Help me with Accounting Task

I have to complete an accounting task. Please help me complete it. Here is the first question. There are 3 questions of similar difficulty. Many thanks

QUESTION 1 (10 Marks)

The following financial statements were prepared for the management of Morgan Ltd. The statements contain some information that will be disclosed in note form in the general purpose external financial statements to be issued to the investors.

Morgan Ltd

Income Statement

For the year ended 30 June 2018

Revenues (Note 2) $850,500

Expenses, excluding finance costs (Note 4) 686,700

Finance costs 6,300


Profit before income tax 157,500

Income tax expense 63,000


Profit $ 94,500


Morgan Ltd

Statement of Financial Position

As at 30 June 2018

Current assets

Cash and cash equivalents $ 37,800

Accounts receivables $299,250

Less: Allowance for doubtful debts 18,900



Inventories 252,000


Total current assets 570,150


Non-current assets

Land 63,000

Building $189,000

Less: Accumulated Depreciation 37,800

_________ 151,200

Store equipment 47,250

Less: Accumulated Depreciation 22,050

_________ 25,200


Total Non-current assets 239,400


Total assets 809,550


Current liabilities

Accounts payables 270,900

Preference dividends payable 3,780

Ordinary dividends payable 25,200

Other current liabilities 12,600


Total current liabilities 312,480


Non-current liabilities

Long-term borrowings (Note 5) 63,000


Total Non-current liabilities 63,000


Total liabilities 375,480


Net assets 434,070



Share capital $315,000

Retained earnings 119,070


Total equity 434,070


Morgan Ltd

Statement of Changes in Equity

For the year ended 30 June 2018

Share capital


Balance at start of period $252,000


Balance at end of period 252,000


Preference (Note 6):

Balance at start of period 63,000


Balance at end of period 63,000


Total share capital $315,000


Retained earnings

Balance at start of period $53,550

Total profit for the period 94,500

Dividends – preferences (3,780)

Dividends – ordinary (25,200)


Balance at end of period $119,070


Notes to the financial statements

Note 2: Revenue

Sales $850,500

Note 4: Expenses

Cost of sales 567,000

Selling and distribution expenses 89,000

Administration expenses 30,700

Note 5: Long-term borrowings

10% mortgage payable 63,000

Note 6: Preference shares

6% preference shares 63,000

Additional information:

1. The balance of certain accounts at the beginning of the year are:

Accounts receivables $315,000

Allowance for doubtful debts (26,350)

Inventories 220,500

2. Total assets and total equity at the beginning of the year were $756,000 and $368,550 respectfully.


A. Name the ratios that a financial analyst might calculate to give some indication of the following cases: (2 Marks)

1. A company’s earning power

2. The extent to which internal resources have been used to finance acquisition of assets

3. Rapidity with which accounts receivables are collected

4. The ability of the entity’s earnings to cover its interest commitments

5. The length of time taken by the business to sell its inventories

B. Calculate and briefly discuss the suitability of the ratios mentioned for each of the above cases. (6 Marks)

C. Given the above financial statements, comment on the company’s profitability and liquidity. (2 Marks)

Skills: Accounting, Finance, Financial Research, Excel, Financial Analysis

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