PRE-EXAMINATION REVISION

FOR
CENTRE FOR FOUNDATION STUDIES IN SCIENCE
UNIVERSITY OF MALAYA
FCAB 0111 ACCOUNTING AND FINANCIAL MANAGEMENT
Question 1
(a) Explain the following terms:
a. Accrued expenses.
b. Prepaid revenues.
(b) Give examples for each of the above.
(c) Elaborate on the accounting treatment for each of the above.
(d) Calculate for the following asset (i) the annual depreciation charges since it
was acquired and (ii) the accumulated depreciation every accounting year
until to 31st March 2015:
Machine P : Purchased on 1st June 2010
Machine Q : Purchased on 1st April 2011
Machine R : Purchased on 1st January 2012
Depreciation rate is 10% using reducing balance method.
Question 2
Hero Enterprise prepares its financial statements at the end of every accounting
year. The trial balance of the business as at 31 st December 2014, is as follows:

Debtor
Salary

Hero Enterprise
Trial Balance as at 31st December 2014
RM
20,0
00
15,0
00

165,75
4

Sales
Beginning inventory
Utilities
Drawings

2,7
66
2,8
88
2,9
80
1,76
1

Commission
Sales return

7,3
63
2,87
6
2,98
8

Rent
Purchases return
Cash

RM

4,8

46
2,82
8

Accumulated depreciation - machinery

General expenses
Advertisement expenses

28,2
71
29,2
99
83,73
6

Capital
Machinery
Purchases

80,0
00
66,5
30
259,9
43

259,94
3

Additional information as at 31st December 2014:

1. Accrued advertisement expenses for the year amounted to RM701.
2. Stock on hand as at 31st Dec 2014 totaled RM50,000.
REQUIRED:
(a) Prepare an Income Statement of Zero Enterprise for the month ended 31 st
December 2014.
(b) Prepare a Balance Sheet of Zero Enterprise as at 31 st December 2014.
Question 3
(a) With reference to your completed financial statement in Question 2 above,
calculate the following:
i.
Gross profit ratio
ii.
Net profit ratio
iii.
Current ratio
iv.
Acid Test ratio
(b) Interprete each of the above (i) to (iv).
(c) What are the limitation of using ratio analysis ?
Question 4
There are two alternative investment proposals in consideration.
Proposal for Project 1 data:
Initial investment cost RM800,000
Estimated useful life 5 years
Estimated salvage value RM50,000
Estimated annual net income RM200,000
Proposal for Project 2 data:
Initial investment cost RM920,000
Estimated useful life 6 years
Estimated salvage value RM20,000
Estimated annual net income RM220,000

All revenue and expenses other than depreciation will be received and paid in
cash. The company uses a discount rate of 10% in evaluating all capital
investments.
REQUIRED:
Compute the following for each proposal,
Annual net cash flow
Payback period (in years)
Average investment
Return on average investment
Net present value
(b)

Based on your analysis in (a), which proposal appears to be

the best investment? Explain.