Question 7 Write short notes on:（a) Real property.（b) Personal property.

Question 5

(a) Define defamation.

(b) Explain the difference between libel and slander.

Question 1

Briefly explain void, voidable and unenforceable contract.

Question 2

Use the information in the table below to answer the following questions concerning a consumer's choice between food and clothing.

(a)Fill in the blanks that remain in the table.

(b)Let income=＄130, Pf=＄20, and Pc=＄10. Does the market basket C=1 and F=6 satisfy the budget constraint? Could this be the utility maximizing market basket? If not, in which direction would the consumer like to reallocate his purchases (i. e., more food or more clothing)?

Question 9

A & D Ltd. provides you with the following information for the two years ended 31 December years 2002 and 2003.

Balance Sheet ended at 31 December

2002 2003

＄'000 ＄'000

Plant and machinery 1,346 1,838

Less: Depreciation (224) (337)

Stock 234 346

Trade debtors 432 540

Bank and cash 60 414

Trade creditors (192) (216)

Accrued expenses (20) —

Taxation (80) (90)

Dividends (45) (60)

1,511 2,435

Less: 7% Debentures (350) (1,000) 1,161 1,435

Paid-up share capital 900 1,000

Share premium — 100

Revenue reserves 85 120

Profit and loss 176 215 1,161 1,435

Trading and Profit and Loss Account

2002 2003

＄'000 ＄'000

Turnover 2,775 3,254

Less: Cost of sales (1,816) (2,245)

Gross profit 959 1,009

Less: Operating expenses (763) (765)

Profit before taxation 196 244

Less: taxation (80) (90)

Profit after taxation 116 154

Less: transfer to reserves (20) (35)

proposed dividends (45) (80)

Retained earnings for the year 51 39

Additional information:

Plant and machinery with a cost of ＄62,000 and a written-down value of ＄24,800 was sold for＄12,000.

Required:

(a)Briefly state the purposes of preparing a cash flow statement.

(b)Prepare a cash flow statement for A & D Ltd. for the year ended 31 December 2003 in the format as prescribed by HKSSAP15: Cash Flow Statement.

Question 7

The assets and liabilities of the Music Club on 1 January 2002 were as follows:

＄

Clubhouse 1,375,000

Music Equipment (Cost) 300,000

Music Equipment (Book Value) 175,000

Bank & Cash 533,500

Bar Stock 145,500

Bar Debtors 15,500

Rates Prepaid 34,000

Subscriptions-in Arrear 5,500

Subscriptions-in Advance 23,500

Bar Creditor 63,500

Loan to Club 540,000

Accruals-Electricity 19,000

Accruals- Miscellaneous Expenses 37,500

Accruals-Loan Interest 16,500

Accruals-Rent of Music Ground 11,000

The receipts and payments account for the year ended 31 December 2001 shown below was prepared by the honorary treasurers.

Receipts ＄ ＄

Bar Sales 2,015,000

Telephone 2,000

Hire of Music Facilities 890,000

Christmas Party 88,500

Miscellaneous 43,000

Subscriptions 170,000 3,208,500

Payments

Bar Purchases 1,468,500

Loan Repayment 85,000

Rent of Music Ground 49,000

Rates 160,000

Electricity 153,000

Equipment Repairs 163,000

Expenses of Christmas Party 33,500

Maintenance 66,500

Wages 70,000

Telephone 6,500

Bar Sundries 72,000

Loan Interest 48,500

Miscellaneous 81,500 2,457,000

Increase in Bank 751,500

Bank Balance 1 January 2002 533,500

Bank Balance 31 December 2002 1,285,000

Additional Information:

(1)Balances on 31 December 2002

＄

Bar Stock 197,000

Bar Debtors 25,000

Bar Creditors 150,500

Music Ground Rent Prepaid 8,000

Electricity Owing 17,500

Subscriptions-In Arrear 9,500

Subscriptions-in Advance 30,000

Rates Prepaid 38,000

(2)Included in subscriptions in arrears on 31 December 2002 is ＄2,500, which has been outstanding for 5 years, and the management committee wish to write off as a bad debt.

(3)Depreciation is to be provided at the following rates:

Clubhouse 5% by reducing balance method

Music Equipment 5% by straight line method

(4)Incorrectly included in repairs to equipment was ＄100,000 for the purchase of a full set of weight training equipment which was installed in the club house in January 2002, and which has an estimated life of 10 years.

Required:

Prepare the Club's Income and Expenditure Account for the year ended 31 December 2002.

Question 7

After the first year of trading, Mr. Wong provided you the following list of ledger balances as at 31 December 2003:

＄

Stock, 1 January 2003 3,300

Stock, 31 December 2003 25,200

Sales 160,000

Purchases 100,000

Premises 142,600

Fixtures & Fittings 45,200

Motor Vehicles 42,500

Returns Inwards 1,500

Returns Outwards 2,600

Carriage Inwards 1,000

Carriage Outwards 250

Debtors 30,500

Creditors 41,500

Wages 17,495

Rent and Rates 3,900

Lighting & Heating 18,455

Insurance 10,600

Motor Vehicle Expenses 2,400

Cash at Bank 4,700

Bank Loan 29,000

Loan Interest 2,300

Drawing 6,400

You are further given the following information:

1.Wages owing are ＄550.

2.Prepaid rent is ＄600.

3.Depreciation of Fixtures & Fittings is 10% per annum on cost.

4.Depreciation of Premises is based on a 10-year lease.

5.Depreciation of Motor Vehicles is 50% life using the reducing balance method.

6.Stock taken for Mr. Wong's own use is ＄1,100. Such a transaction has not yet been recorded.

7.It is estimated that one-third of the driving time is for private purposes.

8.5% of the outstanding accounts at the year end is thought to be uncollectible.

9.There was no error made in the recording of business transactions for the year.

Required:

(a)Prepare a Trading and Profit and Loss Account for the year ended 31 December 2003.

(b)Prepare a Balance Sheet as at 31 December 2003.

(c)Explain the meaning and the significance of Working Capital.

Question 5

Mr. Wong is a small manufacturer of bicycles in Hong Kong. His business incurred the following costs for the year ended 31 December 2003.

＄

Materials (100% variable) 300,000

Labor (25% variable) 200,000

Selling & distribution cost (20% variable) 50,000

Other costs (fixed) 170,000 720,000

Normally, the business sells 3,000 units at ＄300 each:

Required:

(a)Calculate the breakeven point in units and dollar sales.

(b)Calculate the contribution to sales ratio.

(c)Calculate the margin of safety in percentage.

Question 4

Chan promised to pay his nephew ＄5,000 if his nephew would refrain from drinking liquor and using tobacco until the nephew should be 21 years of age. The nephew took Chan's words seriously, and abandoned drinking and smoking. After the nephew celebrated his 21st birthday, he asked Chan to pay the amount promised, Chan refused.

Could the nephew sue Chan for breach of the contract?