Depreciation and sale of equipment (questions 8 and 9):

Downton Smith Ltd. purchased a piece of machinery on Jan 1st2013 for 400,000. The company estimated a useful life of 10 years and a residual value of zero for this asset. On December 31st2015, the company decided to sell the machinery for 350,000.

What is the accumulated depreciation of this piece of machinery on December 31, 2015 right before selling it?

80,000

120,000

280,000

320,000

9.

What is the gain or loss on the sale of this machinery at the end of 2015?

Gain of 50,000

Loss of 50,000

Gain of 70,000

Loss of 70,000

10.

Understanding how accounts relate to each other (questions 10 13):

The managers of Moreton, Inc. prepared the following summaries of their company's assets and liabilities (amounts are in millions):

31/12/x231/12/x1Current assetsCash14020A/R5070Inventories11893Noncurrent assetsEquipment, net260300Total assets568483LiabilitiesAccounts payable10180Owners EquityShare capital250250Retained profits217153Total liabilities & OE568483An analysis of the company's cash account for x2 shows three main transactions (amounts also in millions): (1) amount received from customers: 500; (2) amount paid to suppliers for merchandise: 330; (3) amount of dividends declared and paid: 50. All sales and purchases are on credit. (Hint: Use T-accounts)

Compute sales revenues in x2:

20

450

480

520

11.

Compute the purchases of inventoriesin x2:

21

309

310

351

12.

Compute cost of goods sold in x2:

129

301

326

376

13.

Compute the profit or loss for Moreton Inc. in x2:

114

66

34

84

14.

The Cash Flow Statement direct method (questions 14 17):

For the remaining questions, please consider the following cash transactions that happened in the company Becker GmbH in 2015 (amounts in 000):

Collections from customers: 500

Purchase of equipment: 40

Payment of dividends: 30

Payment of taxes: 20

Proceeds from sale of equipment: 20

Payment to suppliers: 300

Payment of salaries and administration expenses: 75

Payment of prepaid rent: 5

Acquisition of a long term loan: 90

Compute the cash flow from operations (CFO)?

80

100

105

120

15.

Compute the cash flow from investing activities (CFI).

-60

-20

20

30

16.

Compute the cash flow from financing activities (CFF).

-120

-60

40

60

17.

How much was the total change in cash in 2015?

140

0

80

180

18.

Reviewing the Income Statement (questions 18 20)

Vertikal SA imports and distributes climbing gear. Its profit and loss account for the year x5 has the following items (amounts in 000):

Debits: interest expense of 10, salaries expenses of 80, depreciation expense of 20, cost of goods sold of 150, utilities expenses of 30, rent expense of 15, and tax expense of 20.

Credits: sales revenues of 350, and gain on sale of office equipment of 5.

The net income is 30.

Compute the gross margin for x5.

100

120

205

200

19.

Compute theoperating profitfor x5.

80

55

60

75

20.

Compute the profit before taxes for x5.

60

50

75

55