Net profit – Knowsia

MA – L2 – Q58 – Performance analysis

Calculate and define financial ratios for Akwasi and Kofi, two manufacturing companies, using their financial statements.

Question

The statements of profit or loss and statements of financial position of two manufacturing companies in the same sector are set out below.

Statement of profit or loss for Akwasi

	ZC¢
Revenue	150,000
Cost of sales	(60,000)
Gross profit	90,000
Interest payable	(500)
Distribution costs	(13,000)
Administrative expenses	(15,000)
Profit before tax	61,500
Income tax expense	(16,605)
Profit for the period	44,895

Statements of financial position for Akwasi and Kofi

	Akwasi	Kofi
	ZC¢	ZC¢
Assets
Non-current assets
Property		280,000
Plant and equipment	190,000	500,000
	190,000	780,000
Current assets
Inventories	12,000	26,250
Trade receivables	37,500	105,000
Cash at bank		22,000
	49,500	153,250
Total assets	240,000	933,250
Equity and liabilities
Equity
Share capital	156,000	174,750
Retained earnings	51,395	390,830
	207,395	565,580
Non-current liabilities
Long-term debt	10,000	250,000
Current liabilities
Trade payables	22,605	117,670
Total equity and liabilities	240,000	933,250

Required:

Define and calculate the following ratios for each company:

(a) Gross profit percentage (2 marks)

(b) Net profit percentage (2 marks)

(d) Asset turnover (2 marks)

The statements of profit or loss and statements of financial position of two manufacturing companies in the same sector are set out below.

Statement of profit or loss for Akwasi

	ZC¢
Revenue	150,000
Cost of sales	(60,000)
Gross profit	90,000
Interest payable	(500)
Distribution costs	(13,000)
Administrative expenses	(15,000)
Profit before tax	61,500
Income tax expense	(16,605)
Profit for the period	44,895

Statements of financial position for Akwasi and Kofi

	Akwasi	Kofi
	ZC¢	ZC¢
Assets
Non-current assets
Property		280,000
Plant and equipment	190,000	500,000
	190,000	780,000
Current assets
Inventories	12,000	26,250
Trade receivables	37,500	105,000
Cash at bank		22,000
	49,500	153,250
Total assets	240,000	933,250
Equity and liabilities
Equity
Share capital	156,000	174,750
Retained earnings	51,395	390,830
	207,395	565,580
Non-current liabilities
Long-term debt	10,000	250,000
Current liabilities
Trade payables	22,605	117,670
Total equity and liabilities	240,000	933,250

Required:

Define and calculate the following ratios for each company:

(a) Gross profit percentage (2 marks)

(b) Net profit percentage (2 marks)

(d) Asset turnover (2 marks)

The statements of profit or loss and statements of financial position of two manufacturing companies in the same sector are set out below.

Statement of profit or loss for Akwasi

	ZC¢
Revenue	150,000
Cost of sales	(60,000)
Gross profit	90,000
Interest payable	(500)
Distribution costs	(13,000)
Administrative expenses	(15,000)
Profit before tax	61,500
Income tax expense	(16,605)
Profit for the period	44,895

Statements of financial position for Akwasi and Kofi

	Akwasi	Kofi
	ZC¢	ZC¢
Assets
Non-current assets
Property		280,000
Plant and equipment	190,000	500,000
	190,000	780,000
Current assets
Inventories	12,000	26,250
Trade receivables	37,500	105,000
Cash at bank		22,000
	49,500	153,250
Total assets	240,000	933,250
Equity and liabilities
Equity
Share capital	156,000	174,750
Retained earnings	51,395	390,830
	207,395	565,580
Non-current liabilities
Long-term debt	10,000	250,000
Current liabilities
Trade payables	22,605	117,670
Total equity and liabilities	240,000	933,250

Required:

Define and calculate the following ratios for each company:

(a) Gross profit percentage

(b) Net profit percentage

(d) Asset turnover

Answer

Find Related Questions by Tags, levels, etc.

Tags: Asset Turnover, Efficiency, Financial Ratios, Gross Profit, Net profit, Performance Analysis, Profitability, ROCE
Level: Level 2

Topic: Performance Analysis

MA – L2 – Q57 – Performance analysis

Evaluate KINTAMPO LTD's performance using financial ratios for two divisions, Amir and Mo.

Question

Zestco is an importer and retailer of vegetable oils. Extracts from the financial statements for this year and last are set out below.

Statements of profit or loss for the years ended 30 September

	Year 7	Year 6
	ZC¢’000	ZC¢’000
Revenue	2,160	1,806
Cost of sales	(1,755)	(1,444)
Gross profit	405	362
Distribution costs	(130)	(108)
Administrative expenses	(260)	(198)
Profit before tax	15	56
Income tax expense	(6)	(3)
Profit for the period	9	53

Statements of financial position as of 30 September

	Year 7	Year 6
	ZC¢’000	ZC¢’000
Assets
Non-current assets
Property, plant and equipment	78	72
Current assets
Inventories	106	61
Trade receivables	316	198
Cash	6
	428	259
Total assets	506	331
Equity and liabilities
Equity
Ordinary shares	110	85
Preference shares	23	11
Share premium	15
Revaluation reserve	20
Retained earnings	78
Current liabilities
Bank overdraft	49
Trade payables	198
Current tax payable	7
Total equity and liabilities

Required:

Define and calculate the following ratios for each year:

(a) Gross profit percentage

(b) Net profit percentage

(d) Asset turnover

(e) Current ratio

(f) Quick ratio

(g) Average receivables collection period

(h) Average payables period

(i) Inventory turnover.

Answer

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Tags: Asset Turnover, Current Ratio, Efficiency, Financial Ratios, Gross Profit, Liquidity, Net profit, Performance Analysis, Profitability, Quick Ratio, ROCE
Level: Level 2

Topic: Performance Analysis

MA – L2 – Q46 – Decision making techniques

Compute Ouluto Limited's net profit for February 20X9 based on the optimum product mix, given resource constraints and cost data.

Question

Ouluto Limited (OUL) is engaged in the manufacture and sale of three products viz. WBA, QPR and SC. The following information is available from OUL’s records for the month of February 20X9:

	WBA	QPR	SC
Sales price per unit (GH₵)	2,300	1,550	2,000
Material cost per Kg. (GH₵)	250	250	250
Labour time per unit (Minutes)	20	30	45
Machine time per unit (Hours)	4	2.5	3
Net weight per unit of finished product (Kg.)	6	4	5
Yield (%)	90	95	92
Estimated demand (Units)	10,000	20,000	9,000

Each worker is paid monthly wages of GH₵15,000 and works a total of 200 hours per month. OUL’s total overheads are estimated at 20% of the material cost.
Fixed overheads are estimated at GH₵5 million per month and are allocated to each product on the basis of machine hours. 100,000 machine hours are estimated to be available in February 20X9.
Required:
Based on optimum product mix, compute OUL’s net profit for the month of February 20X9.

Answer

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Tags: contribution margin, fixed costs, Machine Hours, Manufacturing, Net profit, Optimal production, Product mix, Profit Maximization, Resource Allocation, variable costs
Level: Level 2

Topic: Decision making techniques

FA – L1 – Q62 – Correction of Errors

Prepare journal entries to correct errors in Western Medical Supplies' trial balance as of June 30, 20X9.

Question

The trial balance of Western Medical Supplies showed a short credit of ZM₵6,264 as at June 30, 20X9. A suspense account was opened for the difference and the profit for the year was then calculated at ZM₵956,180.
The following errors and adjustments were discovered subsequently:
(i) An invoice of ZM₵3,700 was debited to purchases but the goods were received after year-end and were not included in the closing inventory.
(ii) Store equipment costing ZM₵8,100 and having a book value of ZM₵3,600 was sold for ZM₵2,500. Cash was debited and store equipment was credited. No other entries were made.
(iii) A cheque of ZM₵1,850 received from a customer was dishonoured on June 25, 20X9 but no entry was made in the books. Cash there against was received after year-end.
(iv) Purchase of office equipment costing ZM₵15,200 was entered in the purchases account. Depreciation on office equipment is provided at the rate of 10%.
(v) A purchase invoice of ZM₵197 was debited to the supplier account as ZM₵917.
(vi) Purchase returns book was under-casted by ZM₵650.
(vii) The opening balance of furniture account was brought forward as ZM₵18,300 instead of ZM₵13,800. Depreciation on furniture is provided at the rate of 10%.
(viii) A balance of ZM₵730 in the sales ledger is to be offset against a balance of ZM₵880 in the purchase ledger.

Required:
(a) Prepare journal entries to adjust the above items.

(b) Recalculate the net profit for the year.

Answer

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Tags: Depreciation, Error Correction, Inventory, Net profit, Non-current Assets, Payables, Profit Adjustment, Receivables, suspense account, Trial Balance
Level: Level 1

Topic: Correction of Errors

FA – L1 – Q52 – Control accounts and account reconciliations

Adjust sales/purchase ledger control accounts and reconcile with individual ledger balances for Kofi Enterprises.

Question

Kofi Enterprises maintains accounts on a fully integrated computerised accounting system which produces control accounts as an integral part of the DOUBLE ENTRY system. At the end of each month individual sales and PURCHASE ledger balances are reconciled automatically to the respective control accounts as a pre-programmed control check.

Unfortunately Kofi was taken ill in the middle of August and his assistant input a number of entries without the correct integration codes. Consequently the system has been unable to reconcile the control accounts at the end of that month. The assistant has manually extracted the individual ledger balances, and the net totals at 31 August are as follows.

Purchase ledger	Sales ledger
GH¢3,556	GH¢8,946

The assistant has also manually produced draft accounts for the six months to 31 August and provides you with the following abridged trial balance.

	GH¢	GH¢
Sales ledger control account	8,979
Purchase ledger control account		7,496
Net profit per draft accounts		4,322
Sundry balances (net)	2,839
	11,818	11,818

You have checked through the accounting records and discovered the following discrepancies.
(1) The total for the PURCHASES day book input total for August has been incorrectly shown as GH¢6,241 following a manual override. The total should have been GH¢2,641.
(2) An old debit balance of GH¢28 in the PURCHASE ledger had been written off during August as bad. You discover that no ENTRY had been input other than in the individual supplier’s ledger account.
(3) A payment of GH¢260 on 14 August relating to the payment of a July PURCHASES invoice had been wrongly input in the cash account as wages.
(4) During the month of August there had been a mix-up over goods supplied to a CUSTOMER, Kwame. The goods were invoiced for GH¢62, despatched to Kwame and correctly entered in the system on 5 August. Several items turned out to be defective and were returned by Kwame on 28 August. These goods, originally costing GH¢14, were included in the original invoice of GH¢62 at an amount of GH¢17. No ENTRY was made in the books as a result of the return of the goods but they were manually input into the INVENTORY account at GH¢17. Owing to their damaged state their net realisable value is estimated to be GH¢5.
(5) Kofi has received discounts during the month amounting to GH¢280. However, these have only been manually input to the individual suppliers’ accounts.
(6) Certain discrepancies in the print-out of balances at 31 August have come to light, suggesting a software error might also have occurred. You discover that
(i) debit balances on the sales ledger of GH¢54 and GH¢69 respectively had been completely omitted from the listing
(ii) a CREDIT balance on the PURCHASE ledger of GH¢71 had been listed as a debit balance of GH¢17
(iii) the total of debit entries on Adwoa’s account in the sales ledger had been overcast by GH¢90.

Required
(a) Adjust the sales and PURCHASE ledger control accounts and show the reconciliation of the closing balances with the aggregate of the individual balances extracted from the PURCHASE and sales ledgers.

(b) Compute a revised net profit for the six month period to 31 August.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Bad Debts, Discounts, Error Correction, Financial Statements, Inventory Valuation, Ledger adjustments, Misclassification, Net profit
Level: Level 1

Topic: Correction of Errors

Tag (SQ): Net profit

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MA – L2 – Q58 – Performance analysis

Calculate and define financial ratios for Akwasi and Kofi, two manufacturing companies, using their financial statements.

MA – L2 – Q57 – Performance analysis

Evaluate KINTAMPO LTD's performance using financial ratios for two divisions, Amir and Mo.

MA – L2 – Q46 – Decision making techniques

Compute Ouluto Limited's net profit for February 20X9 based on the optimum product mix, given resource constraints and cost data.

FA – L1 – Q62 – Correction of Errors

Prepare journal entries to correct errors in Western Medical Supplies' trial balance as of June 30, 20X9.

FA – L1 – Q52 – Control accounts and account reconciliations

Adjust sales/purchase ledger control accounts and reconcile with individual ledger balances for Kofi Enterprises.

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MA – L2 – Q58 – Performance analysis

Calculate and define financial ratios for Akwasi and Kofi, two manufacturing companies, using their financial statements.

You're reporting an error for "MA – L2 – Q58 – Performance analysis"

MA – L2 – Q57 – Performance analysis

Evaluate KINTAMPO LTD's performance using financial ratios for two divisions, Amir and Mo.

You're reporting an error for "MA – L2 – Q57 – Performance analysis"

MA – L2 – Q46 – Decision making techniques

Compute Ouluto Limited's net profit for February 20X9 based on the optimum product mix, given resource constraints and cost data.

You're reporting an error for "MA – L2 – Q46 – Decision making techniques"

FA – L1 – Q62 – Correction of Errors

Prepare journal entries to correct errors in Western Medical Supplies' trial balance as of June 30, 20X9.

You're reporting an error for "FA – L1 – Q62 – Correction of Errors"

FA – L1 – Q52 – Control accounts and account reconciliations

Adjust sales/purchase ledger control accounts and reconcile with individual ledger balances for Kofi Enterprises.

You're reporting an error for "FA – L1 – Q52 – Control accounts and account reconciliations"

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