ACC00724 (Accounting for Managers) S3, 2014 ASSIGNMENT 1 (30 MARKS) Question 1 Total marks for Q1. (20 marks) Financial statements of Nimbin Pty Ltd are presented below: Nimbin P/L Statement of Financial Position As at 30 June 2013 and 2014 ($000) 20142013 Current assets Cash and cash equivalents $1,645 $2,110 Accounts receivables (all trades) 4,100 3,675 Inventories 7,000 6,930 ______ _____ Total current assets 12,745 12,715 ______ ______ Non-current assets Property, plant and equipment 17,190 15,330 _______ ______ Total non-current assets 17,190 15,330 _______ _______ Total assets $29,935 $28,045 ======= ====== Current liabilities Payables $5,780 $5,990 _______ ______ Total current liabilities 5,780 5,990 _______ ______ Non-current liabilities Interest-bearing liabilities 9,940 9,450 _______ _____ Total non-current liabilities 9,940 9,450 _______ _______ Total liabilities $15,720 $15,440 ====== ====== Equity Share capital $7,700 $7,700 Retained earnings 6,515 4,905 _______ _______ Total equity $14,215 $12,605 ====== ====== Nimbin P/L Income Statement As at 30 June 2014 ($000) Revenues (net sales) $55,000 Less: cost of sales 35,100 _______ Gross profit 19,900 _______ Less: Expenses Selling and distribution expenses 7,100 Administrative expenses 4,970 Finance costs 1,560 ______ Total expenses 13,630 ______ Profit before income tax 6,270 Income tax expense 1,908 ______ Profit $4,362 ===== Nimbin P/L Statement of changes in Equity For the year ended 30 June 2014 ($000) Share capital Ordinary (7,200.000 shares) Balance at start of period $7,200 ______ Balance at end of period 7,200 _______ Preference (250,000 shares) Balance at start of period 500 ______ Balance at end of period 500 ______ Total share capital $7,700 ====== Retained Earnings Balance at start of period $4,905 Total income for the period 4,362 Dividends paid – ordinary (2,702) Dividends paid – preference (50) ______ Balance at end of period $6,515 ====== Additional information: Payables include $5,620 (2014) and $5,730 (2013) trade accounts payable; the remainder is accrued expenses. Market prices of issued shares at year-end (2014): Ordinary $12; Preference $6.70. Required: A. Calculate the following ratios for 2014. The industry average for similar businesses is shown. (14 marks) Industry average 1. Rate of return on total assets 22% 2. Rate of return on ordinary equity 20% 3. Profit margin 4% 4. Earnings per share 45c 5. Price-earnings ratio 12.0 6. Dividend yield 5% 7. Dividend payout 70% 8. Current .

1. ACC00724 (Accounting for Managers) S3, 2014
ASSIGNMENT 1 (30 MARKS)
Question 1
Total marks for Q1. (20 marks)
Financial statements of Nimbin Pty Ltd are presented below:
Nimbin P/L
Statement of Financial Position
As at 30 June 2013 and 2014
($000)
20142013
Current assets
Cash and cash equivalents
$1,645
$2,110
Accounts receivables (all trades)

2. 4,100
3,675
Inventories
7,000
6,930
______
_____
Total current assets
12,745
12,715

3. ______
______
Non-current assets
Property, plant and equipment
17,190
15,330
_______
______
Total non-current assets
17,190

4. 15,330
_______
_______
Total assets
$29,935
$28,045
=======
======
Current liabilities
Payables

5. $5,780
$5,990
_______
______
Total current liabilities
5,780
5,990
_______
______
Non-current liabilities

6. Interest-bearing liabilities
9,940
9,450
_______
_____
Total non-current liabilities
9,940
9,450
_______
_______

7. Total liabilities
$15,720
$15,440
======
======
Equity
Share capital
$7,700
$7,700
Retained earnings
6,515

8. 4,905
_______
_______
Total equity
$14,215
$12,605
======
======
Nimbin P/L
Income Statement

9. As at 30 June 2014
($000)
Revenues (net sales)
$55,000
Less: cost of sales
35,100
_______
Gross profit
19,900

10. _______
Less: Expenses
Selling and distribution expenses
7,100
Administrative expenses
4,970
Finance costs
1,560
______

11. Total expenses
13,630
______
Profit before income tax
6,270
Income tax expense
1,908

12. ______
Profit
$4,362
=====
Nimbin P/L
Statement of changes in Equity
For the year ended 30 June 2014
($000)
Share capital
Ordinary (7,200.000 shares)
Balance at start of period

13. $7,200
______
Balance at end of period
7,200
_______
Preference (250,000 shares)
Balance at start of period

14. 500
______
Balance at end of period
500
______
Total share capital
$7,700

15. ======
Retained Earnings
Balance at start of period
$4,905
Total income for the period
4,362
Dividends paid – ordinary
(2,702)
Dividends paid – preference
(50)

16. ______
Balance at end of period
$6,515
======
Additional information:
Payables include $5,620 (2014) and $5,730 (2013) trade
accounts payable; the remainder is accrued expenses. Market
prices of issued shares at year-end (2014): Ordinary $12;
Preference $6.70.
Required:
A. Calculate the following ratios for 2014. The industry average
for similar businesses is shown. (14 marks)
Industry average
1. Rate of return on total assets

17. 22%
2. Rate of return on ordinary equity
20%
3. Profit margin
4%
4. Earnings per share
45c
5. Price-earnings ratio
12.0
6. Dividend yield

18. 5%
7. Dividend payout
70%
8. Current ratio
2.5:1
9. Quick ratio (acid ratio)
1.3:1
10. Receivables turnover
13
11. Inventory turnover

19. 6
12. Debt ratio
40%
13. Times interest earned
6
14. Assets turnover
1.8
B. Given the above industry averages, comment on the
company’s profitability, liquidity and use of financial gearing.
(6 marks)
Question 2
Total marks for Q5. (10 marks)

20. a) A local restaurant is noted for its fine food, as evidenced by
the large number of customers. A customer was heard to remark
that the secret of the restaurant’s success was its fine chef.
Would you regard the chef as an asset of the business? If so,
would you include the chef on the balance sheet of the business
and at what value? (2 MARKS)
b) Accounting provides much information to help managers
make economic decisions in their various workplaces. You are
required to provide examples of economic decisions that the
following people would need to make with the use of accounting
information: (3 MARKS)
· A manager of human resources
· A factory manager
· The management team of an Australian Football League (AFL)
club
· The manager of a second-hand clothing charity
c) Indicate the effect of each of the following transactions on
any or all of the three financial statements of a business: (5
MARKS)
1. Statement of financial position
2. Statement of financial performance
3. Statement of cash flows
Apart from indicating the financial statements (s) involved, use
appropriate phrases such as ‘increase total asset’, ‘decrease
equity’, ‘increase income’, ‘decrease cash flow’ to describe the
transaction concerned.
1. Purchase equipment for cash.
2. Provide services to a client, with payment to be received
within 40 days.

21. 3. Pay a liability.
4. Invest additional cash into the business by the owner.
5. Collect an account receivable in cash.
6. Pay wages to employees.
7. Receive the electricity bill in the mail, to be paid within 30
days.
8. Sell a piece of equipment for cash.
9. Withdraw cash by the owner for private use.
10. Borrow money on a long-term basis from a bank.
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ACC00724 Accounting for Managers, Assignment 1, S3 2014
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