Page 1 of 6ASSIGNMENT 2ND SEMESTER : FINANCIAL MANAGEMENT (FM)CHAPTERS COVERED : CHAPTERS 1 - 8, 10...

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Page 1 of 6ASSIGNMENT 2ND SEMESTER : FINANCIAL MANAGEMENT (FM)CHAPTERS COVERED : CHAPTERS 1 - 8, 10 & 21 - 24 LEARNER GUIDE : STUDY UNITS 1 - 4 & 8 DUE DATE : 3:00 p.m. 21 AUGUST 2012 TOTAL MARKS : 100INSTRUCTIONS TO CANDIDATES FOR COMPLETING AND SUBMITTING ASSIGNMENTSThe 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 on plain A4 paper. You must show all working calculations, including and where appropriate multiple choice working calculations. 6. A separate assignment cover, which is provided by the IMM GSM, must be attached to the front cover 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 21 August 2012. Late assignments will be accepted, but 25 marks will be deducted from the maximum mark, if received after 3:00 p.m. on 21 August 2012 and 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 Friday, 5 October 2012.© IMM Graduate School of Marketing Assignment: 2nd Semester 2012 FM

Robert · Accepted Answer

1 
 
Question 1 
1.1 Missing Trading Ltd. 
Original cost as on 1st January 2009   R 120 000 
Less: Depreciation for 2009 (120000 x 15%)       18 000 
Carrying value as on 31st Dec 2009       102 000 
Less: Depreciation for 2010 (102000 x 15%)       15 300 
Carrying value as on 31st Dec 2010         86 700 
Less: Depreciation for 2011 (86700 x 15%)       13 005 
Carrying value as on 31st Dec 2011         73 695 
Therefore: 
Amount of depreciation as period expense for 3rd year = R 13 005 
Carrying value as on 31st Dec 2011 = R 73 695
1.2  Straight line method of depreciation   
 Depreciation per period = [Cost – Salvage value]/Estimated life 
 Please note: Estimated life is NOT given in the question. Therefore, we are   
 assuming the following estimated life in years for calculation. 
Assumption 1: Estimated life = 10 years 
Depreciation per period  [120 000 – 0]/10 years  = R 12 000 
Assumption 2: Estimated life = 5 years 
Depreciation per period  [120 000 – 0]/5 years  = R 24 000 
Assumption 3: Estimated life = 4 years 
Depreciation per period  [120 000 – 0]/4 years  = R 30 000
2 
 
1.3   2 other possible methods to value stock other than FIFO 
 (1) LIFO – Last in First Out 
 (2) Average cost method
1.4 Bluegrass Natural Foods 
 a. The inventory turnover of the company (6.0) is much lower than the 
industry ratio of 10.4 times. The higher the inventory turnover, higher is the 
speed of conversion of inventory into sales. A lower ratio indicates excess 
storage of inventory. I can recommend the new owners to reduce the 
average investment in inventory and store only an optimal amount. 
Inventory storage should not be so high as to block cash and profit and 
should not be so less so that it would fall short for sales. Storing an optimal 
amount of inventory will also reduce the inventory handling and carrying 
costs.  
b. The average collection period of the company (73 days) is much higher 
than the industry average collection period of 52 days. This means that the 
company is slow in collection by an average of 21 days when compared to 
the industry. It is recommended that the company improves its collection 
efforts by following and implementing strict credit policy, offering cash 
discounts for earlier payments and thereby encouraging customers to pay 
early and by efficient follow up of payments.

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