Instructions – PLEASE READ THEM CAREFULLY
Assignment Question(s): (Marks 30)
Q1. How are the direct write-off method and the allowance method applied in accounting for uncollectible accounts receivables? Explain with examples (4 Marks)
Q2. Explain what is meant by depreciation
Describe the methods of depreciation and give a numerical example for each method (7 Marks)
Q3 The following information is related to PQR company and XYZ company for the year 2013:
|PQR Company||XYZ Company|
|Cash dividend declared and paid during the year||750,000||124,800|
|Number of shares of common stock outstanding||50,000||24,000|
|Par value of a share||50||50|
|Market value of a share||60||52|
Both the companies belong to same industry. PQR is an old and well-established company where as XYZ is a new company. The historical data shows that the PQR has a stable annual dividend distribution to stockholders.
Calculate dividend yield ratio of both the companies. Which company would you recommend for investment in shares? Explain with reasons. (5 Marks)
Q4. A company’s income statement for 2021 showed the following:
Net income, SR150, 000;
depreciation expense, SR20,000
Accounts receivable decreased SR20, 000
merchandise inventory increased 8,000
accounts payable increased 3,000.
Required: Prepare the operating activity section of the statement of cash flow using the indirect method. (5 Marks)
Q5. Why does the management of any companies analyze financial statements? Explain by using the different tools in analyzing financial statement with proper numerical example? (5 Marks)
Q6. a) Explain the methods that can estimate bad debt expenses in business. (Give numerical examples) (1 Mark)
b.) Differentiate between Accounts receivable and Notes receivable. (1 Mark)
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