TUTORIAL CHAPTER 5 (INCOME STATEMENT)

Question 1
Assume Mr Ramlee purchase a combine for RM75,000 on Jan 1. Calculate the annual
depreciation expenses for year 1, 2 and 3 under straight line method, double declining balance
method, and sum of year digit method assuming a 10-year useful life and a salvage value
RM8,000.

Question 2
An asset costing RM20,000 has estimated useful life of 5 years and terminal value of
RM4,500. Calculate the depreciation for the three years of its life using double declining
balance method.

Question 3
A machinery costs RM5,000 and has an anticipated RM1,000 resale value at the end of its
five-year useful life. Compute the depreciation schedule for the machinery by the sum-of-
years-digits method.

Question 4
Item RM
Cash expenses 110,000
Depreciation 8,500
Ending inventory value 28,000
Beginning unused supply 5,000
Ending accrued expenses 9,000
Cash revenue 167,000
Beginning inventory value 42,000
Beginning accrued expenses 1,500
Ending unused supply 2,500

Based on the above information, calculate:

a) Cash-basis net farm income
b) Total Revenue on Accrual Basis
c) Accrual -Basis net farm income

Question 5
Explain the different between profit and profitability
Question 6
The table below was a summary of an income statement for an agricultural project.
Item RM
Net farm income 51,200
Total Liabilities 318,000
Total asset 602,500
Interest paid 20,900
Value of unpaid family labour 3,000
Opportunity cost of labour 11,000
Opportunity cost of management 9,000
Opportunity cost of capital 7%

Using the above information, calculate

a) Rate of return to capital
b) Rate of return of equity
c) Return to labour and management

Question 7
Prepare an income statement for Ramlee based on following information. Then, calculate
Ramlee’s retained earnings.

Item RM
Crop sales 35,000
Livestock product sales 70,000
Ending crop inventories 3,000
Interest expenses 8,000
Depreciation 1,500
Ramlee’s family living expenses 15,000
Beginning crop inventories 1,000
Loss in sale of capital asset 2,200
Input expenses 7,000
Fuel and lubricant 1,000
Livestock expenses 1,300
Repair and Maintenance 700
Ramlee’s income tax 1,500