香港專業會計員 會 THE HONG KONG ASSOCIATION OF ACCOUNTING TECHNICIANS (Incorporated with Limited Liability) Unit A, 17/F, Fortis Bank Tower, 77-79 Gloucester Road, Wanchai, Hong Kong. Accounting Technician Examinations Pilot Examination Paper Level I Paper 1 Financial Accounting Questions Suggested Answers and Marking Scheme
The Suggested Answers given in this Booklet are purposely made to give more details for educational purpose. Published by HKAAT 5/2001 HKAAT 2001 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior permission of the publisher.
Accounting Technician Examinations Pilot Examination Paper Level I Paper 1 Financial Accounting Time allowed 3 hours Section A 20 Multiple Choice Questions (compulsory) Section B 4 Questions (attempt any 3) DO NOT OPEN THIS PAPER UNTIL INSTRUCTED TO DO SO BY THE SUPERVISOR
SECTION A (MULTIPLE CHOICE QUESTIONS) (25 marks) Answer ALL questions in this section. Choose the best answer for each question. Marks will not be deducted for incorrect answers. (Questions 1 to 15 each carry 1 mark, total 15 marks) 1. When a business is adopting a perpetual inventory system for recording inventory, which of the following descriptions are incorrect? (1) The daily inventory balance cannot be obtained. (2) Every inventory movement is recorded in the inventory account. (3) Goods returned from customers will not be recorded in the inventory account. (4) The inventory balance can only be obtained from a physical inventory taking. A B C D (1) and (3) only (1), (3) and (4) only (2), (3) and (4) only All of the above 2. Which of the following double entries are correct for a trading company which adopts a periodic inventory system? Account debited Account credited (1) Goods bought on credit Inventory Accounts payable (2) Goods sold for cash Cash Sales (3) Goods returned to a supplier Accounts payable Purchases returns (4) Office equipment bought on credit Purchases Accounts payable A B C D (1) and (2) only (2) and (3) only (3) and (4) only (2), (3) and (4) only 3. A trial balance should be described as a statement to show A B C D the financial position of a business. a list of all the balances brought down in the ledger accounts of a business. whether the double entry accounting records of a business are correct. the cash position of a business. Which of the following are the books of prime entry? (1) Cash book (2) General journal (3) Sales journal (4) Purchases journal (5) Returns inwards journal (6) Returns outwards journal (7) Trial balance Page 1 of 13
A B C D (1), (2), (3) and (4) only (2), (3), (4), (5) and (6) only (1), (2), (3), (4), (5) and (6) only All of the above 5. What is the purpose of providing depreciation for fixed assets in accounts? A B C D To manipulate the profit. To allocate the cost of fixed assets to the periods expected to benefit from their use. To build up funds to replace fixed assets as they become fully depreciated. To record the losses due to decreases in market values. 6. Which of the following are purposes of an accounting system? (1) Interpret and record the effects of business transactions. (2) Classify the effects of transactions to facilitate the preparation of reports. (3) Summarise and communicate information to decision makers. (4) Dictate the specific types of business that the firm may engage in. A B C D (1), (2) and (3) only (1), (2) and (4) only (2), (3) and (4) only All of the above 7. A $100 cash purchase of stationery was posted as a debit to salary expense and a credit to cash. This error will A cause the sum of the total debits to exceed the sum of the total credits in the trial balance by $100. B cause the sum of the total credits to exceed the sum of the total debits in the trial balance by $100. C not affect the balancing of the trial balance. D cause the trial balance to be out of balance by $200. 8. A $500 cash receipt from a credit customer was recorded as a debit to accounts payable and a credit to cash. This error will cause A accounts receivable to be overstated by $1,000. B accounts payable to be overstated by $500. C cash to be understated by $1,000. D cash to be understated by $500. 9. If an adjustment for accrued wages is not made at the year end, the net profit will be A B C D understated. overstated. unaffected. unable to determine. Page 2 of 13
10. The prepaid rates account shows a beginning balance of $5,600 and an ending balance of $6,500. During the year, cash of $13,200 was paid for rates. What is the rates expense to be shown on the current year s profit and loss account? A $12,300 B $13,200 C $14,100 D $25,300 11. If revenue expenditure is erroneously recorded as capital expenditure, the effect will A B C D overstate net profit, owner s equity and assets. understate net profit, owner s equity and assets. overstate net profit, owner s equity and understate assets. understate net profit, owner s equity and overstate assets. 12. Which of the following are expenses of a partnership? (1) Loan interest paid to one of the partners (2) Advertising of the partnership (3) Salaries paid to the partners (4) Interest on capital to the partners A B C D (1) and (2) only (1), (2) and (3) only (2) only All of the above 13. The accruals concept means that, when preparing accounts, A B C D items should normally be accounted for in a manner consistent with the way in which they were accounted for previously. profits should not be anticipated and losses should be provided for as soon as they are foreseen. the firm for which the accounts are being prepared should be assumed to continue in operational existence for the foreseeable future at a scale of operation not significantly less than the current scale of operation. revenues and costs are recognised as they are earned or incurred, not as money is received or paid. 14. Which of following will not alter the total net assets of a business? A B C D Charging depreciation on fixed assets. Additional capital contributed by the owner. Payments of interest to loan creditor. Receipts from trade debtors. Page 3 of 13
15. What does prime cost consist of? (1) All direct factory costs (2) All indirect factory costs (3) All administrative expenses (4) All selling expenses A B C D (1) only (1) and (2) only (1), (2) and (3) only All of the above (Questions 16 to 20 each carry 2 marks, total 10 marks) 16. Beluga Limited bought a new machine from an overseas supplier at a price of $56,200. Beluga also paid import duty of $2,000 and delivery charges of $1,820 on the new machine as well as $2,200 to install the machine in the factory. After the machine had been used for a month, it was cleaned and lubricated at a cost of $1,500. What is the total cost of the new machine to be recorded in the books of Beluga Limited? A $58,200 B $60,020 C $62,220 D $73,720 17. The total sales for the month of December 2000 of Starfish Company was $500,000, while its gross profit margin and net profit margin were 25% and 10% respectively. What was its cost of goods sold for December 2000? A $50,000 B $125,000 C $375,000 D $450,000 18. The owner s equity and total assets of Oyster Limited were $60,000 and $150,000 respectively at the beginning of the year. Assets increased by 60% and liabilities decreased by 60% during the year. What is its owner s equity at the end of the year? A $156,000 B $174,000 C $186,000 D $204,000 19. Manatee Ltd purchased a motor vehicle for $300,000 on 1 January 1998. The residual value of the motor vehicle is $30,000 and its estimated life is six years. What is the net book value of the motor vehicle at the end of 31 December 2000, after recording depreciation for the year using the straight-line method? Page 4 of 13
A $210,000 B $180,000 C $165,000 D $135,000 20. Penguin Limited s manufacturing account for the year ended 31 December 2000 shows the following information: Prime cost $100,000 Factory overheads $300,000 Work in progress, 1 January 2000 $30,000 Work in progress, 31 December 2000 $20,000 What is the cost of production of finished goods? A $350,000 B $390,000 C $410,000 D $450,000 (Total 25 marks) [ END OF SECTION A ] Page 5 of 13
SECTION B (ANSWER THREE QUESTIONS ONLY) (75 marks) Answer any THREE questions in this section. Each question carries 25 marks. 1. The summarised final accounts of Blue Whale Limited for the years 1999 and 2000 are as follows: Balance sheets as at 31 December 2000 1999 $ 000 $ 000 $ 000 $ 000 Fixed assets 2,900 3,400 Less: Provision for depreciation 1,120 960 1,780 2,440 Current assets Inventories 454 90 Trade debtors 3,900 2,550 Bank 10 4,364 50 2,690 Less: Current liabilities Trade creditors 900 680 Provision for tax 140 30 Proposed dividend 200 80 Bank overdraft 604 1,844 260 1,050 Net current assets 2,520 1,640 4,300 4,080 Financed by: Ordinary shares of $1 each, fully paid 3,300 3,000 Retained profit 400 280 3,700 3,280 Long term liabilities 8% debentures 600 800 4,300 4,080 Trading and profit and loss accounts for the year ended 31 December 2000 1999 $ 000 $ 000 $ 000 $ 000 Sales 8,000 6,000 Less: Cost of goods sold: Opening inventories 90 110 Add: Purchases 5,164 3,580 5,254 3,690 Less: Closing inventories 454 4,800 90 3,600 Gross profit 3,200 2,400 Operating expenses (excluding interests) 2,000 1,600 Profit before interest and tax 1,200 800 Interest expenses 480 640 Profit before tax 720 160 Taxation 140 30 Profit after tax 580 130 Page 6 of 13
Dividend paid and proposed 460 120 Retained profit for the year 120 10 Additional information: (a) All sales and purchases were on credit terms. (b) No new fixed assets were acquired during 1999 or 2000. (c) The following ratios had been calculated for the 1999. (i) gross profit to sales percentage 40% (ii) net profit to sales percentage 13.3% (iii) return on capital employed 19.6% (iv) assets turnover ratio 1.5 (v) current ratio 2.6 (vi) acid test ratio 2.5 (vii) inventory turnover ratio 10.1 days (viii) debtors collection period 155.1 days (ix) creditors repayment period 69.3 days (x) gearing ratio 19.6% (xi) interest cover ratio 1.3 times REQUIRED: (a) Calculate (to 1 decimal place) the following ratios for the company for 2000: (i) gross profit to sales percentage (ii) net profit to sales percentage (iii) return on capital employed (iv) assets turnover ratio (v) current ratio (vi) acid test ratio (vii) inventory turnover ratio (viii) debtors collection period (ix) creditors repayment period (x) gearing ratio (xi) interest cover ratio. (11 marks) (b) Comment on the financial performance of the company for 2000 in terms of (i) profitability and use of assets; (ii) short term liquidity; and (iii) long term solvency, based upon the ratios you have calculated in (a) above and the information provided in the question. (14 marks) (Total 25 marks) Page 7 of 13
2. Susan Lang and Helen Lee are partners sharing profits and losses in the ratio 3:2 respectively. Their balance sheet at 31 December 2000 was as follows: Balance sheet as at 31 December 2000 $ 000 $ 000 $ 000 Fixed assets Plant and machinery 100 Fixtures and fittings 44 144 Current assets Inventories 72 Trade debtors 48 120 Less: Current liabilities Trade creditors 34 Bank overdraft 24 58 62 206 Capital: Susan Lang 153 Helen Lee 53 206 On 1 January 2001, the partners decided to admit Jamie Wong, the marketing manager, as a new partner. Jamie Wong introduced $40,000 into the business on that date. Susan Lang, Helen Lee and Jamie Wong would then share profits in the ratio 3:2:1 respectively. The three partners agreed that the assets were to be revalued and goodwill adjusted between the old partners at the date of admission of Jamie Wong. The assets were revalued as follows: $ 000 Plant and machinery 120 Fixtures and fittings 40 Inventories 64 Trade debtors 45 Goodwill was valued at $30,000 and was not to be retained in the books of the new partnership. It was agreed that the fixed capital of the partners should be maintained in proportion with their profit-sharing ratio which was based on Jamie Wong s capital account balance after the goodwill adjustment. Any surplus or deficit from the capital accounts of Susan Lang and Helen Lee were to be transferred to their current accounts respectively. Page 8 of 13
REQUIRED: (a) What is goodwill? Explain briefly. (2 marks) (b) Prepare the following accounts to record the admission of Jamie Wong on 1 January 2001: (i) revaluation account (6 marks) (ii) capital accounts, including entries for the new partner, Jamie Wong. (10 marks) (c) Prepare the balance sheet for the new partnership as at 1 January 2001. (7 marks) (Total 25 marks) Page 9 of 13
3. (a) The bank column of the cash book of Dolphin Limited for the month ended 31 December 2000 showed a credit balance of $143,760 which did not agree with the company s bank statement for the same period. During your investigation of the difference, the following facts are revealed: (1) A receipt from Victor Chan relating to a credit sale amounting to $199,000 was received on 30 December 2000 and immediately banked but no entry had been made in the books. The items appeared in the bank statement on 2 January 2001. (2) Two cheques for $950 and $5,120 respectively were drawn in December 2000 and correctly entered in the cash book, but had not been presented for payment by the bank at the end of 31 December 2000. (3) The receipts side of the cash book had been overcast by $1,500. (4) A cheque for $825 received from a customer was returned by the bank marked insufficient funds, but no corresponding entry had been made in the cash book. (5) A credit transfer amounting to $6,000 had been posted to the bank statement on 20 December 2000 from unidentifiable sources. Subsequent contact with the bank revealed that the credit belonged to another customer of the bank with a similar name. (6) Bank charges amounting to $965 had not been entered in the cash book. (7) Dividends amounting to $7,200 had been credited by the bank but not entered in the cash book. (8) A standing order payment for $1,100, entered on the bank statement, had been entered on the debit side of the cash book. (9) A cheque for $527, drawn by another customer of the bank, had been charged to Dolphin Limited s business bank account erroneously. (10) A cheque for $1,200 received from a customer in settlement of his account had been entered in the cash book as $2,100. (11) A standing order for hire purchase repayments of $3,500 had been paid twice, in error, by the bank. No entry had been made in the books for either of the payments. REQUIRED: (i) Prepare the necessary adjustments in the cash book of Dolphin Limited, bringing down the adjusted balance on 31 December 2000. (10 marks) Page 10 of 13
(ii) Using the adjusted cash book balance in (a) above, prepare a bank reconciliation statement showing the adjusted bank statement balance (after adjustments of bank errors) and the original bank statement balance (before adjustment of bank errors) as at 31 December 2000. (9 marks) (b) Qualitative characteristics of financial statements are the attributes that make the information provided in financial statements useful to users for assessing the financial position, performance and cash flow of an enterprise. The four principal qualitative characteristics are identified as understandability, relevance, reliability and comparability. REQUIRED: Explain briefly any three out of the four principal qualitative characteristics. (6 marks) (Total 25 marks) Page 11 of 13
4. The following balances have been extracted from the books of Jellyfish Limited as at 31 December 2000: $ $ 10% debentures (issued in 1998) 50,000 Accountancy fees 12,000 Bad debts 3,000 Bank 134,050 Business registration fee 2,250 Cash 1,500 Cost of goods sold 180,000 Debenture interest paid 2,500 Debtors and creditors 41,000 32,800 Directors remuneration 25,000 Discounts 4,000 5,000 Electricity 17,000 General reserves 60,000 Interim dividend paid 30,000 Inventory at 31 December 2000 16,000 Legal fees 8,500 Motor vehicles : at cost 120,000 accumulated depreciation 22,800 Office equipment : at cost 200,000 accumulated depreciation 20,000 Ordinary shares of $0.50 each 200,000 Profit and loss account at 1 January 2000 15,000 Provision for doubtful debts 1,000 Rent and rates 36,000 Sales 500,000 Share premium 5,000 Transportation 6,800 Wages and salaries 72,000 911,600 911,600 Additional information: (1) Depreciation is to be charged as follows: Office equipment 10% per annum on a straight-line basis Motor vehicles 10% per annum on a reducing balance basis (2) The following adjustments are to be made on 31 December 2000: $ Accrued wages and salaries 3,600 Accrued audit fee 8,000 Prepaid rent and rates 3,000 Provision for doubtful debts is to be maintained at 3% of trade debtors. Page 12 of 13
(3) The directors resolved to transfer $10,000 to the general reserve and to propose a final dividend of 10 cents per ordinary share. (4) The estimated profits tax liability for the year to 31 December 2000 is $14,700. REQUIRED: (a) Prepare the trading, profit and loss account (including appropriation section) of Jellyfish Limited for the year ended 31 December 2000. (15 marks) (b) Prepare the balance sheet of the company as at the same date. (10 marks) (Total 25 marks) [ END OF PILOT EXAMINATION PAPER ] Page 13 of 13
Accounting Technician Examinations Pilot Examination Paper Level I Paper 1 Financial Accounting Suggested Answers and Marking Scheme
SECTION A (MULTIPLE CHOICE QUESTIONS) (25 marks) (Questions 1 to 15 each carry 1 mark, total 15 marks) 1. B 2. B 3. B 4. C 5. B 6. A 7. C 8. C 9. B 10. A 11. A 12. A 13. D 14. D 15. A (Questions 16 to 20 each carry 2 marks, total 10 marks) 16. C 17. C 18. D 19. C 20. C (Total 25 marks) Page 1 of 9
SECTION B (ANSWER THREE QUESTIONS ONLY) (75 marks) 1. (a) (All in $ 000) 2000 (i) Gross profit to sales percentage: 3,200 100% Gross profit sales 100% 8,000 = 40% (ii) Net profit to sales percentage: 1,200 100% Profit before interest and tax sales 100% 8,000 = 15% (iii) Return on capital employed: 1,200 100% Profit before interest and tax capital employed 100% 4,300 = 27.9% (iv) Assets turnover: 8,000 Sales capital employed 4,300 = 1.9 (v) Current ratio: 4,364 Current assets current liabilities 1,844 = 2.4 (vi) Acid test ratio: 4,364 454 (Current assets inventories) current liabilities 1,844 = 2.1 (vii) Inventory turnover ratio: (90 + 454) 0.5 365 Average inventory cost of goods sold 365 days 4,800 = 20.7 days (viii) Debtors collection period: 3,900 365 Debtors sales 365 days 8,000 = 177.9 days (ix) Creditors repayment period: 900 365 Creditors purchases 365 days 5,164 = 63.6 days (x) Gearing ratio: 600 100% Long-term liabilities Long-term liabilities + 4,300 shareholders funds 100% = 13.9% (xi) Interest cover: 1,200 100% Profit before interest and tax interest 480 = 2.5 times Page 2 of 9
(b) Profitability and use of assets (1 mark each, total 11 marks) The company was successful in raising its sales in 2000 while maintaining the same gross profit to sales percentage as in 1999 at 40%. The increase in net profit to sales percentage from 13.3% in 1999 to 15% in 2000 was possibly due to better cost controls and/or cost reduction in operating expenses, thus leading to greater profit before interest and tax. [3 marks] The company was more efficient in utilising its assets base in generating sales as evidenced by the increase in asset turnover ratio from 1.5 in 1999 to 1.9 in 2000. The shareholders should be delighted to see the improvement in profitability in that the return on capital employed increased from 19.6% in 1999 to 27.9% in 2000. [3 marks] Short-term liquidity The inventory turnover ratio increased from 10.1 days in 1999 to 20.7 days despite the increase in sales. This was because of the change of stock holding policy to maintain a higher inventory level to meet increased sales. The debtors collection period stood high at 155.1 days and further rose to 177.9 days in 2000. On the other hand, the creditors repayment period fell from 69.3 days in 1999 to 63.6 days in 2000. Both changes had adverse effects on the company s cash flow. [3 marks] Both the current ratio and the acid test ratio deteriorated in 2000. The current ratios dropped marginally from 2.6 in 1999 to 2.4 in 2000, while the acid test ratio dropped from 2.5 in 1999 to 2.1 in 2000. Nevertheless, the company still had sufficient liquid assets to meet current liabilities. [2 marks] Long-term solvency The company issued additional ordinary shares in 2000 to provide funds to redeem part of the 8% debenture and thus lower the gearing ratio from 19.6% in 1999 to 13.9% in 2000. In fact, the company had a very low gearing ratio with improving interest cover in 2000 which implied good long-term stability. The interest cover improved from 1.3 times in 1999 to 2.5 times in 2000. [3 marks] (14 marks) (Total 25 marks) Page 3 of 9
2. (a) Goodwill is the difference between the value of a business as a whole and the aggregate of the fair values of its separable net assets. (2 marks) (b) (i) Revaluation account Marks $ 000 $ 000 Marks Fixtures and fittings Plant and machinery [1] (44 40) 4 (120 100) 20 [1] [1] Inventories (72 64) 8 [1] Trade debtors (48 45) 3 Capital accounts [1] Susan Lang 3 [1] Helen Lee 2 20 20 (6 marks) (ii) Capital account Susan Lang $ 000 $ 000 [0.75] Goodwill adjustment 15 Balance b/d 153 [0.5] [0.75] Transferred to current account 54 Profit on revaluation 3 [0.5] [0.75] Balance c/d 105 Goodwill adjustment 18 [0.75] 174 174 (4 marks) Capital account Helen Lee $ 000 $ 000 [0.75] Goodwill adjustment 10 Balance b/d 53 [0.5] [0.75] Balance c/d 70 Profit on revaluation 2 [0.5] Goodwill adjustment 12 [0.75] Transferred to current account 13 [0.75] 80 80 (4 marks) Capital account Jamie Wong $ 000 $ 000 [1] Goodwill adjustment 5 Bank 40 [0.5] [0.5] Balance c/d 35 40 40 (2 marks) Page 4 of 9
(c) Susan Lang, Helen Lee and Jamie Wong Balance sheet as at 1 January 2001 $ 000 $ 000 Marks Fixed assets Plant and machinery 120 [0.5] Fixtures and fittings 40 [0.5] 160 Current assets Inventories 64 [0.5] Trade debtors 45 [0.5] Bank (40 24) 16 [1] 125 Current liabilities Trade creditors 34 [0.5] Net current assets 91 251 Capital accounts Susan Lang 105 [0.5] Helen Lee 70 [0.5] Jamie Wong 35 [0.5] 210 [0.5] Current accounts Susan Lang 54 [0.5] Helen Lee (13) [0.5] 41 [0.5] 251 (7 marks) (Total 25 marks) Page 5 of 9
3. (a) (i) Cash book (bank column) Marks $ $ Marks [1] Victor Chan (1) 199,000 Balance b/d 143,760 [0.5] [1] Dividend income (7) 7,200 Overcast of receipts side (3) 1,500 [1] Dishonoured cheque 825 [1] (4) Bank charges 965 [1] Payment wrongly debited (8) (1,100 2) 2,200 [1.5] Posting error (10) (2,100 1,200) 900 [1.5] Hire purchase repayment (11) 3,500 [1] Balance c/d 52,550 [0.5] 206,200 206,200 (10 marks) (ii) Bank reconciliation statement as at 31 December 2000 $ $ Balance as per adjusted cash book 52,550 [1] Add: Unpresented cheques (2) (950 + 5,120) 6,070 [2] 58,620 Less: Uncredited deposit (1) 199,000 [1] Balance as per adjusted bank statement (overdraft) (140,380) [1] Add: Bank error- credit transfer (5) 6,000 [1] (134,380) Less: Bank error cheque drawn by mistake (9) 527 [1] Bank error Hire purchase repayments paid twice (11) 3,500 [1] 4,027 Balance as per original bank statement (overdraft) (138,407) [1] (9 marks) (b) Understandability. An essential quality of the information provided in financial statements is that it is readily understandable by users. For this purpose, users are assumed to have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information with reasonable diligence. Relevance. To be useful, information must be relevant to the decision-making needs of users. Information has the quality of relevance when it helps users to evaluate past, present or future events, or confirms, or corrects, past evaluations. Page 6 of 9
Reliability. Information has the quality of reliability when it is free from material error and bias and can be depended upon to represent faithfully that which it either purports to represent or could reasonably be expected to represent. Comparability. Users must be able to compare the financial statements of an enterprise over time to identify trends in its financial position and performance. Users must also be able to compare the financial statements of different enterprises in order to evaluate their financial position, performance and cash flows. It is therefore necessary for like transactions and other events to be presented in a consistent manner. (2 marks each, any three, total 6 marks) (Total 25 marks) Page 7 of 9
4. (a) Jellyfish Limited Trading and profit and loss account for the year ended 31 December 2000 Marks $ $ Sales 500,000 [0.5] Less: Cost of goods sold 180,000 [0.5] Gross profit 320,000 [0.5] Add: Discounts received 5,000 [0.5] 325,000 Less: Operating expenses Accountancy fees 12,000 [0.5] Audit fee 8,000 [0.5] Bad debts 3,000 [0.5] Business registration fee 2,250 [0.5] Debenture interest (50,000 10%) 5,000 [0.75] Directors remuneration 25,000 [0.5] Discounts allowed 4,000 [0.5] Electricity 17,000 [0.5] Legal fees 8,500 [0.5] Provision for depreciation Office equipment (200,000 10%) 20,000 [0.75] Motor vehicles [(120,000 22,800) 10%] 9,720 [0.75] Provision for doubtful debts (41,000 3% 1,000) 230 [0.75] Rent and rates (36,000 3,000) 33,000 [0.75] Transportation 6,800 [0.5] Wages and salaries (72,000 + 3,600) 75,600 [0.75] 230,100 Net profit before taxation 94,900 [0.5] Profits tax 14,700 [0.5] Profit after taxation 80,200 [0.5] Appropriation: Transfer to general reserves 10,000 [0.5] Ordinary dividend interim 30,000 [0.5] final (200,000 0.5 0.1) 40,000 [1] 80,000 Retained profit for the year 200 [0.5] Retained profit brought forward 15,000 Retained profit carried forward 15,200 (15 marks) Page 8 of 9
(b) Jellyfish Limited Balance sheet as at 31 December 2000 $ $ $ Marks Fixed assets Office equipment, at cost 200,000 Less: Provision for depreciation 40,000 Motor vehicles, at cost 120,000 Less: Provision for depreciation 32,520 160,000 [1] 87,480 [1] 247,480 Current assets Inventories 16,000 [0.5] Debtors 41,000 Less: Provision for bad and doubtful debts 1,230 39,770 [1] Prepayments 3,000 [0.5] Bank 134,050 [0.5] Cash at bank 1,500 [0.5] 194,320 Current liabilities Creditors 32,800 [0.5] Accrued expenses (3,600 + 8,000 + 2,500) 14,100 [1] Taxation payable 14,700 [0.5] Dividends payable 40,000 [0.5] 101,600 Net current assets 92,720 340,200 Financed by: Ordinary share capital 200,000 [0.5] Share premium 5,000 [0.5] Retained profit 15,200 [0.5] General reserves (60,000 + 10,000) 70,000 [0.5] 290,200 Long-term liabilities 10% debentures 50,000 [0.5] 340,200 (10 marks) (Total 25 marks) END Page 9 of 9