FINM7409
Mid-semester Exam
S2, 2023
Part B
Question 1
Woodland Ltd is a home furniture retailer and wholesaler selling affordable home furniture. During the year ended 30 June, it made the following purchases of home office desks:
|
Date
|
Price ($)
|
# Units
|
|
July
|
250
|
30
|
|
September
|
300
|
42
|
|
November
|
350
|
50
|
|
April
|
380
|
30
|
As at 1 July, Woodland Ltd had 25 desks in inventory, which were costed at $450 per unit. As at 30 June, an inventory count revealed 29 desks in inventory.
Required
Compare the value of the desks on hand as at 30 June to be included in the inventory balance on the statement of financial position, under the following cost flow assumptions:
i) FIFO
ii) Weighted-average
(10 marks)
Question 2
St Lucia Timber Ltd. purchased a paper pulper machine for its timber-based production process on 1 April 2022. The machine cost $780,000. St Lucia Timber estimates that the machine has a useful life of 5 years and will have a residual value of $28,000. The company uses straight-line depreciation method to estimate depreciation expenses.
Required:
Estimate the depreciation expense to be recorded in the statement of profit or loss for the year in which the machine was purchased and the subsequent year, assuming St Lucia Timber’s reporting period ends on 31 December.
(10 marks)
Question 3
Sigma Field Ltd. reported a profit of $95,000 for the year. The statement of profit or loss showed that depreciation expense was $12,000 and a gain on the sale of a truck of $7,500. The statement of financial position showed a decrease in accounts receivable of $15,000 for the year, an increase in inventory of $8,000 and a decrease in accounts payable of $5,000.
Required
Prepare a reconciliation of operating profit to cash flows from operating activities using the indirect method.
(10 marks)