2024 BPGHS S5 POA P2 (MS)

Name of Candidate: …………………………………………… ( ) Class: …………… This paper consists of 8 printed pages [Turn over BUKIT PANJANG GOVERNMENT HIGH SCHOOL PRELIMINARY EXAMINATION 2024 SECONDARY 5 GCE 'O' LEVEL SYLLABUS PRINCIPLES OF ACCOUNTS Paper 2 7087/02 21 August, 2024 2 hours 0750 h – 0950 h READ THESE INSTRUCTIONS FIRST Do not turn over the cover page until you are told to do so. Write in dark blue or black pen on both sides of the paper. You may use an HB pencil for any diagrams or graphs. Do not use staples, paper chips, glue or correction fluid. The use of an approved calculator is allowed. Answer all the questions. 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. FOR EXAMINER’S USE Question 1 / 20 Question 2 / 21 Question 3 / 8 Question 4 / 11 Total: / 60 Candidates answer on the Question Paper Additional Materials: Insert MARKING SCHEME

2 © BPGHS Preliminary Examination 2024 7087/02 1(a) Le-Vince Pte Ltd Statement of financial performance for the year ended 31 March 2024 $ $ Legal fee revenue (40 400 - 3 200) 37 200 [1] Add: Other incomes Commission income 8 000 [1] 45 200 Less: Other expenses Office expenses (6 200 - 1 230) 4 970 [1] Wages and salaries (9 310 + 2 310) 11 620 [1] Rent expense (15 000 / 15 x 12) 12 000 [1] Interest on bank loan (6% x 60 000 x 5/12) 1 500 [1] Depreciation of fixtures and fittings ([55 000 - 3 000] / 10) 5 200 [1] Depreciation of equipment (10% x [150 000 - 28 500]) 12 150 [1] Reversal of impairment loss on trade receivable (780 – 640) (140) [1] (47 300) Loss for the year (2 100) [1]

3 © BPGHS Preliminary Examination 2024 7087/02 [Turn over 1(b) Le-Vince Pte Ltd Statement of financial position as at 31 March 2024 $ $ $ Cost Accumulated Net book Assets depreciation value Non-current assets Equipment (AD: 28 500 + 12 150) 150 000 40 650 109 350 Fixtures and fittings (AD: 15 600 + 5 200) 55 000 20 800 34 200 143 550 [1] Current assets Trade receivables 32 000 Less: Allowance for impairment of trade receivables (2% x 32 000) (640) Net trade receivables 31 360 [1] Prepaid rent expense (15 000 / 15 x 3) 3 000 [1] Prepaid office expenses 1 230 [1] Cash at bank (35 000 + [1 x 25 000]) 60 000 [1] 95 590 Total assets 239 140 Equity and Liabilities Shareholders’ equity Share capital, 125 000 ordinary shares 125 000 [1] Retained earnings (29 230 - 2 100 - [125 000 x 0.05]) 20 880 [1 – OF] 145 880 Non-current liabilities Long-term borrowings 60 000 Current liabilities Trade payables 21 000 Legal fee revenue received in advance 3 200 [1] Interest on bank loan payable (2 500 – 1 000) 500 [1] Dividends payable 6 250 [1] Wages and salaries payable 2 310 33 260 Total equity and liabilities 239 140 *OF – Students will still be awarded th is mark as long as the right formula is applied even if the profit/loss for the year figure used from part (a) is calculated wrongly to avoid double - penalisation.

4 © BPGHS Preliminary Examination 2024 7087/02 2(a) Drawings are assets taken from the business by the owner for personal use. [1] 2(b) Accounting theory: Accounting entity theory [1] Explanation: Business and owner are treated as separate entities [1]. Hence, the amount of $500 was taken out from the business bank account for personal use is to be recorded as drawings. [1] 2(c) (i) On 6 May 2024, the owner / Tahiya took out goods costing $1 250 for personal use. [1] (ii) On 30 September 2024, the total drawings of $3 750 was transferred to the capital account at the end of the financial year. 2(d) Liquidity is the ability of the business to convert its current assets into cash to pay its current liabilities [1] whereas profitability is the ability of the business to generate excess income to cover its expenses. [1] 2(e) (i) 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 [𝟏] 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 = 68 580 40 810 = 1.68 [1] (ii) 𝑄𝑢𝑖𝑐𝑘 𝑟𝑎𝑡𝑖𝑜 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 − 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 − 𝑃𝑟𝑒𝑝𝑎𝑦𝑚𝑒𝑛𝑡𝑠 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 [𝟏] 𝑄𝑢𝑖𝑐𝑘 𝑟𝑎𝑡𝑖𝑜 = 15 080 40 810 = 0.37 [1]

5 © BPGHS Preliminary Examination 2024 7087/02 [Turn over 2(f) Evaluation of current ratio • Current ratio has worsened each year from 3.18 in 2022 to 2.01 in 2023 to 1.68 in 2024. [1] • This means that for every $1 of short-term debts, the company has $3.18, $2.01 and $1.68 of net current assets to cover its debts in 2022, 2023 and 2024 respectively. [1] Evaluation of quick ratio • Quick ratio has worsened each year from 1.68 in 2022 to 0.84 in 2023 to 0.37 in 2024. [1] • This means that for every $1 of short-term debts, the company has $1.68, $0.84 and $0.37 of quick assets to cover its debts in 2022, 2023 and 2024 respectively. [1] Reason for the decline in liquidity (Any two of the following) [1 – per reason] • The reason was the increasing inventory of the business from $15 100 in 2022 to $37 800 in 2023 which suggests that the company is overstocking or have difficulties in selling its goods which worsens its liquidity of the business. • The increase of net trade receivables from $9 200 in 2022 to $15 080 in 2024 which suggests that the business has difficulties in collecting payment from its credit customer. • The decrease of cash at bank of $7 800 in 2022 to a bank overdraft of $19 050 in 2024 suggests that the business will have less fund to make its payment / obligation when it is due. Conclusion • Overall, the liquidity of Tahiya’s business is in a worsening/declining trend as the quick ratio fell below 1. [1] 2(g) Any two of the following [2]: (1) Increase cash by obtaining long-term loan. (2) Increase cash by selling excess non-current assets. (3) Increase cash by obtaining cash contribution from owners. (4) Decrease cash outflow by negotiating better credit terms from supplier. (5) Decrease cash outflow by reducing operating expenses.

6 © BPGHS Preliminary Examination 2024 7087/02 3(a) Trial balance will balance as long as there is a debit and credit entry of the same amount [1]. Even if the account is wrong or amount is wrong [1], trial balance will still balance. 3(b) Keane Statement to show adjusted profit for the year ended 31 December 2024 $ Unadjusted profit for the year 20 450 Add: Commission income – was understated (1 000 x 2) 2 000 [1] Rental expense – was overstated 290 [1] Less: Motor vehicle maintenance fees – was understated (670) [1] Adjusted profit for the year 22 070 [1] 3(c) Accounting is an information system that provides accounting information for stakeholders to make informed decisions regarding the management of resources and performance of business. [1] 3(d) Business is assumed to run indefinitely unless there is credible evidence that it may close down. [1]

7 © BPGHS Preliminary Examination 2024 7087/02 [Turn over 4(a) Trade receivables should be valued at trade receivables less allowance for impairment of trade receivables (net trade receivable). [1] 4(b) Journal Date Particular Debit Credit 2024 $ $ Jul 13 Cash at bank (0.25 x 2 900) 725 [1] Allowance for impairment of trade receivables (0.75 x 2 900) 2 175 [1] Trade receivable – Xun Trading 2 900 [1] 4(c) Both options are acceptable so long as students provide the following reasonable evidence and explanation to support their