Business, Accounting and Financial Studies

Mock Exam Paper 1 (Set B)

SECTION B (30 marks)

Part 1 (20 marks) Answer ALL questions in this part.

1. (a) Classify the following transactions into different types of books of original entry:
(i) Withdrew inventories by owner
(ii) Issued a debit note for goods returned
(iii) Bought furniture for company use by cheque
(3 marks)

(b) The owner of Able Company is dissatisfied with the poor performance of his company and
wants to merge it with his other company, Brilliant Company, in order to improve the
performance of Able Company. Identify and explain the accounting principle or concept
that is violated in the above situation. (3 marks)

2. In the marketing department of a company, the manager had decided the goal of his department
was “achieving a significant growth in sales performance within this quarter” by himself without
negotiating with any subordinates or colleagues.

(a) Which leadership style does the marketing manager use in the above case? Under what
situations should the company not use this type of leadership style? State two of them.
(3 marks)

(b) Why the goals set by the marketing manager cannot be attained? Explain with one reason.
(2 marks)

3. Larry is an experienced and famous chef in a famous Chinese restaurant, operating in a

partnership. Larry is also the partner, who had contributed a little capital to the partnership, but
with no right to the management. Recently, he decides to resign and joins a franchise restaurant
chain.

(a) Which type of partner is Larry? (1 mark)

(b) Why Larry would join a franchise even though he is famous in his field? Explain why.
(4 marks)

2021-DSE MOCK SET B 1-1 1

Business, Accounting and Financial Studies
Mock Exam Paper 1 (Set B)

4. Locus Company is considering invest in one of these projects, which have the following cash flow
patterns. The cost of capital is 5% per annum.

Year Project A Project B

0 -$12,000 -$12,000
1 +$4,000 +$3,000
2 +$4,000 +$4,000
3 +$4,000 +$5,000

(a) What is the meaning of net present value? (1 mark)

(b) Which project should Locus Company invest in? Support your answer with calculations.
(Correct to the nearest dollar.) (3 marks)

Part 2 (10 marks) Answer ONE question in this part.

5. Jessica sells health products to clinics. The following balances were obtained from the books of as
at 31 March 2015:
$
Cost of goods sold 45,430
Inventory, as at 31 March 2015 7,450
Office equipment 27,600
Bank fixed deposit 10,000
Bank overdraft 8,000
Trade receivables 17,200
Rent 30,000
Sales 86,000
Trade payables 21,000
Capital, as at 31 March 2014 ?

(a) Prepare for Jessica the trial balance as at 31 March 2015. (6 marks)

Jessica considers to expanding her business to the mainland and her friend tells her that it is not
easy to set up a firm in the mainland.

(b) Explain two factors that would discourage the Jessica’s decision. (4 marks)

2021-DSE MOCK SET B 1-2 2

Business, Accounting and Financial Studies
Mock Exam Paper 1 (Set B)

6. The following is the statement of financial position for King Company as at 31 December:

2014 2015
$ $
Non-current assets
Furniture and fixtures 75,800 70,200

Current assets
Inventory 66,400 78,200
Accounts receivable 53,900 52,400
Bank 4,800 -
125,100 130,600

Less: Current liabilities

Accounts payable 61,000 56,700
Bank overdraft - 7,800
61,000 64,500

Net current assets 64,100 66,100

139,900 136,300

Capital
Balance as at 1 January 103,400 139,900
Add: Net profit 52,500 46,100
155,900 186,000
Less: Drawings 16,000 49,700
139,900 136,300

(a) Calculate (to two decimal places) the following accounting ratios for the year ended 31
December 2014 and 2015:
(i) current ratio
(ii) quick ratio
(iii) return on capital employed
(6 marks)

Many comment that small and medium enterprises (SMEs) will be superseded by multi-national
companies. However, SMEs can still compete with them in many ways.

(b) State and explain two of them. (4 marks)

END OF PAPER

2021-DSE MOCK SET B 1-3 3