M2 OAES Assigned Questions

Read the Success on the OAES document for full instructions about how to use this system.

Assigned questions for Module 2 are:

Q6-1: What are accounting standards?

Q6-2: Summarize the IASB’s Framework for the Preparation and Presentation of Financial Statements.

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. How much is the Gross profit, Operating profit, and the Net Profit after tax?

Q6-4: What are some ways you can express the accounting equation?

Q6-5: The following items appear in a Statement of Financial Position: Receivables €200,000; Payables €350,000; Inventory €100,000; Non-current assets €750,000; Long-term loan €400,000. What is the balance of Shareholders’ funds (SH Equity)?

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, what is the value of goodwill in ABC’s Statement of Financial Position at the end of the third year after acquisition?

Q6-7: What is Agency theory and what is it primarily concerned with?

Q7-1: What is the difference between ROI and ROCE ratios?

Q7-2: Use the following information extracted from ABC’s Income Statement and Balance sheet to determine ABC’s Days Sales Outstanding, Inventory Turn, and Payables Days Outstanding:

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.

Q7-3: A company has capital employed of €1,000,000 and generates a profit after tax of €300,000. Assume the company has a balance sheet with 60% debt. What is the ROI? Now assume the company has a balance sheet with 40% debt. What is the ROI?

Q7-4: A business has current assets of $35,000 and current liabilities of $20,000. It collects its receivables more quickly and uses $10,000 of its cash at bank to repay a long-term debt. What is the effect on the working capital ratio after the long-term debt is repaid?

Q8-1: How is inventory valued in the Balance Sheet (Statement of Financial Position)?

Q8-2: In a manufacturing business, when the company has completed production on inventory it wishes to sale, explain flow of costs for affected inventory accounts.

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.


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