Question 2 Alec Powell runs a small shop selling sports equipment. He has run this business as a sole trader for a number of years and has built up a small niche market by offering a specialist service for local sports teams. This has enabled him to continue trading with a high level of sales even though larger 'chains' have undercut his prices. He wants your advice on a number of issues relating to drawing up the financial accounts for the year ended 31 December 2010: - (a) A similar business at the other side of the city has been recently sold as a going concern to a larger chain of sports shops. The selling price of the business was £50,000 higher than the book value of the assets. Mr Powell believes that his own sports shop would generate similar amounts of goodwill and would like to include a value for goodwill on the state- ment of financial position. (b) Each of the last four years he has sold football boots to one of the local football teams every February. He has been informed that next year the club would probably continue in this. manner. In anticipation Powell has produced the set ready for sale. He would like to include these in the 2010 sales figures due it being 'almost certain' that these will be sold. (c) One of the machines that are used to print the team shirts has been depreciated using the straight line method for the last five years. However, the machine will need replacing five years before Powell expected. With this in mind, he would like to increase the amount of depreciation that he charges each year to show a more realistic valuation for the machine. (This part of the question may require that you have studied Chapter 10.) (d) On March 30 this year Powell received £A,000 relating to sales made in the previous year. He would like to include this &4,000 as income for this year as this is the period in which it was received. Using your knowledge of accounting and the concepts outlined in this chapter advise Mr Powell in each point on he appropriate action to take.

Q4. Analysis of Financial StatementsThere was a bit of concern about one of Big Rock’s newer entities – Big Rock PavingCompany. Management wants you to review the two financial statements below and giveyour analysis of the company’s performance.Big Rock Paving CompanyAssets LiabilitiesCurrent Assets: Current Liabilities:Cash 200,000 Accounts Payable 700,000Accounts Receivable 300,000 Notes Payable 600,000Inventory 800,000Total Current Assets 1,300,000 Total Current Liabilities 1,300,000Fixed Assets: Owners’ Equity:Property, Plant & Equipment 2,200,000 Common Stock ($1 Par) 600,000Less: Accumulated Depreciation 600,000 Capital Surplus 100,000Net Fixed Assets 1,600,000 Retained Earnings 100,000Total Assets 2,900,000 Total Owners’ Equity 800,000Total Liabilities and Owners’Equity2,900,000Big Rock Paving CompanyIncome Statement for Year Ending December 31, 2021Sales 3,400,000Less: Cost of Goods Sold 2,700,000Less: Administrative Expenses 700,000Less Depreciation 682,000Earnings Before…

Question 3.3. Assume you work for a Norwegian company exporting a container of Salman Azerbaijan or Haiti. The customs official informs you that there is a delay in clearing your container through customs, and it may last a month. However, if you are willing to pay an "expediting fee" of $200, he will try to make it happen in one day. What are you going to do?

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