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Appendix 1 Revision practice

Answer 1
(a) (i) Advertising and Promotions
20X8 $ 20X8 $
Jul 28 Bank 7,500 Apr 1 Accrued b/f 2,220
Oct 15 Bank 12,600
20X9
Mar 31 Profit and loss 14,400
" 31 Prepaid c/f 3,480
20,100 20,100

(ii) Printing and Stationery


20X8 $ $
Apr 1 Stock of stationery b/f 20,400
Sep 14 Bank: Stationery 5,100
20X9 20X9
Feb 12 Bank: Printing 2,520 Mar 31 Profit and loss 13,110
Mar 31 Accrued printing c/f 3,690 " 31 Stock of stationery c/f 18,600
31,710 31,710

(iii) Rental Income


$ 20X8 $
Apr 1 In advance b/f (3 months) 3,780
Jul 1 Bank (6 months) 7,560
Oct 1 Bank (6 months) 8,880
20X9
Mar 31 Profit and loss (12 months) 15,780
1
" 31 In advance c/f (3 months: $8,880 × 2 ) 4,440
20,220 20,220

(iv) Rates
20X8 $ $
Apr 1 Prepaid b/f (3 months) 4,680
Jul 1 Bank (6 months) 10,080
Oct 1 Bank (6 months) 10,080
20X9
Mar 31 Profit and loss (12 months) 19,800
1
" 31 Prepaid c/f (3 months: $10,080 × 2 ) 5,040
24,840 24,840

(b) Financial Services


Balance Sheet as at 31 March 20X9 (extract)
Current Assets $ Current Liabilities $
Stock of stationery 18,600 Income in advance 4,440
Prepayments ($3,480 + $5,040) 8,520 Accrued expenses 3,690

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Answer 2
(a)
Cash Book
20X6 $ 20X6 $
Mar 31 Balance b/f 93,596 Mar 31 Bank interest charges (3) 184
" 31 Paul Lee: Incorrect payment (2) 1,080 " 31 Rates: Autopay (4) 2,688
" 31 Peter Pang: Credit transfer (5) 3,256 " 31 David Ho: Dishonoured cheque (6) 2,080
" 31 Omitted sales receipts (8) 2,504 " 31 Balance c/f 95,484
100,436 100,436

(b) Anne Lo
Bank Reconciliation Statement as at 31 March 20X6
$
Balance as per bank statement 91,600
Add (7) Uncredited items 8,744
100,344
Less (1) Unpresented cheques 4,860
Corrected balance as per cash book 95,484

(c) A bank reconciliation statement is compiled to ensure that the difference between the balance in the bank
statement and the balance in the cash book is due principally to the timing difference in entering items, or to
discover errors or irregularities, if any, in either the bank’s or the depositor’s records.

Answer 3
(a) Patrick Ho
The Journal
Date Particulars Dr Cr
20X6 $ $
Dec 31 (1) Bank interest charges 3,600
Suspense 3,600
Dec 31 (2) Charles 1,325
Suspense 1,325
Dec 31 (3) Equipment 6,000
Stock 6,000
Dec 31 (4) Suspense 30
Wing Wah Ltd ($3,830 – $3,800) 30
Dec 31 (5) Suspense 180
Sales ($755 – $575) 180
Dec 31 (6) Discounts allowed 380
Discounts received 380
Suspense 760
Dec 31 (7) Suspense 500

190
(b) Suspense
$ $
Wing Wah Ltd (4) 30 Bank interest charges (1) 3,600
Sales (5) 180 Charles (2) 1,325
Difference in trial balance 5,975 Discounts allowed (6) 380
Discounts received (6) 380
Trial balance: Petty cash (7) 500
6,185 6,185

(c) Statement Showing the Effect on Net Current Assets After the Corrections
$ $
Original net current assets 81,085
Add (2) Debtors understated 1,325
(7) Petty cash balance omitted 500 1,825
82,910
Less (3) Stock overstated 6,000
(4) Debtors overstated 30 6,030
Corrected net current assets 76,880

Answer 4
Stephen Kwan
Trading and Profit and Loss Account for the year ended 31 March 20X5
$ $
Sales 18,250
Less Cost of goods sold:
Stock as at 1 April 20X4 4,000
Add Purchases 12,250
16,250
Less Stock as at 31 March 20X5 4,250 12,000
Gross profit 6,250
Add Other revenues:
Discounts received 300
Interest receivable 438
6,988
Less Expenses:
Sundry expenses 162
Rent and rates ($1,200 – $100) 1,100
Insurance 325
Wages and salaries ($2,975 + $275) 3,250
Discounts allowed 475
Bad debts 113
Provision for bad debts [($4,613 – $113) × 5% – $150] 75
6
Provision for depreciation: Office equipment [($750 × 10%) + ($250 × 10% × 12 )] 88
Motor vehicles 400 5,988
Net profit 1,000

191
Stephen Kwan
Balance Sheet as at 31 March 20X5
$ $ $ $
Fixed Assets
Office equipment 1,000
Less Accumulated depreciation 88 912
Motor vehicles 2,000
Less Accumulated depreciation 400 1,600 2,512

Current Assets
Stock 4,250
Debtors 4,500
Less Provision for bad debts 225 4,275
Prepayments 100
Interest in arrears 438
Cash in hand 250 9,313

Less Current Liabilities


Creditors 3,000
Accruals 275
Bank overdraft 2,675 5,950
Net current assets 3,363
5,875
Financed by:
Capital as at 1 April 20X4 6,750
Add Net profit for the year 1,000
7,750
Less Drawings 1,875
5,875

Answer 5
(a) Mark Choi
Trading and Profit and Loss Account for the year ended 31 May 20X6
$ $
Sales (W1) 426,855
Less Cost of goods sold:
Stock as at 1 June 20X5 16,800
Add Purchases (W2) 222,180
238,980
Less Stock as at 31 May 20X6 20,100 218,880
Gross profit 207,975
Add Other revenues:
Discounts received 480
208,455
Less Expenses:
Bad debts 435
Discounts allowed 720
Provision for depreciation: Furniture and equipment ($36,000 × 10%) 3,600
Insurance ($4,260 + $360 – $1,080) 3,540
Electricity and water ($894 – $78 + $126) 942
Stationery 318
Transportation ($5,040 + $480 – $720) 4,800
Rent 33,000
Telephone 420
Wages ($127,500 + $3,000) 130,500 178,275
Net profit 30,180

192
(b) Mark Choi
Balance Sheet as at 31 May 20X6
Fixed Assets $ $ $
Furniture and equipment 36,000
Less Provision for depreciation ($7,200 + $3,600) 10,800 25,200

Current Assets
Stock 20,100
Debtors 16,800
Prepayments ($720 + $1,080) 1,800
Bank (W3) 27,468 66,168

Less Current Liabilities


Creditors 8,700
Accruals ($3,000 + $126) 3,126 11,826
Net current assets 54,342
79,542
Less Long-term Liabilities
Interest free loan from Mary repayable 31 May 20X9 15,000
64,542
Financed by:
Capital as at 1 June 20X5 (W4) 61,362
Add Net profit 30,180
91,542
Less Drawings 27,000
64,542

Workings:

(W1) Calculation of credit sales for the year ended 31 May 20X6:
$
Cash received from debtors 110,400
Add Discounts allowed 720
Bad debts 435
Debtors as at 31 May 20X6 16,800
128,355
Less Debtors as at 1 June 20X5 11,700
Credit sales for the year 116,655

∴ Total sales = Credit sales + Cash sales


= $116,655 + $310,200
= $426,855

(W2) Calculation of credit purchases for the year ended 31 May 20X6:
$
Cash paid to creditors 55,800
Add Discounts received 480
Creditors as at 31 May 20X6 8,700
64,980
Less Creditors as at 1 June 20X5 4,200
Credit purchases for the year 60,780

∴ Total purchases = Credit purchases + Cash purchases


= $60,780 + $161,400
= $222,180

193
(W3) Calculation of cash at bank:
$ $
Balance as at 1 June 20X5 7,500
Receipts
Cash sales 310,200
Debtors 110,400
Interest free loan from Mary 15,000 443,100
Less Payments
Rent 33,000
Wages 127,500
Cash purchases 161,400
Creditors 55,800
Telephone 420
Electricity and water 894
Stationery 318
Transportation 5,040
Insurance 4,260
Drawings 27,000 415,632
Balance as at 31 May 20X6 27,468

(W4) Calculation of capital as at 1 June 20X5:


$ $
Assets
Furniture and equipment ($36,000 – $7,200) 28,800
Stock 16,800
Debtors 11,700
Prepayments ($480 + $360) 840
Bank 7,500 65,640
Less Liabilities
Creditors 4,200
Accruals 78 4,278
Capital as at 1 June 20X5 61,362

194