Interpretation of Accounts The following information has been taken from the accounts of McBreen Ltd for the year ended 31/12/2015: Trading and Profit and Loss Account for the year ended 31/12/2015 € Credit Sales 650,000 Less: Cost of Sales Stock 01/01/2015 42,000 Add: Credit Purchases ??? Less: Stock 31/12/2015 58,000 ??? Cost of Sales ??? Gross Profit 300,000 Less: Total Expenses (including interest) 220,000 Net Profit for year 80,000 Balance Sheet as at 31/12/2015 € Fixed Assets 500,000 50,000 450,000 Current Assets (including debtors €20,000) 210,000 Less Creditors: amounts falling due within 1 year 88,000 122,000 Trade Creditors 72,000 Financed by: Creditors: amounts falling due after more than 1 year 150,000 6% Debentures (2020/2021) 150,000 Capital and Reserves Authorised Issued Ordinary Shares at €1 each 342,000 80,000 Profit and Loss Account 80,000 € 572,000 (a) You are required to calculate: (to 2 decimal places where appropriate.) (i) The purchases - Leaving Cert Accounting - Question 5 - 2016

To find the percentage mark-up on cost, we can use the following formula:

Here,

• Gross Profit = €300,000
• Cost of Sales = €300,000

Substituting these values:

However, we need to calculate it based on the cost price. Thus, dividing gross profit by cost and using the correct cost figure:

Thus:

The net profit margin can be calculated using the formula:

Where:

• Net Profit = €80,000
• Credit Sales = €650,000

Substituting the values:

To determine the period of credit given to debtors, we can use the formula:

With:

• Debtors = €20,000
• Credit Sales = €650,000

Substituting the values:

Depreciation refers to the allocation of the cost of a tangible asset over its useful life. It indicates how much of an asset's value has been used up during a specific period. For McBreen Ltd, the depreciation mentioned for fixed assets is €50,000, which should be deducted from the fixed asset value in the balance sheet.

Tangible assets are physical items that have a finite value and can be seen or touched. They include items like machinery, buildings, and equipment. In this balance sheet, the fixed assets valued at €500,000 are tangible assets for McBreen Ltd.

Shareholders' funds refer to the monetary resources contributed by the owners of a business. They are made up of issued share capital and retained profit. In McBreen Ltd, the total shareholders' funds include €342,000 in issued shares and €80,000 in retained profits.

Authorised share capital is the maximum amount of share capital that a company is allowed to issue to shareholders. For McBreen Ltd, the authorised share capital is €342,000, which can be further broken down into ordinary shares.

The acid test ratio is calculated using:

From the balance sheet, Current Assets = €210,000, Inventory (Stock) = €58,000, and Current Liabilities (Creditors) = €88,000:

This suggests that the company has €1.73 available for every €1 of current liabilities.

The return on capital employed (ROCE) provides insight into how efficiently a company is using its capital to generate profit. A ROCE of 18% indicates that McBreen Ltd can generate €0.18 of profit for every euro of capital employed, which is a favorable figure signifying good management and profitability.

The return on capital employed for 2014 was 18%, and this has decreased to 15.56% in 2015. This decline indicates a reduction in profitability. Even though McBreen Ltd remains profitable, the trend suggests that the company may be facing challenges in maintaining its profit levels.