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ACC201e Examination - January Semester 2016 Financial Accounting Friday, 20 May 2016 10:00 am - 12:00 pm ____________________________________________________________________________________ Time allowed: 2 hours ____________________________________________________________________________________ INSTRUCTIONS TO STUDENTS: 1. This examination contains SIX (6) questions and comprises SEVEN (7) printed pages (including cover page). 2. You must answer ALL questions. 3. This is a closed book examination. 4. All answers must be written in the answer book. 5. Included as an Appendix on Pages 6 to 7 is the Formula Sheet. At the end of the examination Please ensure that you have written your examination number on each answer book used. Failure to do so will mean that your work cannot be identified. If you have used more than one answer book, please tie them together with the string provided. THE UNIVERSITY RESERVES THE RIGHT NOT TO MARK YOUR SCRIPT IF YOU FAIL TO FOLLOW THESE INSTRUCTIONS. ACC201e Copyright 2016 SIM University Examination - January Semester 2016 Page 1 of 7 Question 1 (a) Analyse and explain the purpose of preparing a trial balance. (5 marks) (b) What are some of the errors not revealed by the trial balance? (10 marks) Question 2 LHT Manufacturing bought a machine for $33,000 on 1 January 20X2. The machine was expected to be in use for 3 years and the residual value was estimated to be $3,000. The production capacity of the machinery was 100,000 units. 50,000 units were produced in 20X2, 35,000 units in 20X3 and 15,000 units in 20X4. The company's fiscal year ends 31 December. Required: Illustrate and determine the depreciation expense, accumulated depreciation and the net book value of the machine for each of the years 20X2, 20X3 and 20X4 using the: (a) Straight line method. (3 marks) (b) Double declining balance method. (6 marks) (c) Units of production method. (6 marks) Question 3 The following information revealed the transactions of Usim Pte Ltd for the month: Date Jan 1 Jan 3 Jan 7 Jan 9 Jan 10 Jan 29 Transactions Beginning Inventory Sale Purchase Sale Purchase Sale Units Purchased (Sold) 140 (30) 60 (90) 80 (70) Unit Cost $95.00 $90.00 $80.00 Required: Using the periodic inventory system, determine the costs of goods sold and the costs of ending inventory under the following methods: ACC201e Copyright 2016 SIM University Examination - January Semester 2016 Page 2 of 7 (a) FIFO. (5 marks) (b) LIFO. (5 marks) (c) Weighted average. (5 marks) Question 4 Briefly explain and describe two (2) kinds of short-term investments that can be commonly found in the current assets section of the statement of financial position. (6 marks) Question 5 The unadjusted trial balance of Rajah Engineering Pte Ltd as at 31 December 20X1 is given below: Rajah Engineering Pte Ltd Trial Balance 31 December 20X1 Account Title Debit $ Cash 39,000 Inventory 2,300 Purchases 145,000 Accounts receivable 43,900 Prepaid insurance 3,600 Motor vehicles 260,000 Accumulated depreciation - MV Revenue Salaries expense 132,900 Utilities expense 23,500 Rental expense 86,000 Accounts payable Long-term loan Share capital Retained earnings Unearned revenue 736,200 ACC201e Copyright 2016 SIM University Examination - January Semester 2016 Credit $ 55,000 398,000 10,300 30,000 200,000 34,200 8,700 736,200 Page 3 of 7 Other information as at 31 December 20X1 included the following: (i) The long-term loan of $30,000 was initiated on 1 August 20X1, and carries an annual interest of 4%. The annual interest will be paid on an annual basis and the first interest payment will be on 31 July 20X2. (ii) The prepaid insurance of $3,600 was bought on 1 July 20X1 to cover the premise for 1 year. (iii) During October 20X1, the company purchased on credit $1,100 worth of inventory. The accounts clerk posted the entries to Debit Purchases $1,100 and Credit Cash $1,100. (iv) The company uses the periodic inventory system. A stock count was made and the inventory at year end was $7,990. Required: (a) For each of the points (i) to (iv) above, record the necessary adjusting journal entries for the year ending 31 December 20X1. Journal narratives are not necessary. (9 marks) (b) Prepare the statement of financial position of Rajah Engineering Pte Ltd as at 31 December 20X1. (16 marks) (c) Compute and analyse the current ratio for Rajah Engineering Pte Ltd for the year ending 31 December 20X1. The industry average for current ratio is about 1.5. (4 marks) Question 6 The statement of financial position and an extract of the income statement for AMK Enterprises Pte Ltd are as follows: AMK Enterprises Pte Ltd Statement of financial position As at 31 December 20X3 20X3 Current Assets $ Cash 46,300 Accounts receivable 31,300 Inventories 8,200 Prepaid rental 5,000 20X2 $ 16,700 10,500 10,500 7,000 Non-current Assets Equipment, net 85,000 ACC201e Copyright 2016 SIM University Examination - January Semester 2016 212,000 Page 4 of 7 Total assets Current Liabilities Accounts payable Salaries payable Other payable Non-current Liabilities Note payable Shareholders' equity Share capital Retained earnings Total liabilities & Shareholders' Equity 302,800 129,700 8,200 7,500 8,800 11,500 6,600 7,200 70,000 20,000 60,000 148,300 302,800 60,000 24,400 129,700 AMK Enterprises Pte Ltd Income Statement (extract) For the year ended 31 December 20X3 $ $ Sales revenue 325,000 Cost of goods sold (98,500) Gross Profit 226,500 Gain on sale of fixed assets 500 Total revenue and gain Expenses: Depreciation expense Other operating expense Total expense Profit before tax Income tax expense Profit after tax 227,000 10,400 89,000 (99,400) 127,600 (3,700) 123,900 Additional information: During the year, the company purchased an equipment for $140,000 cash. Required: Prepare a statement of cash flow for AMK Enterprises Pte Ltd for the year ended 31 December 20X3 using the indirect method. (20 marks) ----- END OF PAPER ----- ACC201e Copyright 2016 SIM University Examination - January Semester 2016 Page 5 of 7 APPENDIX 1: FORMULA SHEET Measuring Ability to Sell Inventory and Collect Cash 1. Inventory turnover = Cost of goods sold Average inventory 2. Accounts receivable turnover = Sales revenue credit sales Average net accounts receivable 3. Accounts payable turnover = Cost of goods sold Average accounts payable 4. Cash conversion cycle = Receivable collection period + Inventory resident period Payable outstanding period 5. Receivable collection period = 365 Accounts receivable turnover 6. Inventory resident period = 365 Inventory turnover 7. Payable outstanding period = 365 Accounts payable turnover Measuring Ability to Pay Current Liabilities 8. Current ratio = Current assets Current liabilities 9. Acid-test (quick) ratio = Cash + Short-term investments + Net current receivables Current liabilities Measuring Ability to Pay Long-Term Debt 10. Debt ratio 11. Times-interestearned ratio = Total liabilities Total assets = Income from operations (or the Earnings before Interest and Taxes) Interest expense ACC201e Copyright 2016 SIM University Examination - January Semester 2016 Page 6 of 7 Measuring Profitability Gross / Operating 12. / Net Profit margin1 = Gross or Operating or Net profit Net sales 13. Asset turnover = Net sales Average assets Return on total assets (ROA) = Net income Average total assets = Net income Preference dividends Average ordinary shareholders' equity = Net cash provided by operating activities - Cash payments for investments in PPE = Net cash provided by operating activities Net Profit 14. Return on ordinary 15. shareholders' equity (ROE) Analysing Cash Flows 16. Free cash flow 17. Cash realisation ratio Analysing Shares as an Investment Earnings per 18. ordinary share (EPS) = Net income Preference dividends Weighted-average number of ordinary shares outstanding Price/earnings (P/E) ratio = Market price per ordinary share Earnings per share 20. Dividend yield = Dividend per ordinary share (or preference) Market price per ordinary share (or preference) Book value per ordinary share = Total shareholder' s equity Preference equity Number of ordinary shares outstanding 19. 21. 1 Also called the Gross/Operating/Net Profit percentage. ACC201e Copyright 2016 SIM University Examination - January Semester 2016 Page 7 of 7 ACC201e Examination - July Semester 2015 Financial Accounting Friday, 13 November 2015 10:00 am - 12:00 pm ____________________________________________________________________________________ Time allowed: 2 hours ____________________________________________________________________________________ INSTRUCTIONS TO STUDENTS: 1. This examination contains SIX (6) questions and comprises NINE (9) printed pages (including cover page). 2. You must answer ALL questions. 3. This is a closed book examination. 4. All answers must be written in the answer book. 5. Included as an Appendix on Pages 8 to 9 is the Formula Sheet. At the end of the examination Please ensure that you have written your examination number on each answer book used. Failure to do so will mean that your work cannot be identified. If you have used more than one answer book, please tie them together with the string provided. THE UNIVERSITY RESERVES THE RIGHT NOT TO MARK YOUR SCRIPT IF YOU FAIL TO FOLLOW THESE INSTRUCTIONS. ACC201e Copyright 2015 SIM University Examination - July Semester 2015 Page 1 of 9 Question 1 The unadjusted trial balance of QP Pte Ltd for the financial year ending 31 December 20X1 is as follows: Account Title Cash Accounts receivable Prepaid advertising Prepaid rental Inventory Purchases PPE Accumulated depreciation - PPE Accounts payable Bonds (Long term) Unearned sales revenue Share capital Retained earnings Sales Utilities expense Salaries expense Transport expense Depreciation expense Interest expense Income tax expense Sales discount Debit $ 804,000 863,200 30,000 124,000 2,462,000 1,090,000 3,000,000 Credit $ 900,000 78,200 1,200,000 143,000 2,000,000 514,100 5,820,000 103,940 1,040,200 727,400 300,000 36,000 31,560 43,000 10,655,300 10,655,300 The firm uses a periodic inventory system. A stock count was made and the inventory at 31 December 20X1 was $183,000. Additional information: (i) The prepaid advertising was for a series of 10 advertisements to appear on the English channel programme. As at 31 December 20X1, 7 of the advertisements have been screened. (ii) On 1 July, the company made a rental payment of $124,000 for 2 years' rent. (iii) The long term bonds, issued at par, carry an annual interest of 6%. Interest payments will be made every 1 January and 1 July. (iv) On 28 December 20X1, the company delivered half of the outstanding sales order for customers who have already paid up fully for their goods a month ago. ACC201e Copyright 2015 SIM University Examination - July Semester 2015 Page 2 of 9 (v) As at 31 December 20X1, workers' salaries amounting to $6,900 has yet to be paid. (vi) The PPE has already been depreciated for 20X1. Required: Prepare the statement of comprehensive income of QP Pte Ltd for the year ending 31 December 20X1, incorporating all the necessary adjustments as given in the additional information. (You do not need to provide the adjusting journal entries). (15 marks) Question 2 (a) On 1 January 20X1, Abbot Engineering (Abbot) purchased a piece of machinery for $140,000. The machinery has a 5 year expected useful life and a $7,200 expected residual value. Initially, Abbot used double-declining balance depreciation. On 1 January 20X3, Abbot changed to straight line depreciation. The expected useful life and residual value are unchanged. Illustrate the accounting for depreciation by calculating the depreciation expense and the net book value of the assets for the 5 years. (10 marks) (b) Explain why there is a need for non-current assets to be depreciated. (5 marks) Question 3 Beng Supplies Pte Ltd began 20X1 with 600 units of its principle product. The cost of each unit was $20.00. The company uses the periodic inventory system. Transactions for the month of January 20X1 are as follows: Purchases Date Units 12 Jan 19 Jan Total 300 950 1,250 Unit cost $ 19.00 18.00 Sales Date 5 Jan 18 Jan 22 Jan Total Units 400 700 460 1,560 ACC201e Copyright 2015 SIM University Examination - July Semester 2015 Page 3 of 9 Required: Illustrate the accounting for inventory-related transactions by computing the ending inventory and cost of goods sold for the month of January using the following methods: (i) LIFO; (5 marks) (ii) FIFO; and (5 marks) (iii) Weighted average. (5 marks) Question 4 (a) Differentiate and explain the reasons for favouring the use of accrual basis of accounting over the cash basis? (4 marks) (b) On 1 July 20X1, OFC Pte Ltd (\"OFC\") sold 2 office desks and 10 arm chairs to B2B Enterprise Solutions, for $2,000 with credit terms of 30 days. On 10 July 20X1, B2B Enterprise Solutions paid up half of the outstanding amount and was given a 2% discount due to early payment. 31 July 20X1 is OFC's financial year end. On 3 August 20X1, OFC was informed that B2B Enterprise Solutions was ordered by the court to be wound up. OFC practises the direct write off method for bad debt accounting. Required: (i) Prepare the journal entries for each of the transactions. Journal narratives are not required. (7 marks) (ii) Explain to OFC why the direct method of accounting for bad debts is not ideal. (4 marks) ACC201e Copyright 2015 SIM University Examination - July Semester 2015 Page 4 of 9 Question 5 Extracts of the financial statements of RAL Pte Ltd for the years ended 31 December 20X2 and 20X3 are as follow: RAL Pte Ltd Comparative Income Statement (extract) Years Ended 31 December 20X2 and 20X3 20X2 $ $ Sales Revenue Cash Credit Cost of goods sold Beginning inventory Purchases ( all on credit ) Less: Ending inventory COGS Gross profit Less expense Profit before tax Less Income tax expense Profit after tax 20X3 $ 288,000 96,000 2,688,000 2,976,000 3,552,000 3,648,000 345,600 1,996,800 2,342,400 518,400 518,400 2,476,800 2,995,200 691,200 1,824,000 1,152,000 864,000 288,000 57,600 230,400 RAL Pte Ltd Comparative Statement of Financial Position As at 31 December 20X2 and 20X3 20X2 $ $ Current assets Cash Inventory Account receivables, net Non-current assets Property, plant and machinery, net Total assets Current liabilities Account payables Bank loan (6 months) Long term liabilities Bonds (5 years @5%) ACC201e Copyright 2015 SIM University Examination - July Semester 2015 $ 38,400 518,400 393,600 2,304,000 1,344,000 1,056,000 288,000 57,600 230,400 20X3 $ 67,200 691,200 950,400 604,800 1,363,200 96,000 1,046,400 393,600 19,200 $ 96,000 1,459,200 662,400 412,800 182,400 844,800 153,600 134,400 Page 5 of 9 Shareholders' equity Ordinary shares Total liabilities and shareholders' equity 480,000 1,046,400 480,000 1,459,200 Additional information: The accounts receivable as at 31 December 20X1 was $182,400. Required: (a) Compute the following ratios for the two years: (i) Current ratio; (ii) Quick ratio; (iii) Inventory resident period; (iv) Receivable collection period; and (12 marks) (b) Using the ratios you have computed, explain on the changes in the position of the company as revealed by the changes in these ratios. (8 marks) Question 6 The following financial information for UL Engineering Pte Ltd is as given below: UL Engineering Pte Ltd Comparative Statement of Financial Position As at 31 December 20X1 and 20X2 20X1 Assets Current Cash Inventories Account receivable Non-current Property, Plant & Equipment, net Total Assets Liabilities Current Accounts payable Income tax payable Non-current Bank loan ACC201e Copyright 2015 SIM University Examination - July Semester 2015 20X2 145,600 624,000 302,900 137,800 533,000 526,500 2,730,000 3,802,500 3,900,000 5,097,300 292,500 117,000 234,000 156,000 117,000 0 Page 6 of 9 Shareholders' equity Share capital Retained earnings Total equity and liabilities 3,022,500 253,500 3,802,500 4,095,000 612,300 5,097,300 Additional information: (i) The profit before tax for 31 December 20X2 was $546,000. (ii) Depreciation of $162,000 was charged for the year ending 31 December 20X2. (iii) An item of PPE with a net book value of $240,000 was sold at a gain of $60,000. (iv) Interest paid was $18,000 during the year ending 31 December 20X2. (v) There was no over or under provision of tax for the year ending 31 December 20X1. (vi) Dividends were declared and paid during the year ending 31 December 20X2. Required: Prepare a statement of cash flows for UL Engineering Pte Ltd for the year ending 31 December 20X2 using the indirect method. (20 marks) ----- END OF PAPER ----- ACC201e Copyright 2015 SIM University Examination - July Semester 2015 Page 7 of 9 Appendix: Formula Sheet Measuring Ability to Sell Inventory and Collect Cash 1. Inventory turnover = Cost of goods sold Average inventory 2. Accounts receivable turnover = Sales revenue credit sales Average net accounts receivable 3. Payable turnover = Cost of goods sold Average accounts payable 4. Cash conversion cycle = Receivable collection period + Inventory resident period Payable outstanding period 5. Receivable collection period = 365 Accounts receivable turnover 6. Inventory resident period = 365 Inventory turnover 7. Payable outstanding period = 365 Accounts payable turnover Measuring Ability to Pay Current Liabilities 8. Current ratio = Current assests Current liabilities 9. Acid-test (quick) ratio = Cash + Short-term investments + Net current receivables Current liabilities Measuring Ability to Pay Long-Term Debt 10. Debt ratio 11. Times-interestearned ratio = Total liabilities Total assests = Income from operations Interest expense ACC201e Copyright 2015 SIM University Examination - July Semester 2015 Page 8 of 9 Measuring Profitability 12. Gross or Operating or Net profit Gross/Operating/Net = 1 Profit margin Net sales 13. Asset turnover = Net sales Average assests Return on total assets (ROA) = Net income Average total assests Return on ordinary 15. shareholders' equity (ROE) = Net income Preference dividends Average ordinary shareholders' equity 14. Analysing Cash Flows 16. Free cash flow 17. Cash realisation ratio = Net cash provided by operating activities - Cash payments for investments in PPE = Net cash provided by operating activities Net Profit Analysing Shares as an Investment Earnings per 18. ordinary share (EPS) = Net income Preference dividends Weighted-average number of ordinary shares outstanding Price/earnings (P/E) ratio = Market price per ordinary share Earnings per share 20. Dividend yield = Dividend per ordinary share (or preference) Market price per ordinary share (or preference) Book value per ordinary share = Total shareholder' s equity Preference equity Number of ordinary shares outstanding 19. 21. 1 Also called the Gross/Operating/Net Profit percentage. ACC201e Copyright 2015 SIM University Examination - July Semester 2015 Page 9 of 9 ACC201e Examination - July Semester 2016 Financial Accounting Friday, 18 November 2016 10:00 am - 12:00 pm ____________________________________________________________________________________ Time allowed: 2 hours ____________________________________________________________________________________ INSTRUCTIONS TO STUDENTS: 1. This examination contains SIX (6) questions and comprises TEN (10) printed pages (including cover page). 2. You must answer ALL questions. 3. This is a closed book examination. 4. All answers must be written in the answer book. 5. Included as an Appendix on Pages 9 to 10 is the Formula Sheet. At the end of the examination Please ensure that you have written your examination number on each answer book used. Failure to do so will mean that your work cannot be identified. If you have used more than one answer book, please tie them together with the string provided. THE UNIVERSITY RESERVES THE RIGHT NOT TO MARK YOUR SCRIPT IF YOU FAIL TO FOLLOW THESE INSTRUCTIONS. ACC201e Copyright 2016 SIM University Examination - July Semester 2016 Page 1 of 10 Question 1 (a) The following were transactions by Cap Ten Enterprises Ltd for the month of July: (i) On 1 July, the company bought an oven to be used in the staff pantry on cash terms for $2,360. (ii) The company adopts the periodic inventory system. On 5 July, the company purchased $14,000 worth of inventory on credit. (iii) On 22 July, the company rendered services on account, $1,500. As per agreement with the customer, the amount is to be collected after 14 days. (iv) On 29 July, the company made a payment of $5,400 for the rental of the office. Required: Record the above transactions by providing the journal entries, no narrative required, for Cap Ten Enterprises Ltd for the month of July. (6 marks) (b) The bank statement of UHC Pte Ltd shows a balance of $36,480 on 31 March 20X9. The company cash account on the books has a balance of $36,192. The following reconciling items explain why the two balances differ: (i) A cheque amounting to $1,920 issued late in March and recorded in the journal has not been paid by the bank. (ii) A deposit of $2,400 made on 29 March was not listed on the bank statement. (iii) The bank received $960 by NETS on behalf of UHC Pte Ltd. (iv) The bank statement shows interest revenue of $144. (v) The bank statement shows a NSF check for $336. Required: Prepare a bank reconciliation statement using the above information. (7 marks) (Total: 13 marks) ACC201e Copyright 2016 SIM University Examination - July Semester 2016 Page 2 of 10 Question 2 On 1 January 20X0, Ah Huat Bakery Ltd installed an oven and fixtures for the new bakery at a cost of $28,000 and $43,200 respectively. The following information shows the depreciation for the oven and fixtures for year 20X0 and 20X1. Cost Depreciation for 20X0 Depreciation for 20X1 Oven $ 28,000 6,800 6,800 Fixtures $ 43,200 10,800 8,100 (a) Demonstrate your knowledge on depreciation accounting by determining the depreciation expense and Net Book Value (NBV) of the two (2) assets for the year 20X2 and 20X3. (10 marks) (b) Distinguish between the two (2) depreciation methods used by Ah Huat Bakery Ltd. (5 marks) (Total: 15 marks) Question 3 BBM Enterprise Ltd (\"BBM\") had a beginning inventory balance that consisted of 200 units costing $18 per unit. Purchases and sales are shown in the schedule for the month of March. At the end of the month, BBM conducted a physical count of inventory and confirmed that 250 units were actually on hand at the end of the month. The company uses the periodic inventory system. Transaction Beginning inventory Purchased Sold Purchased Sold 1 Mar 7 Mar 10 Mar 18 Mar 24Mar No. of units. 200 300 350 400 300 Unit cost $18.00 $24.00 $25.50 Required: (a) Compute and determine the cost of ending inventory and cost of goods sold for the month of March using the following methods. (i) FIFO. (5 marks) (ii) Weighted average. (6 marks) ACC201e Copyright 2016 SIM University Examination - July Semester 2016 Page 3 of 10 (b) After attending an inventory management seminar, your boss is keen on adopting the perpetual inventory system for his business. However, he is still not clear what this system is. Illustrate the key differences between the perpetual inventory system from the periodic inventory system to your boss. (4 marks) (Total: 15 marks) Question 4 The unadjusted trial balance of PQ Engineering Pte Ltd for year ending 31 December 20X6 is given below: Account Title Cash Inventory Purchases Accounts receivable Prepaid Rental Equipment Accumulated depreciation - Equipment Revenue Salaries expense Utilities expense Rental expense Unearned revenue Accounts payable Bank loan - 5 years Share capital Retained earnings Debit $ 96,040 30,120 84,800 21,400 24,000 180,000 Credit $ 48,000 259,900 72,440 152,000 40,000 700,800 42,000 61,100 50,000 200,000 39,800 700,800 Other information at 31 December 20X6 included the following: Additional information: (i) The equipment costing $180,000 has useful life of 10 years and its estimated salvage value is $20,000. Depreciation charge is to be provided using the straight line depreciation method. (ii) On 23 February 20X6, the company signed a $42,000 service contract with a customer where the customer paid $42,000 cash upfront to the company. The company will provide monthly maintenance services for 12 months beginning on 1 March 20X6. ACC201e Copyright 2016 SIM University Examination - July Semester 2016 Page 4 of 10 (iii) The company took a 5-year bank loan of $50,000 on 1 July 20X6. The loan carries an annual interest of 4% to be paid yearly, and the first interest payment will be made on 30 June 20X7. (iv) The $24,000 prepaid rental was for a 1-year rental for the office effective 1 November 20X6. (v) On 27 December 20X6, the company made a $13,000 payment to its supplier for purchases previously made on credit but the clerk forgot to record this. (vi) PQ Engineering Pte Ltd uses the periodic inventory system. A stock count was made and the inventory at 31 December 20X6 year end was $23,200. Required: (a) For each of the points (i) to (vi) above, apply the accrual accounting concepts by passing the necessary adjusting entries, no narrative required, for the year ending 31 December 20X6. (12 marks) (b) Prepare the statement of financial position for PQ Engineering Pte Ltd as at 31 December 20X6, incorporating all the necessary adjustments as given in the additional information. (15 marks) (Total: 27 marks) Question 5 The financial results of ALP Pte Ltd are given below: ALP Pte Ltd Statement of Financial Position As at 31 December 20X1 $ Current assets Cash Inventory Account receivables, net Non-current assets Property, plant and machinery, net Total assets Current liabilities Account payables Tax payable ACC201e Copyright 2016 SIM University Examination - July Semester 2016 28,400 88,400 36,500 $ 153,300 319,000 472,300 97,600 11,200 108,800 Page 5 of 10 Long term liabilities Bank loan Total liabilities Shareholders' equity Ordinary shares Total liabilities and shareholders' equity 40,000 148,800 323,500 472,300 ALP Pte Ltd Income Statement (Extract) For year ending 31 December 20X1 $ $ Sales Revenue 320,000 Cost of goods sold Beginning inventory 34,500 Purchases (all on credit) 196,800 Less: Ending inventory (51,800) COGS 179,500 Gross profit 140,500 Less expense 84,000 Profit before tax 56,500 Less Income tax expense 5,600 Profit after tax 50,900 Additional information: (i) The total assets as at 31 December 20X0 was $427,700. (ii) The industry average assets turnover ratio is 0.65. Required: Compute and comment on the asset turnover ratio for ALP Pte Ltd for the year ended 20X1. (5 marks) (Total: 5 marks) ACC201e Copyright 2016 SIM University Examination - July Semester 2016 Page 6 of 10 Question 6 Comparative statement of financial positions and extract of income statement for DEF Pte Ltd are as follow: DEF Pte Ltd Comparative Statement of financial positions 31 December 20X8 and 20X9 20X9 $ Assets Current Assets Cash Accounts receivable Interest receivable Inventory Non-current Assets Long-term loan receivable Fixed assets, net Total assets Liabilities and Shareholders' Equity Current Liabilities Accounts payable Salaries payable Others payable Non-current Liabilities Bank loan Shareholders' equity Share capital Retained earnings Total liabilities & Shareholders' Equity 20X8 $ 17,600 45,500 400 49,300 5,000 44,200 300 78,500 23,000 493,000 628,800 10,000 339,000 477,000 45,800 43,000 22,800 25,600 25,600 24,200 110,000 25,000 350,000 57,200 628,800 350,000 26,600 477,000 DEF Pte Ltd Income Statement (extract) For the year ended 31 December 20X9 $ $ Revenue 511,000 COGS 275,100 Gross Profit 235,900 Other gains/losses Interest revenue Gain on sale of fixed assets ACC201e Copyright 2016 SIM University Examination - July Semester 2016 1,000 6,000 Page 7 of 10 Less expenses Salaries expense Depreciation expense Other operating expense Interest expense Total expense Profit before tax Income tax expense Profit after tax 67,000 13,000 76,400 4,800 161,200 81,700 38,800 42,900 Additional information: (i) Acquisition of fixed assets amounted to $200,000 for the year. (ii) The company paid out dividends for the year. Required: Prepare a statement of cash flow for DEF Pte Ltd for the year ended 31 December 20X9 using the indirect method. (25 marks) (Total: 25 marks) ----- END OF PAPER ----- ACC201e Copyright 2016 SIM University Examination - July Semester 2016 Page 8 of 10 APPENDIX 1: FORMULA SHEET Measuring Ability to Sell Inventory and Collect Cash 1. Inventory turnover = Cost of goods sold Average inventory 2. Accounts receivable turnover = Sales revenue credit sales Average net accounts receivable 3. Accounts payable turnover = Cost of goods sold Average accounts payable 4. Cash conversion cycle = Receivable collection period + Inventory resident period Payable outstanding period 5. Receivable collection period = 365 Accounts receivable turnover 6. Inventory resident period = 365 Inventory turnover 7. Payable outstanding period = 365 Accounts payable turnover Measuring Ability to Pay Current Liabilities 8. Current ratio = Current assets Current liabilities 9. Acid-test (quick) ratio = Cash + Short-term investments + Net current receivables Current liabilities Measuring Ability to Pay Long-Term Debt 10. Debt ratio 11. Times-interestearned ratio = Total liabilities Total assets = Income from operations (or the Earnings before Interest and Taxes) Interest expense ACC201e Copyright 2016 SIM University Examination - July Semester 2016 Page 9 of 10 Measuring Profitability Gross / Operating 12. / Net Profit margin1 = Gross or Operating or Net profit Net sales 13. Asset turnover = Net sales Average assets Return on total assets (ROA) = Net income Average total assets = Net income Preference dividends Average ordinary shareholders' equity = Net cash provided by operating activities - Cash payments for investments in PPE = Net cash provided by operating activities Net Profit 14. Return on ordinary 15. shareholders' equity (ROE) Analysing Cash Flows 16. Free cash flow 17. Cash realisation ratio Analysing Shares as an Investment Earnings per 18. ordinary share (EPS) = Net income Preference dividends Weighted-average number of ordinary shares outstanding Price/earnings (P/E) ratio = Market price per ordinary share Earnings per share 20. Dividend yield = Dividend per ordinary share (or preference) Market price per ordinary share (or preference) Book value per ordinary share = Total shareholder' s equity Preference equity Number of ordinary shares outstanding 19. 21. 1 Also called the Gross/Operating/Net Profit percentage. ACC201e Copyright 2016 SIM University Examination - July Semester 2016 Page 10 of 10