Answers to Mock Exam Paper (Nov 2020) — Paper 1
SECTION A (2 marks for each question)
1.
A
2.
C
3.
A
4.
B
5.
C
6.
D
7.
C
8.
B
9.
D
10.
A
11.
A
12.
B
13.
D
14.
A
15.
B
16.
D
17.
C
18.
B
19.
C
20.
A
21.
C
22.
D
23.
D
24.
D
25.
C
26.
C
27.
A
28.
B
29.
B
30.
A
SECTION B
Part 1
1
(a) Advantages of adopting division of work in Fast Auto Limited’s factory:

Time can be saved as factory workers do not have to switch from one
task to another.

It is easier for managers at Fast Auto Limited to supervise the
manufacturing process as each factory worker specialises in only one
task.

Using machines to replace labour is easier because the manufacturing
Any 2
process is divided into small tasks. This facilitates automation.
(b) (i)
2 each
Finance department
1
(ii) Other major tasks of the finance department include:

Forecasting both the company’s short-term and long-term financial
needs

Developing budgets to meet the company’s financial needs

Monitoring the company’s actual revenues, costs and expenses
Any 2
against the budgets in the financial plan
2
1 each
(a)
2020
Oct 25 Jade Lau
[$2,000 × (1 – 2%)]
Cash
$ 2020
Oct 1 Purchases
1,960
2020
Oct 1 Cash
Purchases
$
1,500
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$
1,500
0.5
0.5
0.5
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Sales
2020
Oct 20 Jade Lau
2020
Oct 20 Sales
2020
Oct 25 Jade Lau
$
2,000
Jade Lau
$ 2020
2,000 Oct 25 Cash
" 25 Discounts allowed
($2,000 × 2%)
$
1,960
0.5
0.5
40
Discounts allowed
$
40
0.5
0.5
0.5
(b) The water fees of $1,200 should be recorded as an expense for the year
ended 31 October 2020.
1
According to the accrual concept, revenues and expenses are recognised
when they are earned or incurred. Such revenues and expenses would then be
included in the financial statements of that year.
3
2
(a) Reasons why Alan should not take out a personal loan from a bank:

As Alan has a poor personal credit record, his loan application may be
rejected.

1
As Alan has a poor personal credit record, the bank may charge high
loan interest or offer poor loan terms.
1
(b) Benefits that Alan can gain from this investment:

Alan can earn capital gains when the share price increases.

Alan can earn investment income from share dividends.

Alan can vote at the IT company’s annual general meetings and affect
the company’s major decisions.
Any 2
2 each
Part 2
4
(a) SMART goal characteristics that are not demonstrated by the goal include:

Specific: The goal does not define ‘more people’ and ‘like’ clearly.

Measurable: The goal is not expressed in numerical terms. It is difficult
to measure how many people like the fast food chain’s food.

Time frame: The goal does not specify a time frame for achieving the
goal.
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Any 2
2 each
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(b)
Eric Ng
Trial Balance as at 30 June 2020
Other operating expenses
Returns outwards
Returns inwards
Carriage inwards
Carriage outwards
Purchases
Sales
Office equipment
Bank overdraft
Capital, 1 July 2019
0.5
Dr
Cr
$
105,300
$
2,800
5,100
600
50,400
0.5
0.5
0.5
0.5
0.5
250,800
500,000
664,200
5
0.5
1,300
0.5
0.5
10
412,090
664,200
0.5
0.5
0.5
(a) Steps involved in Richard’s planning process:
Step 1: Richard establishes objectives and goals. For example, he may set a
goal of increasing sales by 10% next year.
Step 2: Richard gathers useful and relevant information which is important
for achieving his objectives and goals.
Step 3: Richard evaluates alternative options and chooses the best ones
which can help achieve his objectives and goals most effectively and
efficiently.
Step 4: Richard sets a time frame for action.
Step 5: Richard implements the plan, i.e., carries out the actual actions
according to the plan.
(1 mark for each point in the correct sequence)
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(b)
Mary Cheung
Statement of Financial Position as at 31 August 2020
$
$
Non-current assets
Office furniture
Motor vehicles
300,000
80,000
380,000
0.5
0.5
Current assets
Inventory
Trade receivables
Cash at bank
100
4,000
14,400
18,500
0.5
100,000
80
100,080
0.5
0.5
0.5
Less Current liabilities:
Bank loan (repayable on 31 December 2020)
Trade payables
Net current liabilities
0.5
(81,580)
298,420
Financed by:
Capital
Balance as at 1 September 2019 (balancing figure)
Add Net profit for the year ($120,600 – $36,800 + $100 – $28,500)
243,020
55,400
298,420
0.5
1
END OF PAPER 1
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