SWISS COTTAGE 2022 4E5N EXAM POA PRELIM P2

SWISSCOTTAGESECONDARYSCHOOLSECONDARYFOURANDFIVEPRELIMINARYEXAMINATION O Name: ( ) Class: PRINCIPLESOFACCOUNTS Paper 2 Additional Materials: Answer paper (6sheets) 7087/02Tuesday30August 20222hours READTHESEINSTRUCTIONSFIRST Writeyour name, classandindexnumber onall theworkyouhandin.Writeindarkblueor blackpenonbothsidesof thepaper.YoumayuseanHBpencil for roughworking.Donot usestaples, paper clips, glueor correctionfluid.Theuseof anapprovedcalculator isallowed. Answer all questions. Thebusinessesdescribedinthisquestionpaper arefictitious.Start eachquestiononaseparatepage.All calculationsmust beshownadjacent totheanswer. At theendof theexamination, fastenall your worksecurelytogether.Thenumber of marksisgiveninbrackets[ ] at theendof eachquestionor part question. Thisdocument consistsof 8printedpages. Setter: MrsFan-FongSookThengVetter: MsKarenAng [Turnover HomeofThoughtfulLeaders:ServewithHonour,LeadwithHumility

2 Answer all questions. 1 The following balances were taken fromthe booksSappyPteLtd, aclothesretailer, on30June2022. $ Motor vehicles 150000 Premises 240000 Accumulateddepreciation–Motor vehicles 15000 Accumulateddepreciation–Premises 94500 Salesrevenue 652900 Salesreturn 21470 Cost of sales 290450 Discount received 12300 Discount allowed 19430 Rent income 18000 Salariesexpense 29000 Insuranceexpense 12900 Utilitiesexpense 10340 5%LoanfromSwissBank 50000 Cashat bank 50470 Tradereceivables 92940 Allowancefor impairment of tradereceivables 5230 Inventory 75900 Tradepayables 24190 Retainedearnings 20780 Sharecapital, 100000ordinaryshares 100000

3 Additional information 1. From 1 July 2021, the company began to sublet part of the office space at $2 500 permonth. Themonthlyrent wasincreasedby$500from1January2022onwards. 2. Interest onloanisstill owing. 3. Aquarter of theloanisrepayableon1January2023. 4. $50 000 worth of goods was destroyed in a warehouse fire and this is not recorded in thebooks. The insurance company will compensate $25 000 for the damaged inventory.Payment will bemadeon31December 2022. 5. One of the credit customers who owed $1 500 was declaredbankrupt. Thedebt hasyet tobewrittenoff. 6. A review of the trade receivables showed that 5%of the trade receivables are likely tobecomeuncollectible. 7. Motor vehicles are to be depreciated at 10%per annumusing reducing balanced method.Premisesaretobedepreciatedat 20%per annumusingstraight linemethod. 8. Adividend of $0.05 per share was declared on 30 June2022. Thedividendwill bepaidon31July2022. REQUIRED (a) Prepare the statement of financial performance for the year ended 30 June2022. [8] (b) Preparethestatement of financial positionasat 30June2022.[12] [Total: 20]

4 2 The following information is extracted from the statement of financial performance of TimTradingfor theyear ended31December 2021. Net salesrevenue $150000 Averageinventory $5800 Total operatingexpenses $45000 GrossProfit Margin 40% Returnonequity 8% REQUIRED (a) Calculatethefollowingfor theyear ended31December 2021. Showall workings.Roundoff your answersto1decimal place. (i) Cost of sales [1] (ii) Profit margin [2] (iii) Rateof inventoryturnover [1] TimTrading also supplied the followinginformationfromhisbusinessfor theyear ended31December 2020. Net salesrevenue $145000 Cost of sales $100050 Total operatingexpenses $25000 GrossProfit Margin 31.0% Profit Margin 13.8% REQUIRED (b) Write four comments on the profitability of TimTrading over the two years ended 31December 2020and2021. [4] (c) Explain howproviding trade discounts to his customers would help Tim’sbusinesstoimproveitsprofitability. [2]

5 Tam Pte Ltd, a competitor in the same industry provided the following information for thebusinessfor theyear ended31December 2021. GrossProfit Margin 45% Profit Margin 12.1% Rateof inventoryturnover 22times Returnonequity 10% REQUIRED (d) Compare and comment on the difference in the rate of inventory turnover betweenTimTradingandTamPteLtd. [2] (e) What isoneconsequenceof havingalowrateof inventoryturnover? [1] (f) Choco Lover Enterprise is considering investing in either Tim Trading or Tam PteLtd. Suggest whichbusinessChocoLover Enterpriseshouldinvest in. Support your answer withonereason. [2] [Total: 15]

6 3 The following balances were taken from the books of Andy Services at the start of thefinancial year on1January2021. $Motor vehicles 80000Accumulateddepreciation 10450 On 1 July 2021, AndyServicessoldoneof itsmotor vehicleswhichcost $20000for $15000bycheque. Themotor vehiclewasbought on1January2019. On 1 November 2021, the owner contributed his personal motor vehicle for business use,worth$12000. Andy Services provides depreciation at a rate of 20%per annumon net book value. Afullyear’s depreciation is provided in theyear of purchaseandnodepreciationisprovidedintheyear of sale. REQUIRED (a) Explain, using an appropriateaccountingtheory, whyabusinessrecordsdepreciationof non-current assets. [2] (b) Calculate the gain or loss on the sale of motor vehicles for the year ended 31December 2021. [2] (c) Calculatethedepreciationexpensefor theyear ended31December 2021. [2] (d) Preparethemotor vehiclesaccount for theyear ended31December 2021. [4] (e) Stateonedifferencebetweencapital expenditureandrevenueexpenditure. [2] [Total: 12]

7 4 James just started J&J Consultancy. The business needstoprint highvolumeof reportsandislookingtobuyahighefficiencyprinter whichcanprint, copy, scanandfax. James needs to decide whether he should buy or rent the printer. If he were to buy theprinter, he owns the printer and will be abletosell it off whentheprinter isnolonger suitablefor his business usage. If he were to rent the printer, he can rent another one when theannual rental agreement ends. BuyPrinter Rent Printer Cost $2500 $100deposit(refundableafter contract isup)Other cost ● Cost of an ink cartridge is at$150. One ink cartridge canprint around2500pages● Cost of colour toner is at$185.● Servicing cost of $120 persession ● Monthly rental at $150 for aminimumrental of ayear. Warranty 3years Not applicable Condition New May have been rented out for thepast 12months. Printer features ● Printer resolutionof1200x2400dpi*● Copy and scan resolution of600x600dpi● Print speed at 28 pages perminute● Printing via cable connectionor Wi-Fi● Scanned copies can bedirectlysendtoemail ● Printer resolutionof1200x2400dpi● Copy and scan resolution of 1200x2400dpi● Print speed at 40 pages perminute● Printing viacableconnectionorWi-Fi● Need to use USB storagedevicetosavescannedcopiesOtherinformation ● 6 times free servicing within 3years of warranty whichevercomesfirst● Freeinstallation● Freebundle:10 Reams of A4-sizePaper at$4 per reamand 1freecolourtoner costing$185. Termsandconditionsof rental:● $200 penalty if the printer isreturned before end ofcontract.● Deposit will not be refunded ifthe printer is damaged by userand/or printer returned beforeendof contract.● Contract is renewed annually.Terms and conditions maychangeaccordingly.● Rental cost will includeservicing and replacement ofinkcartridgeandtoner.* Printresolutionismeasuredindotsperinch(or“DPI”)whichmeansthenumberofdotsofinkperinchthataprinterdepositsonapieceofpaper. REQUIRED (a) If you are James, will you rent or buy the printer? Justify your decision with threereasons. [7]

8 James’sbusinessreceivesandissuesvariousdocumentsduringitsoperations. REQUIRED (b) For each of the transaction below, identify the source document used to record theinformation. (i) Bought two laptops for business use, worth $2 000 each fromComputer World oncredit. [1] (ii) ReturnedadefectivelaptopbacktoComputer World. [1] (iii) Receivedachequeof $1500for consultancyservicerenderedtoCraftmanLtd. [1] (iv) Computer WorldhasunderchargedJamesfor thelaptoppurchasedby$500. [1] (c) State and explaintheaccountingtheoryappliedwhenabusinessrecordstransactionsbasedoninformationfromsourcedocuments. [2] [Total: 13] Endof Paper

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