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.
