Download Accounting Exercises and Questions: Financial Statements, Ratios, and Inventory Management and more Exercises Business Management and Analysis in PDF only on Docsity!
QUESTION 1
(a) In 2018, Dreaming Bhd planned to apply for a 10-year loan from Buffalo Bank in 2019 for an amount of RM1.5 million. Does Dreaming Bhd need to report this loan as a non- current liability in the Balance Sheet as at 31 December 2018? (Your answer need to be based on the accounting definition of a liability). ( 4 points) (b) What information does the statement of cash flow provide that is not available from the balance sheet or the income statement? (3 points) (c) The following information relates to Avenger Trading Enterprise. Net sales 200, Closing inventory 44, Opening inventory 54, Purchases inventory 130, Rent expense Depreciation Purchase of computer Salary expense Cash in hand
Please compute: i) Cost of sales; ii) Gross profit; and iii) Net profit/loss ( 4 points) [show your working clearly] ( 4 + 3 + 4 = 11 marks) QUESTION 2 The tables below present business situations in three different companies. A. Daffodile Ltd 2019 2018 Current ratio 3.1:1 2.1: Quick ratio 0.8:1 1.4: Inventory turnover 165 days 110 days Based on the above ratios, write a comment on the liquidity in the company. ( 9 points) B. Hibiscus Ltd Based on the above ratios, write a comment on the efficiency in the company. ( 7 points)
Average settlement period for accounts receivable 63 days 21 days Average settlement period for accounts payable 50 days 48 days
C. Daisy Ltd 2019 2018 Gross profit margin 40% 15% Profit margin 10% 10% Based on the above ratios, write a comment on the profitability of the company. ( 8 points) ( 9 + 7 + 8 = 24 marks) QUESTION 3 A. Flow n Breeze Ltd decided to offer a narrower range of clothing to its customers in the future. How might this decision affect the company’s level of clothing inventory? Clearly explain your answer. (4 points) B. Lately, Decker Ltd found that there was a deterioration in the quality and reliability of bought-in components. These components are a critical part of the machinery which the business assembles for its customers. How might the poor quality of the components affect the company’s level of component inventory? Clearly explain your answer. (6 points) (4 +6 = 10 marks) QUESTION 4 Jack and Jills, a retail business, has supplied the following information in relation to their actual sales in 2017 and planned sales for the first quarter of 2018. Cash Credit Total $ $ $ 2017 Actual Sales for November 25,000 25,000 50, December 35,000 40,000 75, 2018 Estimated Sales for January 15,000 20,000 35, February 18,000 30,000 48, March 22,000 40,000 62, Past records indicate that expected receipts collected from debtors will be: 60% in the month of sale 40% in the month following the sale TASK a. What is the projected cash inflow from debtors in both January and February? ( 8 points) [show your working clearly] b. What is the total cash expected to be collected from all sales in March? ( 6 points) [show your working clearly] c. Based on your answers above, explain how the preparation of a cash budget could assist a company to identify short-term problems. ( 10 points) ( 8 + 6 + 10 = 24 marks)
