Financial Reporting Analysis Homework: Financial Statement Analysis

This document provides a solution to a financial reporting analysis homework assignment. It includes answers to multiple-choice questions covering topics such as financial statement components, share types, and consolidation principles. The solution also involves preparing consolidated financial statements, addressing the impact of depreciation omission, and performing vertical analysis on financial data. Furthermore, the document includes calculations for rent and debt receivables, along with an adjusted trial balance as of December 31. Desklib is a platform where students can find similar resources and study tools.

Financial Reporting Analysis
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Table of Contents
Question 10......................................................................................................................................3
Question 11......................................................................................................................................3
B Working calculation.................................................................................................................4
C Effect of omission....................................................................................................................4
Question 12......................................................................................................................................4
Question 13......................................................................................................................................5
REFERENCES................................................................................................................................8
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Question 10
1.
B. Statement of financial position
2.
B. both a debit and a credit entry
3.
A. Current assets
4.
B. Normally Preference shares have no votes at meetings of shareholders
5.
A. give the holder the right to buy or sell a certain number of shares by a specified date at a
stipulated price
6.
A. current, 12 months, before
7.
C. A parent should own majority shares in the subsidiary
D. A parent should control the majority of the votes at subsidiary’s shareholders’ meetings
8.
D. decrease in income tax expense
9.
A. $1,037,800.
10.
A. Decrease in trade receivables turnover
B. Increase in inventory turnover
Question 11
Consolidated financial statement is being prepared at the time of acquisition and it is also
prepared by the parent and also claim the resources of the parent company as well (Ishii and et.al
2021). At the time of preparing consolidated statement all the assets and liabilities of parent
company added Together and consolidated adjustments have been prepared. The rent receivable
of $600 and it has been included $150 as well. Receivables are being reported as income in the
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finanacial statement of the company. It can be categorized in the form of liquid assets, and they
are the very important part of working capital.
B Working calculation
Total assets tolated $325000
Net assets $200000
$325000-200000 = 1250000
C Effect of omission
The overall treatment of depreciation expenses has direct impact the profit which
appears in the income statement of the company (Youssef and et.al 2019). The larger
depreciation expenses of the given yea will provide lower net income and profitability of the
company. It happens because depreciation is a non- cash expense that change the company's cash
flow. When a business purchases any physical asset for the useful life of the asset, Sometimes
major expenses of the company the overall profit of the company. Besides this, depreciation has
direct impact the profit and income of the company. Depreciation has been found in the income
statement, balance sheet and cash flow statement. Depreciation is a kind of expenses, whenever
it has used it carry value of the assets. Many companies select different methods, but they
always have revaluation as an option. Depreciation is a kind of accounting method which used to
allocate the cost of all the tangible asset of the company for a given of time period. Depreciation
can put a big impact on the overall profit and growth of the company. The method which is used
by company allow the overall expenses and cost of the assets over the time period. If the assets
get fully paid at the upfront, then it can be entered as a debit for the value of the assets.
Question 12
a.
Particulars Amount
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Rent till 28th February 20x0 $32,000
rent for remaining months $19,200
Total rent $51,200
rent written off rate in Singapore @
20% $10,240
10240 can be recorded in income statement as written off rent and 19200 can be referred as
accrued in current liability head of financial position.
b
Total debt receivables $ 474500
Sales return = $728400
bad debts = $9800
Particular Amount
Bad debts $9800
Total debt receivables $ 474500
Written off Bad debts / Total debt
receivables*100
2.06
Write off of the expenses can be claimed in the form of tax deduction. As it is deductyed from
the revenue.
Question 13
Adjusted trial balance as at December 31
Particulars Debit Credit
Accounts Receivable $22,500
Accounts Payable $8,750
Accumulated Depreciation,
equipment $3,750
Additional Paid-in Capital $38,750
cash $11,250
Common Stock $6,250
Cost of Goods Sold $13,750
Dividends $2,500
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Equipment $27,500
Loss on Sale of Equipment $7,250
Interest Expense $125
Inventory $6,250
Notes Payable $5,125
Retained Earnings, beginning $5,000
Sales Revenue $25,000
Supplies Expense $1,500
Total $92,625 $92,625
Vertical analysis
20x2 20x1
$ % $ %
Non-current assets
Tangible assets 165,220 79.25 93,098 72.71
Current assets
Inventory 13,728 6.58 11,760 9.18
Trade Receivables 17,765 8.52 12,684 9.91
Cash and cash
equivalents 11,770 5.65 10,495 8.20
Total assets 208,483 100% 128,037 100%
Capital and reserves
Ordinary share capital 193,326 92.73 117,978 92.14
Retained earnings 12,623 6.05 8,521 6.66
Current liabilities
Trade Payables 1,577 0.76 819 0.64
Accruals 957 0.46 719 0.56
Total equity and
liabilities 208,483 100% 128,037 100%
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REFERENCES
Books and journals
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