The

following are statements about the calculation of free cash flow (FCF) and

EBIT:

1. When depreciation expense increases

compared to an earlier period, EBIT decreases but FCF increases.

2. When accounts payable increases compared

to an earlier period, EBIT increases and FCF increases.

3.

When accounts receivable increases

compared to an earlier period, EBIT decreases and FCF increases.

4.

When inventories increase compared to an earlier period, EBIT doesn't change

and FCF decreases.

Which combination is most correct?

The

following are statements about price and value:

1. Price is the amount of money investors

are willing to spend on an asset.

2. Value expresses in dollars the

willingness of investors to invest.

3. The value of an asset depends on its

future expected cash flows

4. When price and value are the same, we

say that an asset is fairly priced

Which combination is most correct?

Question 3.3 (b):

How much tax does the company have to pay? (3 marks)

Question 3.3 (a):

What is Kartoons' taxable income? Show your workings. (5 marks)

Question 3.3 (c):

To what extent does the design of Australia’s company income tax system

reflect the core principles of good tax design (that is: efficiency, equity and

simplicity)?

Question 3.2 (a):

Describe two potential problems that may arise from the

process described above.

Question 3.2 (b):

Recommend two ways that the internal controls for the receipt of

inventory could be strengthened

Question 3.1 (b):

Recommend two ways

that AUDITFIX could mitigate (reduce) the risks created by the issue(s)

you identified previously in Question 3.1 (a)

Question 3.1 (a):

What independence threat(s) do you identify from the

information presented above? Briefly explain your answer in 50 words or less. (

Question 2.3:

After further investigation, your fears are confirmed, and you find one transaction that Lamia Scale forgot to record. Lamia Scale sold some obsolete inventory. This inventory had an original price of $65,000 but was sold for only $40,000. However, the company forgot to record this transaction. 

Calculate and record in the response template provided below what Lamia Scale's current ratio and quick ratio were before considering the impact of this transaction (i.e., as presented in the financial statements in Question 2.1) and what the current ratio and quick ratio will be after adjusting the accounting records to reflect the impact of this transaction. (5 marks)

Note: Round your answers to two decimal places and show your workings.

Hint: Please refer to Lamia Scale Ltd's Balance Sheet in Question 2.1.