| University | James Cook University (JCU) |
| Subject | BU1002 / BU1902: Accounting for Decision Making |
Question 1
The following table presents a selection of ratios for ScooterAir and Dolphin Airlines, two businesses that operate in the same industry:
| ScooterAir | Dolphin Airlines | |
| Asset turnover | 1 time | 0.4 times |
| Debtors days | 6.8 days | 25.1 days |
| Current Ratio | 0.59 | 0.89 |
| Total debt to equity ratio | 120.31% | 250.89% |
| Profit margin | 10.50% | 4.32% |
| Quick Ratio | 1.09 | 0.33 |
| Return on equity (ROE) | 22.4% | (35.7)% |
| Return on assets (ROA) | 4.90% | 1.42% |
Required:
Classify the above ratios into the categories of profitability, asset efficiency, liquidity, and capital structure and compare the ratio results of the two entities. Based on your analysis, identify and explain which company would be considered a better investment.
Question 2
The information below relates to Changi Enterprises for the year ended 30 June 2019.
| Cash-at-bank balance 1 July 2018 | ($22,000) |
| Cash paid to suppliers | 192,200 |
| Cash receipts from customers | 294,000 |
| Payments for wages and expenses | 25,000 |
| Bank loan received | 6,600 |
| Taxes paid | 20,000 |
| Depreciation of equipment | 35,600 |
| Interest received | 20,500 |
| Cash received from the sale of investments | 55,000 |
| Cash paid to purchase equipment | 40,000 |
| Issued shares in exchange for a block of land | 100,000 |
| Dividends paid | 29,000 |
| Interest paid | 30,000 |
| Net profit | 46,000 |
| Loss on sale of equipment | 63,000 |
Required:
- Prepare Changi’s Statement of Cash Flow on 30 June.
- Discuss and comment on Changi’s cash flow statement, particularly the information that it conveys and its usefulness.
Question 3
Novena Pumps Pte Ltd manufactures and sells swimming pool filter pumps. Price and cost data are as follows:
| Selling price per unit | $25.00 |
| Variable costs per unit:
Direct material |
$10.50 |
| Direct labor | 5.00 |
| Manufacturing overhead | 3.00 |
| Selling costs | 1.30 |
| Total variable costs per unit | $19.80 |
Annual total fixed costs:
| Manufacturing overhead | $192,000 | |
| Selling and administrative | 276,000 | |
| Total fixed costs | $468,000 | |
| Forecast annual sales (120,000 units)
Required: a) What is Novena’s break-even point in units? |
$3,000,000 |
|
| b) What is the company’s break-even point in sales dollars? | ||
- Explain how Novena Pumps could use break-even and cost-volume-profit (CVP) analysis for planning and control.
Question 4
TED Corp wishes to prepare a cash budget for the month of March 2021 and has provided projected sales revenue data below:
Projected sales: ___
| January 2021 | $144,000 |
| February 2021 | $205,000 |
| March 2021 | $220,000 |
All sales are on credit with 65% collected during the month of sale, 30% collected during the month following the sale, and 5% during the second month after the sale.
Required:
- Prepare the cash receipts section of a cash budget for TED Corp for the month of March 2019.
- Discuss how the cash budgeting process will help TED Corp achieve its goals.
Question 5
Kim Soo offers tutoring services to first-year university students. Kim has established a sole proprietorship business named KSHelp. The following information relates to the business activities for the end of the financial year 30 June 2020:
| Account: | $ |
| Accounts payable | 800 |
| Accounts receivable | 1,500 |
| Accumulated depreciation – computer equipment | 4,950 |
| Accumulated depreciation – Motor vehicle | 8,250 |
| Advertising expense | 510 |
| Capital at the beginning | 14,500 |
| Cash at bank | 8,445 |
| Computer equipment | 8,250 |
| Depreciation expense – computer equipment | 1,650 |
| Depreciation expense – Motor vehicle | 2,750 |
| Drawings | 2,520 |
| Loan | 7,500 |
| Motor vehicle | 16,750 |
| Motor vehicle expense | 330 |
| Office supplies | 1,500 |
| Office supplies used | 840 |
| Telephone charges | 255 |
| Tutoring fees earned | 9,750 |
Required:
- Prepare a Statement of Profit or Loss on 30 June.
- Explain the different purpose and role of the Statement of Profit or Loss compared to a Statement of Financial Position and how the information contained in each might be useful to Kim Soo.
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