Cafe De Coral Horizontal Integration Essay

1636 words - 7 pages

TEST 2013 – 2014



- This paper contains FIVE multiple choice questions and
THREE short questions
* Attempt ALL questions
* Marks allocated to each question are indicated in brackets
* Start with a new page for each question
* This paper carries 50 marks
* Non programmable calculator can be used in the test
* You are reminded of the necessity for clear and clearly presentation in your answer
* Do NOT take away this question paper

Multiple Choice Questions (2 marks each, total ...view middle of the document...

If the company estimates that 1% of its net credit sales will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense? |
| A | $ 25,400 |
| B | $ 31,400 |
| C | $122,000 |
| D | $134,000 |

5 | ABC Company makes a loan to Lily Company and receives in exchange a three-year, $10,000 note bearing interest at 10 percent annually. The market rate of interest for a note of similar risk is 12 percent. How does ABC Company record the receipt of the note? |
| A | Debit Note receivables $10,000Credit Cash $10,000 |
| B | Debit Cash $10,000Credit Note receivables $10,000 |
| C | Debit Note receivables $10,497Credit Cash $10,497 |
| D | Debit Note receivables $9,520Credit Cash $9,520 |
| | |

Present value table for 1

Present value table of an ordinary annuity of 1

Question 1 (Total 20 marks)
The Income Statement of Apple Limited for the year ended 31 December 2013 is given as below:
Apple Limited
Income Statement for the year ended 31 December 2013
| $ | $ |
Sales | | 6,900,000 |
Cost of goods sold | | |
Beginning inventory | 1,900,000 | |
Purchases | 4,400,000 | |
Goods available for sale | 6,300,000 | |
Ending inventory | 1,600,000 | |
Cost of goods sold | | 4,700,000 |
Gross Profit | | 2,200,000 |
Operating expenses | | |
Selling expenses | 450,000 | |
Administrative expense | 700,000 | 1,150,000 |
Net income | | 1,050,000 |

Additional Information:
1. Accounts receivables decreased $310,000 during the year.
2. Prepaid expenses increased $170,000 during the year.
3. Accounts payable to suppliers of merchandise decreased $275,000 during the year.
4. Accrued expenses payable decreased $120,000 during the year.
5. Administrative expenses include depreciation expense of $60,000.

(a) Prepare the operating activities section of the statement of cash flows for Apple Limited for the year ended 31 December 2013, using:
(i) INDIRECT method.
(8 marks)
(ii) DIRECT method.
(9 marks)
(b) What is the purpose of the statement of cash flows? What information does it provide?
(3 marks)

Question 2 (Total 10 marks)

Star Company is a listed company involved in textile industry.
On 1 January 2005, the company acquired a building at cost $4,000,000 and it was used as an office since acquisition. The estimated useful life for the building is 40 years. Straight-line method is applied for the depreciation of this building.
On 31 December 2012, the fair value of the building is determined as $3,800,000.
On 1 July 2013, the company disposed the building for a cash amount of $4,000,000.
Star Company is adopting revaluation model for all property, plant and...

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