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ASSIGNMENT 1ST SEMESTER : FINANCIAL MANAGEMENT (FM)
CHAPTERS COVERED : CHAPTERS 1 8, 10 & 21 – 24
LEARNER GUIDE : UNITS 1 4 & 8
DUE DATE : 3:00 p.m. 19 MARCH 2013
TOTAL MARKS : 100
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INSTRUCTIONS TO CANDIDATES FOR COMPLETING AND SUBMITTING
ASSIGNMENTS
The complete Instructions to Students for Completing and Submitting Assignments must be collected from any IMM GSM office, the relevant Student Support Centre or can be downloaded from the IMM GSM website. It is essential that the complete instructions be studied prior to commencing your assignment. The following points highlight only a few important notes.
1. You are required to submit ONE assignment per subject.
2. The assignment will contribute 20% towards the final examination mark, and the other 80% will be contributed by the examination, however, the examination papers will count out of 100%.
3. Although your assignment will contribute towards your final examination mark, you do not have to earn credits for admission to the examinations; you are automatically accepted on registering for the exam.
4. Number all the pages of your assignment (e.g. page 1 of 4) and write your name and surname, student number and subject at the top of each page.
5. The IMM GSM requires assignments to be presented in a typed format, on plain A4 paper. Unless otherwise specified, this assignment must be completed within a limit of 1500 words, excluding the bibliography. Students who exceed the word limit may find that only part of the submitted assignment will be marked.
6. A separate assignment cover, which is provided by the IMM GSM, must be attached to the front of each assignment.
7. Retain a copy of each assignment before submitting, in case the original does not reach the IMM GSM.
8. The assignment due date refers to the day up to which assignments will be accepted for marking purposes. The deadline is 3:00 p.m. on 19 March 2013. Late assignments will be accepted, but 25 markswill be deducted from the maximum mark, if received after 3:00 p.m. on 19 March 2013and up to 5:00 p.m. the following day, after which no assignments will be accepted.
9. If you fail to follow these instructions carefully, the IMM Graduate School of Marketing cannot accept responsibility for the return of the assignment. It may even result in your assignment not being marked.
Results will be available on the IMM GSM website, www.immgsm.ac.za, on 3 May 2013.
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© IMM Graduate School of Marketing
Assignment: 1st Semester 2013 FM
Page 2 of 7
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SPECIFIC INSTRUCTIONS:
Answer ALL the questions
The use of calculators is permitted. Show ALL calculations.
Read all questions carefully to determine exactly what is required before attempting to answer.
Number your answers clearly and set them out under appropriate headings and sub-headings.
QUESTION 1
[25]
Mark each of the accounts listed in the following table as follows:
1.1 In column (1), indicate in which statement income statement (IS) or balance sheet (BS) the account belongs.
1.2 In column (2), indicate whether the account is a current asset (CA), current liability (CL), expense (E), non-current asset (NCA), non-current liability (NCL), revenue (R) or shareholders equity (SE). The type of account must be in terms of IS and BS entries and not the basic accounting equation (BAE).
(1)
(2)
Account name
Statement
Type of account
Trade and other payables (Creditors)
Trade receivables (Debtors)
Accumulated depreciation
Administrative expense
Buildings
Cash
Ordinary share capital (at par)
Cost of goods sold
Depreciation
Equipment
General expense
Finance cost
Inventories
Land
Long-term debt
Machinery
Short-term borrowings
Operating expense
Preference share capital
Redeemable preference share dividends
Retained earnings
Sales revenue
Selling expense
Taxation on profits
Vehicles
© IMM Graduate School of Marketing
Assignment: 1st Semester 2013
FM
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Page 3 of 7
QUESTION 2
[40]
The following pre-adjusted balances have been extracted from the general ledger of Trendline Traders for the year ended 31 December 2012.
R
Capital
2 000 000
Cash at bank
90 000
Buildings
600 000
Vehicles
300 000
Furniture
210 000
Salaries
215 000
Lights and Water
15 500
Carriage on sales
22 000
Commission received
19 300
Rent received
14 000
Insurance
4 800
Packing Material
10 200
Drawings
13 500
Bad Debts
15 200
Debtors
313 800
Creditors
287 700
Accumulated Depreciation: Vehicles
150 000
Accumulated Depreciation: Furniture
95 000
ADDITIONAL INFORMATION
a. The following transactions took place in respect of the particular product that Trendline Traders sold during 2012.
Date
Units
Cost price per unit
01-Jan-12
Stock on hand
10 000
R 100
03-Feb-12
Issued stock
4 000
04-Mar-12
Received stock
16 000
R 120
05-Jun-12
Issued stock
4 000
06-Aug-12
Issued stock
6 000
31-Dec-12
Returned stock to supplier: 2 000 units received on 4 March.
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b. Depreciation must be provided for the current year as follows:
i. Vehicles 20% per annum on the cost price
ii. Furniture 10% per annum on the reducing balance method (No vehicles or items of furniture were bought or sold during the year)
c. Trendline Traders requires a 30% mark-up on cost price.
d. Trendline Traders uses a periodic inventory system. Ignore VAT.
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© IMM Graduate School of Marketing
Assignment: 1st Semester 2013 FM
Page 4 of 7
REQUIRED:
2.1.
Calculate the value of the closing stock using the FIFO method.
(10)
Use the following format and show the balance after each transaction.
Received
Issued
Balance
Date
Units
Price
Amount
Units
Price
Amount
Units
Price
Amount
2.2 2.2.1 Prepare the income statement (statement of comprehensive income)
for the year ended 31 December 2012.
(17)
2.2.2
Prepare the balance sheet (statement of financial position)
as at
31 December 2012.
(13)
QUESTION
3
[21]
Your friend Joe is planning to open a small gymnasium and he has asked you as marketing expert to help him determine the viability of the gymnasium.
Initial costs have been estimated to be as follows:
Refurbishment of the premises
R 120 000
Training equipment
R
80 000
Sauna equipment
R
60 000
R 260 000
These initial costs will be depreciated to a zero book value over 5 years.
The gymnasium will result in annual maintenance charges of R26 000 and annual insurance charges of R13 000.
It is estimated that the variable operating costs will be approximately R60 per month per member. The R60 excludes a 5% commission calculated on each membership fee that Joe will pay to his sales people.
Market research has shown that an annual membership fee of R3 200 per member can be charged.
REQUIRED:
3.1
Calculate the annual unit contribution expected to be realised.
(3)
3.2
Calculate the number of members required to break-even.
(5)
3.3
Calculate the break-even revenue.
(2)
3.4 Assume that Joe wants to make a profit of R89 000. How many members
does Jo need to enrol and what will be the value of his revenue to break-even at the required level of profit? (You may assume that the commission rate and
all other costs remain unchanged.)
(4)
© IMM Graduate School of Marketing
Assignment: 1st Semester 2013
FM
Page 5 of 7
Joe is considering a more aggressive approach to marketing and intends spending R20 000 on advertising as well as increasing the sales commission to 6% and reducing the membership fee to R3 000. As a result of his strategy he would like to make a profit of R70 000.
3.5 Assuming all other costs remain unchanged calculate the number of
membershe needs to enrol in order to break-even.
(7)
QUESTION 4
[14]
Provided on the next page are a statement of financial position (balance sheet) and a statement of comprehensive income (income statement) correctly prepared for a given entity for the 2012 financial period.
Required:
4.1 Using the given financial statements calculate the following ratios for the 2012financial year, rounded off to the nearest second decimal:
(Note: averages are not required and you may assume 360 days in the year and all sales are on credit.)
4.1.1
Total asset turnover
(2)
4.1.2
Mark up %
(2)
4.1.3
Current ratio
(2)
4.1.4
Debtors collection period
(2)
4.1.5
Creditors Payment Period
(2)
(Assume average daily credit purchases of R50 000)
4.1.6
Quick ratio
(2)
4.2 Based on your answers for 4.1.3 4.1.6 comment generally on the liquidity
and activity of the given entity for 2012.
(2)
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© IMM Graduate School of Marketing
Assignment: 1st Semester 2013 FM
Page 6 of 7
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Statement of financial position
Assets
2012
Property, plant and equipment (PPE) at cost price
192 000
Accumulated depreciation
-22 000
PPE at carrying value
170 000
Investment in shares
3 000
Non-current assets
173 000
Inventories
30 000
Trade receivables
45 000
Cash and cash equivalents
24 000
Current assets
99 000
Total assets
272 000
Equity and liabilities
Share capital
50 000
Reserves
4 000
Retained earnings
28 000
Ordinary shareholders equity
82 000
Preference shares
28 000
Shareholders equity
110 000
Total equity
110 000
Long-term debt
80 000
Non-current liabilities
80 000
Trade payables
25 000
Bank overdraft
1 000
Tax payable
1 000
Dividends payable
5 000
Short-term loans
50 000
Current liabilities
82 000
Total equity and liabilities
272 000
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© IMM Graduate School of Marketing
Assignment: 1st Semester 2013 FM
Page 7 of 7
Statement of comprehensive income
2012
Turnover
150 000
Cost of sales and services rendered
-70 000
Gross profit
80 000
Operating expenses
-40 000
Operating income
4 000
Operating profit
44 000
Investment income
2 000
Finance cost
-14 660
Profit before tax
31 340
Tax
-9 400
Profit after tax
21 940
Preference share dividends
-2 800
Attributable earnings
19 140
Ordinary dividends
-10 000
Retained earnings (for the year)
9 140
ASSIGNMENT TOTAL: 100
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© IMM Graduate School of Marketing
Assignment: 1st Semester 2013 FM