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A distant cousin of yours had inherited some money so he was able to realise his life long ambition to set up in business and

A distant cousin of yours had inherited some money so he was able to realise his life long

ambition to set up in business and sell that well known financial publication, the National

Review. He put R5 000 into the business, arranged to get any additional funds required from

his friendly local bank manager and started trading on 1 January 2010.

The first thing he did was to buy himself a high performance Izuzu Frontier for R4,000.

During his first year's trading he bought and paid for 100 National Reviews (50 @ R40 and 50

@ R50 each). He sold 80 of them for R80 each, partly on cash and partly on credit.

He also pays cash for other expenses (R580) incurred during the year.

At the end of his first year's trading he wishes to ascertain his financial position and, having

heard that you are involved in business, asks you to work out his business's profit (or loss)

position and its financial position.

He also gives you the following information:

At the end of the year he is still owed for four publication sold on credit. Three of these had

been bought by Standard Bank and the fourth by Rod Miller who was last seen boarding a

plane bound for China.

He hopes that the Isuzu will last for at least four years and should be worth at least R1,000 as

a trade-in in at that time. Advertisements in the newspaper showed that the market value of

the Izuzu at the 31 December 2010 was R3,500 - R3,750.

In addition:

a) You must work out the businesss cash balance.

b) Ignore tax, dividends, interest, inflation and anything else you don't understand.

c) If the numbers are not big enough for you, just keep adding noughts to make them

bigger.


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