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HC1010: Accounting for Business - Financial Statements Elements and Financial Statement Analysis - Assessment Answer
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Internal Code: 1AHCIG
Code: HC1010
a. You are required to explain and calculate the following ratios for the years ended 30 June Year 2019 and 30 June Year 2018:
– current ratio;
– quick ratio;
– accounts receivable turnover (times and in days); and
– inventory turnover (times and in days).
b. Comment on the short-term solvency, including the efficiency of the business, given the ratio results obtained in your answer in part a.
PART B. Income and Revenue
The core business of Green Apple Ltd involves the sale of anti-virus software. The following took place during the financial year ended 30 June. The company earned $25 000 000 from the sale of software; $3 000 000 from update downloads; and $50 000 in interest from investing in the short-term money market. The company also received a $2000 discount arising out of the early settlement of liability; and issued shares in exchange for $500 000 cash during the year.
Discuss whether the foregoing five financial items would meet the definition of income to the company during the year? Give reasons for your answer.
Which, if any, of the items, would meet the definition of revenue to the company for the year? Give reasons for your answer.
PART C. Comparing balance sheet
ABC company and XYZ company conduct the same type of business. Both are recently formed entities. the balance sheets of the two companies as at 30 June 2020 are as follows:
You are required to answer the following questions based on the information provided above:
a. assuming that you are a banker and that the owner of each business has applied for a short- term loan of $6000 (repayable in six months), which application would you select as being the more favorable? Explain.
b. assuming that you are a businessperson interested in buying one or both companies, and both owners have indicated their intentions to sell, for which business would you be willing to pay the higher price, assuming you will be taking over the existing liabilities of the company? explain.
c. if the existing owners agreed to be accountable for all existing liabilities, how would this change your decision in (b), if at all?
Accounting for Business Assessment Answer
Assignment Task: Financial Statements Elements and Financial Statement Analysis - ? Familiar with and readily able to access (refer to) and integrate across: o The social role and purpose of accounting. o The accounting equation and how it shapes the financial statements. o General Purpose Financial Statements (GPFS). o Special Purpose Financial Statements (SPFS). ? Understand how to prepare, analyse, and interpret financial ratios from GPFS. ? Obtain and contextualise business information for business accounting to explain and apply to business decisions. ? Demonstrate the ability to apply, analyse, synthesise and evaluate information from multiple sources to make decisions about the financial performance of entities including assets, liabilities, owner’s equity, revenue and expenses. ? Apply concepts and theories discussed on a weekly basis ? Use transaction data and financial statement analysis for data-driven decision- making ? Demonstrate the ability to communicate accounting information writing to a professional standard. PART A Financial Ratios and Financial Statement analysis
a. You are required to explain and calculate the following ratios for the years ended 30 June Year 2019 and 30 June Year 2018:
– current ratio;
– quick ratio;
– accounts receivable turnover (times and in days); and
– inventory turnover (times and in days).
b. Comment on the short-term solvency, including the efficiency of the business, given the ratio results obtained in your answer in part a.
PART B. Income and Revenue
The core business of Green Apple Ltd involves the sale of anti-virus software. The following took place during the financial year ended 30 June. The company earned $25 000 000 from the sale of software; $3 000 000 from update downloads; and $50 000 in interest from investing in the short-term money market. The company also received a $2000 discount arising out of the early settlement of liability; and issued shares in exchange for $500 000 cash during the year.
Discuss whether the foregoing five financial items would meet the definition of income to the company during the year? Give reasons for your answer.
Which, if any, of the items, would meet the definition of revenue to the company for the year? Give reasons for your answer.
PART C. Comparing balance sheet
ABC company and XYZ company conduct the same type of business. Both are recently formed entities. the balance sheets of the two companies as at 30 June 2020 are as follows:
You are required to answer the following questions based on the information provided above:
a. assuming that you are a banker and that the owner of each business has applied for a short- term loan of $6000 (repayable in six months), which application would you select as being the more favorable? Explain.
b. assuming that you are a businessperson interested in buying one or both companies, and both owners have indicated their intentions to sell, for which business would you be willing to pay the higher price, assuming you will be taking over the existing liabilities of the company? explain.
c. if the existing owners agreed to be accountable for all existing liabilities, how would this change your decision in (b), if at all?
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