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NATIONAL OPEN UNIVERSITY OF NIGERIA
UNIVERSITY VILLAGE, PLOT 91, CASDASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI, ABUJA.
FACULTY OF MANAGEMENT SCIENCES
JULY 2017 EXAMINATION
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
