2024 HGV POA Paper 2 Answers

, s. Danish Hairst Accumulated 1 U) `cf..-d 2 N 9 Es z ....... ..... 00 00) 0 CO CO CD N 00 0 ,:r 0 e- Nr N. N 00 00 00 0 Nr Cl) e - El g "0 ..J C = Danish Hairs CD CO CO N C,1 0 •—•• a CD /.... C) 0 0 e-- ..... e... 0 0 0 LO N T i _....--, 00 00 Cl) 0 CNI V" e- N 0 4 0 C•1 0 0 C.") 0) LC) Total assets o TS N-co 1,..... ,-u, ..... 2 c) U) ' u) g3 Ea Cii + C , 0 0.3 ..a• o ..... 11 5 : : cm 0) w lo, c — 0 - "E ...,• -J -Iccl) ra ki :•-•= Cu .?.., -13 13 "0 CL .- ECI. C -1-._ CU Li U CU Fc .a. .0 :se. 2 " a) -79 a) = co .. 2 1.5 -6 N w w u) rx I— 0 ...... ...... ...... ...... ...... T T V. T . .7..... ....., "...• 00 000 00) 0 Nr. CO 0 LO CO CD CD '- •41. N U) e-- ..--, C. 0 RI ap ..4. c) vc>UU> ' i c) cp c, p p c, Li 69, 0 -) ......._ Nr. ta.; x iao ti, >c co c' 2 8 8 a s.... U) CC) CW a ,-_-.. ,,,, ....... ra; . . „, CD .6 . X U) to CD . 1 .._Cn E t:F3- C.CO . ..... ..... U) Ti 0 ,9- -o • a) . 'F'• 2 ru-) a) c 0) u) ' u) CO 0 C c L-c a) cn 0- a) c c cm a) co ;c 79- ca, zil %c 0.0 (,2!) 2- '.--• -4- 2 a) ..G 'al >', co iii 7:* . 92 0-) fg ft) :.- Tzi P._ —, '" tis -E c -c 19.8-E— P'EL L1-= -8 o_c ,--t... 0 76 Tti a) ..g..- a) cl. ;c••• -.A o L2 ifi E c`l — — a= _.) F- Q. T co ..... ...... ...;,... 000 00) 0 N. Cl) 0 T . 0 1 0 CD 0 N i 01 N 1 C) LO 1 1 I u . 0 [Q1 Total: 20m] Prepared by Mdm Grace Ang Prepared by Mdm Grace Ang 1 Z•

rg i aS C0 c.) col^ c.) x 9- 01 IS<W .0 .5. (c) Cost of sales = $500 + $600 = $1100 [1m] (d) Workshop income received in advance Elm] (ii) Current ratio = Current assets / Current liabilities = $56 800 / $12 100 = 4.69 Elm] Amirah Trading's (AT) working capital of $44 700 was better than Hannah Trading's (HT) $27 000. This seemingly implied that AT was in a better liquidity position as compared to HT. AT's current ratio of 4.69 was better than HT's 3.70. However, AT's quick ratio of 0.24 was worse than HT's 1.30. Since quick ratio is a stricter indicator of liquidity as compared to current ratio, AT's liquidity position was worse than HT's. Moreover, AT's quick ratio was less than 1. This indicated that AT had insufficient quick assets to settle its current liabilities and was probably having cashfiow problems. AT's inventory holdings of $50 000 was 2.50 times that of HT's $20 000. Thus, a significantly higher amount of AT's funds was tied up in unsold inventory. AT lacked cash. AT had bank overdraft of $400 while HT had cash at bank balance of $10 000, yet both businesses owed almost the same amount to credit suppliers. AT's liquidity position was further aggravated by $2 000 of long-term borrowings becoming current as the status changed from being due in over 1 year to falling due within the next 12 months, 4aa '5 CL s- CNI C., Nr LO CO I, - CO [Q2 Total: 11m] [Q3 Total: 17m] Prepared by Mdm Grace Ang Prepared by Mdm Grace Ang 4

-, cy- Nr 0 :..u. --, cL5 t,-;-- Ci 0 0 v- C•1 CuE E m Cu a) E o C.) C a) CuC a) 0. X 0.) Cu 2 -§ 1 a co oN N e .--C?) 0 CD a a ,,,,, ....... .0... ........ T . T . Cu 7(.4 _ •ta 2 O z 0 00 0 0 Co 0 01.C) 0 0 ,---sr ,-- Ace Academy should rent a photocopier. Upfront payment for renting a photocopier is $4 400 lower as compared to buying and is within the amount that Ace Academy is able to spend on upfront payment. Workings $5 000 - $600 = $4400 There will be less strain on Ace Academy's cash flow and there is no need for it to take up a short-term loan and incur interest expense. Repairs is fully taken care of by the rental company as long as the damage is caused by routine usage. Hence, Ace Academy need not concern itself with the maintenance of the photocopier and can better focus on business operations. Contract period of 1 year is not an onerously long period of time. Ace Academy can easily switch to a different or better model of photocopier or switch to a different rental company after the contract period and need not concern itself with the removal of the photocopier or finding a buyer for the used photocopier. Decision .c- c CuCua) CC Elaboration 1 Reason 2 Elaboration 2 Reason 3 Elaboration 3 T t a Prepared by Mdm Grace Ang CD *6 in C) cp Cu a. Prepared by Mdm Grace Ang