2015 O Level POA Answers Paper 2
Adi
Statement of financial performance for the year ended 30 June 2015
| $ | $ | |
| Sales revenue (311380 + 3400) | 314780 | |
| Less : cost of sales | 156460 | |
| Gross profit | 158320 | |
| Less : Other Expenses | ||
| Freight charges | 230 | |
| Wages | 94300 | |
| Insurance (5200 – 800) | 4400 | |
| General expenses | 14900 | |
| Impairment loss on trade receivables | 850 | |
| Interest on loan (9000 x 8% x 3/12) | 180 | |
| Depreciation on motor vehicles ((110000 – 21000) x 20%) | 17800 | |
| Depreciation on fixtures and fittings (35500 x 15%) | 5325 | |
| 137985 | ||
| Profit for the year | 20335 |
Adi
Statement of financial position as at 30 June 2015
| Assets | $ | $ | $ |
| Non-current asset | cost | Acc. dep. | N.B.V |
| Motor vehicles | 110000 | 38800 | 71200 |
| Fixtures and fittings | 35500 | 12925 | 22575 |
| Total non-current assets | 93775 | ||
| Current assets | |||
| Trade receivables (20110 + 3400) | 23510 | ||
| Less: Allowance for impairment on trade receivables | 850 | 22660 | |
| Inventory | 24500 | ||
| Prepaid insurance | 800 | ||
| Total current assets | 47960 | ||
| Total assets | 141735 | ||
| Equity and liabilities | |||
| Owner’s equity | |||
| Capital(123400 + 20335 – 25400) | 118335 | ||
| Total equity | 118335 | ||
| Non-current liabilities | |||
| Long term borrowings | 9000 | ||
| Current liabilities | |||
| Trade payables | 13020 | ||
| Bank overdraft | 1200 | ||
| Interest on loan payable | 180 | ||
| Total current liabilities | 14400 | ||
| Total equity and liabilities | 141735 |
a)
| 31 Dec 2012 | 31 Dec 2013 | 31 Dec 2014 | |
| Average inventory | (12000+18500)/2= 15250 | (18500+25500)/2= 22000 | (25500+28000)/2= 26750 |
| Inventory turnover rate | 63500/15250= 4.2 times | 71000/22000= 3.2 times | 77500/26750= 2.9 times |
bi) Despite the increase in cost of sales over three years, Joe’s inventory turnover rate is on a declining trend from 4.2 times in 2012 to 3.2 times in 2013 to 2.9 times in 2014.
bii) From the increasing inventory balances for the three years, the reasons for the trend could be due to buying of more stocks or selling slower and obsolete stocks.
c) Inventory turnover rates can be improved by buying lesser so as to clear the existing inventory first and by giving discounts to sell more and faster.
a)
General journal
| Date | Particulars | Dr | Cr |
| 2015 | $ | $ | |
| Jul 31 | Dividend (200000 x $0.25) | 50000 | |
| Cash at bank | 50000 | ||
| Aug 1 | Cash at bank (80000 x $2.50) | 200000 | |
| Issued share capital | 200000 |
bi) Issued share capital on 1 Aug 2015 = $200000 + $200000
= $400000
bii) Retained earnings on 1 Aug 2015 = $70000 + $120000 – $50000
= $140000
biii) Total equity on 1 Aug 2015 = $400000 + $140000
= $540000
c) The two professional ethics which must be applied by accountants are:
- Integrity. That is being straightforward and honest in all professional and business relationships.
- Objective. That is to be unbiased when making professional judgement in the accounting process.
ai) Trade receivables are current assets arising from selling of goods on credit.
aii) Allowance for impairment on trade receivables is the identification of special customers whose debt may not be collectible in the immediate future. It is presented in the balance sheet as a deduction against trade receivables.
b)
Accumulated depreciation of motor vehicles account
| Date | Particulars | Dr | Cr | Bal |
| 2013 | $ | $ | $ | |
| Apr 30 | Impairment loss on trade receivables | 235 | 235 Cr | |
| May 1 | Balance b/d | 235 Cr | ||
| 2014 | ||||
| Apr 30 | Impairment loss on trade receivables | 137 | 372 Cr | |
| May 1 | Balance b/d | 372 Cr | ||
| 2015 | ||||
| Apr 30 | Impairment loss on trade receivables | 168 | 540 Cr | |
| May 1 | Balance b/d | 540 Cr |
c)
Statement of financial position as at 30 April 2015
| Current assets | $ | $ |
| Trade receivables | 27600 | |
| Less: allowance of impairment on trade receivables | 540 | |
| 27060 |
