Principles of Finance (FINC2202)
Higher Institute of Commerce and Management (HICM)
Semester: Second Semester
Level: 200
Year: 2019
DEPARTMENT OF ACCOUNTING AND FINANCE
PRINCIPLES OF FINANCE EXAMINATION; LEVEL 200; 2018/2019 ACADEMIC YEAR
QUESTION 1 (45 marks)
For December 31,2015, the balance sheet of INST A Corporation is as follows:
ASSETS
LIABILITIES AND STOCKHOLDERS EQUITY
Current assets
Liabilities
Cash
10
Accounts payable
12
Accounts receivable
15
Notes payable
20
Inventory
25
Bonds payable
50
Prepaid expenses
12
Total liabilities
82
Total current assets
62
Stockholders’ equity
Fixed assets
Common stock
75
Plant & equipment (gross)
250
Paid
-
in Capital
25
Less accumulated depreciation
50
Retained earnings
80
Net plan & equipment
200
Total stockholders
5
equity
180
Total assets
262
Total liabilities & stockholder’s E
262
Sales for 2016 were 220 FCFA and the cost of goods sold was 60% of sales. Selling and administrative
expenses was 22 FCFA. Depreciation expense was 8% of plant and equipment (gross) ar the beginning
of the year. Interest expense for the notes payable was 10%, and interest expense on the bonds payable
was 12%. These interest expenses are based on December 31, 2015 balances. The tax rate averaged
20%. 2 FCFA in preferred stock dividends were paid and 8.4 FCFA in dividends were paid to common
stockholders. There were 10,000 shares of common stock outstanding.
During 2016, the cash balance and prepaid expenses balance were unchanged. Accounts receivable
and inventory increased by 10%. A new machine was purchased at the end of December. 2016 at a cost
of 35 FCFA. Accounts payable increased by 25%. Notes payable increased by 6 FCFA and bonds
payable decreased by 10 FCFA, both at the end of the year. The common stock, and paid-in-capital in
excess of par accounts did not change.
a)
Prepare an income statement for 2016. (12 marks)
b)
Prepare a statement of retained earnings for 2016. (7 marks)
c)
Prepare a balance sheet as of December 31,2016. (13 marks)
d)
Prepare a statement of cash flow for 2016. (13 marks)
NB: All amounts are in thousands
QUESTION 2 (25 marks)
The financial statement of LATEN1GHT Ltd presents the following information; Sales (all on credit)
50,000,000 FCFA in the year 2016.
Sales to total assets 5 times
Total debt to asset 75%
Current ratio 7.5 times
Inventory turn over 12.5 times
Average collection period 45 days
Fixed assets turnover 12.5 times
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Work Required: Using the information above, fill in the balance sheet below.
Cash Current debt
Accounts receivable Long term debt
Inventory Total debt
Total current assets Equity
Fixed assets
Total assets Total debt + equity
It is your altitude, not you armpitude that determines your altitude.
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