SWISS_COTTAGE_2022_4E5N_EXAM_PRELIM_P2_MARKING SCHEME

2022PRELIMINARYEXAMINATION4E5NPrinciplesofAccountsP2MARKINGSCHEME1(a) SappyPteLtdStatementforfinancialperformancefortheyearended30June2022$ $ Salerevenue 652900 Less:Salereturn (21470) Netsalesrevenue 631430 1 Less:Costofsales (290450) Grossprofit 340980 1 Add:Otherincome Discountreceived 12300 Rentincome(2500x6+3000x6) 33000 1 45300 Less:otherexpenses Discountallowed 19430 Salariesexpense 29000 Insuranceexpense 12900 Utilitiesexpense 10340 Interestexpense(5%x50000) 2500 1 Impairmentlossoninventory 25000 1 Impairmentlossontradereceivables[(5%x(92940–1500)–(5230–1500)) 842 1 Depreciationofmotorvehicles(10%x(150000–15000)) 13500 1 DepreciationofPremises(20%x240000) 48000 1 161512 Profitfortheyear 224768

(b) SappyPteLtdStatementoffinancialpositionasat30June2022Assets Cost$ Accumulateddepreciation$ NBV($) Non-currentassets Motorvehicles 150000 28500 121500 1 Premises 240000 142500 97500 1 Totalnon-currentassets 219000 Currentassets Cashatbank 50470 Tradereceivables(92940–1500) 91440 1Less:Allowanceforimpairmentoftradereceivables(5%x(92940–1500) 4572 86868 1 Inventory(75900–50000) 25900 1 Insurancereceivables 25000 1 Rentincomereceivables(33000–18000) 15000 1 Totalcurrentassets 203238 Totalassets 422238 Equityandliabilities Shareholders’equity Sharecapital,100000ordinaryshares 100000Retainedearnings(20780+224768–5000) 240548 1 Totalequity 340548 Non-currentliabilities Longtermborrowing(50000x¾) 37500 1 Totalnon-currentliability 37500 Currentliability Currentportionoflongtermborrowing(50000x¼) 12500 1 Tradepayables 24190 Interestpayable(5%50000) 2500 1 Dividendpayable($0.05x100000) 5000 1 Totalcurrentliabilities 44190Totalequityandliabilities 422238[Total: 20]

Question2 (a)(i) GrossProfit=150000x0.4=$60000 CostofSales=NetSalesRevenue–GrossProfit=150000–60000=$90000[1] (ii) ProfitfortheYear=GrossProfit–Expenses=60000–45000=$15000[1] ProfitMargin= 𝑃𝑟𝑜𝑓𝑖𝑡 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑌𝑒𝑎𝑟𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 ×100%= 15000150000 ×100%=10.0%[1] (iii) RateofInventoryTurnover= 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑆𝑎𝑙𝑒𝑠𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 = 900005800 =15.5times[1] (b)Anyfourofthefollowing: [4] –1markeach ● Thegrossprofitmarginhasimprovedby9%fromtheyearended31December2020to2021.● ThismaybeduetoTimTradingloweringcostpriceasseenasadropincostofsalesfromtheyearended31December2020to2021bysearchingforacheapersupplier.● TheprofitabilityofTimTradinghasdroppedfromtheyearended31December2020to2021,asseenfromthe3.8%decreaseinprofitmargin.● Thisislikelyduetotheincreaseinoperatingexpensesfromtheyearended31December2020to2021.● ThisislikelyduetoTimTradingbeinglessefficientinmanagingtheiroperatingexpenses. (c)Offeringtradediscount,whichisareductionoffthelistpriceoftheitems,itwillencouragecustomerstobuyinbulkorencouragecustomerloyalty[1].Thiswillinturnincreasesalesforthebusiness. [1] (d)Anytwoofthefollowing: [2] –1markeach ● TherateofinventoryturnoverforTimTradingat15.5timesisworsethanofTamPteLtdat22times.Forevery1unitnotsold,TimTradingsold15.5unitswhileTamPteLtdsold20units.● TimTradingmayhavealowerrateofinventoryturnoverashemayha