St Andrew's Secondary School

Principles of Accounts - Secondary 4 Express / 5 Normal Academic

Preliminary Examination 2017 (Paper 1)

1(a) Tongue Thai'ed

Rent Expense A/c
Date Particulars Dr (+) Cr (-) Bal
2015 $ $ $
Oct 1 Accrued Rent 2,800 2,800 Cr 0.5
Dec 1 Cash at Bank 22,000 19,200 Dr 0.5
2016
Jul 1 Capital 9,000 28,200 Dr 0.5
Sep 30 Prepaid Rent (3/6 x 9,000) 4,500 23,700 Dr 1
30 Profit and Loss 23,700 0 0.5
[3]
1(b) Rent Income A/c
Date Particulars Dr (-) Cr (+) Bal
2016 $ $ $
Jan 1 Cash at Bank (1,500 x 9) 13,500 13,500 Cr 1
Sep 30 Profit and Loss (1,500 x 7 + 1,800 x 2) 14,100 600 Dr 1
30 Rent Income Receivable 600 0 1
[3]
1(c) In accordance with Matching Theory 1
Expenses incurred are matched with income earned in the same period to determine profit 1

In accordance with Accrual Theory

Expenses are recognised when it is incurred and income when it is earned regardless of whether
cash has been paid or received [2]

1(d) Imprest = 17.20 + 112.80

= $130 1

1(e) Tongue Thai'ed

General Journal
Date Particulars Dr ($) Cr ($)
2016
Nov 1 Petty Cash (12.40 + 21.20 + 32.70) 66.30 1
Cash at Bank 66.30 0.5
(Being reimbursement of petty cash imprest) 0.5

66.30 66.30 [2]

1(f) Removes unnecessary details from the Cash Book 1
Work can be divided amongst staff
2(a) Forever Yang's gross profit margin of 25% is better than SK Two's 21%. 1
Forever Yang's profit margin of 10% is also better than SK Two's 9%. 1 [2]

2(b) (i) Forever Yang has a higher selling price of its goods 1
(ii) Forever Yang buys its goods from a cheaper supplier 1
(iii) Forever Yang buys in bulk to enjoy trade discounts 1 [3]

2(c) Name of business: SK Two 0.5

Reason: SK Two has a better (0.5) percentage of expenses to net sales revenue of 12% (21% - 9%) (0.5)
compared to Forever Yang's 15% (25% - 10%). (0.5) [2]

2(d) Integrity 0.5

Objectivity 0.5 [1]

2(e) Desired gross profit = 13,000 + 5,600 + 3,000

= $21, 600 1

Cost of Sales = (21,600 / 20) x 80

= $86,400 1

Inventory Turnover Rate = 86,400 / 7,200

= 12 times 1 [3]
3(a) Error 2 is an example of Error of Commission. 0.5
A correct amount of $1,200 (0.5) is recorded in the wrong accounts (insurance instead of rent) (0.5) belonging
to the same category (expenses). (0.5) [2]

3(b) So Watt Limited

Statement of Adjusted Profit for the year ended 31 May 2017
$
Unadjusted Profit 50,000
Add/ (Less): (1) Discount received understated (100 x 2) 200 1
(2) Rent understated (1,200) 0.5
(2) Insurance overstated 1,200 0.5
(3) Sales Returns overstated (3,200 - 2,300) 900 1
(4) Repairs Expense understated (2,700) 1
(5) No effect 0 0.5
Adjusted Profit 48,400 0.5
[5]
3(c)(i) Profits accumulated by business and not distributed to shareholders 1

3(c)(ii) So Watt Limited

Retained Earnings A/c
Date Particulars Dr (-) Cr (+) Bal
2016 $ $ $
Jun 1 Balance b/d 80,000 Cr 0.5
2017
May 31 Profit and Loss 48,400 128,400 Cr 0.5
Dividends (0.05 x 400,000) 20,000 108,400 Cr 1

Jun 1 Balance b/d 108,400 [2]

3(d) So Watt Limited

Balance Sheet (extract) as at 31 May 2017
Shareholders' Equity $
Issued Share Capital, 400,000 Ordinary Shares 200,000 1
Retained Earnings 108,400 0.5
Total Equity 308,400 0.5 [2]

3(e) To distribute profits to shareholders 1

To reward shareholders for their investments

3(f) Banks are more willing to lend money to a company than a sole proprietorship 1
Shareholders have limited liability as the maximum amount they will lose is their initial investment
Easier to transfer ownership than a sole trader

3(g) Sole proprietorship is easier and less expensive to set up 1

3(h)(i) Increase $80 1

3(h)(ii) No effect 1
 St Andrew's Secondary School
Principles of Accounts - Secondary 4 Express / 5 Normal Academic
Preliminary Examination 2017 (Paper 2)

1(a) No Paint No Gain

Income Statement for the year ended 31 July 2017
$ $
Sales Revenue 339,060
Less: Sales Returns 8,280
Net Sales Revenue 330,780 0.5
Less: Cost of Sales 205,770 0.5
Gross Profit 125,010
Add: Other Income
Discount Received 1,780 0.5
126,790
Less: Expenses
Rent 52,000 1
Interest Expense (6% x 100,000) 6,000 1
Insurance (1,200 - 5/6 x 600) 700 1
Utilities Expense (2/3 x 660) 440 1
Reversal of Impairment Loss on Trade Receivables [(2,950 - 1,400) - 1,250] (300) 1
Depreciation of Furniture and Fittings (15% x 111,300) 16,695 1
Depreciation of Equipment [20% x (160,700 - 50,600)] 22,020 1
Bank Charges 50 97,605 0.5
Profit for the Year 29,185
[9]
1(b) No Paint No Gain
Balance Sheet as at 31 July 2017
Assets $ $ $
Non-current Assets Cost Accumulated Net Book
Depreciation Value
Furniture and Fittings 111,300 26,895 84,405 1
Equipment 160,700 72,620 88,080 1
272,000 99,515 172,485
Current Assets
Inventory 13,800
Trade Receivables (42,970 - 1,400) 41,570 1
Less: Allowance for Impairment of Trade Receivables 1,250 0.5
Net Trade Receivables 40,320
Prepaid Insurance (5/6 x 600) 500 1
54,620
Total Assets 227,105

Equity and Liabilities

Owner's Equity
Beginning Balance, 1 August 2016 70,800
Add: Profit for the Year 29,185 0.5
Less: Drawings (8,800 + 1/3 x 660) 9,020 1
Total Equity 90,965

Non-current Liabilities
Long Term Borrowings (100,000 - 20,000) 80,000 1
80,000
Current Liabilities
Trade Payables 26,990 0.5
Accried Rent (52,000 - 50,000) 2,000 1
Accrued Interest on Loan (6,000 - 4,300) 1,700 1
Current Portion of Long-term Borrowings 20,000 0.5
Short-term Borrowings (5,400 + 50) 5,450 1
 56,140
Total Equity and Liabilities 227,105
[11]
2(a)(i) Current Assets = 17,100 + 750 + (16,540 - 900)
= $33,490

Current Liabilities = 700 + 800 + 16,810

= $18,310

Current Ratio = 33,490 / 18,310 1,1

= 1.83 : 1

2(a)(ii) Quick Assets = 16,540 - 900

= $15,640

Quick Ratio = 15,640 / 18,310 1,1

= 0.85 : 1 [4]

2(b) Current ratio worsened from 2.32 : 1 in 2016 to 1.83 : 1 in 2017. 1

Quick ratio also worsened from 1.68 : 1 in 2016 to 0.85 : 1 in 2017. 1
This suggests that the business has lesser current and quick assets to repay immediate debts.
Inventory holdings worsened as inventory increased from $8,000 in 2016 to $17,100 in 2017. 1
This suggests that the business has too much funds tied up in inventory. 1
Cash position worsened as bank balance decreased from $5,660 in 2016 to an overdraft of $700 in 2017. 1
This suggests that the business could be having cash flow problems. 1 [6]

2(c) Current ratio measures the ability to repay immediate debts with all current assets whereas quick ratio
measures the ability to repay immediate debts with quick assets. 1

Quick ratio uses only liquid assets which are more easily convertible into cash and excludes prepayments
and inventory. 1 [2]

2(d) Motor Vehicles (Net Book Value)

Opening balance + Purchase - Depreciation = Ending balance
108,000 + 90,000 - Depreciation = 184,000 0.5 each
Depreciation = 198,000 - 184,000
= $14,000 0.5 [2]

2(e) Could have been financed by external borrowings as long-term bank loan increased by $20,000 1
Could have been financed by capital contributions by owner as capital increased by $52,510 1
Could have been financed by the available bank balance which decreased by $6,360 [2]
3(a)(i) Kohconut
Trade Payables Control A/c
Date Particulars Dr (-) Cr (+) Bal
2017 $ $ $
Mar 31 Cash at Bank 12,560 12,560 Dr 0.5
Inventory (Returns) 2,430 14,990 Dr 0.5
Discounts Received 570 15,560 Dr 0.5
Interest Expense 50 15,510 Dr 0.5
Inventory (Purchases) 24,410 8,900 Cr 0.5

Apr 1 Balance b/d 8,900 Cr 0.5

OR Trade Payables Control A/c

Purchases - Payments - Returns - Discount Received + Interest Expense = Closing Balance
Purchases - 12,560 - 2,430 - 570 + 50 = 8,900 0.5 each
Purchases = $24,410 0.5

Total Inventory Purchased = 24,410 + 2,800 0.5

= $27,210 [3.5]

3(a)(ii) Inventory A/c

Date Particulars Dr (+) Cr (-) Bal
2017 $ $ $
Mar 31 Trade Payables 24,410 24,410 Dr
0.5
Cash in Hand 2,800 27,210 Dr
Trade Payables (Returns) 2,430 24,780 Dr 0.5
Cost of Sales 19,380 5,400 Dr 0.5

Apr 1 Balance b/d 5,400 Cr 0.5

OR Inventory A/c
Purchases - Purchases Returns - Cost of Sales = Closing Balance
27,210 - 2,430 - Cost of Sales = 5,400 0.5 each
Cost of Sales = $19,380 0.5 [2]

3(a)(iii) Net Sales Revenue = 150% x Cost of Sales

= 150% x 19,380
= $29,070 1

Credit Sales = Net Sales Revenue - Cash Sales

= 29,070 - 10,500
= $18,570 0.5 [1.5]

3(b) Cash in Hand A/c

Cash Sales - Cash Purchases - Drawings - Cash banked in - Cash Stolen = Ending Balance
10,500 - 2,800 - (200 x 12) - 4,250 - Cash Stolen = 250 0.5 each
Cash Stolen = $800 0.5 [3]

3(c) (i) Receipt 0.5

(ii) Credit Note 0.5
(iii) Invoice 0.5
(iv) Payment Voucher 0.5 [2]
4(a) Leaf It To Me
Inventory A/c
Date Particulars Dr (+) Cr (-) Bal
2017 $ $ $
May 31 Total Trade Payables 50,000 50,000 Dr 1
Total Trade Payables 6,000 44,000 Dr 1
[2]
4(b) Unnecessary details are reduced as only totals are posted to the ledgers 1
Keep errors in recording within the specialised journals 1
Information on similar transactions is readily available for monitoring purposes [2]

4(c) Leaf It To Me
General Journal
Date Particulars Dr ($) Cr ($)
2017
May 31 Capital 7,200 0.5
Drawings 7,200 0.5

31 Trade Payables Control 780 1

Trade Receivables Control 780 1

31 Profit and Loss (5,000 - 2,500 - 2,000) 500 1

Sale of Non-current Asset 500 1

8,480 8,480 [5]

4(d) Correction of errors 1

Non-cash capital contributions and drawings by owner
Opening and closing entries

4(e) Facilitates payment as Leaf It To Me can tell the net amount owed to Florist Gump 1
Eliminates the risk of Florist Gump's account becoming irrecoverable

4(f) (i) Sales Ledger 0.5

(ii) General Ledger 0.5 [1]
5(a) Planet of the Grapes
Cost of Sales A/c
Date Particulars Dr (+) Cr (-) Bal
2016 $ $ $
Dec 6 Inventory (11,245 + 6,550) 17,795 17,795 Dr 1
20 Inventory (12,460 + 7,770) 20,230 38,025 Dr 1
31 Trading 38,025 0 1
[3]
5(b) Planet of the Grapes
Trade Receivable - Chin Pan Zee A/c
Date Particulars Dr (+) Cr (-) Bal
2016 $ $ $
Dec 1 Balance b/d 1,200 Dr 0.5
20 Sales Revenue (90% x 27,300) 24,570 25,770 Dr 1
25 Cash at Bank 25,000 770 Dr 0.5
Discount Allowed 770 0 0.5
27 Cash at Bank 25,000 25,000 Dr 0.5
Discount Allowed 770 25,770 Dr 0.5
31 Equipment 20,000 5,770 Dr 0.5
Allowance for Impairment of Trade Receivables 5,770 0 1
[5]

5(c) To encourage bulk purchase of the goods 1

5(d) Lower of Cost or Net Realisable Value 1

5(e) (i) No effect 0.5

(ii) Overstated by $230 0.5
(iii) Understated by $230 0.5
(iv) Understated by $230 0.5 [2]