ASSIGNMENT 1 (20 MARKS)

 

Question 1                                                      Total marks for Q1. (10 marks)

Financial statements of Nimbin Pty Ltd are presented below:

Nimbin P/L

Statement of Financial Position

As at 30 June 2015 and 2016

($000)

2016                2015

Current assets

Cash and cash equivalents                                           $1,645             $2,110

Accounts receivables (all trades)                                   4,100               3,675

Inventories                                                                    7,000             6,930

______            _____

Total current assets                                          12,745             12,715

______            ______

Non-current assets

Property, plant and equipment                         17,190             15,330

_______          ______

Total non-current assets                                  17,190             15,330

_______          _______

Total assets                                                                  $29,935           $28,045

=======        ======

Current liabilities

Payables                                                                      $5,780             $5,990

_______          ______

Total current liabilities                                     5,780               5,990

_______          ______

Non-current liabilities

Interest-bearing liabilities                                            9,940               9,450

_______          _____

Total non-current liabilities                              9,940               9,450

_______          _______

Total liabilities                                                 $15,720           $15,440

======          ======

Equity

Share capital                                                                $7,700             $7,700

Retained earnings                                                          6,515               4,905

_______          _______

Total equity                                                                 $14,215           $12,605

======          ======

Nimbin P/L

Income Statement

As at 30 June 2016

($000)

Revenues (net sales)                                                    $55,000

Less: cost of sales                                                         35,100

_______

Gross profit                                                                   19,900

_______

Less: Expenses

Selling and distribution expenses                       7,100

Administrative expenses                                    4,970

Finance costs                                                      1,560

______

Total expenses                                                 13,630

______

Profit before income tax                                                6,270

Income tax expense                                           1,908

______

Profit                                                                           $4,362

=====

Nimbin P/L

Statement of changes in Equity

For the year ended 30 June 2016

($000)

Share capital

Ordinary (7,200.000 shares)

Balance at start of period                                             $7,200

______

Balance at end of period                                              7,200

_______

Preference (250,000 shares)

Balance at start of period                                             500

______

Balance at end of period                                              500

______

Total share capital                                                        $7,700

======

Retained Earnings

Balance at start of period                                             $4,905

Total income for the period                                           4,362

Dividends paid – ordinary                                           (2,702)

Dividends paid – preference                                              (50)

______

Balance at end of period                                              $6,515

======

Additional information:

Payables include $5,620 (2016) and $5,730 (2015) trade accounts payable; the remainder is accrued expenses. Market prices of issued shares at year-end (2016): Ordinary $12; Preference $6.70.

Required:

1. Calculate the following ratios for 2016. The industry average for similar businesses is shown. (6 marks)

Industry average

1. Rate of return on total assets 22%
2. Rate of return on ordinary equity 20%
3. Profit margin 4%
4. Earnings per share 45c
5. Price-earnings ratio 0
6. Dividend yield 5%
7. Dividend payout 70%
8. Current ratio 5:1
9. Quick ratio (acid ratio)                         3:1
10. Receivables turnover 13
11. Inventory turnover 6
12. Debt ratio 40%
13. Times interest earned 6
14. Assets turnover 8

1. Given the above industry averages, comment on the company’s profitability, liquidity and use of financial gearing. (4 marks)

 

 

Question 2                                                      Total marks for Q5. (10 marks)

1. A local restaurant is noted for its fine food, as evidenced by the large number of customers. A customer was heard to remark that the secret of the restaurant’s success was its fine chef.  Would you regard the chef as an asset of the business?  If so, would you include the chef on the balance sheet of the business and at what value? Discuss. (2 MARKS)

 

1. Accounting provides much information to help managers make economic decisions in their various workplaces. You are required to provide examples of economic decisions that the following people would need to make with the use of accounting information: (3 MARKS)

• A manager of human resources
• A factory manager
• The management team of an Australian Football League (AFL) club
• The manager of a second-hand clothing charity

 

1. c) Indicate the effect of each of the following transactions on any or all of the three financial statements of a business: (5 MARKS)

1. Statement of financial position
2. Statement of financial performance
3. Statement of cash flows

Apart from indicating the financial statements (s) involved, use appropriate phrases such as ‘increase total asset’, ‘decrease equity’, ‘increase income’, ‘decrease cash flow’ to describe the transaction concerned.

1. Purchase equipment for cash.
2. Provide services to a client, with payment to be received within 40 days.
3. Pay a liability.
4. Invest additional cash into the business by the owner.
5. Collect an account receivable in cash.
6. Pay wages to employees.
7. Receive the electricity bill in the mail, to be paid within 30 days.
8. Sell a piece of equipment for cash.
9. Withdraw cash by the owner for private use.
10. Borrow money on a long-term basis from a bank.

THE END