PSS 2024 POA 4E5N 2024 Prelim paper 2

Answer all questions The following balances were taken from the books of Bradyen Pte Ltd, a clothes retailer, on 30 June 2024. $ Motor vehicle 208 000 Premises 450 000 Accumulated depreciation - motor vehicle 16 800 Accumulated depreciation - premises 80 800 Sales revenue 960 000 Sales return 23 350 Cost of sales 405 700 Discount received 12 800 Discount allowed 21 900 Rent income 33 000 Salaries expense 39 000 Insurance expense 12 500 Utilities expense 12 000 3% bank loan 90 000 Cash at bank 10 000 Trade receivables 97 600 Allowance for impairment of trade receivables 8 790 Inventory 22 900 Trade payable 1 660 Accumulated loss 900 Share capital, 100 000 ordinary shares 100 000 Additional information: 1. On 1 July 2023, the business earns rent income by renting out part of the office at $2 500 per month. The rent was increased by $300 from 1 January 2023 onwards. 2. Salaries of the business was paid up to 30 September 2024. 3. One-third of the bank loan is repayable by 31 December 2023. Interest on loan was not paid up. 4. 30% of the inventory was destroyed by a flash flood and this is not recorded in the books. The insurance company has agreed to compensate $5 000 for the damaged inventory. Payment will be made on 1 September 2023. 5. One of their credit customers who owed $2 700 declared bankrupt. The debt has yet to be written off. 6. A review of the trade receivables showed that 5% of the trade receivables are likely to become uncollectible.

7. Motor vehicles are to be depreciated at 20% using straight-line method while premises is to be depreciated at 10% per annum on net book value. 8. A dividend of $0.02 per share was declared on 30 June 2023. The dividend will be paid on 1 October 2023. REQUIRED (a) Prepare the statement of financial performance for the year ended 30 June 2024. [10] (b) Prepare the statement of financial position as at 30 June 2024. [10]

2. Izzah is a sole trader and the following information was extracted from her books on 30 September 2023. $ Inventory 30 000 Trade receivables 7 000 Prepaid rent 1 000 Trade payables 12 000 Bank overdraft 2 000 Bank loan payable 2028 20 000 REQUIRED a. Explain the difference between profitability and liquidity. [2] b. Explain the importance of being liquid. [2] c. Calculate the following for the year ended 30 September 2023. Correct to two decimal places if necessary. i. Current ratio, ii. Quick ratio. [2] Izzah also supplied the following information for his previous two years ended 30 September 2021 and 2022. Year ended 30 September 2021 2022 Current ratio 3.0 2.5 Quick ratio 1.3 1.1 REQUIRED d. Evaluate the trend in liquidity of the business over the three years ended 30 June 2021, 2022 and 2023. Use the given information and your answer to (c). [6] e. Advise Izzah on one way to improve liquidity of her business. [1] Izza is considering comparing her efficiency in trade receivables management with her competitors. REQUIRED f. Name one efficiency ratio which Izzah could use. [1] [Total: 14]

3 Printer Pte Limited buys and sells food printing equipment on credit and manages its inventory using the FIFO method. On 1 July 2023, the company had 30 units of grinding equipment, each costing $2 100. During the month of July 2023, the following sales and purchases transactions took place: Sales transactions Jul 17 Sold 30 units for $9 500 Jul 29 Sold 30 units for $8 500 Purchases transactions Jul 5 Bought 30 units for $3 200 Jul 12 Bought 40 units for $4 400 Jul 20 Bought 20 units for $2 300 REQUIRED (a) Explain how the ending inventory is valued with an appropriate accounting theory. [2] (b) Calculate the gross profit for the year ending 31 July 2023. [2] On 15 August 2023, the company realised that three printers had rusty parts and needed replacement of those parts before they could be sold for $1 050. The three printers cost $500 and the replacement parts cost $120. REQUIRED (c ) State the journal entry to record the information on 15 August 2023. A narration is required. [3] Printer Pte Ltd provided the following information on inventory: 31 July 2020 31 July 2021 Cost of sales $24 600 $16 300 Ending inventory $4 200 $2 700 Inventory turnover 7.47 times ? times REQUIRED d. Calculate the inventory turnover rate for the financial year ended 31 July 2021, rounding your answer to 2 decimal places. [1] e. Comment on the change in inventory turnover. [3] [Total: 12]

The following balance were taken from the books of Fiona Trading at the start of the financial year on 1 September 2021. $ Motor vehicles 360 000 Accumulated depreciation of motor vehicles 21 000 Additional information: 1. On 26 January 2022, Fiona Trading sold one of its motor vehicles which cost $50 000 for $11 800 by cheque. The motor vehicle was bought on 1 September 2019. 2. On 1 December 2022, Fiona Trading imported a new motor vehicle from Tiffany Ltd for $41 000 on credit. 3. Fiona Trading provides depreciation at a rate of 10% per annum on net book value. No depreciation is charged in the year of sale. REQUIRED (a) Define ‘accumulated depreciation’. [1] (b) Prepare journal entries to record the sale of the motor vehicle on 26 January 2022 including the closing entry. Narrations are not required. [4] (c) Calculate the depreciation for the year ended 31 August 2023. [2] (d) Comment on suitability of Fiona Trading’s selection of depreciation method for the motor vehicles. [2]

Fiona, the owner of Fiona Trading, decides to replace the 10 computers used by the office staff. She is unable to decide whether to buy or rent the laptops. The budget for the computers is set at $40 000. She expects the computers to be used for at least 5 years. If Fiona buys the computers, she will be able to modify the specifications and software. She is able to sell it when the computers are no longer suitable and buy another model. If Fiona rents the computers, she will be able to change the models of the computers when the annual rental agreement ends. The other details are listed in the table below. Buy Rent Costs of Computers /Deposit $20 000 $4 000 Other costs $200 annual servicing cost Monthly rental for a year per computer: $550 Condition New Rented out for past 1 year. Other information ● Can last for about 5 years. ● Comes with 2 years warranty. ● Rental cost includes servicing and free annual upgrade to the latest software. REQUIRED (e) If you are Fiona, would you choose to rent or buy the laptops? Explain your answer. [7] [Total: 14]

1a: Bradyen Pte Ltd Statement o f Financial Performance for the year ended 30 June 2024 $ $ Sales revenue 960 000 Less: sales return (23 350) Net sales revenue 936 650 [1] Less: cost of sales (405 700) Gross profit 530 950 [1] Add: other income Discount received 12 800 Rent income ($2500 x 6 + $2800 x 6) 31 800 [1] 44 600 575 550 Less: Expenses Discount allowed 21 900 Salaries expense (39 000 /15 x 12) 31 200 [1] Insurance expense 12 500 Utilities expense 12 000 Depreciation – Premises [10% x (450000-80800) 36 920 [1] Depreciation – Motor vehicle (20% x 208000) 41 600 [1] Impairment loss on trade receivables (reversal/0 (1 345) [1] Interest expense 2 700 [1] Impairment loss on inventory (6870-5000) 1 870 [1] (153 345) Profit for the year 416 205 [1] Q1b: * Final [1] is given only if the two figures balance Bradyen Pte Ltd Statement of Financial Position as at 30 June 2024 Cost $ Less: Accumulated Depreciation $ Net book value $ Assets Non-current asset Motor vehicle 208 000 (58 400) 149 600 [0.5] Premises 450 000 (117 720) 332 280 [0.5] Total non-current assets 658 000 (176 120) 481 880

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