Paper 2A Question 1(a) - HKEAA 2A – Q1(b): Sample 2 . 2013/11/5. 6 ... • Wrong focus of the answer. The question focused on: i) retirement of partner, not admission of partner

2013/11/5

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BUSINESS, ACCOUNTING

AND FINANCIAL STUDIES

EXAMINATION 2013

PAPER 2A

Section A

Paper 2A – Question 1(a)

State and explain the accounting

principle or concept that has been

violated and show the journal entries

to correct the above. (Narration is not

required.)

(4 marks)

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Paper 2A – Question 1(a): Marking Scheme

Poor

Could not state and apply the accounting principle or concept violated

Wrong journal entries

Paper 2A – Q1(a): Sample 1

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Good

Could state and explain the accounting principle or concept violated

Gave partly correction journal entries


Very good

Prepared correction journal entries


Related

explanation

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Paper 2A – Question 1(b)

Write up the cash at bank account for the

month of March 2013. (6 marks)

Paper 2A – Question 1(b): Marking Scheme

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Poor

Opposite side of opening cash at bank balance

Misinterpretation of the cheque 201542

Could not read the question carefully

Wrong account names as description for some entries

Paper 2A – Q1(b): Sample 1

Fair

Could not work out the double entries for the cheque 201542

Wrong account names as description for some entries


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Good

Could not work out the double entries for the cheque 201542


Paper 2A – Question 2(a) & (b)

For the retail business of Mr. Chan,

prepare the following accounts for the

year ended 31 December 2012:

(a) Equipment account (3 marks)

(b) Accumulated depreciation account – Equipment

(4 marks)

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Poor

Could not work out the double entries for disposal and depreciation expense

Was unable to distinguish between capital expenditure and revenue expenditure and the cost of the new equipment could not be correctly arrived

Paper 2A – Q2(a) & (b): Sample 1

Paper 2A – Question 2(a) & (b): Marking Scheme

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Fair

Could not work out the double entries for disposal of equipment

Wrong account names as description for the new equipment purchased

Wrongly ignored the calculation of depreciation for the new equipment


Old equipment

Very good

Correct answers


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Paper 2A – Question 2(c)

State and explain the accounting principle or

concept violated in the above situation.

(3 marks)

Paper 2A – Question 2(c): Marking Scheme

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Poor

Wrong spelling of the concept

Failed to give appropriate explanation

Did not explain why using different

depreciation methods to show stable operating

results continuously violated the principle

Paper 2A – Q2(c): Sample 1

Fair

Correctly identified the accounting concept violated

Failed to give appropriate explanation

Did not explain why using different depreciation methods to show stable operating results continuously violated the principle


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Very good

Sufficient explanation of consistency principle


Paper 2A – Question 3(a) & (b)

(a) Calculate the predetermined production overhead absorption rate for the year 2014. (2 marks)

(b) State one rationale for Hansan Ltd’s choice of using the existing absorption base to calculate its predetermined production overhead absorption rate. (2 marks)

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Paper 2A – Question 3(a) & (b): Marking Scheme

Poor

Wrongly included direct costs and administrative overheads in the calculation of predetermined production overhead absorption rate

Could not state the reason for using direct labour hours as the existing absorption base


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Fair

Correctly calculated predetermined production overhead absorption rate

Could not state the reason for using direct labour hours as the existing absorption base


Very good

Correctly stated using direct labour hours more than machine hours

Only failed to state the reason for using direct labour hours as the existing absorption base


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Paper 2A – Question 3(c)

Calculate the selling price of this job,

showing separately the amount of:

- prime cost

- production cost

- total cost

(6 marks)

Paper 2A – Question 3(c): Marking Scheme

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Poor

Made a wrong classification of costs

Wrongly ignored the calculation of the selling price of the job


Fair

Correctly calculated the prime cost

Could not apply the predetermined overhead absorption rate to calculate the production overhead for the job

Wrongly ignored the selling price of the job


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Very good

Only failed to apply the net profit margin of

50% to set the price




EXAMINATION 2013

PAPER 2A

Section B

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33

Paper 2A – Question 4 (a&b)

34

Paper 2A – Question 4 (a&b)

＊

＊

＊

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35

Paper 2A – Question 4 (a): Marking Scheme

＊

＊

＊

＊

36

Paper 2A – Question 4 (b): Marking Scheme

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PAPER 2A- QUESTION 4(A): SAMPLE 1

• Failed to deal with revaluation and goodwill adjustments for partner changes

• Wrong entry for bank payment to retiring partner

PAPER 2A- QUESTION 4(A): SAMPLE 2

• Failed to deal with revaluation adjustments:

i) Ignored allowance for trade receivable

ii) Misinterpreted loss on revaluation of equipment “ decreased by 20% ”, NOT “decreased to 20%”

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PAPER 2A- QUESTION 4(B): SAMPLE 2

• Missed items like current account of partner Daisy and loan from Carrie.

40

Paper 2A – Question 4 (c)

＊

＊

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41

Paper 2A – Question 4 (c): Marking Scheme

PAPER 2A- QUESTION 4: SAMPLE 1

• Unable to record profit appropriation properly in the current account.

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Paper 2A- Question 4: Sample 2

• Able to include all the appropriated profit elements, but

i) interest on capital based wrongly on current account balance.

ii) failed to deduct partner’s salary and interest on capital before sharing profit $300,000

• Wrongly captured the cash injection by Ellen in current account.

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Paper 2A – Question 4 (d)

(d) Give one reason why asset revaluation is necessary

upon the retirement of a partner.

(2 marks)

Marking Scheme

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• Got confused in asset revaluation and profit and loss sharing issues in dealing with retirement of partner.


• Wrong focus of the answer. The question focused on:

i) retirement of partner, not admission of partner.

ii) asset revaluation, not cost of goods

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• Well answered

48

Paper 2A – Question 5

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49

Paper 2A – Question 5 (continued)

50


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51


52


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PAPER 2A – QUESTION 5: SAMPLE 1

• Unable to identify and determine the amount of sales and expenses items from incomplete records.


• Unable to draw up proper T account for trade payable. The debits and credits were completely reversed.

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55


• Unable to draw up proper T accounts for cash and bank.


• Understood the pricing policy of mark-up of 40%.

• Unable to determine cash loss and failed to include all expenses like depreciation.

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• Omitted insurance claim receivable in the current assets.

• Ignored note (i), all sales were made on cash basis.

• Depreciation wrongly computed based on reducing balance method.

58

PAPER 2A - QUESTION 6 (AI-III)

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59

PAPER 2A - QUESTION 6 (BI-III)

60


＊＊

＊

＊

＊

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61


[ ($190,000+$57,000) / 0.6 ]

[ $411,667 – $380,000 ]

62

Paper 2A – Question 6: Sample 1

• Unable to identify variable costs for contribution margin computation and used wrong breakeven formula.

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• Ignored the requirement of showing calculations to support the recommendation.


• Able to identify relevant costs for contribution margin computation and work out breakeven analysis.

• Wrongly used breakeven sales dollar as the denominator of the margin of safety.

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• Overlooked the requirement of presenting the margin of safety in percentage form.


• Ignored to state the effect of sales commission on breakeven sales.

• Failed to realise that additional sales would bring in additional variable costs, including those from direct material, direct labor and variable production overhead.

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• Wrongly classified the 5% sales commission as part of the sales, instead of a variable cost item.


• Well prepared incremental profit analysis.

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PAPER 2A – QUESTION 6

(c) Why is a decline in the margin of safety an issue

of concern to the management of a company?

(2 marks)

Marking Scheme


• Wrong interpretation of the decline of margin of safety

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• Failed to identify or explain the impact brought on by the decline of margin of safety.

• A very general description of margin of safety. Failed to indicate that a decline of margin of safety would mean a decrease in profit and an increase in the possibility of having a loss.


• Able to identify and explain the impact brought on by the decline of margin of safety.

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EXAMINATION 2013

PAPER 2A

Section C

Paper 2A Question 7

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Paper 2A Question 7

Paper 2A Question 7 (Sample 1)

Correct

Only (i) 2011

Incorrect

Reasons ~

• Ignored

omitted

sales

• Wrong

equations

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ALL incorrect

Wrong equations


Incorrect

(b) (i) Not making the comparison

(b) (ii) Not mentioning the correct ways to reduce

current liabilities

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ALL

correct!


Correct

Only (iv) 2011

Incorrect

Reasons ~

• Ignored the effect on

gross profit

• Retained profit for the

year vs. Retained

profits carried forward

to next year

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Incorrect

(b) (i) Not giving an accurate conclusion

(b) (ii) Not mentioning the correct ways to reduce

current liabilities


ALL correct except for two highlighted figures

GOOD practice ??

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Paper 2A Question 8

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Paper 2A Question 8

Paper 2A Question 8

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Paper 2A Question 8

Paper 2A Question 8

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Could not obtain the correct gross profit

ratio and sales commission in %


Many mistakes, in particular, omitted all

unavoidable costs (e.g. 4/5 office expenses of

shop C) and forfeited rental deposit

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Incorrect

(c) No supporting reason for making conclusion

(d) Not answering the question


Careless mistake made (3/7 instead of 2/7)

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Mistakes made:

sales, salary

per month

instead of per

year and same

careless

mistake as in (a)


Incorrect

Wrong conclusion

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Incorrect

Not justifiable assumptions and explanations


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Incorrect ~

Forfeited

rental

deposit

Salary per

month

instead of

per year

Sales

commission

rate


Documents

Paper 2A Question 1(a) - HKEAA 2A – Q1(b): Sample 2 . 2013/11/5. 6 ... • Wrong focus of the answer. The question focused on: i) retirement of partner, not admission of partner