SHAU KEI WAN EAST GOVERNMENT SECONDARY SCHOOL
S.5 YEARLY EXAMINATION 2001/2002
PRINCIPLES OF ACCOUNTS
Class: 5A - EDate: March 25, 2002
Full marks: 100Time allowed: 2.5 hours
Name: ______(Class no:___)(8:30 - 11:00 a.m.)
Answer four questions:
Three from Section A (42%), and
Two from Section B (58%).
All workings must be shown.
Marks are awarded for clarity of expression and neatness of presentation.
S.5/M. Exam. 02/P.A./P.2
Section A
Answer any THREE questions from this section. Each question carries 14 marks.
- The transactions which occurred during the first month of trading of a business are listed below:
January
1Mr Chen deposited $10 000 into the business bank account as the opening capital.
4Fixtures costing $1 500 were paid for by cheque.
8$200 was withdrawn from the bank and handed over to the petty cashier for all petty cash expenditure below $50.
13Purchases on credit amounted to $7 500.
15$40 was paid for stationery.
17Cash sales were $300.
21Goods were returned by a customer and a cash refund of $80 was made.
22Rent of $3 200 was paid by cheque.
23Credit sales to Johnny, Philip and George were $750, $1 400 and $2 100 respectively.
27Cheques of $745 and $1 380 were received from Johnny and Philip respectively in full settlement of their accounts.
28$15 was spent on stamps.
30George paid cash to settle his account. $35 discount was al1owed as discount for prompt payment.
Cash purchases for $1 100 paid by cheque.
31Reimbursement was made from the cash till for the month’s petty cash expenditure.
$500 cash deposited in the bank.
An examination of the bank column in the cash book and the bank statement disclosed the following:
(i)Dividends amounting to $700 had been credited by the bank but not entered in the cash book.
(ii)Cheques issued amounting to $1 100 had not been presented to the bank for payment.
(iii)A payment of $350 for rates by standing order had not been recorded in the cash book.
(iv)The cash deposited on 31 January was not credited by the bank statement until the following date.
Required:
(a)Show the relevant entries in a two-column cash book for the above transactions.
(10 marks)
(b)Show the discounts allowed account in the general 1edger.( 2 marks)
(c)Prepare a bank reconciliation statement after the adjustments in the cash book had been made ( 2 marks)
S.5/M. Exam. 02/P.A./P.3
2.Beauty Limited, a manufacturing company, purchased a productive machine from Sunshine Company of Canada, the invoice price being $52 500. The machine was received on 16 December 1992 after the purchase price plus import duty of $5 000 and landing charges of $2 000 had been paid. Installation was completed by 1 January 1996 at a further cost of $2 800.
The company estimated that the machine would have a useful life of 10 years and a scrap value of $14 300. The financial period ends on 30 September each year and depreciation is to be charged on a straight-line basis. The performance of the machine was not satisfactory and it was sold on 30 April 1999 for $41 625.
A new machine, with list price $100 000, was bought on 1 May 1999. Trade discount of 20% was received. The machine would be used for 8 years and a scrap value of $10 000.
Required:
Prepare the following accounts to record the above for the year ended 30 September from 1995 to 1999:
(a)productive machine;(4 marks)
(b)provision for depreciation - productive machine; and(8 marks)
(c)disposal of productive machine.(2 marks)
3.Mrs. Wong suspected that his newly-employed cashier had been misappropriating cash from the company.
The balances verified by Mrs. Wong as true were:
1 April 200130 April 2001
$$
Creditors 10 87212 623
Debtors 15 648 8 139
Cash 2 300 ?
The invoices indicated that credit sales and credit purchases for the month were $64 725 and $21 403 respectively. Of the total payments to creditors, $6 200 was made by cheques whilst all debtors paid their accounts in cash. Cash sales amounted to $4 500. During the month, cash $30 000 was deposited into the bank.
S.5/M. Exam. 02/P.A./P.4
Cash was paid for the following items:
$
Electricity 600
Cash purchases 1 200
Stationery 500
Motor expenses (one-third for Mrs. Wong private use) 600
Drawings 3 000
Salary of cashier 7 000
On 30 April 2001, there was $3 400 cash in hand.
Required:
Calculate the amount of cash shortage.(14 marks)
- Identify the accounting principle or concept illustrated in each of the following cases, and gives your explanation briefly.
(i)A sole trader does not record his personal assets and liabilities in the accounts of his business.
(ii)The accountant of a corporation has charged the cost of a box of paper clips to an expense account, even though it can be used for two years.
(iii)Kong Ming Company has reported motor vehicles on the balance sheet at a total cost of $1 000 000 less accumulated depreciation of $440 000. Although the assets might be realised for considerably less than $560 000 if the business were discontinued and they were sold, the assets are not reported on the balance sheet at their estimated realisable values.
(iv)Wan, a salesman, was paid $3000 cash on 27 April 2001 as a commission on an order he completed during the accounting year ended 31 March 2001. The commission was treated as a 2001 expense.
(14 marks)
Section B
Answer any TWO questions from this section. Each question carries 29 marks.
S.5/M. Exam. 02/P.A./P.5
5.The following trial balance was extracted from the books of Sun Limited at 31 March 2001:
$$
1 200 000 ordinary shares of $0.50 each, fully paid 600 000
Furniture and fittings, at cost 1 500 000
Motor vehicles, at cost 500 000
Provision for depreciation, 1 April 2000
Furniture and fittings 427 000
Motor vehicles 118 000
Retained profits 67 000
General reserve 93 600
Trade debtors 364 600
Trade creditors 241 200
Stock, 1 April 2000 26 410
10% loan (borrowed in 2000 and repayable in 2004) 200 000
Cash at bank 333 290
Share premium 401 000
Provision for doubtful debts, 1 April 2000 5 400
Sales 2 954 300
Purchases 1 716 600
Loan interest 15 000
Carriage inwards 6 000
Sales returns 20 000
Purchases returns 9 000
Administration expenses 205 450
Selling and distribution expenses 409 150
Interim ordinary dividend 20 000
5 116 5005 116 500
Additional information:
(i)Depreciation was to be charged as fol1ows:
Furniture and fittings - 10% on net book value
Motor vehicles - 20% on cost
(ii)Stock as at 31 March 2001 amounted to $28 500.
(iii)The following adjustments were to be made on 31 March 2001:
$
Accrued carriage inwards 400
Prepaid administration expenses 9 600
(iv)An amount of $2 200 owing from a customer was to be settled by contra with his account as a supplier.
Trade debtors amounting to $4 000 were to be written off and a provision for
S.5/M. Exam. 02/P.A./P.6
doubtful debts was to be maintained at 3% of trade debtors.
(v)Directors’ fees of $35 000 were to be provided for.
(vi)The directors resolved to transfer $85 000 to the general reserve and to propose a final ordinary dividend of $0.05 per share.
(vii)On 1 April 2000, $300 000 9% debentures were issued at 98. The company debited the bank account and credited the share premium account in respect of this issue. Discount on debentures was to be written off against the share premium account evenly over three years. No debenture interest has yet been paid.
Required :
(a)Prepare the trading, profit and loss and appropriation account of Sun Limited for the year ended 31 March 2001, and (15 marks)
(b)the balance sheet of Sun Limited as at the same date.(14 marks)
6.Edwin and Ford were in partnership sharing profits and losses in the ratio of 2:1. They made up their accounts annually to 31 March.
The following trial balance was extracted on 31 March 2001:
$$
Partner’s capital accounts
Edwin 67 200
Ford 23 000
Loose tools, valued as at 31 March 2000 48 400
Leasehold premises 110 000
Motor vehicle - at cost 79 800
provision for depreciation as at 31 March 2000 37 920
Stock as at 31 March 2001 13 640
Debtors 3 960
Loan - Edwin at 8% p.a. 74 000
Bank overdraft 57 640
Creditors 14 080
Gross profit 120 120
Operating expenses 114 400
Partners’ drawings
Edwin 13 200
Ford 10 560
393 960393 960
S.5/M. Exam. 02/P.A./P.7
On 31 March 2001, loose tools were valued at $39 600. Provision of $15 960 was to be made for depreciation of the motor vehicle and $2 640 was to be accrued for operating expenses.
The partnership was dissolved on 1 April 2001 on the following terms:
(i)Edwin took over the stock for $11 000.
(ii)Ford took over the motor vehicle for $24 000 and part of the loose tools for $16 500.
(iii)The leasehold premises were sold for $143 000.
(iv)The remaining loose tools were sold for $18 700.
(v)$3 800 was collected from debtors, the balance being taken over by Edwin.
(vi)Edwin’s loan and interest for the year were repaid.
(vii)Other liabilities were paid in full, except a discount of $120 received from creditors.
(viii) Realisation expenses amounted to $4 201.
Required to prepare:
(a)a profit and loss account for the year ended 31 March 2001;(5 marks)
(b)a rea1isation account;(11 marks)
(c)the bank account; and (7 marks)
(d)the partners’ capital accounts (in columnar form) showing the final settlement on dissolution. (6 marks)
7.On 31 March 2000, the trial balance of Green Lee, a wholesaler, failed to agree and the difference was entered in a suspense account. After the draft final accounts had been prepared, the following matters were discovered. The draft profit for the year amounted to $196 000.
(i)The credit side of the salaries account had been undercast by $1 000.
(ii)Credit sales of $3 812 had been correctly credited to the sales account but had been debited to the customer’s account as $3 182.
(iii)The bookkeeper had been instructed to reduce the provision for doubtful debts by $1300. However, an increase of $1 100 in provision for doubtful debts had been made.
(iv)Due to an oversight, a cash discount had been allowed to a credit customer on an
S.5/M. Exam. 02/P.A./P.8
invoiced amount of $8 000 at the rate of 10%. A discount of 7% should have been recorded.
(v)Rent of $6 000 which had been prepaid at 31 March 1999 had not been brought down in the rent account as an opening balance.
(vi) Prepaid insurance of $1 829 had been wrongly accounted for as an accrual.
(vii)A cash payment of repairs on a motor vehicle for $9 500 had been recorded as $5 900 in the motor vehicles account and the cash account. Wages of $40 000 paid for the construction of a store room was debited to the wages account. It is the policy of the company to provide depreciation on the cost of all fixed assets at 10% per annum.
(viii)Purchases journal was overcast by $1 000.
(ix) Discounts allowed of $750 had been wrongly credited to the discounts received account.
Required:
(a)Prepare journal entries to correct the above. (Narrations are not required.) (14 marks)
(b)Draw up the suspense account.( 4 marks)
(b)Prepare a statement to correct the draft net profit for the year ended 31 March 2001. (11 marks)
END OF PAPER