Accounting for Managers

ASSIGNMENT

On Page 3 following you will find an extract from the Academic Integrity Policy. You are reminded that you must be aware of the requirements under this policy.

The assignment in this topic is an individual assignment therefore it is not permissible to work with other students. It is also NOT ACCEPTABLE to share files (electronic or otherwise) of your assignment work with other students - to do so is to engage in academic dishonesty. See the following pages for additional advice regarding discussion of assignments with other students.

ASSIGNMENT DETAILS

Question 1

Closing balance sheet items are given below for Giveitago. Giveitago owns a retail business that sells Fitness and Gym Equipment. The balance sheet is prepared in the accounting equation format, as at 30 June 2014. Transactions for the month of July are also given.

Required:

1. Prepare worksheet entries for the business transactions for the month ended 31 July 2014. You will need additional columns to the table below for additional assets, expenses, liabilities, and owner's equity and revenue accounts.

2. Prepare an Income Statement for the period ending 31 July 2014.

3. Prepare a Classified Balance Sheet in the vertical format, as at 31 July 2014.

Giveitago Hard

Balance Sheet

as at 30th June 2014

Date

Cash at Bank Accounts Receivable Inventory = Accounts Payable Loan (due 31/7/2014) Capital June 30 120,000 47,000 nil 27,000 40,000 100,000 July

1 Paid $2,500 for office rent.

2 Paid $20,000 off accounts payable.

3 Received $25,000 against accounts receivable

4 Paid $15,000 off the loan balance outstanding

5 Paid $1,800 for advertising

6 Paid $2,900 for wages

7 Paid $8,500 for a new photo copier

8 Purchased inventory for $4,500 on credit (180 units at $25 each) Paid $1,500 off Giveitago's personal credit card

9 Recorded credit sales $4,500 (100 of the units purchased on the 8th were sold)

10 Recorded cash sales $2,200 (44 of the units purchased on the 8th were sold)

11 Recorded gas invoice received for $650

12 Paid $1,800 for sales commission

13 Purchased inventory for $8,400 cash (280 units at $30 each)

14 Paid $7,500 for a new office photocopier

15 Paid Giveitago $500 for drawings

16 Recorded cash sales $4,400 (36 units purchased on the 8th and 44 units purchased on the 18th were sold)

Question 2

Iamtrying Pty Ltd

Income Statements for the year ending 30th June 2012 2013 2014

Sales on Credit 100,000 150,000 175,000

Less Cost of goods sold 75,000 104,000 120,000

Gross Profit 25,000 46,000 55,000

Less expenses

Selling expenses 5,000 17,500 21,000

Admin expenses 4,500 10,000 11,000

Interest expense 1,500 1,500 ......................1,500

Total Expenses 11,000 29,000 33,500

Net Profit 14,000 17,000 21,500

Less Tax 5,500 6,000 7,500

Net Profit after tax 8,500 11,000 14,000

N.B. Credit Purchases 70,000 95,000 110,000

Iamtrying Pty Ltd

Balance Sheets

As at year ending 30th June

Assets 2012 2013 2014

Cash 5,000 7,500 12,500

Accounts Receivable 7,500 13,500 17,500

Inventory 2,000 4,000 7,500

Total Current Assets 14,500 25,000 37,500

Building 16,000 16,000 21,000

Fixtures & Fittings 10,000 12,500 12,500

Total N/C Assets 26,000 28,500 33,500

Total Assets 40,500 53,500 71,000

Liabilities

Accounts Payable 2,000 4,000 7,500

Total C/Liabilities 2,000 4,000 7,500

Loan 12,500 12,500 12,500

Total N/C Liabilities 12,500 12,500 12,500

Total Liabilities 14,500 16,500 20,000

NET ASSETS 26,000 37,000 51,000

Shareholders' Equity

Opening Share capital 15,000 15,000 15,000

Retained Earnings 11,000 22,000 36,000

General Reserve 0 0 0

Total Equity 26,000 37,000 51,000

Required

The management of Iamtrying Pty Ltd has approached you to discuss their financial performance. You are presented with their financial reports (above).

• 1. Give the formula for each of the following ratios and calculate the ratios for the 2013 and 2014 years.

• Return on Shareholders' Funds • Return on Total Assets • Gross profit margin

• Net Profit Margin • Inventory T/Over in days • A/C Receivable T/Over in days

• A/C Payable T/Over in days • Current Ratio • Acid Test Ratio

• Gearing Ratio • Interest Cover Ratio

• 2. Based on your interpretation of the ratios prepare a report to management addressing separately:-

? Profitability

? Efficiency

? Liquidity

? Gearing

NB. Your report should be no more than one page in length.