BM12 Revision: Balance Sheet + Profit & Loss

Individually, complete the following problems on a separate sheet of paper. Make sure to show your work. You may use a calculator.

If you finish early, start reading* on Investment Appraisal: Payback Period on p. 310-312 in Hoang or in Mr. Slaughter’s BM Blog. http://goo.gl/lOYbHW

For homework, take notes on Payback Period. I will check these next class because I’d like to offer tips on how to strengthen note-taking.

PART ONE: Miley Co. Profit & Loss

For the year 2010, Miley Co. generated average monthly revenues of $125,000. This was achieved by pricing the goods with an average mark up of 50% of total direct costs. The company’s expenses for the year included:

Advertising $ 50,000Salaries $100,000Interest payable $ 15,000Rent $ 75,000Utilities $ 25,000Taxes $ 45,000

From the net profits, the company retained 50% and paid out the balance as dividends to shareholders.

HL & SL: Prepare a profit and loss account for Miley Co. for 2010.

PART TWO: Bieber Co. Balance Sheet

Selected financial information from Bieber Co. accounts as at 3l March 2014 (all figures in US$m)

1) HL & SL: Using the information provided, prepare a balance sheet for Bieber Co. as at 31 March 2014.

2) HL: Using the reducing balance method of depreciation at a rate of 40% per year, calculate the total depreciation charge on the equipment purchased three years ago (show all your working).

3) HL: Prepare Bieber Co.’s new balance sheet as at 31 March 2014, taking into account the depreciation charge calculated in no. 2.

Cash 0.1Creditors 0.8Debtors 0.2Fixed assets – equipment 1.5Fixed assets – land and buildings 9Loan capital 4Retained profit 2Share capital 4