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Accounting for Managers (ACC00724) S2, 2019 Assignment 1 (20 Marks) QUESTION 1 (10 Marks) Ken Kennett Building Services is a local business operating in the housing industry. Ken Kennett has no formal accounting system and does not use financial statements for decision making. However, he is negotiating a contract with a supplier of building materials who wants to see his financial statements to ensure that Ken can meet his payments each month. Ken has asked you to prepare financial statements. Based on his last tax return and the content of his shoebox (where he keeps his invoices and receipts) for this year, you have recorded the following items: Cash in the shoebox (with the receipts and invoices) $500 Cash in the bank account 3,800 Building services provided550,000 Amounts owed by customers 80,000 Wages paid to employees150,000 Wages owed to the employees 3,500 Equipment 68,000 Building supplies used310,000 Building supplies on hand 18,000 Amounts owed to suppliers 30,000 Motor vehicle 32,000 Motor vehicle expenses 5,600 Electricity and telephone expenses 4,000 Cash used by Ken for personal expenditure 5,700 REQUIRED: A. Using the information above, prepare a statement of financial performance (income statement) and a statement of financial position (balance sheet) for Ken Kennett Building Services. ( 6 Marks) B. How would the financial statements you provide help the supplier of building materials decide whether or not to trade with Ken? What parts of the financial statements would be positive indicators that Ken Kennett Building Services would be able to pay for supplies on time and what items may cause some concern for the suppliers? (4 Marks) QUESTION 2 (10 Marks) Clive Calmer offers accounting services to the local small business owners! He has set up a sole proprietorship business named CC Accounting. Clive has collected the following information relating to his business activities at the end of financial year: Office supplies$1,500 Office supplies expense 840 Telephone expense 255 Motor vehicle expense 330 Accounts receivable 1,500 Bank loan 7,500 Accounts payable 1,080 Cash at bank 8,445 Computer equipment 8,250 Advertising expense 510 Accounting service income 9,750 The following information was also disclosed from examining Clive’s bank statement: Accounting service income receipts$8,250 Initial contribution by Clive 3,300 Bank loan received 9,000 Payments to suppliers 2,355 Repayment of loan 1,500 Computer equipment purchase 8,250 REQUIRED: A. Without preparing formal financial statements, calculate the following: (6 Marks) 1. Profit/loss for the year 2. Total assets at the end of the year 3. Total liabilities at the end of the year 4. Clive Calmer’s capital balance at the end of the year 5. Net cash inflow/outflow for the year B. If Clive had withdrawn $3,000 in cash during the year, what effect would this have (increase, decrease, no effect) on the figures you calculated in requirement A? (4 Marks) 2