Question

Question 4 The following are comparative financial statements of Clementi Ltd Clementi Ltd Comparative Income Statements For the year ended 31 December 20X6 20X7 20X5 Sales 832,500 340,000 417,000 Cost of goods sold 283,500 212,500153,900 Gross profit 549,000 127,500 263,100 Distribution expenses 154,350 46,920 76,200 29,920 Administrative expenses 76,002 34,200 Total expenses 230,352 76,840110,400 Profit before tax 318,648 50,660152,700 Income tax expenses 61,20010,370 23,505 257,448 Net profit 40,290129,195 Clementi Ltd Comparative Statements of Financial Position As at 31 December 20X7 20X6 20X5 Property, plant and equipment, net 150,000144,000 90,000 5,925 77,622 Long-term investments 750 Current assets 78,585 56,886 Total assets 228,585 201,636 173,547 Liabilities and Equity Current liabilities 4,200 29,940 30,450 Share capital Share premium 108,000 108,000 90,000 13,500 13,500 9,000 44,097 Retained earnings 72,885 50,196 Total liabilities and equity 228,585201,636 173,547 Required: Compute each year's current ratio (a) (3 marks) (b) Express the statement of financial position data in trend percent with 20X5 as the base year (7 marks)

Question 4

The following are comparative financial statements of Clementi Ltd:

Clementi Ltd Comparative Income Statements For the year ended 31 December

Sales
Cost of goods sold Gross profit Distribution expenses Administrative expenses Total expenses
Profit before tax
Income tax expenses Net profit

832,500 340,000 283,500 212,500 549,000 127,500 154,350 46,920

76,002 29,920 230,352 76,840 318,648 50,660

61,200 10,370 257,448 40,290

20X7 20X6 20X5 $$$

417,000 153,900 263,100

76,200

34,200 110,400 152,700

23,505 129,195

20X7 20X6 $$$

Clementi Ltd
Comparative Statements of Financial Position As at 31 December

Property, plant and equipment, net Long-term investments
Current assets
Total assets

Liabilities and Equity Current liabilities
Share capital
Share premium
Retained earnings
Total liabilities and equity

Required:

150,000 0 78,585 228,585

34,200 108,000 13,500 72,885 228,585

144,000 750 56,886 201,636

29,940 108,000 13,500 50,196 201,636

90,000 5,925 77,622 173,547

30,450 90,000 9,000 44,097 173,547

20X5

(a) Compute each year’s current ratio.

(b) Express the statement of financial position data in trend percent with 20X5 as the base year.

(7 marks)

ACC202 Copyright © 2017 Singapore University of Social Sciences (SUSS) Page 6 of 10 Examination – July Semester 2017

(3 marks)

(c) Express the income statement data for the three years as common-size percent. (6 marks)

(d) Use the results computed above to comment on any significant findings revealed. (9 marks)

Answer 1

a) Computation of Current Ratio   

	20X7	20X6	20X5
Current Ratio*	2.43	1.90	2.55

Current Ratio* = Current Assets/Current Liabilities

Current Ratio 2017 =78,585/34,200=2.43

Current Ratio 2016=56,886/29,940=1.90

Current Ratio 2015= 77,622/30,450=2.55

b) Statement of financial position data in trend percent

	20X7	20X6	20X5
	$	$	$
Property, plant and equipment, net	166.67	160	100
Long-term investments	0	12.66	100
Current assets	101.24	73.28	100
Liabilities and Equity
Current liabilities	112.32	101.7	100
Share capital	120	120	100
Share premium	150	150	100
Retained earnings	165.28	113.83	100

c)  Income statement data for the three years as common-size percent

Clementi Ltd

Comparative Income Statement

	20X7	20X6	20X5
	$	$	$
Sales	199.64	81.53	100
Cost of Goods sold	184.21	138.08	100
Gross Profit	208.66	48.46	100
Distribution Expenses	202.56	61.57	100
Administrative Expenses	222.23	87.48	100
Total Expenses	208.65	69.60	100
Profit before tax	208.67	33.17	100
Income Tax Expense	260.37	44.12	100
Net profit	199.27	31.18	100

d) The significant findings are that the Gross Profit had increased from 48% to 209% due to significant increase in sales and and minor increase in cost of goods sold. This could be due to two reasons, the selling price would have increased or cost of goods sold have been decreased by efficient use of resources