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7110 2015 MJ 21 Ratio and Principle

The document provides financial information for John for the year ended 31 March 2015, including revenue, inventory, expenses, and capital details. It requires calculations for cost of goods sold, profit for the year, and various financial ratios, along with comments on business performance. Additionally, it discusses proposals to improve profit and the accounting principles that would be violated by each proposal.

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msmonicalee.my
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8 views3 pages

7110 2015 MJ 21 Ratio and Principle

The document provides financial information for John for the year ended 31 March 2015, including revenue, inventory, expenses, and capital details. It requires calculations for cost of goods sold, profit for the year, and various financial ratios, along with comments on business performance. Additionally, it discusses proposals to improve profit and the accounting principles that would be violated by each proposal.

Uploaded by

msmonicalee.my
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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11

4 John provided the following information for the year ended 31 March 2015.

$
Revenue 900 000
Inventory 1 April 2014 65 000
Inventory 31 March 2015 35 000
Expenses 105 000
Owner’s capital 300 000
Long term loan 150 000

Mark up 20%

REQUIRED

(a) Calculate for the year ended 31 March 2015:

(i) Cost of goods sold

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

.......................................................................................................................................[2]

(ii) Profit for the year

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

.......................................................................................................................................[2]

© UCLES 2015 7110/21/M/J/15 [Turn over


12

(b) Calculate the following ratios.

Workings 31 March 2015 31 March 2014


Profit margin
(profit for the year 5%
to revenue)
Rate of inventory
7 times
turnover
Return on capital
4%
employed (ROCE)
[6]

(c) Give two comments on the performance of John’s business over the two years.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...............................................................................................................................................[6]

© UCLES 2015 7110/21/M/J/15


13

John is considering the following proposals to improve his profit for the year.

1 Change the depreciation methods for non-current assets.

2 Remove the provision for doubtful debts from the financial statements.

3 Value the inventory at market price.

4 Place a value on the skill of the workforce in the financial statements.

5 Exclude expenses owing from the income statement.

REQUIRED

(d) Name the accounting principle/concept which would not be complied with if each proposal
was implemented. The first one has been completed as an example.

Proposal Accounting principle/


concept
1 Change the depreciation methods for non-current
Consistency
assets
2 Remove the provision for doubtful debts from the
financial statements
3 Value the inventory at market price

4 Place a value on the skill of the workforce in the


financial statements
5 Exclude expenses owing from the income statement

[4]

[Total: 20]

© UCLES 2015 7110/21/M/J/15 [Turn over

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