2024 CTSS Prelim 4E5N P2 Ans

1 CTSS 2024 4E5N PrelimPaper 2 Suggested SolutionsQuestion 1(a)Ping Consultancy Services Pte LimitedStatement of financial performance for year ended 31 December 2023$$Consultancy fee revenue (-8200)106 800Other incomeAdvertising income4 700Less: Other expensesRental expense36 000Utilities expense (-600)23 000Wages and salaries (+2000)29 000Depreciation of fixtures and fittings [(90 000 – 20 000)/10] 7 000Depreciation of office equipment [15% x (22 000 – 8 000)]2 100Reversal of impairment loss on trade receivables [5% x (22 500 -0) – 2 200](1 075)Interest expense (9/12 x 6% x 10000)45096 475Profit for the year15 025

2 (b)Ping Consultancy Services Pte LimitedStatement of financial position as at 31 December 2023AssetsCostAcc DepNBVNon-current assets$$$Fixture and fittings90 000(42 000)48 000Office equipment22 000(10 100)11 90059 900Current assetsTrade receivables 22 500 Less: allowance for impairment of trade receivables(1 125)21 375Prepaid utilities 600 Cash at bank7 40029 375Total assets89 275Equity and liabilitiesShareholder’s equityIssued share capital, 120 000 ordinary shares 30 000Retained earnings (17 700+15 025 OF – 3 600)29 42559 425Non-current LiabilitiesLong term borrowings10 000Current LiabilitiesTrade payables5 900Consultancy fee received in advance8 200Wages and salaries payable 2 000Dividends payables (120 000 x 0.03)3 600Interest payable45019 850Total equity and liabilities89 275 [Total: 20]

3 Question 2(a) Any two of the following: Usage Wear and tearObsolescenceLegal limits(b) Any two of the following: Purpose of non-current assetFeatures of non-current assetCustomer’s reviewWarranty(c)Matching Theory In line with the matching theory, a portion of the original cost of the non-current asset is recorded as depreciation expense, so as to match against the income earned in the same financial period to determine the profit for the period. (d)Depreciation for first year = 10% x (8000 – 0) = 800Depreciation for second year = 10% x (8000 – 800) = 720Total depreciation = 800 + 720 = 1520 Loss on sale of motor vehicle = 4600 – (8000 – 1520) = - 1880 (e)Depreciation expense = 10% x [ (72000 – 8000) – (34000 – 1520) ]  = 3152 (f)Any one of the following: Capital expenditureRevenue expenditureDefinitionExpenditure incurred to increase earning capacity of the businessExpenditure incurred to maintain productive life of non-current assetsConsists ofCosts to buy and bring the non-current assets to their intended useCosts to enhance the non-current assetsCosts to operate, repair and maintain the non-current assets in working conditionBenefits Provides benefits for more than a yearProvides benefits which will be used within one yearRecorded asNon-current assets in the Statement of Financial PositionExpense in the Statement of Financial Performance(g)(i)The profit will be understated by $26700 (ii) The non-current asset will be understated by $26700 [Total: 14]

4 Question 3(a)Rate of inventory turnover