Questions and Answers of Accounting And Finance For Non Specialists

What about the economic benefits of producing accounting information? Do you think it is easier, or harder, to assess the economic benefits of accounting information than to assess the costs of
Can you think of at least four types of organisation that are not primarily concerned with making profits?
On Wednesday, Paul bought more wrapping paper for £46 cash. However, it was raining hard for much of the day and sales were slow. After Paul had sold half of his total inventories for £32, he
Assume a business owns a 50 percent stake in a gold mine. As this ownership stake will not give control over the whole of the gold mine, can this resource be regarded as an asset of the business?
Try drawing up a statement of financial position for Jerry and Company as at 4 March.
Try drawing up a statement of financial position as at 6 March for Jerry and Company.
Does the fact that the level of inventories (and, perhaps, of other factors) may not be typical of their levels at other times in the reporting period pose a problem for external users seeking to
Refer to the statement of financial position of Brie Manufacturing shown earlier in Example 2.4. What would be the effect of revaluing the property to a figure of£110,000 in the statement of
With which of the ideas discussed earlier in the chapter is this accounting treatment of impaired assets consistent?
Why might it be a good idea to have impairment tests carried out by independent experts?
The following information relates to the activities of H&S Retailers for the year ended 30April 2018:Prepare an income statement for the year ended 30 April 2018. (Hint: Not all items listed
Generally speaking, are methods based on outputs or inputs likely to be more suitable in measuring progress towards transferring goods or services to customers?
How will the eventual payment of the outstanding sales commission and the electricity bill for the last quarter be dealt with in the accounting records of Domestic Ltd?
Andrew Wu (Engineering) Ltd bought a new motor car for its marketing director. The invoice received from the motor car supplier showed the following: New BMW 3 Series 28,350 Delivery charge 280 Alloy
What would be the effect on the income statement, and on the statement of financial position, of not taking into account the fact that a debt is bad?
Singh Enterprises, which started business on 1 January 2015, has a reporting period to 31 December and uses the straight-line method of depreciation. On 1 January 2015, the business bought a machine
The following is the statement of financial position of TT and Co at the end of its first year of trading:During 2017, the following transactions took place:1 The owners withdrew £20,000 of equity
The following is the statement of financial position of WW Associates as at 31 December 2016:During 2017, the following transactions took place:1 The owners withdrew equity in the form of cash of
A shareholder of the company in Example 4.3 owned 100 shares before the bonus issue.How will things change for this shareholder as regards the number of shares owned and the value of the
Some people are about to form a company, as a vehicle through which to run a new business.What factors should they bear in mind when deciding between forming a private limited company or a public
Compare the main features of a preference share with those of:(a) an ordinary share; and(b) loan notes.
The following information was extracted from the financial statements of I. Ching (Booksellers)plc for the year to 31 December 2017:Required:Prepare a statement of comprehensive income for the year
Presented below is a draft set of financial statements for Chips Limited.The following additional information is available:1 Purchase invoices for goods received on 29 June 2018 amounting to £23,000
Rose Limited operates a small chain of retail shops that sells high-quality teas and coffees.Approximately half of sales are on credit. Abbreviated and unaudited financial statements are as
The relevant information from the financial statements of Pluto plc for last year is as follows:The following further information is available about payments during last year:What figure should
Torrent plc’s income statement for the year ended 31 December 2017 and the statements of financial position as at 31 December 2016 and 2017 are as follows:During 2017, the business spent £67
Chen plc’s income statements for the years ended 31 December 2016 and 2017 and the statements of financial position as at 31 December 2016 and 2017 are as follows:Included in ‘cost of sales’,
The following financial statements for Blackstone plc are a slightly simplified set of published accounts. Blackstone plc is an engineering business that developed a new range of products in 2013.
Calculate the ROSF for Alexis plc for the year to 31 March 2018.
Calculate the ROCE for Alexis plc for the year to 31 March 2018.
Calculate the operating profit margin for Alexis plc for the year to 31 March 2018.
Calculate the gross profit margin for Alexis plc for the year to 31 March 2018.
Calculate the average inventories turnover period for Alexis plc for the year ended 31March 2018.
Calculate the average settlement period for Alexis plc’s trade receivables for the year ended 31 March 2018.
Calculate the average settlement period for trade payables for Alexis plc for the year ended 31 March 2018.
Calculate the sales revenue to capital employed ratio for Alexis plc for the year ended 31 March 2018.
Calculate the sales revenue per employee for Alexis plc for the year ended 31 March 2018.
Show how the ROCE ratio for Alexis plc can be analysed into the two elements for each of the years 2017 and 2018. What conclusions can you draw from your figures?
Calculate the current ratio for Alexis plc as at 31 March 2018.
Calculate the acid test ratio for Alexis plc as at 31 March 2018.
Calculate the gearing ratio of Alexis plc as at 31 March 2018.
Calculate the interest cover ratio of Alexis plc for the year ended 31 March 2018.
Calculate the dividend payout ratio of Alexis plc for the year ended 31 March 2018.
Calculate the dividend yield for Alexis plc for the year ended 31 March 2018.
Calculate the earnings per share of Alexis plc for the year ended 31 March 2018.
Calculate the P/E ratio of Alexis plc as at 31 March 2018.
What do you deduce from the investment ratios set out above? Can you offer an explanation why the share price has not fallen as much as it might have done, bearing in mind the much poorer trading
A garage business has an old car that it bought several months ago. The car needs a replacement engine before it can be driven. It is possible to buy a reconditioned engine for £300. This would take
Will the garage in Activity 7.4 seek to sell the car with its reconditioned engine for £3,800?Activity 7.4A garage business has an old car that it bought several months ago. The car needs a
In Real World7.2, we saw that Ryanair’s break-even point varied from 70 percent to 73 percent over the five-year period. Why was it not the same each year?Real World7.2 BE at Ryanair Commercial
Cottage Industries Ltd expects to sell 500 baskets a month. The business has the opportunity to rent a basket-making machine. Doing so would increase the total fixed cost of operating the workshop
Cottage Industries Ltd has spare capacity as its basket makers have some spare time. An overseas retail chain has offered the business an order for 300 baskets at a price of £13 each.Without
Now assume that Shah Ltd has no spare capacity, so it can only produce the component internally by reducing its output of another of its products. While it is making each component, it will lose
In considering Goodsports Ltd, we saw that the general clothes department should not be closed ‘without any other developments’.What ‘other developments’ could affect this decision, making
Marine Suppliers Ltd undertakes a range of work, including making sails for small sailing boats on a made-to-measure basis.The business expects the following to arise during the next month:The
Can you think of any further benefits that an ABC approach to costing may provide?
What is the difference between the way in which direct costs are accounted for when using ABC and how they are treated when taking a traditional approach to full costing?
Vierra Popova Ltd now wishes to prepare its cash budget for the second six months of the year. The budgeted income statements for each month of the second half of the year are as follows:The business
Have a go at preparing the trade receivables budget for Vierra Popova Ltd for the six months from July to December.
Have a go at preparing the trade payables budget for Vierra Popova Ltd for the six months from July to December.
Should favourable variances be investigated to discover their cause?
Real Worlds 9.4 and 9.5 both suggest that the figures that appear in budgets often do not actually occur. Does this pose a problem in trying to control the various aspects of the business through
Now consider these three forms of finance from the viewpoint of a business. Will a business rank them, according to risk, in the same order?
Why does the value of fixed-interest loan notes rise and fall with rises and falls in the levels of interest rates in the economy generally?
The evidence shows that more than half of the shares listed on the London Stock Exchange are owned by investors who are based overseas. Why might overseas investors want to buy shares listed in
Surveys show that many small businesses use credit cards to help finance their activities. Why might they do this?
Russell Ltd installs and services heating and ventilation systems for commercial premises.The business’s most recent statement of financial position and income statement are as follows:Required:(a)
In the solution to Activity 12.12, one of the three reasons for holding cash was to exploit opportunities. The example was given of the acquisition of a competitor business.What other types of
On 1 March, Joe Conday started a new business. During March he carried out the following transactions:Required:Draw up a statement of financial position for the business at the end of each day. 1
The following information was extracted from the financial statements of I. Ching(Booksellers) plc for the year to 31 December 2009: Finance charges Cost of sales Distribution expenses Revenue
Presented below is a draft set of financial statements for Chips Limited. Chips Limited Income statement for the year ended 30 June 2010 Revenue Cost of sales Gross profit Depreciation Other
Rose Limited operates a small chain of retail shops that sell high-quality teas and coffees.Approximately half of sales are on credit. Abbreviated and unaudited financial statements are given
The following information has been taken from the financial statements of Juno plc for last year and the year before last: Operating profit Depreciation charged in arriving at operating profit
Torrent plc’s income statement for the year ended 31 December 2010 and the statements of financial position as at 31 December 2009 and 2010 are as follows: Revenue Cost of sales Gross profit Income
Chen plc’s income statements for the years ended 31 December 2009 and 2010 and the statements of financial position as at 31 December 2009 and 2010 are as follows: Income statements for the years
The following financial statements for Brownstone plc are a slightly simplified set of published accounts. Brownstone plc is an engineering business that developed a new range of products in 2007.
Amsterdam Ltd and Berlin Ltd are both engaged in retailing, but they seem to take a different approach to it according to the following information: Ratio Return on capital employed (ROCE) Return on
Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for 2009 and 2010 are as follows:Dividends were paid on ordinary shares of
Gandhi Ltd renders a promotional service to small retailing businesses. There are three levels of service: the ‘basic’, the ‘standard’ and the ‘comprehensive’. On the basis of past
It is sometimes claimed that the full cost of pursuing some objective represents the longrun break-even selling price. Why is this said and what does it mean?
Distinguish between job costing, process costing, and batch costing.What tend to be the problems specifically associated with each of these?
Pieman Products Ltd makes road trailers to the precise specifications of individual customers.The following are predicted to occur during the forthcoming year, which is about to start:All direct
Newtake Records Ltd owns a small chain of shops selling DVDs and CDs. At the beginning of June the business had an overdraft of £35,000 and the bank had asked for this to be eliminated by the end of
The accountant of your business has recently been taken ill through overwork. In his absence his assistant has prepared some calculations of the profitability of a project, which are to be discussed
What are the benefits to a business of issuing convertible loan notes?
Why might a business that has a Stock Exchange listing revert to being unlisted?
H. Brown (Portsmouth) Ltd produces a range of central heating systems for sale to builders’ merchants. As a result of increasing demand for the business’s products, the directors have decided to
Gainsborough Fashions Ltd operates a small chain of fashion shops. In recent months the business has been under pressure from its suppliers to reduce the average credit period taken from three months
Telford Engineers plc, a medium-sized manufacturer of automobile components, has decided to modernise its factory by introducing a number of robots. These will cost£20 million and will reduce
Hercules Wholesalers Ltd has been particularly concerned with its liquidity position in recent months. The most recent income statement and statement of financial position of the business are as
The managing director of Sparkrite Ltd, a trading business, has just received summary sets of financial statements for last year and this year:Required:(a) Show, by using the data given, how you
Boswell Enterprises Ltd is reviewing its trade credit policy. The business, which sells all of its goods on credit, has estimated that sales revenue for the forthcoming year will be£3 million under
What is the purpose of providing accounting information?
On Thursday, the fourth day of his business venture, Paul, the street trader in wrapping paper, bought more inventories for £53 cash.During the day he sold inventories that had cost £33 for a total
The following is the statement of financial position of WW Associates as at 31 December 2008:During 2009, the following transactions took place:1 The owners withdrew equity in the form of cash of
Evidence tends to show that most businesses are less effective than the best ones in their industry in controlling their working capital. Can you think of some reasons why this might be the case?
In the solution to Activity 12.14, one of the three reasons for holding cash was to exploit opportunities. The example was given of the acquisition of a competitor business. What other types of
How might each of the following affect the level of inventories held by a business?(a) An increase in the number of production bottlenecks experienced by the business.(b) A rise in the business’s
Town Mills Ltd is a wholesale business. Extracts from the business’s most recent financial statements are as follows:Required:(a) Calculate the average operating cash cycle (in days) during the
Assume that Freezeqwik Ltd (Activity 12.16) wishes to reduce its OCC by 30 days. Evaluate each of the options available to this business.Data from Activity 12.16The financial statements of Freezeqwik

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