Financial and Managerial Accounting

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Part 1 – Financial Analysis

Peter is a self employed music teacher and has the following trial balance:

Trial Balance as at 30 June 2013

Debit Credit

£ £

Instruments	1,500
Furniture	400
Rent for room	2,400
Computer	1,000
Fees from tuition		10,500
General expenses	1,000
Capital		3,550
Bank	1,500
Postage and stationery	50
Electricity	300
Advertising	300
Creditors		150
Debtors	350
Telephone	400
Drawings	5000
	14200	14200

Note: In this case, there are no trading purchases.

Required:

1) Prepare Peter Income Statement for the year ended 30 June 2013 and a Balance Sheet as at 30 June 2013.

(30 marks)

2) Briefly research and discuss the changes in international regulation for reporting financial statements. In particular the changes to the names of profit and loss account.

(20 marks)

Part 2 – Performance Evaluation

The comparative condensed income statements of SPENCER Corporation are shown below.

SPENCER CORPORATION

Comparative Condensed Income Statements

For the Years Ended December 31

2013 2012

Net sales $620,000 $500,000

Cost of goods sold 450,000 400,000

Gross profit 170,000 100,000

Operating expenses 54,000 40,000

Net income $116,000 $ 60,000

Instructions

(a) Prepare a horizontal analysis of the income statement data for SPENCER Corporation using 2013 as a base. (Show the amounts of increase or decrease.)

(b) Prepare a vertical analysis of the income statement data for SPENCER Corporation in columnar form for both years.