SECTION A
Each question scores two marks. Mark only ONE answer for each of the multiple-choice question. If you mark more than one answer, you will receive NO MARKS for that question. No marks will be deducted for wrong answers.
1A bookstore has decided to donate 1% of its sales revenue to support the ongoing charity work of The Salvation Army in Hong Kong,This is an example of
A. business ethics.
B.social responsibilities
C.corporate governance.
D.legal behaviour.
2Toyota announced a recall in February 2010 of about 436,000 hybrid vehicles worldwide, including its latest Prius model, to fix brake problems. Which of the following stakeholders is likely to be affected?
A.Managers
B.Creditors
C.Suppliers
D.All of the above.
3Which of the following is the performance standard for a telephone survey company which conducts questionnaires for its clients?
A.Number of calls made by the interviewers.
B.Number of customer complaints
C.Average cost of completing the questionnaire
D.All of the above
4Which of the following items would not be reported in an income statement?
A.Drawings
B.Inventory
C.Expenses
D.Other income
5On the first day that Jane joins T&T Company as a customer service assistant, her supervisor, Jackie, tells her about many company policies and working procedures. At the end of the day, Jane can barely remember what has been said. What is the cause of the above communication problem?
A.Lack of feedback in communication
B.Inappropriate channel
C.Selective perception
D.Information overload
6A laissez-faire policy is based on the idea that the government should
A.minimise intervention in the market.
B.promote a spirit of entrepreneurship which helps promote economic growth.
C.protect and respect private property rights.
D.allow the free flow of information.
7What factor has accounted for structural changes in Hong Kong’s economy in the early 1980s?
A.The rapid expansion of Hong Kong’s manufacturing industry.
B.Hong Kong began to industrialise and exported a lot of products to other countries.
C.Factory owners in Hong Kong started to relocate their production bases
to the Mainland.
D.The inflow of labour, capital and entrepreneurs from the Mainland.
8Which of the following events would affect the capital balance of a business?
A.The business incurs a net loss for the period.
B.Sale of equipment by the business at cost
C.Purchase of premises by the business on credit
D.The owner uses his own money to pay for the maid who works in his apartment.
9Which of the following accounts is to be closed off at the end of an accounting period?
A.Accounts receivable
B.Capital
C.Salaries
D.Inventory
10The following are examples of equity financing except
A.for Mr Kwong and Mr Leung admitting Miss Fung as new partners in their accounting firm.
B.Miss Tam using her personal savings to finance her flower shop.
C.Goodwill Company obtaining trade credit from its supplier.
D.People Company Ltd issuing new shares to new investors.
11TTM Company is a multinational shipping company which has operations in more than 10 countries. Which is the most appropriate method for organising its marketingactivities?
A.Functional structure
B.Geographical structure
C.Product structure
D.Customer structure
12An effective information system would
A.provide the correct information to the right people at the right time and in the right form.
B.give reliable and timely information to managers and workers.
C.facilitate communication between employees even if they are geographically
dispersed.
D.transform data into information which is useful for decision-making.
13The following information was extracted from the books of Concord Co for the year ended
31 December 2010:
$
Cost of goods sold60,000
Total assets as at 31 December 2010185,000
Total liabilities as at 31 December 201085,000
Inventory as at 31 December 201020,000
Sales less returns inwards100,000
Accounts receivable as at 31 December 201030,000
Expenses10,000
The return on capital employed for the year was
A.20%.
B. 30%.
C.40%.
D.50%.
14Suppose the working capital ratio of a business as at a certain date is 1.5 : 1. The quick ratioas at that date
A.must be greater than 1.
B.must be less than 0.
C.equals 0.
D.cannot be determined.
15The Hospital Authority requires non-local expectant mothers to make a booking with Hong Kong public hospitals in advance. What is the aim of this strategy in terms of operations management?
(i)Forecasting demand
(ii)Scheduling work
(iii)Planning for capacity
(iv)Designing a facility layout
A.(i) and (ii)
B.(i) and (iii)
C.(ii) and (iv)
D.All of the above
16The advantage(s) of a sole proprietorship over a partnership is/are that
(i)a sole proprietor is not bound by the decisions of others.
(ii)a sole proprietor does not need to disclose the company’s financial information to the public.
(iii)a sole proprietor can have a lower profits tax rate.
A.(i) only
B.(ii) only
C.(i) and (iii)
D.All of the above
17A private limited company
A.has no upper limit on the number of shareholders.
B.does not have a separation of ownership and management.
C.can obtain capital without losing control of the business.
D.can sell its shares to the public.
18SMEs are more flexible than MNCs because
(i)SMEs are relatively small and have a simple organisational structure.
(ii)SMEs employ professional managers to run their businesses.
(iii)SMEs are mostly labour-intensive operations and use relatively simple technology.
(iv)the owners of SMEs can make decisions quickly.
A.(i) and (ii)
B.(i) and (iv)
C.(ii) and (iii)
D.All of the above
19Which of the following transactions would be recorded in the purchases account of a business?
(i)Cash purchases of goods
(ii)Credit purchases of goods
(iii)Drawings of goods by the owner
(iv)Purchases of non-current assets for business use
A.(i)
B.(i), (ii) and (iii)
C.(ii), (iii) and (iv)
D.All of the above
20How many columns are there in a computerised account?
A.One
B.Two
C.Three
D.Four
21A purchase invoice showed a gross amount of $5,500, less a trade discount of 8% and a cash discount of 3% if settled within 7 days. The company returned one-third of the goods immediately after delivery and received a credit note from the supplier. If this invoice was settled within five days, the payment amount would be
A.$880.
B.$1,636.07.
C.$3,204.67.
D.$3,272.13.
22Which of the following statements is true?
A.A revenue item is increased by debiting the revenue account and decreased by crediting the revenue account.
B.Liabilities are increased by debit entries to the liability account;liabilities are decreased by credit entries to the liability account.
C.A debit entry is used to record a decrease in expenses, while a credit entry is used to record an increase in expenses.
D.Assets are increased by debit entries to the asset account;assetsare decreased by credit entries to the asset account.
23The tasks performed by the first-line manager in a factory include
(i)choosing a suitable location for a new plant which is to be built next year.
(ii)thinking over the possibilities of using new machines to enhance overall production efficiency.
(iii)ensuring that operational tasks can meet the production schedule.
(iv)dealing with quality control problems that occur in the production process.
A.(i) and (ii)
B.(i) and (iii)
C.(ii) and (iv)
D.(iii) and (iv)
24Which of the following descriptions are correct?
(i)Financial statements are periodic accounting reports prepared to show the financial position and operating results of a business.
(ii)A balance sheet shows the assets, liabilities and capital of a business for a specific period of time.
(iii)An income statement summarises the revenues and expenses of a business as of a specific date.
(iv)The capital account shows the amount of resources supplied to a business by its owner(s).
A.(i) and (ii)
B.(i) and (iv)
C.(ii) and (iii)
D.(iii) and (iv)
25How should the return of goods bought on credit to a supplier be recorded in the purchaser’s books? What is the source document for this transaction?
DrCrSource document
A.Accounts payableReturns outwardsDebit note
B.Returns inwardsAccounts receivableDebit note
C.Returns outwardsAccounts receivableCredit note
D.Accounts payableReturns inwardsCredit note
26An international casual wear retail chain has the following plans:
Plan A: Enter the Mainland market
Plan B: Open five shops each in Beijing and Shanghai in 2011.
What kinds of business plans are these?
A.Plan A: Long-term plan; Plan B: Short-term plan
B.Plan A: Tactical plan; Plan B: Operational plan
C.Plan A: Directional plan; Plan B: Specific plan
D.Plan A: Strategic plan; Plan B:Operational plan
27Tommy Lee, a trader of office equipment, sold a copying machine on credit to Tai San Co. Which of the following journal entries and corresponding ledgers for posting are correct for this transaction?
A.DrOffice equipment (General ledger); CrTai San Co (Accounts payable ledger)
B.Dr Tai San Co (Accounts receivable ledger); CrOffice equipment (General ledger)
C.DrPurchases (General ledger); CrTai San Co (Accounts payable ledger)
D.DrTai San Co (Accounts receivable ledger);CrSales (General ledger)
Refer to the following information for Questions 28 – 29:
The following trial balance was prepared by an inexperienced bookkeeper. Some of the accounts were listed on the wrong side of the trial balance.
Ada CoTrial Balance as at 31 December 2010
Dr / Cr
$ / $
Accounts payable / 4,100
Accounts receivable / 4,500
Bank overdraft / 2,535
Discounts allowed / 530
Discounts received / 130
Drawings / 3,510
Purchases / 14,500
Rent expense / 1,250
Sales / 18,000
Inventory / 2,000
28What should the correct totals for debit and credit balances be?
A.$22,780; $28,275
B.$25,890; $25,165
C.$26,290; $24,765
D.$29,790; $21,265
29Ifthe capital account is the only missing account, the correct capital balance should be
A.$1,525Cr.
B.$725Cr.
C.$6,595Cr.
D.$5,495Dr.
30The owner of a business paid for the repairs of his private car by issuing a cheque for $2,500 from the business bank account. The bookkeeper recorded the transaction as follows:
DrCr
$$
Motor repairs2,500
Bank2,500
Which of the following accounting principles or concepts has been violated?
A. Going concern concept
B. Business entity concept
C.Accrual concept
D.Consistency principle
END OF SECTION A
SECTION B
Write your answers for this section in the spaces provided.
1Use the 4Ps to design a marketing strategy for a boutique in Central.(4 marks)
2Due to increases in wages and production costs, many factory owners in the Mainland are considering relocating to East Asian countries, e.g., Vietnam, Malaysia, Thailand, etc.
(a)What factors do they need to consider? Describe three of these factors.(3 marks)
(b)How can information management help them manage the risks of investing in the East Asian countries? (2 marks)
3The opening and closing inventory figures of King Kong Co for the year ended 31 March 2010 were $40,000 and $50,000 respectively. After investigation, it was found that the opening inventory had been overstated by $3,000 while the closing inventory had been overstated by $4,300.
Required:
Indicate how the above errors affected the net profit figure for the year.(4 marks)
4The following account balances are extracted from the ledgers of David Chan at 31 October 2010:
$
Capital21,550
Bank720Cr
Drawings1,270
Discounts received400
Purchases9,470
Peter Lai1,320Dr
Rent880
Susan Yeung2,345Cr
During November 2010, the following transactions took place:
Nov1Bought goods for $520 from Fanny Chan on credit.
Nov5Inventory costing $1,200 were taken by David Chan for private use.
Nov15David transferred $500 from his private bank account to the business bank account as an additional investment.
Nov25 Rent for November and December, at $330 per month, was paid by cheque.
Nov29 Peter Lai settled his account by cheque, deducting 5% cash discount.
Required:
Prepare the necessary ledger accounts to record the above transactions, then balance off the accounts at the end of the month. (5 marks)
5The account balances of ABC Co as at 1 January 2010 were as follows:
Accounts receivable: Mandy Chan $864; Nancy Kwan $1,200
Accounts payable: Amy Chan $560
Cash: $800
Bank: $400 Cr
The following transactions took place during January 2010:
2010
Jan1A sum of $300 was withdrawn from the bank account and handed over to the petty cashier to pay for expenses below $30.
“5Mandy Chan paid half of the amount owed by cheque.
“8Nancy Kwan settled the account by cheque, deducting a 2% cash discount.
“9Paid postage of $20.
“13Settled Amy Chan’s account by cheque, after deducting a 2% cash discount.
“19Withdrew $100 from the bank account for office use.
“26Mandy Chan paid us $20 in cash.
“30Paid general expenses of $18.
Required:
(a)Write up a three-column cash book for the month of January 2010. Then balance it off on
31 January 2010 and show the balance brought down on 1 February 2010.(3marks)
(b)Write up the petty cash book with the following analysis columns: postage, general expenses and ledger account. Balance the petty cash book at the end of the month and show the amount of cash drawn from the bank to restore the imprest amount on 1 February 2010 (assuming that the imprest amount was $300). (1marks)
6Philip Lee is a sole trader. The following figures were extracted or determined from his books as at
31 December 2010:
(i)Current ratio was 2.2 : 1.
(ii)Quick ratio was 1.1 : 1.
(iii)Working capital amounted to $180,000.
(iv)Cash at bank amounted to 30% of working capital.
(v)There were three types of current assets: cash at bank, accounts receivable and inventory.
(vi)Current liabilities consisted only of accounts payable.
Required:
Using the information given, calculate the following figures as at 31 December 2010:
(a)Accounts payable(4 marks)
(b)Accounts receivable(2 marks)
(c)Inventory(1 mark)
7Tommy Lui commenced business in 2010. The following information was extracted from his books of account:
Credit purchases in January 2010:
DateSupplierList priceTrade discount
2010
Jan3Lawrence Wong$1,46010%
“8Ronald Tseng$3,15012%
“12Besa Cheung$3,34015%
“21Freda To$5,67020%
Returns outwards in January 2010:
DateSupplierList price
2010
Jan16Ronald Tseng$400
“27Freda To$500
Required:
(a)Prepare the purchases journal and returns outwards journal for January 2010.(2 marks)
(b)Suppose all the goods purchased during the month were sold for $32,127. Compute the amount of gross profit. (1 mark)
(c)Compute the gross profit ratio for the month ended 31 January 2010.(1 mark)
8From the following trial balance for Sandy Wong, prepare an income statement for the year ended
28 February 2010. Also prepare three separate statements, showing the balances of total assets, total liabilities and capital of the business as at that date. (6 marks)
Trial Balance as at 28 February 2010
Dr / Cr
$ / $
Accounts payable / 14,144
Accounts receivable / 23,103
Bank overdraft / 864
Bank loan (repayable on 28 February 2018) / 28,800
Capital / 130,743
Cash / 68
Drawings / 9,540
Electricity / 3,510
Inventory, 1 March 2009 / 11,340
Motor vehicles / 18,900
Office equipment / 25,200
Premises / 97,600
Purchases / 139,860
Rent and rates / 2,070
Returns inwards / 4,680
Returns outwards / 5,985
Salaries and wages / 43,650
Sales / 199,170
Carriage inwards / 185
379,706 / 379,706
Inventory at 28 February 2010 was valued at $13,450.
END OF SECTION B
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NSS BAFS Mock Exam Paper 2010© Pearson Education Asia Limited 2010