Answers Diploma in International Financial Reporting June 2013 Answers and Marking Scheme Marks 1 Consolidated statement of financial position of Alpha at 31 March 2013 ASSETS Non-current assets: Property‚ plant and equipment (280‚000 + 225‚000 + 19‚250 (W1) + 6‚000 (W1) + 6‚120 (W7)) Intangible assets (W1) Goodwill (W2) Investment in Gamma (W9) Other investments $’000 536‚370 6‚000 89‚000 77‚120 40‚000 –––––––––– 748‚490 –––––––––– 137‚500 103‚000 25‚000 –––––––––– 265‚500 ––––––––––
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preparation‚ interpretation and presentation of financial statements‚ | Q1 (a‚ b & c) | 3. Apply and evaluate financial techniques for management planning‚ decision making and control in the short‚ medium and long term. | Exam | QUESTION 1 Delta Ltd is a medium size firm dealing with furniture business. The condensed financial accounts for the last three years are summarized below: Income Statement for the financial year ended 31 December as follows: FY | 2009 | 2010 | 2011 | | $’000
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Ratios and Financial Planning at East Coast Yachts 1. Current Ratio= Current Assets/Current Liabilities = 17‚582‚000/23‚689‚300 = 0.74 Quick Ratio = (Current Assets – Inventories)/Current Liabilities =(17‚582‚0007‚363‚700)/23‚689‚300 =0.43 Total Asset Turnover = Sales/Total Assets =234‚‚300‚000/130‚338‚900 =1.8 Inventory Turnover = Cost of Goods Sold/Inventory =165‚074‚000/7‚363‚700 =22.41 Receivables Turnover = Sales/Accounts Receivable =234‚300‚000/6‚567‚600 =35.68 Total Deb
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value of the annual after-tax cash flows by the cost of the project. Explanation: The profitability index is calculated as Net Present Value / Initial Outlay. 3. Project Sigma requires an investment of $1 million and has a NPV of $10. Project Delta requires an investment of $500‚000 and has a NPV of $150‚000. The projects involve unrelated new product lines. What is your evaluation of these two projects? Both projects should be accepted because they have positive NPV’s Explanation: A
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capital leased planes comprised of 164 planes. “Capital Leases – Flight Equipment” totaling $107 is equal to the original present value of the planes under capital lease comprised of 7 planes under capital lease. F. Depreciation Expense $186.26 Accumulated Depreciation $186.26 This amount was calculated by using the amount corresponding to “Flight Equipment” of $6‚574 on the balance sheet minus the residual value of 15% divided by 30 years: [(6‚574 – (6‚574*.15)]/30 = 186.26
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Leases For Years ending December 31‚ 2011-finish Delta Lease payments = $11‚109 Contract Carrier Aircraft Lease Payments = $3‚837 Total = $14‚946 3) Increase in debt automatically will increase in risk generally. Debt requires to be paid back‚ interest will be added to the principal if we fail to pay it on time‚ and could also lead to bankruptcy. Debt to equity ratio is to measure the risk of the company. Debt to equity ratio for Delta = [$43‚188-897]/$897= 47.1 If debt increase by
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INVENTORY – PERIODIC INVENTORY SYSTEM In a Periodic Inventory System‚ no effort is made to keep up – to – date records of either the inventory or the cost of goods sold. Instead‚ these amounts are determined only periodically __ usually at the end of each year. It is used by very small businesses having manual accounting systems. Questions 1 – 3 (Meigns & Meigns)‚ Question 4 (Fess & Warren) Question 1:- Mach IV Audio uses periodic inventory system. One of the
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and can borrow at a lower interest rate. Another reason could be that the leasing company will get the carts back at the end of the lease and could lease them to a different company. Another reason could be that the lessor will benefit from the depreciation tax shield on the carts‚ which might offset the lessor’s differential interest revenue. QUESTION 3: There are two scenarios to answer this question: first scenario RCGB purchases the carts using its own funds and we calculate the NPV @ 8%/ year
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Process Costing - The Hershey Company/ Kaiser Aluminum Process costing is used mostly in companies when converting raw materials into homogenous products. A single product is produced on a continuous basis and all units of the product are identical. Costs are computed by department where the materials‚ labor‚ or overhead costs are added to the product in the processing department. Our two companies‚ The Hershey Company and Kaiser Aluminum‚ convert raw materials to their finished products of chocolate
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d) Suppose after restructuring negotiations creditors reduce the face value of debt to $24M conditionally on the firm raising new equity to fund the project. Will the company go ahead with the project? 3. You are considering the acquisition of DELTA Enterprises.
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