2021 HKDSE 企業、會計與財務概論 模擬試題連答案詳解

Statement (1) is correct: Under the Hong Kong Companies Ordinance, a private limited company must have at least one director who is a natural person (individual).
Statement (2) is correct: The maximum number of shareholders in a private limited company is restricted to 50.
Statement (3) is incorrect: A private limited company is not required to publish or file its audited financial statements with the Companies Registry for general public inspection, unlike a public limited company.

Therefore, (1) and (2) only are correct.

A (2 marks)
- Full 2 marks for selecting the correct option A.
- 0 marks for incorrect options.

The principle of 'unity of command' states that an employee should receive orders from and report to only one direct superior to avoid conflicting instructions and confusion.

B (2 marks)
- Full 2 marks for selecting option B.
- 0 marks for incorrect options.

According to the business entity concept, personal expenses of the owner paid out of the business funds must be treated as drawings, not as business operating expenses.

Double entry:
Debit: Drawings
Credit: Bank

B (2 marks)
- Full 2 marks for selecting option B.
- 0 marks for incorrect options.

The historical cost concept requires assets to be recorded and reported at their original acquisition cost rather than their current market value or replacement cost, as historical cost is objective and verifiable.

A (2 marks)
- Full 2 marks for selecting option A.
- 0 marks for incorrect options.

Nominal interest rate \(r = 6\%\) per annum.
Compounding semi-annually: periodic interest rate \(i = \frac{6\%}{2} = 3\% = 0.03\).
Number of compounding periods \(n = 2 \times 2 = 4\).

Future Value (FV) \(= \$40\,000 \times (1 + 0.03)^4 = \$40\,000 \times 1.12550881 \approx \$45\,020\).
Total interest earned \(= \text{FV} - \text{Principal} = \$45\,020 - \$40\,000 = \$5\,020\).

C (2 marks)
- Full 2 marks for selecting option C.
- 0 marks for incorrect options.

Working Capital \(= \text{Current Assets} - \text{Current Liabilities}\)

\(\text{Current Assets} = \text{Inventory} (\$35\,000) + \text{Trade receivables} (\$45\,000) + \text{Prepaid insurance} (\$6\,000) = \$86\,000\).

\(\text{Current Liabilities} = \text{Trade payables} (\$28\,000) + \text{Bank overdraft} (\$12\,000) + \text{Accrued rent} (\$4\,000) = \$44\,000\).
(Note: The bank loan repayable in 2029 is a non-current liability and machinery is a non-current asset).

\(\text{Working Capital} = \$86\,000 - \$44\,000 = \$42\,000\).

A (2 marks)
- Full 2 marks for selecting option A.
- 0 marks for incorrect options.

Statement (1) is correct: The annualised percentage rate (APR) of credit cards is generally significantly higher (often over 30%) than that of personal installment loans.
Statement (2) is correct: Credit cards offer an interest-free grace period (usually 50–60 days) for retail purchases if paid in full by the payment due date.
Statement (3) is correct: Personal installment loans are structured with predetermined monthly repayments of principal and interest over an agreed term.

Hence, (1), (2) and (3) are all correct.

D (2 marks)
- Full 2 marks for selecting option D.
- 0 marks for incorrect options.

Statements (1) and (2) are typical advantages of SMEs: due to their smaller size and flat structure, they have closer contact with customers, greater flexibility, and shorter decision chains.
Statement (3) is incorrect: Economies of scale in mass production are an advantage of large corporations, not SMEs, because large firms have larger output volumes and bargaining power.

Therefore, (1) and (2) only are correct.

A (2 marks)
- Full 2 marks for selecting option A.
- 0 marks for incorrect options.

Statement (1) is correct: A public limited company is required by law to file and publish audited financial reports for public inspection.
Statement (2) is correct: A public limited company has a minimum requirement of one shareholder and has no statutory upper limit on the number of shareholders.
Statement (3) is incorrect: Shares in a public limited company are freely transferable and do not require approval from the board of directors (restriction on share transfer is a key characteristic of private limited companies).

Award 2 marks for option A. 0 marks for any other option.

Quarterly interest rate \(r = \frac{6\%}{4} = 1.5\% = 0.015\).
Total number of compounding periods \(n = 2 \times 4 = 8\) quarters.

Future Value (FV):
\[ FV = \$50\,000 \times (1 + 0.015)^8 = \$50\,000 \times 1.126493 = \$56\,324.63 \]

Total interest earned:
\[ \text{Interest} = FV - \text{Principal} = \$56\,324.63 - \$50\,000 = \$6\,324.63 \approx \$6\,325 \]

Award 2 marks for option C. 0 marks for any other option.

The going concern assumption assumes that the business will continue in operational existence for the foreseeable future with neither the intention nor the necessity of liquidation. Therefore, non-current assets are recorded at historical cost less accumulated depreciation rather than at net realisable / liquidation values.

Award 2 marks for option B. 0 marks for any other option.

Unity of command states that an employee should receive orders and be accountable to one, and only one, immediate superior to avoid conflicting instructions and confusion.

Award 2 marks for option B. 0 marks for any other option.

Option B involves debiting two accounts without making any credit entry, which results in debit totals exceeding credit totals by $2 400, thus causing the trial balance to disagree.
Option A is an error of omission (trial balance balances).
Option C is an error of original entry (trial balance balances with equal incorrect amounts).
Option D is an error of principle (trial balance balances).

Award 2 marks for option B. 0 marks for any other option.

Statement (1) is correct: Cash advances do not enjoy an interest-free grace period and interest starts accruing immediately on the date of withdrawal.
Statement (2) is correct: Retail purchases enjoy an interest-free repayment period if the entire statement balance is paid in full on or before the due date.
Statement (3) is incorrect: Paying only the minimum payment avoids late fees, but interest and finance charges are still levied on the remaining unpaid balance and new transactions.

Award 2 marks for option A. 0 marks for any other option.

Statement (1) is correct: SMEs have flatter structures and shorter decision-making chains, giving them greater flexibility.
Statement (2) is correct: Under the official definition in Hong Kong, non-manufacturing enterprises employing fewer than 50 persons (and manufacturing enterprises employing fewer than 100 persons) are defined as SMEs.
Statement (3) is incorrect: SMEs are typically unlisted and face difficulty in raising equity funds directly from the public equity market.

Award 2 marks for option B. 0 marks for any other option.

Current Assets:
\[ \text{Current Assets} = \text{Inventory} (\$42\,000) + \text{Trade receivables} (\$38\,000) + \text{Cash at bank} (\$15\,000) = \$95\,000 \]

Current Liabilities:
\[ \text{Current Liabilities} = \text{Bank overdraft} (\$6\,000) + \text{Trade payables} (\$24\,000) + \text{Short-term bank loan} (\$10\,000) = \$40\,000 \]
(Note: 5-year bank loan is a non-current liability.)

Working Capital:
\[ \text{Working Capital} = \text{Current Assets} - \text{Current Liabilities} = \$95\,000 - \$40\,000 = \$55\,000 \]

Award 2 marks for option A. 0 marks for any other option.

Statement (1) is correct because a limited company is a legal entity distinct from its members.
Statement (2) is correct because shareholders have limited liability.
Statement (3) is incorrect because private limited companies are strictly prohibited by law from issuing shares or debentures to the general public.

A (2 marks) - (1) and (2) only.
Award 2 marks for correct answer A. No partial marks.

Geographical departmentalisation groups jobs on the basis of territory or geography (e.g., Northern, Eastern, and Southern districts) to serve specific locations effectively.

B (2 marks) - Geographical departmentalisation.
Award 2 marks for correct answer B.

Assets as at 31 October 2023 comprise:
- Cash = $80 000 - $14 000 = $66 000
- Motor vehicles = $120 000
- Inventory = $25 000
Total assets = $66 000 + $120 000 + $25 000 = $211 000.

B (2 marks) - $211 000.
Award 2 marks for correct answer B.

Semi-annual interest rate \(r = \frac{6\%}{2} = 3\% = 0.03\).
Total compounding periods \(n = 2 \times 2 = 4\).
Future Value \(= \$50\,000 \times (1 + 0.03)^4 = \$50\,000 \times 1.12550881 = \$56\,275.44\).
Total interest earned \(= \$56\,275.44 - \$50\,000 = \$6\,275\).

C (2 marks) - $6 275.
Award 2 marks for correct answer C.

According to the accrual (matching) concept, costs incurred to generate revenues over multiple accounting periods should be capitalized as non-current assets and depreciated systematically over their useful lives, rather than expensed immediately in full in the year of purchase.

B (2 marks) - Accrual concept.
Award 2 marks for correct answer B.

Statement (1) is correct: Retail purchases made with credit cards have an interest-free grace period when the statement balance is paid in full.
Statement (2) is correct: Personal instalment loans have a fixed repayment schedule and fixed monthly instalments over a specified period.
Statement (3) is incorrect: Cash advances on credit cards incur immediate, very high annualised interest rates and handling fees, which are substantially higher than typical personal loan rates.

B (2 marks) - (1) and (2) only.
Award 2 marks for correct answer B.

Corporate social responsibility (CSR) towards employees involves promoting work-life balance (flexible working), investing in employee growth and development (training subsidies and study leave), and ensuring physical well-being and occupational safety (ergonomic furniture).

D (2 marks) - (1), (2) and (3).
Award 2 marks for correct answer D.

In option C, office equipment account is debited with $4 800 while cash account is credited with $8 400. This single-sided unequal amount posting results in a discrepancy of $3 600 between debit and credit totals in the trial balance. Options A, B, and D involve equal debit and credit entries, so the trial balance totals will still agree.

C (2 marks) - Cash purchase recorded with unequal debit and credit values.
Award 2 marks for correct answer C.

Under CEPA, goods of Hong Kong origin meeting the rules of origin enjoy zero tariff when imported into the Mainland (statement 1 is correct). Hong Kong service suppliers enjoy preferential treatment to enter and expand in the Mainland market (statement 2 is correct). However, Hong Kong enterprises operating in the Mainland are still subject to Mainland domestic taxation such as corporate income tax (statement 3 is incorrect). Thus, only (1) and (2) are correct.

A (2 marks) - Statements (1) and (2) are correct, while statement (3) is incorrect.

Option B is correct: Division of work allows workers to specialize in specific tasks, improving speed, proficiency, and efficiency. Option A describes unity of command, not unity of direction. Option C is incorrect because ultimate accountability cannot be delegated. Option D is incorrect because the scalar chain defines the formal hierarchy from top to bottom.

B (2 marks) - Division of work leads to specialization and increased operational efficiency.

When goods/inventory are taken by the owner for personal use, the transaction is recorded at cost price ($4 200). The double entry is:
- Debit: Drawings account ($4 200) to record the reduction in owner's equity
- Credit: Purchases account ($4 200) to reduce the cost of goods available for resale.

A (2 marks) - Drawings is debited with the cost price ($4 200) and Purchases is credited.

Using the accounting equation: $$\text{Assets} = \text{Liabilities} + \text{Capital}$$

$$\begin{aligned}
\text{Total Assets} &= \text{Trade receivables} + \text{Inventory} + \text{Fixtures and fittings} + \text{Cash in hand} \\
&= 68\ 000 + 32\ 000 + 150\ 000 + 6\ 000 \\
&= 256\ 000
\end{aligned}$$

$$\begin{aligned}
\text{Total Liabilities} &= \text{Bank overdraft} + \text{Trade payables} + \text{Short-term bank loan} \\
&= 14\ 000 + 45\ 000 + 50\ 000 \\
&= 109\ 000
\end{aligned}$$

$$\text{Capital} = \text{Total Assets} - \text{Total Liabilities} = 256\ 000 - 109\ 000 = 147\ 000$$

A (2 marks) - Total Assets ($256 000) minus Total Liabilities ($109 000) equals Capital ($147 000).

$$\begin{aligned}
\text{Present Value of Cash Inflows} &= \frac{42\ 000}{1 + 0.10} + \frac{48\ 400}{(1 + 0.10)^2} \\
&= \frac{42\ 000}{1.10} + \frac{48\ 400}{1.21} \\
&= 38\ 181.82 + 40\ 000.00 \\
&= 78\ 181.82
\end{aligned}$$

$$\begin{aligned}
\text{Net Present Value (NPV)} &= \text{Present Value of Inflows} - \text{Initial Outlay} \\
&= 78\ 181.82 - 80\ 000 \\
&\approx -\$1\ 818
\end{aligned}$$

B (2 marks) - Correct discounting of cash inflows gives PV = $78 182; NPV = $78 182 - $80 000 = -$1 818.

Statement (1) is correct: Self-employed persons between 18 and 64 must enrol in an MPF scheme. Statement (2) is incorrect: When an employee's monthly income is below the minimum level, the employee is exempt from contributing, but the employer is still required to contribute 5% of the employee's income. Statement (3) is correct: Under MPF regulations, mandatory accrued benefits are preserved until the statutory retirement age of 65 (subject to specific early withdrawal exceptions). Therefore, (1) and (3) only are correct.

B (2 marks) - Statements (1) and (3) are correct, while statement (2) is false regarding employer contribution obligations.

(a) A multinational corporation (MNC) is an enterprise that owns or controls production or service facilities in one or more countries other than its home country. Since the business maintains operating hubs and offices in Hong Kong, Vietnam, and Malaysia, it is a multinational corporation.

(b)
- Existing general partnership: Owners (partners) have unlimited liability (they are personally liable for all business debts).
- Proposed private limited company: Shareholders have limited liability (limited to the amount of share capital contributed or unpaid).

(c) Disadvantages of converting to a private limited company:
1. Higher establishment and administrative expenses: The firm must comply with statutory incorporation requirements, annual auditing, and file returns with the Companies Registry.
2. Greater disclosure and legal compliance: Subject to more stringent regulations under the Companies Ordinance compared to a partnership.
3. Dilution of control: Admitting external shareholders requires sharing ownership and decision-making powers, and share transfers require approval from the board of directors.

(a)
- States that it is a multinational corporation (1 mark)
- Explains that it maintains business operations/facilities in more than one country/territory (Hong Kong, Vietnam, and Malaysia) (1 mark)

(b)
- Partnership: Unlimited liability (1 mark)
- Private limited company: Limited liability (1 mark)

(c) For each valid disadvantage explained with reference to conversion (max 2 disadvantages, 1.5 marks each = 3 marks):
- Higher formation/compliance/auditing costs (1 mark for point, 0.5 mark for explanation)
- More legal formalities / statutory requirements / public disclosure (1 mark for point, 0.5 mark for explanation)
- Loss of sole decision-making authority / sharing of profits with new investors (1 mark for point, 0.5 mark for explanation)

(a) The Hang Seng Index (HSI) serves as the main performance barometer of the Hong Kong stock market, reflecting the price movements of the largest and most liquid constituent companies listed on the Main Board.

(b) Ways Gary can use the HSI:
- To assess market sentiment and trends (bull vs bear market) to determine the timing of investment entry or exit.
- To benchmark the relative performance of a specific stock against the broad market average.

(c) Differences between blue-chip shares and fixed deposits:
- Return: Fixed deposit yields a predetermined and guaranteed interest rate, whereas returns on blue-chip shares consist of variable dividend income and uncertain capital gains.
- Risk: Fixed deposits carry virtually zero risk of capital loss (protected up to statutory limits), whereas share prices fluctuate and investors face capital loss risk.

(d) Rights of an ordinary shareholder:
- Voting rights at Annual General Meetings (AGMs) and extraordinary general meetings.
- Right to receive dividends when declared by the board of directors.
- Right to receive annual reports and audited financial statements.
- Right to share in surplus assets upon liquidation.

(a)
- Mentions that HSI reflects the overall price level / performance benchmark of major listed companies in Hong Kong (1 mark)

(b)
- States a valid use (e.g. market timing, performance comparison, trend analysis) (1 mark) with adequate explanation for an individual investor (1 mark) (Total: 2 marks)

(c)
- 1 mark for comparing return differences (fixed interest vs variable dividend/capital gain)
- 1 mark for comparing risk differences (guaranteed principal vs price fluctuation/capital loss risk) (Total: 2 marks)

(d)
- 1 mark for each valid shareholder right (max 2 marks):
* Right to vote at general meetings
* Right to receive dividends (if declared)
* Right to receive financial reports / statutory company notices
* Pre-emptive right to new share issues / residual claim on winding-up

(a)
$$\begin{array}{llr|llr}
\multicolumn{6}{c}{\textbf{Rent and rates}} \\
\hline
\text{2023} & & \$ & \text{2023} & & \$ \\
\text{Mar 12} & \text{Bank} & 45\,000 & & &
\end{array}$$

(b)
Calculation of bank balance as at 31 March 2023:
$$\text{Total receipts} = \$120\,000 + \$22\,000 = \$142\,000$$
$$\text{Total payments} = \$74\,000 + \$45\,000 + \$30\,000 = \$149\,000$$
$$\text{Bank balance} = \$142\,000 - \$149\,000 = -\$7\,000 \text{ (Overdraft)}$$

$$\begin{array}{lc}
\multicolumn{2}{c}{\textbf{Patrick}} \\
\multicolumn{2}{c}{\textbf{Statement of Financial Position as at 31 March 2023 (extract)}} \\
\hline
& \$ \\
\textbf{Current liabilities} & \\
\text{Bank overdraft} & 7\,000 \\
\end{array}$$

(c)
- Principle violated: Business entity concept.
- Explanation: Under this concept, the business is treated as a distinct entity separate from its owner. Personal expenditures of the owner (such as a family holiday) must be treated as drawings (reduction in owner's equity) and not as business operating expenses.

(a)
- Debit side of Rent and rates account with date (Mar 12), description (Bank), and amount ($45,000) (1 mark)

(b)
- Calculation / identification of overdraft balance of $7,000 (1 mark)
- Proper heading of the extract of Statement of Financial Position (0.5 mark)
- Presentation under Current liabilities as "Bank overdraft $7,000" (1.5 marks)

(c)
- Identifies "Business entity concept" / "Entity concept" (1 mark)
- Explains that the business and owner are separate entities, so owner's personal expenses should be recorded as drawings rather than business expenses (1 mark)

(A) (a)
(i) $\text{Working capital ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}} = \frac{$94\,000 + $136\,000 + $42\,000}{$30\,000 + $70\,000 + $12\,000} = \frac{$272\,000}{$112\,000} = 2.43 : 1$

(ii) $\text{Acid test ratio} = \frac{\text{Current Assets} - \text{Inventory}}{\text{Current Liabilities}} = \frac{$94\,000 + $42\,000}{$112\,000} = \frac{$136\,000}{$112\,000} = 1.21 : 1$

(b)
- Both the working capital ratio ($2.43:1$) and acid test ratio ($1.21:1$) of Apex Stationery are higher than the respective industry averages ($2.20:1$ and $1.10:1$), indicating that the firm has sufficient ability to meet its short-term debt obligations.
- However, the working capital ratio is significantly higher than the acid test ratio, showing that a high proportion of current assets is tied up in inventory ($$136\,000\$ out of $$272\,000$, or $50\%$).
- Holding excessive inventory may increase holding costs and the risk of obsolescence/damage, and inventory cannot be converted into cash immediately.

(B) (c)
- Unity of command

(d)
- Operational inefficiency and delays: Subordinates receiving contradictory orders will be confused about which superior's instructions to prioritize, resulting in mistakes, hesitation, and lower productivity.
- Workplace conflict and lower employee morale: Disagreements and tension may arise between the supervisors involved, while frontline employees face frustration and stress from trying to please multiple bosses.

(A) (a) (i) Working capital ratio = ($272,000 / $112,000) : 1 = 2.43 : 1 (1 mark)
(ii) Acid test ratio = ($136,000 / $112,000) : 1 = 1.21 : 1 (1 mark)
(Note: award 0 marks if ratio is not expressed in the form of X:1 or not rounded to two decimal places)

(b) Liquidity comments (1 mark for each relevant point, max 3 marks):
- Both ratios are higher than the industry average, indicating the firm has sufficient short-term assets to cover short-term debts / good short-term solvency. (1 mark)
- A large portion of current assets is tied up in inventory / significant drop from working capital ratio to acid test ratio. (1 mark)
- Excess inventory leads to higher carrying/storage costs and liquidity risk since inventory is less liquid. (1 mark)

(B) (c) Unity of command (1 mark)

(d) Two negative impacts (2 marks for each well-explained point with context, max 4 marks):
- Causes role ambiguity and confusion among staff, leading to wasted time, delays, and poor customer service. (2 marks)
- Creates friction and jurisdictional conflicts between the two supervisors and undermines staff morale/job satisfaction. (2 marks)

1. Royalty income calculations:
- Unearned income at 1 Jan 2023 (for 1 Jan 2023 to 31 Mar 2023 = 3 months):
$$\text{Monthly rate (Oct 2022 - Mar 2023)} = \frac{\$180\,000}{6} = \$30\,000$$
$$\text{Balance b/d at 1 Jan 2023 (C)} = 3 \times \$30\,000 = \$90\,000$$
- Receipt on 5 Apr 2023 (D) = $$210\,000\$
- Accrued royalty income at 31 Dec 2023 (for 1 Oct 2023 to 31 Dec 2023 = 3 months):
$$\text{Monthly rate (Oct 2023 - Mar 2024)} = \frac{\$240\,000}{6} = \$40\,000$$
$$\text{Balance c/d at 31 Dec 2023 (F)} = 3 \times \$40\,000 = \$120\,000$$
- Total royalty income transferred to Profit and Loss for 2023 (B):
$$\text{Jan–Mar: } 3 \times \$30\,000 + \text{Apr–Sep: } \$210\,000 + \text{Oct–Dec: } 3 \times \$40\,000 = \$90\,000 + \$210\,000 + \$120\,000 = \$420\,000$$

2. Warehouse insurance expense calculations:
- Monthly fee before 1 Sep 2023 = \$\frac{\$12\,000}{3} = \$4\,000\$
- Accrued expense at 1 Jan 2023 (1 month: 1 Dec 2022 to 31 Dec 2022) (G):
$$\text{Balance b/d} = 1 \times \$4\,000 = \$4\,000$$
- Expense transferred to Profit and Loss for 2023 (H):
$$\text{Jan–Aug (8 months)} = 8 \times \$4\,000 = \$32\,000$$
$$\text{Sep–Dec (4 months)} = 4 \times \$4\,000 \times 1.2 = \$19\,200$$
$$\text{Total expense for 2023 (H)} = \$32\,000 + \$19\,200 = \$51\,200$$

Royalty income account:
- (A) Profit and loss (1 mark)
- (B) $420 000 (1 mark)
- (C) $90 000 (1 mark)
- (D) $210 000 (1 mark)
- (E) Balance c/d (1 mark)
- (F) $120 000 (1 mark)

Warehouse insurance expenses account:
- (G) $4 000 (1 mark)
- (H) $51 200 (1 mark)

Total: 8 marks

(a)
$$\begin{array}{llr|llr}
\multicolumn{6}{c}{\textbf{Zenith Limited}} \\
\multicolumn{6}{c}{\textbf{Cash at bank}} \\
\hline
\textbf{2024} & & \textbf{\$} & \textbf{2024} & & \textbf{\$} \\
\text{Jun 30} & \text{Credit transfer (Macro Trading)} & 32\,400 & \text{Jun 30} & \text{Balance b/d} & 8\,620 \\
\text{Jun 30} & \text{Dividend income} & 3\,180 & \text{Jun 30} & \text{Direct debit (Office rent)} & 16\,000 \\
& & & \text{Jun 30} & \text{Bank charges} & 320 \\
& & & \text{Jun 30} & \text{Oasis Co} & 6\,300 \\
& & & \text{Jun 30} & \text{Balance c/d} & 4\,340 \\
\hline
& & 35\,580 & & & 35\,580
\end{array}$$

(b)
$$\begin{array}{lrr}
\multicolumn{3}{c}{\textbf{Zenith Limited}} \\
\multicolumn{3}{c}{\textbf{Bank Reconciliation Statement as at 30 June 2024}} \\
\hline
& \textbf{\$} & \textbf{\$} \\
\text{Adjusted balance as per cash at bank account} & & 4\,340 \\
\text{Add: Unpresented cheque - 601202} & & 21\,420 \\
\hline
& & 25\,760 \\
\text{Less: Uncredited deposit - Radiant Ltd} & & (7\,450) \\
\hline
\text{Balance as per bank statement} & & 18\,310 \\
\hline
\end{array}$$

(c)
- Realisation principle
- Revenue should only be recognized when goods are transferred or services are provided to the customer and the customer incurs the liability to pay. Since the goods will only be delivered in July 2024, the receipt is unearned revenue and must not be recognized as revenue in the year ended 30 June 2024.

(a) Cash at bank account (4 marks):
- Balance b/d on credit side ($8 620) (0.5 marks)
- Credit transfer - Macro Trading ($32 400) (0.5 marks)
- Dividend income ($3 180) (0.5 marks)
- Direct debit - Office rent ($16 000) (0.5 marks)
- Bank charges ($320) (0.5 marks)
- Reversal of post-dated cheque - Oasis Co ($6 300) (1 mark)
- Balance c/d ($4 340) (0.5 marks)

(b) Bank reconciliation statement (2 marks):
- Adjusted balance as per cash book ($4 340) (0.5 marks)
- Add unpresented cheque 601202 ($21 420) (0.5 marks)
- Less uncredited deposit Radiant Ltd ($7 450) (0.5 marks)
- Balance as per bank statement ($18 310) (0.5 marks)

(c) Concept explanation (2 marks):
- Realisation principle (1 mark)
- Explanation that revenue should be recognized only after the goods are delivered / services performed, hence it cannot be recognized as revenue in June 2024 (1 mark)

(a)(1) Production cost per unit of Headsets:
$$\begin{array}{lr}
& \textbf{\$} \\
\text{Direct material cost } (2.5\text{ kg} \times \$60) & 150 \\
\text{Direct labour cost} & 80 \\
\text{Fixed manufacturing overhead per unit } (\$800\,000 / 4\,000\text{ units}) & 200 \\
\hline
\textbf{Production cost per unit} & \mathbf{430} \\
\hline
\end{array}$$

(a)(2) Contribution margin per unit:
- Keyboard: $$100 - (1\text{ kg} \times \$30) - \$10 - \$10 = \$50\$
- Mouse: $$600 - (2\text{ kg} \times $80) - $20 - $20 = $400$
- Contribution margin per sales mix of Keyboards and Mice (2 : 1):
$$(\text{Contribution of Keyboard} \times 2) + (\text{Contribution of Mouse} \times 1) = (\$50 \times 2) + \$400 = \$500$$

(b) Total fixed overheads = $$200\,000 + \$300\,000 + \$800\,000 = \$1\,300\,000\$
Contribution from 1 600 sales mixes of Keyboards and Mice:
$$1\,600 \times \$500 = \$800\,000$$
Contribution margin required from Headsets to break even:
$$\$1\,300\,000 - \$800\,000 = \$500\,000$$
Unit contribution of Headsets:
$$\$500 - (2.5\text{ kg} \times \$60) - \$80 - \$20 = \$250$$
Break-even sales quantity of Headsets:
$$\frac{\$500\,000}{\$250} = 2\,000\text{ units}$$

(c) Total contribution required for target profit:
$$\text{Total fixed overheads} + \text{Target profit} = \$1\,300\,000 + \$350\,000 = \$1\,650\,000$$
Contribution from 3 200 units of Headsets:
$$3\,200 \times \$250 = \$800\,000$$
Contribution required from Keyboards and Mice:
$$\$1\,650\,000 - \$800\,000 = \$850\,000$$
Number of sales mixes required:
$$\frac{\$850\,000}{\$500} = 1\,700\text{ sales mixes}$$
Sales quantity of Keyboards:
$$1\,700 \times 2 = 3\,400\text{ units}$$

(a)(1) Production cost per unit of Headsets = $150 + $80 + $200 = $430 (1 mark)
(a)(2) Unit contribution: Keyboard = $50, Mouse = $400 (1 mark)
Contribution margin per sales mix = ($50 * 2) + $400 = $500 per mix (1 mark)

(b) Total fixed costs = $1 300 000
Contribution required for Headsets = $1 300 000 - (1 600 * $500) = $500 000 (1 mark)
Sales quantity of Headsets = $500 000 / $250 = 2 000 units (1 mark)

(c) Total contribution required = $1 300 000 + $350 000 = $1 650 000
Remaining contribution for Keyboards and Mice = $1 650 000 - (3 200 * $250) = $850 000 (1.5 marks)
Number of sales mixes = $850 000 / $500 = 1 700 mixes (0.5 marks)
Sales quantity of Keyboards = 1 700 * 2 = 3 400 units (1 mark)

Total: 8 marks

(a)

$$
\begin{array}{llr|llr}
\multicolumn{6}{c}{\textbf{Trade receivables}} \\
\hline
\text{2022} & & \$ & \text{2022} & & \$ \\
\text{Jan 1} & \text{Balance b/d} & 38\,000 & \text{Dec 31} & \text{Bank} & 425\,000 \\
\text{Dec 31} & \text{Sales} & 480\,000 & & \text{Returns inwards} & 8\,000 \\
& & & & \text{Trade payables (set-off)} & 1\,200 \\
& & & & \text{Balance c/d} & 83\,800 \\
\hline
& & \underline{\underline{518\,000}} & & & \underline{\underline{518\,000}}
\end{array}
$$

---

(b)

$$
\begin{array}{lrr}
\multicolumn{3}{c}{\textbf{Statement to calculate total purchases for the year ended 31 December 2022}} \\
\hline
& \$ & \$ \\
\text{Cost of goods sold [(\$480 000 - \$8 000)} \times (1 - 25\%)] & & 354\,000 \\
\text{Add: Closing inventory as at 31 December 2022 (W1)} & & 55\,000 \\
\hline
& & 409\,000 \\
\text{Less: Opening inventory} & & (46\,000) \\
\hline
\textbf{Purchases for the year 2022} & & \underline{\underline{363\,000}}
\end{array}
$$

(W1) Calculation of closing inventory as at 31 December 2022:
$$\text{Inventory count on 5 January 2023} = \$52\,000$$
$$\text{Add: Cost of goods sold (1–5 Jan)} = \$6\,400$$
$$\text{Less: Purchases received (1–5 Jan)} = -\$4\,500$$
$$\text{Add: Returns outwards (1–5 Jan)} = \$1\,100$$
$$\text{Closing inventory as at 31 December 2022} = \$52\,000 + \$6\,400 - \$4\,500 + \$1\,100 = \$55\,000$$

---

(c)

$$
\begin{array}{llr|llr}
\multicolumn{6}{c}{\textbf{Trade payables}} \\
\hline
\text{2022} & & \$ & \text{2022} & & \$ \\
\text{Dec 31} & \text{Bank} & 230\,000 & \text{Jan 1} & \text{Balance b/d} & 24\,500 \\
& \text{Trade receivables (set-off)} & 1\,200 & \text{Dec 31} & \text{Purchases [\$363 000} \times 90\%] & 326\,700 \\
& \text{Balance c/d} & 120\,000 & & & \\
\hline
& & \underline{\underline{351\,200}} & & & \underline{\underline{351\,200}}
\end{array}
$$

---

(d)

$$
\begin{array}{lrr}
\multicolumn{3}{c}{\textbf{Statement to calculate working capital as at 31 December 2022}} \\
\hline
\textbf{Current assets} & \$ & \$ \\
\text{Inventory} & & 55\,000 \\
\text{Trade receivables} & & 83\,800 \\
\text{Bank [\$112 000 + \$425 000 - \$230 000 - \$72 000 - \$30 000]} & & 205\,000 \\
\text{Cash in hand [\$65 000 - (\$363 000} \times 10\%) - \$18\,400] & & 10\,300 \\
\hline
\text{Total current assets} & & 354\,100 \\
\hline
\textbf{Less: Current liabilities} & & \\
\text{Trade payables} & 120\,000 & \\
\text{Accrued rental expenses} & 6\,500 & \\
\hline
\text{Total current liabilities} & & (126\,500) \\
\hline
\textbf{Working capital as at 31 December 2022} & & \underline{\underline{227\,600}}
\end{array}
$$

(a) Trade receivables account (3 marks):
- Opening balance ($38 000) and sales ($480 000) on Dr [0.5 + 0.5 mark]
- Bank ($425 000) and returns inwards ($8 000) on Cr [0.5 + 0.5 mark]
- Set-off / Contra ($1 200) [0.5 mark]
- Correct closing balance c/d ($83 800) [0.5 mark]

(b) Statement to calculate total purchases (4 marks):
- Adjusted closing inventory calculation ($55 000) [1.5 marks]
- Cost of goods sold ($354 000) [1 mark]
- Correct deduction of opening inventory ($46 000) [0.5 mark]
- Purchases figure ($363 000) [1 mark]

(c) Trade payables account (2 marks):
- Opening balance ($24 500) and credit purchases ($326 700) on Cr [0.5 + 0.5 mark]
- Bank ($230 000), set-off ($1 200), and balance c/d ($120 000) on Dr [0.5 + 0.5 mark]

**(d) Statement of working capital (3 marks):**
- Correct listing of current assets items: Inventory, Trade receivables, Bank, Cash [1.5 marks]
- Correct listing of current liabilities items: Trade payables, Accrued rent [1 mark]
- Final working capital calculation ($227 600) [0.5 mark]

(a)(1) Unit contribution margin under the current plan:

- Model Alpha:
$$\text{Variable cost per unit} = \$110 + \$64 + \$26 = \$200$$
$$\text{Unit CM} = \$320 - \$200 = \$120$$

- Model Beta:
$$\text{Variable cost per unit} = \$160 + \$96 + \$34 = \$290$$
$$\text{Unit CM} = \$450 - \$290 = \$160$$

- Model Gamma:
$$\text{Variable cost per unit} = \$220 + \$120 + \$60 = \$400$$
$$\text{Unit CM} = \$600 - \$400 = \$200$$

---

(a)(2) Total budgeted profit under the current plan:

$$
\begin{array}{lrr}
\text{Total contribution margin:} & & \$ \\
\quad \text{Alpha } (15\,000 \times \$120) & 1\,800\,000 & \\
\quad \text{Beta } (10\,000 \times \$160) & 1\,600\,000 & \\
\quad \text{Gamma } (5\,000 \times \$200) & 1\,000\,000 & 4\,400\,000 \\
\text{Less: Total fixed manufacturing overheads} & & (2\,000\,000) \\
\hline
\textbf{Total budgeted profit} & & \underline{\underline{2\,400\,000}}
\end{array}
$$

---

(b)(1) Revised unit contribution margin under the proposed plan:

- Model Alpha:
$$\text{Revised selling price} = \$320 \times (1 - 0.05) = \$304$$
$$\text{Unit variable cost} = \$200$$
$$\text{Revised unit CM} = \$304 - \$200 = \$104$$

- Model Beta:
$$\text{Revised unit variable cost} = (\$160 - \$10) + \$96 + \$34 = \$280$$
$$\text{Revised unit CM} = \$450 - \$280 = \$170$$

---

(b)(2) Financial evaluation of the proposal:

Method 1: Total Profit Statement under the proposed plan
$$
\begin{array}{lrr}
\hline
& \$ & \$ \\
\text{Total contribution margin:} & & \\
\quad \text{Alpha } (19\,000 \text{ units} \times \$104) & 1\,976\,000 & \\
\quad \text{Beta } (12\,000 \text{ units} \times \$170) & 2\,040\,000 & 4\,016\,000 \\
\text{Add: Rental income from machinery} & & 45\,000 \\
\hline
& & 4\,061\,000 \\
\text{Less: Revised fixed manufacturing overheads} & & \\
\quad [\$2\,000\,000 - (5\,000 \times \$100 \times 60\%)] & & (1\,700\,000) \\
\hline
\textbf{Revised profit under proposed plan} & & \underline{\underline{2\,361\,000}}
\end{array}
$$
$$\text{Change in profit} = \$2\,361\,000 - \$2\,400\,000 = -\$39\,000$$

OR Method 2: Incremental Profit / (Loss) Analysis
$$
\begin{array}{lr}
\hline
& \$ \\
\text{Loss of contribution margin from discontinuing Gamma } (5\,000 \times \$200) & (1\,000\,000) \\
\text{Incremental contribution margin from Alpha } [(19\,000 \times \$104) - \$1\,800\,000] & 176\,000 \\
\text{Incremental contribution margin from Beta } [(12\,000 \times \$170) - \$1\,600\,000] & 440\,000 \\
\text{Savings in avoidable fixed overheads } (\$500\,000 \times 60\%) & 300\,000 \\
\text{Rental income from leased machine} & 45\,000 \\
\hline
\textbf{Net decrease in profit} & \underline{\underline{(39\,000)}}
\end{array}
$$

Conclusion: Apex Limited should not accept the proposal as the quarterly profit would decrease by $39 000.

---

(c) Non-financial factor:
- Customer dissatisfaction or loss of brand loyalty from existing customers who require Model Gamma.
- Reaction of competitors who might capture the market share left behind in the premium air purifier segment.
- Impact on workforce morale or retraining requirements when reallocating labour to other product lines.

(a)(1) Contribution margin per unit (3 marks):
- Model Alpha: $120 [1 mark]
- Model Beta: $160 [1 mark]
- Model Gamma: $200 [1 mark]

**(a)(2) Total budgeted profit (2 marks):**
- Total contribution margin ($4 400 000) [1 mark]
- Net profit calculation ($2 400 000) [1 mark]

**(b)(1) Revised unit contribution margin (2 marks):**
- Revised CM for Alpha ($104) [1 mark]
- Revised CM for Beta ($170) [1 mark]

**(b)(2) Statement of financial evaluation (4 marks):**
- Revised contribution margin for Alpha and Beta / Incremental contributions [1.5 marks]
- Avoidable fixed overheads saving ($300 000) and rental income ($45 000) [1.5 marks]
- Net decrease in profit ($39 000) and recommendation to reject [1 mark]

(c) Non-financial factor (1 mark):
- Any valid non-financial factor (e.g. customer goodwill, competitor reaction, employee retraining/morale) [1 mark]

### (a)(1) Apex Meridian Limited
Income Statement for the year ended 31 December 2024

$$\begin{array}{lrr}
& \textbf{\$} & \textbf{\$} \\
\text{Sales } [\$2\,960\,000 - \$60\,000 \times 60\%] & & 2\,924\,000 \\
\text{Less: Cost of goods sold} & & \\
\quad \text{Opening inventory} & 94\,000 & \\
\quad \text{Add: Purchases } [\$1\,850\,000 - \$12\,000] & 1\,838\,000 & \\
\hline
& 1\,932\,000 & \\
\quad \text{Less: Closing inventory (W1)} & (123\,800) & (1\,808\,200) \\
\hline
\textbf{Gross profit} & & \mathbf{1\,115\,800} \\
\text{Less: Expenses} & & \\
\quad \text{Salaries and wages} & 248\,000 & \\
\quad \text{Rent and rates} & 160\,000 & \\
\quad \text{General administrative expenses } [\$86\,000 + \$1\,200] & 87\,200 & \\
\quad \text{Depreciation - Plant and machinery } [\$1\,800\,000 \times 10\%] & 180\,000 & \\
\quad \text{Depreciation - Delivery vans (W2)} & 68\,400 & \\
\quad \text{Loss on disposal of delivery van (W2)} & 9\,200 & \\
\quad \text{Debenture interest } [\$500\,000 \times 6\%] & 30\,000 & (782\,800) \\
\hline
\textbf{Net profit for the year} & & \mathbf{333\,000} \\
\hline
\end{array}$$

---

### (a)(2) Statement to calculate the retained profits as at 31 December 2024

$$\begin{array}{lrr}
& \textbf{\$} & \textbf{\$} \\
\text{Retained profits as at 1 January 2024} & & 367\,500 \\
\text{Add: Net profit for the year} & & 333\,000 \\
\hline
& & 700\,500 \\
\text{Less: 2023 Final dividend paid} & 120\,000 & \\
\quad\quad \text{2024 Interim dividend paid} & 60\,000 & \\
\quad\quad \text{Transfer to general reserve} & 50\,000 & (230\,000) \\
\hline
\textbf{Retained profits as at 31 December 2024} & & \mathbf{470\,500} \\
\hline
\end{array}$$

---

### (a)(3) Apex Meridian Limited
Statement of Financial Position as at 31 December 2024

$$\begin{array}{lrrr}
& \textbf{Cost (\$)} & \textbf{Acc. Dep. (\$)} & \textbf{NBV (\$)} \\
\textbf{Non-current assets} & & & \\
\text{Plant and machinery} & 1\,800\,000 & 600\,000 & 1\,200\,000 \\
\text{Delivery vans } [\$640\,000 - \$120\,000] & 520\,000 & 289\,600 & 230\,400 \\
\hline
& 2\,320\,000 & 889\,600 & 1\,430\,400 \\
\textbf{Current assets} & & & \\
\text{Inventory} & & & 123\,800 \\
\text{Trade receivables } [\$520\,000 - \$36\,000 - \$25\,000] & & & 459\,000 \\
\text{Bank } [\$559\,500 + \$25\,000 - \$1\,200 + \$52\,000] & & & 635\,300 \\
\hline
\textbf{Total assets} & & & \mathbf{2\,648\,500} \\
\hline
\textbf{Equity} & & & \\
\text{Ordinary share capital } [\$1\,000\,000 + \$80\,000] & & & 1\,080\,000 \\
\text{Share premium } [\$80\,000 \times \$0.25] & & & 20\,000 \\
\text{General reserve } [\$180\,000 + \$50\,000] & & & 230\,000 \\
\text{Retained profits} & & & 470\,500 \\
\hline
& & & 1\,800\,500 \\
\textbf{Current liabilities} & & & \\
\text{Trade payables } [\$345\,000 - \$12\,000] & & & 333\,000 \\
\text{Accrued debenture interest } [\$30\,000 - \$15\,000] & & & 15\,000 \\
\text{6\% Debentures (maturity date: 30 June 2025)} & & & 500\,000 \\
\hline
\textbf{Total equity and liabilities} & & & \mathbf{2\,648\,500} \\
\hline
\end{array}$$

---

### Workings:

W1: Closing Inventory
- Counted inventory: $$112\,000\$
- NRV adjustment for damaged goods: $$112\,000 - ($18\,000 - ($14\,500 - $1\,500)) = $112\,000 - $5\,000 = $107\,000$
- Add: Sale-or-return goods unaccepted at cost: $60\% \times $60\,000 / 1.25 = $28\,800$
- Less: Free promotional samples incorrectly included: $-$12\,000$
- Adjusted closing inventory: $$107\,000 + \$28\,800 - \$12\,000 = \$123\,800\$

**W2: Delivery Vans Depreciation & Disposal**
- Sold van carrying amount on 1 Jan 2024: $$120\,000 - $48\,000 = $72\,000$
- Depreciation on sold van (1 Jan 2024 to 30 Sep 2024): $$72\,000 \times 20\% \times \frac{9}{12} = \$10\,800\$
- Carrying value at disposal: $$72\,000 - $10\,800 = $61\,200$
- Loss on disposal: $$61\,200 - \$52\,000 = \$9\,200\$
- Remaining vans cost on 1 Jan 2024: $$640\,000 - $120\,000 = $520\,000$
- Remaining vans acc. dep. on 1 Jan 2024: $$280\,000 - \$48\,000 = \$232\,000\$
- Depreciation on remaining vans for 2024: \$(\$520\,000 - \$232\,000) \times 20\% = \$57\,600\$
- Total 2024 depreciation expense: $$10\,800 + $57\,600 = $68\,400$
- Accumulated depreciation at 31 Dec 2024: $$232\,000 + $57\,600 = $289\,600$

---

### (b)
- No.
- The proposed final dividend was declared/approved by directors after the reporting date (31 December 2024). Therefore, no present legal or constructive obligation existed as at 31 December 2024. It is a non-adjusting event after the reporting period and should only be disclosed in the notes to the financial statements.

(a)(1) Income Statement (8 marks):
- Sales: $$2\,924\,000\$ (1 mark)
- Purchases: $$1\,838\,000$ (0.5 mark)
- Closing inventory: $$123\,800\$ (1.5 marks)
- Gross profit: $$1\,115\,800$ (0.5 mark)
- Salaries & wages and Rent & rates: $$248\,000\$ and $$160\,000$ (0.5 mark)
- General administrative expenses: $$87\,200\$ (0.5 mark)
- Depreciation - plant & machinery: $$180\,000$ (0.5 mark)
- Depreciation - delivery vans: $$68\,400\$ (1 mark)
- Loss on disposal: $$9\,200$ (1 mark)
- Debenture interest: $$30\,000\$ (0.5 mark)
- Net profit: $$333\,000$ (1 mark)

(a)(2) Statement of Retained Profits (3 marks):
- Retained profits b/f and Net profit: (0.5 mark)
- 2023 Final dividend: $$120\,000\$ (0.5 mark)
- 2024 Interim dividend: $$60\,000$ (0.5 mark)
- Transfer to general reserve: $$50\,000\$ (0.5 mark)
- Closing retained profits: $$470\,500$ (1 mark)

**(a)(3) Statement of Financial Position (7 marks):**
- Non-current assets (Plant: $$1\,200\,000\$; Vans: $$230\,400$): (1.5 marks)
- Current assets (Inventory: $$123\,800\$; Trade receivables: $$459\,000$; Bank: $$635\,300\$): (1.5 marks)
- Ordinary share capital ($$1\,080\,000$) & Share premium ($$20\,000\$): (1 mark)
- General reserve ($$230\,000$) & Retained profits ($$470\,500\$): (1 mark)
- Trade payables ($$333\,000$) & Accrued debenture interest ($$15\,000\$): (1 mark)
- 6% Debentures under Current liabilities ($$500\,000$ due to maturity in June 2025): (1 mark)

(b) Explanation (2 marks):
- Stating 'No' with reason that dividend proposed after the reporting period is not a present obligation / liability at the balance sheet date (1 mark)
- Stating that it should only be disclosed in the notes as a non-adjusting event (1 mark)