Introduction to Accounting and Finance

Introduction to Accounting and
Finance

Table of Contents
Part A – Collins Colman Limited...............................................................................................3
Part B – Parksmead Limited......................................................................................................7
a. Determining the contribution of each microwave in regard to covering the fixed cost.....7
b. Computation of BEP and the margin of safety if microwave is sold at the price of £40...7
c. Computation of profit that Parks mead Ltd would make by selling 60000 units of
microwaves at the price of £40..............................................................................................9
d. Determining and analysing the new strategy of Parksmead Ltd........................................9
e. Underpinning assumptions attached to the BEP model...................................................10
Part C – Skipsey Clifford Plc...................................................................................................11
a. Computing payback, ARR, and NPV of the firm.............................................................11
REFERENCES.........................................................................................................................14

Part A – Collins Colman Limited
Income Statement
For the year ended 31 December 2019
Particulars £ £
Revenue:
Sales(604800+154800) 759600
Other income 0
Total Revenues 759600
Expenses:
COGS or cost of sales 291600
64800 356400
Depreciation 11000
Wages paid 140400
Add Outstanding wages at the end of the year 2610 143010
Electricity Expenses 9270
Van running expenses 40320
Bad debts 1800
Rent paid 135000
Less: - prepaid rent at the end of the year 27000 108000
Total Expenses: - 669800
Net profit before tax(PBT) 89800
Less: - Tax paid 6930
Net profit after tax(PAT) 82870
Balance Sheet
For the year ended 31 December 2019
LIABILITIES ASSETS

£ £ £ £
Shareholder's Equity Fixed Assets
Equity share capital 216000 Delivery Van 61000
Reserves and surplus 82870
Long Term Liabilities
Current Liabilities Current Assets
Outstanding Wages 2610 Prepaid Rent 27000
Outstanding Electricity
Expenses 2430 Closing Inventory 273600
Trade Payables 111600 Trade Receivables 77400
Bank Overdraft 132840 Prepaid Tax 1350
Cash 108000
Total Liabilities 548350 Total Assets 548350
Working:
Note 1 Total Sales
credit sales 604800
cash sales 154800
759600
Note 2 Depreciation
Purchase Price of Van 72000
scarp value 6000
life in years 6