I need help in doing an accounting paper within a few hours
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| INSTRUCTIONS TO CANDIDATES 1. This question paper consists of FIVE QUESTIONS. Students must answer FOUR questions. Read the instructions for each question carefully. 2. Write your answer in the area provided below the question paper. 3. Any reference material brought into the examination room must be handed to the invigilator before the start of the examination (In case of physical examination). | |||
| This question paper consists of 5 PAGE, excluding this page. | |||
QUESTION ONE
Snappy Frames makes digital viewers that it currently sells to retailers for MVR 25 each. Budgeted production for the forthcoming year is expected to be 200,000 viewers and the following data on costs is available.
| Production (units) | Total |
| 170,000 | 3,230,000 |
| 200,000 | 3,400,000 |
| 180,000 | 3,290,000 |
| 150,000 | 3,150,000 |
Required:
1. Estimate the total fixed costs and variable cost per viewer for Snappy Frames
(6 marks)
2. Calculate the breakeven point in terms of units and sales revenue plus the margin of safety using budgeted production of 200,000 units and the current cost structure.
(7 marks)
3. In response to the recession the board of Snappy Frames is forced to reduce the selling price of a viewer by 20% to maintain its volume. The company is able to reduce its variable costs by 10% but the fixed costs were unchanged. Calculate the revised breakeven point and the margin of safety.
(6 marks)
4. Discuss the concept of contribution and how it is different to gross profit.
(3 marks)
5. Give examples of selling, distribution and/or administration costs which have both fixed and variable elements.
(3 marks)
[TOTAL: 25 MARKS]
QUESTION TWO
Naheez set up his own business as a management consultant in January last year. He took out a bank loan for MVR50, 000, repayable in equal monthly installments over 5 years. He also negotiated an overdraft facility for MVR20, 000. He rents a small office in Male’ for MVR60,000 per year. He has installed computer equipment, telephones, furniture, and fittings at a total cost of MVR66,000, which he expects to renew after six years. By the end of December Naheez has billed clients for 1,250 client hours at a rate of MVR120 per client per hour. He keeps records of all his cash transaction and all his bills received and paid.
Details of these cash transactions for the first year are:
Cash MVR
In
Own money as capital 10,000
Receipts from clients 120,000
Bank Loan 50,000
Out
Buying stationery and other sundry 10,300
Items
Wages of full-time office assistant 15,000
Office fittings 66,000
Fuel and Heat 3,500
Rent 75,000
Loan repaid 10,000
Loan interest paid 3,000
Travel expenses 14,800
At the end of the year Naheez has only received three quarterly electricity bills, he expects the fourth to be approximately MVR1,200. He also had a closing Inventory of stationery of MVR2,000.
Required:
Produce Naheez’s Income Statement for the financial year ending 31 December.
[10 marks]
Produce Naheez’s Statement of Financial Position as at that date.
[10 marks]
Comment on the results you have produced, giving particular consideration to: How much do you suggest Naheez should take out of the business as his reward? Briefly assess the profitability and value of the business.
[5 marks]
[TOTAL: 25 MARKS]
QUESTION THREE
The directors of Aik ltd are considering whether to accept one of the two mutually exclusive projects and, if so, which one to accept. Each project involves an immediate outlay of MVR250,000 and estimates of subsequent cash flows are as follows:
Project A Project B
Net cash inflow at the end of: MVR MVR
Year 1 100,000 30,000
Year 2 70,000 50,000
Year 3 70,000 70,000
Year 4 70,000 100,000
Year 5 30,000 150,000
Aik ltd cost of capital is 10%. The present values for MVR1 discontinued at 10% and 15% are:
| Year | 10% | 15% |
| 0.909 | 0.870 | |
| 0.826 | 0.756 | |
| 0.751 | 0.658 | |
| 0.683 | 0.572 | |
| 0.621 | 0.497 |
Required:
For each project calculate the following:
The Payback Period (4 marks)
The Net Present Value when discounted at 10% and 15% (10 marks)
The Internal Rate of Return (5 marks)
Evaluate the results you have obtained and recommend which project should be undertaken. Discuss what other factors should be taken into consideration. (6marks)
[TOTAL: 25 MARKS]
QUESTION FOUR
The summarised financial statements of Wulworths Plc, a major high street retailer, are reproduced below:
| Statement of Comprehensive | Income 2020 | 2019 |
| MVRm | MVRm | |
| Revenue | 2,737.0 | 2,630.7 |
| Cost of goods sold | (2,045.8) | L1,934.7) |
| Gross profit | 691.2 | 696.0 |
| Selling and marketing costs | (571.6) | (534.1) |
| Administrative expenses | (125.1) | (112.9) |
| Other operating income | 23.5 | 21.9 |
| Operating profit | 18.0 | 70.9 |
| Finance cost | (14.5) | (13.7) |
| Finance income | 3.8 | 4.3 |
| Profit before taxation | 7.3 | 61.5 |
| Taxation | 0.2 | (20.2) |
| Profit for the year | 7.5 | 41.3 |
| Statement of Financial Position Assets Non-current assets | as at 31 December 2020 | 2019 |
| | ||
| Intangible assets | 110.1 | 95.7 |
| Property, plant and equipment | 312.9 | 297.2 |
| 423.0 | 392.9 | |
| Current assets | ||
| Inventories | 377.1 | 344.2 |
| Trade and other receivables | 303.5 | 212.6 |
| Cash and cash equivalents | 28.4 | 246.7 |
| 709.0 | 803.5 | |
| Current liabilities | ||
| Borrowings | (129.8) | (98.6) |
| Trade and other payables | (517.9) | (546.7) |
| Current tax liabilities | (9.9) | 25.0) |
| (657.6) | (670.3) | |
| Net current assets | 51.4 | 133.2 |
| Non-current liabilities | ||
| Financial liabilities | ||
| Borrowings | (191.4) | (223.5) |
| Net assets | 283.0 | 302.6 |
| Shareholders' equity | ||
| Ordinary shares | 182.4 | 182.1 |
| Share premium | 31.7 | 33.5 |
| Retained earnings | 68.9 | 87.0 |
| Total equity | 283.0 | 302.6 |
| Cash Flow Statement 2020 | 2019 | ||
| MVRm Cash flows from operating activities | |||
| Cash (utilised by)/generated from operations (39.6) | 129.5 | ||
| Interest paid (12.6) - | (10.5) | ||
| Interest received 2.5 | 4.5 | ||
| Tax paid (13.4) | (16.6) | ||
| Net cash (utilised by)/generated from operating activities (63.1) | 106.9 | ||
| Cash flows from investing activities | |||
| Acquisition of subsidiaries (net of cash acquired) | (63.0) | ||
| Purchase of intangible assets | (7.3) | (10.6) | |
| Purchase of property, plant and equipment | (71.9) | (46.0) | |
| Net cash used in investing activities | (142.2) | (56.6) | |
| Cash flows from financing activities | |||
| Net proceeds from issue of ordinary shares | 0.7 | 5.5 | |
| Proceeds from bank borrowings | 11.9 | ||
| Dividends paid to Company's shareholders | (25.6) | (24.3) | |
| Net cash used in financing activities | (13.0) | (18.8) | |
| Net (decrease)/increase in cash and cash equivalents | (218.3) | 31.5 | |
| Cash and cash equivalents at beginning of the year | 246.7 | 215.2 | |
| Cash and cash equivalents at end of the year | 28.4 | 246.7 | |
| Required: | | ||
Comment on the performance of Wulworths Plc in 2020, and its financial position at 31 December 2020.
[TOTAL: 25 MARKS]
QUESTION FIVE
Corporate governance code requires public listed companies in Maldives to comply on laws, regulations, procedures, and policies. It also requires certain level of transparency to the shareholders. To mitigate risk and avoid fraudulent activities, monitoring and control measures must be established in companies.
By reflecting on public listed company in Maldives, discuss about the audit measures company must practice considering both internal and external audit. Additionally, explain the reason why it requires an audit report of independent external auditor?
[TOTAL: 25 MARKS]
END OF QUESTION PAPER
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