Finance Answers

Ten thousand euro is invested in a bank account for 3 years at an annual
rate of interest of 2.4%. How much is this investment worth if
(a) the interest is compounded annually?
(b) the interest is compounded monthly.

"ABC copmpany owns a 10 year lease to a building in the centre of HCMC which it currently pays $200,000 rent each year"

Project A: US corp leases the building from ABC.

Is 200,000 a sunk cost if this company is to adopt project A?

Suppose that sales and profits of Oly Enterprises are growing at a rate of 30% per year. At the end of 4 years (t4) the growth rate will drop to a steady 5%. Oly recently paid a dividend of $1 per share. If the required return is 20%, what is the value of one Oly share today (t0)?

(Assume dividends grow at the same rate as earnings after year 4.)

McGonigal’s Meats, Inc. currently pays no dividends. The firm plans to begin paying dividends in 3 years (at the end of t3). The first dividend at that time will be $1 and dividends are expected to grow at 5% per annum thereafter.

Given shareholders demand a 12% return on their investments, what is the price of the

stock today (t0)?

Prepare adjusting journal entries for Wan Catering in the GENERAL JOURNAL for the year ended 31st December 2012, for each of these situations. Narratives for each entry are required.
i. Wan Catering received RM5, 000 from a customer on November 15, 2012, for catering service to be performed in December 2013. The RM5, 000 was recorded in Unearned Revenue in November 2012. By the end of December, the service has been performed.
ii. Wan Catering invested RM50, 000 into a 5% government bond some years ago. The 5% interest was due to be paid on 31st December every year. However, Wan Catering had yet to receive the payment from the government by 31st December 2012.
iii. Wan Catering paid a total salary of RM28, 000 every month to all of its staffs. Due to some unforeseen circumstances, the salaries for the final week amounting to RM7, 000 have not been paid.
iv. Wan Catering paid RM12, 000 for insurance for 12 months beginning on 1st September 2012. The amount was recorded as Prepaid Insurance on 1st September.

Prepare adjusting journal entries for Wan Catering in the GENERAL JOURNAL for the year ended 31st December 2012, for each of these situations. Narratives for each entry are required.


i. Wan Catering received RM5, 000 from a customer on November 15, 2012, for catering service to be performed in December 2013. The RM5, 000 was recorded in Unearned Revenue in November 2012. By the end of December, the service has been performed.


ii. Wan Catering invested RM50, 000 into a 5% government bond some years ago. The 5% interest was due to be paid on 31st December every year. However, Wan Catering had yet to receive the payment from the government by 31st December 2012.


iii. Wan Catering paid a total salary of RM28, 000 every month to all of its staffs. Due to some unforeseen circumstances, the salaries for the final week amounting to RM7, 000 have not been paid.

iv. Wan Catering paid RM12, 000 for insurance for 12 months beginning on 1st September 2012. The amount was recorded as Prepaid Insurance on 1st September.


v. Wan Catering purchased a RM3, 500 kitchen equipment on 1st January 2012. It is expected to have a useful life of three years and it will worth about RM500 at the end of three years. Wan Catering used the straight-line depreciation method. (15 marks)

PK Berhad purchased a Truck for RM85, 000 on 1st of January 2013. It was paid by cash with a trade-in of RM15, 000 on an older lorry. The lorry was purchased on the 1st of January 2009 for RM70, 000 and expected to have a salvage value of RM5, 000 at the end of 5 years of its useful life.

Required:

i. Calculate the depreciation per annum on the lorry. (3 marks)


ii. Calculate the net book value of the lorry as at 31st December 2012. (6 marks)


iii. Record the journal entry for the purchase of the truck. (6 marks)

KH Sdn Bhd, a trading company, had 1,000 units of industrial chairs in its stores at 1 January 2013. These were valued at a cost price of RM40 per unit. The stores records revealed the following purchases of the electrical component during January 2013:
Date Units Unit Price RM
January 1 2,000 RM41.50 83,000
January 6 2,000 RM42.00 84,000
January 14 3,000 RM43.00 129,000
January 21 1,000 RM44.00 44,000
January 27 2,000 RM46.50 93,000
During January, KH sold 8,000 units of the industrial chairs at RM100 per unit. Using the above data, apply the following methods of valuation to show the impact on the gross profit of the company for January 2013:
(a) „first in first out‟ (FIFO). (7 marks)
(b) „last in first out‟ (LIFO). (7 marks)
(c) „weighted average cost‟. (6 marks)

how the basic accounting principle of „prudence‟ affects the preparation of financial statements (4 marks)

a. PK Berhad purchased a Truck for RM85, 000 on 1st of January 2013. It was paid by cash with a trade-in of RM15, 000 on an older lorry. The lorry was purchased on the 1st of January 2009 for RM70, 000 and expected to have a salvage value of RM5, 000 at the end of 5 years of its useful life.

Required:

i. Calculate the depreciation per annum on the lorry. (3 marks)


ii. Calculate the net book value of the lorry as at 31st December 2012. (6 marks)


iii. Record the journal entry for the purchase of the truck. (6 marks)