Fin Acc Assignment 2014 2015 1 
Masters in Management BMAN 73071 Introduction to Accounting
First Assessment – Financial Reporting
Part A. A short answer only is required.
How will each of the following affect the amount of cash in a limited liability company?
(i) A write down of the value of the company’s office block.
(ii) The amortisation of one of the company’s brands by 20%.
(iii) A decrease in the level of inventories.
(iv) An issue of 10,000 £1 preference shares at £1.50 per share.
(v) A bonus issue of ordinary shares.
(vi) The sale by a major shareholder of all her shares in the company.
The owner of a business asks you to explain why his accountant says he has made a profit of £75,000, but his bank manager is complaining that he is overdrawn by £40,000. Give 2 short examples of transactions that could lead to a bank overdraft even if the company is profitable
Answers：
(i) A write down of the value of the company’s office block does not affect the amount of cash .
(ii) The amortisation of one of the company’s brands by 20% does not affect the amount of cash.
(iii) A decrease in the level of inventories will do positive effect to the cash amount.
(iv) An issue of 10,000 £1 preference shares at £1.50 per share will cause the increase of the cash amount.
(v) A bonus issue of ordinary shares does not influence the amount of cash.
(vi) The sale by a major shareholder of all her shares in the company does not influence the amount of cash .
（1） the withdraw of cash by the owners from equity investment will have no effect on the expenses in the income statement
（2） the generation of revenue for the period on credit while the cash has not received yet
Part B.
A company has just bought a new machine for £100,000. It is expected to be used in the company for 4 years and then to be sold. At the time of sale it ble of further production for perhaps another 3 years and so it will have an estimated value of £20,000.
Calculate the depreciation charge for this machine and show what values
First Assessment – Financial Reporting
Part A. A short answer only is required.
How will each of the following affect the amount of cash in a limited liability company?
(i) A write down of the value of the company’s office block.
(ii) The amortisation of one of the company’s brands by 20%.
(iii) A decrease in the level of inventories.
(iv) An issue of 10,000 £1 preference shares at £1.50 per share.
(v) A bonus issue of ordinary shares.
(vi) The sale by a major shareholder of all her shares in the company.
The owner of a business asks you to explain why his accountant says he has made a profit of £75,000, but his bank manager is complaining that he is overdrawn by £40,000. Give 2 short examples of transactions that could lead to a bank overdraft even if the company is profitable
Answers：
(i) A write down of the value of the company’s office block does not affect the amount of cash .
(ii) The amortisation of one of the company’s brands by 20% does not affect the amount of cash.
(iii) A decrease in the level of inventories will do positive effect to the cash amount.
(iv) An issue of 10,000 £1 preference shares at £1.50 per share will cause the increase of the cash amount.
(v) A bonus issue of ordinary shares does not influence the amount of cash.
(vi) The sale by a major shareholder of all her shares in the company does not influence the amount of cash .
（1） the withdraw of cash by the owners from equity investment will have no effect on the expenses in the income statement
（2） the generation of revenue for the period on credit while the cash has not received yet
Part B.
A company has just bought a new machine for £100,000. It is expected to be used in the company for 4 years and then to be sold. At the time of sale it ble of further production for perhaps another 3 years and so it will have an estimated value of £20,000.
Calculate the depreciation charge for this machine and show what values