2022 QTSS 4E5NA Prelims P1 QNS

[Turn over Name: …………….………………………………….. ( ) Class: 5A Queenstown Secondary School Preliminary Examination 2022 Secondary Five Normal (Academic) Principles of Accounts Paper 1 7087/01 26 August 2022 Time: 1040 – 1140 Friday Duration: 1 hour Setter: Mdm Farhati Ahmad Candidate answer on the Question Paper. No Additional Materials are required. READ THESE INSTRUCTIONS FIRST Write your name, class and index number on all the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use an HB pencil for rough working. Do not use staples, paper clips, glue or correction fluid. The use of approved calculator is allowed. Answer all questions. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 4 questions and 9 printed pages. For Examiner’s Use Q1 /10 Q2 /10 Q3 /10 Q4 /10 TOTAL /40

2 1 Wanda runs Scarlet Witch Bakery. She rents a shop to expand her business. Her business has a financial year end of 31 March. The following information has been provided. Rent expense account Date Particulars Debit $ Credit $ Balance $ 2021 Apr 1 Rent expense payable 600 600 Cr 2022 Jan 31 Cash at bank 30 500 29 900 Dr Mar 31 Prepaid rent expense 5 900 24 000 Dr 31 Income summary 24 000 REQUIRED (a) Interpret the entries on the following dates. (i) 1 April 2021 …………………………………………………………………………………. ………………………………………………………………………............[1] (ii) 31 March 2022 …………………………………………………………………………………. .………………………………………………………………………………… …………………………………………………………………………………. …………………………………………………………………...................[2]

3 [Turn over On 1 April 2021, Scarlet Witch Bakery has $800 of commission received in advance. During the year ended 31 March 2022, the business received cheques amounting to $4 200 for commission income. On 31 March 2022, the business still has not received $1 200 of commission income earned. REQUIRED (b) Calculate the amount of commission income earned for the year ended 31 March 2022. Show your workings clearly. ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………[3] (c) Prepare journal entries to adjust the commission income for the year ended 31 March 2022. A narration is not required. Journal Debit $ Credit $ [2] (d) State and explain the accounting theory that is applied when adjusting the commission income for the year ended 31 March 2022. Name: …………………………………………………………………………...[1] Explanation: ………………………………………………………………………. ……………………………………………………………………………………[1] [Total:10]

4 2 The following trial balance was extracted from the books of Dr Strange Ltd on 31 July 2022. $ Sales revenue 51 500 Cost of sales 25 600 Motor vehicles 29 700 Bank overdraft 2 900 Share capital 10 000 Trade receivables 8 100 Trade payables 2 400 Commission income 300 Motor vehicle expenses 5 700 Retained earnings 2 000 The following errors were discovered after the trial balance was prepared. 1 Payment of $150 for motor vehicle expenses was charged to motor vehicles. 2 Debit note of $500 issued to a credit customer has not been recorded. 3 Commission received of $540 had been debited to the commission income account and credited to the cash at bank account. REQUIRED (a) Explain the limitations of a trial balance. ……………………………………………………………………………………… ……………………………………………………………………………………[1] (b) Complete the table to show the effect of the errors 1-3 on the profit for the year. Where there is no effect, tick (√) the ‘no effect’ column. The first one has been completed as an example. Profit is overstated $ Profit is understated $ No effect $ Error 1 150 Error 2 Error 3 [2]

5 [Turn over (c) Prepare the adjusted trial balance as at 31 July 2022, after correction of errors. Trial Balance as at 31 July 2022 Debit $ Credit $ [7] [Total:10]

6 3 Wong started his retail business , Sorcerer Supreme Gifts. On 1 July 2021, the business bought toys from an overseas supplier on credit. The following costs were incurred on the purchase of his first batch of toys: $ Cost of 30 toys 5 000 Import duties on toys 450 Salaries paid to workers hired to repack the toys 1 500 Expenses paid for marketing the toys 500 REQUIRED (a) Calculate the cost of purchases on 1 July 2021. Show all workings clearly. ……………………………………………………………………………………… ……………………………………………………………………………………[1] In the month of July 2021 , the business also carried out the following cash transactions. The business records inventory movement using the First -In-First- Out (FIFO) method. Purchases Sales 6 July 30 toys at $5 500 14 July 30 toys for $8 500 13 July 40 toys at $6 800 20 July 30 toys for $8 000 REQUIRED (b) Prepare the inventory account for the month ended 31 July 2021 and bring down the balance to the next month. Inventory account Debit $ Credit $ Balance $ [4]

7 [Turn over On 30 June 2022, the business discovered that some of the toys were damaged due to humidity. These toys now had a net realisable value of $5 450. The cost of these toys was $7 500. Wong decides to report the inventory value as $7 500 in the statement of financial position as at 30 June 2022. REQUIRED (c) Evaluate if Wong is making the correct decision. Justify your answer with an accounting theory. ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… …………………………………………………………………………………….[3] Karl, Wong’s accountant, is afraid that he will be terminated if he does not agree with his employer’s decision. REQUIRED (d) Advise Karl on the correct course of action. Support your answer with a professional ethic of accounting. ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………[2] [Total:10]

8 4 America Chavez is setting up a business selling designers’ bags from Europe. She understands that there are three forms of business ownership. They are sole proprietorship, limited liability partnership and private limited company. REQUIRED (a) Explain one difference between limited liability partnership and private limited company. ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………[2] As a sole proprietor, America provided the following information for the year ended 30 April 2022. Capital 2021 Debit $ Credit $ Balance $ May 1 Balance b/d 19 000 Cr Jul 18 Inventory 14 000 2022 Feb 1 Cash in hand 120 Apr 30 Income summary 11 000 30 Drawings 2 120 20 000 Cr May 1 Balance b/d 20 000 Cr REQUIRED (b) Interpret the entries on the following dates. (i) 18 July 2021 ……………………………………………………………………………… ….………………………………………………………………………..[1] (ii) 30 April 2022 ……………………………………………………………………………… ……………………………………………………………………………… .………………………………………………………………………….…. ………….………………………………………………………………..[2]

9 (c) Explain how the owner’s equity changed from 1 May 2021 to 30 April 2022. ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………… ..………………………………………………………………………………….[3] As a new business owner, America is not sure of the source documents for some transactions.