Fanling Lutheran Secondary School

FANLING LUTHERAN SECONDARY SCHOOL

2014 - 2015 Mock Examination

S.6 BAFS PAPER 1

Marking Scheme

SECTION A

1. C 11. D 21. A

2. C 12. D 22. C

3. D 13. B 23. A

4. B 14. B 24. D

5. C 15. A 25. A

6. A 16. A 26. A

7. B 17. C 27. D

8. D 18. C 28. C

9. B 19. D 29. C

10. B 20. D 30. A

SECTION B (30 marks) Short Questions

Part 1 (20 marks) Answer ALL questions in this part.

1. (a)

—  Setting up a sole proprietorship is easier than setting up a partnership.
—  Setting up a sole proprietorship is cheaper than setting up a partnership.
—  A sole proprietor can make decisions quickly.
—  The operation of sole proprietorships more efficient and flexible than a partnership.

(b)

—  Division of labour: Each partner can contribute his expertise and ability to the business.
—  More sources of capital: Anthony’s uncle can bring in more capital.
—  Sharing business risk: The business risk will not be borne only by Anthony himself.

(4 marks)

2

(a) / Laissez-faire leadership (3)
(b) / Disadvantages:
—  not suitable for new or inexperienced staff (1)
—  need to be independent and have high incentive to work (1)
—  difficult to monitor or control the working process (1)
—  easy to have chaos
(c) / —  enhance the reputation of the business (2)
—  increase the long-term profitability

(5 marks)

3 / NPV of Machine A
= $120,000/(1 + 10%) + $120,000/(1 + 10%)2 + $120,000/(1 + 10%)3 + $35,000/(1 + 10%)3 - $200,000
= $124,719
NPV of Machine B
= $100,000/(1 + 10%) + $100,000/(1 + 10%)2 + $150,000/(1 + 10%)3 + $50,000/(1 + 10%)3 - $200,000
= $123,817
Since Machine A has a higher NPV, Cookie Company should purchase Machine A.

(4 marks)

4.

(a) / —  Stationery
—  Entertainment
—  Electricity
—  Interest income
—  Discounts received
—  Rental income

(b)

Kerry Company
Statement of Financial Position as at 31 December 2013
$ / $
ASSETS
Non-current assets
Fixtures and fittings / 120,000
Current assets
Inventory / 32,000
Trade receivables / 23,000
Cash / 10,000 / 65,000
185,000
CAPITAL AND LIABILITIES
Capital
Balance as at 1 January 2013 / 100,000
Add Net profit for the year (bal figure) / 52,000
152,000
Less Drawings / (4,000)
148,000
Current liabilities
Trade payables / 37,000
Total Capital and Liabilities / 185,000

(7 marks)

Part 2 (10 marks) Answer ONE question in this part.

5. (a)

ABC Company
Trial Balance as at 31 March 2013
Dr / Cr
$ / $
Accounts receivable / 3,510
Accounts payable / 1,637
Bank overdraft / 1,780
Discounts allowed / 130
Discounts received / 530
Returns inwards / 910
Returns outwards / 328
Carriage inwards / 288
Carriage outwards / 177
Drawings / 2,510
Purchases / 34,500
Rental expense / 8,250
Sales / 38,000
Inventory / 2,000
Capital / 10,000
52,275 / 52,275
ABC Company
Income Statement for the year ended 31 March 2013
$ / $ / $
Sales / 38,000
Less Returns inwards / (910)
37,090
Less Cost of goods sold:
Opening inventory / 2,000
Add Purchases / 34,500
Carriage inwards / 288
34,788
Less Returns outwards / (328) / 34,460
36,460
Less Closing inventory / (1,325) / (35,135)
Gross profit / 1,955
Add: Discounts received / 530
2,485
Less Expenses:
Carriage outwards / 177
Discounts allowed / 130
Rental expense / 8,250 / (8,557)
Net loss / (6,072)

(Total: 10 marks)

6.

(a) / —  Political/legal: government policies about licensing, rules and regulations
—  Economic: economic growth, income level and purchasing power
—  Socio-cultural: cultural values, lifestyle
—  Technological: technological level of café operation, IT applications
—  Competitive: operation of other cafés and competition in the industry
(Any three of the above)
(b) / —  Fire — Buying insurance and installing fire alarms
—  Theft — Buying insurance and hiring security guards
—  Machine breakdown — Checking machines regularly and having back-up machines
—  Injuries — Buying insurance and providing work safety training for workers
(Any three of the above)
(c) / —  Division of labour — Each partner can contribute specialised knowledge and ability to the business.
—  More sources of capital—This leads to further and better development of the business.
—  Sharing business risk—The business risk will not be borne by one person only
(Any one of the above)

(Total: 10 marks)

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14-15 S.6 BAFS (I) Mock Examination Page 1 By M. C. WONG