Handbook of Cost & Management Accounting Report

Question: Describe about the Handbook of Cost Management Accounting? Answer: 1: In the books of Quigley Co Journal entries Dr. Cr. Date Particulars Amount ($) Amount ($) 31/12/2015 Dr. Depreciation account Cr. Machine account 160238 160238 Machine account Date Particulars Amount($) (Dr) Date Particulars Amount (Cr) ($) 1//1/2015 To balance b/d 1081925 31/12/2015 By Depreciation 160238 31/12/2015 BY Balance c/d 921688 1081925 1081925 Workings Note 1Calculation showing depreciation Cost of asset $ 1,402,400 Residual value $ 120500 Life of the assets 8 years Depreciation (1402400-120500)/8 $160238 Balance as on 1/1/2015[1402400-(160238*2)] $ 1081925 Note 2 The asset is purchased in the year 2013 and here the machinery account is shown in the year 2015. So the opening balance of Machine in as on 1/1/2015 is calculated after deducting two years depreciation (Kimmel, Weygandt Kieso, 2007). 2: In the books of Marks company Ratio analysis Current asset 1130000 Current liabilities 345000 Current ratio 3.275362319 Quick assets 746000 Quick liabilities 345000 Acid Test ratio 2.162318841 Net sales 2408000 Account receivable 338000 Receivable turnover 7.124260355 Cost of goods sold 1644000 Average inventory 364500 Inventory turnover 4.510288066 Gross profit 764000 Sales 2408000 Profit on sales 32% Earnings 262000 Number of shares 117200 EPS 2.235494881 Net profit 262000 Equity 1172000 Return on common stock 22% MPS 80 EPS 2.235 PER 35.79418345 Debt 402000 Assets 2714000 Debt to assets 0.148120855 Total value of shares 1172000 Number of shares 117200 Book value 10 Note: Marks sold 35000 shares at the middle of the year, so the total number of equity shares is getting reduced at the end of the year and as the ratios are calculated at the end of the year so the number of shares is taken as 117200 (Paramasivan Subramanian, 2009). Note 2: Amount of current assets consists of cash account receivable and Inventories. Note3: Quick asset means current assets minus inventories and quick liabilities means current liabilities minus bank overdraft. As here no overdraft balance is given so the quick liability is same as the current liability (Shapiro Sarin, 2009). Note 4: here the balance of inventory and accounts receivable at the timer of calculating the turnover period is taken on average basis i.e. average of balances of 2014 and 2015. Note 5: Here Debt to total asset ratio is calculated on the basis of total asset consisting of current and noncurrent assets (Srivastava, 2008). Note 6; all the relevant ratios are calculated by taking the balances of 2015 only. 3: Calculation showing the amortization of lease schedule (2014-2019) Year Annual lease payment($) Interest($) Principal($) Balance($) 1 3,407,500 701000 243585 457415 2,950,085 2 2,946,815 701000 202123 498877 2,744,692 3 2,744,692 701000 183932 517068 2,227,624 4 2,227,624 701000 137396 563604 1,664,020 5 1,664,020 701000 86672 614328 1,049,692 6 1,049,692 701000 31382 669618 380,074 7 380,074 380074 0 380074 0 Note : The effective rate of interest is assumed to be 9%. Calculation showing the depreciation Sum of digits methods = 1+2+3+4+5+6+7 = 28 1st year (2014) = (3407500*1)/28 = 121696.4 2nd year (2015)= (3407500*2)/28 = 243392.9 In the books of Hughey (Lessee) Journal entries For the year ended December 2014 (Dr) (Cr) Date Particulars Amount ($) Amount ($) 1.1.2014 Dr. Asset under Lease A/c 3407500 Cr. Lease payable 3407500 (Being asset is acquired under lease agreement) 1.1.2014 Dr. Lease Payable 701000 Cr. Bank 701000 (Being first installment paid) 31.12.2014 Dr. Depreciation 121696 Cr. Provision for Depreciation 121696 (Being depreciation charge on the assets) 31.12.14 Dr. interest 243585 Cr. Interest Payable 243585 (Being interest payable on lease) 31.12.2014 Dr. Interest payable 243585 Dr. Lease Payable 457415 Cr. Bank 701000 (Being interest and a part of principal amount is repaid) 31.12.2014 Dr. Profit and loss 121696 Cr. Depreciation 121696 (Being amount of depreciation charged at the end of the year to PL A/C) (Stittle Wearing, 2008) 4: Milnar Company Partial cash flow statement For the year ended 31/12/2015 Cash flow from operating activities Cash flow from Investing activities i) Sale of machine $ 95,000.00 ii) Purchase of machine $ (138,000.00) Workings Machine account Date Particulars Amount($) (Dr) Date Particulars Amount (Cr) 1//1/2015 To balance b/d $ 695,000.00 31/12/2015 By Bank $ 95,000.00 To Profit and loss $ 64,000.00 31/12/2015 BY Accumulated depreciation $ 40,000.00 To Bank $ 138,000.00 By Balance c/d $ 762,000.00 $ 897,000.00 $ 897,000.00 Accumulated depreciation Date Particulars Amount($) (Dr) Date Particulars Amount (Cr) 1//1/2015 To Machine $ 40,000.00 31/12/2015 By Balance b/d $ 144,000.00 To balance c/d $ 188,000.00 31/12/2015 $ 40,000.00 $ 144,000.00 Note 3 Here nothing will come under the head cash flow from operating activities as no information regarding the regular operations of the business is mentioned here (Hoque, 2005). References Hoque, Z. (2005).Handbook Of Cost Management Accounting. London: Spiramus. Kimmel, P., Weygandt, J., Kieso, D. (2007).Financial accounting. Hoboken, NJ: John Wiley. Paramasivan, C., Subramanian, T. (2009).Financial management. New Delhi: New Age International (P) Ltd., Publishers. Shapiro, A., Sarin, A. (2009).Foundations of multinational financial management. Hoboken, N.J.: John Wiley Sons. Srivastava, R. (2008).Multinational financial management. New Delhi: Excel Books. Stittle, J., Wearing, B. (2008).Financial accounting. Los Angeles: SAGE Publications.