(Solution Manual) Accounting Building Business Skills

Carlon,Mladenovic,McAlpine,Palm, 4

Business

Solution Manual

4th Edition

• $15.00 $50.00

---

Description

Solution Manual for Accounting Building Business Skills, The downloadable file consists of 1190 pages, and the total size of the file is 8.19 MB. Purchase now only for highly discounted price.

Author(s): Carlon, Mladenovic, McAlpine, Palm

---

---

Study Note Preview

Solutions Manual to accompany Accounting: Building Business Skills Fourth Edition Prepared by Shirley Carlon, Rosina Mladenovic - McAlpine and Chrisann Palm Chapter 1: Introduction to accounting 1.1 CHAPTER 1 – INTRODUCTION TO ACCOUNITNG ASSIG NMENT CLASSIFICATION TABLE Learning Objectives Brief Exercises Exercises Problems 1. Define accounting, describe the accounting process and define the diverse roles of accountants. 1 2. Explain the characteristics of the main forms of busines s organisation. 1 1A; 1B 3. Understand the Conceptual Framework and the purpose of financial reporting. 4. Identify the users of financial reports and describe users’ information needs. 3 8 2A; 2B 5. Identify the elements of each of the four main financial statements. 4,5,6 2,3,4,5, 7,9,10 3A,4A,5A,6A 7A;8A;3B,4B 5B,6B,7B,8B 6. Describe the financial reporting environment . 2 1 7. Explain the accounting concepts, principles, qualitative characteristics and co nstraints underlying financial statements 6 3A; 3B 8. Calculate and interpret ratios for analysing an entity’s profitability, liquidity and solvency. 7 11,12,13 9A,10A 9B,10B Solutions manual to accompany Accounting: building business skills 4e 1.2 CHAPTER 1 – INTRODUCTION TO ACCOUNT ING ANSWERS TO QUESTIONS 1. Advantages of company structure are limited liability (shareholders not being personally liable for corporate debts), indefinite life, easy transferability of ownership (through selling shares) , and greater ability to raise funds. Disadvantages of a company are the establishment costs and ongoing fees and increased government regulations . 2. External users are those outside the business who have an interest in knowing about the activities of the entity as resource providers , recipients of goods or services or parties performing a review of oversight function. Examples include investors, creditors such as banks and suppliers, taxing authorities, regulatory agencies, trade unions and customers. 3. (a) Income statement. (b) Statement of financial position . (c) Income statement. (d) Statement of financial position . (e) Statement of financial position . (f) Statement of financial position . 4. The Conceptual Framework consists of a set of concepts to be followed by preparers of financial statements and standard setters. The Conceptual Framework provides guidance to preparers of financial information by defining who is required to report and who the users are likely to be. 5. It is important to determine if a business is a reporting entity as it is only reporting entities that are required to prepare general purpose financial reports in accordance with the accounting standards. Three main indicators determine which of the forms of business organisation fall into the category o f a reporting entity. That is, an entity is more likely to be classified as a reporting entity if it is (1) managed by individuals who are not owners of the entity, (2) politically or economically important, and (3) sizable in any of the following ways — sales, assets, borrowings, customers or employees. 6. The three categories in the statement of cash flows are operating activities, investing activities and financing activities. The categories were chosen because they represent the three principal types o f business activity. 7. Retained earnings is the profit retained in a company. Retained earnings is increased by profit and is decreased by dividends and by losses. 8. The going concern principle lends credibility to the cost principle; otherwise items would be reported at liquidation value. By assuming the entity will continue to operate, assets can continue to be reported at cost because they are expected to Chapter 1: Introduction to accounting 1.3 bring benefits to the business through use even though they may have little or no resale value. 9. Rose Ena is correct. Comparability means that financial statements can be compared between companies and over time. Using the same accounting principles and accounting methods from period to period with a company, facilitates comparability. When accoun ting methods are inconsistent, it is difficult to determine whether a company is better off, worse off, or the same from period to period. 10. A company’s operating cycle is the average time taken to acquire goods and services and convert them to cash in producing revenues . 11. (a) Tia is not correct. There are three characteristics: • liquidity, • profitability; and • solvency (b) The three parties are not primarily interested in the same characteristics of a company. Short -term creditors are primarily int erested in the liquidity of the business. In contrast, long -term creditors and shareholders are primarily interested in the profitability and solvency of the company. However, they may use the same financial statements as a source of information. 12. (a) The increase in profit margin is good news because it means that a larger percentage of profit is generated for each dollar of net sales. (b) An increase in the current ratio generally signals good news because the company improved its liquid ity. (c) The decrease in the debt to total assets ratio is good news because it means that the company has decreased the proportion of assets funded by creditors, thus reducing risk of being unable to repay debt. (d) An increase in current ca sh debt coverage ratio is good news because it means that the company has increased its ability to meet short -term obligations. The higher the current cash debt coverage the more favourable is the liquidity of the business. Solutions manual to accompany Accounting: building business skills 4e 1.4 SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 1.1 (a) P Shared control, increased skills and resources. (b) SP Simple to set up and maintain control with founder. (c) C Easier to transfer ownership and raise funds, no personal liability. BRIEF EXERCISE 1.2 (a) False (b) True (c) False BRIEF EXERCISE 1.3 1. Trying to determine whether the company complied with the Corporations Act. 2. Trying to determine whether the entity can pay its obligations. 3. Trying to determine whether a major investment proposal will be c ost effective. 4. Trying to determine whether the company’s profit will result in a share price increase. 5. Trying to determine whether the entity should use debt or equity financing. (a) 3 Executive directors (b) 2 Bank managers (c) 4 Shareholders (d) 5 Chief Financial Officer (e) 1 ASIC BRIEF EXERCISE 1.4 DFV Takeaway Pty Ltd Statement of financial position as at 31 December 2012 Assets Cash $15 000 Accounts receivable 8 000 Inventory 17 000 Total assets 40 000 Liabilities Accounts payable 30 000 Net assets $10 0 00 Equity Share capital 10 000 Total equity $10 000 Chapter 1: Introduction to accounting 1.5 BRIEF EXERCISE 1.5 IS (a) Expenses during the period. SFP (b) Accounts payable at the end of th e year. SCF (c) Cash received from borrowing during the period. SCF (d) Cash payments for the purchase of property, plant and equipment. BRIEF EXERCISE 1.6 Taylor Ltd Statement of financial position (Partial) Current assets: Cash $3,000 Short -term investments 8,200 Accounts receivable 20,000 Supplies 1,500 Prepaid rent 4,000 Total current assets 36,700 Non-current assets: Property, plant and equipment 10,000 Total non -current assets 10,000 Total assets $46,700 BRIEF EXERCISE 1.7 Return on assets ratio = assets total AverageProfit = 41.07%$5,000,000$2,053,646= Profit margin ratio = SalesProfit = 21.97%$9,346,911$2,053,646= Solutions manual to accompany Accounting: building business skills 4e 1.6 SOLUTIONS TO EXERCISES EXERCISE 1.1 (a) 8 Auditor’s opinion (b) 1 Company (c) 6 Share capital (d) 7 Accounts payable (e) 3 Accounts receivable (f) 2 Creditor (g) 4 Sole trader (h) 5 Partnership EXERCISE 1.2 Geoff’s Gear Pty Ltd Income Statement for the year ended 31 December 2012 $ $ Revenues: Hire revenue 70,000 Expenses: Advertising expense 1,800 Electricity expense 2,400 Rent expense 10,400 Wages expense 28,000 Total expenses 42,600 Profit $27,400 Geoff’s Gear Pty Ltd Calculation of retained earnings for the year ended 31 De cember 2012 $ Retained earnings, 1 January 45,000 Add: Profit 27,400 72,400 Less : Dividends (7,000) Retained earnings, 31 December $65,400 Chapter 1: Introduction to accounting 1.7 EXERCISE 1.3 Quality Products Ltd Statement of financial position as at 30 June 20 12 Assets: Cash $20,000 Accounts Receivable 10,000 Supplies 8,500 Inventory 44,000 Total assets 82,500 Liabilities: Accounts payable 20,000 Net Assets Equity: $62 500 Share capital $40,000 Retained earnin gs *22,500 62,500 Total Equity $62,500 *$27,500 – $5,000 EXERCISE 1.4 White Ltd (a) Eq Retained earnings $1,000 E Cost of sales 12,800 E Wages expense 9,400 A Cash 1,200 L Current payables 4,500 E Interest expense 1,100 E Other expense 600 E Depreciation expense 1,400 L Non-current borrowings 12,000 A Inventories 2,800 R Sales revenue 26,000 A Accounts Receivable 5,000 Eq Reserves 1,000 E Income tax expense 200 Eq Contributed equity 10,000 A Property and Equipment 20,000 Solutions manual to accompany Accounting: building business skills 4e 1.8 (b) Calculation of profit for White Ltd for the year ended 30 June 20 12 $ $ Sales revenue 26,000 Expenses: Cost of sales 12,800 Wages expense 9,400 Interest expense 1,100 Other expense 600 Depreciation ex pense 1,400 Income tax expense 200 Total expenses 25,500 Profit $500 EXERCISE 1.5 Bridges Ltd Note to solve the missing amounts the student needs to decide the order to solve the missing amounts 1. The Statement of changes in e quity shows the ending retained earnings as $32,000 which then can be substituted into the Statement of financial position so that (b) equals $32,000 . 2. Now (a) Contributed equity can be calculated. Accounts payable + Contributed equity + Retained earn ings = Total liabilities and equity. $5,000 + (a) + $32,000 = $65,000 (a) = $65,000 – $32,000 – $5,000 (a) = $28,000 3. Items (d) and (e) are the same figure . Therefore solve (e) first in the Statement of changes in equity Beginning retained earnings + Profit – Dividends = Ending retained earnings $10,000 + (e) – $5,000 = $32,000 (e) = $32,000 –$10,000 + $5,000 (e) = $27,000 and also (d) equals $27,000 4. Lastly now item (c) can be calculated Revenue – Cost of sales – Administrative expenses = Pr ofit $80,000 – (c) – $10,000 = $27,000 $80,000 – $10,000 – $27,00 0 = (c) (c) = $43,000 Chapter 1: Introduction to accounting 1.9 EXERCISE 1.6 Cheong Pty Ltd (a) This is a violation of the cost principle. The inventory was written up to its market value when it should have remained at cos t. (b) This is a violation of the accounting entity concept . The treatment of the transaction treats Cheong Kong and Cheong Pty Ltd as one entity when they are two separate entities. The computer should not have been charged to the expense account. If pa id for by the business, it should have been treated as a loan from the business to Cheong Kong. (c) This is a violation of the period concept . This concept states that the economic life of an entity can be divided into artificial time periods (months, qu arters or a year). By adding two more days to the year, Cheong Pty Ltd would be misleading financial statement users. In addition, 20 12 results would not be comparable to previous years’ results, and the problem would recur in 20 13. The period should have been 52 weeks or 53 at the most. Retailers often use a complete number of weeks rather than an exact year. As a 365 -day year consists of 52 weeks plus one day, many retailers use 52 -week periods and then, approximately every 5 years, use a 53 -week year. However, this is fully disclosed for comparative purposes. For example Woolworths Limited and Coles Myer Limited. EXERCISE 1.7 AGL Ltd Statement of financial position (Partial) as at 30 June 20 10 $M Current assets: Cash assets 480.4 Receivables 1234.5 Inventories 94.2 Other financial assets 225.3 Other current assets 174.1 Total current assets 2208.5 Non-current assets Receivables 0.6 Equity accounted investments 200.8 Deferred expenditure (non -current) 607.5 Oil and gas assets 333.4 Property, plant and equipment 2056.2 Intangibles 3149.0 Other financial assets 106.5 *Other non -current assets 28.4 Total non -current assets 6482.4 Total assets $8690.9 *SOME VERSION OF TEXT THIS FIGURE APPEARED AS $284 M NOT 28.4 M SO TOTAL ASSETS WOULD BE $8946.5 MSolutions manual to accompany Accounting: building business skills 4e 1.10 EXERCISE 1. 8 Goodman Fielder Limited Statement of financial position (Partial) as at 30 June 2010 $M Current assets: Cash and cash equivalents 73.3 Trade and other receivables 247.4 Inventor ies 166.1 Derivative financial instruments 0.1 Current tax receivable 16.0 Other current assets 6.5 Total current assets 509.4 Non-current assets Receivables 5.3 Investments in jointly controlled entities 1.8 Property, plant and equi pment 602.5 Intangible assets 1906.5 Deferred tax assets 54.7 Other non -current assets 2.2 Total non -current assets 2573.0 Total assets $3082. 4 EXERCISE 1. 9 (a) Wellington Wall Coverings Pty Ltd Income Statement for the year ended 31 July 2012 $ $ Revenues: Sales revenue 100,000 Less: Cost of sales 60,000 Gross profit 40,000 Other revenue Rent revenue 50,000 Expenses: Salaries expense 40,000 Depreciation expense 7,000 Other expenses 38,000 Total expense (85,000 ) Profit $5,000 Calculation of Retained Earnings for the year ended 31 July 20 12 $ Retained earnings, 1 August 20 11 3,000 Add: Profit 5,000 Retained earnings, 31 July 20 12 $8,000 Chapter 1: Introduction to accounting 1.11 (b) Wellington Wall Coverings Pty Lt d Statement of financial position as at 31 July 2012 $ $ Current assets: Cash 25,000 Inventory 20,000 Total current assets 45,000 Non-current assets: Land 120 000 Building 140,000 Less : Accumulated depreciation (14,000) 126,000 Total non -current assets 246,000 Total Assets 291,000 Current liabilities: Accounts payable 11,000 Rent received in advance 2,000 Total current liabilities 13,000 Non-current liabilities Bank l oan 110 000 Total non -current liabilities 110,000 Total liabilities 123 000 Net Assets $168 000 Equity Share capital 160,000 Retained earnings 8,000 Tota l equity $168,000 Solutions manual to accompany Accounting: building business skills 4e 1.12 EXERCISE 1.10 (a) Bear Pty Ltd Income Sta tement for the year ended 31 July 201 4 $ $ Revenues: Sales revenue 140,000 Less: Cost of sales 84,000 Gross profit 56,000 Other revenue Rent revenue 70,000 Expenses: Salaries expense 56,000 Depreciation expense 9,800 Other exp enses 53,200 Total expense 119,000 Profit $ 7,000 (b) Bear Pty Ltd Calculation of Retained Earnings for the year ended 30 June 201 4 $ Retained earnings, 1 July 201 3 4,200 Add: Profit 7,000 Retained earnings, 30 June 201 4 $11,200 Chapter 1: Introduction to accounting 1.13 (b) Bear Pty Ltd Statement of financial position as at 30 June 2014 $ $ $ Current assets: Cash 35,000 Inventory 28,000 Total current assets 63,000 Non-current assets: Land 168,000 Building 196,000 Less : Accumulated depreciation 19,600 176,400 Total non -current assets 344,400 Total Assets 407,400 Current liabilities: Accounts payable 15,400 Rent received in advance 2,800 Total current liabilities 18,200 Non-current liabili ties Bank loan 154,000 Total non -current liabilities 154,000 Total liabilities 172,200 Net Assets $235,200 Equity Share capital 224,000 Retained earnings 11,200 Total equity $235,200 Solutions manual to accompany Accounting: building business skills 4e 1.14 EXERCISE 1. 11 Retail Ltd (a) Working capital = current assets – current liabilities Beginning of year $53,764,000 = $223,313,000 – $169,549,000 End of year: $78,485,000 = $208,426,000 – $129,941,000 Current ratio = current assets/current liabilities Beginning of year: 1.32:1 = $223,313,000 / $169,549,000 End of year: 1.60:1 = $208,426,000 / $129,941,000 (b) These measures indicate that Retail Ltd’s liquidity improved during the year. Chapter 1: Introduction to accounting 1.15 EXERCISE 1.1 2 AGL 2010 $ M 2009 $ M (a) Debt to assets ratio 33.09. 8690$0. 2891$=or 33.26% 35.07. 9034$0. 3189$= or 35.3% (b) Cash debt coverage ratio 13.0 23189$ 2891$390$=+  06.0 24473$ 3189$4.235$=+  (c) The ratio of debt to total assets decreased, indicating decreased reliance on debt , and, AGL’s cash flows from operating activities increased and the coverage of total liabilities increased. (d) In 20 10 AGL’s cash provided by operations ($ 390.0M) was sufficient to cover the cash used in investing activities ($ 91.7M). If there was a cash deficiency AGL, being a publicly listed company, could raise more money from the public through the issue of shares. The company could also borrow money if required. In 2009 there was a large cash inflow from investing activities If the Statement o f cash flows is downloaded then it can be seen that the cash from operating activities did cover investing outflows but was not sufficient to cover financing resulting in a net decrease in cash for the year of $142.7M. In 2009 cash increased by $522.2M. Cash flow from operating activities was $235.4M and a review of the statement of cash flows indicates that a further $1396.5M was raised from sale on Investments and $1201.8M from sale of subsidiaries. This was used to finance other investing activities an d to meet financing commitments. $1420.8M was used to repay borrowings. Note to instructor This exercise would be suitable for post graduate class and also provide the URL so that can complete the response in more depth. If students wish to investiga te Wattyl’s annual report the web address is http://agl.com.au/about/InvestorToolkit/Pages/AnnualReports.aspx Solutions manual to accompany Accounting: building business skills 4e 1.16 EXERCISE 1.13 NOTE: cash generated (used) by investing activi ties is not given in question 2010 used $83.8M and 2009 $64.9M Goodman F ielder L imited 2010 $’000 2009 $’000 (a) Debt to assets ratio 46.0$3082$1414= or 46% 48.0$3074.0$1476.3= or 48% (b) Cash debt coverage ratio 22.0 2$1476.3 $1414$319.7=+  28.0 2$540.5 $1476.3$285.1=+  (c) The ratio of debt to total assets decreased slightly , indicating increased reliance on debt. The net cash flows from operations increased but the cash coverage of total liabilities decreased indicating a slight wo rsening of the solvency position. (d) The investing cash flows were omitted from the text but are given above so either provide to students or they can look up accounts. However the cash flows from operating activities in both years is greater then re quired for investing activities and in both years the operating cash flows also were not sufficient to cover financing activities as further funds were borrowed in each year(see comment under part c) . Overall the cash position increased in both years If students wish to investigate Goodman Fielder’s annual report the web address is : http://www.goodmanfielder.com.au/index.php?q=node/91 . Chapter 1: Introduction to accounting 1.17 SOLUTIONS TO PROBLEM SET A PROBLEM SET A 1.1 (a) The concern over legal liability would make the limited liability company form a better choice over a partnership. Also, the corporate form will allow the business to raise cash more easily which may be of importance in a rapidly growing industry . (b) Sarah and Andrew should adopt the partnership form because it facilitates bringing together the contribution of skills and resources. Also there does not appear to be any expected needs for further fund in the near future. (c) The fact that the c ombined business expects that it will need to raise significant funds in the near future makes the company form more desirable in this case. (d) It is likely that this business would form as a partnership. Its needs for additional funds would probably be minimal in the foreseeable future. Also, the three know each other well and would appear to be contributing equally to the firm. Service firms, like consulting businesses, are frequently formed as partnerships. Alternatively, they may prefer the company form to simplify subsequent expansion and take advantage of limited liability, but they would need to consider the additional regulation that it would involve. (e) One way to ensure control would be for Anthony to form a sole proprietorship. However in o rder for this business to thrive, it will need a substantial investment of funds early. This would suggest the company form of business. In order for Anthony to maintain control over the business, he would need to own more than 50 percent of the voting pow er. In order for the business to grow, he may have to be willing to give up some control. PROBLEM SET A 1.2 (a) In deciding whether to extend credit for 30 days you would be most interested in the Statement of financial position because it shows the ass ets on hand that would be available for settlement of the debt in the near -term. (b) In purchasing an investment that will be held for an extended period, the investor must try to predict the future performance of Domino’s . The income statement provides the most useful information for predicting future performance. (c) In extending a loan for a relatively long period of time, the bank is most interested in the probability that the company will generate sufficient income to meet its interest payments an d repay its principal. The bank would therefore be interested in predicting future profit using the income statement. It should be noted, however, that the lender would also be very interested in both the Statement of financial position and the Statement of cash flows — the Statement of financial position would show the amount of debt the company has already incurred, as well as assets that could be liquidated to repay the loan. And the bank would be interested in the Statement of cash flows because it wou ld provide useful information for predicting the company’s ability to generate cash to repay its obligations. (d) The finance director would be most interested in the Statement of cash flows since it shows how much cash the company generates and how that cash is used. The Statement of cash flows can be used to predict the company’s future cash -generating ability. Solutions manual to accompany Accounting: building business skills 4e 1.18 PROBLEM SET A 1.3 Ultimo Travel Goods Pty Ltd (a) 1. The accounting entity concept states that economic events can be identified with a parti cular unit of accountability. Since the Gold Coast villa is the personal property of Mark Austin – not Ultimo Travel Goods Pty Ltd – it should not be reported on the company’s Statement of financial position . Likewise, the loan is a personal loan of Mark A ustin – not a liability of the company. 2. The cost principle dictates that assets are recorded at their original cost. Therefore reporting the inventory at $30,000 would be improper and violates the cost principle. The inventory should be reported at $10,000. 3. Including the personal telephone account payable is a violation of the accounting entity concept . The $5,000 payable is not a liability of Ultimo Travel Goods Pty Ltd. If the company pays the telephone account on behalf of Mark Austin, it should be accounted for as a loan to Mark. (b) Ultimo Travel Goods Pty Ltd Statement of financial position as at 30 June 20 12 $ $ Assets Cash 20 000 Accounts receivable 55 000 Inventory 10 000 Total assets 85,000 Liabilities Accou nts payable ($40,000 -$5,000) 35,000 Notes payable 15,000 Total liabilities 50,000 Net Assets $35 000 Equity 35,000 Total equity $35,000 Chapter 1: Introduction to accounting 1.19 PROBLEM SET A 1.4 CSI Pty Ltd Income Statement for the month ended 31 May 20 12 $ $ Revenues: Service revenue 10,000 Expenses: Advertising expense 900 Fuel expense 3,400 Insurance expense 400 Rent expense 1,500 Repair expense 500 Total expenses 6,700 Profit $3,300 CSI Pty Ltd Calculation of Retained Earnin gs for the month ended 31 May 20 12 $ Retained earnings, 1 May 0 Add: Profit 3,300 3,300 Less : Dividends (1,500) Retained earnings, 31 May $1,800 CSI Ltd Statement of financial position as at 31 May 20 12 $ $ Assets: Current Asse ts Cash 7,800 Accounts receivable 11,400 19,200 Non-Current Assets Equipment 60,000 Total assets 79,200 Liabilities: Current Liabilities Accounts payable 2,400 Non-Current Liabilities Bank loan 30,000 Total liab ilities 32,400 Net Assets $46,800 Equity: Share capital 45,000 Retained earnings 1,800 Total equity $46,800 Solutions manual to accompany Accounting: building business skills 4e 1.20 PROBLEM SET A 1.5 Dunstan Ltd Dunstan Ltd should include the following items in its Statement of cash flows : Cash pa id to suppliers Cash dividends paid Cash paid to purchase equipment Cash received from customers Dunstan Ltd Statement of cash flows for the year ended 31 December 2012 Cash flows from operating activities: Cash received from customers $185,000 Cash paid to suppliers (105,000) Net cash provided by operating activities 80,000 Cash flows from investing activities: Cash paid to purchase equipment (26,000) Net cash used in investing activities (26,000) Cash flows from fin ancing activities: Dividends paid (10,000) Net cash used in financing activities (10,000) Net increase in cash $44,000 Chapter 1: Introduction to accounting 1.21 PROBLEM SET A 1.6 Bear Ltd Income Statement for the month ended 31 August 2013 $ $ Revenues: Service revenu e 11 800 Expenses: Advertising expense 800 Fuel expense 3 600 Insurance expense 600 Rent expense 2 500 Repair expense ..800 Total expenses 8 300 Profit $3 500 Bear Ltd Calculation of Retained Earnings for the month en ded 31 August 2013 $ Retained earnings, 1 August 0 Add: Profit 3 500 3 500 Less : Dividends (1 000) Retained earnings, 31 August $2 500 Bear Ltd Statement of financial position as at 31 August 2013 $ $ Assets: Current Assets Cash 12 300 Accounts receivable 25 400 37 700 Non-Current Assets Equipment 87 000 Total assets 124 700 Liabilities: Current Liabilities Accounts payable 7 200 Non-Current Liabilities Bank loan 40 000 Total liabilit ies 47 200 Net Assets $77 500 Equity: Share capital 75 000 Retained earnings 2 500 Total equity $77 500 Solutions manual to accompany Accounting: building business skills 4e 1.22 PROBLEM SET A 1. 7 Pod Ltd Pod Ltd should include the following items in its Statement of cash flows: Cash paid to suppli ers Cash dividends paid Cash paid to purchase equipment Cash received from customers Pod Ltd Statement of cash flows for the year ended 30 June 2013 Cash flows from operating activities: Cash received from customers $296 000 Cash pai d to suppliers (170 000 ) Net cash provided by operating activities 126 000 Cash flows from investing activities: Cash paid to purchase equipment (50 000) Net cash used in investing activities (50 000) Cash flows from financing activities: Dividends paid (18 000) Net cash used in financing activities (18 000) Net increase in cash $58 000 Chapter 1: Introduction to accounting 1.23 PROBLEM SET A 1. 8 Boral Ltd Statement of financial position as at 30 June 20 10 $’m Current assets: Cash assets 157.0 Accou nts receivable 783.7 Inventory 548.5 Assets held for sale 59.5 Other current assets 63.3 Total current assets 1612.0 Non-current assets: Receivables 19.2 Inventories 85.3 Investments accounted for using equity method 294.1 Other financial assets 26.8 Property, plant and equipment (net) 2785.1 Intangible assets 277.6 Deferred tax asset 43.3 Other non -current assets 66.0 Total non -current assets 3597.4 Total assets 5209.4 Current liabilities: Accounts payable 640.9 Interest -bearing liabilities 8.9 Current tax payable 98.9 Provisions 246.0 Liabilities held for sale 9.9 Total current liabilities 1004.6 Non-current liabilities: Payables 22.1 Interest -bearing liabilitie s 1330.7 Deferred tax liabilities 118.9 Provisions 107.0 Total non -current liabilities 1578.7 Total liabilities 2583.3 NET ASSETS $2626.1 Equity : Issued Capital 1724.0 Reserves (38.9) Retained earnings 938.4 Total parent en tity interest 2623.5 Non-controlling interests 2.6 TOTAL EQUITY $2626.1 If students wish to look up Boral’s annual report the web address is http://w ww.boral.com.au/PromoList/annual_sustainability_reports.asp Solutions manual to accompany Accounting: building business skills 4e 1.24 PROBLEM SET A 1. 9 City Sales Pty Ltd (a) Working capital = $474,500 – $250,000 = $224,500 (b) Current ratio = 1:1.9$250,000$474,500= (c) Current cash debt coverage ratio =  times1.5 2$100,000 $250,000$260,000=+ (d) Debt to total assets ratio = 1: 0.453$1,014,800$460,000= or 45.3% (e) Cash debt coverage ratio =  times0.7 2$300,000 $460,000$260,000=+ (f) Profit margin ratio = 1: 0.052$2,200,000$115,000= or 5.2 % (g) Return on assets ratio = 1: 0.127$902,800$115,000 2$1,014,800 $790,800$115,000= =   + OR 12.7% .