A B C D E F

Revenue +18,000 Cost of sales Personnel expenses Depreciation, amortization and write-downs -1,000 Other operative expenses -5,000 -1,500 Financial income +50 Financial Expense Profit before tax -6,000 0 18,000 -1,500 50 0

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

A B C D E F

Cash flow from operating activities +1,000 Cash flow from investing activities Cash flow from financing activities +8,000 +50 Cash flow of the year 1,000 8,000 0 0 50 0

A B C D E F

Tangible non-current assets +12,000

Intangible non-current assets +5,000 Financial non-current assets/Investments Inventory Trade receivables Cash and cash equivalents +18,000 +1,500 -12,000

Total Assets 5,000 0 18,000 1,500 0 0

Equity +8,000 Loans Provisions Trade payables Total Equity and Liabilities 0 8,000 0 0 0 0

Question Two

Part a

The income statement shows the revenues and expenses of a company with a particular period.

Accruals refer to the accounting transaction that has already been, but the subsequent cash is not yet received.

Equity refers to the total value of share issued by a company. It also is given by subtracting all the company's liabilities from the total assets.

Current assets are the company's assets that can be converted into cash within a period of one year or less.

Cash flow from operating activities refers to the cash generated from the regular operational activities within a given period, such as sales revenue and sales expenses.

Part b

A provision refers to the amount of money set aside to cover the future liabilities that may be incurred by the company. The major purpose of provisions is to ensure that the account balance is accurate since it helps to cover some of the costs that may be unaccounted for within the current or previous financial year. Provisions lead to the reduction of a company's equity since they are recognized on the balance sheet as liabilities and further expense in the income statement.

Part c

Note 19 covers the other intangible assets such as software, licenses, and other similar assets. The structure of the notes shows the opening balance, the impact of the IFRS 15 on the balance, the intangible asset acquired, the disposals, capital expenditures, write-downs, amortization, and the residual value for the year.

Part d

This question is a test since every accountant practitioner is required to be well conversant with all the relevant accounting procedures including the assumption, principles, and concepts that govern the accounting transactions as stipulated by the United States generally accepted accounting principles (US GAAP). In the case scenario, it is not strange that the invoice was not received and using the accrual principle, the company can recognize the transaction even though the invoice is not yet received.

Question Three

Part a

Details Racer Bikes Mountain Bikes Children's Bikes

Budgeted Volume 2,000 5,000 20,000

Direct material cost/Bike PS500 PS300 PS30

Total direct material cost PS1,000,000 PS1,500,000 PS600,000

Direct labor cost/Bike PS100 PS100 PS10

Total direct labor cost PS200,000 PS500,000 PS200,000

Total direct costs PS1,200,000 PS2,000,000 PS800,000

Total indirect costs (PS2,600,000 + PS1,320,000) = PS3,920,000

To be allocated based on the budgeted volume 200027000 PS3,920,000

= PS290,370 500027000 PS3,920,000

= PS725,926 2000027000 PS3,920,000

= PS2,903,704

Total Production costs PS1,490,370 PS2,725,926 PS3,703,704

Full cost per bike PS745 PS545 PS185

Part b

Details Racer Bikes Mountain Bikes Children's Bikes

Budgeted Volume 2,000 5,000 20,000

Selling price/bike PS1,000 PS600 PS80

Totals sales revenue PS2,000,000 PS3,000,000 PS1,600,000

Full cost per bike PS745 PS545 PS185

Total cost PS1,490,000 PS2,725,000 PS3,700,000

Profit margin PS510,000 PS275,000 (PS2,100,000)

The profit margin for the entire company will be (PS1,315,000), and the most profitable product is the racer bikes.

Part c

Effective allocation of resources is a vital aspect of enhancing the success of projects within a company. Therefore, Sports Bikes Inc. manufacturers should, therefore, focus an allocating the financial resources on the products that have the potential to create a financial benefit as well. For example, looking at the three products, the full costing method shows that the Children bikes are operating at a loss which makes the entire company to make a loss. However, the racer bikes and mountain bikes are operating at a profit. Given this case, the company can consider stopping the production and sale of the children bikes since they are consuming resources without generating a profit and instead focus on the other profitable products.