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