Accounting Answers

A. Read the problem carefully and explain your answer briefly.

1. The government has called upon its residents and citizens to pay taxes and assume monetary burdens so that it can finance public needs and perform its functions. Mr. Dela Cruz refused to pay taxes. Accordingly, he does not care whether the government continue to exist or not. Aside from that he just wanted to save all his millions for himself. Is the contention of Mr. Dela Cruz correct? Why?

With reference to financial management, write a short essay on the concept of

time value of money as a key fundamental in respect of managers’ maximising corporate value for shareholders. Maximum 600 words and include references.

With reference to financial management, write a short essay on the concept of cost of capital as a key fundamental in respect of managers’ maximising corporate value for shareholders. Maximum 600 words and include references.

With reference to financial management, write a short essay on the concept of sources of finance as a key fundamental in respect of managers’ maximising corporate value for shareholders. Maximum 600 words and include references.

Aero Inc.

Balance Sheet

December 31, 2019

Cash $20,000

Accounts Receivable 21,200

Investments 32,000

Plant Assets 81,000

Land 40,000

194,200

Accounts Payable $30,000

Bonds Payable 41,000

Common Stock 100,000

Retained Earnings 23,200

$194,200

During 2020, the following occurred.

1. Aero liquidated its available-for-sale debt investment portfolio at a loss of $5,000.

2. A tract of land was purchased for $38,000.

3. An additional $30,000 in common stock was issued at par.

4. Dividends totaling $10,000 were declared and paid to stockholders.

5. Net income for 2020 was $35,000, including $12,000 in depreciation expense.

6. Land was purchased through the issuance of $30,000 in additional bonds.

7. At December 31, 2020, Cash was $70,200, Accounts Receivable was $42,000, and Accounts Payable was $40,000.

a. Prepare a statement of cash flows for the year 2020 for Aero.

b. Prepare the unclassified balance sheet as it would appear at December 31, 2020.

True or False

6. Companies infrequently take advantage of purchase discounts because they amount to so little savings.

7. Periodic inventory systems are, in general, less expensive to operate than perpetual systems.

8. In a periodic system, cost of goods sold is the difference between what a company has available for sale (beginning inventory and purchases) and what they didn’t sell (ending inventory).

9. Companies only follow the “lower-of-cost-or-market” guideline if they use a periodic inventory system.

10. The “purchases” account is not used in a perpetual inventory system.

True or False

1. If the market value of a company’s inventory increases, the company should record a gain.

2. A company should include costs of transporting an item to its store when determining the cost of the item.

3. A company that uses a perpetual inventory system should still perform a physical inventory count.

4. In a perpetual system, but not a periodic system, cost of goods sold is determined and recorded at the time of sale.

5. If inventory is shipped FOB shipping point, the buyer takes title as soon as the inventory leaves the seller’s warehouse.

a and b are equal partners with capitals 2,00,000 and 1,00,000 respectively. as per deed, they are allowed a interest @8% on capital . during the year the firm earned a profit of rs 12,000. interest in capital allowed to a will be

Discuss the steps of performing trend analysis on the financial statements of any company.

1. A company issued financial statements for the year ended December 31, but failed to include the following adjusting entries:

A. Accrued service fees earned of $2,200.

B. Depreciation expense of $8,000.

C. Portion of office supplies (an asset) used $3,100.

D. Accrued salaries of $5,200.

E. Revenues of $7,200, originally recorded as unearned, have been earned by the end of the year.

Determine the correct amounts for the December 31 financial statements by completing the following table:

Assets Liabilities        Equity Net Income

Reported amounts............... $350,000 $200,000   $150,000 $70,000

Add (subtract) to

correct for item:

A…………………………..

B…………………………..

C…………………………..

D…………………………..

E…………………………..

Corrected amounts……… $ $                      $ $