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)Accumulationofprofitsandlossesthathasnotbeendistributedtoshareholdersyetsinceoperation. [1m]OR:Accumulationofpastprofit/losslessdeclareddividends (c)QuestPteLtdmadeaprofitof$90000fortheyearended31December2021andthisamountwastransferredtotheretainedearningsaccounton31December2021. [1m] (d)QuestPteLtddeclareddividendstotaling$78500fortheyearended31December2021andthisamountwastransferredtotheretainedearningsaccounton31December2021. [1m] (e)Shareholders’ equityon1January2022=Shareholders’ equityon31December2022=Sharecapital on31December2021+Retainedearningson31December2021=$535000[1m]+$911500[1m]=$1446500 (f)Stakeholder:EmployeesDecision:WhethertocontinueworkingatQuestPteLtd[1m]Note: 1mfor bothstakeholder anddecision (g)ProfitfortheyeartoseeifQuestPteLtdislikelytopayoutbonus[1m]OR:CashatbankbalancetoseeifQuestPteLtdwill paysalaryontime. Note: Accept anyother reasonableanswer for (f) and(g). [Q3Total: 8m] Page3of 4

Q4(a)Anyoneofthefollowing:● Segregationofduties● Custodyofcash● Authorisationofpayments[1m] (b) InthebooksofOliver’sbusinessCashatBankDate Particulars Dr($) Cr($) Bal ($)2022 May31 Bal b/d 280Cr [1m]Rent 1340[1m]LeeYanLtd(correctionoferror) 800[1m]Commissionincome 3650[1m]MinaEnterprise(dishonouredcheque) 7200[1m] 5970CrJun1 Bal b/d 5970Cr [1m] -1mif wrongdate (c)Oliver’sbusinessBankReconciliationStatementasat31May2022 $Balanceasperbankstatement (4370) (1)Add:Depositsintransit JaylynLtd 4500Less:Chequesnotyetpresented KengTrading(chequeno.1057) (6100)Balanceasperadjustedcashatbankaccount (5970) [3m] (d)Profitfortheyear=Income–Expense=+$3650-$1340=+$2310Profitincreasedby$2310[1m]Note: Botheffect andamount must becorrect tobeawarded1m. [Q4Total: 11m] Page4of 4