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2017 BGSS 4E5N Prelim P2
2017 BGSS 4E5N Prelim P2
2017 BGSS 4E5N Prelim P2
4E 4E
5N Preliminary Examination 2017
5N
PRINCIPLES OF ACCOUNTS 7175/2
Paper 2 31 July 2017
2h
Additional Materials: Multi-column accounting paper (6 sheets)
Section A
Answer all questions.
Section B
Answer one question.
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Section A
Answer all questions.
1 The following balances were extracted from the books of Yeo Ltd on 31 March 2017.
Dr Cr
$ $
Issued share capital (50 000 ordinary shares) 75 000
Retained earnings 52 150
Sales returns 10 800
Cost of sales 75 000
Sales revenue 158 000
4% bank loan repayable 31 December 2020 80 000
Interest on loan 400
Motor vehicles 90 000
Accumulated depreciation of motor vehicles 19 500
Office equipment 35 000
Accumulated depreciation of office equipment 7 000
Trade receivables 46 600
Allowance for impairment of trade receivables 9 200
Trade payables 39 200
Rent expense 25 000
Salaries expense 33 000
Insurance expense 7 480
Cash at bank 65 600
Discounts 2 390 1 020
Inventory 49 800
441 070 441 070
Additional information
1 At 31 March 2017,
(i) Monthly rental expense is at $2 500.
(ii) Insurance included $2 400 paid for a period of 6 months ending 31 May 2017.
2 Inventory was valued at $48 000 on 31 March 2017.
3 The bank loan was taken on 1 January 2017. Interest on loan has not fully been
paid.
4 10% of the bank loan is to be repaid on 31 December 2017.
5 Pat, who owed $1 800, was declared bankrupt. The amount was not yet written off.
6 Based on objective evidence, $2 800 of debts were likely to be uncollectible.
7 Depreciation is to be provided as follows:
(iii) Motor vehicles: 20% using reducing-balance method
(iv) Office equipment: 15% using straight-line method
8 On 1 March 2017, a dividend of $0.10 per share was declared and paid up.
REQUIRED
(a) Prepare the income statement for the year ended 31 March 2017.
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[Total: 20]
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Oliver’s financial year ends on 31 December. The following information was supplied.
Number of $
computers
Inventory, 1 January 2016 110 110 000
Additional information
1 Oliver buys goods on credit. His purchases during the year are listed below.
3 During the year, Oliver sold 340 units of computers at $400 000.
REQUIRED
(a) Calculate the cost of sales for the financial year ended 31 December 2016.
(b) Prepare the inventory account for the year ended 31 December 2016.
(c) Calculate the inventory turnover rate for the year ended 31 December 2016, giving
your answer to two decimal places.
(d) The inventory turnover rate for 2015 was 4.0 times. Suggest two reasons for the
change in the ratio.
The net realisable value of the inventory as at 31 December 2016 was $90 000.
REQUIRED
(f) State the basis of inventory valuation and explain the accounting concept to
support your answer.
[3]
(g) The book value of the inventory as at 31 December 2016 was not written down to
net realisable value. State the effect of this on the gross profit for the years ended
31 December 2016 and ending 2017.
[2]
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[Total: 16]
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3 Wu owns a business, Wuber, selling toy cars. Wuber does not maintain full double
entry records and the following balances were provided.
Wuber also provided the following information at the end of the financial year on 31
July 2017.
$
Write-off of trade receivables 2 800
Discount allowed 1 240
Discount received 2 450
Cash receipts from credit customers 8 800
Cash payments to credit suppliers 5 700
Cash sales 7 500
Sales returns 2 380
Cost of sales 3 350
REQUIRED
(b) For the year ended 31 July 2017, prepare an extract of the income statement,
showing only the trading portion. [3]
(c) Explain the difference between a cash transaction and a credit transaction. [2]
[Total: 12]
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Section B
Additional information
2 On 10 August 2015, Hulk House was declared bankrupt and its debt was written
off.
4 On 12 January 2017, Wonder Co managed to pay $0.30 for every dollar it owed
and the remaining debt was written off.
REQUIRED
(a) Prepare the journal entries for the transactions that occurred on 12 January 2017.
(Additional information 4)
[3]
(b) Prepare the allowance for impairment of trade receivables account for the three
years ended 31 March 2015, 2016 and 2017. .
[6]
(c) Prepare an extract of the income statement for Lori Trading for the year ended 31
March 2017.
[1]
(d) Explain why Lori Trading should make an allowance for impairment of trade
receivables. Support your answer with an accounting concept.
[2]
[Total: 12]
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5 The following balances were extracted from the books of Dawson Ltd at 1 January
2015.
$
Issued share capital, 200 000 ordinary shares 300 000
Additional information
1 The company made a loss of $9 700 for the year ended 31 December 2015 and a
profit of $13 680 for the year ended 31 December 2016.
2 On 1 March 2016, 150 000 ordinary shares were issued at $2.00 per share.
3 Dividends at $0.10 per share were declared and paid on 31 December 2015.
Dividends at $0.20 per share were declared on 31 December 2016 and paid on 15
January 2017.
REQUIRED
(a) Prepare the journal entries for the declaration of dividends on 31 December 2016.
Narrations are not required. [2]
(b) Prepare the issued share capital account for the years ended 31 December 2015
and 2016. [3]
(c) Prepare the retained earnings account for the years ended 31 December 2015 and
2016. [5]
(d) Give two advantages a company has over a sole proprietorship. [2]
[Total: 12]