Additional Tutorial Questions - [compulsory]
Week 1: Introduction
1. If you earn $100 interest in a year on a $2,000 fixed deposit in a bank account,
what is the interest rate applicable to the deposit?
2. If you invest $20,000 into a business and earns a profit of $4,000 in the first year,
what is the return on the investment?
3. If you bought 500 Cybertech Ltd shares on the stock market for $6.90 and
received a total dividend of $150.
What is the Dividend Per Share?
What is the Dividend Yield?
4. If you made a profit of $32,000 last year and made a profit of $38,000 this year,
what is the percentage improvement in profit?
5. What are the different ownership structures available to businesses in Australia?
Week 2: The Share-market
1. What do the following terms mean? All Ordinaries
2. What is the media name for the stock market indicators in the following countries:
United States Hong Kong England
3. What are the listing abbreviations for 3 major retail companies listed on the local
Week 7: Profit Calculation – Accrual Method of Accounting
In January 2007, Dr. Watson deposited $60,000 in a business bank account to establish
the Metro Medical Clinic. No formal accounting system was established but records
were kept of all cash transactions. Additional financial information was kept by Dr
Watson in his diary.
The following summary of cash transactions for the first year of operations was prepared
by the clinic’s secretary on 31 December 2007.
CASH RECEIPTS $
Initial capital, Dr Watson 60,000
Receipts from clients 185,000
Purchase of equipment 80,000
Secretary’s salary 28,000
Medical supplies 10,000
Rent of premises 30,000
Miscellaneous expenses 2,750
Dr Watson – personal expenses 34,000
1. The equipment is to be depreciated at the rate of 15% per annum.
2. Customers owe $8,500 for medical services performed during 2007. A deposit of
$1,600 has been received from a client for work to be done in 2008.
3. The secretary has been awarded a bonus of $1,200. The electricity account for December
amounting to $240 has been received. These amounts have not yet been paid.
4. Medical supplies on hand at the end of the year had cost $1,500.
5. The premises are rented at $2,000 per month, payable 3 months in advance.
The last payment was made on 30 December 2007.
1. Using Accrual Accounting, prepare an Income Statement and a Balance Sheet.
2. Explain your treatment of the owner’s personal expenses. How does this affect the
profitability of the business?
Week 8: Budgets
Sam is contemplating an overseas holiday at the end of the year and is interested in
identifying his likely cash position. He works for himself and currently [end of April] has
$4,500 in the business bank.
From now to the end of the year he expects to earn $1,200 per week on average and
pay out $350 per week for business expenses. On average, two months of earnings will
be outstanding [owing], while the same applies to business expenses.
Sam withdraws $580 per week for his personal living expenses and does not save any
[a] At the end of December how much cash is likely to be available in the business
for Sam to spend on his holiday.
[b] Advise Sam on how he can improve his cash position.
Consider the following details for Victoria’s Bookshop :-
Actual Sales for 2007
Budgeted Sales for Quarter ending 31 January 2008
Sales are normally 20% cash and 80% on credit. All books have a Selling Price of $80.
Credit Sales are usually collected in the following pattern.
• 80% … 1 month after the sale
• 15% … 2 months after the sale
• 5% bad debts
Prepare a Cash Collection Budget for the months of November, December and January.
Week 11: Cost / Volume / Profit Questions
Jarrod is considering a new venture selling sporting items over the internet. After
preliminary research he has found that he can purchase his main product for $40 per
unit. His internet set-up and on-going maintenance costs are $25,000 per annum.
His administrative costs are $2 per sale. Postage and Handling is expected to be
around $5.50 per sale. He estimates that he can sell 2,000 units in a year.
• What selling price should he set to ensure that he does incur a loss ?
• What selling price should he set to make a profit of $21,000 after tax ?
[assume tax rate of 30%]
• If customers will pay a maximum of $70 per unit, how many extra units
[above the 2,000 estimated sales units] will he have to sell to make his desired profit ?
Week 12: Other Short-Term Decisions
Sportswear Ltd is interested in comparing the price of buying a tee-shirt as compared
with the cost of manufacturing the item in-house. The tee-shirt can be purchased for
$12 each from a local supplier. The cost of manufacturing in-house include Materials
$7, Direct Labour $4 and Fixed Overhead of $3 per unit.
• Should Sportswear Ltd make or buy the product?
• Please explain your reasoning.
Empire Ltd is faced with the decision of whether to arrange for printing of their Annual
Report in-house or to get it produced externally. They have been quoted a cost of
$4.85 per report from a local business.
To produce the report in-house would cost $1,350 in materials, $950 in labour costs,
and fixed overheads of $400 in order to produce 700 copies required. If the report is
done in-house it would mean diverting staff from other activities which generate a profit
• What is the best result for the company, to print in-house or to print externally?
• Should any other factors be taken into consideration?