Statement of Financial Position - Accounting & Finance Assignment Help

Assignment Task

Assignment Questions
Question 1
Below is a Statement of Financial Position for a small business as at the end of 2019.
($’000)($’000)
Current AssetsCurrent Liabilities
Cash 6Suppliers Accounts Payable 12
Inventory  2ATaxes Payable 2
Accounts Receivable 15
Prepaid Lease 2Non-Current Liabilities
Interest Only Bank Loan 5B
Non-Current Assets
Property, Plant & Equipment 60Equity
Accumulated Depreciation(2C)Contributed Capital 10
Retained Earnings ?
Calculate the Retained Earnings for this business at the end of 2019. (2 marks)
Below is a list of the general ledger account totals from the trial balance at the end of 2020 for the business.
Name of Account Dr Cr
Cash ?
Inventory15,000
Accounts Receivable ?
Prepaid Lease 0
Property Plant & Equipment ?
Accumulated Depreciation ?
Suppliers Accounts Payable 2C,000
Taxes Payable 0
Interest Only Bank Loan 5B,000
Contributed Capital 10,000
Retained Earnings ?
Credit Sales17B,000
Cash Sales 30,000
Cost of Goods Sold 88,000
Wages Expense 2A,000
Lease Expense 8,000
Utilities Expenses 5,000
Interest on Bank Loan 3,000
Dividends Paid 50,000
Except for the cost of goods sold and new taxes, assume that all expenses are paid for in cash. The business had new equipment purchases during 2020 of $5,000 and depreciation on all property, plant & equipment is calculated using the reducing balance method with an annual depreciation rate of 3B%.

If the business pays a flat tax rate of 2C%, construct a Statement of Financial Performance for the business for 2020 showing:
i) gross profitii) operating profit iii) net profit after tax
- Show the journal entries for recording the new taxes payable.
- Calculate the total inventory purchases for 2020 and the total cash amounts paid to suppliers.
- If total cash receipts from accounts receivable were $175,000, calculate the end of year balance for accounts receivable.
- Based on all of the above information, construct an updated Statement of Financial Position for the business at the end of 2020. Note the Business’s final cash position will be a balancing item assuming all of the other information has been processed correctly.
- Based on all of the above information, construct a Statement of Cashflows for 2020 and check that the balance sheet cash position is correct.

Question 2
Using the financial statements created in Question 1, calculate the following ratios for the business:
i)Gross Profit Margin
ii)Net Profit Margin
iii)Return on Assets
iv)Return on Equity
v)Current ratio
vi)Quick ratio
vii)Net Cash Flow ratio
viii)Debt ratio
ix)Asset Turnover ratio
x)Asset ‘Days’ Turnover

b) Write a short summary of your results (Are they good, bad or average?), including a comment on any areas that might warrant further attention or investigation by the business owner.

Question 3
Using the financial statements created in Question 1, calculate the business’s net working capital at the end of 2020.
Calculate the cash cycle for the business and give a brief discussion (300 words maximum)of the results including how the business could improve its cash cycle.

Question 4
The garden supply company has the following business transaction estimates relating to the final quarter of 2020. Assume cash transactions where appropriate unless explained otherwise.
October November December
$ $ $
Total Sales – See note 1. 110,000 130,000 180,000
Receipts from Accounts Receivable To calculate – See note 2.
Wages 30,000 35,000 40,000
Office Equipment 0 7,000 0
Lease Prepayment for 2021 0 0 4,000
Administrative Expenses 3,000 3,000 3,000
Accrued Expenses 0 0 8,000
Depreciation on Office Equipment 7,000 8,000 8,000
Maturing of Term Deposit 8,000 0 0
Credit Purchases 70,000 80,000 90,000
Payments of Accounts Payable To calculate - See note 3.
Drawings 3,000 4,000 5,000

Notes
1. 30% of total sales are cash sales. 70% of total sales are on credit.
2. Actual receipts from Accounts Receivable are 7A% of the previous month’s credit sales and the balance owing is received in the following month. Actual credit sales were $70,000 in both August and September 2020.
3. Credit purchases on Accounts Payable are paid 6B% in the month of purchase with the remainder paid in the month following. Credit purchases in September 2020 were $60,000.
4. Garden Supply’s cash balance at 1 October 2020 was $555.
Prepare a month by month cash budget for the quarter ending 31 December 2020 and comment briefly on the monthly cash positions.

Question 5
The garden supply company is introducing various aged trees to their product range in 2021. They have provided the following information relating to its planned activities.
I-year-old 2-year-old 3-year-old
Selling price $1A $24 $3C
Variable cost/unit $9 $1B $20
Expected Sales Volume 40,000 30,000 10,000
Total fixed cost = $180,000
Calculate the contribution margin for each product, the sales mix percentages (based on sales volume) and the weighted average contribution margin.(6 marks)
Calculate the break-even point in total units and units per product based on the data. (4 marks)
Management is now considering increasing the price of 1-year-old trees by $3 with an expected drop in volume to 30,000 trees while lowering the price of 3-year-old trees by $3 with an expected increase in volume to 20,000 trees. There would be no change to the price and sales volume of 2-year-old trees. Implementing this initiative would increase annual fixed costs by $10 000. On the available data, would you recommend the initiative?

Question 6
The garden supply company is also considering taking out a loan and buying a small truck to save costs on deliveries. The truck costs $6A000 and is expected to earn end of year after tax net cash inflows of $10000, $1B000, $20000 and $20000 for the next four years before it wears out sufficiently to be unreliable and must be sold for an estimated $1C000 (after tax).
a) Calculate the NPV of the truck if the interest rate on the loan is 5.A% pa.
b) Calculate the NPV of the truck if the interest rate on the loan is 10.B% pa.
c)Advise management of your recommendation regarding purchase of the truck based on your NPV calculations.
d) Calculate the accounting rate of return on the truck investment.
e) What additional advice would you give management if the required payback period was three years.

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