ESSS 2022 4E5N Prelim P2 ANS

Answer to4E5NMYE2022P2 Question1 (a)GritPteLtdStatementofFinancialPerformancefortheyearended30June2022$ $Salesrevenue 185,000LessSalesreturns (25,700)NetSalesrevenue 159,300LessCostofsales (84,500)Grossprofit [1] 74,800AddOtherIncomeCommissionincome(1150–420) [1] 730Discountreceived 310TotalOtherIncome 1,040TotalIncome 75,840LessOtherExpensesUtilities 11,870Advertising(6130–400) [1] 5,730Interestexpense(8%X50000) [1] 4,000Rentalexpense 8,500Salaries 22,710Depreciationoffixturesandfittings(15%X42000) [1] 6,300Depreciationofofficeequipment20%X(78300–23000)[1] 11,060Reversalofimpairmentlossontradereceivables(6140–1500)–5%X(81500–1500) [1] (640)Totalexpenses (69,530)Profitfortheyear 6,310 [7] 1

(b)GritPteLtdStatementofFinancialPositionasat30June2022Assets $ $ $ Non-currentAssets Cost AccumulatedDepreciation NetBookValue(23,000+11,060)Officeequipment 78,300 (34,060) 44,240[1](8,360+6,300)Fixturesandfittings 42,000 (14,660) 27,340[1]TotalNon-currentAssets 71,580CurrentAssetsInventory 31,640Tradereceivables(81,500–1,500) [1] 80,000LessAllowanceforimpairmentoftradereceivables(5%X80,000) (4,000)NetTradereceivables 76,000 [1]Prepaidadvertising(1200/6X2) [1] 400TotalCurrentAssets 108,040TotalAssets 179,620EquityandLiabilitiesShareholders’EquitySharecapital,180,000ordinaryshares[1] 90,000Retainedearnings(22,390–3,600[1]+6,310[OF1]) 25,100TotalShareholders’Equity 115,100Non-currentLiabilitiesLongtermborrowings(50,000–10,000) [1] 40,000CurrentLiabilitiesBankoverdraft 1,380Tradepayables 8,120Currentportionoflongtermborrowings[1] 10,000Commissionincomereceivedinadvance[1] 420Interestpayable(4,000–3,000) [1] 1,000Dividendspayable(0.02X180,000) [1] 3,600TotalCurrentLiabilities 24,520TotalEquityandLiabilities 179,620[13] 2

Question2 (a) CashatbankAccountDate Particulars Dr Cr Balance2022 $ $ $Apr30 Balanceb/d [1] 5300DrApr30 TradereceivableYuesniTrading(Dishonouredcheque) [1] 1800Apr30 Inventory(1010–1110) [1] 100Apr30 Commissionincome[1] 310Apr30 Bankcharges[1] 25 3885Dr 2022May1 Balanceb/d 3885Dr[5] (b)BankReconciliationStatementasat30April2022$ $CreditbalanceasperBankStatement [1] 2385AddDepositsintransitTradereceivableJoJoTrading [1] 2100LessChequesnotyetpresentedUtilities(3017) [1] (600)UpdatedbalanceasperCashatBankAccount 3885 [3] (c) Anyoneofthefollowing(1mark)- Chequehasexpiredasitwasdatedmorethan6monthsago- Chequeispost-datedasthedateonthechequeisafuturedate- Informationonthechequeisnotconsistent,forexample,theamountwritteninnumbersdoesnotmatchamountwritteninwords(orsignatureisdifferentfromtheauthorizedversioninthebank’srecords)- Informationonchequeisnotcomplete,forexample,thereisnodate(oramounttobepaidorsignature)- Thepayer’sbankaccountdoesnothavesufficientfundstomakethepayment/theaccounthasbeenclosed/frozen [1] (d) Commissionincomeincreasesprofitby$310[1]Bankchargesdecreasesprofitby$25[1] [2] [Total:11] 3

Question3(a) Abusinessneedstobeliquidsothatitcanpayitscurrentliabilitiesandoperatingexpenses[1]toensurethatthebusinesscancontinueitsoperationssmooth