Maryknoll Convent School

(Secondary Section)
Form 5 Final Examination 2020
Business, Accounting and Financial Studies

Name: ____________________ ( ) Time allowed: 1 hour 15 minutes

Class: ___________ Total marks: 55

Answer all questions.

Section A Short Questions (33 marks)

1. The trial balance as at 31 March 2019 for Bob failed to agree and a suspense account was opened to record
the difference. The following errors were subsequently discovered:
(i) Credit purchases for $5,000 had been overlooked by the bookkeeper and no record was made in
the books.
(ii) A receipt of $8,000 from interest revenue was credited to the interest expense account.
(iii) A rental payment for December 2018 amount to $9,000 was recorded as $900 in the books. The
bill would be settled in January 2019.
(iv) A payment for $8,800 to a supplier, Tom, had been entered in the cash book only.
(v) Discount allowed of $560 had been credited to the sales account as $650 and credited to trade
receivables as $560.
(vi) On 31 December 2018, Bob paid the company’s electricity bill of $5,000 by his personal cheque.
He thought he was just using his own asset and therefore made the following accounting entries:
Dr Electricity fee $5,000
Cr Bank $5,000

Required:
(a) Prepare the necessary journal entries to correct the above. Narrations are not required. (7 marks)
(b) Identify the type of error made in each of items (i), (ii) and (iii) above. (3 marks)
(c) Identify and explain the accounting principle or concept that has been violated in (vi) above. (3 marks)

(Total: 13 marks)

2. The financial year of Balloon Company ended on 31 December 2018. The business did not carry out the
stocktaking until 5 January 2019. On that day, the value of the inventory was found to be $156,000 at cost
price.

The following information was available:

(i) Sales made during 1 January 2019 to 5 January 2019 totalled $12,300.
(ii) All goods were sold at a uniform mark-up of 1/3.
(iii) Purchases invoices during 1 January 2019 to 5 January 2019 totalled $10,000.
(iv) Goods with a selling price of $500 had been sent to a customer on a sale or return basis on 26
December 2018. These goods were not sold as at 31 December 2018.

Required:
Calculate the correct inventory value as at 31 December 2018. (4 marks)

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3. Angel Company is a retail shop selling computer software. The balance of the company’s cash at bank
account as at 31 December 2018 amounted to $88,000 and did not agree with the bank statement balance
on that date. The following information relating to the financial year:

(i) A receipt in the cash at bank account for $3,700 had been wrongly recorded as payment by cheque
to a supplier and posted to the related personal account in sales ledger accordingly.
(ii) Interest income amounting to $5,300 had been credited by the bank but had not been recorded in
the company’s cash at bank account.
(iii) A credit transfer of $6,500, from a source unknown to the company and dated 15 December 2018,
was recorded in the bank statement. Subsequent investigation revealed that the transfer should
have been made to another customer of the bank with a similar name.
(iv) A debit of $9,260 was recorded in the bank statement for a dishonoured cheque.
(v) The cash at bank account included a post-dated cheque for $12,750 received from a customer. The
cheque was still kept in the cashier’s desk on 31 December 2018.
(vi) As at 31 December 2018, unpresented cheques amounting to $9,500 and a deposit of $58,200 had
not been recorded by the bank.

Required:
(a) Update the cash at bank account as at 31 December 2018. (5 marks)
(b) Write up a bank reconciliation statement as at 31 December 2018, commencing with the updated cash
at bank balance. (4 marks)
(Total: 9 marks)

4. On 10 March 2019, Queen Ltd announced the issue of $400,000 6% debentures at par, payable in full on
application and repayable 15 years later at par.

The debentures were over-subscribed by 40% and the application monies were received on 15 March 2019.
The debentures were issued on 1 April 2019, with the excess application monies refunded on the same date.
Interest is payable on 31 March and 30 September of each year.

Required:
(a) Prepare journal entries with narrations to record the above transactions for the year ended 31 December
2019. Narrations are not required. (5 marks)
(b) Suggest two other methods that Queen Ltd can use to raise funds. (2 marks)

(Total: 7 marks)

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Section B Long Questions (22 marks)

5. Sarah Tsoi’s business did not maintain proper accounting records. She was able to provide the following
information about her business for the year ended 31 December 2019:

(i) Transactions processed through the bank account:

$
Receipts:
Cash sales 320,000
Disposals of motor vehicles 180,000
Receipts from trade debtors 500,000
Bank loan 600,000
Payments:
Drawings 60,000
Motor vehicles 250,000
Payments to trade creditors 260,000
Insurance 12,300
Wages and salaries 27,000

(ii) Account balances as at 31 December 2018 and 31 December 2019:

31 Dec 2018 31 Dec 2019

$ $
Bank 88,000 Cr 902,700
Insurance 13,200 (prepaid) 7,600 (accrued)
Inventory 184,800 208,800
Motor vehicles, net book value 364,000 300,400
Land 1,300,000 1,300,000
Trade payables 233,200 246,400
Trade receivables 294,800 272,800

(iii) During the year, cash sale receipts totalled $122,000. Sarah took $35,000 for personal use and the
balance was used to pay wages and salaries. These transactions were not recorded in the books.
(iv) Discounts allowed and discounts received for the year amounted to $2,800 and $9,800 respectively.
(v) An allowance for doubtful debts was to be created at 5% of trade receivables.
(vi) Motor vehicles were sold at a loss of $50,000.
(vii) The bank loan was obtained on 1 October 2019. The loan interest rate was 5% per annum. No
interest had been paid.
(viii) Depreciation on motor vehicles for the year had been provided for.

Required:
(a) Calculate Sarah Tsoi’s capital as at 1 January 2019. (4 marks)
(b) Prepare an income statement for the year ended 31 December 2019. (18 marks)

(Total: 22 marks)

- End of Paper –