NAME: _____________________________( ) CLASS: 4E___

HOUGANG SECONDARY SCHOOL

MID-YEAR EXAMINATION 2021

PAPER 2

PRINCIPLES OF ACCOUNTS 7087/2

SECONDARY FOUR EXPRESS

7 May 2021, Friday 2 hours

MAKE THE DIFFERENCE RESPECT OURSELVES RESPECT OTHERS MAKE THE DIFFERENCE RESPECT OURSELVES RESPECT OTHERS MAKE THE DIFFERENCE
MAKE THE DIFFERENCE RESPECT OURSELVES RESPECT OTHERS MAKE THE DIFFERENCE RESPECT OURSELVES RESPECT OTHERS MAKE THE DIFFERENCE
MAKE THE DIFFERENCE RESPECT OURSELVES RESPECT OTHERS MAKE THE DIFFERENCE RESPECT OURSELVES RESPECT OTHERS MAKE THE DIFFERENCE
MAKE THE DIFFERENCE RESPECT OURSELVES RESPECT OTHERS MAKE THE DIFFERENCE RESPECT OURSELVES RESPECT OTHERS MAKE THE DIFFERENCE
MAKE THE DIFFERENCE RESPECT OURSELVES RESPECT OTHERS MAKE THE DIFFERENCE RESPECT OURSELVES RESPECT OTHERS MAKE THE DIFFERENCE

READ THESE INSTRUCTIONS FIRST

Write your class, index and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, glue or correction fluid.
The use of an approved calculator is allowed.

Answer all questions on the writing paper provided.

The businesses described in this question paper are fictitious.

Start each question on a separate page.
All calculations must be shown adjacent to the answer.

Where the columnar format is used, the running balance column should be updated for the first and
last entries. Where applicable, the balance should be brought down to the next financial year.

At the end of the examination, faster all your work together.

The number of marks is given in brackets [ ] at the end of each question or part question.

For Examiner’s Use

Q1 / 20
Q2 / 12
Q3 / 12
Q4 / 16
Total / 60

This question paper consists of 5 printed pages (including this cover page)

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1 The following balances were extracted from the books of Javis Ltd on 31 March 2021.

Issued share capital, 300 000 ordinary shares 150 000

Retained earnings, 1 April 2020 18 300
3% Mortgage loan 90 000
($20 000 is repayable in January 2022)
Office equipment at cost 250 000
Motor Vehicles at cost 139 000
Accumulated Depreciation:
 Office equipment 14 000
 Motor vehicles 11 000
Sales revenue 315 000
Cost of sales 93 400
Sales returns 5 000
Cash at bank 380 Cr
Cash in hand 22 500
Interest on Mortgage loan 2 400
Allowance for impairment of trade receivables 6 200
Inventory 57 000
Trade receivables 37 000
Trade payables 34 640
Insurance 34 050
Discount received 6 530
Discount allowed 1 100
Wages & salaries 4 600

Additional information:

1. At 31 March 2021:
(i) Insurance expenses of $27 240 was prepaid.
(ii) Interest on loan was not fully paid up.

2. Inventory as at 31 March 2021 has a net realizable value of $52 000.

3. A total amount of $2 000 debts was deemed to be uncollectible and has to be written off
as irrecoverable.

4. The business decided to make an allowance for impairment of trade receivables based on
5% of its trade receivables.

5. Depreciation is to be charged on office equipment at 15% per annum using the straight-
line method and depreciation is to be charged on motor vehicles at 10% per annum using
the reducing balance method.

6. The company declared a dividend of $0.04 per share. The dividend will be paid on 30 June
2021.
REQUIRED

(a) Prepare the statement of financial performance for the year ended 31 March 2021. [10]

(b) Prepare the statement of financial position as at 31 March 2021. [10]

[TOTAL: 20]
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2 The cash at bank account of Joey Trading for June 2020 is shown below.

Cash at bank A/C

Date Particulars Dr Cr Bal
2020 $ $ $
Jun 1 Bal b/d 2 350 Dr
5 Jacobs Supplies (cheque no. 123001) 560
10 Yasmin 780
12 Rent (cheque no. 123002) 1 200
25 Samy (cheque no. 123003) 340
27 Insurance expense (cheque no. 123004) 200
28 Commission income (cheque no. 123005) 500
30 Inventory (cheque no. 123006) 530
30 Benjamin 490

Jul 1 Bal b/d

The bank statement for the month of June was received on 3 July 2020. The cash balances on
30 June in the cash at bank account and the bank statement did not agree.

Bank statement
Date Particulars Withdrawals Deposits Bal
2020 $ $ $
Jun 1 Bal b/d 2 850 Cr
2 Cheque no. 123000 500 2350 Cr
4 Direct deposit – Keith 1 250 3 600 Cr
8 Cheque no. 123001 560 3 040 Cr
11 Cheque deposit 780 3 820 Cr
15 Cheque no. 123002 1 200 2 620 Cr
17 Direct payment – utilities 350 2 270 Cr
27 Cheque no. 123003 340 1 930 Cr
30 Bank interest 15 1 945 Cr

REQUIRED

(a) Prepare the adjusted cash at bank account for June 2020. [4]

(b) Prepare the adjusted bank reconciliation statement as at 30 June 2020. [4]

(c) On 1 August 2020, Joey Trading received a direct debit of $1 000 from a customer
instantaneously as he purchased goods. This transaction was facilitated through
PayLah!, a cashless payment system.

The accountant of Joey Trading commented the following: “Since there is no physical
cash involved in this transaction, it is not a cash transaction. Hence it is a credit
transaction.”

Do you agree with the accountant? Explain your answer. [2]

(d) Bank reconciliation is an internal control of cash that is implemented by most

businesses. Explain how bank reconciliation helps to detect or deter the occurrence of
fraud in businesses. [2]
[TOTAL: 12]

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3 The following balances were taken from the books of Evergreen Trading at the start of the financial
year on 1 January 2019.

$
Fixtures and fittings 60 000
Accumulated Depreciation of fixtures and fittings 15 610

Additional information:

1. On 1 April 2019, Evergreen Trading sold one of its cabinets which cost $4 000 for $2 400
by cheque. The cabinet was bought on 1 January 2017.

2. On the same day, Evergreen Trading installed a new cabinet for $12 000 on credit from
Ikia Ltd.

3. Evergreen Trading provides depreciation at a rate of 15% per annum on net book value.
A full year’s depreciation is provided in the year of purchase and no depreciation is
provided in the year of sale.

REQUIRED

(a) Define depreciation. [1]

(b) State two causes of depreciation. [2]

(c) Prepare the fixtures and fittings account for the year ended 31 December 2019. [4]

(d) Calculate the gain or loss on the sale of the cabinet on 1 April 2019. [3]

(e) Evergreen Trading depreciates its office equipment using the reducing balance
method but uses the straight line method for motor vehicles.

Explain whether Evergreen Trading has violated the consistency concept. [2]

[TOTAL: 12]
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4 Peter is unable to decide whether he should buy or rent laptops for his office staff. He has a budget
of $10 000. If he buys laptops, he owns it and can sell it when it is no longer suitable, and then
buy another one. If he rents laptops, he can rent another one when the annual rental agreement
ends.

The other details of the option are listed in the table below.

Buy laptops Rent laptops

Cash Down 50% x $18 000 $5 000
Payment / Deposit = $9 000
Other Costs Loan repayment + interest + Annual rental:
annual insurance $2 500
(for the next 5 years):
$12 000
Condition New Has been rented out for the past
2 years
Other information  Replacement laptops will be  Replacement laptops will be
delivered within 3 working delivered within 10 working
days days
 Has to arrange for own  Rental cost includes servicing
servicing and maintenance and technicians will come
down to the site annually to
upgrade the Windows System

REQUIRED

(a) If you are Peter, will you buy or rent the laptops? Support your answer with reasons. [7]

Paul and Faith are both sole traders. The following information relates to their businesses for the
year ended 30 September 2020.

Paul Faith
$ $
Net sales revenue 145 000 223 000
Cost of sales 93 500 170 800
Gross profit 51 500 52 200
Expenses 24 900 17 700
Profit for the year 26 600 34 500
Average inventory 2 400 13 400
Average equity 120 000 250 000

REQUIRED

(b) Calculate to two decimal places, the profit margin for each business. [2]

(c) Comment on the differences in profitability of Paul’s and Faith’s businesses. [5]

(d) Jovan would like to invest in either Paul’s or Faith’s business. Advise Jovan on which
business he should invest in. Justify your answer using the given data and profitability
ratios. [2]

[TOTAL: 16]

END OF PAPER

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