2021 N Level POA Answers 7086
Paper 1 :
ai) Integrity. Being straightforward and honest in all professional and business relationships
aii) Objectivity. Not letting bias, conflict of interest or undue influence of others to override professional judgment
(b) To serve as an objective and verifiable evidence of a business transaction.
(c)
| Source document | Type of transaction | |
| (i) | Receipt | Cash purchase or cash sale |
| (ii) | Debit note | Correct an undercharge of a credit sale or purchase |
| (iii) | Invoice | Credit purchase or credit sale |
| (iv) | Credit Note | Return of credit sale or credit purchase |
| (v) | Payment Voucher | Record of payments |
(d)
Income Summary.
(e)
• safeguard assets of the business
• ensure business transactions are recorded objectively and on a timely basis
• ensure that the business complies with laws and regulation
a)
Trade payable : Ting
| Date | Particulars | Dr ($)- | Cr ($)+ | Balance |
| 2021 | ||||
| Jun 1 | Balance b/d | 4820 Cr | ||
| 2 | Inventory (purchases) | 2160 | ||
| 6 | Inventory (returns) | 180 | ||
| 30 | Cash at bank | 3000 | 3800 Cr | |
| Jul 1 | Bal b/d | 3800 Cr |
b)
Trade discount is given by the seller to the buyer of goods to encourage bulk purchase.
ci)
Dr Trade payable
Cr Discount Received
(ii)
Dr Discount allowed Cr Trade receivable
a)
| Method of depreciation | Workings | Depreciation expense for the year ended | |
| 31 August 2020 | 31 August 2021 | ||
| Straight-lineUseful life 5 yearsScrap value $2500 | ($40000-$2500)/5 = $7500 | $7,500 | $7,500 |
| Reducing-balanceof 20% per annum | Yr 1: $40,000×20%=$8000 Yr 2: ($40,000-$8000)x20% = $6400 | $8,000 | $6,400 |
b) Reducing balance method
c)
Jerome
Extract of Statement of Financial Position as at 31 August 2021
| Cost | Accumulated Depreciation | Net Book Value | |
| Non-current Assets | $ | $ | $ |
| Motor vehicles | 40,000 | 14,400 | 25,600 |
a)
| Only trading business | Both trading business and service business | |
| Calculates cost of sales | ✔ | |
| Calculates profit for the year | ✔ | |
| May have other income | ✔ | |
| Always holds inventory | ✔ |
b)
| General Journal | |||
| 2021 | Dr ($) | Cr ($) | |
| Cash at bank | 20000 | ||
| Capital | 20000 | ||
| Office equipment | 500 | ||
| Capital | 500 | ||
| Drawings | 20 | ||
| Inventory | 20 |
Paper 2 :
Simon
Statement of financial performance for the year ended 31 March 2021
| $ | $ | |
| Sales revenue | 425 800 | |
| Less: Sales returns | (28 700) | |
| Net sales revenue | 397 100 | |
| Less: Cost of sales | 275 600 | |
| Gross profit | 121 500 | |
| Other income | ||
| Rent income (7 700+700) | 8 400 | |
| Less: Other expenses | ||
| Insurance (1 650-400) | 1 250 | |
| Discount allowed | 225 | |
| General expenses | 16 130 | |
| Office expenses (6 900+250) | 7 150 | |
| Wages and salaries | 62 800 | |
| Depreciation of office equipment (10%x10 000) | 1 000 | |
| Depreciation of motor vehicles [20%x(15 000-5 400)] | 1 920 | (90 475) |
| Profit for the period | 39 425 |
Simon
Statement of financial position as at 31 March 2021
| $ | $ | $ | |
| Non-current assets | Cost | Accumulateddepreciation | Net book value |
| Office equipment | 10 000 | 3 000 | 7 000 |
| Motor Vehicles | 15 000 | 7 320 | 7 680 |
| 25 000 | 10 320 | 14 680 | |
| Current assets | |||
| Inventory | 12 500 | ||
| Trade receivables | 18 900 | ||
| Cash at bank | 3 020 | ||
| Cash in hand | 425 | ||
| Rent income receivable | 700 | ||
| Prepaid insurance | 400 | 35 945 | |
| Total Assets | 50 625 | ||
| Equity & Liabilities | |||
| Owner’s equity | |||
| Capital (30 500+39 425-40 200) | 29 725 | ||
| Current liabilities | |||
| Trade payables | 20 650 | ||
| Office expenses payable | 250 | 20 900 | |
| Total equity and liabilities | 50 625 |
a) For cash sales, money received from customers will be recorded in the cash in hand or cash at bank account, while for sales on credit, money owed by credit customers will be recorded in the trade receivables account.
b)i)
Journal
| Date | Particulars | Dr | Cr |
| 2020 | $ | $ | |
| Jun 3 | Allowance for impairment of trade receivables | 800 | |
| Trade receivables – Hollins’ | 800 |
b)ii)
Journal
| Date | Particulars | Dr | Cr |
| 2020 | $ | $ | |
| Dec 31 | Impairment loss on trade receivables [(5%x 47 000) – (2 820-800)] | 330 | |
| Allowance for impairment of trade receivables | 330 |
c)
Statement of Financial Performance for the year ended 31 December 2020 (extract)
| Less: Other expenses | $ | $ |
| Impairment loss on trade receivables | 330 |
d)
Statement of Financial Position as at 31 December 2020 (extract)
| Current assets | $ | $ |
| Trade receivables | 47 000 | |
| Less: Allowance for impairment of trade receivables | (2 350) | 44 650 |
e)
Reputation of customers
Customer’s history of repayment
Economic outlook
Choose any two of the following above
a)i) Prepaid expenses are expenses that have been paid by the business, but not yet incurred.
a)ii) Prepaid expense is recognised as an expense only when service has been provided to the business.
b)i) Income received in advance is income that is received, but not yet earned.
b)ii) Income received in advance is recognised as an income only when service has been provided by the business to its customer.
c)i) $190 + $12 200 – $230 = $12 160
c)ii) $1 200 + $8 300 – $1 650 = $7 850
d)i) Current liabilities
d)ii) Current liabilities
e) Accrual basis of accounting theory
a) $8 200 + $250 + $500 + $195 = $9 145
b) $50 000
c)
- Reduce selling price for slow-moving goods to sell inventory faster
- Provide trade discount to encourage customers to buy in bulk and regularly to sell inventory faster
- Attract more customers through marketing campaigns to sell inventory faster
- Use technological tools to improve the accuracy of predictions about customer demand in order to know when and how much inventory to buy
Choose two of the following above
d) Prudence theory
e)
Tegan should choose Bright Light.
Assuming that the business purchases 100 desk lamps, the total cost for Bright Light would be $2520 [100 x $20 + 20% x (20 x 100) + $120], which is cheaper than the total cost for Illuminate of $2955 [100 x $25 + 15% x (25 x 100) + $80]. A lower inventory cost would mean a lower cost of sales and a higher gross profit assuming both selling prices are similar.
Bright Light is already a successful product and appeals to a wide range of consumers, hence Tegan will be assured of good sales volume from this product.
Or
Tegan should choose Illuminate.
The product from Illuminate is made from wood from a sustainable forest, which would be more environmentally friendly as compared to the product from Bright Light that is made from non-recyclable materials.
The product from Illuminate allows a dimming feature, which would be much preferred by customers as customers would be able to adjust the lighting of the light bulb according to their preferences, instead of only having a on or off function as provided by the product of Bright Light.
