Accounting Exam: Income Statement, Financial Position, Ratios, Cash Flow, NPV, IRR

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TABLE OF CONTENTS
SECTION A...............................................................................................................................3
Calculating the income statement for the year ended 30/ 06/ 2020.......................................3
Preparing statement of financial position as at 30/ 06/ 2020.................................................4
SECTION B...............................................................................................................................5
QUESTION 2.............................................................................................................................5
a) Calculating ratios:..............................................................................................................5
b) Commenting on the performance of the company.............................................................7
QUESTION 3.............................................................................................................................8
a) Calculating annual cash flow of company.........................................................................8
b) Calculating payback and net present value........................................................................8
c) Advising the company.......................................................................................................9
d. Commenting on IRR and benefits......................................................................................9
e. Five factors that require to be considered before making the final decision....................10
REFERENCES.........................................................................................................................11

SECTION A
Calculating the income statement for the year ended 30/ 06/ 2020
Particulars Details Amount
Sales 1000
Less
Cost of Sales
Opening inventory 45
Purchases 500
Closing inventory 50 495
Gross profit 505
Expenses
Rates (40- 4) 36
Insurance (20- 3) 17
General expenses 22
Energy bills (25 + 2) 27
Audit fees (13+ 2) 15
Bad debt 1
Directors remuneration 52
Debenture interest 10
Interest on bank loan 3
Salaries and wages 150
Depreciation on equipment 20
Depreciation on vehicle 31 384
Profit before tax 121
Provision for tax 22
Profit after tax 99
Interim dividend paid (21 21
Final proposed (350 * 0.1) 35 56
Retained profit from last year 50
Retained profit for this year 93
Notes to financial statement
Depreciation
Equipment
Cost - accumulated 100 - 20 80
Depreciation 80 * 25% 20
Vehicle
Cost - accumulated 200- 45 155
Depreciation 155 * 20% 31

Preparing statement of financial position as at 30/ 06/ 2020
Particular Details Amount
Non- current asset
Equipment 40 60
Vehicle 76 124
Premises 450
Current asset
Receivable 82
Cash 3
Bank 10
Closing inventory 50
Prepayments 7 152
Total assets 786
Non- current liabilities
10 % debenture 140
5% bank loan 60 200
Current liabilities
Payable 62
Accrued 14
Proposed dividend 35
Provision for tax 22 133
Share capital
£1 Ordinary share capital 350
Profits 93 443
Total shareholder fund 776
SECTION B
QUESTION 2
a) Calculating ratios:
 Gross Profit Ratio
PARTICULARS FORMULA YEAR YEAR