ACC316 : Analysis of Financial Statement (2017-2)

 

NATIONAL OPEN UNIVERSITY OF NIGERIA

Plot 91, Cadastral Zone, Nnamdi Azikiwe Express Way,

Faculty of Management Sciences

Department of Financial Studies,

Jabi-Abuja.

JULY 2017 Examinations

 
Course Code:   ACC316
Course Title:    Analysis of Financial Statement
Time Allowed:    2 Hours                                                        Credit Unit: 2
Instructions: 1.     Attempt Question 1 and any other two (2) Questions
2.     Question 1 is compulsory and carries 30 marks
while the other 2 Questions carry 20 marks each.
 
3.      Present all your points in coherent and orderly manner.
1. EUA Company Limited has presented the following Financial Statements for 2010 year of operation.
EUA Company Limited
Statement of Financial Position as at December 31st, 2010
Assets                                                 ₦
Liabilities                                            ₦
Cash                                               70,000
Marketable Securities                    30,000
Accounts receivable, net             450,000
Inventories                                   350,000
Total current assets                      900,000
Gross plant and equipment          2,100,000
Allowance for depreciation         (500,000)
Net plant and equipment              1,600,000
 
Total assets                                   2,500.000
 
The annual sinking find contribution is ₦25,000
Accounts Payable                          150,000
Note payable to bank (8%)            200,000
Accruals                                           20,000
Income tax payable                          80,000
Total current liabilities                   450,000
Mortgage Bonds (6%)                    150,000
 
Debenture (7%)                              400,000
Total liabilities                             1,000,000
 
 
Shareholder Equity:
Ordinary Shares                               500,000
Retain earnings                             1,000,000
Shareholder’s equity                     1,500,000
Liabilities plus equity                   2,500,000
 
 
 
 
Income Statement for the year ended December 31st, 2010
₦                                 ₦
Net Sales                                                                                                                     5,400.000
Cost of goods sold                                                                                                      4,400.00
Operating expense:                                                                                                     1,000.000
Selling                                                                      400,000
General and Administrative                                     130,000
Lease payment                                                            20,000
Total operating expenses                                                                                             550,000
Operating income                                                                                                        450,000
Other revenues-interest on Marketable Securities + royalties                                     3,000
Operating income plus other revenues                                                                        453,000
Less other expenses:
Interest on bank note                                                              16,000
Interest on mortgage                                                                9,000
Interest on debentures                                                                        28,000
Total interest                                                                                                               53,000
Net income before taxes                                                                                             400,000
Income taxes (at 50%)                                                                                                200,000
Net after tax income available to ordinary shareholders (net profit)                           200,000
Dividends                                                                                                                   30,000
Increase in retained earnings                                                                                       170,000
 
You are required to calculate the following ratios:
a)         Liquidity         :      1) Current ratio
2)  Quick ratio
b)         Activity           :      3) Inventory turnover
4)  Fixed Assets turnover
5)  Total Assets turnover
c)         Profitability:        6)  Profit Margin on sales %
7)Net operating margin %
d)         Investment:         8) Return on Net worth %
Each of the 8 ratios carries three marks                     =         24
1 mark bonus for presentation                                    =            1
Total=25 marks
2)     a)   Define accounting policies.                                                 5 marks
b)   Highlight the significant accounting policies that have to be stated in
the financial statements                                                                           15 marks
 
3)      List and explain the qualitative characteristics of financial statements
in accordance with the Framework.                                                            20 marks
 
4) The income statement for the year ended 31st December, 2009 showed that a trading
stores made a profit of N18,000,000. The bank balance had reduced from N10,000,000 at the beginning   of the year to N3,000,000 at the 31st December, 2009. By this adverse situation, the entrepreneur  requested the Financial Manager for am explanation of the reduction in the cash balance. The analysis of cash receipts and payments in the year is summarized as cash movement thus:
Cash Receipt:
 
Cash receipts from sales and debtors
 
Loan raised for expansion
 
Cash payment:
Purchases of goods and payment to credits
 
Payment  of wages and salaries
 
Payment of interest and bank charges
 
Expenditure on extension of premises
 
Payment for New fittings
 
Cash withdrawn by the entrepreneur
 
Payment of miscellaneous expenses
 
Excess of Cash Payment over cash receipts in the year
₦‘000
₦‘000
145,000
20,000
 
109,000
10,000
1,000
30,000
5,000
10,000
7,000
(172,000)
(7,000)
From the above presentation, prepare a cash-flow statement for the year ended 31st
December, 2009.
 
5.   a) Explain the main components of the financial statement.              10 marks
b) State the elements of an income statement.                                 10 marks
You can get the exam summary answers for this course from 08039407882

Check anoda sample below

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