Accounting and Finance for Business: Solved Assignments and Essays

Accounting and Finance for
Business

TABLE OF CONTENTS
QUESTION 1..................................................................................................................................3
(a) Calculation of Retained earnings...........................................................................................3
(b) Preparation of statement of financial performance................................................................3
(c) Journal Entries of tax payable................................................................................................5
(d)Calculation of total inventory purchases and total cash paid to suppliers..............................5
(e) Calculation of total cash receipts and closing accounts receivable........................................6
(f) Preparation of statement of financial position........................................................................6
(g) Preparation of statement of cash flows..................................................................................7
QUESTION 2..................................................................................................................................7
(a) Computation of financial ratios..............................................................................................7
(b) Analysis of the ratios-..........................................................................................................11
QUESTION 3................................................................................................................................12
(a) Calculation of net working capital-......................................................................................12
(b) Computation of cash cycle...................................................................................................13
QUESTION 4................................................................................................................................15
Monthly cash budget..................................................................................................................15
QUESTION 5................................................................................................................................16
(a) Calculation of contribution margin and weighted average contribution margin.................16
(b) Calculation of Break-even point..........................................................................................16
(c) Recommendation of the initiative........................................................................................17
QUESTION 6................................................................................................................................18
(a) Computation of net present value at 5.7% interest rate........................................................18
(b) Computation of net present value at 10% rate.....................................................................18
(c) Comparison of net present values at 5.7% and 10% rate.....................................................19
(e) Analysis of payback period..................................................................................................19
REFERENCES..............................................................................................................................20

QUESTION 1.
(a) Calculation of Retained earnings
current assets current liabilities
cash 6 suppler account payable 12
inventory 21 taxes payable 2
accounts receivable 15
prepaid lease 2
non current assets non current liabilities
ppe 60 interest on bank loan 58
accumulated
depreciation 25
equity
contributed capital 10
retained earnings 47
129 129
(b) Preparation of statement of financial performance
Statement of
financial
performance
Sales 208000
-cost of
goods sold 88000

gross profit 120000
Expenses
wages 21000
lease exp 8000
utilities exp 5000
depreciation 24700
total
expenses 58700
operating
profit 61300
non
operating
income 58000
-non
operating
expenses
Dividend
paid 50000
interest
expense 3000
earnings
before tax 66300
tax 16575
net profit
after tax 49725

(c) Journal Entries of tax payable
Profit and loss account
Dr.
To tax payable account 16575
16575
Tax payable Dr. 16575
To bank account 16575
(d)Calculation of total inventory purchases and total cash paid to suppliers
trading account
opening
inventory 21000 sales 208000
purchases 181000 closing stock 15000
wages 21000
223000 223000
Trade creditors
account
to balance
c/d 25000 by purchases 181000
to cash 168000 by balance b/d 12000
193000 193000

(e) Calculation of total cash receipts and closing accounts receivable
Accounts receivable
account
to balance
b/d 15000
by balance
c/d 18000
to sales 178000 by cash 175000
193000 193000
(f) Preparation of statement of financial position
Particulars amount particulars amount
Current assets current liabilities
cash 19000
suppliers account
payable 25000
inventory 15000 tax payable 31700
accounts receivable 18000
prepaid lease 0
non current assets
non current
liabilities
ppe 65000
interest on bank
loan 3000
accumulated depreciation -300 Equity
contributed capital 10000
retained earnings 47000
116700 116700