The document provides an overview of general purpose financial statements, including the balance sheet, profit and loss account, and cash flow statement. It describes what each statement includes and the key components. The balance sheet shows assets, liabilities, and equity of an entity at a point in time. The profit and loss account shows revenues and expenses over a period of time. The cash flow statement describes cash inflows and outflows from operating, investing, and financing activities.
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Question1On January 1, 2014, Flip Company purchased 10,000 shares.pdfsuretheboss10
Question1:
In an effort to concentrate its resources in more profitable areas, Frick Corporation recently sold
its family pizza restaurant segment. The disposal constitutes:
a. an extraodinary item.
b. a discontinued operation which should be treated as a prior period adjustment.
c. a discontinued operation which should be disclosed net-of-tax effects.
d. a portion of income from continuing operations.
Question2:
Frick Corporation has 100,000, 5%, $100 par preferred shares outstanding. The stock is callable
at 102, but was originally issued at 99. The current dividend has been fully paid. Total
stockholders\' equity is $20,000,000. The residual common equity is:
a. $20,000,000
b. $10,100,000
c. $10,000,000
d. $9,800,000
Question3:
Frick Company\'s balance sheet included cash ($4,000,000), accounts receivable ($16,000,000),
inventories ($10,000,000), prepaid expenses ($2,000,000), accounts payable ($9,000,000), and
accrued expenses ($7,000,000). These are the only current items.
a. The quick ratio is 2:1.
b. The quick ratio is 1.25:1.
c. The current ratio is 1.875:1.
d. Both A and C.
Question4:
Selected information for 2014 is: cost of goods sold, $5,400,000; average inventory, $1,800,000;
net sales, $7,200,000; average receivables, $960,000; and net income, $720,000. Assuming a
360-day year, what was the inventory turnover ratio for 2014?
a. 333
b. 3
c. 7.5
d. 20
Question5:
On the schedule of cost of goods manufactured:
a. beginning work-in-process plus direct materials used equals manufacturing costs.
b. cost of goods manufactured is the same thing as total manufacturing costs.
c. work-in-process will necessarily increase if total manufacturing costs increase.
d. factory overhead plus beginning work-in-process equals manufacturing costs.
Question6:
Which costing method seems ideally suited to the production of homogenous products in
continuous throughput?
a. Activity-based costing.
b. Job order costing.
c. Process costing.
d. Absorption costing.
Question7:
Frick Company uses a job order cost system and applies overhead based on estimated rates. The
overhead application rate is based on total estimated overhead costs of $200,000 and direct labor
hours of 50,000. For job 836, direct labor hours were 800.
a. Factory Overhead should be debited for $3,200.
b. Factory Overhead should be credited for $3,200.
c. Overhead Expense should be debited for $3,200.
d. Overhead Expense should be credited for $3,200.
Question8:
For job 1838, there were 1,000 direct labor hours, and actual overhead was $500 for depreciation
and $1,400 for indirect labor. Overhead is applied at $2 per direct labor hour. Which account
should be debited for $1,900?
a. Work in Process.
b. Cost of Goods Sold.
c. Factory Overhead.
d. Cost of Goods Manufactured.
Solution
Answer:1 a. an extraodinary item.
Answer:2 a. $20,000,000
Answer:3 b. The quick ratio is 1.25:1.
Quick Ratio=Quick Asset/Current liability
=($4,000,000+$16,000,000)/($9,000,000+$7,000,000)
=1.25:1
Quick asset does n.
acc 291 new,uopacc 291 new,uopacc 291 new complete course,uopacc 291 new entire course,uopacc 291 new week 1,uop acc 291 new week2,uop acc 291 new week 3,uop acc 291 new week 4,uop acc 291 new week 5,uop acc 291 new tutorials,uopacc 291 new assignments,uopacc 291 newhelp
Question1On January 1, 2014, Flip Company purchased 10,000 shares.pdfsuretheboss10
Question1:
In an effort to concentrate its resources in more profitable areas, Frick Corporation recently sold
its family pizza restaurant segment. The disposal constitutes:
a. an extraodinary item.
b. a discontinued operation which should be treated as a prior period adjustment.
c. a discontinued operation which should be disclosed net-of-tax effects.
d. a portion of income from continuing operations.
Question2:
Frick Corporation has 100,000, 5%, $100 par preferred shares outstanding. The stock is callable
at 102, but was originally issued at 99. The current dividend has been fully paid. Total
stockholders\' equity is $20,000,000. The residual common equity is:
a. $20,000,000
b. $10,100,000
c. $10,000,000
d. $9,800,000
Question3:
Frick Company\'s balance sheet included cash ($4,000,000), accounts receivable ($16,000,000),
inventories ($10,000,000), prepaid expenses ($2,000,000), accounts payable ($9,000,000), and
accrued expenses ($7,000,000). These are the only current items.
a. The quick ratio is 2:1.
b. The quick ratio is 1.25:1.
c. The current ratio is 1.875:1.
d. Both A and C.
Question4:
Selected information for 2014 is: cost of goods sold, $5,400,000; average inventory, $1,800,000;
net sales, $7,200,000; average receivables, $960,000; and net income, $720,000. Assuming a
360-day year, what was the inventory turnover ratio for 2014?
a. 333
b. 3
c. 7.5
d. 20
Question5:
On the schedule of cost of goods manufactured:
a. beginning work-in-process plus direct materials used equals manufacturing costs.
b. cost of goods manufactured is the same thing as total manufacturing costs.
c. work-in-process will necessarily increase if total manufacturing costs increase.
d. factory overhead plus beginning work-in-process equals manufacturing costs.
Question6:
Which costing method seems ideally suited to the production of homogenous products in
continuous throughput?
a. Activity-based costing.
b. Job order costing.
c. Process costing.
d. Absorption costing.
Question7:
Frick Company uses a job order cost system and applies overhead based on estimated rates. The
overhead application rate is based on total estimated overhead costs of $200,000 and direct labor
hours of 50,000. For job 836, direct labor hours were 800.
a. Factory Overhead should be debited for $3,200.
b. Factory Overhead should be credited for $3,200.
c. Overhead Expense should be debited for $3,200.
d. Overhead Expense should be credited for $3,200.
Question8:
For job 1838, there were 1,000 direct labor hours, and actual overhead was $500 for depreciation
and $1,400 for indirect labor. Overhead is applied at $2 per direct labor hour. Which account
should be debited for $1,900?
a. Work in Process.
b. Cost of Goods Sold.
c. Factory Overhead.
d. Cost of Goods Manufactured.
Solution
Answer:1 a. an extraodinary item.
Answer:2 a. $20,000,000
Answer:3 b. The quick ratio is 1.25:1.
Quick Ratio=Quick Asset/Current liability
=($4,000,000+$16,000,000)/($9,000,000+$7,000,000)
=1.25:1
Quick asset does n.
1. General Purpose Financial
Statements
• Contains historical information
• Comprises –
• Balance Sheet
• Profit & Loss Account
• Cash Flow Statement
• Includes annexure, footnotes, schedules, etc.
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2. Balance Sheet
• A statement of financial position of an Entity as of
f p y
a certain date
• Describes –
• Assets e.g. Cash, Land & Bldg., P&M, etc.
• Liability e.g. Loans, Advances, creditors, etc
e g Loans Advances creditors etc.
• Equity i.e. Initial Investment + Accumulated Earnings
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3. Profit & Loss Account
• A statement of financial performance of an
f p f
entity over a period of time
• Describes –
• Revenues i.e. Sales & other Gains
• Expenses i.e. Direct & Indirect spending
ie
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4. Cash Flow Statement
• A statement of change in financial positions
g f p
at two points in time
• Describes generation & application of cash as
classified under –
• Operating Activities
• Investing Activities
• Financing Activities
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5. Asset
• An asset is a resource controlled by the entity
y y
as a result of past events from which future
economic benefits are expected to flow to the
f p
entity
• Fixed Assets, Investments, Current Assets &
Advances, Miscellaneous Expenditures
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6. Liability
• A liability is a present obligation of the entity
y p g y
arising from past events, the settlement of
which is expected to result in an outflow from
p f
the entity, of resources embodying economic
benefits.
• Secured Loans, Unsecured Loans, Current
Liabilities & Provisions
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7. Owner’s Equity
• Owner’s equity is the residual interest in the
assets of the entity after deducting all its
liabilities
• Sh C it l Reserves & Surplus
Share Capital, R S l
E=A–L
or A = L + E
or A = TL
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8. Check d t di
Ch k understanding
Identify Asset, Liability & Equity
Equipment Depreciation
Retained Earningsg Prepaid Rent
Goodwill Preference Shares
Goods in Stores y
Dividend Payable
Patents Factory
Debtors Freehold Land
Land value appreciation
Perks payable to employee
Suit filed by customernarain@fms.edu
for indemnity
9. Recognition of Assets & Liabilities
• Assets & Liabilities arise from recording of
g
Transactions & Other Events
• Recording of T&OE –
• Exchange with other Entities
• Maintain the Accounting Equation
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10. Illustration
1. Mr. X contributes Rs. 10000 in cash
2.
2 The company borrows Rs. 3000 from bank
Rs
3. Co. purchases equipment for Rs. 5000 in cash
4. Co. gives consultancy services worth Rs. 12000
but customers have paid Rs. 8000 so far
5. Co. pays Rs. 4500 each for salaries, maintenance
6. Co. gives dividend of Rs. 1000
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11. Initial P bl
I iti l Problem
Accounting Equation Approach
ASSETS = LIABILITIES + EQUITY
Cash Equipment Debtors Bank Loan Capital Earnings
1. +10,000 +10,000
2. +3,000
, +3,000
,
3. -5,000 +5,000
4. +8,000 +4,000 +12,000
5.
5 -9,000
9 000 -9,000
9 000
6. -1,000 -1,000
6,000 5,000 4,000 3,000 10,000 +2,000
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12. Class Exercise
1. Mr. Z started business with Rs. 20000 as capital
2. He purchased furniture for cash Rs. 500
p
3. He purchased goods for cash Rs. 1000
4.
4 He purchased goods on credit for Rs. 2000
p rchased Rs
5. He sold goods on credit for Rs. 4000 costing Rs.
2500
6. He paid Rs. 1000 of Rent & Rs. 2000 for
Salaries narain@fms.edu
14. Exercise 1
E i
1.
1 A company issues 50 000 shares of Rs 10 face
50,000 Rs.
value Equity Shares at par value for cash.
2. The
2 Th company acquires L d & B ildi costing
i Land Building i
Rs. 2,25,000 with the payment of Rs. 50,000 in
cash and the b l
h d h balance i settled b raising 8%
is l d by i i
Mortgage for 20 years.
3. Purchases a used JCB for Rs. 13,200 cash.
4. Acquires Raw Material costing Rs. 8,600 on
q g ,
account from Mr. X. narain@fms.edu
15. Exercise 1
5. Returns defective Raw Material purchased
above and costing Rs. 900 to the supplier.
6. Pays the supplier in (4) and (5) the amount due,
less a 2% discount for the prompt payment.
p p p y
7. Obtains a fire insurance policy providing Rs.
5,00,000
5 00 000 coverage beginning next month. It pays
month
the Insurance Premium of Rs. 4,950 for the
current year.
year
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16. Exercise 1
8. Pays Rs. 1,800 for 3 month Rent for the office
space.
9. Purchases a Patent on a machine process for Rs.
90,000 cash .
10. Purchases Office Equipment from Mr. R for
0. u c ases O ce qu p e t o . o
Rs. 2,700 making a down payment of Rs. 250
and agreeing to pay the balance in 30 days.
d g ee g o p y e b ce d ys.
11. The company makes sale of all the goods for
Rs. 16,000
Rs 16 000 out of which only Rs 12 000 could
Rs. 12,000
be Realised from Mr. Y
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17. Solution to Exercise 1
Income Statement
Profit & Loss A/c …..
for the period ending ….
for the year ending …….
y g
Expenses Incomes
Insurance
I 4,950 Sales Revenue
4 950 S l R 16,000
16 000
Rent 1,800 Cash Discount gain 154
Net Goods purchased 7,700
Profit 1,704
16,154 16,154
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18. Solution to Exercise 1
Balance Sheet of …..
as on …….
Liabilities Assets
Creditors - R 2,450 Land & Building 2,25,000
8% M t
Mortgage 1,75,000 Equipments
1 75 000 E i t 15,900
15 900
Equity Shares 5,00,000 Patent 90,000
Profit & Loss A/C 1704 Debtors - Y 4,000
Cash 3,44,254
6,79,154 6,79,154
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19. Solution to Exercise 1
Cash Flow Statement
for th
f the period ending …
i d di
Cash Flow from operations
Receipt from sales 12,000
payment to insurer 4,950
payment to creditors 7,546
payment for rent 1,800
Net cash outflow from operations 2,296
Cash Flow from investments
Land B ildi b
L d & Building bought
h 50,000
50 000
JCB bought 13,200
Patent bought 90,000
Office Equipment bought 250
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Net cash outflow from investments 1,53,450
20. Solution to Exercise 1
Continued …….
Cash Flow from financing
Issue of E it Shares
I f Equity Sh 5,00,000
5 00 000
Net cash inflow from financing 5,00,000
Increase in cash balance 3,44,254
Cash balance at the beginning of the period 0
Cash balance at the end of the period 3,44,254
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