Question
Section A Answer the following question using solutions. (Total marks 20) 8 Marks 1) Potassium manufacturing company incomes for the years 2016 through 2020
Section A Answer the following question using solutions. (Total marks 20) 8 Marks 1) Potassium manufacturing company incomes for the years 2016 through 2020 were: 2016-795,000 2017-523,000 2018-435,000 2019 700,000 2020-625,000 Potassium supplies believe that an average of these earnings represents a fair estimate of annual earnings for the indefinite future. The following are included in pretax earnings: Depreciation on buildings (each year) Depreciation on equipment (each year) Extraordinary loss-2016 Extraordinary gain- 2019- 120,000 OMR 105,000 OMR 25,000 OMR 30,000 OMR Normal rate of return @15% Requirements Calculate the expected future earning and average future earning of Potassium export Company. 8 Marks 2) Zen Company acquired the assets and assumed the liabilities of Son Company non January 1,2019 for OMR 820,000 when Son Company balance sheet was as follows: Son Company Balance Sheet January 1, 2019 Cash OMR 175,000 Receivable 155,200 Inventory 210,400 Land 269,200 Plant and equipment (net) 500,800 Total 1,310,600 Accounts payable 154,500 Bonds payable 580,000 Common stock OMR 2 320,000
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