Deyi 4EXP Prelim Paper 1 2024

1 Frosty Slushies has a financial year end o n 31 March 2024. The following ledger account has been prepared. REQUIRED (a) Interpret each of the following entries in the sale of equipment account. (i) Equipment ……………………………………………………………………………………………………... …………………………………………………………………………………………………..[1] (ii) Accumulated depreciation of equipment ……………………………………………………………………………………..………………. …………………………………………………………………………………………………..[1] (iii) Other receivable- Freezie ……………………………………………………………………………………..………………. …………………………………………………………………………………………………..[1] (b) State the effect and amount of the sale of equipment on the following: (i) Non-current assets ……………………………………………………………………………………..……………[1] (ii) Profit for the year ……………………………………………………………………………………..……………[1] (c) Define ‘depreciation’. ……………………………………………………………………………………..……………………. ………………………………………………………………………………………………..………[1] Sale of equipment Date Particulars Debit $ Credit $ Balance $ 2024 Mar 31 Equipment 20 000 20 000 Dr Accumulated depreciation of equipment 3 800 16 200 Dr Other receivable-Freezie 24 500 8 300 Cr Income summary 8 300 -

2 (d) Name and explain an accounting theory why Frosty Slushies needs to provide for depreciation on its non-current assets. Name…………………………………………………………………………………………………… Explanation……………………………………………………………………………………………. ………………………………………………………………………………………………………….. ………………………………………………………………………………………………………..[2] (e) State two non-accounting information a business should consider when deciding to purchase a non-current asset. ……………………………………………………………………………………………..……………. ……………………………………………………………………………………………..…………[2] [Total : 10] [Turn over 2 Evermore Gym took up a $150 000 loan from Infinity Bank at an interest rate of 2% per annum on 1 May 202 2 and the amount was deposited in the business’ bank account . The loan is to be repaid equally over 5 years. The loan and interest expense are repayable every year on 30 April 202 3.The financial year of Evermore Gym ends on 31 December. REQUIRED

3 (a) Prepare the journal entry to record the borrowing on 1 May 202 2. Narration is not required. Journal Date Particulars Debit $ Credit $ [2] (b) Calculate the interest expense and the interest expense payable f