1. Morisot plc supplies mobile phones and network services to retail customers. On 1^st July 2019 it launched its latest model of handset, the Artwork 5. As a promotional offer, customers can sign a three-year contract which provides a free handset at the beginning of the period. The customer then pays £25 per month for unlimited calls, texts and data.

The handsets can be purchased separately for £648 and the monthly plan without the handset is available for £18 per month.

Gurpreet signed a contract on 1^st January 2020.

Requirement

Calculate how much revenue Morisot plc should recognise with respect to Gurpreet’s contract in the year ending 30^th June 2020.   (5 marks)

2. Morisot plc owns a piece of freehold land that it had been using for parking vehicles. However, in order to fund a new strategic development, the directors decided on 18^th June to dispose of the land as it was the only way funds could be raised. The land is carried on the Statement of financial position at the original cost of £60,000 at 30^th June 2020. The directors have appointed an agent to market the property on the company’s behalf. This agent has advised the fair value of the land is £85,000 and is advertising the land at this price. The agent expects in the current market that the sale will be completed within a month. The selling costs are expected to amount to 2% of selling price.

Requirement

Explain, with the aid of calculations, how the transaction should be accounted for in the year ending 30^th June 2020

The following information relates to a company ABC Ltd for the year ended 30 June 2020:

Required:

Prepare the production cost statement, trading statement and the relevant notes for the year ended 30 June 2020.

Boehm Corporation has had stable earnings growth of 6% a year for the past 10 years, and in 2019 Boehm paid dividends of $1 million on net income of $10 million. However, net income is expected to grow by 22% in 2020, and Boehm plans to invest $7.5 million in a plant expansion. This one-time unusual earnings growth won't be maintained, though, and after 2020 Boehm will return to its previous 6% earnings growth rate. Its target debt ratio is 34%. Boehm has 1 million shares of stock.

1. Calculate Boehm's dividend per share for 2020 under each of the following policies:
   1. Its 2020 dividend payment is set to force dividends per share to grow at the long-run growth rate in earnings. Round your answer to the nearest cent.

      $  

   2. It continues the 2019 dividend payout ratio. Round your answer to the nearest cent.

      $  

   3. It uses a pure residual policy with all distributions in the form of dividends (34% of the $7.5 million investment is financed with debt). Round your answer to the nearest cent.

      $  

   4. It employs a regular-dividend-plus-extras policy, with the regular dividend being based on the long-run growth rate and the extra dividend being set according to the residual policy. What will the extra dividend be? Round your answer to the nearest cent.

      $  

2. Which of the preceding policies would you recommend?

   -Select-

Allan set up a trading business, buying and selling goods. The following transactions took place in the first month of its trading, July 2020.

1. Allan introduced $500,000 cash into the business bank account.
2. The business bought a motor vehicle with price of $60,000. The payment was by cheque.
3. The business bought some inventory for $30,000. The payment was by cheque.
4. The entire inventory purchased in transaction #3 was sold $65,000 in cash.
5. Additional inventory was purchased amounting to $100,000 on credit.
6. 50% of the inventory purchased in transaction #5 was sold for $80,000. All these sales were on credit.
7. A payment of $30,000 was made to a supplier for some of the purchases.
8. A payment of $40,000 was received from a customer for some of the sales on credit.
9. Allan draw $10,000 from the bank account for his personal use.
10. The business paid $2,000 for the motor vehicle maintenance using a cheque.
11. The business paid $15,000 by cheque for the premium of one-year insurance policy.
12. The business received a bank loan of $100,000, repayable in two years.
13. Depreciation for motor vehicles should be allocated 10% per annum on costs.

You are required:

1. Post all the transactions to ledger accounts (including the necessary adjustment entries).
2. Prepare a trial balance as at 31 July 2020.

3. Prepare a statement of comprehensive income for the month ended 31 July 2020 and a statement of financial position as at 31 July 2020. (Assume that Allan has closing inventory of $47,000).

Thomas Sdn Bhd is a computer manufacturer. The summarised accounts of Thomas Sdn Bhd for the years 2019 and 2020 are given below.

Thomas Sdn Bhd

Income Statement for the Year Ended 31 December

Thomas Sdn Bhd

Statement of Financial Position as at 31 December

Inventories at 1 January 2019 was RM 50,000.

Required;

a) Calculate the following ratios for 2019 and 2020:

        (i) Current ratio

        (ii)   Acid-test ratio

        (iii) Inventories turnover

        (iv) Accounts turnover

         (v) Gross profit on sales

        (vi) Net profit on sales

b) Explain the possible reasons for and significance of any changes in the ratios shown by your calculations.

Aston Blue plans to manufacture bicycle helmets. Sales will be dependent on the length of the summer season. The company operates under ideal conditions of uncertainty.

On January 1, 2020, Aston Blue started operations by acquiring the necessary equipment which will last 2 years at which time there will be no salvage value. Aston Blue financed the equipment purchase through a $950,000 bank loan at a 8% interest rate and the balance was financed through the issuance of common shares.

Aston Blue’s annual net cash flows will be $1,350,000 if the summer remains hot for 12 weeks and $600,000 if the summer is warm for 6 weeks. Assume that the cash flows are received at year-end. In each year the objective probability that the summer is hot for 12 weeks is 65% and warm for 6 weeks 35%. The interest rate in the economy is 8% in both years.

Aston Blue will pay a dividend of $110,000 at the end of each year of operations.

Assume that in 2020 that the season is hot for 12 weeks.

A. Calculate the present value of the equipment on January 1, 2020.

B. Determine the following items that would appear on the December 31, 2020 financial statements: Cash, equipment, total assets, common shares, retained earnings, net income/loss.

C. Assuming that Aston Blue paid the present value for the equipment, calculate the net income/loss for the year ended December 31, 2021 on a historical cost basis. The equipment is amortized on a straight-line basis.

Aston Blue plans to manufacture bicycle helmets. Sales will be dependent on the length of the summer season. The company operates under ideal conditions of uncertainty.

On January 1, 2020, Aston Blue started operations by acquiring the necessary equipment which will last 2 years at which time there will be no salvage value. Aston Blue financed the equipment purchase through a $950,000 bank loan at a 8% interest rate and the balance was financed through the issuance of common shares.

Aston Blue’s annual net cash flows will be $1,350,000 if the summer remains hot for 12 weeks and $600,000 if the summer is warm for 6 weeks. Assume that the cash flows are received at year-end. In each year the objective probability that the summer is hot for 12 weeks is 65% and warm for 6 weeks 35%. The interest rate in the economy is 8% in both years.

Aston Blue will pay a dividend of $110,000 at the end of each year of operations.

Assume that in 2020 that the season is hot for 12 weeks.

A. Calculate the present value of the equipment on January 1, 2020.

B. Determine the following items that would appear on the December 31, 2020 financial statements: Cash, equipment, total assets, common shares, retained earnings, net income/loss.

C. Assuming that Aston Blue paid the present value for the equipment, calculate the net income/loss for the year ended December 31, 2021 on a historical cost basis. The equipment is amortized on a straight-line basis.

Go Party Ltd (GPL) is a successful New Zealand catering company, operating in South Island. It has a balance date of 30 June. During the preparation of the 30 June 2020 financial statements, the following two issues have come into the light. The details of these issues are as follows:

(a) After a wedding party held by a customer in January 2020, 60 people became seriously ill, possibly as a result of food poisoning from food served by GPL. Legal proceedings were commenced seeking damages from GPL. The company lawyers advised that owing to developments in the case, and it was probable that the company would be found liable and the estimated damages were $85,000 that would be material to the company’s reported profits.

(b) On 15 February 2020, the Department of Occupational Health and Safety undertook an audit against the complaints regards to the company’s unsafe storage practices. If found to be negligent by the court, the company will have to pay a fine and incur cleaning costs. At the end of the financial year, the outcome of the audit is unknown. The company directors are of the opinion that there is a 50% chance that Go Party Ltd will be found negligent.

Required: Determine how GPL should treat the above two issues in its financial statements for the year ended 30 June 2020. Include in your answer the criteria as per NZ IAS 37, necessary journal entries (if required) or any disclosure note/s required.

Manal Pvt.Ltd. budgeted income statement for 1st quarter 2020
Description
JANUARY
FEBRUARY
MARCH
Sales
285,000
323,000
221,000
Purchases
129,000
168,000
95,000
Wages
35,000
37,000
30,000
Supplies
26,000
23,000
21,500
Utilities
6,500
8,700
7,200
Rent
15,000
12,800
13,600
Insurance
12,000
12,000
12,000
Advertising
24,500
28,500
18,000
Depreciation
20,000
20,000
20,000
Net Profit
17,000
13,000
3,700

Manal Receivable Trend:
30% of Sales are collected in the month of sale, 30% of Sales are collected after the month of sale. 40% of Sales are collected two months after the sale is made

Manal Payable Trend:
10% of Purchases are paid for in the month of purchase, 35% of Purchases are paid after the month of purchase, and 55% of Purchases are paid two months after the purchase is made

Additional Information:

Rent and Insurance expense were prepaid at the end of 2020
All other expenses are paid for in the month they were incurred

November Sales = 195,000 November Purchases = 100,000
December Sales = 250,000 December Purchases = 165,000

Please see attached Budgeted Income Statement for 1st Quarter 2020

Required:
Calculate to show Jan-Mar 2020 cash collection from sale, cash payment of purchases and total expenses each month separately on the basis of above given data.