Problem 1) Jayantha commenced business on 1 January 2010 with equity of £100,000. During the year ending 31 December 2010, he paid £92,400 for purchasing goods for sale (all of which was sold) and £31.450 for various expenses. He received £139250 by sale of goods. Jayantha has drawn £12,000 in cash and introduced a motor car to the business valued at f 10,000.
What is Jayantha's equity at 31 December 2010? -
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1. El 15,400
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Sales 139,250
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Equity 1 Jan 2010
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100,000
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2. £127,400
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COG (92,400)
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Investment
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10,000
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3. £137,400
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Expense(31,450)..
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Profit
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15,000
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4. £113,400
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Profit 15,400
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Drawing
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(12,000)
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Problem 2) The following information relates to Simonson Engineering as at 30 September 2010:
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£
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Plant and machinery
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25,000
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Trade payables
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18,000
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Short-term borrowings
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26.000
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Inventories
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45,000
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Property
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72,000
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Long-term borrowings
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51,000
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Trade receivables
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48,000
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Equity at 1 October 2009
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117,500
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Cash in hand
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1,500
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Motor vehicles
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15,000
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Fixtures and fittings
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9,000'
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Profit for the year to 30 September 2010
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18,000
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Drawings for the year to 30 September 2010
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15,000
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Using this information, prepare a statement of financial position for the business using the standard layout illustrated in Example 2.5 on p.48 of Atrill, P., & E. McLaney, (2011) Accounting and Finance fbr Non-Specialists, 7th edition, Harlow: FT/Prentice Hail.
Simonson Engineering
Statement of financial position as at 30 September 2010
Problem 3:
An accountant prepared a statement of financial position for a business. In this statement, the equity of e owner was shown next to the liabilities. This confused the owner, who argued: -My equity is my major asset and so should be shown as an asset on the statement of financial position'. How would you explain this misunderstanding to the owner?
Problem 4: The statement of financial position shows how much a business is worth. Do you agree with this statement? Explain the reasons for your response.
Problem 5: Compute the missing amount in the accounting equation for each business.
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Name of business
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Assets
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Liabilities
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Equity
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Hudson Gift and Cards
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72,000
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37,000
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35,000
|
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New Street Garage
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85,000
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46,000
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39,000
|
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Hair Styles
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92,000
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53,000
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39,000
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Problem 6: At the year end, the total assets of a business were £189,000 and the total liabilities were £126,000. During the year, the owner withdrew £10.000 and introduced a further £18,000 in equity. The business y began the year with total assets 180,000 and total liabilities of £112,000.
What is the profit (loss) for the year?
a. £8,000 (profit)
b. £13,000 (loss)
c. £8,000 (loss)
d. £13,000 (profit)
Problem 7: A company that produces a single product provides the following information: budgeted sales of 40,000 units, margin of safety 25% of budgeted sales, total fixed costs £240,000. What is the contribution per unit of the company's product?
o £8.00
o £4.80
o £24.00
o £6.00
Problem 8: A business makes 2,000 units of a particular product. It spent £24,000 on material and it paid its operatives £40,000. Fixed costs of running the factory were £50,000. The salesforce were also paid £18.000 and the head office costs were £100.000. In order to break evaselling,price per unit will have to be:
o £84
o £66
o £116
o £32