2017-2018

BAFS F.4
FINAL EXAM
CHRISTIAN ALLIANCE S C CHAN MEMORIAL COLLEGE
2017-2018 FORM FOUR FINAL EXAMINATION

BUSINESS, ACCOUNTING AND FINANCIAL STUDIES

Accounting Module

Date of examination: 21st June 2018

8.30 am – 10.15 am (1 hour 45 minutes)
This paper must be answered in English.

INSTRUCTIONS

(1) There are THREE sections in this paper: Section A (40 marks) , Section B (23 marks) and Section C
(37 marks). Full mark: 100.

(2) All questions in this paper are COMPULSORY.

(3) Answers to all the sections should be written in the Answer Book. In the Answer Book, start EACH
question (not part of a question) on a NEW page for Section B and Section C. Write all the answer
to Section A on the same page.

(4) Show your workings clearly.

Name: __________________
Class: F.4 ___ (4X / 4Z)
Class no. : ____

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SECTION A (40 marks)
There are 20 questions in this section. Answer ALL questions. Choose the best answer for each question.
Write down your answers on the answer book provided.

1. Which of the following accounts must carry a debit balance in a trial balance?

A. Rental income
B. Purchases returns
C. Discounts received
D. Purchases

2. Ethical behaviour in business will _____________________________.

(1) enhance the public image of a business

(2) increase the operating costs of a business in the long run
(3) enable a business to be subject to a lower profits tax rate

A. (1) only
B. (2) only
C. (1) and (3) only
D. (2) and (3) only

3. Which of the following should be recorded as an expense of a firm?

(1) wages paid to the part-time workers of the firm in cash

(2) insurance paid for owner's private apartment by the firm's cheque
(3) rent paid for the firm's warehouse by owner's personal cheque

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

4. For a toy company, which of the following is not regarded as an example of fulfilling its social
responsibility?

A. using recycled materials to produce toys

B. donating toys to orphanages
C. offering 20% discount to customers during Christmas
D. improving the working environment of its employees

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5. Which of the following is/are the example(s) of a real account?

(1) Sales account

(2) Bank loan account
(3) Equipment account

A. (1) only
B. (2) only
C. (3) only
D. (2) and (3) only

6. A car retailer sets the following sales target for its new car model:

'50% of Hong Kong drivers will buy our new car model in 2019.'

Which of the following criteria for setting good objectives is/are fulfilled in this sales target?

(1) specific
(2) measurable
(3) attainable

A. (2) only
B. (3) only
C. (1) and (2) only
D. (1) and (3) only

7. Which of the following is not a function of accounting?

A. summarising business transactions

B. monitoring the performance of the accounting staff
C. communicating the performance of the business to different stakeholders
D. classifying business transactions

8. A sole trader drew a cheque to her own creditor using the business’s bank account. Which of the
following double entries is correct?

A. Debit: bank account……Credit: accounts payables account

B. Debit: bank account……Credit: drawings account
C. Debit: drawings account……Credit: bank account
D. Debit: accounts payables account……Credit: bank account

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9. Which of the following statements about the Ocean Park Corporation, a public corporation in Hong
Kong, are correct?

(1) It is listed on the Hong Kong Stock Exchange.

(2) Its board of directors is appointed by the government
(3) It is self-sufficient financially.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

10. Which of the following are examples of risk management?

(1) Predict the chance of delayed delivery of goods to customers

(2) Suggest ways to prevent the business’s computer system being attacked by hackers
(3) Estimate the cost of a marketing campaign
(4) Develop measures to be taken in case a fire breaks out in the warehouse

A. (1), (2) and (3) only

B. (1), (2) and (4) only
C. (1), (3) and (4) only
D. (2), (3) and (4) only

11. An entrepreneur should be self-discipline and ambitious in running a SME because:

(1) a SME faces many difficulties in the operations.

(2) prompt decisions are required to be made by the owner.
(3) he/she is responsible for the success and failure of the business.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

12. Which of the following statements about the procedure(s) of the controlling process is incorrect?

A. if the actual performance differs from the standard, the standard needs to be adjusted immediately.
B. measurement of actual performance.
C. determine the criteria of controlling.
D. the survey of actual performance must be carried out regularly.

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13. Which of the following statements regarding Small and Medium Enterprises (SMEs) in Hong Kong are
incorrect?

(1) A toy manufacturer with 90 employees is an SMEs.

(2) SMEs enjoy a lower profits tax rate than multinational corporations.
(3) SMEs can only be operated by sole proprietorship.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

14. Which of the following about tall type organizational structure and flat type organizational structure are
correct?

Tall type Flat type

(1) Communication Difficult Fast
(2) Span of control Wide Narrow
(3) Flexibility Lower Higher

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

15. Mr. Li considers changing his bookstore from a sole proprietorship to a private limited company. Which
of the following can be the possible reason?

A. He can raise more capital after changing the form of ownership.

B. He can employ professional management to operate the business.
C. He is not responsible for the liability of the business personally.
D. He can enjoy a lower profits tax rate.

16. Prosperity Wholesale sold 80 kg of pork for $15,200 to Golden Restaurant on credit. Golden Restaurant
promised to pay the debt within two weeks. The amount should be recorded in the credit side of the
account of Golden Restaurant.

A. Trade payables
B. Bank overdraft
C. Trade receivables
D. Bank loan
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17. Multinational corporations usually enjoy a lower average cost than other businesses. This is because

(1) it produces in a large scale and utilises the production capacity efficiently.
(2) it can reduce the production cost by purchasing materials in bulk.
(3) it practices division of work which enhances the production efficiency.
(4) it can drive out the competitors by charging a lower price than other firms.

A. (1), (2) and (3) only

B. (1), (3) and (4) only
C. (2), (3) and (4) only
D. (1), (2), (3) and (4)

18. Which of the following people are involved in tertiary production?

(1) An account clerk in a school

(2) A construction worker in a construction site
(3) A lorry driver of a garment factory
(4) A lawyer of a property developer

A. (1) and (2) only

B. (1) and (4) only
C. (1), (3) and (4) only
D. (2), (3) and (4)only

19. Which of the following is not a socio-cultural factor that affects business decisions?

A. Educational level of population.

B. Religions of the country and the region.
C. The percentage of aging population.
D. Government’s expenditure on social welfare.

20. Generally, which of the following is not a responsibility of the top management?

A. Take part in daily operations

B. Set long-term goals
C. Set sustainable development plans
D. Adjust organisational goals according to external factors

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SECTION B (23 marks)

1. The following are some accounting terminologies:

 Sales journal
 General journal
 General ledger
 Sales ledger
 Assets
 Capital
 Closing entries

REQUIRED:
Select from the above accounting terminologies the most appropriate for each of the definitions or
descriptions below:

(a) A book of original entry in which credit sales of a motor van are recorded.

(b) Economic resources of an entity.

(c) Entries made to transfer the balances of nominal accounts to the profit and loss account.

(d) The resources provided by the owners of business.

(e) The book where the sales account is kept.

(Total: 5 marks)

2. Bird Ltd is a multinational coffee company and coffeehouse chain. The headquarter is in Australia.
Fish Ltd is a small and medium enterprise in Hong Kong. In order to enter the Hong Kong market,
Bird Ltd and Fish Ltd formed a joint venture, Animal Limited.

(a) State two reasons why Bird Ltd prefers to form a joint venture instead of entering the Hong Kong
market itself. (4 marks)

(b) Explain one economic factor and one cultural factor that Bird Ltd should consider when setting
up branches in Hong Kong. (4 marks)
(Total: 8 marks)

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3. Company A and Company B are wholesales businesses selling organics food. Their organization
charts are as follows:

Company A

General Manager

Hong Kong Island Kowloon New Territories

Company B

General Manager

Human Resources Information Marketing Financial Manager

Manager Manager Manager

(a) State the form of departmentalization adopted by the two companies. (2 marks)

In Company A, a clerk is recruited to assist the managers of both Hong Kong Island and New Territories.

(b) State the principle of effective management being violated. (1 mark)

(c) Suggest one problem that might arise when the principle in (b) is violated. (2 marks)

(d) Which department of Company B should be responsible for handling customers’ complaints?
Explain one main role of the department in the company. (2 marks)

The financial manager of Company B always consults his subordinates before making any decisions.

(e) State the leadership style of the financial manager. Also, state one advantage of adopting this
leadership style. (3 marks)
(Total: 10 marks)

SECTION C (37 marks)

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4. Jessica gives her customers individual trade discounts according to how much they buy. In addition, she
allows a 2% cash discount on any payments received within 30 days of invoice date. A new customer,
Maria negotiates a 10% trade discount and was approved. Her transactions during March were as
follows :

2018
March 5 Purchased goods with a list price of $60,000 on credit from Jessica. Invoice issued on
the same day.

8 Returned damaged goods with a list price of $500 to Jessica.

29 Paid the balance she owed to Jessica by cash.

REQUIRED:
Prepare the account of Maria in Jessica’s accounts receivable ledger. (Total: 4 marks)

5. Gloria is a sole proprietor of a trading company. The following transactions occurred in May 2018:

May 2 Sold office equipment to Annie on credit at cost of $10,500.

8 Gloria took goods costing $5,000 from the business without paying
for them.
12 Sold office furniture to Leon at $25,000 by cheque.
18 Gloria contributed a machine valued at $13,000 to the business.
29 A debt of $88,000 owed by a customer, who bought the goods on
credit one week ago, was settled by a motor vehicle.

REQUIRED:
Prepare the journal entries to record the above items. Narrations are not required. (Total: 5 marks)

6. Mr. Chau was the owner of a boutique and the transactions of the boutique in October 2018 were as
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 follows:

2018
Oct 1 Balance brought down:
Cash: $85,000 (Dr)
Bank: $125,000 (Dr)
Oct 3 Purchased clothes of $15,000 and received 2% trade discount. The amount was settled in
cash.
Oct 6 Purchased clothes at a list price of $18,000 from Cool Fashion on credit and received
5% discount.
Oct 7 Purchased office equipment for $16,000 by cheque.
Oct 9 Paid salaries of $23,000 by cheque.
Oct 13 Paid rent and rates of $8,000 in cash.
Oct 16 Repaid the amount owed to Cool Fashion by cheque. Received 4% discount for early
repayment.
Oct 19 Introduced cash of $30,000 as capital.
Oct 20 Deposited $10,000 cash into the business’s bank account.
Oct 23 Paid $35,000 (received $750 cash discount) to Ms. Yau, a supplier, by cheque.
Oct 24 Received payment of $12,000 (allowed $500 cash discount) from Mr. Bou, a customer,
in cash.
Oct 26 Paid $49,000 (received $800 cash discount) to Mr. Chiu, a supplier, in cash.
Oct 28 Mr. Chau withdrew cash of $4,500 from the boutique for personal use.

REQUIRED:

(a) Record the above transactions in the three-column cash book and balance off the cash book at the
end of October 2018. (9 marks)

(b) Distinguish between trade discount and cash discount in terms of their effect on inventory level.
(2 marks)
(Total: 11 marks)

7. The following trial balance relates to Bookin Company as at 31 March 2018:

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 Trial Balance as at 31 March 2018
Dr. Cr.
$ $
Office equipment 118,400
Premises 638,230
Cash at bank 18,125
Cash in hand 44,450
Sales 880,000
Purchases 429,500
Wages and salaries 155,175
Carriage inwards 22,025
Rent and rates 158,575
Postage and stationery 300
Returns inwards 2,400
Returns outwards 1,065
Discounts received 9,400
Discounts allowed 1,300
Inventory as at 1 April 2017 26,500
Trade receivables and trade payables 14,200 5,650
Drawings 6,935
Capital 575,000
Loan from Banana Shop (Due on 31 December 2018) 165,000

1,636,115 1,636,115

Inventory as at 31 March 2018 is valued at $22,725.

REQUIRED:

Prepare for Bookin Company:

(a) an income statement for the year ended 31 March 2018. (7.5 marks)

(b) a statement of financial position as at 31 March 2018. (6.5 marks)

(Both in VERTICAL style.)

(c) Bookin, the owner of the business, purchased the premises for several years. The purchase cost of
the premises was $638,230. Bookin decided to record the value of premises at the current market
value, which was $920,000 and report in the coming year’s financial statements.

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State and explain the accounting principle or concept that has been violated. Advise Bookin what he
should do to comply with the accounting principle or concept. (3 marks)
(Total: 17 marks)
END OF PAPER

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