2022 HKDSE Business, Accounting and Financial Studies Practice Paper | DSE Mock

A manufacturing firm ensures its operations strictly comply with local environmental laws and its business is highly profitable. However, it does not engage in any voluntary community development projects or charitable donations, stating that these are not the duties of a business. According to Carroll's Pyramid of Corporate Social Responsibility, which responsibilities is this firm fulfilling? (1) Economic responsibility (2) Legal responsibility (3) Philanthropic responsibility

Which of the following statements about the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and the Mainland is/are correct? (1) It allows Hong Kong service suppliers to enjoy preferential treatment when setting up businesses in the Mainland. (2) All goods imported from the Mainland into Hong Kong enjoy zero tariff under CEPA. (3) It strengthens economic integration and cooperation between Hong Kong and the Mainland.

Which of the following are the characteristics of Small and Medium Enterprises (SMEs) in Hong Kong? (1) They are highly flexible and can respond quickly to market changes. (2) They constitute the vast majority of business establishments in Hong Kong. (3) They have easier access to capital markets for equity financing compared to listed companies.

The owner of a retail business took goods with a cost of \( \$5,000 \) and a selling price of \( \$6,500 \) for his own use. If the business uses a periodic inventory system, the journal entry to record this transaction is:

The following balances were extracted from the books of a trading firm: Sales: \( \$450,000 \); Opening inventory: \( \$30,000 \); Purchases: \( \$280,000 \); Carriage inwards: \( \$8,000 \); Carriage outwards: \( \$12,000 \); Closing inventory: \( \$40,000 \); Returns outwards: \( \$5,000 \). What is the gross profit of the firm?

Andy and Billy are in partnership, sharing profits and losses in the ratio of \( 3:2 \). The partnership agreement provides for an annual salary of \( \$40,000 \) to Billy and interest on capital at \( 5\% \) per annum. Capital account balances at 1 January 2022 were: Andy: \( \$200,000 \); Billy: \( \$100,000 \). For the year ended 31 December 2022, the partnership's net profit was \( \$120,000 \). What is Billy's total share of profit (including salary, interest on capital, and share of residual profit) for the year?

Which of the following statements comparing government bonds and common stocks is/are correct? (1) Bondholders are creditors of the issuer, while common shareholders are owners of the company. (2) In the event of liquidation, the claims of bondholders are settled before those of common shareholders. (3) The interest payments of bonds are legally binding obligations, whereas dividend payments on common stocks are discretionary.

A smartphone manufacturer launches a brand-new, highly innovative flagship model. It sets a very high initial price to target tech enthusiasts who are willing to pay a premium. As competitor models enter the market, the company plans to gradually lower the price. What pricing strategy is this company using?

Which of the following statements about the '360-degree feedback' performance appraisal method is/are correct? (1) It gathers performance feedback from multiple sources, including supervisors, peers, subordinates, and customers. (2) It helps reduce individual bias that may occur when appraisals are conducted solely by a direct supervisor. (3) It is generally less time-consuming and less costly to implement than traditional top-down appraisals.

Which of the following activities of a retail store manager represents the management function of 'Controlling'?

The financial accounts of Joyful Trading for the year ended 31 December 2023 showed: Sales $800,000, Gross profit ratio 25% on cost, Opening inventory $60,000, Closing inventory $80,000, Carriage inwards $12,000, and Carriage outwards $8,000. What was the amount of purchases for the year?

Which of the following statements about bonds and equities (stocks) are correct? (1) Bondholders have voting rights in a company's general meetings, while shareholders do not. (2) Bond coupon payments are usually fixed, whereas stock dividends are discretionary and depend on the company's profitability. (3) In the event of liquidation, bondholders have a higher priority claim on the company's assets than ordinary shareholders. (4) Both bonds and equities guarantee the return of principal at maturity.

A fast-food chain plans to launch a new mobile ordering app to reduce customer waiting time and improve order accuracy. Which of the following represents the primary role of the Human Resources Department in this collaborative project?

Alan and Bob are partners sharing profits and losses in the ratio of 3:2. On 1 January 2023, Candy was admitted into the partnership with a 1/5 share of profits. On that date, the partnership's net assets (excluding goodwill) were revalued upwards by $100,000, and goodwill was valued at $50,000. It was agreed that goodwill was not to be maintained in the books. What is the net adjustment to Bob's capital account?

On 5 May 2023, Zenith Company sold goods with a list price of $20,000 on credit to David. A 10% trade discount was given. The payment terms were 2/10, n/30. On 8 May 2023, David returned damaged goods with a list price of $2,000. David settled the outstanding balance on 12 May 2023. What is the cash amount received by Zenith Company on 12 May 2023?

A toy manufacturer voluntarily recalls a batch of products after discovering a minor paint defect that does not violate local safety regulations but might cause skin irritation in highly sensitive children. By doing so, the company is demonstrating social responsibility towards which stakeholder group, and which business practice does this reflect?

Which of the following are major contributions of Small and Medium Enterprises (SMEs) to the economy of Hong Kong? (1) Providing the majority of employment opportunities in the private sector. (2) Serving as a major source of innovation and flexibility in response to market changes. (3) Representing over 98% of the total number of business establishments in Hong Kong. (4) Directly determining the benchmark interest rates in the interbank market.

Under the Closer Economic Partnership Arrangement (CEPA) between Mainland China and Hong Kong, which of the following benefits is/are enjoyed by Hong Kong businesses? (1) Zero tariff on all goods of Hong Kong origin imported into the Mainland. (2) Complete waiver of corporate income tax for Hong Kong companies operating in the Mainland. (3) Preferential treatment for Hong Kong service suppliers entering the Mainland market.

Mr. Chan plans to deposit $10,000 at the end of each year for 3 consecutive years into a savings account that pays an annual interest rate of 4%, compounded annually. What will be the total accumulated balance in the account at the end of the third year (rounded to the nearest dollar)?

A company purchased a specialized machine for $500,000. Due to rapid technological changes, the market value of the machine dropped to $200,000 by the end of the first year. However, the company is financially stable and plans to use the machine for its entire estimated useful life of 5 years. The accountant records the machine at cost less accumulated depreciation ($400,000) instead of writing it down to its market value of $200,000. Which of the following justifies this treatment?

A purchase of office equipment of $12,000 on credit was entered in the Purchases Journal and posted to the purchases account as $21,000. The supplier's account was correctly credited with $12,000. How does this affect the trial balance totals?

Mr. Chan wishes to accumulate $500,000 in 5 years for his child's education. If the bank offers an annual interest rate of 4% compounded annually, how much must he deposit today? (Round to the nearest dollar).

Which of the following statements about '360-degree feedback' performance appraisal is/are correct? (1) It collects feedback only from the employee's direct subordinates. (2) It helps reduce individual bias in performance evaluation. (3) It is generally less time-consuming and costly to implement than a traditional top-down appraisal.

Andy and Bobby are partners sharing profits and losses in the ratio of 3:1. They admitted Cindy into the partnership, and the new profit-sharing ratio is 3:2:1. Goodwill was valued at $60,000, and it was agreed that the goodwill account is not to be maintained in the books. What is the net impact on Bobby's capital account for this goodwill adjustment?

A firm paid $48,000 for a 12-month insurance policy on 1 October 2022. On 1 December 2022, it paid $30,000 for 3 months' rent in advance starting from that date. If the financial year ends on 31 December 2022, what are the total prepayments to be shown in the statement of financial position as of 31 December 2022?

Which of the following is an example of a company fulfilling its social responsibility towards its competitors?

In Hong Kong, which of the following is/are the characteristic(s) of small and medium enterprises (SMEs)? (1) They have high flexibility in responding to market changes. (2) They usually find it easier to obtain bank loans than large enterprises due to their size. (3) They are defined as manufacturing enterprises employing fewer than 100 persons, or non-manufacturing enterprises employing fewer than 50 persons.

Under the Closer Economic Partnership Arrangement (CEPA) between Mainland China and Hong Kong, which of the following benefits is provided to Hong Kong?

The following information is extracted from a company's financial records: Net Sales: $800,000, Cost of Goods Sold: $480,000, Opening Inventory: $55,000, Closing Inventory: $65,000. What is the inventory turnover rate (in times) for the year?

A company is considering a project that requires an initial outlay of $150,000. The project is expected to generate net cash inflows of $60,000, $70,000, and $80,000 at the end of Year 1, 2, and 3 respectively. If the cost of capital is 10%, what is the net present value (NPV) of the project (to the nearest dollar)? (Discount factors at 10%: Year 1 = 0.9091, Year 2 = 0.8264, Year 3 = 0.7513)

Alan and Betty are partners sharing profits and losses in the ratio of 3:2. The partnership agreement provides for:
(i) Interest on capital at 5% per annum on the fixed capital balances (Alan: \$100,000, Betty: \$80,000).
(ii) Annual salary of \$24,000 to Betty.
(iii) Interest on drawings at 10% per annum on total drawings. During the year, Alan drew \$15,000 on 1 July 2022, and Betty drew \$10,000 on 1 October 2022. The financial year ends on 31 December 2022.
The net profit for the year ended 31 December 2022 was \$120,000 before the above adjustments.

Required:
(a) Calculate the interest on drawings for Alan and Betty respectively. (2 marks)
(b) Prepare the Profit and Loss Appropriation Account of the partnership for the year ended 31 December 2022. (4.67 marks)

Mr. Chan, aged 62, plans to retire next year. He has accumulated a sum of \$2,000,000 and is looking for a stable source of income during retirement. An investment advisor suggests two options to him:
Option A: Investing all funds in a 3-year Hong Kong Government Green Bond, which pays a fixed annual interest of 4.5%.
Option B: Investing all funds in high-growth technology stocks listed on the Hong Kong Stock Exchange, which currently offer no dividend payments but have potential for capital appreciation.

Required:
(a) Based on the concept of risk-return trade-off, explain why Option A is more suitable than Option B for Mr. Chan’s retirement planning. (3.67 marks)
(b) Apart from investment returns and risk, state and explain TWO other factors that Mr. Chan should consider when planning his personal finance for retirement. (3 marks)

SmartApparel Limited is a garment manufacturer in Hong Kong. Recently, some of its overseas suppliers were reported to have used sweatshop labor and paid workers wages below the legal minimum. Under pressure from the public and consumer groups, the management of SmartApparel is considering adopting a Code of Ethics for its supply chain management, ensuring all suppliers comply with ethical labor standards.

Required:
(a) Explain TWO social responsibilities that SmartApparel has towards its suppliers. (3 marks)
(b) From the perspective of SmartApparel Limited, discuss the business benefits (other than avoiding negative publicity) of acting in a socially responsible manner. (3.67 marks)

Sunny Limited is a Hong Kong-based wholesaler of organic food. Recently, the company has been experiencing tight cash flows due to rapid business expansion. To improve its liquidity position, the financial manager has proposed the following two measures: (1) Delay payments to all small local farmers (suppliers) from 30 days to 90 days. (2) Offer a cash discount of 2% to credit customers who settle their accounts within 10 days (current credit term is 30 days). Required: (a) Explain two advantages and two disadvantages to Sunny Limited of offering the cash discount to its credit customers. (4 marks) (b) From the perspective of business ethics and social responsibility, discuss two negative impacts of delaying payments to small local farmers. (4 marks) (c) Suggest two other cash management strategies (other than cash discounts and delaying supplier payments) that Sunny Limited can adopt to improve its cash flow. (2 marks)