Additional Tutorial Questions - Semester 1 / 07


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Additional Tutorial Questions - Semester 1 / 07

  1. 1. 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 NASDAQ FTSE 2. What is the media name for the stock market indicators in the following countries: United States Hong Kong England Japan Australia 3. What are the listing abbreviations for 3 major retail companies listed on the local Stock Exchange? 146
  2. 2. 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 CASH PAYMENTS Purchase of equipment 80,000 Secretary’s salary 28,000 Medical supplies 10,000 Rent of premises 30,000 Electricity 2,000 Telephone 1,500 Miscellaneous expenses 2,750 Dr Watson – personal expenses 34,000 ADDITIONAL INFORMATION… 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. REQUIRED 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? 147
  3. 3. Week 8: Budgets Question 1 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 of it. [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. Question 2 Consider the following details for Victoria’s Bookshop :- Actual Sales for 2007 August $64,000 September $72,000 October $80,000 Budgeted Sales for Quarter ending 31 January 2008 November $88,000 December $96,000 January $48,000 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 REQUIRED Prepare a Cash Collection Budget for the months of November, December and January. 148
  4. 4. Week 11: Cost / Volume / Profit Questions Question 1 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 Question 1 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. Question 2 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 of $1,000. • What is the best result for the company, to print in-house or to print externally? • Should any other factors be taken into consideration? 149