3 A 5 year bank loan at 10 interest per annum would finance the balance of the

3 a 5 year bank loan at 10 interest per annum would

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3 A 5-year bank loan, at 10% interest per annum, would finance the balance of the purchase price. REQUIRED (b) (i) Calculate the bank balance at 31 December 2015. [2] (ii) Calculate the amount of the loan which would be taken out. [3] (c) Assess the effect the purchase of the premises would have on annual cash flows in future years. [4] (d) Recommend to the managing committee of the club whether or not they should proceed with the purchase of the premises. Justify your answer by discussing both advantages and disadvantages of the purchase. [7] [Total: 25]
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4 © UCLES 2016 9706/31/O/N/16 2 The directors of Hank Limited provide the following statements of financial position at 31 March: 2016 2015 $000 $000 Assets Non-current assets (net book value) 259 224 Current assets Inventories 128 102 Trade receivables 132 118 Cash and cash equivalents 14 260 234 Total assets 519 458 Equity and Liabilities Equity Share capital 210 180 Share premium 15 Retained earnings 107 131 332 311 Non-current liabilities Bank loan (repayable 2020) 42 20 Current liabilities Trade payables 102 109 Bank overdraft 23 Other payables – taxation 20 18 145 127 Total equity and liabilities 519 458 Additional information The following information relates to the year ended 31 March 2016: 1 The profit from operations was $30 000. 2 During the year non-current assets with a cost of $24 000 and accumulated depreciation of $19 000 were sold for $8000. 3 The depreciation charge for the year was $12 000. All non-current assets held at the end of the financial year are depreciated over 25 years using the straight-line method. 4 Interest paid for the year was $9000. 5 Dividends paid during the year were $25 000. A dividend of $30 000 had been proposed at the end of the year. 6 The taxation charge was $20 000.
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5 © UCLES 2016 9706/31/O/N/16 [Turn over REQUIRED (a) Explain the difference between a statement of cash flows and a cash budget. [2] (b) Prepare a statement of cash flows for Hank Limited for the year ended 31 March 2016 in accordance with IAS 7. [10] (c) Explain with reference to the statement of cash flows whether Hank Limited has a strong or a weak cash position. [4] (d) Prepare a summarised schedule of non-current assets as it would appear as a note in the published accounts for the year ended 31 March 2016. [5] (e) Advise the directors whether or not they should apply the International Accounting Standards when preparing the published accounts. Justify your answer. [4] [Total: 25]
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6 © UCLES 2016 9706/31/O/N/16 3 Alpha plc and Beta plc both operate in the same industry. Both have the same annual sales revenue. Neither have any preference shares in issue. The following additional information is provided: Alpha plc Beta plc Profit for the year $160 000 $100 000 Profit margin ? 10% Finance charges $16 000 ? Profit from operations ? ? Income gearing ? 20% Number of ordinary shares 400 000 ? Earnings per share ? $0.20 Price earnings ratio ? 4.2 Market value of one share $1.20 $0.84 Dividend per share $0.07 ?
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