UNDERSTANDABLE & USEFUL Accounting information should be readily understandable to the intended users of the information. This is a function of both the intended users and the intended uses of the information. Accounting systems that define either the users or uses narrowly may justify more complex information requirements and standards. Accounting systems that envision a … Read more
Answer to Accounting Test Question IFS No 4: Current ratio Acid-test ratio Debt to equity ratio 1 Company issued ordinary shares for cash I I D 2 Bought raw material on account I D I 3 Received money from accounts receivable N N N 4 Expiration of prepaid rent D N I 5 Payment of … Read more
Accounting Test Question No IFS 4: Effect of Management Decisions On Ratios Require: Put by letter whether each of the actions listed below will immediately -increase (I), -decrease (D) or -have no effect (N) on the ratios shown. Current ratio Acid-test ratio Debt to equity ratio 1 Company issued ordinary shares for cash 2 Bought … Read more
Answer to Accounting Test Question IFS No 3: (a) current ratio = Current asset/current liabilities = ($200,000+$810,000+$830,000)/$710,000) = 2.59 (b) acid-test ratio = (Current assets- inventory)/current liabilities =($200,000+$810,000)/$710,000 = 1,42 (c) debt to equity ratio = (Total liabilities)/Shareholders fund =($710,000+$550,000)/($1,500,000+$1,670,000) =0.39 (a) times interest earned ratio =(Net Income+ Interest Expense+ Income Tax)/Interest Expense =($210,000+$40,000+$150,000)/$40,000 =10 … Read more
Accounting Test Question No IFS 3: Append below Company XYZ’s Income Statement and Balance Sheet: Income Statement ($’000) 2005 Net Sales 7,100 Interest expense 40 Income tax expense 150 Net Income 210 Balance Sheet ($’000):- Assets 2005 Cash 200 Accounts Receivable 810 Inventory 830 Property, plant and equipment ( net) 2,590 Total Assets 4,430 Liabilities … Read more
Accounting Test Question SV No.1: Company XYZ uses a perpetual inventory system. Append below the following transaction relating to its merchandise inventory during the month of Nov’06 Date Transaction Nov 1 Inventory on hand – 3,000 units @ $8 each Nov 1 Inventory on hand – 3,000 units @ $8 each Nov 7 Bought 5,000 … Read more
Answer to Accounting Test Question IFS No 2: 1(a) Profit margin on sales = Net Income/ Net Sales = $340,000/$7,050,000 = 4.8% 1(b) Return on Assets (ROA) = Net Income/(Average Total Assets)/2 =$340,000/($4,430,000+3,990,000)/2 = 8.1% 1(c) Return on Shareholders’ equity = Net Income/ (Average Total Shareholder fund)/2 =$340,000/($3,170,000+2,360,000)/2 =12.3% (1) Computation of Dividend paid during … Read more
Accounting Test Question No IFS 2: Append below Company XYZ’s Income Statement and Balance Sheet: Income Statement ($’000) 2005 2004 Net Sales 7,050 6,200 Net Income 340 410 Balance Sheet ($’000):- Assets 2005 2004 Current Assets 1,840 1,570 Property, plant and equipment ( net) 2,590 2,420 Total Assets 4,430 3,990 Current Liabilities 1,150 1,190 Long … Read more
Answer to Accounting Test Question IFS No 1: Inventory turnover ratio =Â Cost of Goods Sold/ Average Inventory Value = $3,000,000/(830,000+710,000)/2 =$3,000,000/$770,000 = 3.89 times Receivables turnover ratio = Net Turnover/(Average Accounts Receivable) =$7,000,000/($810,000+620,000)/2 = 9.79 times Therefore, Average collection period =365 days/ 9.79 =37.28 days Asset turnover ratio = Net Turnover/ (Average Total Asset) … Read more
Accounting Test Question No IFS 1 : Interpretation Of Financial Statements Accounting Test Question No IFS 1: Details of financial performance of Company XYZ For year 2005 Income Statement: Net Sales – $ 7 million, Cost of Goods sold -$ 3 million Net Income – $1.2 million Balance Sheet ($’000):- Assets 2005 2004 Cash 200 … Read more