AAT 2011 (Paper 2, 9) (Incomplete records)

9.Gigi Chan is the owner of a tuck shop and does not keep proper set of books. On 31 March 2010, the following information is available.

As at 31 March 2009 / As at 31 March 2010
Items / $ / $
Trade receivables / 67,260 / 78,900
Trade payables / 43,540 / 54,880
Inventory / 78,010 / X
Accrued general expenses / 1,360 / 3,280

She just received profit tax return from the Inland Revenue Department. She is requested to submit the profit and loss account for the year ended 31 March 2010 for tax assessment purpose.

Additional information:

(1)All goods were purchased and sold on credit.

(2)During the year ended 31 March 2010, cheques and cash received from trade receivable amounted to $488,270 and $32,970 respectively. Cash discounts granted to trade receivables for early settlement were $7,700.

(4)Cheques and cash paid to trade payables amounted to $308,060 and $17,870 respectively. Discounts received from trade payables were $5,960.

(5)The gross profit margin was 25% on all sales for the year.

(6)The firm paid $24,770 for general expenses during the year.

REQUIRED:

(a)You are required to prepare the following statements:

(i)Statement to compute sales for the year ended 31 March 2010

(ii)Statement to compute purchases for the year ended 31 March 2010

(iii)Profit and loss account for the year ended 31 March 2010

(b)Compute the ratios of average inventory period (in days), trade receivable collection period and trade payable repayment period. Comment on any liquidity problems faced by Gigi.

HKCEE (2010, 6)(Incomplete records)

The Craze Club is a non-profit making organization which aims at promoting visual arts. Members are required pay an annual membership fee of $1,000. The club operates a small gift shop which sells T-shirts and decorative accessories. A mark-up of 80% on cost was made on all sales of gifts.

The following is a summary of the receipts and payments of Craze Club for the year ended 31 December 2009:

$ / $
Balance at bank, 1 January 2009 / 28,940 / Purchases of gifts / 152,500
Subscriptions / 188,150 / Art course – tutors’ salaries / 40,000
Art course fees / 164,000 / – materials / 8,000
Sales of gifts / 256,900 / Rent and rates / 120,000
Operating expenses of gift shop / 13,170
Staff salaries / 208,740
Sundry expenses / 5,860
Utilities expenses / 17,760
Donations to charities / 20,000
Purchases of furniture and fittings / 30,000
Balance at bank, 31 December 2009 / 21,960
637,990 / 637,990

Additional information:

(i)Some of the club’s balance as at 31 December were as follows:

2008 / 2009
$ / $
Gift stock / 29,190 / ?
Gift shop debtors / 39,800 / ?
Discounts allowed / - / ?
Subscriptions in arrears / 4,000 / 6,000
Subscriptions in advance / 2,000 / 1,000
Rent and rates prepaid / 2,250 / 3,850
Utilities expenses owing / 960 / 1,020
Furniture and fittings, at cost / 84,520 / ?
Accumulated depreciation – furniture and fittings / 23,760 / ?

(ii)Sales of gifts for 2009 amounted to $266,400. All purchases of gifts were made in cash while all sales were made on credit. The credit period allowed to average debtors was 2 months.

(iii)A physical stock-taking on 5 January 2010 showed that the value of gift stock on that date was $30,150. During the 5 days from 1 January to 5 January 2010, goods received from a supplier and goods returned outwards had a list price of $4,000 and $200 respectively. A trade discount of 10% had been given by the supplier on these goods.

(iv)On 31 December 2009, some of the gift stock was found missing.

(v)Subscriptions of $3,000 had long been outstanding and therefore the club wrote off the amount in the current year.

(vi)Donations to charities for the year also included some T-shirts at a cost of $2,500.

(vii)It is the club’s policy to depreciate furniture and fittings at 20% per annum using the straight-line method. A full year’s depreciation is to be charged in the year of acquisition.

REQUIRED:

Prepare for Craze Club:

(a)the trading account for the gift shop for the year ended 31 December 2009;

(b)the income and expenditure account for the year ended 31 December 2009; and

(c)the balance sheet as at 31 December 2009.

HKCEE (2009, 6)(Incomplete records)

The following is a summary of the receipts and payments of Fei Fei Dance Club for the year ended 31 December 2008:

$ / $
Bank balance c/d / 67,460 / Bar creditors / 27,500
Sale of audio equipment / 4,260 / Bar operating expenses / 10,610
Subscriptions / 217,800 / Utilities expenses / 19,860
Interest on loan / 3,200 / Rent and rates / 125,000
Proceeds from annual dance party / 15,000 / Wages and salaries / 54,300
Bar debtors / 46,490 / Loan to Lily Dance Club (repayable in August 2009) / 40,000
Purchases of audio equipment / 28,800
Expenses of annual dance party / 9,120
Donations – charity / 2,000
Bank balance c/d / 37,020
354,210 / 354,210

Additional information:

(i)A bank statement for December 2008 was received by the club. An examination of the club’s bank account and the bank statement disclosed the following:

(1)Direct deposits of $6,000 for subscriptions had been lodged by members.

(2)An autopay was made by the bank for utilities expenses of $420.

(3)Cheques issued amounting to $2,930 had not been presented to the bank for payment. Among these cheques was one for $223 drawn nine months ago for the payment of bar purchases. The club decided to cancel the cheque on 31 December 2008.

(4)Lodgement of $4,260 from the sale of audio equipment had not yet been recorded by the bank.

(ii)Some of the club’s balances as at 31 December were as follows:

2007 / 2008
$ / $
Bar stock / 3,260 / ?
Subscriptions in arrears / 17,820 / 14,580
Subscriptions in advance / 34,950 / 27,320
Audio equipment, at cost / 300,000 / ?
Accumulated depreciation – audio equipment / 209,000 / ?
Bar debtors / 4,780 / 4,920
Bar creditors / 3,660 / 2,544
Wages and salaries prepaid / 7,000 / 5,000
Bar operating expenses owing / 2,200 / 2,830
Deposit paid for annual dance party / 1,800 / -
Accumulated fund / 152,310 / ?

(iii)Net profit ratio of the bar was 10%.

(iv)One-tenth of the wages and salaries was to be allocated to the bar.

(v)Audio equipment sold on 1 January 2008 had a cost of $50,000 and a net book value of $9,000. Additional audio equipment were purchased on 1 May 2008. It is the club’s policy to depreciate audio equipment at 40% per annum using the reducing-balance method on a pro rata basis.

REQUIRED:

(a)Prepare a bank reconciliation statement as at 31 December 2008 commencing with the bank balance of $37,020 and ending with the balance as per bank statement.

(b)Prepare the bar trading account for the year ended 31 December 2008.

(c)Prepare the income and expenditure account for the year ended 31 December 2008.

(d)Prepare the balance sheet as at 31 December 2008.

HKCEE (2009, 7)(Incomplete records)

The annual physical stocktaking of Albert Shop did not take place on the day of the company’s year end, 31 December 2007. However, stock was taken on 13 January 2008 when the business closed for the weekend. All normal sales by the company are made at a gross profit of 20% on sales.

Subsequent investigation revealed the following:

(i)Stock at 13 January 2008 was $78,178.

(ii)During the period from 1 January to 13 January 2008, the company recorded the following:

$
Sales / 45,000
Returns inwards / 800
Purchases / 29,680
Returns outwards / 470

Included in the purchases was an amount of $300 for carriage inwards which was mistakenly charged by a supplier.

(iii)An item of stock with a normal selling price of $1,000 was purchased in 2005. It was found to be obsolete and could only be sold for $600.

(iv)One of the stock sheets dated 13 January 2008 had been overcast by $1,720.

(v)Included in stock were goods with an invoiced price of $960 which were received on a sale or return basis from a supplier on 28 December 2007. Albert Shop had not notified the supplier of its intention to buy the goods by 13 January 2008.

REQUIRED:

(a)Prepare a statement to calculate the amount of stock as at 31 December 2007.

Albert Shop had the following balances in its debtors and creditors control accounts at 1 January 2008:

$

Debtors control (net of a credit balance of $716)95,426

Creditors control64,178

$
Cash received from customers / 765,212
Cash paid to suppliers (including an amount of $500 which had been recorded twice in the books) / 588,458
Returns inwards / 2,620
Returns outwards / 5,535
Discounts received / 2,860
Discounts allowed / 3,150
Carriage inwards / 230
Carriage outwards / 880
Cash sales / 5,510
Cash purchases / 1,029
Cash refunded by supplier for amount overcharged / 200
Samples charges by supplier / 170
Allowance to customers on goods damaged in transit / 1,000
Bad debts written off / 840
Interest charged on overdue customers’ accounts / 205
Contra between debtors and creditors / 815
Bad debts recovery (included in cash received from customers) / 150
Goods withdrawn by owner for personal use at selling price / 1,080

On 31 December 2008, the correct balances of the debtors and creditors control accounts in the books of Albert Shop were $58,154 and $42,200 respectively.

REQUIRED:

(b)Prepare for Albert Shop the debtors control account and the creditor account for 2008.

(c)Prepare the trading account, showing the amount of closing stock, for Albert Shop for the year ended 31 December 2008.

HKCEE(2008, 3) (Accounting Principles and incomplete)

(B)Due to unexpected circumstances, the year-end physical stocktaking of Mr Wong’s business was delayed from 31 December 2007 to 6 January 2008. The cost of stock as at the close of business on 6 January 2008 was $38,420.

Additional information:

(i)After the physical count, an item costing $100 was found to be worthless. It was damaged by a warehouse worker on 30 December 2007.

(ii)The purchases and sales during the period 1 to 6 January 2008 amounted to $7,230 and $6,880 respectively. During this period, goods at the invoiced price of $5,900 were returned by customers and there were no returns outwards. It is the company’s policy to sell all goods at a 25% mark-up on cost.

(iii)Goods costing $350 was drawn by Mr Wong on 4 January 2008 for his personal use. In addition, goods were sold on 5 January 2008 to company staff for $2,000, being 50% of the normal selling price. Both events had not been recorded in the books.

(iv)Goods costing $720 were sent to a customer on 20 December 2007 for inspection. The customer confirmed his acceptance of the goods on 8 January 2008.

REQUIRED:

Prepare a statement to calculate the closing stock value of Mr Wong’s business as at 31 December 2007.

HKCEE (2007,5)(Incomplete record)

George Ho is a sold trader engaged in the trading of clocks and watches. During a burglary in March 2007, George lost some of the stock as well as most of his accounting records. However, after careful investigations, the following information for the year ended 31 March 2007 was made available:

(i)Account balances at 31 March 2006 were as follows:

$
Motor vehicles, at cost / 420,000
Accumulated depreciation – motor vehicles / 252,000
Stock, at cost / 284,000
Trade debtors / 157,500
Trade creditors / 105,000
Prepaid administrative expenses / 3,000
Accrued selling expenses / 5,750
Bank / 107,750
Capital / ?

(ii)All receipts and payments were made through the bank account. The bank transactions during the year were:

$
Trade debtors / ?
Trade creditors / 1,839,000
Selling expenses / 182,240
Drawings / 18,000
Administrative expenses / 109,120

(iii)Based on the sales invoices, the following information relating to sales was available:

Date of receipt of order / Date of delivery / Sales amount
$
28 February 2006 / 3 April 2006 / 560,000
15 June 2006 / 19 June 2006 / 530,000
25 September 2006 / 30 September 2006 / 620,000
30 December 2006 / 5 January 2007 / 680,000
31 March 2007 / 6 April 2007 / 300,000
2,690,000

(iv)Discounts received and discounts allowed amounted to $16,000 and $21,060 respectively.

(v)In January 2007, George drew stock costing $20,000 for personal use.

(vi)On 1 March 2007, a motor vehicle with a cost of $180,000 was purchased on credit. Depreciation on motor vehicles is to be calculated at 10% per annum on cost.

(vii)The business attained an average stock turnover period of 2 months over the past few years. Stock at 31 March 2007 had been replenished to the normal level and amounted to $212,000 at cost.

(viii)Account balances at 31 March 2007 included the following:

$
Trade debtors / 181,440
Trade creditors / 98,000
Prepaid administrative expenses / 3,360
Accrued selling expenses / 7,020

You are required to prepare:

(a)the bank account;

(b)the trading, profit and loss account for the year ended 31 March 2007; and

(c)the balance sheet as at 31 March 2007.

HKCEE (2006, 7)(Incomplete records)

The following is a summary of the receipts and payments of Summit Badminton Club for the year ended 31 March 2006:

$ / $
Balance at bank – 1 April 2005 / 65,720 / Bar creditors / 52,700
Subscriptions / 254,200 / Badminton course – coach salaries / 95,000
Bar debtors / 141,700 / Bar operating expenses / 19,450
Bar cash sales / 16,000 / Electricity / 21,500
Badminton course fees / 125,000 / Rent and rates / 174,000
Sales of rackets / 48,900 / Purchase of rackets / 30,600
Sale of office equipment / 6,500 / Salaries / 143,000
Purchases of office equipment / 100,000
Balance at bank – 31 March 2006 / 21,770
658,020 / 658,020

Additional information:

(i)Some of the club’s balances as at 31 March are as follows:

2005 / 2006
$ / $
Bar stock / 18,580 / ?
Subscriptions in arrears / 9,300 / 10,800
Subscriptions in advance / 11,000 / 7,800
Office equipment at cost / 260,000 / ?
Provision for depreciation – office equipment / 135,000 / ?
Bar debtors / 13,200 / ?
Bar creditors / 4,300 / ?
Rent and rates prepaid / 2,500 / 6,500
Electricity owing / 5,000 / 3,000

(ii)Bar sales were made at a gross profit ratio of 55%. 10% of the bar sales were for cash.

(iii)All bar purchases were on credit and the bar stock turnover rate was 5 times.

(iv)Office equipment which had been sold on 1 April 2005 had a cost of $90,000 and a net book value of $8,000. Additional office equipment was purchased on 1 January 2006.

It is the club’s policy to depreciate office equipment at 25% per annum using the reducing balance method.

(v)10% of the rent and rates was to be allocated to bar.

(vi)The club started selling rackets as from 1 December 2005. All purchases and sales were for cash. The rackets were sold at a profit of $20,500 during the four months.

You are required to prepare:

(a)a bar trading account for the year ended 31 March 2006;

(b)an income and expenditure account for the year ended 31 March 2006; and

(c)a balance sheet as at 31 March 2006.

HKCEE (2005, 7)(Incomplete records)

Dan Tang operates a small business in bed-linen. On 1 April 2004, Dan had the following balances in his books:

$
Trade debtors / 54,000
Trade creditors / 27,000
Bank / 60,380
Cash / 5,120
Stock / 30,800

Purchases and sales were made for cash and on credit. A mark-up of 80% on cost was made on all sales.

On 31 March 2005, the date of the financial year end, a fire broke out in the business premises and some of the accounting records, stock and cash were destroyed. After investigating all the remaining records, Dan was able to identify the following:

(i)Average cash sales of $21,975 per month were recorded. The credit period allowed to average trade debtors was 1.5 months. The amounts received from trade debtors were all in cash.

(ii)Expenses for the year, after adjustments were as follows:

$
Rent and rates / 91,200
Bad debts / 8,720
Discounts allowed / 20,642
Selling and distribution expenses / 10,990
Administrative expenses (including the depreciation of $13,000 on office equipment) / 219,700

On 31 March 2005, rates of $1,800 were prepaid and selling and distribution expenses of $490 were accrued.

(iii)A piece of office equipment was sold for cash $30,000 during the year.

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

(v)The following payments were made by cheque during the year:

$
Trade creditors / 381,000
Purchase of office equipment / 28,000

(vi)Correspondences with the customers, suppliers and bank and counting of the remaining cash and stock revealed the following balances at 31 March 2005:

$
Trade debtors / 101,700
Trade creditors / 31,000
Bank / 41,000
Cash / 38
Stock / 16,300

You are required to:

Prepare statements to show

(a)the amount of cash loss on 31 March 2005; and

(b)the amount of stock loss on 31 March 2005.