QSS 2022 4E Prelim Paper 2

` NAME: CLASS: INDEXNO: QUEENSWAYSECONDARYSCHOOLPRELIMINARYEXAMINATION2022SECONDARY4EXPRESS/5NORMALACADEMIC PrinciplesofAccounts 7087/02Paper2 12September20222hourAdditionalMaterials:Multi-columnaccountingpaper(5sheets) READTHESEINSTRUCTIONSFIRST Writeyourindexnumberandnameonalltheworkyouhandin.Writeindarkblueorblackpenonbothsidesofthepaper.YoumayuseanHBpencilforanyroughworking.Allcalculationsmustbeshownadjacenttotheanswer.Theuseofanapprovedcalculatorisallowed. Answerallquestions. Thebusinessesdescribedinthisquestionpaperareentirelyfictitious. Starteachquestiononaseparatepage. Attheendoftheexamination,fastenallyourworksecurelytogether. Thenumberofmarksisgiveninbrackets[ ]attheendofeachquestionorpartquestion. ForExaminer’sUse Parent’sSignature 60 Thisdocumentconsistsof5printedpages. 1

Setter: MrsCindyTan [Turnover SectionA Answerallquestions. 1 ThefollowingbalanceswereextractedfromthebooksofCozyPteLtd,aninteriordesigncompanyon31December2021. $Tradereceivables 15000Allowanceforimpairmentoftradereceivables 2000Equipment 60000Fixturesandfittings 40000Accumulateddepreciationofequipment 6000Accumulateddepreciationoffixturesandfittings 4000Bankloan 50000Interestexpense 1200Discountallowed 500Discountreceived 800Cashatbank 32000Tradepayables 14600Designfeerevenue 25800Rentexpense 15600Salariesexpense 17000Sharecapital,20000ordinaryshares 50000Retainedearnings,1January2021 28100 Additionalinformation: 1 Annualdeprecationischargedon:(i) Equipmentat5%perannumusingthereducing-balancemethod(ii) Fixturesandfittingsat10%perannumusingthestraight-linemethod. 2 Theamountforrentexpensecovers1January2021to31January2022. 3 Oneofthecompany'screditcustomerswasdeclaredbankrupt.Thedebtof$800hasyettobewrittenoff. 4 Areviewoftradereceivablesrevealedthat4%ofthetradereceivablesarelikelytobeuncollectible. 5 Designfeerevenueamountingto$5000wasreceivedinadvance. 2

6 Adividendof$0.05persharehadbeendeclaredandwillbepaidon1April2022. 7 Arepaymentof$8000onthebankloanistobemadeon31March2022. REQUIRED (a) Preparethe statementof financialperformancefor the yearended31December2021. [10] (b) Preparethestatementoffinancialpositionasat31December2021. [10] [Total:20] 3

2 Thefollowinginformationis extractedfromthebooksofLimPteLtdfortheyearsended30April2020to2022. 2020 2021 2022$ $ $Equipment 8600 9050 9300Cashatbank 19425 15680 9800Tradepayables 17400 17250 17000Prepaidrental 1550 1420 2500Prepaidinsurance - - 4000Tradereceivables 9400 8800 11000Cashinhand 1560 1030 2000Inventory 10700 11500 25000Currentportionoflong-termborrowings - - 10000 REQUIRED (a) Calculatethefollowingasat 30April2022. Correctyouranswersto twodecimalplaces. (i) Currentratio [1] (ii) Quickratio [1] Thefollowinginformationrelatesto30April 202020212022Currentratio 2.45 2.23 ?Quickratio 1.75 1.48 ? REQUIRED (b) Commentonthetrendinliquidityofthebusinessoverthethreeyearsended30April2020,2021and2022. [6] Thebusinessprofithasremainedthesameoverthe3 yearsended30April2020,2021and2022. REQUIRED (c) Suggestwhytheliquidityofthebusinesshaschangedeventhoughtheprofithasremainedthesameoverthe3years. [4] [Total:12] 4

3 Mandy, theownerofaclothingstoreprovidedthefollowinginformationon31December2021. 1 Mandytookcash,$500,forherownuseeverymonth. 2 Mandytookinventorycosting$400forherownuseduringtheyear. 3 Thecapitalaccounthadabalanceof$50000at1January2021. 4 Thebusinessmadealossof$7400fortheyearended31December2021. 5 On1June2021,shecontributeda$10000chequetothebusiness. REQUIRED (a) Preparejournalentriesto: (i) recordtheadditionalcapitalcontributedon1June2021.Narrationsarenotrequired. [2] (ii) transferthelossfortheyeartothecapitalaccounton31December2021.Narrationsarenotrequired. [2] (iii) transferdrawingstothecapitalaccounton31December2021.Narrationsarenotrequired. [2] (b) Preparethecapitalaccountfortheyearended31December2021. [5] (c) Statetheamountofcapitalwhichwillbepresentedinthestatementoffinancialpositionasat31December2021. [1] (d) Statetheeffectofowner’sdrawingsonthebusinessprofitfortheyear. [1] (e) Statetwoadvantagesofbeingasoleproprietor. [2] [Total:15] 5

4 On1January2020,Timothyboughtapieceofcoffee-makingmachineryfor$80000fromJoMachineryoncredit.Themachineryisdepreciatedat10%perannumusingthereducing-balancemethodandchargesnodepreciationinyearofsale. On31July2022,themachinerywassubsequentlysoldfor$74000andtheamountwasbankedin.Timothy’sfinancialyearendson31December. REQUIRED (a) Calculatethedepreciationexpenseofeachofthetwoyearsended31December2020and2021. [2] (b) Calculatethegainorlossonthesaleofmachinery. [2] (c) Preparethejournalentrytorecordthegainorlossonthesaleofmachinery.Anarrationisnotrequired. [2] Timothywantsto sellhiscoffeedirectlyto hiscustomersandheis consideringwhethertobuyorrentashoptosellhiscoffee. To buytheshop,hewouldhaveto borrowfromthebank,andthemonthlyloanrepaymentincludingtheinterestis$2000.Theloanperiodis10years.Healsohasto payfortheyearlydeepcleaningfortheshopwhichcosts$5000andhewouldneedtoclosefor3daysduringthecleaning.Sincetheshopbelongstohim,hecanrenovateanddecoratetheshopto suithisneeds.Theshopis alsolocatedat apopulartouristlocation. To renttheshop,he needsto pay$2500forrentalpermonthandtherentalagreementis24months,subjecttorenewalafterthat.Toterminatethecontract,heneedstogive3months’notice.Unlikeifheownstheshop,thelandlordwillarrangeforyearlycleaningandmaintenancewhichrequireshimto closefor1 week.Theshopis quitewell-decoratedandnorenovationisrequiredorallowed.TheshopisconvenientlylocatednearanMRTstation. REQUIRED (d) RecommendwhetherTimothyshouldpurchasetheshop,orrentonefromalandlord.Justifyyourchoicewiththreereasons. [7] [Total:13] EndofPaper2 6