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Accounting and Finance for Managers (092025-ISM)
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QUESTION A1 (50 marks)
A-Max Corporation, a business owned by sole trader Jimmy, had the following assets and liabilities as at the financial years ended 30 September 2023 and 30 September 2024 as shown.
| 30 SEPTEMBER 2024 | 30 SEPTEMBER 2023 |
ASSETS |
|
|
Cash at bank | $15 000 | $ 6 000 |
Inventory | 14 000 | 15 000 |
Prepaid insurance | 5 000 | 2 500 |
Accounts receivable | 7 000 | 6 000 |
Motor vehicles | 20 000 | 20 000 |
Land and buildings | 40 000 | 40 000 |
LIABILITIES |
|
|
Accounts payable | $26 000 | $17 500 |
Accrued expenses | 5 000 | 8 000 |
Mortgage | 10 000 | 10 000 |
Bank loan | 35 000 | 37 500 |
REQUIRED:
a) Estimate the equity as at the end of the two financial years. (10 marks)
b) If Jimmy contributed an extra $15 000 capital during the financial year ending 30 September 2023 and made no drawings, determine his profit (or loss) for the year, assuming the above balances remain the same.
(5 marks)
c) If Jimmy had contributed an extra $20 000 and withdrew $15 000 during the year ending 30 September 2023, determine his profit for the year, assuming the above balances remain the same.
(5 marks)
d) JP Morgan operates a wholesale clothing operation called JP’s Designs. All the sales and purchases of the business are made on credit. The opening and closing balances for accounts receivable, accounts payable and inventory are shown below.
| At start of period |
| At end of period | ||||
Accounts receivable | $ | 3 000 |
|
| $ | 5 800 |
|
Inventory |
| 12 000 |
|
|
| 15 200 |
|
Accounts payable |
| 4 000 |
|
|
| 6 100 |
|
During the reporting period, JP Morgan received $58 000 from accounts receivable and paid $36 000 to suppliers.
REQUIRED:
Estimate the revenue from sales, cost of sales and gross profit for the reporting period for JP Morgan’s Designs.
(15 marks)
e) Describe the impact of Other Comprehensive Income (OCI) on the overall financial performance and how it is used by stakeholders in decision-making. Recommend examples
how can companies use the information from the Statement of Comprehensive Income to improve their financial strategies and performance. (15 marks)
(Total:50 marks)