Accounting Business Reporting for Decision Making

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374 Accounting: Business Reporting for Decision Making


MNM Ltd
Statement of profit or loss for the year ended 30 June 2016

Sales revenue
Cost of sales

$ 462 500
307 500
Gross profit
Expenses (including tax and finance)

155 000
80 000
Profit $ 75 000

MNM Ltd
Balance sheet as at 30 June 2016
Current assets
Cash assets
Receivables (all trade)
Less: Allowance for doubtful debts

$ 149 625
9 450

$ 18 900

140 175
Inventories 126 000
Total current assets 285 075
Non-current assets
Land
Building
Less: Accumulated depreciation

113 000
18 900

31 500

94 100
Store equipment
Less: Accumulated depreciation

23 625
13 625 10 000
Total non-current assets 135 600
Total assets 420 675
Current liabilities
Payables (all trade)
Income tax payable
Other

135 450
14 490
6 300
Total current liabilities 156 240
Non-current liabilities
10% mortgage payable 31 500
Total liabilities 187 740
Equity
Contributed capital: 6% preference shares
Ordinary shares
Retained earnings

25 000
126 000
81 935
Total equity 232 935
Liabilities and equity $ 420 675

Additional information


  1. The balances of certain accounts at the beginning of the year are as follows.


Accounts receivable (gross)
Allowance for doubtful debts
Inventories

$157 500
(14 175
110 250

)


  1. Total assets and total equity at the beginning of the year were $387 500 and $190 500 respectively.

  2. Income tax expense for the year was $31 500. Net finance expenses were $3150.
    Required
    Identify and calculate the ratios that a financial analyst might calculate to give some indication of
    the following:
    a. the entity’s earning ability
    b. the extent to which internal sources have been used to finance asset acquisitions

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