SECTION A: Case Study A (Total = 24 + 20 + 12 = 56 Marks)
Background and Content:
Your friend Sammy is about to prepare the 31 March balance sheet for her new business, Tasty Cookie shop. This is Tasty Cookie’s first month of operation, and Sammy is also going to calculate the first month’s net income. She needs to prepare the balance sheet and calculate net income so she can pass the information along to her parents. They loaned her $5000 so that she could start the business.
Although Sammy thinks that business is booming, she has a big problem. She does not know enough about accounting to prepare the balance sheet to calculate March’s net income. As a matter of fact, Sammy had never heard the words “balance sheet” and “net income” until her parents asked her to promise to give them these statements every month before they would agree to loan Sammy the $5000.
Luckily, Sammy saves every piece of paper associated with Tasty Cookie. She kept copies of all of the business agreements she signed. She deposited all of the money Tasty Cookie earned in the company’s bank account and retained copies of every deposit slip. Sammy also paid every company bill with a cheque and saved all of the related documents.
Assessment Tasks:
Answer all three questions below:
1. Assume Sammy wants to prepare Tasty Cookie’s 31 March balance sheet and March’s income statement according to AASB. Describe to Sammy, in your own words, how she should organize the information about Tasty Cookie’s March transactions so that she can prepare a balance sheet and an income statement and keep her promise to her parents.
(24 marks)
2. After a week, Sammy is still struggling with all the statements. She has come to you for help (with her parents’ permission). She says, “please describe what financial statements are, what the major financial statements are and what each financial statement includes”. Prepare a written response to Sammy’s request.
(20 marks)
3. One year later, Sammy saved some money from her Tasty Cookie business. She has $3500 to invest in the Australian Securities Exchange and is deciding between an investment in Lorne Will Ltd or Lily Ltd. In the most recent reporting period, Lily Ltd made a profit after tax of $1 000 000, compared to Lorne Will’s after-tax profit of $500 000. On this basis, your friend believes Lily Ltd is the superior investment. Discuss your friend’s investment choice. In doing so, suggest other financial data that should be considered. Identify the non-financial data that may be of interest to inform your friend’s investment decision.
(12 marks)
SECTION B: Case Study B (Total = 20 Marks)
Background and Content:
ABS: 72% of Businesses Expecting Cashflow Reduction as Coronavirus Fallout Materialises
By Matthew Elmas
Updated on 04 May, 2020
Accessed from
https://www.smartcompany.com.au/finance/cashflow/cashflow-coronavirus-abs/
on 6 May 2020.
Almost three-quarters of Aussie businesses fear reduced cashflow over the next two months as fallout from the COVID-19 pandemic continues to ravage the economy, according to the Australian Bureau of Statistics (ABS).
The ABS published the latest edition of its coronavirus business impact survey on Monday, revealing widespread feelings of uncertainty in the last full week of April.
While 72% of firms expect cashflow to reduce heading into July, a further 69% of the 2,014 firms surveyed said they’re anticipating reduced demand for goods and services.
The figures come as the Australian Taxation Office (ATO) prepares to this week start payments for the Morrison government’s $130 billion JobKeeper program.
The survey finds about 60% of SMEs have either signed up for JobKeeper or intend to, with ABS’ head of industry statistics John Shepherd saying only 8% of small businesses will give the scheme a miss because they can’t afford to pay staff.
After reading the above article, Sleep Wise Pty Ltd comes to you and asks for your help to prepare the cashflow statement for them. They want to understand their cash position in the current business environment. The following cash flows were extracted from the accounts of Sleep Wise Pty Ltd for the year ended 30 June 2020.
Proceeds from shares (right issue)
|
$
|
75,000
|
Repayment of borrowings
|
$
|
50,000
|
Sale of property
|
$
|
340,000
|
Interest received
|
$
|
7,600
|
Payments to employees
|
$
|
80,000
|
Receipts from customers
|
$
|
220,000
|
Expenses paid
|
$
|
2,000
|
Purchase of office equipment
|
$
|
75,000
|
Payments to suppliers
|
$
|
68,000
|
GST paid
|
$
|
9,500
|
Beginning cash balance
|
$
|
12,000
|
Ending cash balance
|
$
|
370,100
|
Assessment Tasks:
Prepare a statement of cash flows using the direct method, and please evaluate the statement. (20 marks)
SECTION C: Case Study C (Total = 4 + 3 + 3 + 5 +5 + 4 = 24 Marks)
Background and Content:
How-covid-19-will-reshape Electronic Parcel Storage Locker market-analysis By Top Business Players Tiburon Lockers Inc. , Vlocker , Eurolockers , CP Lockers , Xiame…More
By [email protected]
Updated on 28 April, 2020
Accessed from
https://latestherald.com/2020/04/28/how-covid-19-will-reshape-%EF%BB%BF-electronic-parcel-storage-locker-market-analysis-by-top-business-players-tiburon-lockers-inc-vlocker-eurolockers-cp-lockers-xiame-more/
on 6 May 2020.
Electronic Parcel Storage Locker Market Report is exclusive and talks in detail about the current market situations. Also, about the overall market journey in the previous five years along with the prophecy made by the experts in the industry. However, the report also provides the necessary SWOT analysis as it’s one of the main elements. In revenue terms, in the worldwide market, the Electronic Parcel Storage Locker Market is forecasted to generate a great market share.
Your client, Lock Swift Pty Ltd is worrying about their locker business in the future and is asking you to help them analyse the situation. Lock Swift Pty Ltd operates a single-product entity. Data relating to the product for 2020 were as follows:
Annual volume
|
|
|
|
units:
|
32000
|
Selling price per unit
|
|
|
$
|
90
|
Variable manufacturing cost per unit
|
|
$
|
30
|
Annual fixed manufacturing costs
|
|
$
|
150000
|
Variable marketing and distribution costs per unit
|
$
|
17
|
Annual fixed non-manufacturing costs
|
|
$
|
280000
|
Assessment Tasks:
Answer all six questions below:
1. Calculate the break-even in both dollars and units for 2020. (4 marks)
2. Calculate the margin of safety in both units and sales dollars.
(3 marks)
3. Calculate the profit achieved in 2020 given the annual volume of 32 000 units. (3 marks)
4. Changes in marketing strategy are planned for 2021. This would increase variable marketing and distribution costs by $4 per unit, and reduce fixed non-manufacturing costs by $80 000 per year. Calculate the units that would need to be sold in 2021 to achieve the same profit as in 2020. (5 marks)
1. Would you recommend the change? Explain. (5 marks)
6. Explain four uses of Cost-volume-profit (CVP) analysis for Lock Swift.
(4 marks)
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END OF ASSESSMENT -