HGV 2022 Prelim P1 ANS

HillgroveSecondarySchoolPreliminaryExamination2024E/5NAPrinciplesof AccountsPaper 1(7087/01)Suggestedanswersandmarkingscheme Q1(a)Accountinginformationrecordedmustbesupportedbyreliableandverifiableevidencesothatfinancial statementswill befreefromopinionsandbiases. [1m] (b)Transactionsshouldberecordedattheiroriginal cost. [1m] (c)Toinformcreditcustomeroftheamountowedafterthebusinesssoldgoodsoncredit. [1m] (d)1meach(i) Remittanceadvice(ii)Paymentvoucher [1m]Note: Bothanswersmust becorrect tobeawarded1m. (e)(i)Adjust(ii)Ledgers [1m]Note: Bothanswersmust becorrect tobeawarded1m. (f)Onlybusinesstransactionsthatcanbemeasuredinmonetarytermsarerecorded. [1m] (g)Thelifeofabusinessisdividedintoregulartimeintervals. [1m] [Q1Total: 7m] Q2(a)Anyoneofthefollowing:● Natureofproduct● Typesofstorage● Customers’ preference[1m] (b)Averageinventory=(Beginninginventory+Endinginventory)/2=($94150+$92120)/2=$93135[1m] Rateofinventoryturnover=Costofsales/Averageinventory=$850000/$93135=9.13times[1m](c)1meach.Awarduptomaximum4m.Point1 GoodFit’s(GF)rateofinventoryturnoverimprovedfrom4.06timesin2021to6.64timesin2022.QuickStep’s(QS)rateofinventoryturnoverimprovedfrom8.11timesin2021to9.13timesin2022.2 Thus, bothbusinessessoldoutandreplenisheditsinventorymoretimesin2022ascomparedto2021.3 Hence,therewasimprovementinefficiencyininventorymanagementfor bothbusinessesoverthetwoyears.4 Nonetheless,QS’srateofinventoryturnoverwasbetterthanGF’sfor bothyears.5 Thus,QSsoldoutandreplenisheditsinventorymoretimesthanGFfor bothyears.6 Hence,QSwasmoreefficientininventorymanagementascomparedtoGFfor bothyears. Page1of 4

[4m] (d)QuickStep(QS)probablyhasapersistentadvantageoverGoodFit(GF).Forexample,thequalityofsafetybootsthatQSissellingmightbeofasignificantlybetterqualitythantheonesthatGFisselling.Thus,thereisapersistentlyhigherdemandforQS’sinventoryleadingtoitbeingabletosell itsinventoryfasterthanGF. [1m] Accept anyother reasonableanswer that explainswhyQuickStepmight beabletosell itsinventoryfaster or wasmoreabletokeepsufficient inventoryonhand. (e)Thematchingtheorystatesthatexpensesincurredmustbematchedagainstincomeearnedinthesameperiodtodeterminetheprofitforthatperiod. [1m] Thus,thebusinessrecordsthechangeintheamountofdebtsestimatedtobeuncollectible(i.e.changeinallowanceforimpairmentoftradereceivables)asimpairmentlossontradereceivables(expense)tomatchagainstthecreditsales(income)earnedinthesamefinancialperiod. [1m] (f) InthebooksofQuickStepJournalDate Particulars Dr($) Cr($)2021 Jul 7 Allowanceforimpairmentoftradereceivables 2800(1)Tradereceivable:GreatConstruction 2800(1)[2m] (g) InthebooksofQuickStepJournalDate Particulars Dr($) Cr($)2022 Mar31 Impairmentlossontradereceivables[(6%x$30000)–($4000-$2800)] 600 Allowanceforimpairmentoftradereceivables 600[2m] [Q2Total: 14m] Page2of 4

Q3(a)Aportionofretainedearningsthatwasdistributedtoshareholders. [1m]OR:Thereturnonshareholders’ interestsinthebusiness. (b)Accumulationofprofitsandlossesthathasnotbeendistributedtoshareholdersyetsinceope