KCPSS 4NA POA Prelim 2024 ANS

N’Level Revision Set O – Kuo Chuan Presbyterian N’Level Prelim 2024 SOLUTIONS -PAPER 1- Answer all the questions. 1 Kim Teck is a sole trader. As at 30 June 2023, his business had the following assets and liabilities. Current Assets Current Liabilities Non-current Assets Non-current Liabilities $50 000 $26 000 $80 000 $30 000 Required (a) State the meaning of each of the following terms: (i) Assets [1] Assets are resources a business owns or controls that are expected to provide future benefits. (ii) Liabilities [1] Liabilities are obligations owed by a business to others that are expected to be settled in the future. (iii) Equity [1] Equity refers to the claim by the owner on the net assets of a business. (b) Calculate the equity of Kim Teck’s business as at 30 June 2023. [3] [1] [1] Equity = $(50 000 +80 000) – (26 000 +30 000) = $74 000 [1]

2 The table shows the transactions that occurred in Kim Teck’s business. Show the effect of the following transactions on assets, liabilities and owners’ equity. Assets Liabilities Owners’ Equity Example: Kim Teck contributed $10 000 cheque into the business. Cash at bank +10 000 No effect Capital +10 000 Kim Teck’s business purchased goods worth $6 000 on credit from a supplier. Inventory +6 000 [1] Trade payable +6 000 [1] No effect Kim Teck withdrew $5000 cash from the business bank account for personal use. Cash at bank − 5 000 [1] No effect Drawings − 5 000 [1] [4] [Total: 10]

3 KCPSS 2024/Sec 4NA Prelim POA P1 [Turn Over 2 The trade receivable account for Terry Trading in the books of Lydia Wholesale is shown below. Trade receivable – Terry Trading Date Particulars Dr Cr Balance 2023 Jul 1 Bal b/d 14 000 Dr 9 Sales revenue 3 000 17 000 Dr 12 Sales return 400 16 600 Dr 23 Cash at bank 15 000 1 600 Dr Required (a) Interpret the entries in Trade receivable – Terry Trading account on: (i) 9 July 2023 [1] Sold goods at $3 000 to Terry Trading on credit. (ii) 12 July 2023 [1] Defective goods were returned to Terry Trading. (iii) 23 July 2023 [1] Received a cheque 0f $15 000 from Terry Trading.

4 (b) State the source document for each of the transactions on: (i) 9 July 2023: Invoice [1] (ii) 12 July 2023: Credit note [1] (iii) 23 July 2023: receipt [1]

5 KCPSS 2024/Sec 4NA Prelim POA P1 [Turn Over

6 The financial year of Lydia Wholesale ends on 31 July. The trade receivable balances are as follows: 31 July 2022 31 July 2023 Trade receivables $59 800 $65 000 On 31 July 2023, Terry Trading was declared bankrupt. Lydia Wholesale wrote off the debt of $1 600 owed by Terry Trading. Required (c) Prepare the journal entry to record the debt written off on 31 July 2023. A narration is not required. [2] Journal Entry Date Particulars Dr Cr 31 Jul 23 Allowance for impairment of trade receivables 1 600 [1] Trade receivables – Terry Trading 1 600 [1] Lydia Wholesale maintains an allowance for impairment of trade receivables based on 5% of its trade receivable at the end of every financial year. Required (d) Prepare the journal entry to record the adjustment of allowance for impairment of trade receivable for the financial year ended 31 July 2023. Narration is not required. [2] Journal Entry Date Particulars Dr Cr 31 Jul 23 Impairment loss on trade receivables 1 860 [1] Allowance for impairment of trade receivables 1 860 [1] [Total: 10] 59 800 x 0.05 = 2990 2990 – 1600 = 1390 65 000 x 0.05 = 3250 3250 – 1390 = 1860 3 Jeremy is an accountant preparing the financial statements of a business on

7 KCPSS 2024/Sec 4NA Prelim POA P1 [Turn Over 31 December 2023. Required (a) Complete the following table indicating with a tick (√) on which side of a trial balance each item would appear. Debit Credit Prepaid rent expense √ Accumulated depreciation of office equipment √ Sales return √ Discount received √ [4] After preparing the trial balance as at 31 December 2023, the following errors were discovered by Jeremy. (1) Payment of $2 100 by cheque for advertising has been recorded as $1 200 in the books. (2) Goods sold for $5 000 has been debited to the sales revenue account and credited to the credit customer Tammy Store. (3) The maintenance expense of $300 for the van was debited to the motor vehicle account. Required (b) Prepare journal entries to correct the errors in each of (1), (2) and (3). Narrations are not required. [6] Date Particulars Dr Cr 31 Dec 23 Advertising expense 900 [1] Cash at bank 900 [1] Trade receivable – Tammy Store 10 000 [1] Sales revenue 10 000 [1] Maintenance expense 300 [1] Motor vehicle 300 [1]

8 (c) State one purpose of the trial balance. [1] The purpose of the trial balance is to facilitate the preparation of the financial statements OR to ensure arithmetic accuracy in recording. [Total: 11]

9 KCPSS 2024/Sec 4NA Prelim POA P1 [Turn Over 4 The financial year of Jon Bakery ends on 31 December. On 1 July 2022, Jon Bakery took a loan of $150 000 from ABC Bank at an interest rate of 2% per annum. The loan has a repayable period of 10 years. Both the partial repayment of the loan and payment of interest are to be made on every 1 July of each financial year. Required (a) Calculate the amount of loan that is to be repaid on every 1 July of each financial year. [1] Loan repayment = 150 000 ÷ 10 = $15 000 (b) Calculate the amount of interest expense incurred on 31 December 2022. [1] Interest expense = 150 000 x 0.02 x 0.5 = $1 500 (c) Prepare the journal entry to record the adjustment to the interest expense as at 31 December 2022. A narration is required. [3] Date Particulars Dr Cr 31 Dec 22 Interest expense [1] 1 500 Interest expense payable [1] 1 500 (Interest expense owing) [1]

10 (d) Prepare an abstract of the statement of financial performance for the year ended 31 December 2022, showing only the expense section. [1] Statement of financial performance for the year ended 31 December 2022 $ Less : Other expenses Interest expense 1 500 (e) Prepare an abstract of the statement of financial position as at 31 December 2022, showing only the liabilities section. [3] Statement of financial position as at 31 December 2022 $ Non-current liabilities Long term borrowings 135 000 [1] Current Liabilities Current portion of long term borrowings 15 000 [1] Interest expense payable 1 500 [1] [Total: 9] [End of Paper]