HONG KONG TAOIST ASSOCIATION

TANG HIN MEMORIAL SECONDARY SCHOOL

(2021 - 2022) Mock Examination
S.6 Business, Accounting and Financial Studies (BAFS)

Paper II

Question Paper

Date : 11 – 02 – 2022
Time : 10:15 a.m. – 12:30 p.m. (135 minutes)
Marks : 80 marks

Name : _______________________

Class : _______ ( X1 / X2 / X3 )

Class no.: ________

 There are THREE sections in this paper:

 All questions in Section A are compulsory. You are required to answer two of the three questions in
Section B and one of the two questions in Section C.
 All workings must be shown.
 Marks are awarded for clarity of expression and neatness of presentation.
 There are altogether 11 pages in this question paper.

Section Max marks

A Q1 7
Q2 9
Q3 8
B Q4 12
Q5 12
Q6 12
C Q7 20
Q8 20

Provided by pastpaper_king
THMSS / 2021-2022 / S.6 / BAFS / Mock Examination / Paper II / Question Paper
P.1
Section A (24 marks, weighing 30%)
Question 1 (7 marks)

(i) The director would like to include skills and competence of employees as assets in the Statement
of Financial Position

State the accounting principle or concept which has been violated. (1 mark)

(ii) In order to provide the most accurate accounting information, as there was a court case for Boss
Company which may result to a loss of the company. The company published their final
financial results on 28 February 2022 for the financial year ended 31 March 2021.

State the accounting principle or concept which has been violated. (1 mark)

(iii) Fashion Company Ltd. operates a chain of retailing shops. The yearly sales and net profits
amounted to 85 million and 6 million for financial year ended 31 December 2020. In June, 3
sales staff were found stealing goods from a shop in Mongkok. The total loss were amounted to
$4,250. The accountant recorded the inventory loss in sundry expenses account.

State and explain if any accounting principle or concept which has been violated. (2 marks)

(iv) Water World Sports Club organizes various sports classes for children. $98,400 fees for
swimming classes were received in December 2020. The swimming lessons were to be
conducted from 1 January 2021 to 31 March 2021. The sole proprietor, Mr. Wong, recorded all
the amount received as fees income for the financial year ended 31 January 2021.

State and explain if any accounting principle/concept is violated by Mr. Wong. (3 marks)

Provided by pastpaper_king
THMSS / 2021-2022 / S.6 / BAFS / Mock Examination / Paper II / Question Paper
P.2
Question 2 (9 marks)

The following items are the transactions for a trading company owned by Mandy. The shop
maintained cash book, Purchases Journal, Sales Journal, Sales Returns Journal, Purchases Returns
Journal and General Journal in the books.

Item Date Transaction

2020
i) Jan 1 Bought goods $28,000 on cash from Lucy Limited.
ii) Feb 1 Mandy drew goods ($700 at purchases invoice or $1,200 at selling price) for
personal use.
iii) Feb 15 Bought goods $80,000 from Benny Limited on credit. Less 5% trade
discount and 8% cash discount will be received if it was settled within 2
months.
iv) Mar 2 Sold goods on credit to Cindy Limited $7,500.
v) Mar 4 Mandy settled the amount due to Benny Limited by her personal cheque.
vi) Mar 15 Return 20% goods to Benny Limited as it was damaged. Received a
document from Benny Ltd.

Required
a) Identify the books of original entry for item i) to vi) (3 marks)

b) For the transactions with Benny Limited, (4 marks)

I) Identify the source document for Mar 15.
II) State which ledger should the account of Benny Limited locate.
III) Prepare ledger account of Benny Limited for the period 1 January to 31 March 2020 and
balancing off on 31 March 2020.

c) Identify the amount should be posted in Feb 1, explain which accounting principle governing
your choice. (2 marks)

Provided by pastpaper_king
THMSS / 2021-2022 / S.6 / BAFS / Mock Examination / Paper II / Question Paper
P.3
Question 3 (8 marks)

The following items are the transactions for a Car Importer for the year ended 31 October 2020.
Item Date Transaction
2020
e.g. Jan 1 Bought furniture $18,000 and stationery $3,100 on credit
i) Feb 1 Bought three motor vehicles $88,000 each.
ii) Feb 1 Paid a deposit $700,000 for acquiring an apartment. The remaining 65% was
to be settled by bank loan. $20,000 legal cost and $12,000 stamp duty was
paid.
iii) Mar 1 Bought four identical machine at $10,000 each. Import duty $10,000 and
training cost $4000 was paid on the same date.
iv) May 1 Painting and decoration for the apartment, acquired in February, $70,000 was
paid and the apartment was ready for use on Aug 1. Annual Management fee
$21,000 to 30 July 2021 was paid by cheque.

Required
a) Copy the following table, identify the amount of capital and revenue expenditure for each items
for the year ended 31 October 2020. (4 marks)
Capital expenditure Revenue expenditure
e.g. $18,000 $3,100
i)
ii)
iii)
iv)

b) The apartment acquired on February 1 was expected to use 25 years. Calculate the depreciation
expense by straight line method of the apartment for the year ended 31 October 2020 (1 marks)

One of the machine bought on 1 March 2020 was broken down, the machine was disposed on 1
August 2021 for $6,060 after $1,500 was paid for repairs. Company decided to use reducing balance
method at the rate of 30% to calculate depreciation.

c) Prepare the disposal account as at 1 August 2021. (3 marks)

Provided by pastpaper_king
THMSS / 2021-2022 / S.6 / BAFS / Mock Examination / Paper II / Question Paper
P.4
Question 6 (12 marks)

MMN Limited prepared the account for the year ended 31 March 2021, the following are the extract
of current assets in the Statement of Financial Position as at 31 March 2021. Goods were normally
mark up at 60% and 5% has been provided for general allowance for doubtful debts.
Current assets $
Inventory 216,500
Net trade receivable 178,600
Cash at bank ? / (?)
Prepaid insurance expenses (ii) 5,500

Current liabilities
Trade payable 100,800
Accrued rental expenses 28,000

Subsequent investigation revealed the following information:

A) Cash at bank component
i) The bank statement was received on 4 April 2021, showing the debit balance of $17,030 at 31
March 2021.

ii) Direct debit of rent $42,000 for the three-month ended 30 April 2021 had not been entered in the
books.

iii) There are two cheques not yet presented by the bank. One is paid for annual insurance to 1
March 2022 was issued on 28 March 2021 but not yet presented by the bank. Another one is
paid for a supplier $8,080 issued on 24 August 2020 which has been expired.

B) Inventory Component
iv) The Inventory taking was taken place on 6 April 2021 valued at $216,500. During 1 April to 5
April, sales, purchases and returns inwards were $92,000, $80,400 and $4,600 respectively.
20% of the goods sold in this period was sold at 40% special discount as it was outdated and for
stock clearance.

v) A batch of goods costing $51,500 was sent to a customer, Mary, on a sales-or-return basis on 10
March 2021. It was recognized as full credit sales on 1 March 2021. As at 31 March 2021,
Mary accepted 65% of the goods only. Until 31 March 2021, Mary remained unpaid for the
goods.

Required
a) Prepare a Bank reconciliation Statement as at 31 March 2021 starting from the bank statement
balance to unadjusted cash book balance. (3 marks)

b) Prepare a statement showing the correct value of inventory as at 31 March 2021. (5 marks)

c) Prepare a Statement to calculate total current assets as at 31 March 2021. (3 marks)

Adjusted total current liability as at 31 March 2021 is $131,910.

Required
d) Calculate quick ratio as at 31 March 2021. (1 mark)

(Correct to 2 decimal places)

Provided by pastpaper_king
THMSS / 2021-2022 / S.6 / BAFS / Mock Examination / Paper II / Question Paper
P.7
Section C (20 marks, weighing 25%)

Answer one question in this section

Question 7
So and Yeung were partners sharing profit and loss in the ratio 2:3. Goods were sold at mark-up of
20%. The following accounting information was extracted from the books of the partnership as at 31
March 2021 (at the end of the financial year):
Dr. Cr.
$ $
Capital: So 400000
Capital: Yeung 350000
Current: So 18500
Current: Yeung 28947
Furniture (net) (all purcased on 1 April 2015) 262000
Inventories 274500
Cash at bank 99922
Trade receivables 123625
Goodwill 28000
Suspense 19400
798347 798347

Additional information:
(i) On 20 March 2021, Ho Ho company sent free samples to the partnership. These samples were
valued at $4,600 and the book-keepers wrongly included the value of free samples into the
closing inventory.

(ii) Accrued rent balance $19,400 had not been brought down in the rent account as at 1 April 2020.

Required:
(a) Prepare journal entries to correct errors (i) and (ii). (3 marks)

Provided by pastpaper_king
THMSS / 2021-2022 / S.6 / BAFS / Mock Examination / Paper II / Question Paper
P.8
On 1 April 2021, Yeung retired and Tse was admitted on the following terms:
(i) Furniture were revalued downward by $18,000 and there was no change to useful life of them.

(ii) Allowance for doubtful accounts was to be made at 4%.

(iii) Goodwill was to be revalued at $40,000. No goodwill account was to be maintained in new
partnership’s books.

(iv) Tse was to bring in an equipment at agreed value of $55,000 and the estimated useful life of it
was 5 years. Tse would also introduce $100,000 in cheques as his capital.

(v) So was to withdraw money so that capital account balance of So and Tse would be in the ratio 2:1.
So and Tse were to share profit and loss equally.

(vi) Balance of Yeung’s capital was to be retained as a 5% loan to the new partnership.

Required:
(b) Prepare revaluation account. (2 marks)
(c) Prepare capital accounts in columnar form on changes of the partnership on 1 April 2021. (5
marks)

During the year ended 31 March 2022, the partnership made a net loss of $48,455 before charging
loan interests and depreciation of non-current assets. The old partnership had charged depreciation of
furniture at 10% on costs. The new partnership continued to adopt straight line method on
depreciation of all non-currents.

Some account balances were extracted from books:

$
Cash at bank 328,252
Inventories 162,400
Trade receivables 92,500
Allowance for doubtful accounts 3,700
Trade payables 153,200
On 31 March 2022, the partners had serious disagreement and decided to dissolve the partnership on
the following terms:

(i) Tse took over all the inventories at only $100,000 as he was personally responsible to settle
$50,000 trade payables. Partnership settled the remaining trade payables by cash and a 2%
discount was received.

(ii) Furniture and equipment were sold for a total of $185,000.

(iii) Cash discount of $2,100 was allowed to trade debtors and $3,500 trade debts were uncollectible.

Required:
(d) Prepare realization account (5.5 marks)
(e) Prepare capital accounts of partners in columnar form to show changes required in the dissolution.
(4.5 marks)

Provided by pastpaper_king
THMSS / 2021-2022 / S.6 / BAFS / Mock Examination / Paper II / Question Paper
P.9
Question 8 (20 marks)

Flashy Ltd is engaged in trading of sportswear. It has issued 62,500 ordinary shares at $8 each since
its incorporation. Goods are sold at uniform margin of 40%. A burglary happened in March 2020.
Some sportswear were stolen and some accounting records were damaged. The following information
relating to year ended 31 March 2020 was available:

Some accounts balances were extracted from books:

31 Mar 2019 31 Mar 2020

$ $
Cash 3300 ?
Inventories 250000 ?
Trade receivables 62000 48000
Equipment (net) 650000 ?
Prepaid rent (1 month) 9000 0
Bank overdraft 21000 ?
Trade payables 19500 ?
Deposits paid to a equipment supplier (i) 24000 0

Additional Information:
i. The deposits were paid for an equipment to be delivered on 1 June 2019. The new equipment
delivered on schedule.

ii. Physical stock taking showed that stock on 31 March 2020 amounted to 136,000 which was
after writing down the value of 20 obsolete T-shirts from costs of $400 each to its estimated
salable value of $350 each. Insurance company agreed to compensate 60% of inventory stolen.

iii. Bank statements indicated bank balance was $374,720 as at 31 March 2020. The bank statements
also revealed the following summarized amounts for the year ended 31 March 2020:
$
Receipts:
Cheques from credit customers 1310000
Cash sales 184000

Payments:
Administrative expenses 210000
Purchase of a equipment (i) 51000
Trade payables ?

iv. A cheque for $28,200 received from a trade debtor had not yet presented by bank

v. Cash sales were all banked after paying rent $20,000. The other receipts and payments were
recorded in company bank account.

vi. Administrative expenses included rent paid $77,000. Monthly rent increased by $1,000 since 1
August 2019.

vii. Debit note received amounted to $35,300 during the year ended 31 March 2020.
Provided by pastpaper_king
THMSS / 2021-2022 / S.6 / BAFS / Mock Examination / Paper II / Question Paper
P.10
viii. All purchases were on credit basis and credit purchases amounted to $855,300 for the year. Trade
payables turnover was 30 times

ix. The firm had the policy of depreciating equipment using reducing balance method at 20% per
annum. Rent and equipment depreciation expenses are grouped into administrative expenses.

x. Profits tax amounted to $15,300 were to be provided and the board of directors declared
dividends of 20 cents on 15 April 2020.

Required:
(a) Prepare income statement for the year ended 31 March 2020 (10 marks)
(b) Prepare statement of financial position as at 31 March 2020. (10 marks)

~ End of Paper ~

Provided by pastpaper_king
THMSS / 2021-2022 / S.6 / BAFS / Mock Examination / Paper II / Question Paper
P.11