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Transcription of this question: AH LtdJose owns AH Ltd, a private limited company, that provides climbing and adventure tourismopportunities for children in Ecuador. AH Ltd is partly financed by a non-governmental organization(NGO), which promotes outdoor and Other healthy activities in Ecuador. An increase in tourism hasmeant that AH Ltdhas been working at full capacity. However, some issues have begun to emerge.In a meeting with Jose, an NGO representative expressed concern over the quality Of the climbingequipment being used. Several minor accidents involving children had occurred. In addition, theNGO representative had not been kept up-to-date on the financial position Of AH Ltd. After themeeting, Jose showed the following financial figures to his accountant, MarcoSelected financial information from AH Ltd’s accounts as at 31 March 2014 (all figures in IJSSm).CashCreditorsDebtorsFixed assets — equipmentFixed assets — land and buildinLoan ca italRetained profitShare capital0.10.80.21.59424Marco is concerned that the information from AH Ltd’s accounts does not show a true reflection OfAH Ltd’s financial position. For example, Jose has not made any provisions for depreciating the valueOf the equipment since purchasing it three years ago. Marco has informed Jose that the equipmentshould be depreciated using the reducing balance method at a rate Of 40 % per year.Jose wishes to expand the business to Offer more climbing opportunities. Marco, however, warnsthat the current equipment needs to be replaced to meet international quality standards. Additionalfunding from the NGO is not possible, and banks in Ecuador give few loans to small businesses such asLtd.(Question I continued)(a)(b)(d)(e)Define the following terms:(i) debtors(ii) fixed assets.Explain one advantage and one disadvantage for AH Ltd Of working at fullcapacity.(i)(ii)(iii)Using the information provided from AH Ltd’s accounts, prepare a balancesheet for as at 31 March 2014.Using the reducing balance method Of depreciation, calculate the totaldepreciation charge on the equipment purchased three years ago (show allyour w0 rking).Prepare AH Ltd’s new balance sheet as at 31 March 2014 taking intoaccount the depreciation charge calculated in part (ii).Explain one advantage for AH Ltd of using a straight line method ofdepreciationinstead Of a reducing balance method Of depreciation.Examine two appropriate sources Of finance for AH Ltd to fund the replacementOf the Old equipment.[2 marks][2 marks][4 marks][3 marks][3 marks][3 marks][2 marks][6 marks]

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