S.5 BUSINESS, ACCOUNTING AND FINANCIAL STUDIES Accounting Module

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1 FANLING LUTHERAN SECONDARY SCHOOL FIRST TERM EXAM S.5 BUSINESS, ACCOUNTING AND FINANCIAL STUDIES Accounting Module Date : 19th January, 2016 Time allowed: 8:30 am - 10:45 am (2 hour 15 minutes) This paper must be answered in English INSTRUCTIONS: 1. There are three sections in this paper 2. All questions in Section A and B are COMPULSORY. You are required to answer ONE of the two questions in Section C. 3. Write your answers in the answer sheet. Start EACH question (not part of a question) on a NEW page. 4. This paper contains 8 pages S.5 BAFS 1 st Examination Page 1 By M. C. WONG

2 SECTION A (24 marks) Answer ALL questions in this section. 1. Tony Sing is selling the following items at the list prices shown: wedding gowns at $1,000 each, cocktail dresses at $500 each; party dresses at $400 each, and flower girl dresses at $200 each. Tony made the following credit sales in September 2009: 2009 Sept 1 To Tai Hing Co: 5 wedding gowns, 11 cocktail dresses. Less a 20% trade discount. " 7 To Wing Tai Co: 6 cocktail dresses, 20 party dresses. Less a 25% trade discount. " 13 To Tung Sun Ltd: 2 wedding gowns, 30 flower girl dresses. Less a 10% trade discount. " 23 To Luk Kee: 3 cocktail dresses, 4 party dresses, 5 flower girl dresses. No trade discount was given. (a) Record the above transactions in the sales journal. (b) Post the journal entries to the debtors accounts and the sales account in the accounts receivable ledger and general ledger. (Total: 6 marks) 2. David is a sole proprietor who keeps records of his cash and bank transactions in a three-column cash book. The balances in the cash book as at 1 January 2013 were: cash $12,680 and bank overdraft $30,980. Transactions made in January 2013 were as follows: 2013 Jan 2 Received a cheque from a customer, Leung, who was given a cash discount of % to settle his account of $150,000. The cheque was banked on the same day. 5 Paid a 20% deposit by cheque for the purchase of a motor van costing $200,000. The balance was to be paid on delivery two weeks later. 7 Received a cheque of $190,000 from Hilly Company as commission for work done. 14 Cash amounting to $8,790 from sales were deposited into the bank directly. 17 David withdrew $3,200 from the cash box to pay his son's school fees. 19 Paid the balance of the motor van purchased on 5 January by cheque. 24 Settled Kam Kee's account of $35,000 by cheque, with a cash discount of 3%. 28 Withdrew $9,000 from the bank and put the money in the cash box for business use. 30 Paid wages of $10,000 in cash and $20,000 by cheque. Write up a three-column cash book for January (Total 6 marks) S.5 BAFS 1 st Examination Page 2 By M. C. WONG

3 3. Rita is a trader selling kid s garment. The following balances were taken from her books of account as at 1 January 2014: Stationery $2,580 Dr Commission expenses $35,000 Cr Rent $50,000 Dr She made the following payments by cheque in 2014: Jan 1 to Dec 31 Total payments for stationery $13,500 Jan 1 to Dec 31 Total payments to the salesmen for commission $46,600 Feb 18 Rent for six months to 31 August 2014 $150,000 Sept 5 Rent for six months to 28 February 2015 $180,000 Other information is as follows: (i) Sales for the year amounted to $237,200. (ii) The amount of stationery charged to the profit and loss account for the year ended 31 December 2014 was $18,000. (iii) Commission received should be 10% of the total sales for the year. Prepare the following accounts for the year ended 31 December Show clearly the amount transferred to the profit and loss account and the balance brought down on 1 January (a) (b) (c) Stationery Commission Rent (Total: 6 marks) 4. Mr Ho commenced his business on 1 April During the two years ended 31 March 2005 and 2006, the following information relating to debtors was available: (i) On 31 March 2005, a debt of $6,000 from a customer, Mr Tam, was written off. (ii) If the company had a balance of $20,000 in the previous for doubtful debts and had debtors amounted to $939,000 on 31 March It was decided to make a provision for doubtful debts of 3% on debtors as at 31 March (iii) On 27 March 2006, $4,000 was received by cheque from Mr Tam in settlement of the debt which had previously been written off as bad on 31 March (iv) On 31 March 2006, debtors amounted to $33,800. It was decided to make a provision for doubtful debts of 2% on debtors as at 31 March Prepare journal entries to record the above items. (Total: 6 marks) S.5 BAFS 1 st Examination Page 3 By M. C. WONG

4 SECTION B (36 marks) Answer ALL questions in this section. 5. The following information was extracted from the cash book of Jaden Company for the month ended 31 December 2014: Cash at bank 2014 $ 2014 Cheque No. $ Dec 1 Balance b/d Dec 8 Kenneth Ltd Candy Ltd Electricity Man Ltd Tony Cherry Yip's Ltd Nam Ltd Balance c/d Jaden Company received the following bank statement for the month of December 2014:: Date Description Withdrawal Deposit Balance 2014 $ $ $ Dec 1 Balance b/d Cheque deposit Cheque deposit Direct debit - water Refer to drawer Cheque Sunny Ltd Cheque deposit Cheque deposit Cheque Bank charges Additional information: (i) On 18 December 2014, a customer, Sunny Ltd, made a credit transfer to the company's bank account without notifying the company. (ii) On 21 December 2014, Cheque was received from a customer, Yip's Ltd, but it was recorded as a payment in the cash at bank account. (a) Update the cash at bank account of Jaden Company. (b) Prepare a bank reconciliation statement as at 31 December 2014, commencing with the updated cash at bank balance. (Total: 10 marks) S.5 BAFS 1 st Examination Page 4 By M. C. WONG

5 6. (A) Given the following records of goods purchased, returned to suppliers and sold during the first year operation of operation of a trading business: Purchases Returns outwards Sales 2016 Unit Unit cost 2016 Unit Unit cost 2016 Unit Unit price Jan 2,000 $60 Feb 100 $60 Mar 1,400 $100 May 2,000 $70 Jun 100 $70 Aug 2,000 $120 Sept 1,200 $90 (a) Calculate the weighted average cost per unit of inventory. (b) determine the value of inventory as at 31 December (B) The annual physical stocktaking of Albert Shop did not take place on the day of the company s year end, 31 December However, stock was taken on 13 January 2008 when the business closed for the weekend. All normal sales by the company are made at a gross profit of 20% on sales. Subsequent investigation revealed the following: (i) Stock at 13 January 2008 was $78,178. (ii) During the period from 1 January to 13 January 2008, the company recorded the following: $ Sales 45,000 Returns inwards 800 Purchases 29,680 Returns outwards 470 Included in the purchases was an amount of $300 for carriage inwards which was mistakenly charged by a supplier. (iii) An item of stock with a normal selling price of $1,000 was purchased in It was found to be obsolete and could only be sold for $600. (iv) One of the stock sheets dated 13 January 2008 had been overcast by $1,720. (v) Included in stock were goods with an invoiced price of $960 which were received on a sale or return basis from a supplier on 28 December Albert Shop had not notified the supplier of its intention to buy the goods by 13 January Prepare a statement to calculate the amount of stock as at 31 December (Total: 13 marks) S.5 BAFS 1 st Examination Page 5 By M. C. WONG

6 7. The trial balance as at 31 December 2014 for Elsa Company failed to agree and a suspense account was opened to record the difference. The following errors were subsequently discovered: (i) (ii) (iii) Credit sales for $500 had been overlooked by the bookkeeper and no record was made in the books. Payment of $3000 for rates was debited to the rental deposit account. An electricity bill for December 2014 amounting to $2500 was recorded as $250 in the books. The bill would be settled in January (iv) A cheque for $1200 received from a customer, Windy Ltd, had been entered in the cash book only. (v) Discount received of $540 had been credited to the purchases account as $450. (vi) On 31 December 2014, Elsa, the sole owner of the company, took over one of the company s motor vans for her personal use. She thought that she was just using her own asset and therefore she did not make any accounting record for this. The motor van cost $ and had a net book value of $ on 31 December (a) Prepare the necessary journal entries to correct the above. Narrations are not required. (b) Identify the type of accounting error made in each of items (i), (ii) and (iii) above. (Total: 13 marks) S.5 BAFS 1 st Examination Page 6 By M. C. WONG

7 SECTION C (20 marks) Answer ONE question in this section. 8. Mr Wong commenced his business on 1 January Information relating to the machinery for the year ended 31 December 2014 is as follows: (i) Machine 1 was acquired on 1 May Its depreciation charges for the years ended 31 December 2012 and 2013 were $45,000 and $36,000, respectively. (ii) Machine 2 was acquired on 1 June Its purchase price was $240,000. (iii) Machine 3 was acquired on 8 October Its purchase price was $315,000. (iv) On 1 March 2014, Machine 1 was replaced by Machine 4. The trade-in value of Machine 1 was $140,000, and the remaining balance was settled by cheque. Detail of Machine 4 was as follows: $ Purchase cost 185,000 Delivery of the machine to the business 5,000 Testing fee 10,000 Maintenance fee for ,000 Components installed to increase its productivity 20, ,000 (v) Machine 2 was defected and was sold for $160,000 cash on 31 May (vi) Machine 3 was stolen in a burglary on 1 July The insurance company agreed to pay $250,000 as compensation on 31 January (vii) On 1 October 2014, Machine 5 was bought for $300,000 by cheque. The company paid an extra $3,500 and $2,500 for installation and annual insurance, respectively. (viii) Depreciation was to be charged on a reducing-balance basis at a rate of 20% per annum. It is the company s policy to provide a full year s depreciation in the year of acquisition and no depreciation in the year of disposal. (a) Calculate the cost of Machine 1. (b) Write up the following accounts for Mr Wong for the year ended 31 December 2014: (i) (ii) Machinery Accumulated depreciation: Machinery (iii) Disposal: Machinery (Total: 20 marks) S.5 BAFS 1 st Examination Page 7 By M. C. WONG

8 9. The following draft statement of financial position for Healthy Food Company as at 31 December 20X6 has been prepared: ASSETS $ $ Office machinery 148,000 Less: Accumulated depreciation 45, ,700 Motor vehicles 10,000 Less: Accumulated depreciation 2,500 7,500 Inventories 127,600 Account receivables, net 85,500 Suspense account 6, ,100 CAPITAL and LIABILITIES $ Capital 114,622 Account payables 68,750 Rates paid in advance 2,750 Bank loan (repayable on 31 December 20Y2) 100,000 Draft net profit for the year 22,068 Bank overdraft 21, ,100 Subsequent to the preparation of the draft statement of financial position, the following were discovered: (i) (ii) (iii) (iv) On comparing the bank statement with the cash book for the month of December 20X6, the following differences were found: (1) An amount of $8,060, being receipt of dividends, had been credited directly into the bank account. The amount was recorded in the cash book as bank interest charged on the overdraft balance. (2) A cheque of $10,000 issued for paying the deposit to acquire a motor van in February 20X7 was not yet presented to the bank for payment. The amount was recorded as the only motor vehicle of the company. Motor vehicles are depreciated at 25% per annum on cost. Owing to an oversight, $1,300 prepaid insurance at 31 December 20X5 had been omitted from the general ledger in 20X6. Moreover, rates of $2,750 paid in advance at 31 December 20X6 had appeared as a credit balance in the trial balance. At 31 December 20X6, a customer with an outstanding debt of $10,800 was declared bankrupt and the amount is to be written off. In addition, the allowance for doubtful debts was to be reduced by $540. Included in the closing inventories were goods at $10,000 received from Royce Limited on a sale or return basis. No other entries had been made in respect of these goods in the books. (a) Prepare the necessary journal entries to correct the above. Narrations are not required. (b) Prepare the statement of financial position as at 31 December 20X6 in proper format. (Total: 20 marks) END OF PAPER S.5 BAFS 1 st Examination Page 8 By M. C. WONG

FANLING LUTHERAN SECONDARY SCHOOL

FANLING LUTHERAN SECONDARY SCHOOL 2012 2013 2 nd Term Examination S.5 BUSINESS, ACCOUNTING AND FINANCIAL STUDIES Accounting Module Date : 20th June, 2013 Time allowed: 8:30 am - 11:00 am (2 hour 30 minutes)