Geylang Methodist 2024 POA Paper 1 and 2 with Answers

(1, tiancimb Candidate Name Class Geylang Methodist School (Secondary) Preliminary Examination 2024 Index Number PRINCIPLES OF ACCOUNTS Paper 1 No Additional Materials required Setter: Mdm Fion Thia READ THESE INSTRUCTIONS FIRST 7087/01 Sec 4 Express/ Sec 5 Normal (Academic) 1 hour Friday, 16 August 2024 Write your index number and name in the spaces at the top of this page. Write in dark blue or black pen. Do not use staples, paper clips, glue or correction fluid. The use of an approved calculator is allowed. Answer all questions on the question paper. The businesses described in this question paper are entirely fictitious. The number of marks is given in brackets [ ] at the end of each question or part question. The total marks for this paper is 40. This document consists of 8 printed pages. GMS(S)/P0A/P1/PRELIMS2024/4E5N(A) 1 The following information relates to Tasty Bakes as at 30 June 2022, 2023 and 2024. 2022 2023 2024 $ $ $ Equipment 50 400 47 300 51 600 Inventory 17 800 21 300 30 900 Trade receivables 6 470 6 380 5 970 Cash at bank 13 400 9 600 — Prepaid rent 3 400 3 210 4 530 Current portion of long-term borrowings — 6 000 6 000 Trade payables 11 000 7 000 13 500 Salaries payable 1 900 2 350 2 180 Bank overdraft — — 2 500 Working capital $28170 $25140 ? Current ratio 3.18 : 1 2.64 : 1 ? Quick ratio 1.54 : 1 1.04 : 1 ? REQUIRED (a) Calculate the working capital, current ratio and quick ratio for the year ended 30 June 2024. Present your workings clearly. Show your answers to two decimal places, where applicable. (I) Working capital Current ratio Quick ratio

GMS(S)/P0A/Pl/PRELIMS2024/4E5N(A) GMS(S)/P0A/Pl/PRELIM52024/4E5N(A) (b) Evaluate the trend in liquidity of Tasty Bakes business over the three years ended 30 June 2 The cash at bank account and bank statement of Sam's business for the month of February 2024 were 2022, 2023 and 2024. Use the given information and your answer to (a). (c) Suggest two ways to improve liquidity position of a business. [5] [2] (d) State one difference between a bank overdraft and current portion of a long-term borrowing. [2] [Total: 12] as follows: Cash at bank account Date Particulars Cheque number Debit ($) Credit ($) 2024 Feb 1 Balance b/d 5 Rent expense 105 1 700 8 Cash in hand 2 600 15 Utilities expense 106 1 600 18 Ben 1 520 22 Awang 3 600 Marl Balance b/d Bank statement Date Particulars Payments ($) Receipts ($) 2024 Feb 1 Balance b/d 2 Cheque 104 420 8 Cash 2 600 20 Cheque deposit 1 520 21 Cheque 106 1 600 23 Rejected cheque 1 520 25 Credit transfer: Harry Supplies 580 29 Bank charges 240 Balance ($) 2 900 Dr 1 200 Dr 3 800 Dr 2 200 Dr 3 720 Dr 7 320 Dr 7 320 Dr Balance ($) 3 320 Cr 2 900 Cr 5 500 Cr 7 020 Cr 5 420 Cr 3 900 Cr 4 480 Cr 4 240 Cr REQUIRED (a) State two types of internal controls, other than bank reconciliation, a business may use to safeguard cash balances. 3 4 [2] 4:2 io)

— Li. Cif GMS(S)/POA/P1/PRELIMS2024/4E5N(A) GMS(S)/P0A/P1/PRELIMS2024/4E5N(A) (b) Update the cash at bank account as at 29 February 2024. Bring down the updated balance to 3 Hot Pot owns the shop space next to its business premise and rents it out to a café. Hot Pot provided the next month. (c) Prepare the bank reconciliation statement as at 29 February 2024. [3] [3] [Total: 8] the following information for the year ended 30 April 2024. Account balance at 1 May 2023 Rent income received in advance $ 10 490 During the year ended 30 April 2024 Rent received by cheque 28 500 Additional information: Hot Pot has yet to receive $1 000 of rent income. REQUIRED (a) Calculate the amount of rent income (showing all workings) to be included in the statement of financial performance for the year ended 30 April 2024. Hot Pot has also provided the following ledger account. [3] Insurance expense account Date Particulars Dr ($) , Cr ($) Bal ($) 2023 May 1 Insurance expense payable (b)(i) 2 300 2 300 Cr Sep 10 Cash at bank 17 600 15 300 Dr 2024 Apr 30 Prepaid insurance (b)(ii) 1 280 14 020 Dr Apr 30 Income summary 14 020 - REQUIRED (b) Interpret the entries in the insurance expense account on: (I) 1 May 2023 5 6 [1]

GMS(S)/P0A/P1/PRELIMS2024/4E5N(A) GMS(S)/P0A/P1/PRELIMS2024/4E5N(A) (ii) 30 April 2024 (c) Analyse the effect of not making an adjustment for prepaid insurance on 30 April 2024 on: _ (i) Profit for the year Pil (ii) Statement of financial position [1] [2] (d) State and explain the accounting theory used to explain the need to make adjustment for prepaid insurance. [2] [Total: 10] 4 Amira Trading is a business selling washing machines. On 1 May 2024, the business had 30 units of inventory valued at $15 000. The business uses the FIFO method to determine cost of sales. During the month of May 2024, the following purchases took place. 2024 May 3 40 units at $24 000 16 30 units at $16 500 18 10 units at $5 500 On 20 May 2024, the business sold 70 units of inventory for $50 000 to a customer, Gwen. Gwen paid the amount by bank transfer. 7 ki REQUIRED (a) Calculate the cost of sales for the month of May 2024. [2] (b) Prepare the journal entries to record the transaction on 20 May 2024. A narration is not required. Journal Date Debit $ Credit $ 2024 May 20 . • [4] On 31 May 2024, the batch of inventory which was bought on 18 May 2024 could only be sold for $5 000 as a competitor had released a better product for a lower price. REQUIRED (c) Using a suitable accounting theory, explain how inventory should be valued. [2] (d) Prepare the journal entry to record the adjustment on 31 May 2024. A narration is not required. Journal Date Debit $ Credit $ 2024 May 31 ' END OF PAPER fib 8 [2] [Total: 10] 0 I, a j,

(if 2024 GMSS POA 4E5N Prelim Paper '1 Answers Qla) (i) Working capital 30900+5970+4530 - (6000+13500+2180+2500) =$17220 [1] (ii) Current ratio (30900+5970+4530) / (6000+13500+2180+2500) = 1.71 :1 [1] (iii) Quick ratio 5970 / (6000+13500+2180+2500) = 0.25 : 1 [1] Qlb) [Any 5 + Conclusion] • The working capital has worsened from $28170 in 2022 to $25140 in 2023 to $17220 in 2024. • The current ratio worsened from 3.18 in 2022 to 2.64 in 2023 to 1.71 in 2024. • In 2024, the current ratio falls below:41h,ergenergbenplimprIctpk2. • This means that the business has irisyfficienetukent assets to settle its immediate debts in 2024. • The quick ratio Noreneci from 1.54 in 2022 to 1.04 in 2023 to 0.25 in 2024. • In 2024, the quick ratio falls la &low the general berichrbark of . • This means that the business has Iiisuffitient quick assets to settle its immediate debts in 2024. • The decrease in the current ratio and quick ratio was largely due to the decline in cash at bank. Eventually, there was a bank overdraft of $2500 in 2024. • The decrease in the current ratio and quick ratio may be due to money being tied up in inventory and also money required to pay for high storage costs. In conclusion, the business has worsened in its liquidity position over the three years. 1 Q1c) Any 2 ways • Obtain cash contribution from owner or shareholders. • Obtain long-term loan. • Sell excess non-current assets for cash. • Reduce operating expenses. • Negotiate for better/ longer credit terms with suppliers. Qld) Any 1 pair • Bank overdraft happens when business withdraws more than its deposits in the bank account, up tcran agreed limit while current portion of long-term borrowing is the portion of a loan which is repayable within one year. • To reduce bank overdraft, business has to deposit cash into bank account within the year while to reduce long-term borrowing, business has to make regular payments over the loan period or one-time payment at end of loan period while Q2a) Any 2 • Segregation of duties • Custody over cash • Authorisation Q2b) Cash at bank account Date Particulars Dr ($) Cr ($) Bal ($) 2024