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Question 1 (5 x 2 = 10 marks)
Moving Pictures Ltd is planning an expansion internationally and is considering its financing options. One senior manager of the company has advised the Board of Directors that using debt is cheaper than equity as interest is tax deductible, whereas dividends are not. As a shareholder of Moving Pictures Ltd, do you agree with this statement? Why or why not? (2 marks)
When assessing a firm’s profitability, profit before interest and tax is used, but when we evaluate Return on Equity, profit after interest and tax is used. Which of these measures would be of most interest to a shareholder and why?
“All assets will eventually become expenses.” Discuss the validity of this statement. (2 marks)
Spy Ltd has two divisions: Control and Kaos. When evaluating the performance of the two, what must you consider as to whether you use Return on Investment or Residual Income.? Explain. (2 marks)
You are evaluating the following two companies with a view to purchasing shares in one of them.
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| Debt ratio | Dividend Yield | |
| Cowan Ltd | 35.1% | 6.2% |
| Macquarie Ltd | 40.5% | 5.8% |
When considering the above ratios, which company would be a better investment and why代写? (2 marks)
Question 2 (2 + 1 + 1 + 1 + 2 = 7 marks)
Titanic Toys makes and sells a single product, an inflatable life raft. Individual product details are as follows:
Selling price $168
Direct materials $60
Direct labour $48
Variable overhead $28
Fixed Costs $640 000
Estimated sales 26 250 units
Production capacity 30 000 units
Calculate the contribution margin. (2 marks)
Calculate the breakeven point in units. (1 marks)
Calculate the expected profit from the estimated sales. (1 mark)
If Titanic Toys required a profit of $216 000, what level of sales dollars would be required? (1 mark)
Titanic Toys has an offer from a potential overseas client to purchase the life raft for $140. To supply overseas, the variable cost would increase by $12 per unit. Fixed costs would not change. Should Titanic Toys acceptthe special order from overseas? Justify your answer. (2 marks)
Question 3 (6 + 9 = 15 marks)
Gina Fashions has provided you with the following information for its accounts for the year ended 30 June 2020.
| Rent expense | 48 000 |
| Marketing expenses | 3 100 |
| Inventory | 17 500 |
| Debtors | 6 000 |
| Creditors | 12 000 |
| Telephone expense | 3 550 |
| PAYG withheld | 5 250 |
| Motor Vehicles | 35 000 |
| Computer Equipment | 12 000 |
| Accumulated depreciation – Vehicles | 6 000 |
| Accumulated depreciation – Computer equipment | 1 000 |
| General and admin expenses | 28 900 |
| Salaries | 87 500 |
| Drawings | 18 000 |
| Capital – L. Brigitta | 58 000 |
| Cost of sales | 270 000 |
| Cash at bank | 17 200 |
| Sales | 462 000 |
| GST payable | 2 500 |
Additional Information:
Motor Vehicles are depreciated at 20% per annum straight line.
Computer equipment is depreciated at 20% per annum straight line.
Salaries owing at balance date are $800代写
From the information provided by Gina Fashions for year ending 30 June 2020 prepare the income statement. (6 marks)
Gina Fashions
Income Statement for year ending 30 June 2020
From the information provided by Gina Fashions for year ending 30 June 2020 prepare the Balance Sheet. (9 marks)
Gina Fashions
Balance Sheet as at 30 June 2020
Question 4 (3 + 2 + 3 = 8 marks)
From the perspective of a liquidator when could a director be personally liable for the debts of a company. (3 marks)
Explain in your own words how you would distinguish between a fixed and variable cost. (2 marks)
Bond Security has three divisions, Charlie, Diva and Etha. The current level of investments and operating profits by each division are as follows:
| Charlie Division | Diva Division | Etha Division | |
| Operating assets | $1 000 000 | $ 1 500 000 | $ 2 000 000 |
| Operating profit | $ 98 000 | $110 000 | $ 185 000 |
Required:
Compute Return on Investment (ROI) for each division. Bond Security requires a minimum rate of return of 9%. (3 marks)
Question 5 (10 marks)
Gilligan’s Gadgets is in the process of preparing a cash budget for November 2020.
The following sales and purchases data have been compiled for the preparation of the budget:
| August | September | October | November | |
| $ | $ | $ | $ | |
| Purchases | 300 000 | 360 000 | 340 000 | 400 000 |
| Sales | 800 000 | 860 000 | 840 000 | 880 000 |
Additional information:
- All sales are on credit. The company collects 50% in the month following the sale, 30% two months following the sale and 20% in the third month following the sale.
- 40% of all purchases are paid for in the month they are purchased, with the remaining 60% paid for in the following month.
- Plant and Equipment costing $240 000 is expected to be acquired and paid for in November.
- The selling and distribution expenses are $76 000 each month. Administrative expenses are $160 000 per month. This includes $12 000 of depreciation expense. Expenses are paid in the month they are incurred.
- The cash balance on 1 November is $6 000代写.
Required:
Prepare a cash budget for the month of November 2020.
