Accounting - Open book exam: Case studies and ratio analysis

Accounting - Open book
exam

Table of Contents
Case study 1...............................................................................................................................3
1. Preparation of Accounting equation at July 2022..............................................................3
2. Preparation of Profit & loss account for July 2022............................................................5
3. Balance Sheet as at 31st July 2022......................................................................................5
Case Study 2...............................................................................................................................6
2. Identification of financial strengths & weaknesses of Marigold.......................................7
3. Use of ratios for the potential purchase of Marigold by Primrose.....................................8
Case Study 3...............................................................................................................................9
1. Determination of profit cost and gross margin under current method of allocating
manufacturing overheads.......................................................................................................9
2. Allocation of manufacturing overheads under activity based costing method................10
3. Impact of activity - based costing on product profitability..............................................11
Case Study 4.............................................................................................................................12
1. Profit & Loss forecast for the five months to 31st October..............................................12
2. Cash budget for the five months to 31st October..............................................................12
3. Commenting on the resultsand identification of issues and recommendation to address
the same 13
REFERENCES.........................................................................................................................14

Case study 1
1. Preparation of Accounting equation at July 2022
Particular
s
Machin
ery
Motor
vehicl
es
Invento
ry: raw
material
s
Invento
ry:
finished
goods
Trade
debtors &
Prepayme
nts
Total Bank
overdr
aft
10%
Ban
k
loan
Trade
Credit
ors &
Accrua
ls
Ordina
ry
share
capital
Retain
ed
Profits
Profit
&
loss
accou
nt
Directo
r’s loan
Total
At
01.07.202
2
58000 25000 6200 5000 24500 1187
00
25700 100
00
27500 70000 -
14500
1187
00
1. -3000 -3000
1. 6500 6500
2. -10500 -10500
3. 7000 7000
4. 13700 -13700
5. 9000 -9000
6. -3100 5600 2500
7. 3170 -3170
8. -7000 -7000
8. 12650 1265
0
9. 750 -750
Director’s
loan
-6000 6000
Bank loan 10000 -
100
00
Interest
on bank
1000 -1000

loan
Bad debts -700 -700
Depreciat
ion
-3250 -1875 -5125
Accruals 515 -515
Insurance 3750 3750
At
31.07.202
2
61750 23125 3100 600 36200 1247
75
56320 0 14315 70000 -
14500
-7360 6000 1247
75
Working notes:
Interest on bank loan = 10000 * 10% = 1000.
Depreciation on machinery = 65000 * 20% * 3/12 = 3250 (for three months)
Depreciation on Motor vehicles = 25000 * 30% * 3/12 = 1875 (for three months)