St Gabriels Sec 4E P1 with ANS

1 [Turn over SGSS/POAP1/4E5N/Prelim/2022 St. Gabriel’s Secondary School 2022 ‘O’ Preliminary Examination Subject : Principles of Accounts Paper : 7087/01 Level/Stream : Sec 4 Express / 5 Normal Academic Duration : 1 hour Date : 19 August 2022 Setters : Mr Tuang Fook Yong / Mdm Ruby Cheah ▪ Section A: You must answer all parts of Question 1. ▪ Section B: Answer one question. ▪ You are advised to spend no longer than 50 minutes on Section A. INFORMATION FOR CANDIDATES The number of marks of each part-question is shown in brackets. Question 1 2 3 4 Total Attained Maximu m 11 10 7 12 40 _______________________________________________________________________ Name: …………………………………………( ) Class: Sec ……………….. READ THESE INSTRUCTIONS FIRST Write your name, class and register number on all the work you hand in. Write in dark blue or black pen. You may use an HB pencil for any diagrams or graphs. Do not use staples, paper clips, 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.

2 [Turn over SGSS/POAP1/4E5N/Prelim/2022 This question paper consists of 10 printed pages including this cover page. Answer all questions. 1 Straford owns a tuition centre, ACEs. It has been the business policy that all receipts and payments of the centre are made by cheques. Straford decided to expand his business by operating another branch in Bukit Timah. As such, the business took a bank loan, to be repaid equally over 20 years, of $240 000 from SG Bank on 1 August 2020. Additional information 1 ACEs’ financial year ends on 31 December each year. 2 Partial repayment of the loan and interest due is on 31 July each year. 3 Interest rate is at 4% per annum payable on the outstanding amount of the loan on 31 July every year. REQUIRED (a) Calculate the amount (showing all working) of loan interest to be included in the statement of financial performance of the business for the year ended 31 December 2021. [3] (b) Prepare an extract statement of financial position for ACEs as at 31 December 2021. Show only the liabilities section. Extract Statement of financial position as at 31 December 2021

3 [Turn over SGSS/POAP1/4E5N/Prelim/2022 [3] The following information have also been provided by ACEs. $ Account balance as at 1 January 2021 Tuition fees received in advance 2 800 During the year ended 31 December 2021 Tuition fees received 9 200 Additional information Tuition fees revenue, $1 800, had not been received on 31 December 2021. REQUIRED (c) Calculate the amount (showing all working) of tuition fees revenue to be included in the statement of financial performance of the business for the year ended 31 December 2021. [2] (d) State the accounting theory which is being applied when calculating the amount for loan interest and tuition fees revenue for the year ended 31 December 2021. [1] (e) State two types of item paid or received directly through the bank for which a bank statement may be used as proof. [2] [Total: 11]

4 [Turn over SGSS/POAP1/4E5N/Prelim/2022 2 Ethan is a trader who buys and sells on credit. He sells his goods at a gross profit margin of 50%. The following credit transactions took place during the month of August 2022. August 1 Sold goods to Cedric for $20 000. 16 Sold goods to Calen for $8 600. Cost of the goods was $4 300. In addition, due to the small quantity order, Ethan charged Calen $400 for delivery fee. REQUIRED (a) Prepare the following accounts for the month of August 2022. Show, where appropriate, the transfer to the income summary account. (i) Cost of sales account Cost of sales account [3] (ii) Sales revenue account Sales revenue account [3]

5 [Turn over SGSS/POAP1/4E5N/Prelim/2022 (b) On 3 September 2022, $25 000 worth of inventory was found to be defective. $15 000 of repair work was spent on restoring the inventory to its original state. These inventory were estimated to be sold for $35 000. (i) Calculate the impairment loss on inventory, showing relevant working. [2] (ii) Name and explain the accounting theory that is applied to the valuation of inventory for the above situation in (b). [2] [Total: 10]

6 [Turn over SGSS/POAP1/4E5N/Prelim/2022 3 The following is an extract of TM Trading statement of financial performance for the year ended 30 June 2022. This was prepared by an inexperienced bookkeeper of TM Trading. TM Trading Statement of financial performance for the year ended 30 June 2022 (extract) $ Gross profit 60 000 Add Discount 4 600 Less Expenses Computers 8 500 Rent expense 10 000 General expenses 15 000 Profit for the year 31 100 The following errors were discovered on 30 June 2022. 1 Computers costing $8 500 were purchased for office use and were recorded as an expense in June 2022. 2 $4 500 included in the general expense was for payment of annual insurance. REQUIRED (a) Briefly explain error 1. [1] (b) State the effect of correcting error 2 on profit for the year ended 30 June 2022. [1] (c) State one feature of a capital expenditure. [1]

7 [Turn over SGSS/POAP1/4E5N/Prelim/2022 (d) An amount of $4 600 has been posted as discount in TM Trading’s statement of financial performance on 30 June 2022. (i) State the type of discount. [1] (ii) State a reason for this discount. [1] (e) ‘A balanced trial balance shows that there is arithmetic accuracy in the double entry recordings of accounts.’ State whether you agree or disagree with the above statement. Explain your answer. [2] [Total: 7]

8 [Turn over SGSS/POAP1/4E5N/Prelim/2022 4 MD Trading and BUK Trading are competitors selling computers and computer accessories. MD Trading provided the following information for the financial year ended 30 June 2022. $ Sales revenue 110 000 Sales returns 3 800 Gross profit 41 700 Total operating expenses 32 600 Drawings 18 000 Capital, 1 July 2021 80 000 REQ