Pasir Ris Sec 4E5N POA Prelim Exam (Paper 2)

Name Class Register Number SECONDARY 4 EXPRESS / 5 NORMAL (ACADEMIC) PRELIMINARY EXAMINATION 2022 PRINCIPLES OF ACCOUNTS Monday 1100 – 1300 7087/2 29 August 2022 2 hour s No Additional Materials are required. READ THESE INSTRUCTIONS FIRST An answer booklet will be provided with this question paper. You should follow the instructions on the front cover of the answer booklet. If you need additional answer paper ask the invigilator for a continuation booklet. Answer all questions. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. All questions in this paper carry equal marks. This document consists of 8 printed pages. Setter: Lee Chee Weng [Turn over Pasir Ris Secondary School

2 Section A Answer all questions. 1 The following balances were extracted from the books of Daniel Consultancy on 30 June 2022. $ Consultancy fee revenue 325 200 Share capital, 50 000 ordinary shares 50 000 Retained earnings 80 540 Rent 64 000 Wages and salaries 114 000 Insurance 5 400 Fixtures and fittings 35 000 Motor vehicles 75 000 Accumulated depreciation: Fixtures and fittings 12 250 Motor vehicles 30 000 Trade receivables 125 600 Allowance for impairment of trade receivables 5 782 Trade payables 8 720 Cash at bank 134 742 6% Bank loan repayable 35 000 Interest on bank loan 550 Commission income 6 800

3 Additional information 1 - Rent expense relates to a sixteen-month period ending on 31 October 2022. - Wages and salaries, $2 600 were outstanding. - Commission income received in advance was $950. 2 Bank loan approved and started on 1 January 2022. Loan interest for the year ended 30 June 2022 was not fully paid. 3 Motor vehicle is to be depreciated at 20% per annum using the reducing balance method. 4 Fixtures and fittings are to be depreciated at 10% per annum using the straight-line method. 5 A trade receivable owing $6 600 was declared bankrupt. This amount is to be written off. 6 The allowance for impairment of trade receivables is to be maintained at 5% of trade receivables. 7 The company declared a dividend of $0.50 per share. The dividend will be paid on 31 December 2022. REQUIRED (a) Prepare the statement of financial performance for the year ended 30 June 2022. [10] (b) Prepare the statement of financial position as at 30 June 2022. [10] [Total: 20]

4 2 The following information was extracted from the books of Wei Cong Trading on 31 August 2021: $ Trade receivables 25 000 Allowance for impairment of trade receivables 4 320 On 26 January 2022, a credit customer, Bhatti Pte Ltd owing a debt of $3 500 filed for bankruptcy. It has been agreed that Mr Bhatti will pay $0.20 for every $1.00 owed. The remaining unpaid debt w ill be written off. The cheque from Mr Bhatti was received on the same day. At the end of 31 August 2022, the trade receivables balance was $38 000. Wei Cong Trading maintains an allowance for impairment of trade receivables at 3% of the trade receivables balance at the end of the financial year. REQUIRED (a) Prepare the journal entries to record the following. Narration is not required: (i) the transaction on 26 January 2022. [3] (ii) Adjustment of allowance for impairment of trade receivables on 31 August 2022, including the closing entry [4] Additional Information 1 Wei Cong Trading grants all its customers 28 days credit term. 2 For the year ended 31 August 2022 $ Sales revenue 360 580 Sales returns 4 990 Cost of sales 180 151 (b) Calculate the following for the year ended 31 August 2022. Show your answers to two decimal places (i) Rate of trade receivables turnover [2] (ii) Trade receivables collection period [1]

5 Given that for the year ended 31 August 2021, (i) The rate of trade receivables turnover was 13.21 times and (ii) The trade receivables collection period was 25.35 days. REQUIRED (c) Evaluate the efficiency of Wei Cong Trading’s trade receivables management over the two years. [5] (d) Suggest two ways to improve Wei Cong Trading’s efficiency in trade receivables management. [2] (e) Explain the term impairment loss on trade receivables. [1] (f) Using an appropriate accounting theory, explain why it is necessary for a business to account for impairment loss on trade receivables. [2] [Total: 20]

6 3 The following inventory ledger account was extracted from the books of Ka Sing Trading for the month of July 2022: Inventory account Date Particulars Debit $ Credit $ Balance $ 2022 July 1 Balance b/d 5 830 Dr 8 Trade payable – Andy Wong 13 450 19 280 Dr 10 Trade payable – Andy Wong 3 200 16 080 Dr 15 Cost of sales 6 750 9 330 Dr 23 Cost of sales 4 500 4830 Dr 28 Cash at bank 780 5 610 Dr 31 Impairment loss on inventory 600 5 010 Dr August 1 Balance b/d 5 010 Dr Additional information On 31 July 2022, $600 worth of goods were damaged by overnight flooding in the office. REQUIRED (a) Interpret the entries on the following dates (i) 10 July [1] (ii) 15 July [1] (iii) 31 July [2] (b) What is the difference between the inventory and the office computer equipment owned by the business? [2] (c) Explain how the cost of inventory purchased is determined. [2] (d) Using an accounting theory, explain how inventory is valued. [2] [Total: 10]

7 4 Cheng Trading buys and sells gaming keyboards. The following information is extracted for the year ended 30 September 2022. $ Inventory 5 450 Net Sales revenue 85 790 Gross profit 40 010 Profit for the year 18 660 The inventory as at 1 October 2021 is $8 000. (a) Calculate the rate of inventory turnover for the year ended 30 September 2022. Show your answers to two decimal places [1] (b) Given Cheng Trading rate of inventory turnover is 4.13 for the year ended 30 September 2021, evaluate its efficiency in inventory management [2]

8 Cheng Trading shortlisted gaming keyboards from two new manufacturers. The information available for comparison is listed below. REQUIRED (c) Advise Cheng Trading whether to order Raxer or Logicmach gaming keyboards. [7] [Total: 10] End of paper Raxer Brand Logicmach Brand Price per unit $200 $60 Minimum order 10 units per order 100 units per order Cost of additional storage space Not required $500 Warranty 4 months 1 year Nature Great overall build quality Average overall build quality Features Wired and Wireless Black only Wired only Multi-colour

9 Daniel Consultancy Statement of financial performance for the year ended 30 June 2022 $ $ Consultancy fee revenue 325 200 [1] Other income Commission income (6 800 – 950) 5 850 [1] Less: Other expenses Rent expense ( 64 000/16 x 12 ) 48 000[1] Depreciation – Fixtures and Fittings (10% x 35 000) 3 500[1] Depreciation – motor vehicle 20% x (75 000 – 30 000) 9 000[1] Wages and Salaries expense (114 000 + 2600) 116 600[1] Insurance expenses 5 400 Interest expenses (6% x 35 000 x 6/12) 1 050[1] Impairment loss on trade receivable 6 768 [1] 190 318 5 950* - (5 782 – 6 600)* [1 for partial working shown] Profit for the year 140 732 [1 OF*] *If profit is derived from adding rent income and expenses items only. [Total: 10] SECONDARY 4 EXPRESS / 5 NORMAL (ACADEMIC) PRELIMINARY EXAMINATION 2022 PRINCIPLES OF ACCOUNTS Paper 2 (Marking Scheme)

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