2023 SMSS POA 4E5N PRELIM P1 WITH ANS

ST. MARGARET’S SECONDARY SCHOOLPreliminary Examinations 2023CANDIDATE NAMECLASSREGISTER NUMBERPRINCIPLES OF ACCOUNTSPaper 1 Secondary 4 Express / 5 Normal (Academic)7087/0125 August 20231 hour Additional Materials: NilREAD THESE INSTRUCTIONS FIRSTDo not turn over the pages until you are told to do so.Write your name, class and index number on all the work you hand in, including the cover page.Write in dark blue or black pen.Do not use staples, paper clips, highlighters, glue or correction fluid.The use of an approved calculator is allowed.Answer all questions in the spaces provided in the Question Paper.Where the columnar format is used, the running balance column should be updated for the first and last entries. Where applicable, the balance should be brought down to the next financial year.All calculations must be shown adjacent to the answer.The businesses described in this question paper are entirely fictitious.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. This document consists of 10 printed pages.

2Answer all questions.1Zen wishes to set up a business selling curtains. He approaches you for the following advice. REQUIRED(a)Give two features of a sole proprietorship.……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………[2](b)State one difference between a bank loan and a bank overdraft.……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………[2]On 31 July 2023, after preparing the trial balance, Zen discovered the following errors.1.Utilities of $345 was recorded on the wrong side of both the cash at bank and utilities accounts.2.Zen withdrew $1 200 worth of curtains from the business as samples for his clients. This was recorded in the drawings account.

3REQUIRED(c)State the journal entries to correct the above errors. Narrations are not required.……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………[4](d)The profit for the year before discovering the errors was $28 900. Calculate the correct profit for the year ended 31 July 2023, after the correction of the above errors 1 and 2. Show your workings.……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………[2][Total: 10]

42Fast Forward Pte Ltd provided following account balance on 1 August 2020.Retained earnings a/cDateParticularsDebitCreditBalance2020$$$Aug 1Balance b/d45 400 Cr 2021Jul 31Income summary9 80055 200 CrJul 31Dividends 2 50052 700 Cr Aug 1Balance b/d52 700 Cr2022Jul 31Income summary5 00047 700 Cr Jul 31Dividends 3 00044 700 Cr Aug 1Balance b/d44 700 Cr REQUIRED(a)Define the following terms(i)dividends…………………………………………………………………………………………..…………………………………………………………………………………………..…………………………………………………………………………………………..………………………………………………………………………………….….…[1](ii)retained earnings…………………………………………………………………………………………..…………………………………………………………………………………………..…………………………………………………………………………………………..……………………………………………………………………………………..…[1](b)Explain how the shareholders’ equity of Fast Forward Pte Ltd changed from 2020 to 2021.………………………………………………………………………………………………...………………………………………………………………………………………………...…………………………………………………………………………………………………

5………………………………………………………………………………………………[2](c)Explain how the shareholders’ equity of Fast Forward Pte Ltd changed from 2021 to 2022.………………………………………………………………………………………………...………………………………………………………………………………………………...…………………………………………………………………………………………………………………………………………………………………………………………………[2]On 1 August 2020, the share capital of Fast Forward Pte Ltd was $100 000, made up of 100 000 ordinary shares. On 9 September 2021, the business issued 10 000 shares at $2 per share. REQUIRED(d)Prepare the business’ share capital account for the two years ended 31 July 2021 and 2022.………………………………………………………………………………………………..………………………………………………………………………………………………..………………………………………………………………………………………………..………………………………………………………………………………………………...………………………………………………………………………………………………...………………………………………………………………………………………………...……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………[3][Total: 9]

63Janice runs a restaurant, Yummy Bites. The business’ financial year ends on 31 July.On 1 August 2020, the business bought a delivery van for $50 000. Janice is not sure if she should depreciate the delivery van based on straight-line or reducing-balance method. REQUIRED(a)Define depreciation.………………………………………………………………………………………………….……………………………………………………………………………………………….....……………………………………………………………………………………………….....…………………………………………………………………………………………….....[2](b)Calculate the difference in the business’ profits between the two depreciation methods, if the depreciation rate for the year is 20% per annum, for the years ended(i)31 July 2021…………………………………………………………………………………………….…………………………………………………………………………………………….…………………………………………………………………………………………….…………………………………………………………………………………………….…………………………………………………………………………………………….…………………………………………………………………………………………….…………………………………………………………………………………………….………………………………………………………………………………………….[2](ii)31 July 2022…………………………………………………………………………………………….…………………………………………………………………………………………….…………………………………………………………………………………………….…………………………………………………………………………………………….…………………………………………………………………………………………….…………………………………………………………………………………………….…………………………………………………………………………………………….

7………………………………………………………………………………………….[3]On 31 July 2022, Janice sold the delivery van and received a cheque of $32 800. Janice has decided to adopt the reducing-balance method to depreciate all the business’ motor vehicles, at the rate of 20% per annum.REQUIRED(c)Prepare the sale of non-current asset account for the year ended 31 July 2022.………………………………………………………………………………………………….………………………………………………………………………………………………….………………………………………………………………………………………………….………………………………………………………………………………………………….………………………………………………………………………………………………….………………………………………………………………………………………………….………………………………………………………………………………………………….………………………………………………………………………………………………….………………………………………………………………………………………………….………………………………………………………………………………………………….[4][Total:11]

84Beautiful Homes Co is in the business of selling paintings. On 31 July 2022 the business had an inventory balance of $25 000. Unfortunately, the store experienced a fire and one-fifth of the inventory was damaged. The insurance company informed Beautiful Homes Co that the business would be able to receive a full compensation. As at 31 July 2022, the claim had not yet been received.The business’ financial year ends on 31 July.REQUIRED(a)State the valuation rule of inventory.……………….………………………………………………………………………………[1](b)Calculate the amount of inventory loss due to the fire. Show all workings. ………………………………………………………………………………………………….……………………………………………………………………………………………….....……………………………………………………………………………………………….....…………………………………………………………………………………………….....[1](c)Prepare the journal entries to adjust the value of the inventory on 31 July 2022. Narrations are not required. ………………………………………………………………………………………………….……………………………………………………………………………………………….....……………………………………………………………………………………………….....………………………………………………………………………………………………….……………………………………………………………………………………………….....……………………………………………………………………………………………….....……………………………………………………………………………………………........[2]

9On 31 July 2023, the following information is extracte