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HKDSE BAFS Paper 2A Accounting Structured Practice Paper (10 Questions, 100 Marks)
HKDSE BAFS Paper 2A Accounting
HKDSE BAFS Paper 2A Accounting structured practice paper: 10 original questions worth 100 marks in 60 minutes, covering straight-line and reducing-balance depreciation.
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Paper details Level: S6 (DSE) | Subject: BAFS Accounting | Time: 60 minutes | Marks: 100 | Questions: 10
Section A Financial Accounting: Depreciation, Inventory and Reconciliation (50 marks)
Questions 1-3
| # | Question | Answer and marking notes |
|---|---|---|
| 1 | A trading company bought a machine on 1 April 2023 at a cost of HK$480,000. The machine has an estimated useful life of five years and a residual value of HK$30,000. The year end is 31 December. (a) Calculate the depreciation expense for 2023 using the straight-line method. (4 marks) (b) Calculate the depreciation expense for 2023 using the reducing-balance method at 25% per year. (3 marks) (c) Calculate the net book value of the machine at 31 December 2024 under the reducing-balance method. (3 marks) |
(a) Annual depreciation = (480,000 – 30,000) / 5 = HK$90,000. Only nine months belong to 2023, so 90,000 x 9/12 = HK$67,500. (b) 480,000 x 25% x 9/12 = HK$90,000. (c) 2024 depreciation = (480,000 – 90,000) x 25% = HK$97,500; net book value = 480,000 – 90,000 – 97,500 = HK$292,500. Marking note: part (a) must be pro-rated for nine months; part (c) must deduct two years of depreciation. |
| 2 | Inventory records show: opening inventory 200 units at HK$40 each; 300 units bought in March at HK$44 each; 500 units bought in April at HK$50 each. 700 units were sold during the year and 300 units remain. (a) Calculate the total cost of goods available for sale and the weighted average unit cost. (4 marks) (b) Calculate the closing inventory value using the FIFO method. (3 marks) (c) Calculate the closing inventory value using the weighted average method and state the difference. (3 marks) |
(a) Total units = 200 + 300 + 500 = 1,000; total cost = 8,000 + 13,200 + 25,000 = HK$46,200; weighted average unit cost = 46,200 / 1,000 = HK$46.2. (b) Under FIFO the 300 closing units all come from the April batch: 300 x 50 = HK$15,000. (c) Weighted average: 300 x 46.2 = HK$13,860, so FIFO gives HK$1,140 more. Marking note: part (b) needs the reasoning that closing stock belongs to the latest batch. |
| 3 | The bank statement at 30 June shows a credit balance of HK$58,400. The following items were found: unpresented cheques HK$12,600; deposits in transit HK$9,800; a note collected by the bank HK$5,000 not yet recorded by the company; bank charges HK$180; a dishonoured customer cheque HK$2,400 not yet recorded. (a) Calculate the adjusted bank balance. (4 marks) (b) Calculate the cash book balance at 30 June. (4 marks) (c) Explain why unpresented cheques need no entry in the cash book. (2 marks) |
(a) Adjusted bank balance = 58,400 + 9,800 – 12,600 = HK$55,600. (b) Adjusted cash book balance = 55,600 – 5,000 + 180 + 2,400 = HK$53,180. (c) The company already recorded the payment when the cheque was issued; only the bank has not yet cleared it, so the difference is a timing difference and no further entry is needed. Marking note: part (a) scores zero if the directions of the two timing items are reversed. |
Questions 4-5
| # | Question | Answer and marking notes |
|---|---|---|
| 4 | Trade receivables total HK$620,000. The allowance for doubtful debts has an opening credit balance of HK$18,000. Bad debts of HK$22,000 were written off during the year and HK$3,000 of debts written off in earlier years was recovered. A closing allowance of 3% of receivables is required. (a) Calculate the required closing allowance. (3 marks) (b) Calculate the doubtful debts expense for the year. (4 marks) (c) Calculate the net receivables shown in the statement of financial position. (3 marks) |
(a) 620,000 x 3% = HK$18,600. (b) Allowance before adjustment = 18,000 – 22,000 + 3,000 = -HK$1,000, a debit balance, so the charge is 18,600 + 1,000 = HK$19,600. (c) 620,000 – 18,600 = HK$601,400. Marking note: the debit balance in part (b) is the commonest error; it must be added, not deducted. |
| 5 | Net sales are HK$1,250,000, cost of sales HK$875,000 and average inventory HK$125,000. (a) Calculate the gross profit and the gross profit margin. (4 marks) (b) Calculate the inventory turnover in times. (3 marks) (c) Calculate the inventory turnover period in days, using 365 days and one decimal place. (3 marks) |
(a) Gross profit = 1,250,000 – 875,000 = HK$375,000; gross profit margin = 375,000 / 1,250,000 = 30%. (b) 875,000 / 125,000 = 7 times. (c) 365 / 7 = 52.1 days. Marking note: part (b) must use cost of sales, not sales revenue, in the numerator. |
Section B Financial Analysis and Management Accounting (50 marks)
Questions 6-8
| # | Question | Answer and marking notes |
|---|---|---|
| 6 | Current assets are inventory HK$180,000, trade receivables HK$240,000 and cash HK$30,000; current liabilities are HK$250,000; non-current assets are HK$1,150,000; profit before interest and tax is HK$162,000. (a) Calculate the current ratio and the quick ratio. (4 marks) (b) Calculate the return on capital employed. (4 marks) (c) Explain why the quick ratio is lower than the current ratio. (2 marks) |
(a) Current assets = 180,000 + 240,000 + 30,000 = HK$450,000; current ratio = 450,000 / 250,000 = 1.8 times; quick ratio = (450,000 – 180,000) / 250,000 = 1.08 times. (b) Capital employed = 1,150,000 + 450,000 – 250,000 = HK$1,350,000; ROCE = 162,000 / 1,350,000 = 12%. (c) The quick ratio excludes inventory, so the larger the share of inventory in current assets, the wider the gap between the two ratios. Marking note: part (b) must deduct current liabilities to reach capital employed. |
| 7 | A factory produced 8,000 units and sold 6,500 units at HK$120 each. Unit direct material is HK$30, unit direct labour HK$20 and unit variable production overhead HK$10. Fixed production overhead for the year is HK$240,000 and is absorbed on production volume. There is no opening inventory and no other cost. (a) Calculate the unit product cost and closing inventory value under absorption costing. (4 marks) (b) Calculate the profit under marginal costing and under absorption costing. (4 marks) (c) Explain the cause and the amount of the profit difference. (2 marks) |
(a) Unit variable production cost = 30 + 20 + 10 = HK$60; fixed overhead absorption rate = 240,000 / 8,000 = HK$30, so the unit cost is HK$90; closing inventory = (8,000 – 6,500) x 90 = HK$135,000. (b) Marginal costing: contribution = 6,500 x (120 – 60) = HK$390,000, less fixed overhead 240,000 gives HK$150,000. Absorption costing: sales 780,000 – cost of sales 585,000 gives HK$195,000. (c) The HK$45,000 difference equals 1,500 closing units x the HK$30 absorption rate, because part of the fixed overhead is carried forward in inventory. Marking note: part (c) must name the fixed overhead held in inventory and give the amount. |
| 8 | The selling price is HK$80 per unit, unit variable cost HK$48 and annual fixed cost HK$384,000. (a) Calculate the unit contribution, the contribution margin ratio and the break-even volume. (4 marks) (b) Sales this year are 15,000 units; calculate the margin of safety in units and as a percentage. (3 marks) (c) How many units are needed to earn a target profit of HK$160,000? (3 marks) |
(a) Unit contribution = 80 – 48 = HK$32; contribution margin ratio = 32 / 80 = 40%; break-even volume = 384,000 / 32 = 12,000 units, that is HK$960,000 of revenue. (b) Margin of safety = 15,000 – 12,000 = 3,000 units, which is 20% of sales; profit = 3,000 x 32 = HK$96,000. (c) (384,000 + 160,000) / 32 = 17,000 units. Marking note: part (c) must add fixed cost to the target profit. |
Questions 9-10
| # | Question | Answer and marking notes |
|---|---|---|
| 9 | Equipment costs HK$600,000, has an estimated life of five years with no residual value and generates net cash inflows of HK$180,000 a year. The discount rate is 10% and the five-year annuity factor is 3.791. (a) Calculate the net present value. (4 marks) (b) Calculate the payback period in years to two decimal places. (3 marks) (c) Calculate the accounting rate of return using average investment. (3 marks) |
(a) Present value of inflows = 180,000 x 3.791 = HK$682,380; NPV = 682,380 – 600,000 = HK$82,380, which is positive, so the project is acceptable. (b) Payback period = 600,000 / 180,000 = 3.33 years, about 3 years and 4 months. (c) Annual depreciation = 600,000 / 5 = HK$120,000; annual profit = 180,000 – 120,000 = HK$60,000; average investment = 600,000 / 2 = HK$300,000; ARR = 60,000 / 300,000 = 20%. Marking note: part (c) must use profit, not cash inflow, in the numerator. |
| 10 | A limited company issued 200,000 ordinary shares of HK$5 par at an issue price of HK$7.5. Retained profits brought forward were HK$800,000, profit for the year was HK$260,000 and a final dividend of HK$0.15 per share was declared. (a) Calculate the share capital and the share premium. (4 marks) (b) Calculate the total dividend. (3 marks) (c) Calculate the retained profits carried forward. (3 marks) |
(a) Share capital = 200,000 x 5 = HK$1,000,000; share premium = 200,000 x (7.5 – 5) = HK$500,000, giving total proceeds of HK$1,500,000. (b) Dividend = 200,000 x 0.15 = HK$30,000. (c) Retained profits carried forward = 800,000 + 260,000 – 30,000 = HK$1,030,000. Marking note: part (a) must not include the premium in share capital; dividends are not an expense. |
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