## M2 OAES Corrections

Q6-3: A business has the following balances in its financial records: Income tax £30,000; Selling & administration expenses £80,000; Revenue £350,000; Interest expenses £15,000; Cost of Sales £190,000. Which of the following is correct?

Question options:

 Gross profit £160,000; Operating profit £80,000; Net profit after tax £35,000 Gross profit £80,000; Operating profit £65,000; Net profit after tax £35,000 Gross profit £160,000; Operating profit £65,000; Net profit after tax £30,000 Gross profit £80,000; Operating profit £65,000; Net profit after tax £35,000

Q6-6: ABC buys a smaller company XYZ for a negotiated price of £1 million. XYZ’s assets are valued at £750,000. Assuming goodwill is amortized over 5 years, the value of goodwill in ABC’s Statement of Financial Position at the end of the third year after acquisition will be:

Question options:

 £100,000 £300,000 £150,000 £400,000

Q7-1: The difference between ROI and ROCE ratios is due to:

Question options:

 Interest, tax and long-term debt Tax and shareholders’ funds Long-term debt and shareholders’ funds Interest and long-term debt

Q7-2: Use the following information extracted from ABC’s Income Statement and Balance sheet and match the item with the correct calculation.

Sales £4,200,000; Gross profit £2,700,000; Receivables £630,000; Payables £275,000; Inventory £300,000. ABC calculates its financial ratios based on being open for business 6 days per week for 50 weeks per year.

 __3__ 5 __2__ 55 __1__ 45
 1. ABC’s days’ sales outstanding 2. ABC’s inventory turn 3. ABC’s days’ payables outstanding

Q7-3: A company has capital employed of €1,000,000 and generates a profit after tax of €300,000. The change in return on investment between a Balance Sheet with 60% debt and one with 40% debt is:

Question options:

 From 43% to 60% From 75% to 50% From 50% to 75%

Q8-2: In a manufacturing business, the completion of production results in the following flow of costs for inventory:

Question options:

 Decrease raw materials and increase finished goods Decrease work in progress and increase cost of sales Decrease work in progress and increase finished goods Decrease finished goods and increase cost of sales

Q8-3: A business purchases inventory stock on four separate occasions. Purchased 3,500 units at a total cost of €8,050; Purchased 3,000 units at a total cost of €7,110; Purchased 4,000 units at a total cost of €9,600; and Sold 5,995 units at a total price of €24,760. Each purchase was completed in the order provided within the same period. Match the inventory method with the correct cost of sales and the correct value of inventory.

 __3__ €13,963 __2__ €4,082 __4__ €3,896.75 __1__ €14,148.20
 1. weighted average method for cost of sales 2. first in-first out method for cost of sales 3. weighted average method for the value of inventory 4. first in-first out method for the value of inventory
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