Accounting for Managers (ACC00724) 52, 2019 Assessment 2 (20 Marks) QUESTION 1 (10 Marks) The following financial statements were prepared for the management of Morgan Ltd. The statements contain some information that will be disclosed in note form in the general purpose external financial statements to be issued to the investors Morgan Ltd Income Statement For the year ended 30 June 2018 Revenues (Note 2) $850,500 Expenses, excluding finance costs (Note 4) 686,700 Finance costs 6,300 Profit before income tax Income tax expense 157,500 63,000 Profit $ 94,500 Morgan Ltd Statement of Financial Position As at 30 June 2018 Current assets Cash and cash equivalents $ 37,800 Accounts receivables $299,250 Less: Allowance for doubtful debts 18,900 280,350 252,000 Inventories Total current assets 570,150 Non-current assets Land 63,000 Building $189,000 Less: Accumulated Depreciation 37,800 151,200 Store equipment 47,250 Less: Accumulated Depreciation 22,050 25,200 southeast-2-prod-feet01-xythos s3-ap-sout 341408248087ca08331312503cbdab22054335017 Ruined carings Balance at start of period Tocal profit for the period Dividends-preferences Dividends-ordinary (3,780) 239,400 Total Non-current assets 809,550 Total assets Current liabilities Accounts payables Preference dividends payable Ordinary dividends payable Other current liabilities 270.900 3,780 25,200 12,600 Total current liabilities 312,480 Non-current liabilities Long-term borrowings (Note 63,000 Total Non-current liabilities 63,000 Total liabilities 375,480 Net assets 434,070 Equity Share capital Retained earnings $315,000 119,070 Total equity 434,070 Morgan Ltd Statement of Changes in Equity For the year ended 30 June 2018 Share capital Ordinary: Balance at start of period $252,000 Balance at end of period 252,000 Preference (Note 6): Balance at start of period 63,000 Balance at end of period 63,000 Total share capital $315,000 273.900 3.780 26.200 2.600 Retained earnings Balance at start of period Total profit for the period Dividends - preferences (3,780) Dividends - ordinary $53,550 94,500 (25,200) Balance at end of period $119,070 $850,500 Notes to the financial statements Note 2: Revenue Sales Note 4: Expenses Cost of sales Selling and distribution expenses Administration expenses Note 5: Long-term borrowings 10% mortgage payable Note 6: Preference shares 6% preference shares 567.000 89,000 30,700 63,000 63,000 Additional information: 1. The balance of certain accounts at the beginning of the year are: Accounts receivables $315.000 Allowance for doubtful debts (26,350) Inventories 220,500 2. Total assets and total equity at the beginning of the year were $756,000 and $368,550 respectfully. REQUIRED: A. Name the ratios that a financial analyst might calculate to give some indication of the following cases: (2 Marks) 1. A company's earning power 2. The extent to which internal resources have been used to finance acquisition of assets 3. Rapidity with which accounts receivables are collected 4. The ability of the entity's earnings to cover its interest commitments 5. The length of time taken by the business to sell its inventories B. Calculate and briefly discuss the suitability of the ratios mentioned for each of the above cases. (6 Marks) C. Given the above financial statements, comment on the stod het01yths3-ap-soute607 1125 cca 55 Pos company's profitability and liquidity. (2 Marks) QUESTION 2 (5 Marks) Koala Bear Day-care provides day-care for children from Mondays through Fridays. Its monthly variable costs per chi are: Lunch $100 Educational supplies Other supplies (paper products, toiletries, etc.) 75 25