I need help with both the questions.

Please provide me with explanations.

Thank you.

Q7 Mr Morgan has been in the merchandizing business for quite sometimes, but he has not been able to reconcile stock for sales properly. At the later stage of the operation last year, he realized that he was running out of liquidity and has therefore depending on bank overdra from a previous surplus current account to nance his daily working capital requirement. After one month of operation in January 2017 he has instructed his accountant to lay out and present a proper nancial statement and to pay off the bank overdraft. All transaction by cash will be transacted through bank directly. The Balance sheet of a business at the start of the month of January 2017 is as follows: ASSETS RM Property 240,000 Furniture and Fittings 60,000 Inventories 42,000 Trade Receivables M 396,000 FINANCED BYquuity Capital 245,000 Bank overdraft 75,000 Trade Payables w Total Equities and Liabilities 396,000 During The month, the following transactions take place: a) Inventories sold for RM25,000 cash ; These inventories had cost RM12.000 b) Sold inventories for RMSZ,000 on credit; These inventories had cost RM26,000. c) Received cash for trade receivables totaling RM32.000. d) The owners of the business introduced RM120,000 of their own money , which was placed in the business bank account. e) The owners brought a motor van, valued at RM30,000 into the business also beginning of the month. All Fixed Assets except property will be depreciated at 10 % on cost per annum. It is the company policy to charge full year depreciation. For the purpose of determining the monthly prot, the depreciation charge will be pro-rate on a monthly basis. 1') Bought inventories on credit for RM25,000. g) Paid trade payables RM15,000. You are required to l)Show how much prot is made as at 3] January 2017. 2) Show the effect ofthe above transaction in a new nancial position at 31 January 2017. 3) Explain to Mr Morgan the importance of depreciating the xed assets. Q8. The directors of Maximprime Berhad are reviewing the nal accounts of the company, which show an operating prot after tax of RM800,000 and retained prots from the previous year totaling RM1.7 million. The balance sheet shows a bank overdraft of RM150,000, and the company has maximum overdraft facilities of RM750,000. 3. Explain why a profitable company might show an overdraft in its balance sheet. b. The retained prot is referred to a revenue reserve. What is the other type of reserve might have? c. Revenue reserves can be used to pay dividend to shareholders. Why might the directors of Maximprime Berhad be reluctant to pay the full RM2 million as a dividend to the shareholders? d. If the company wanted to improve its bank balance, it might consider issuing ordinary shares, preference shares, debentures or convertible loan stock. What are the key features of each of these