1. The following financial data (in thousands of dollars) are for the month of June 2012 for All-Go Pty Ltd. Use this information to answer the questions below.
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Present Situation, 30th June 2012
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Account
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Balance
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Bonds payable (20-year)
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$146,000
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Buildings (net value)
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605,000
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Cash on hand
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21,000
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Creditors
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42,500
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Debtors
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35,000
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Dividends payable
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9,500
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Inventory value (all inventories)
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38,000
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Issued shares
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375,000
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Land value
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680,000
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Long-term mortgage
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558,000
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Retained earnings
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248,000
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Note: bonds are certificates of debt issued in order to raise funds. They carry a fixed rate of interest and are repayable with or without security at a specified future date. They used to be quite common.
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Transactions for June 2012
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Category
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Amount
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Direct labour
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$60,000
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Expenses
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Insurance
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$24,000
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Selling
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74,000
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Rent and lease
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48,000
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Salaries
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132,000
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Other
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74,000
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Total
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352,000
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Income taxes
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24,000
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Increase in finished goods inventory
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30,000
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Materials inventory
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at 315' May 2012
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55,000
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at 30th June 2012
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30,000
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Materials purchases
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24,000
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Overhead charges
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90,000
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Revenue from sales
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600,000
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a) Use the above information to construct a Balance Sheet for All-Go as of 30th June 2012
b) What was the net change in materials inventory during the month?
c) Use the above information to develop a Profit and Loss Statement for the month of June 2012
d) What percentage of revenue is reported as after-tax income?
e) Compute the value of each of the following common business ratios:
Liquidity ratio
Quick assets ratio
Gearing ratio
f) Compute the turnover of inventory ratio (based on gross sales) for All-Go and suggest a meaning for this ratio. (It may be assumed that the average finished goods inventory is worth $38,000 for the period of interest).
2. A successful building contractor purchased a farm to operate on a part-time basis and raise beef cattle. The purchase price of the farm was $1,000,000. The contractor paid $400,000 cash and financed the remainder over ten years at a 7% interest rate with a mortgage, payable to a local bank. Soon after the purchase of the farm, the contractor purchased breeding cattle for $120,000, paid $50,000 in cash, and gave a promissory note to the seller for the balance. The note carried an 8% annual interest rate and was to be paid off within five years. During the first full year, the farm operation resulted in the following revenues and expenses.
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Calves sold
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$80,000
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Hay sold
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2,500
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Labour expenses
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$10,000
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Expenses for machinery rented
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24,000
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Vetinarian fees
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3,500
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Fertilizer purchased
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12,000
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Property taxes
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5,500
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Expenses for repairs
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4,500
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Internal expenses
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49,000
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Expenses for miscellaneous supplies
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2,500
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Note: internal expenses represent the costs associated with contributions from other parts of the contractor's businesses to the farm operation. An example would be the use of his staff and equipment to create a dam.
Prepare a Profit and Loss Statement for the farming operation and determine the net profit (loss) before income taxes.
Questions are adapted from Szonyi, Ai, Fenton, R.G., White, J.A., Age, M.H. and Case, K.E., Principles of Engineering Economic Analysis, Canadian edition, John Wiley & Sons, 1982, and Blank, I. and Tarquin, A., Engineering Economy, 6th edition, McGraw-Hill, 2005