi House provides 10 more days for payment to qualify for 2% cash discount. (1 basic statement). Angela’s business can be more flexible and can pay for more urgent expenses first and still utilise the 2% cash discount. (1 development). 3. Kopi House has good reviews from customers, indicating that it has good reputation and is reliable in providing quality products. (1 basic statement). Angela is able to make profits and remain in business from the good coffee powder quality. (1 development). [5m] [Total: 15m]