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BKAF 3123 ANALYSIS AND USE OF FINANCIAL STATEMENTS

SEMESTER 2 SESI 2015/2016
TUTORIAL 4
DUE DATE: 18 May 2016 (BEFORE 12.00 NOON)

1.

Bill's Produce does 60 percent of its business during June, July, and August.
For Year Ended For Year Ended
December 31, 2010 July 31, 2010

Net Sales
Receivables, less allowance for
doubtful accounts:

RM700,000

RM690,000

Beginning of period
(allowance, January 1, RM2,000;
August 1, RM3,000)

RM 45,000

RM 80,000

RM 50,000

RM 85,000

End of period
(allowance, December 31,
RM3,000; July 31,
RM3,500)
Required:

a. Compute the days' sales in receivables for July 31, 2010, and December 31, 2010,
based on the data above.
b. Compute the accounts receivable turnover for the period ended July 31, 2010, and
December 31, 2010.
c. Comment on the results from (a) and (b).
2.

Anne Elizabeth Company's Balance Sheet for December 31, 2010, and Income Statement
For the Year Ended December 31, 2010, are given below.
Balance Sheet
Anne Elizabeth Company
December 31, 2010
2010

Assets:
Current Assets:
Cash
Marketable Securities
Accounts Receivable, less allowance of $10,000

RM 50,450
25,000
60,000

2009
RM 28,538
20,500
50,000

2010 Net sales Cost of goods sold Gross profit Operating expenses: Selling.000 RM280.000 RM 60. and administrative Interest Earnings before income taxes Income taxes Net earnings 2010 RM718.038 60.000 RM 31.000 RM 43.000 RM334.000 RM 63.000 RM 30.500 2009 RM650.000 RM 50.000 3.500 30.000 (68.500 RM 67.000 2.000 8. and Equipment: Land Buildings and Equipment 70.500 RM 57.000 40.000 210.450 60.038 Liabilities and Shareholders' Equity: Current Liabilities: Accounts Payable Accrued Compensation Income Taxes Total Current Liabilities RM 35.000 8.000 RM 75.000 220.000 RM 33.000 RM 70.000 11.000 RM130.500 RM 67.000 RM218.000 RM233. general. Lifo Prepaid Total Current Assets 90.000 515.Inventory.000 RM 29.038 Long-Term Debt Shareholders' Equity: Common Shares Retained Earnings Total Liabilities and Shareholders' Equity Income Statement Anne Elizabeth Company For the Year Ended December 31.500 520.450 Property.500 .500 29.038 Less Accumulated Depreciation Total Assets 9.450 RM304.000 7.000 RM125.000 220.450 RM394.000 6.000 RM138.000 7.000 8.500 28.500 RM 65. Plant.000 4.000 7.450 RM334.000 RM229.000 RM176.000 244.500 580.500 2008 RM640.000) RM394.000) (60.000 RM 71.

Working capital 4. . When analysing the short-term debt-paying ability of a company. Compute the following ratios for 2010: 1. the company still having difficulty in maintaining its debt especially its account payable. REQUIRED: Analyze the effect of a company’s policy that delays its payment of account payable on inventory and sales. Any action taken by the company about its current assets and its current liabilities policy will determine its survival in the future. The company has maintained a current ratio above the industry average every year. Astana is one of the fastest growing manufacturing companies in Malaysia. Accounts receivable turnover 2. A. However.Required: a. The ability of an entity to maintain its short-term debt is important to all users of financial statements. Merchandise inventory turnover 3. there is a very close relationship between the current assets and the current liabilities. Sales to working capital 3. REQUIRED: Discuss FOUR (4) reasons why above situation happens. in each of the following situation: (a) Short term (b) Long term B. Current ratio 5. Acid-test ratio (conservative) 6.