Professional Documents
Culture Documents
169
2
(a) (i) Thomas Yiu
Cash Book (Bank column)
20X8 $ 20X8 $
(1) Dec 31 Balance b/f 137,900 Dec 31 Trade subscription: 11,060 (11/2 )
(11/2 ) Interest income 1,365 Standing order
(11/2 ) Mr Sin 3,210 Bank interest 210 (11/2 )
Thomas Wong 2,530 Mr Wo: Dishonoured cheque 1,246 (11/2 )
(11/2 ) Cheque received from Mr Ma 6,720 Balance c/f 139,209
previously recorded on the
credit side ($3,360 × 2)
151,725 151,725
(10 marks)
Or
(ii) Bank Reconciliation Statement as at 31 December 20X8
$
Balance as per bank statement 139,419 (1)
Add Overdraft interest wrongly charged 840 (11/2)
140,259
Less Unpresented cheque 1,050 (11/2)
Balance as per correct cash book 139,209
(4 marks)
3 D & J Co Ltd
Ratio analysis 20X1 20X2
$150 $207
(a) Gross profit ratio × 100% = 25% (1) × 100% = 23% (1)
$600 $900
$60 $6
(b) Net profit ratio × 100% = 10% (1) × 100% = 0.67% (1)
$600 $900
$60 $6
(c) Return on capital employed × 100% = 6.25% (1) × 100% = 0.48% (1)
$960 $1, 263
170
$300 $681
(d) Current ratio = 1.25 : 1 (1) = 1.27 : 1 (1)
$240 $537
$300 − $75 $681 − $231
(e) Quick ratio = 0.94 : 1 (1) = 0.84 : 1 (1)
$240 $537
$450 $693
(f) Stock turnover = 6 times (1) = 4.53 times (1)
$75 $153
$150 $450
(g) Debtors collection period (in days) × 365 days = 91.3 days (1) × 365 days = 182.5 days (1)
$600 $900
(14 marks)
Comments:
The company has reduced its gross profit margin to generate sales. However, the company’s stock turnover
ratio has declined by 1.5 times. This shows that the company has a lot of slow-moving stock. Also, the return
on capital employed figure shows that the efficiency of the company in generating revenue from its available
resources has declined. This, in turn, affects the profitability of the company. (3)
The current ratio and quick ratio show that the company’s financial position is not so liquid anymore. The
company may face problems in paying its immediate debts. This shortage of cash could be due to the bad
management policy on debtors. The credit period allowed seems to have lengthened, from 91 days to 183
days. The company should not allow its capital to be tied up in this way and should tighten up its credit
policy or take action against slow-paying debtors. (3)
(6 marks)
(Total 20 marks)
4 (a)
Silver Queen Ltd
Profit and Loss Account for the year ended 31 December 20X7
$ $
Sales 1,794,000 (1/2)
Opening stock 137,800 (1/2)
Purchases 682,500 (1/2)
Carriage inwards 16,900 (1/2)
837,200
Less Closing stock 195,000 (1/2)
Cost of goods sold 642,200 (1/2)
Gross profit 1,151,800 (1/2)
Discounts received 2,665 (1/2)
1,154,465
Less Expenses:
Salaries 101,400 (1/2)
Carriage outwards 10,400 (1/2)
Debenture interest ($32,500 + $32,500) 65,000 (1/2)
Depreciation 93,600 (1/2)
Discounts allowed 5,915 (1/2)
Administrative expenses 109,200 (1/2)
385,515
Profit before taxation 768,950 (1/2)
Taxation 34,580 (1/2)
Profit after taxation 734,370
Appropriations:
Dividend
Preference dividend paid 13,000 (1/2)
Ordinary dividend proposed (2,340,000 × $0.10) 234,000 (1)
247,000
Retained profit for the year 487,370 (1/2)
(10 marks)
171
(b) Silver Queen Ltd
Balance Sheet as at 31 December 20X7
Cost / Provision for Net book
Valuation depreciation value
Fixed Assets $ $ $
Building 1,300,000 — 1,300,000 (1/2)
Office equipment 468,000 210,600 257,400 (1/2)
1,768,000 210,600 1,557,400 (1/2)
Current Assets
Stock 195,000 (1/2)
Trade debtors 136,500 (1/2)
Short-term investments 780,000 (1/2)
1,111,500
Current Liabilities
Trade creditors 31,200 (1/2)
Accrued expenses 32,500 (1/2)
Provision for taxation 34,580 (1/2)
Proposed dividend 234,000 (1/2)
Bank overdraft 105,950 (1/2)
438,230
Net current assets 673,270 (1/2)
2,230,670
Long-term Liabilities
10% debentures 20Y1 650,000 (1/2)
1,580,670
172
6 (a) George and Peter partnership
Realisation Account as at 1 January 20X8
$ $
(1/2) Plant and machinery 545,260 Trade creditors 438,400 (1/2)
(1/2) Furniture and fittings 342,500 Bank overdraft 34,250 (1/2)
(1/2) Stock 404,150 Capital (share of ordinary shares):
3
(1/2) Trade debtors 164,400 George ( ) 986,400 (1)
5
2
Profit from realisation: Peter ( ) 657,600 (1)
5
3
(1) George ( ) 396,204
5
2
(1) Peter ( ) 264,136
5
2,116,650 2,116,650
(7 marks)
Current Assets
Stock 356,200 (1/4)
Trade debtors 117,820 (1/4)
474,020
Current Liabilities
Trade creditors 438,400 (1/4)
Bank overdraft ($34,250 + $56,170) 90,420 (1)
528,820
Net current liabilities (54,800)
1,644,000
173
Workings: Calculation of goodwill
$ $
Purchase consideration
1,000,000 ordinary shares at $1.20 1,200,000 (1/2)
185,000 preference share at $2.40 444,000 (1/2)
Cost of acquisition 56,170 (1/2)
1,700,170
Less Fair values of net assets acquired:
Plant and machinery 822,000 (1/2)
Furniture and fittings 205,500 (1/2)
Stock 356,200 (1/2)
Trade debtors 117,820 (1/2)
Trade creditors (438,400) (1/2)
Bank overdraft (34,250) (1/2)
1,028,870
Purchased goodwill 671,300 (1/2)
(8 marks)
(Total 20 marks)
7
(a) Salaries
20X7 $ 20X7 $
(1) Mar 31 Balance b/f 9,880 Mar 31 Profit and loss 12,180 (1)
(2) " 31 Accruals c/f 2,300
12,180 12,180
Electricity
20X7 $ 20X7 $
(1) Mar 31 Balance b/f 5,875 Mar 31 Profit and loss 6,500 (1)
(1) " 31 Accruals c/f 625
6,500 6,500
Rental Income
20X7 $ 20X7 $
(1) Mar 31 Profit and loss 150,000 Mar 31 Balance b/f 162,500 (1)
(1) " 31 Prepaid income c/f 12,500
162,500 162,500
(10 marks)
(b) (i) Purchases Ledger Control
20X7 $ 20X6 $
(1) Mar 31 Discounts received 1,125 Apr 1 Balance b/f 15,000 (1/2)
(1) " 31 Payments to creditors 156,250 20X7
(1) " 31 Sales ledger: Set off 2,500 Mar 31 Purchases 151,000 (1)
(1/2) " 31 Balance c/f 6,125
166,000 166,000
(5 marks)
(ii) Sales Ledger Control
20X6 $ 20X7 $
(1/2) Apr 1 Balance b/f 30,000 Mar 31 Receipts from debtors 212,875 (1)
20X7 " 31 Purchases ledger: Set off 2,500 (1)
(1) Mar 31 Sales 236,250 " 31 Balance c/f 51,100 (1/2)
(1) " 31 Interest charged to debtors 225
266,475 266,475
(5 marks)
(Total 20 marks)
174