HGV 2022 Prelim P2

HILLGROVESECONDARYSCHOOLPRELIMINARYEXAMINATION2022SECONDARYFOUR(EXPRESS)/ FIVE(NORMALACADEMIC) CANDIDATENAME ( ) CLASS - CENTRENUMBER S INDEXNUMBER PRINCIPLESOFACCOUNTSPaper2 NoAdditionalMaterialsarerequired. 7087/0223Aug20222hours11.40AMto1.40PMREADTHESEINSTRUCTIONSFIRSTAn answer booklet will be provided with this question paper. Youshouldfollowtheinstructionsonthe front cover of the answer booklet. If youneedadditional answer paper asktheinvigilator for acontinuationbooklet. Answer allquestions. Attheendoftheexamination,fastenall yourworksecurelytogether.Thenumberofmarksisgiveninbrackets[]attheendofeachquestionorpartquestion. For Examiner’sUseMarks12Parent’s/Guardian’sSignature:___________________ 34TOTALThisdocumentconsistsof 6printedpages.

2 Answer allquestions. 1 The following balances were extracted from the books of Sedap Pte Ltd on 30 June2022. $Salesrevenue 900000Costofsales 795000Salesreturns 7000Officeequipment 30000Motorvehicles 90000Accumulateddepreciation:Officeequipment 6000Motorvehicles 22500Cashatbank 10800Tradereceivables 8000Allowanceforimpairmentoftradereceivables 400Sharecapital.10000ordinaryshares 20000Retainedearningsat1July2021 50450Servicefeeincome 10800Discountreceived 100Discountallowed 200Rent 35000Utilities 4900Wagesandsalaries 385002%LoanfromGTBank 24000Interest 50Inventory 14800 Additional information 1 Office equipment is to be depreciated at 10%per annum using the straight-linemethod. 2 Motor vehiclesaretobedepreciatedat 25%per annumusingthereducing-balancemethod. 3 Annual servicefeeincomeearnedfortheyearended30June2022was$12000. 4 Includedinrentwas$9000paidfor3monthsending31August2022. 5 It wasestimatedthat thebusinessmaynot beabletocollectpaymentfrom3%ofitscreditcustomers. 6 Loanof$24000wastakenupon1April 2022.Theloanisrepayableover6yearsonevery 31 March, starting 31 March 2023. Interest ischargedat 2%per annumandpartofitwasstill outstandingasat30June2022. HGVPRELIMINARYEXAMINATION20224E/5NAPRINCIPLESOFACCOUNTSPAPER2

3 7 Dividendsof $0.10per shareweredeclaredon25June2022. Thedividendswill bepaidon3July2022. REQUIRED (a) Preparethestatementoffinancial performancefortheyearended30June2022. [9] (b) Preparethestatementoffinancial positionasat30June2022. [11] [Total: 20] 2 DurianQueenisabusinessthat buysdurianfromMalaysiaandsellsthemtocustomersinSingaporeinvacuum-sealedboxes. Recently,DurianQueenpaidthefollowingamountsrelatingtoabatchofdurians. $Purchasepriceofdurians 7000Freight 100Customduties 490Packagingmaterials(e.g.vacuumsealerrollsandboxes) 200Salaryofpart-timeworkershiredtopacktheduriansintoboxes 900Salaryofsalespromoterhiredtopromotethedurians 1000 REQUIRED (a) Calculatethecostofpurchaseforthisbatchofdurian. [1] Durian Queen also buys and sells whole durians. On 1 January 2022, there were 20durians costing $480 in Durian Queen’s shop. The following transactions took placeduringthemonthofJanuary2022. January5 Bought20duriansat$500oncreditfromFruitsKing.10 Sold20duriansoncreditat$900toGrandHotel15 Paid$500bychequetoFruitsKing. REQUIRED (b) PrepareDurianQueen’sinventoryaccountforthemonthended31January2022.[4] Afirebrokeout on31March2022anddestroyeddurianscosting$1000. Onthesameday, Durian Queen submitted insurance claimand was informed that it would receivecompensationfor25%ofthedestroyeddurianson30April 2022. REQUIRED (c) Preparejournal entrieson31March2022inthebooksofDurianQueen.Narrationsarenotrequired. [3] HGVPRELIMINARYEXAMINATION20224E/5NAPRINCIPLESOFACCOUNTSPAPER2

4 As at 30 April 2022, there were Gao Shan Wang variety of durians costing $700 inDurian Queen’s shop. However, this variety of durians was no longer popular withcustomers and Durian Queen estimated that the net realisable value of these durianswas$200. REQUIRED (d) Usinganaccountingtheory,explainthevaluationmethodofinventoryonstatementoffinancial position. [3] (e) Statetwoaccountsthatcanbefoundonstatementoffinancial performanceof alltradingbusinesses. [1] [Total: 12] 3 ThefollowingwereextractedfromthebooksofMugum’sbusiness. Drawings Date Particulars Dr($) Cr($) Bal ($)2020 Nov21 Inventory 100 100 Dr2021 Oct10 Cashinhand 140 240 Dr Capital Date Particulars Dr($) Cr($) Bal ($)2020 Nov1 Bal b/d 50500 CrDec12 Cashatbank 70002021Oct31 Incomesummary 3000 REQUIRED (a) Define‘equity’. [1](b) Interprettheentryon12December2020inthecapital account. [1](c) Interprettheentryon31October2021inthecapital account. [1](d) Preparejournal entryforthetransferofdrawingstothecapital accountfortheyearended31October2021. [2] HGVPRELIMINARYEXAMINATION20224E/5NAPRINCIPLESOFACCOUNTSPAPER2

5 ThefollowinginformationrelatestoMugum’sbusinessat31October2019,2020and2021. 2019 2020 2021$ $ $Non-currentassetsatnetbookvalue 50000 70000 180000 CurrentassetsInventory 10000 22000 98720Tradereceivables 27000 30000 40000Cashatbank 20000 17000 -Total currentassets 57000 69000 138720 CurrentliabilitiesBankoverdraft - - 9000Tradepayables 18000 21000 27000Expensespayable 100 200 300Currentportionoflong-termborrowings - - 5000Total currentliabilities 18100 21200 41300 Workingcapital $38900 $47800 ?Currentratio 3.15 3.25 ?Quickratio 2.60 2.22 ? REQUIRED (e) Define‘liquidity’. [1] (f) CalculatethefollowingforMugum’sbusinessasat31October2021.Showallworkings.(i) Workingcapital(ii) Currentratio(totwodecimal places)(iii) Quickratio(totwodecimal places) [3] (g) Evaluatethetrendinliquidityofthebusinessoverthethreeyearsended31October2019,2020and2021. [8] [Total: 17] HGVPRELIMINARYEXAMINATION20224E/5NAPRINCIPLESOFACCOUNTSPAPER2

6 4 Isaacisthinkingof startingabusinessandhasaskedyoufor helpinunderstandingthefollowingaccountingtheories. REQUIRED (a) Explainthegoingconcerntheory. [1](b) Explaintherevenuerecognitiontheory. [1](c) Explainthematerialitytheory. [1] Isaacisawarethatthereare3legal formsofbusinessownership. REQUIRED (d) Explainthedifferenceintransferabilityofownershipbetweensoleproprietorshipandlimitedliabilitypartnership. [1] IsaacisconsideringsettingupanArt enrichment centrethatprovidesArtlessonsandisseekingadviceonwhichlegal formofbusinessheshouldchoose. IsaacwasworkingasanArt teacher inaprimaryschool for thelast 30years. Althoughhe is an accomplished Art teacher, he has no idea about accounting, marketing andhumanresourcemanagement. Nonetheless, Isaachascousinswhoareexpertsintheseareasofbusinessandmaybekeentosetupthebusinesstogetherwithhim. Isaac would like total control over what typeof Art lessonsareconductedandhowtheArt lessons are conducted. He is prepared to invest $20 000. However, he is awaresetting up an Art enrichment centre requires a lot more funds than that. It is Isaac’sdreamto set up centres all over the country and not onlyonecentre. Nonetheless, asIsaachaselderlyparentswhomheneedstosupportfinancially,hedoesnotwishtopayfordebtsorlossesofthebusinessusinghispersonal assets. Isaachastwochildrenwhomhehopescanoperatethebusinesstogetherwithhimwhentheyareready. REQUIRED (e) AdviseIsaaconwhetherlimitedliabilitypartnershiporprivatelimitedcompanywill beamoresuitableformofbusinessforhim. [7] [Total: 11] HGVPRELIMINARYEXAMINATION20224E/5NAPRINCIPLESOFACCOUNTSPAPER2