2021 EC – F5

ELEGANTIA Name : ( )
Class : F. 5. A / B / C / D / E
First UT

Elegantia College (Sponsored by Education Convergence and

Patronised by H.K. Yee’s Five Tong Assn.)

S5 First Term MOCK Uniform Test 2021 –

2022 BUSINESS, ACCOUNTING, AND FINANCIAL STUDIES

Question-Answer Book

Date : 2nd November 2021 (Tue)

Time : 10:30 a.m. – 11:45 a.m.
Time Allowed : 75 minutes
Total number of pages : 5
Full Marks : 48

This paper must be answered in English.

INSTRUCTIONS
(1) Write your Name, Class and Class Number in the spaces provided on Page 1.

(2) This paper consists of THREE sections. All questions are compulsory.

(3) Write your answers in this Question-Answer book. Supplementary answer sheets will be
supplied on request.

(4) Unless otherwise specified, all working must be clearly shown.

Prepared by:
Answer ALL questions.
EC-F5-BAFS - Page 1 -
Warm up Exercises
1. Candy’s financial year of her business ends on 31 December. On 6 January 2022, the annual
inventory count was conducted and an inventory value of $155,000 was determined.

The following information was available from Susan’s accounting records:

(i) Goods were purchased at a list price for $50,000 on 5 January 2022. A trade discount of 10%
was received.
(ii) Goods were sold for $80,000 between 1 and 6 January 2022. All goods were sold at uniform
mark-up of one-third.
(iii) An inventory item costing $5,500 was returned to the supplier on 6 January 2022. This item
was purchased on 29 December 2020.
(iv) Goods priced at $4,000 were returned by customers between 1 and 6 January 2022.

(v) One of the inventory sheet $8500, was wrongly carried forwarded as $850.
(vi) One of the inventory sheets at 6 January 2022 was overcast by $410

(vii) An inventory with selling price $8400 was purchased on 28 December 2021. This item became
obsolete and could only be sold for $1,000.

Required:
Prepare a statement to calculate the value of inventory as at 31 December 2021. (6 marks)

EC-F5-BAFS - Page 2 -
2. After several years, the company was not able to carry out an inventory count at the new year-
end date of 31 March 2021. Instead the stocktaking took place at the close of business on 8 April
2021. The inventory was valued at cost price of $278,000.

The following additional information was available:

(i) The net realisable value of an inventory item costing $3,240 was estimated to be $3,420.
(ii) It was found that goods included in the inventory valuation at $12,400 had mistakenly been
valued at selling price.
(iii) Purchases made and received (all on credit) during the period 1 April 2021 to 8 April 2021
totalled $6,900.
(iv) Included in the purchases in (iii) was an amount of $500 for carriage wrongly charged by a
supplier.
(v) Sales during the same period totalled $20,000.
(vi) Returns inwards of $3,000 were made on 4 April 2021.
(vii) An inventory sheet used in inventory valuation had been overcast by $2,600.
(viii) Goods costing $2,360 (bought in December 2021) were accidentally damaged during the
inventory count. They could not be sold and were written off in inventory valuation.
(ix) An item of inventory with a normal selling price of $1,200 was found to be obsolete and
could only be sold for $700.
(x) The uniform mark-up was 60% on cost.

Required:
Prepare a statement to calculate the value of inventory as at 31 March 2021. (6 marks)

Calculation of the Value of Inventory as at 31 March 2021

3. The following are the balances extracted from the books as at 31 December 2020:
$ $
Equipment (cost $1 616 000) as at 1 January 2020 768 000
Inventory, 1 January 2020 744 000
Sales (mark-up of 50%) 3 528 000
Purchases 2 197 360
Operating expenses 605 600
Ordinary share capital 400 000
Trade receivables 370 000
General reserve 16 000
4% Debenture (Issued on 1 July 2020) 640 000
Cash at bank 128 560
Retained profits, 1 January 2020 29 200
Dividend paid (2019 final: $38400; 2020 interim $18400) 56 800
4 741 760 4 741 760
Additional information:

(i) On 1 May 2020, a piece of old equipment was traded in for a new model which cost $49 600,
at a trade in value of $16 800. The old equipment was purchased on 1 March 2018 at a cost
of $40 000. The only entry made was: Dr. Equipment $49600; Cr. Cash at bank account
$49600.

Besides, part of the equipment which was purchased for $200 000 in 2011 was still in use
during 2020. It is the company's policy to charge depreciation at a rate of 20% per annum
on a straight-line basis. A full year's depreciation is to be charged in the year of purchase
but none in the year of disposal.

(ii) On 29 December 2020, the company received a purchase order from a customer for goods
priced at $216 000, to be delivered on January 2021. This order was recorded as credit sales
for the year 2020.

(iii)Operating expenses of $605 600 were paid during the year 2020, of which 45% were selling
and distribution expenses while the rest were administrative expenses. Depreciation
expenses, loss on disposal and directors' fees are classified as administrative expenses.

(iv) Estimated profits tax of $10 000 for the year 2020 had not been recorded in the books.
Besides, directors' fees of $104 000 for the year 2020 were to be paid in 2021.

(v) On 31 December 2020, the board of directors resolved to increase the general reserve to
$30,000. Final dividend of $33600 was declared and paid in March 2021

REQUIRED:
Prepare for Tina Company Limited,
(a) the income statement for the year ended 31 December 2020, showing all the necessary items
including purchases, profit before tax and profit after tax. (10 marks)
(b) a statement to calculate the retained profits as at 31 December 2020. (3 marks)
Workings:
3. (a) (i)Income statement for the year ended 31 December 2020 損益表截至 2020 年 12 月 31 日止年度
$ $

Less: Cost of goods sold (100%)

Less: Expenses 費用

(ii) Statement of financial position as at 31 December 2020 計算 2020 年 12 月 1 日留存利潤

Non-current assets $ $

Current assets

Equity

Non-current liabilities

Current liabilities
4. Ron, Ann and Ben had been in partnership for many years sharing profits and losses in the ratio
of 2:2:1. The account balances of the partnership as at 31 December 2018 are as follows:
$
Property, net 1 000 000
Equipment, net 360 000
Motor vans, net 574 000
Inventory 283 000
Trade receivables 240 000
Trade payables 88 000
Capital: -Ron 1 160 000
-Ann 798 000
-Ben 698 000
Cash at bank 287 000
On 1 January 2019, Ron retired and Carol was admitted into the partnership with the following
agreements:
(i) The property was to be revalued upwards by $346 000 while the motor vans were to be
revalued at $390 000.
(ii) An allowance for doubtful debts of $42 000 was to be made. A bad debt recovery of
$2,000 would be collected in early 2019.

(iii) Goodwill was valued at $180 000 but it was not to be maintained in the books. Adjustments
for goodwill between partners were to be made in the capital accounts.
(iv) $900 000 of the amount due to Ron would be left as half-year loan to the partnership, with
an annual interest of 10%. The balance was to be paid on his retirement date.

(v) Carol brought in a piece of equipment valued at $50 000 together with additional funds so
that her capital account would have a balance of $700 000.
(vi) The profit-sharing ratio of Ann, Ben, and Carol is 3:2:1. Ben is entitled to an annual salary
of $30 000 and carol is guaranteed a share of profit of not less than $50 000 per quarter.
REQUIRED:
(a) Prepare the following to record the retirement of Ron and the admission of Carol:
(i) The revaluation account (3 marks)
(ii) The partners’ capital accounts in columnar form (6 marks)
(iii) The statement of financial position for the new partnership as at 1 January 2019
(6 marks)
(b) Suppose the new partnership’s net profit before interest for the quarter ended 31 March
2019 was $270 000. Prepare the appropriation account of the new partnership for the quarter
ended 31 March 2019 (3 marks)
(c) Give two reasons why a goodwill account is not maintained in the books of a partnership.
(a) Revaluation account
 (b) Capital account

(iii) Ann, Ben and Carol

Statement of Financial Position as at 1 January 2019
Non-current assets $ $ $

Current assets

Current liabilities

(b) Appropriation account for the quarter ended 31 March 2019

$ $ $
5. Mandy engaged in the trading in fashion, sold at a mark-up of 80% in the name of Mandy Fashion.
During a burglary in November 2020, it lost some of the inventory $7 570 as well as some
accounting records. After careful investigations, the following information for the year ended
31 December 2020 was available:
(i) Some of the account balances at were as follows:
31 December 2019 31 December 2020
$ $
Inventory 12 600 8 100
Trade receivables 17 820 14 570
Trade payables 34 950 27 320
Equipment, at cost 300 000 ?
Accumulated depreciation – equipment 209 000 ?
Rent accrued 3 660
2 830
Salaries prepaid 11 780 5 000
Capital ? ?

(ii) The following is a summary of the cash at bank account for the year ended 31 December
2020:
$ $
Cash at bank balance b/d 67 460 Trade payables 117 500
Sale of equipment 4 260 Rent and rates 25 000
Cash banked 217 800 Salaries 85 190
Interest income 3 200 Loan to Lee (repayable in July 2021) 40 000
Purchases of equipment 28 800
Trade receivables 52 490 Cash at bank balance c/d 48 7200

(iii) Average cash sales of $21 975 per month were recorded. The amounts received from trade
receivables were both in cash and cheques.

(iv) The business banked all receipts after paying for cash purchases of $10 000 per month and
Kitty’s drawings of $20 000 for the year.

(v) Discounts received for the year amounted to $8,000. In July 2020, Kitty drew goods
costing $12,000 for personal use,

(vi) Equipment sold on 1 January 2020 had a cost of $50 000 and a net book value of $9,000.
Additional equipment was purchased on 1 May 2020. It is the company’s policy to
depreciate equipment at 40% per annum using the reducing-balance method on a pro rata
basis.
REQUIRED:
(a) Prepare the income statement for the year ended 31 December 2020
(b) Prepare the statement of financial position as at 31 December 2020. (20 marks)
Workings: Trade receivables
 Trade payables
Cash

.Mandy Fashion
Income statement for the year ended 31 December 2020
$ $
Sales
Less: Cost of goods sold
Opening inventory

Less: Expenses
 (b) Mandy Fashion
Statement of financial position as at 31 December 2020
Non-current assets $ $ $

Current assets

Capital

Current liabilities

EC-F5-BAFS - Page 10 -
6. Alan Company was not able to carry out an inventory count at the year-end date of 31 March
2019. Instead the stocktaking took place at the close of business on 8 April 2019. The inventory
was valued at cost price of $27 800.

The following additional information was available:

(i) The uniform mark-up was 60% on cost. The following were transactions during the period 1
April 2019 to 8 April 2019:
$
Purchases 1 640
Sales 4 000
Returns inwards 600
Returns outwards 500

(ii) An inventory sheet used in inventory valuation had been overcast by $2,600.

(iii) An item of inventory with a normal selling price of $1,200 was found to be obsolete and could
only be sold for $700.

(iv) The net realisable value of an inventory item costing $3,240 was estimated to be $3,420.

(v) Goods costing $10,000 had been sent to a customer on a sale-or-return basis on 28 March 2019.
The customer agreed to purchase 60% of the goods on 31 March 2019. The remaining goods
would be returned to Rosa Company on 4 April 2019 and were not included in the closing
inventory on 31 March 2019.

REQUIRED:
Prepare a statement to calculate the value of inventory as at 31 March 2019. (6 marks)
Alan Company
Calculation of the Value of Inventory as at 31 March 2019
$ $

EC-F5-BAFS - Page 11 -
 7. Eason started his business as a sole proprietor on 1 January 2019. In 2020, sales were
normally made at a gross profit margin of 30% and all purchases and sales were made on
credit. On 31 December 2020, a fire broke out in the warehouse and all inventory were
destroyed. Insurance company agreed to compensate for 90% of the value of the goods
destroyed. Although many of the records were destroyed in the fire, the following
information was available after investigation:

(i) Information on assets and liabilities was confirmed as follows:

31.12.2019 31.12.2020
$ $
Equipment, net 96 000 ?
Inventory 30 000 ?
Trade receivables 25 000 32 000
Trade payables 28 000 41 000
Accrued insurance 2 400 3 180
Cash at bank 12 000 ?
Cash in hand 9 000 10 000
Capital ?
(ii) An analysis of the bank statements for the year ended 31 December 2020 ar e as follow
s:
$ $
Deposits Receipts from customers 612,500
Additional capital 10 000 622 500
Payments Payment to trade suppliers 451,200
5% fixed deposit (made on 1 March 2020 for 1 year) 24
000
Insurance 7,140
Rent paid in 2020 (Note (iv)) 63,360 545 700
(iii) During 2020, Eason banked all his takings regularly after payments of the 76 800
following
items:
Cash drawings $1 500 per month
Sundry expenses $20 000

(iv) The payment for rent is related to the office tenancy agreement, which was renewed
on 1 November 2020 with an increase in rent of 10%. The payment included a 2-
month rental deposit for renewed rent.

(v) Inventory with cost $30,000 were sent to a customer on “sale or return basis”. At
31 December 2020, only one third of the inventory was confirmed for sales. As part
of the remaining inventory with cost of $4,200 was obsolete, they could be sold out
at the reduced price of $4,800. No related accounting entries had been made to
these transactions.
(vi) All the equipment was brought in by Eason at the commencement of the business.
Depreciation is to be provided on the motor van at 20% per annum on cost.

REQUIRED: Prepare an income statement for the year ended 31 December 2020,
and a statement of financial position as at 31 December 2020. (17 marks)
7.(a) (i) Eason
Income statement for the year ended 31 December 2020
$ $

Less: Expenses

Working 1. Total trade receivable

2. Total
trade payable

3. Cash
(ii) Eason
Statement of financial position as at 31 December 2020
$ $
Non-current Assets

Current Assets

Capital

Current Liabilities
8. Pak and Yu had been in partnership for many years sharing profits and losses in the ratio of 2:3.
The account balances of the partnership as at 31 December 2019 are as follows:
$
Property, net 1 000 000
Motor vans, net 934 000
Trade receivables 240 000
Trade payables 88 000
Capital: -Pak 1 160 000
-Yu 1 496 000
Cash at bank 570 000

On 1 January 2020, Pak retired and Yan was admitted into the partnership with the following
agreements:
(i) The property was to be revalued at $1 346 000 while the motor vans were to be revalued
downwards by $184 000. An allowance for doubtful debts of $42 000 was to be made.
A bad debt recovery of $2 000 would be collected in early 2020.

(iii) Goodwill was valued at $180 000 but it was not to be maintained in the books.

(iv) $900 000 of the amount due to Pak would be left as half-year loan to the partnership, with
an annual interest of 10%. The balance was to be paid on his retirement date.

(v) Yan brought in a motor van valued at $50 000 together with additional funds so that her
capital account would have a balance of $700 000.

(vi) The profit-sharing ratio of Yu and Yan is 2:1. Yan is entitled to a monthly salary of $30 000.
Interest on drawings of 5% per annum would be charged while interest on capital of 4% per
annum would be calculated on the beginning balances of the capital accounts

REQUIRED:
(a) Prepare the following to record the retirement of Pak and the admission of Yan:
(i) The revaluation account (3 marks)
(ii) The partners’ capital accounts in columnar form (6 marks)
(iii) The statement of financial position for the new partnership as at 1 January 2020
(5 marks)

After a year of operation, the following information was extracted from the books of the new
partnership for the year ended 31 December 2020:
$
Gross profit 2 917 200
Operating expenses (including annual salary paid to Yan) 2 412 000
Drawings - Yu (withdrawn on 1 May 2020) 180 000
- Yan (withdrawn on 1 July 2020) 120 000

REQUIRED:
(b) Prepare the appropriation account of the partnership for the year ended 31 December 2020.
(6 marks)
(Total:20
marks)
5.(a) Revaluation account

(b) Capital account

(iii) Yu and Yan

Statement of Financial Position as at 1 January 2020
Non-current assets $ $ $

Current assets

Yu Yan
Capital accounts
Current liabilities

(b) Appropriation account for the year ended 31 December 2020

– End of Mock Practice –

Please go to your notes and continue~~