Malcolm Phillips is a sole trader who prepares his financial statements annually to 30 April. His summarized statements of financial position for the last two years are shown below.

Malcolm is surprised to see that he now has an overdraft, in spite of making a profit and bringing in additional capital during the year.

Questions:

(a) Draw up a suitable financial statement which will explain to Malcolm how his overdraft has arisen.

(b) The following further information relates to the year ended 30 April 2016.

Calculate Malcolm's (1) gross profit margin (2) rate of inventory turnover.

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Statements of Financial Position as at 30 April 2015 2016 E Non-current assets 15,500 18,500 Less Provision for depreciation (1,500) (1,700) 14,000 16,800 Current assets Inventory 3,100 5,900 Trade accounts receivable 3,900 3,400 Bank 1,500 8,500 9,300 Total assets 22,500 26,100 Current liabilities Trade accounts payable 2,000 2,200 Bank overdraft 900 Total liabilities (2,000) (3,100) Net assets 20,500 23,000 Capital account: Balance at 1 May 20,000 20,500 Add Net profit for the year 7,000 8,500 Additional capital introduced 2,000 27,000 31,000 Less Drawings (6,500) (8,000) Total capital 20,500 23,000