Accounting for Managers (ACC00724) S2, 2019 Assessment 2 (20 Marks) QUESTION 1 (10 Marks) The following financial statements were prepared for the management of Morgan Ltd. The statements contain some...

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Accounting for Managers (ACC00724) S2, 2019
Assessment 2 (20 Marks)
QUESTION 1 (10 Marks)
The following financial statements were prepared for the management of Morgan Ltd. The statements contain some information that will be disclosed in note form in the general purpose external financial statements to be issued to the investors.
Morgan Ltd
Income Statement
For the year ended 30 June 2018
Revenues (Note 2)                    $850,500
Expenses, excluding finance costs (Note 4)         686,700
Finance costs                         6,300
                            -------------
Profit before income tax                 157,500
Income tax expense                     63,000
                            -------------
Profit                             $ 94,500    
                            ========
Morgan Ltd
Statement of Financial Position
As at 30 June 2018
Cu
ent assets
Cash and cash equivalents                    $ 37,800
Accounts receivables                $299,250
Less: Allowance for doubtful debts         18,900
                        --------------
                                280,350
Inventories                            252,000
                                _______
Total cu
ent assets                        570,150
                                _______
Non-cu
ent assets
Land                                63,000
Building                    $189,000
Less: Accumulated Depreciation         37,800
                        _________    151,200
Store equipment                47,250
Less: Accumulated Depreciation        22,050
                        _________     25,200
                                _______
Total Non-cu
ent assets                    239,400
                                _______
Total assets                            809,550
                                =======
Cu
ent liabilities
Accounts payables                        270,900
Preference dividends payable                     3,780
Ordinary dividends payable                     25,200
Other cu
ent liabilities                         12,600
                                _______
Total cu
ent liabilities                    312,480
                                _______
Non-cu
ent liabilities
Long-term bo
owings (Note 5)                    63,000
                                _______
Total Non-cu
ent liabilities                    63,000
                                _______
Total liabilities                            375,480
                                _______
Net assets                            434,070
                                =======
Equity
Share capital                            $315,000
Retained earnings                         119,070
                                _______
Total equity                             434,070
                                =======
Morgan Ltd
Statement of Changes in Equity
For the year ended 30 June 2018
Share capital
Ordinary:
Balance at start of period                    $252,000
                                ________
Balance at end of period                     252,000
                                ________
Preference (Note 6):
Balance at start of period                     63,000
                                _______
Balance at end of period                     63,000
                                ________
Total share capital                        $315,000
                                ========
Retained earnings
Balance at start of period                     $53,550
Total profit for the period                     94,500
Dividends – preferences                         (3,780)
Dividends – ordinary                         (25,200)
                                ________
Balance at end of period                    $119,070
                                ========
Notes to the financial statements
Note 2: Revenue
    Sales                            $850,500
Note 4: Expenses
    Cost of sales                        567,000
    Selling and distribution expenses             89,000
    Administration expenses                 30,700
Note 5: Long-term bo
owings
    10% mortgage payable                     63,000
Note 6: Preference shares
    6% preference shares                     63,000
Additional information:
1. The balance of certain accounts at the beginning of the year are:
Accounts receivables        $315,000
Allowance for doubtful debts     (26,350)
Inventories            220,500
2. Total assets and total equity at the beginning of the year were $756,000 and $368,550 respectfully.
REQUIRED:
A. Name the ratios that a financial analyst might calculate to give some indication of the following cases: (2 Marks)
1. A company’s earning powe
2. The extent to which internal resources have been used to finance acquisition of assets
3. Rapidity with which accounts receivables are collected
4. The ability of the entity’s earnings to cover its interest commitments
5. The length of time taken by the business to sell its inventories
B. Calculate and
iefly discuss the suitability of the ratios mentioned for each of the above cases. (6 Marks)
C. Given the above financial statements, comment on the company’s profitability and liquidity. (2 Marks)
QUESTION 2 (5 Marks)
Koala Bear Day-care provides day-care for children from Mondays through Fridays. Its monthly variable costs per child are:
Lunch                                $100
Educational supplies                         75
Other supplies (paper products, toiletries, etc.)             25
                             ____________
Total                                $200
                             ============
Monthly fixed costs consist of:
Rent                            $2,000
Utilities (electricity, water, telephone expenses)         XXXXXXXXXX
Insurance                          300
Salaries                             2,500
Miscellaneous                         XXXXXXXXXX
                            _________
Total                            $5,600
                            =========
Koala Bear charges each parent $600 per child.
REQUIRED:
A. Calculate the
eak-even point. (1 Marks)
B. Koala Bear’s target profit is $10,400 per month, calculate the number of children who must be enrolled to achieve the target profit (1 Marks)
C. Koala Bear lost its lease and had to move to another building. Monthly rent for the new building is $3,000. At the suggestion of parents, Koala Bear plans to take children on field trips. Monthly costs of the field trips are $1,000. By how much should Koala Bear increase fees per child to meet the target profit of $10,400, assuming the same number of children as in requirement B? (1 Marks)
D. How can a company with multiple products calculate its
eak-even point? Discuss and support your discussion by readings and research. (2 Marks)
QUESTION 3 (5 Marks)
Lennox Company uses a job costing system. The company uses predetermined overhead rates in applying manufacturing overhead costs to individual jobs. The predetermined overhead rate in Department A is based on machine-hours, and the rate in Department B is based on direct labour cost. At the beginning of 2018, the company’s management has made the following estimates for the year:
                        Department A        Department B
Direct labour-hours                15,000            30,000
Machine-hours                50,000            12,000
Direct labour cost                $80,000        $172,000
Manufacturing overhead            162,500         215,000
Job 145 was initiated into production on August 1 and completed on September 15. The company’s cost records show the following information on the job:
                        Department A        Department B
Direct labour-hours                22            40
Machine-hours                80            20
Direct material used                $450            $250
Direct labour cost                120            180
REQUIRED:
A. Calculate the predetermined overhead rates that should be used during 2014 in Department A and B. (1 Marks)
B. Calculate the total overhead cost applied to job XXXXXXXXXXMarks)
C. What would be the total cost of job 145? If the job contained 10 units, what would be the cost per unit? (1 Marks)
D. What factors should be considered in selecting a base to be used in calculating the overhead absorption or recovery rates? Discuss. Your discussion should be supported by readings and research. (2 Marks)
Answered Same DaySep 14, 2021ACC00724Southern Cross University

Answer To: Accounting for Managers (ACC00724) S2, 2019 Assessment 2 (20 Marks) QUESTION 1 (10 Marks) The...

Aarti J answered on Sep 16 2021
43 Votes
Accounting for Managers (ACC00724) S2, 2019
Assessment 2 (20 Marks)
QUESTION 1 (10 Marks)
The following financial statements were prepared for the management of Morgan Ltd. The statements contain some information that will be disclosed in note form in the general purpose external financial statements to be issued to
the investors.
Morgan Ltd
Income Statement
For the year ended 30 June 2018
Revenues (Note 2)                    $850,500
Expenses, excluding finance costs (Note 4)         686,700
Finance costs                         6,300
                            -------------
Profit before income tax                 157,500
Income tax expense                     63,000
                            -------------
Profit                             $ 94,500    
                            ========
Morgan Ltd
Statement of Financial Position
As at 30 June 2018
Cu
ent assets
Cash and cash equivalents                    $ 37,800
Accounts receivables                $299,250
Less: Allowance for doubtful debts         18,900
                        --------------
                                280,350
Inventories                            252,000
                                _______
Total cu
ent assets                        570,150
                                _______
Non-cu
ent assets
Land                                63,000
Building                    $189,000
Less: Accumulated Depreciation         37,800
                        _________    151,200
Store equipment                47,250
Less: Accumulated Depreciation        22,050
                        _________     25,200
                                _______
Total Non-cu
ent assets                    239,400
                                _______
Total assets                            809,550
                                =======
Cu
ent liabilities
Accounts payables                        270,900
Preference dividends payable                     3,780
Ordinary dividends payable                     25,200
Other cu
ent liabilities                         12,600
                                _______
Total cu
ent liabilities                    312,480
                                _______
Non-cu
ent liabilities
Long-term bo
owings (Note 5)                    63,000
                                _______
Total Non-cu
ent liabilities                    63,000
                                _______
Total liabilities                            375,480
                                _______
Net assets                            434,070
                                =======
Equity
Share capital                            $315,000
Retained earnings                         119,070
                                _______
Total equity                             434,070
                                =======
Morgan Ltd
Statement of Changes in Equity
For the year ended 30 June 2018
Share capital
Ordinary:
Balance at start of period                    $252,000
                                ________
Balance at end of period                     252,000
                                ________
Preference (Note 6):
Balance at start of period                     63,000
                                _______
Balance at end of period                     63,000
                                ________
Total share capital                        $315,000
                                ========
Retained earnings
Balance at start of period                     $53,550
Total profit for the period                     94,500
Dividends – preferences                         (3,780)
Dividends – ordinary                         (25,200)
                                ________
Balance at end of period                    $119,070
                                ========
Notes to the financial statements
Note 2: Revenue
    Sales                            $850,500
Note 4: Expenses
    Cost of sales                        567,000
    Selling and distribution expenses             89,000
    Administration expenses                 30,700
Note 5: Long-term bo
owings
    10% mortgage payable                     63,000
Note 6: Preference shares
    6% preference shares                     63,000
Additional information:
1. The balance of certain accounts at the beginning of the year are:
Accounts receivables        $315,000
Allowance for doubtful debts     (26,350)
Inventories            220,500
2. Total...
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