Instructions to students: All questions are compulsory

Materials:

Dictionaries are not permitted.

TASK: BS1108 Introduction to Financial Accounting for Business Assignment

Question 1

The following is the trial balance of Mars Ltd on 30th June 2013:

BS1108 Introduction to Financial Accounting for Business

Additional Information:

  1. The directors consider £14,000 of accounts receivable to be bad debt and should therefore be written off.
  2. The directors also propose to provide for doubtful debt at the rate of 5% of the Trade receivable balance at the year end
  3. A total amount of £28,000 relating to utility bills is outstanding and should be provided for.
  4. Inventory at 30th June 2013 was valued at £895,000.
  5. Corporation tax on profits at 30th June 2013 is estimated at £58,000.
  6. Both plant & machinery and fixtures and fittings are to be depreciated at an annual rate of 20% on a reducing balance basis.
  7. A dividend of 3 pence per ordinary shares is proposed to be paid

Required:

Prepare the following financial statements for Mars Ltd:

  1. a) Income statement for the year to 30th June 2013(20 marks)
  1. b) Statement of financial position (balance sheet) as at 30th June 2013(20 marks)(Total: 40 marks)

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Question 2: BS1108 Introduction to Financial Accounting for Business -City, University of London

Venus Ltd – Income Statement for the Year ending 31st Oct 2013

BS1108_Introduction to Financial Accounting for Business BS1108_Introduction_ to_ Financial Accounting for Business

The company’s share price at 31st October 2013 was £2.30 and the total dividend for the year was 8 pence.

Required:

  1. Using the income statement and balance sheet of Venus Ltd, calculate the following ratios:

 You must show the formula for each ratio you have calculated as well as the figures that you have used in each ratio calculation.

  1. Gross profit margin
  2. Net profit margin
  3. Return on Capital employed (ROCE)
  4. Asset turnover
  5. Current ratio
  6. Quick ratio (Acid test ratio)
  7. Trade receivable collection period (in days)
  8. Trade payable payment (in days)
  9. Inventory holding period (in days)
  10. Interest cover
  11. Gearing (debt/equity) ratio
  12. Earnings per share (EPS)
  13. Price Earnings (PE) ratio
  14. Dividend Yield
  15. Dividend cover(22 marks)

2.Briefly discuss the uses and limitations of ratio analysis in assessing a company’s financial position.(8 marks) (Total: 30 marks)

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