Part I The following information relates to the bank statement of Perry Corporation (Perry) dated 31 December 2019: 1. Balance per bank statement as at 31 December 2019 was $6,400. 2. Checks written that had not cleared the bank as at 31 December 2019 were shown below: $ Check# 203 1,500 205 350 3. Interest amounting to $24 was credited to Perry account by the bank on 31 December 2019. 4. The bank's service charge for the month was $5. Perry received a check from the customer for $2,400 on 31 December 2019 and deposited it to the bank's check deposit machine after the banking hours. A credit memorandum enclosed with the December bank statement indicated that a note receivable for $3,000 under collection was collected and the proceeds credited to Perry's bank account on 31 December 2019. Perry also discovered that a check #200 issued in the amount of $455 to purchase office supplies has wrongly booked to the cash ledger as $445. Cash ledger balance in the book of Perry as at 31 December 2019 including the above $2,400 check was $3,941. Required: Prepare a bank reconciliation for Perry Corporation at 31 December 2019. (10 marks) Part II The following information was obtained from the accounting records of Asian Limited at the end of the year: Sales (all on credit) Cost of goods sold Average inventory Average accounts receivable Interest expense Income tax expense Profit after tax Average investment in assets Average shareholders' equity $4,800,000 3,000,000 420,000 380,000 50,000 80,000 280,000 2,600,000 1,000,000 Required: From the information given above, compute the following: (a) Inventory turnover. (b) Total operating expenses (Note: show detailed workings, no formula is required) (c) Gross profit percentage. (d) Return on average assets. Except for the special requirement in part (b) above, you are required to show BOTH the formula and detailed workings of calculations. Round your answer to two decimal places, if necessary. (8 marks) Part III ABC Corporation is a motor accessories trading company who has a huge long overdue outstanding debt from his customers. You are the newly appointed financial controller of ABC Corporation and suggests that interest should be charged to customers whose debts is overdue for 60 days. An interest-bearing note must be issued to these customers and signed by them. You are now at the meeting with the management of ABC Corporation. Required: Briefly explain four advantages to the management to support your suggestion (Note: no marks will be given if answer is in point form). (4 marks)
