Online Exam - Accounting for Business: Income Statement, Financial Position, Payback Period, NPV, BEP Analysis

Online exam - Accounting for
Business

TABLE OF CONTENTS
QUESTION 1...................................................................................................................................3
(a)................................................................................................................................................3
(b)................................................................................................................................................4
QUESTION 3...................................................................................................................................5
a. Calculating payback period.....................................................................................................5
b. Calculation of NPV.................................................................................................................6
c. Ranking of project...................................................................................................................7
d. Recommending one machine to company..............................................................................7
e. Five other factors which require consideration.......................................................................8
QUESTION 4...................................................................................................................................8
(a)................................................................................................................................................8
(b)................................................................................................................................................9
(c)................................................................................................................................................9
(d)................................................................................................................................................9
e. Limitation of BEP analysis...................................................................................................10
REFERENCES..............................................................................................................................11

SECTION A
QUESTION 1
(a)
Income Statement for the year ended 31st December 2020
Particulars Details £ Amount £
Sales Revenue 234000
Less Cost of Sales
Opening Inventory 25000
Add Purchases 167000
Less Closing inventory 28000
Total cost of sales 164000
Gross Profit 70000
Less Operating expenses
Directors’ fees 14000
Insurance (1000-200) 800
Salaries 24000
Rent and rates (5300-300) 5000
Bad debts 2000
General expenses (5000+100) 5100
Depreciation on machinery
(34000*10%) 3400
Depreciation on vehicles (16000-
6000)*20% 2000
Total operating cost 56300
Net profit before interest and tax 13700
Less Debenture interest (700+200) 900
Net profit before tax 12800
Less Corporate tax 4000
Net profit for the year 8800

(b)
Statement of Financial Position as at 31st December 2020
Particulars Cost
Accumulated
depreciation Net Book value
ASSETS
Non-current assets
Machinery 34000 19400 14600
Vehicles 16000 8000 8000
Current assets
Receivables 35000 35000
Bank 12000 12000
Inventory 28000 28000
Prepaid insurance 200 200
Prepaid rates 300 300
Cash 1000
Total assets 99100
Current liabilities
Payables 18000 18000
General expense
payables 100 100
Tax payable 4000 4000
Debenture interest
payable 200 200
Non-current liability
10% Debenture 9000 9000
Net assets 67800