Accounting and Finance for Decision Making - Desklib

This article provides solved assignments and essays on Accounting and Finance for Decision Making. It includes calculations of EBITDA, effective tax rate, and cleaned net income. It also covers transactions related to equity, trade receivables, and cash flow statements. The article ends with a case study on profit and loss account. Course code and college/university information not mentioned.

ACCOUNTING AND
FINANCE FOR DECISION
MAKING
Table of Contents

Part A...............................................................................................................................................3
Part B...............................................................................................................................................3
Question 6...................................................................................................................................3
Question 7...................................................................................................................................4
Question 8...................................................................................................................................4
Part C...............................................................................................................................................4
Question 9...................................................................................................................................4
Question 10.................................................................................................................................5
Question 11.................................................................................................................................7
Part A
 c

 d
 e
 a
 b
Part B
Question 6
6) Calculation of Earning before interest and tax
Gross Profit – Depreciation & amortisation – research and development – SG&A expense
excluding legal claim provision
70890 – 66773 – 2300 – (59890 – 31900) = -30010
Calculation of EBITDA
EBIT + depreciation and amortisation
-30010 + 66773 = 36763
Question 7
7) Calculation of Effective Tax Rate
Income Tax Expenses/ Earning before taxes
2750.7/ 5116.4 * 100 = 54%
Note: Because of the lack of information regarding whether the non-recurring COGS is included
in the P&L or not, it is assumed that this is already included in the COGS mentioned in Income
statement.
Calculation of Normalized ETR
Normalised ETR
ETR – MTR
= 54 – 32
= 22%
Question 8
8) Calculation of Cleaned Net Income for Notsoeasy Ltd.
Particular Amount
Revenue 109054.6

Less Cost of goods sold 70571.4
Gross Profit 38483.1
Less SG&A (Excluding non-recurring gain) 31211.7
Add Non-recurring gain 1300
Operating Profit 8571.4
Less Interest Expenses 2082.9
Profit Before tax 6488.5
Less Tax expenses @ 37% 2400.75
Profit after tax 4087.75
Less Loss from discontinued business 449.5
Net Income 3638.25
Part C
Question 9
(1) Mobile-a-go-go plc started its business on 1 January, 2021 with the initial capital of
£50,000. There is not any other transactions has been occurred on the same day. IT can
be stated that due to having no other transactions with the equity account there is not any
fundamental change in the value of equity on 1 January, 2021.
(2) There is a sale occurred worth of £6,000 against the £3,000 value of stock. Due to the
profit occurred against the sale transaction of value £3,000 this would further increase the
equity with the value £3,000. The current equity value of company as on date 5 January is
£53,000 (50000 + 3000).
(3) The initial value of te trade receivable account is nil. Company sold on credit its stock
worth of £3,000 for £6,000 on 5 January, 2021. Company has further received £3,000
against the trade receivable account on 12 January. This would decrease the ending
balance of trade receivable with £3,000. As compare to the opening balance of trade

receivable there is an increase in the value of trade receivables as on date 12 January,
2021 worth of £3,000.
(4) The office furniture has been bought at the value of £500. In the end of the financial year
if the organisation charge depreciation it would be decrease the total value of the
furniture. In case the Mobile-a-go-go do not charge depreciation than this would be
remaining the same in the books of accounts of company.
(5) Cash received on 12 January is £3,000 and paid £500 for office desk. The remaining
balance of the cash account at the end of 27 January is 2500 (3000 – 500). The account
will increases by 2500 as the is not opening balance in the cash account as on January 1,
2021.
Question 10
3. Cssh flow statement
4. CFO 5. 6.
7. profit before tax 8.
9. 2
8
0
10. Add/less: change in
working capital 11. 12.
13. inc. in debtor
14. -
2
0 15.
16. inc. in stock
17. -
2
0 18.
19. inc in accounts payable
20. 1
0 21.
22. 23.
24. 2
5
0
25. Less: tax paid 26.
27. 7
9
28. 29. 30.
31. Net cash flow from
operating activity 32.
33. 1
7
1
34. 35. 36.
37. Cash flow from investing
activity 38. 39.
40. sale of intangible asset 41. 1 42.

0
43. Net PP&E
44. 2
0 45.
46. 47. 48.
49. Net cash inflow fron
investing activity 50.
51. 3
0
52. 53. 54.
55. Cash flow from
financing activity 56. 57.
58. increase in long-term
liability 59. 3 60.
61. 62. 63.
64. Net cash from financing
activity 65. 66. 3
67. 68. 69.
70. Net cash flow from all
activities 71.
72. 2
0
4
73. Add: opening cash
balance 74.
75. 3
0
76. 77. 78.
79. Closing cash balance 80.
81. 2
3
4
82. Operating working capital (OWC): Current asset – Current liability
31st December XY= 200- 150 = 50
31st December XZ= 260 – 162 = 98
83. Retained earning would be the one BASE computations that would be a part of the
valuation regarding company cash flow. This is a reserve maintained by the organisations
that would be involved in the valuation of the cash flow in organisation.
Question 11
1.1) £40,000 deposited in the bank account would only be treated as a deposit in the
bank account and will increase the balance of the respective account.
1.2) At present Paul is only renting the property. The rent charges against the premises
used would be recorded as an expense in the company profit and loss account.
1.3) Paul find a nil value of scrape against the computer bought. So, there will be
segregation of complete value of £1500 of the overall cost of computer in the three
respective financial years. So the value of £500 against the depreciation of computer

would be charged as an expense against the profit and loss account of the business
entity.
1.4) The purchase of five computer would be recorded as a purchase in trading
account of company. This would increase the purchase account balance of company
with £5000.
1.5) Components purchase would be recorded as a stock in trading account of the
company.
1.6) Selling of three computers would be recorded as a sale of £6000. £2000 would be
recorded in cash account as the sale was made in cash and the remaining would be
recorded in debt account of the company. The £500 worth of component would be a
part off cost of good sold against the computer sold. The total cost would be £3500
(1000 + 1000 + 1000 + 500). The gross profit will be recorded as £2500 (6000 –
3500).
1.7) Van is used only for three months so depreciation of 3 months is like 500 would
be recorded as an expense in the profit and loss account of company.
Profit and loss account
sales 6000
purchase 5000
GP 1000
rent 12000
computer component 3000
depreciation on
computer 125
depreciation on van 500
van running expenses 400

Net profit/ loss -15025
C
The business transactions denoting loss in the profit and loss account. The business
transactions are not stating the positive balance in the form of profitability in books of
accounts of company. The balance is negative which is not a positive results business is
showing or reflecting in the books of accounts of company.