Question 1

a. patent is an asset because it is something that the company owns and has value.

b) Prepaid insurance is an asset because it is an advance payment.

c) Accumulated depreciation is an expense because it is a decrease in the value of an asset.

d) Accounts payable is a liability because it is money that the company owes.

Question 3

1. Caulfield Ltd may have a competitive advantage in manufacturing product A. This could be

due to economies of scale, unique manufacturing capabilities, or access to low-cost inputs.

2. Caulfield Ltd may believe that it can sell product A at a price above $15, making it more

profitable to manufacture the product internally.

Question 4

a.

Depreciation = (Cost of Asset- Residual Value) /Useful life

Depreciation expense = (120,000 - 10,000) / 5 = $22,000 per year

b. The supplies expense for the year is $950. This is calculated by adding the opening balance of

$500 to the year's purchases of $1,000, and then subtracting the closing balance of $550.

500 + 1,000 - 550 = 950

Question 5

Q.51. Leaseback agreements are not included in the statement of financial position as assets

because they do not represent a long-term interest in the property.

2. Operating leases are not included in the statement of financial position as assets because they

do not confer ownership of the property to the lessee.

Question 6

a. Bakery - job costing

b. A manufacturer producing bottled soda water - process costing

c. A manufacturer producing aircrafts - batch costing

d. A private hospital - job costing

Job costing is suitable for businesses that produce unique products or services. Process costing is

suitable for businesses that produce large quantities of similar products. Batch costing is suitable

for businesses that produce products in batches.

A bakery would use job costing because each cake is unique and require different amounts of

ingredients. A manufacturer producing bottled soda water would use process costing because

each bottle of soda water is the same. A manufacturer producing aircrafts would use batch

costing because each aircraft is produced in a batch. A private hospital would use job costing

because each patient requires different treatments.

Question 7.

a)

Schedule for cash receipts for the month of April, May and June.

Month Sales % of Sales collected Actual sales collected

March $6000 0.3*6000 1800

April $5000 (0.3*500) + (0.6*4200) 4020

May $5000 (0.3*5000) + (0.6*3500) + (0.1*1680) 3768

b)

-Incentivize customers to pay their invoices early with a discount

-Offer a credit card as a payment option

-Send friendly reminders after invoices are due.

-Incentivizing customers to pay their invoices early with a discount is a great way to encourage

them to do so.

-Offering a credit card as a payment option is also a great way to speed up cash collection from

customers.

-Sending friendly reminders after invoices are due is also a great way to remind customers to pay

their invoices.
Question 8

a. Current Ratio = Current Assets /Current Liability

= 15300/14400

= 1.06

Quick Ratio = (Current Asset- Inventory)/ Current Liabilities

Current Assets =1,200+12,000+800+1300= 15300

Current Liabilities = 8000+6000+400= 14400

= (15300-0)/14400

= 1.06

b. A quick ratio of 1.06 means that the business has enough liquid assets to cover its short-term

liabilities. This is a good thing because it means that the business is able to pay its bills in the

short term. A current ratio of 1.06 means that the business has enough assets to cover its

liabilities. This is also a good thing because it means that the business is not in danger of

defaulting on its debt.

Question 10

a.
 Project 1
Year Expected Cash inflow CF
0 80000
1 20000 20000
2 30000 50000
3 35000 85000
4 25000 110000
Payback period

Payback Period = 23000/35000

Payback period is 2.86 Years. Project 1 is preferred because it has a shorter payback period

Project 2

Year Expected Net cashflow Cumulative Cashflow Payback

0 $90,000 _
1 $26,000 $26,000.000
2 $25,000 $51,000.000
3 $33,000 $84,000.000
4 $32,000 $116,000.000

Payback period is 3 6000/32000= 3.1875 years

NPV

Project 1

Year Expected Cash inflow Rate

0 80000 1.000 80000
1 20000 0.909 18180
2 30000 0.826 24780
3 35000 0.751 26285
4 25000 0.683 17075
NPV 6320

Project 2
Year Expected Net cashflow Discout rate NPV
0 $90,000 1.000
1 $26,000 0.909 $23,634.000
2 $25,000 0.826 $20,650.000
3 $33,000 0.751 $24,783.000
4 $32,000 0.683 $21,856.000
Value of NPV $923.000

Project one should be considered since it has a higher NPV