BAFS 2021 & Marking scheme answer (modified) Q24.1 Katie and Catherine operate a media service business with offices in UK and other European countries. If a shareholder wants to transfer his shares to new investors, approval must be obtained from the board of directors. To help with expansion, Katie suggests changing the form of business ownership so ‘that more funds can be raised from issuing shares to the public. However, Catherine worries that the new form of business ownership will have some disadvantages for the business, as compared with the existing form. SEAL BB AA SAP ROS ES» CEPT EL (IH SP» HSL RES IS WE ERE GTI + BT ARBIIRER + SER ROTA RATT + DAI SRST RESAS MOO SOATESUELL > Siesta ERASE © (a) Explain whether the above business is a multinational corporation. (2 marks) ULM ES SPAT] it is a multinational corporation F2—RESHAl (1) it operates in more than one country E7ES (BRIE PIE (1) (b) (i) Identify the current form of ownership of the media service business. (1 mark) ETE RAST HY RE Private limited company A #/IRA#I() (Gi) Explain two disadvantages of the new form of business ownership, as compared with the existing form. REARS AAT A AE ATI EL P R © (4 43) Las the shares are freely transferable , existing shareholders may lose control of the company FES BG FY EAR + SUBIR ATER ZY AS SEA (1) 2.more rules and requirements , e.g, release of financial information , compliance with the listing rules BAAR » PI SABE APLAR) 3.higher administrative costs, e.g. auditing , accounting , listing and setup procedures RA» Pleo Bet + Get ~ LRRD 2022 4# 1 A 31 AAT ee @EOSKHF AGRAM Giveaway jit) + DSE 1Q21.2 Katie is an in experienced investor. Recently, her friend recommended buying the shares of a real estate development company. The company operates shopping malls and hotels in Hong Kong. Its shares is one of the constituent stocks of the Hang Seng Index. SUE ARS TEE» RGEE » ALATA HEIL — EE AS IAS» BRITE PSE SMR} LALA + FUL I « (a) (i) What does the Hang Seng Index reflect? (1 mark) PATE RERCONT (HE it reflects the general price level of the shares listed on the Stock Exchange of Hong Kong CRATER RRAR AA LTA (1) (Gi) Give one way that Katie can use the Hang Seng Index to make investment decisions. (1 mark) BYR ROTA + OSLEE OT] DAE REE» assess the general performance of the Hong Kong stock market / real estate development sector sP (di 2 BLT ALBERS RAT EMEA, (1) 2.compare the performance of the Hong Kong stock market / real estate development sector over time LEREHERUH7ES RAREST (1) (b) Ignoring other factors, explain how the following situation may affect the share Price of the real estate development company: QBS FLIES BE » aS R75. M0 fa] ee a ESE 2S A When the epidemic eased, the govemment removed the entry restriction for non-local residents implemented during the spread of COVID- 19. (3 marks) RA + BONEN TE COVID.19, SHRINERS AER Il « 1.the number of visitors to shopping malls and the occupancy rate of hotels will increase the profit of the company will increase. TERRA A EMI > SELAH © 2investors / shareholders are optimistic about the companys future and will buy its shares ROCA ARIK ARB 3.the share price will rise BUB@ E38) (c) List two Katie's rights as a share investor. (2 marks) SLEIGH E 23 HH Be POEL © Lreceive transaction documents , e.g. statements showing the investment transactions BUBBA > POT ARO) 2receive a dividend if the board of directors has declared a dividend WREBAEAA > WALA) 3.vote in annual general meeting EF ERRAG LR) 2022 4 1 F 31 AAT LEME + ERK a SREY AGRAM Giveaway iii) » DSE fQ21.3. Katie commenced a firm as a sole trader on 1 April 2022 with $80 000. The following is the bank account of the firm for April: GLAERS 2022 4 4 1 FLA 80.000 scityeEseteae RTE ROG A Bank S/T FR 2022 $ | 2022 | s Apr Capital #45 80 000 | Apr s Rental expenses fil<2##/} | 37 000 Apr 18 Sales GAG 15 000 | Apr 19 Equipment &| | 62 000 (a) Based on the above account, prepare two relevant nominal accounts to complete the double entries, Balancing off the accounts is not required (2 marks) FRCLEIR > RfERMEIRANARENE + sep HStOTiR « ARSE Rental expenses H@IAL 2022 s ] $ Apr 5 Bank $4772, 37 000 I Sales 345% $ | 2022 | Apr 18 Bank $8777 | 15 000 (b)Prepare an extract of the statement of financial position for Katie as at 30 April 2022 to present the bank account balance and its classification. (2 marks) the statement of financial position for Katie as at 30 April 2022(extract) Current liabilities Bank overdraft 4000 fara 2022 fe 4-H 30 CLA RSI » DRI Aba WU 2022 4 A 30 HAIRS) s Tae SRT 4000 2022 #1 A 31 ATH SEE} AGRAM Giveaway jf) » DSE {)031i!On 1 May 2022, Katie purchased a second-hand motor car on credit at $50 000 for his personal use. The bookkeeper of the firm recorded the transaction as follows: 2022 4 5 AL 1 A» SULA 50.000 7CHRNET A ESCH A OF » BAS LUE ACREANF Other payables St ftRE(TR 2022 s May 1 Motor Cars a 50 000 Motor Cars RE 2022 s ‘May 1 Other payables S(toREATER 50 000 (c) Explain the accounting principle or concept that has been violated in the above case. (2 marks) REP LMR RTS St HLS: + business entity concept (P32(ERGHES: (1) a business is an entity separate from its owner , the private transactions of the owner should not be recorded in the books of the business RLS ARES MRR» PAT IAEA SCS IRNE RLPSMECP C) 2022 $F 1 Fh 31 AAT LOS + eB DEE; AGRAM Giveaway iif) » DSE(QUESTION 4 OR 5) Q21.1B.4, (A) Katie is a shop selling household products. The account balances asat 31 December 2021 extracted from its books were as follows: SUG — RAS IE A SATE « PEALATMLE 2021 4 12 A 31 AAVMRIRiBR ABAD F 8 ‘Bank loan (due in March 2022) | fF SE% (2022 46 3 ARIA) 30000 Bank att 20000 Fixed deposit (for 6 months) SEEK (6 AD 50 000 Inventory ae 180 000 ‘Trade payables WAT BLK 100 000 Trade receivables FEU 120 000 In 2021, the industry avenges of the working capital ratio and acid test ratio were 1.9:1 and 1.0:1 respectively. 202146 + TR SSE ee eLE POMEL AT HAS 19e1 #1 1.021 © (a) Calculate (to two decimal places) the following ratios for 2021 for Katie: working capital ratio S38 42th. [CS 20 000 + $ 50 000 +S 18 0000 + $ 120 000 ) /($ 30000 +S 100 000 )] : 1 =2.85:1 acid test ratio AESILLA [( $20 000 + $50 000 +$120 000 ) / ($30 000 +$ 100 000 )] : 1 =1.46:1 2022 4 1 F 31 BATH AA LEME + ORY [: Mock Exam, @EESEHF AGRAM Giveaway ji} + DSE iI)(B) Miki Company sells computers and accessories. At the beginning of 2021, the General Manager of the company announced its goal to cut its overall costs by 30% in one year. To achieve the goal, the marketing department reduced the budgeted promotion expenses by 25%; the operations department sourced cheaper suppliers in order to reduce the total purchase cost by 15%; and the human resources department planned to streamline the company's structure to save 20% of the labour costs. SEES 51S GRRE E+ 2021 EB) » ANTE RRARER EE As TLE TE PS ATF EG 30% a ESI — ABE + ESATA PE RY 7 250% + EPS EE PO GRREREG » DUSEERER ERASING 15% + ASTRA RISA SRN + Bie 20% A DTA £ both the working capital ratio and acid test ratio of Miki were higher than the industry average and the working capital ratio was much higher than its acid test ratio PANELS ERR LT AY » BRS aE SUBRELSE Lhas greater ability to meet short-term obligations / has sufficient short-term assets to repay short-term liabilities PATI OH LAT EI A Fe tS LL) 2.has a higher proportion of current assets tied up in inventory SOLES ROE PBT) (©) G)Apart from division of work, state the principle of effective management that has been applied in the above case, BRITT Ib » aCe Fie Bi MHS SHEEN mark) Unity of direction %—ZAl (1) (ii) Explain two advantages for Miki Company of applying the principle of effective management in (c)(i) above. MARTIAN Eat (Oi) PRY RM HURL IMMA + 4 marks) Lereates coherence among employees to achieve the same objectives effectively ERLE SEY eR (1) 2.avoids conflicts and confusion among departments as all departments are working towards the same goal BAI ZMRARRL AAR TORS RSH (1) 3.builds up team spirit , which enhance TUR» ER (1), 2022 4 1 A 31 AAT Lo EF AGRAM Giveaway ji) » DSEQ21.1B.5 Ms Law started a garment firm on 1 April 2022. The following balances were obtained from the books as at 30 April 2022: HESCAEAS 2022 4F 4 AL AAU T RHA « LAP ERAWARSEHS 2022 4 4 Fl 30 LOH $ Carriage outwards | 8824 1300 Discounts received | E2stHF41 800 Purchases wee 80 000 Sundry expenses | #88 23.475 Returns inwards saeeael 1500 Sales aie 103 500 The inventory as at 30 April 2022 was valued at $18 000, #2 2022 $F 4 FH 30 FLIYPEERIELAS 18 000 70 « (a) Prepare an income statement for the month ended 30 April 2022. (5 marks) MAAR 2022 4 4 A 30 FILA RH siRaee ° Income statement for the month ended 30 April 2022. $ s Sales $46 103 500 Less: Returns inwards 3447325) 1500 102 000 Less: COGS Purchases RRS 80 000 Less: Closing inventory SAFER 18 000 62.000 Gross profit Zi) 40 000 Add: Discounts received EXSHT40 800 Less: Expenses 3873 40 800 Carriage outwards SH6Q32/5 1300 Sundry expenses 383% 23 475 24775 Net profit $F) 16 025 (b) Explain one use to the government of the income statement of a business. (1 mark) SAY cb SHE ate EOE — Government assesses the tax liability of the firm based on the profits or losses reported in the income statement BURRS PRS PRR (1) 2022 4# 1 A 31 ATR Le + ¢_ Mock Exam SEE} AGRAM Giveaway jf) » DSE {)031i!Miki Company is @ small and medium enterprise with three departments: human resources department, ‘marketing department and production department. PBA TE — RV MR RPS OTE + TATA ER fateh (©) Draw an organisation chart to show the departmentalisation of Miki Company. (1 mark) RASS > BTR ASS GM Sees ee Human resources Marketing Production manager manager manager KRESS Tae SER ‘Which department manager in Miki Company possesses both line authority and staff authority (1 mark) SSS DGB AGP EE A RA A Human resources manager A] #REHE (1) (ii) Explain how the manager mentioned in (d)(i) above exercises line authority and staff authority. AGA. ealt (qi) ASL RRR FOE SU FA TERRA» (2: marks) line authority : to give orders to and direct the work of subordinates in the human resources department EGE) SRE TELLER (1) staff authority : to advise and support the marketing manager and production manager in matters related to human resources PREECE BL) STRODE RSA: ATS (0) 2022 #1 A 31 HATH Ma LEME + eR 2 HALE Mock Exam @ESEHF AGRAM Giveaway jit) » DSE