Accounting Answers

A restaurant bought on the first of January 400 bottles of vine at a price of 40 DKK per bottle.

Payment condition was current month + 15 days. After the first quarter it appeared that the sales in January were 100 bottles, sales in February 125 bottles and the sales in March were 175 bottles .All bottles of wine were sold at a price of 150 DKK each.

Prepare a profit and loss statement

The following account balances are taken from the books of Country Club on 31 December 2017. Revenues and expenses are for the year ended 31 December 2017. The retained profits balance is as at 1 January 2017.





Account


Value ($)


Accounts Receivable


29806


Accounts Payable


25280


Promotional Expense


54742


Cash


5028.2


Food Sales


15611


Cost of food sold


13798


Dividend payments


8209


Electricity Expense


6432


Furniture and fittings


42,500


Inventory


22,500


Land and buildings


75,000


Bank loan payable


43,750


Equipment


51,250


Rent expense


40546


Retained profits (1 January 2017)


74022


Share capital


75,000


Membership revenue


103263


Calculate the retained earnings for the year ended 31 December 2017.

Henry purchased equipment with a cost of $225557 on 1 July 2016. The equipment has an estimated life of 10 years or 108389 units of product. The estimated residual value is $27202. During 2016/17, 14633 units of product were produced with this machinery. Calculate the amount of total accumulated depreciation at 30 June 2017, using units-of-activity depreciation

The balance sheet of a sole trader revealed the following position.

Fixed Assets

Land and buildings

R

9 170

R

Equipment at cost less depreciation 15 570

Goodwill at cost less amounts written off 10 250 34 990

Investment in shares at cost 2 200


Current Assets

R

R

Trading stock

45 840

Sundry debtors less bad debts written off

19 350

Cash at bank

10 920

76 110

113 300

=

A

Less: Current Liabilities

R

Sundry creditors and accruals

77 600

=

L

35 700

Owner's Interest

R

R

Capital

28 400

Profit for the year

7 300

35 700

=

0

Required

Answer the following questions:

(a) Are the assets correctly classified? If not, re-arrange them and give your reasons for doing this.

(b) What is the current ratio? Is it satisfactory?

(c) What is the acid-test ratio? Is it satisfactory?

(d) Is the business solvent? Give your reasons.

(e) Is the business overtrading? Give your reasons.

(f) What is the profitability ratio of the business?

You have been requested by the shareholders to prepare a detailed report analysing the financial performance and financial position of COPPERBELT ENERGY CORPORATION PLC for the year ended 31st December 2018. The Annual Report and Accounts for Copperbelt Energy Corporation Plc are on the website(https://cecinvestor.com/cec-2018-annual-report-erratum/).


REQUIRED: Prepare a REPORT to the shareholders providing a detailed analysis of the Financial performance and Financial Position of CEC company based on the ratios calculated and any other relevant information from the Annual Report:

BIT Bank (in millions) Assets： Reserves $48 Loans $360 Liabilities： Deposits $340 Bank Capital $68 NAT Bank (in millions) Assets Reserves $48 Loans $360 Liabilities Deposits $400 Bank Capital $8 Assume that both BIT Bank and NAT Bank have the same net profit after tax of $8 million a. Which bank (Bank BIT or Bank NAT) is riskier in case of loan depreciation at $60 million? Explain. Show your calculations to explain your answers.

Expert's answer

BIT Bank (in millions) Assets： Reserves $48 Loans $360 Liabilities： Deposits $340 Bank Capital $68 NAT Bank (in millions) Assets Reserves $48 Loans $360 Liabilities Deposits $400 Bank Capital $8 Assume that both BIT Bank and NAT Bank have the same net profit after tax of $8 million

a. Which bank (Bank BIT or Bank NAT) is riskier in case of loan depreciation at $60 million? Explain. Show your calculations to explain your answers.

Question 2

The following details appeared in the final accounts of a sole trader's business.

Current assets

R

8 400

Current liabilities 4 000

Gross profit 5 000

Net profit 2 400

Purchases 16 000

Sales 21 000

Capital 30 000

The opening and closing stocks, being identical figures, are not shown.

Required

Answer the following questions:

(a) What is the ratio between current assets and current liabilities, and

is it a satisfactory one?

(b) What is the percentage gross profit on turnover?

(c) What is the average mark-up percentage on purchases?

(d) What is the capital yield to the owner expressed as a percentage?

(e) Would the owner do better by investing his capital in a building

society at 2

7 1 % per annum? (15)

The Annual Report and Accounts for Copperbelt Energy Corporation Plc are on the website(https://cecinvestor.com/cec-2018-annual-report-erratum/).



e) Calculate the following ratios for 2018 and 2017:

Liquidity Ratios: - Current ratio

- Cash Ratio

- Acid test ratio

Profitability: - Gross Profit %

- Operating profit %

Investment ratios:

- Return on Total Assets(ROA) based on the formula Profit before

tax/Revenue

- Return on Equity(ROE) based on the formula Profit before tax/Total Equity

Efficiency ratios: Debtor collection period/debtors days

Stock days

Creditor payment period/creditor days

Financing/capital structure:

• Interest Cover Ratio

• Total liabilities to Total Equity Ratio

4. Amal Automotive Company experienced the following accounting events during 2019. Received S60,000 cash from the issue of common stock. Performed services for $35,000 cash. Purchase land for $16,000 cash. Borrowed $1,000 cash from the Bank. Paid $24,000 cash for salary expenses. Sold land for $19,000 cash. Paid $20,000 cash on the loan from state bank. Paid $12,800 cash for salary expense. Paid a cash dividend of $15,000 to the stockholders Required: a. Pass general journal entries and post the entries, to T-accounts and determine the ending balance in each account. b. Prepare a statement of cash flows. Assume Amal Automotive had a beginning cash balance of $10,000.