2022 GMSS POA 4E5N PRELIM PAPER 2 ANSWERS

GMS(S)/POA/P2/PRELIM2022/4E/5N/Answers 20224E5NPrelimPaper 2AnswersQuestion1a) BeezeePteLimitedStatementoffinancialperformancefortheyearended30September2021$ $ Salesrevenue 161250Less:Salesreturns 900 Netsalesrevenue 160350 1Less:Costofsales 91200Grossprofit 69150 1 OtherincomeCommissionincome(20200-900) 19300 1 Less:OtherexpensesDepreciationofequipment(10%x(122000–2000)) 12000 1Depreciationofmotorvehicles(20%x(100000-20000)) 16000 1Reversalofimpairmentlossontradereceivables(4%x(29500–1300)) (120) 1Interestexpense(5%x60000) 3000 1Impairmentlossoninventory(13500-12500) 1000 1Insuranceexpense(28000-300) 27700 1Wagesandsalaries 9370 68950Profitfortheyear 19500 1

GMS(S)/POA/P2/PRELIM2022/4E/5N/Answers b) BeezeePteLimitedStatementoffinancialpositionasat30September2021Assets $ $ $ Non-currentassets Cost Accumulateddepreciation Netbookvalue Equipment 122000 24000 98000 1OF Motorvehicles 100000 36000 64000 1OF162000CurrentassetsTradereceivables 29500Less:Allowanceforimpairmentoftradereceivables (1180) 28320 1Cashatbank 1800Inventory 12500 1Prepaidinsurance 300 42920 1Total assets 204920 EquityandLiabilitiesShareholders'equitySharecapital,100000ordinaryshares 100000 1Retainedearnings(15180+19500-2000) 32680 132680 1 Non-currentliabilityLong-termborrowing 60000 1 CurrentliabilityTradepayables 6340Commissionincomereceivedinadvance 900 1Interestpayable(5%x60000) 3000 1Dividendpayable(0.02x100000) 2000 12240 1Total equityandliabilities 204920 2

GMS(S)/POA/P2/PRELIM2022/4E/5N/Answers Question2(a)i.24.00%=Grossprofit/268500x100%Grossprofit=0.24x268500=$64440[1] ii.Costofsales=Netsalesrevenue–Grossprofit=268500–64440=$204060[1OF]Mark-uponcost=Grossprofit/Costofsalesx100%=64440/204060x100%=31.58%(2dp)[1]iii.Profitmargin=Profitfortheyear/Netsalesrevenuex100%=(64440–42100)/268500x100=8.32%[1](b)- FashionRetailgrossprofitmarginof24.00%isbetterthanUptownRetail18.00%.- FashionRetailmark-uponcostof31.58%isbetterthanUptownRetail22.36%.- ThisimpliesthatFashionRetailissellingitsgoodsatahighersellingpriceorbuyingitsgoodsatalowercostprice.- However,FashionRetailprofitmarginis8.32%isworsethanUptownRetail10.39%.- ThisimpliesthatFashionRetailislessefficientinmanagingitsexpensestogeneratenetsalesrevenuecomparedtoUptownRetail.- Overall, FashionRetail islessprofitablethanUptownRetail. (c)HazmishouldinvestinUptownRetail.ThereturnofequityforUptownRetailis53.44%whichisbetterthanthatofFashionRetailwhichis40.68%.Thismeansthatforeverydollarinvested,UptownRetailisabletogeneratemoreprofitsforshareholdersthanFashionRetail. (d)Easierforbusinesstotakeuploansfrombanks/Easiertohireemployees/Possibletodistributeprofitstorewardthemfortheircontributionsandattractinvestors/Expandoperations/Sustainbusinessoperations/Supplierswillingtosellgoodsoncredittobusiness/KeepupwithcompetitorsAny2validpoints–2m Question3(a)i.Cost:$150000Accumulateddepreciation:30000+24000=$54000[1]For31Dec2018:20%x150000=$30000For31Dec2019:20%x(150000–30000)=$24000Netbookvalue=150000–54000=$96000Lossonsale=82000–96000=$140