SASS Prelims 2022 4E5N P2 Q

IndexClass Number Candidate’sName_____________________________________ STANDREW’SSECONDARYSCHOOLPRELIMINARYEXAMINATION2022SECONDARY4EXPRESS/ 5NORMAL(ACADEMIC) PRINCIPLESOFACCOUNTS 7087/02 Paper 2 25August 2022 2hours NoAdditional Materialsarerequired. READTHESEINSTRUCTIONSFIRST An answer booklet will be provided with this question paper. You should followthe instructions on the frontcover of the answer booklet. If you need additional answer paper ask the invigilator for a continuationbooklet. Answer all questions. Theuseof anapprovedcalculator isallowed. Thebusinessesdescribedinthisquestionpaper areentirelyfictitious. Thenumber of marksisgiveninbrackets[ ] at theendof eachquestionor part question. For Examiner’sUse 1 202 153 114 14Total 60 Thisdocument consistsof 6printedpages.

2 POA7087KBC©SAS Answer all questions. 1 GWSPteLimitedbuysandsellsmedical equipment. Thefollowingbalanceswereextractedfromitsbookson31December 2021. $Accumulateddepreciationof motor vehicles 51200Allowancefor impairment of tradereceivables 7600Cashat bank 9400 CreditCommissionincome 12600Cost of sales 320400Discount allowed 8400Equipment 50000General expense 50200Interest on5%bankloan 3000Inventory 73600Motor vehicles 341000Rent expense 65200Retainedearnings1January2021 56600Salesreturns 20600Salesrevenue 505800Sharecapital, 200000ordinaryshares 200000Tradepayables 35600Tradereceivables 464005%Bankloan 100000 Additional information: 1 Commissionincome, $1500, hasyet tobereceived. 2 Therent expenseincludes$20000for thefivemonthsending31March2022. 3 Interest onthe5%bankloanwasnot fullypaid. 4 One-quarter of the5%bankloanisrepayableon30June2022. 5 The allowance for impairment of trade receivables is to be maintained at 10% of tradereceivables. 6 Motor vehiclesaretobedepreciatedat 10%per annumusingthereducing-balancemethod. 7 Equipment is to be depreciated using the straight-line method over a useful life of ten years.Theestimatedresidual valueis$5000. 8 Thecompanydeclaredadividendof $0.05per shareandit will bepaidon15January2022. REQUIRED (a) Preparethestatement of financial performancefor theyear ended31December 2021. [8] (b) Preparethestatement of financial positionasat 31December 2021. [12]

3 [Total: 20]2 Wai SohDimownsabusinessimportingpremiumlightingproducts. ThefollowinginformationrelatestoWai SohDim’sbusinessat 30April 2021and2022. 30April 2021 30April 2022$ $Allowancefor impairment of tradereceivables 2300 5540Capital 50770 69790Cashat bank 1950 -Bankoverdraft - 3400Inventoryat cost 6800 17600Long-termbankloan 50000 70000Motor vehicles(net bookvalue) 90000 126000Prepaidgeneral expenses 720 630Tradepayables 5100 14700Tradereceivables 8700 19200 Additional information: Included in motor vehicles at 30 April 2022 was a payment, $38 000, during the year for a newdeliveryvan. REQUIRED (a) Explainwhat ismeant bytheliquidityof abusiness. [1] (b) Calculatethefollowingfor Wai SohDim’sbusinessfor theyear ended30April 2022. (i) Current ratio [2] (ii) Quickratio [2] Giveyour answerstotwodecimal placeswherenecessary. Showall workings. On30April 2021, Wai SohDim’scurrent ratiowas3.11andthequickratiowas1.64. REQUIRED (c) Evaluate the trend in liquidity over the two years ended 30 April 2021andApril 2022. Usethegiveninformationandyour answer to(b). [6] (d) Stateonereasonwhyit isimportant for Wai SohDim’sbusinesstobeliquid. [1] (e) Using the information fromabove to support your answer, suggest two ways the purchase ofthenewdeliveryvanmayhavebeenfinanced. [2] (f) Explainwhythequickratioisamorereliableindicator of liquiditythanthecurrent ratio. [1] [Total: 15]

4 [Turnover3 Mr Shuoperatesashoesretail business, SolesProprietor, whosefinancial year endson31May. SolesProprietor’sdraft profit for theyear ended31May2022was$29000. After calculatingthedraft profit for theyear, thefollowingomissionsanderrorswerediscovered. 1 Surplusfurniture, net bookvalue$3300, wassoldbychequefor $2800. 2 Thecost of repairstomotor vehicle, $800, hadbeenrecordedinthemotor vehiclesaccount. REQUIRED (a) Calculate the adjusted profit for the year ended 31 May 2022 after the correction of theseerrors. [2] On1June2021, thebalanceinthecapital account was$49700. Duringtheyear ended31May2022, thefollowingtookplace. 2021Oct 29 Goodscosting$340hadbeentakenbyMr Shufor hisownuse. 2022Jan4 Mr Shu paid the cost of maintenance of his home, $600, from the business bankaccount. May11 Mr Shusoldhishousefor $120000. Heput 25%of theproceedsintothebusinessbankaccount. REQUIRED (b) Preparethejournal entriestorecordthefollowing: (i) thetransactionon11May2022 [2] (ii) thetransfer of drawingstoarelevant account on31May2022 [2] Narrationsarenot required. (c) Calculatethetotal equityon31May2022. [2] (d) Statetheeffect drawingswill haveontheprofit for theyear. [1] (e) Describethefeaturesof asoleproprietorshipunder thefollowingheadings. (i) Accesstofunds [1] (ii) Extendof liability [1] [Total: 11]

5 4 Mr Koh runs a business, Mr Kohconut. The business buys and sells prepacked coconut water andhasafinancial year endof 30June. Thefollowingaccount appearedinMr Kohconut’sledger. Allowancefor impairment of tradereceivablesaccountDate Particulars Debit$ Credit$ Balance$2020Jul 1 Balanceb/d 18000Cr2021Feb18 Tradereceivable–CocoNutty 3000 15000CrJun30 Impairment lossontradereceivables 800 15800Cr Jul 1 Balanceb/d 15800Cr Thetotal tradereceivablesamountedto$225000on1July2020. REQUIRED (a) Explainwhat ismeant bytradereceivables. [1] (b) Calculatetherateof theallowancefor impairment of tradereceivablesasapercentage. [1] (c) Interpret theentriesintheallowancefor impairment of tradereceivablesaccount on: (i) 18February2021 [1] (ii) 30June2021 [1] (d) State the meaning of the balance intheallowancefor impairment of tradereceivablesaccounton1July2021. [1] (e) State the effect and amount of the entry in the allowance for impairment of trade receivablesaccount on30June2021ontheprofit for theyear. [1] (f) Explain the matching theory in relation to maintaining an allowance for impairment of tradereceivables. [1]

6 [TurnoverMr Kohconut’scredit policytoitscustomersisshownbelow. 1 Thecredit periodis30days. 2 Acashdiscount of 3%isgivenif payment ismadewithin14days. 3 Thecredit limit is$10000. Two existing customers of Mr Kohconut have approached Mr Koh to negotiate for longer creditperiod of 40 days. Due to the challenging economic conditions, Mr Koh intends to extend a longercredit periodtoonlyonebusiness. Thedetailsof thetwocustomersareshownbelow. BuyTheWay(BTW) Coconut, ya?(CYA)Natureof business Grocerystorewith8outletsinSingapore ● Dessert shopthatspecialisesincoconutdesserts● Has2outletsinSingaporeAveragetradereceivablebalance $7500 $10300 Averagemonthlysalesrevenuefor Mr Kohconut $15900 $25100 Repayment historyover thepastyear ● Averagecollectionperiodof 31days● 1occurrenceof latepayment ● Averagecollectionperiodof36days● 3occurrencesof latepaymentReputationof customer ● Popular amongseniorcitizensduetoextensivediscountsprovided● Hasbeeninbusinessfor10years ● Productshavereceivedpositivereviewsbyfoodcriticsonsocial mediaplatforms● Hasbeeninbusinessfor 18monthsSpecificindustryoutlook Thebusinesshasnoplanstohaveanonlinepresenceeventhoughthereisincreasingcompetitionfromonlineretailers. Thereisincreasingdemandforcoconut dessertsandthebusinesshasplanstoexpandto5outletsin2years’ time. REQUIRED (g) Advise Mr Koh which customer he should grant a longer credit periodto. Justifyyour decisionwiththreereasons. [7] [Total: 14]