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ACC00724 (Accounting for Managers) S2, 2016 ASSIGNMENT 1 (20 MARKS) Question 1 Total marks for Q1. (10 marks) Financial statements of Nimbin Pty Ltd are presented below: Nimbin P/L Statement of Financial Position As at 30 June 2015 and 2016 ($000) Current assets Cash and cash equivalents Accounts receivables (all trades) Inventories Total current assets Non-current assets Property, plant and equipment Total non-current assets Total assets 2016 2015 $1,645 4,100 7,000 ______ 12,745 ______ $2,110 3,675 6,930 _____ 12,715 ______ 17,190 _______ 17,190 _______ $29,935 ======= 15,330 ______ 15,330 _______ $28,045 ====== Current liabilities ACC00724 Accounting for Managers, Assignment 1, S2 2016 Page 1 of 6 Payables Total current liabilities Non-current liabilities Interest-bearing liabilities Total non-current liabilities Total liabilities Equity Share capital Retained earnings Total equity $5,780 _______ 5,780 _______ $5,990 ______ 5,990 ______ 9,940 _______ 9,940 _______ $15,720 ====== 9,450 _____ 9,450 _______ $15,440 ====== $7,700 6,515 _______ $14,215 ====== $7,700 4,905 _______ $12,605 ====== Nimbin P/L Income Statement As at 30 June 2016 ($000) Revenues (net sales) Less: cost of sales Gross profit $55,000 35,100 _______ 19,900 _______ Less: Expenses ACC00724 Accounting for Managers, Assignment 1, S2 2016 Page 2 of 6 Selling and distribution expenses Administrative expenses Finance costs Total expenses Profit before income tax Income tax expense Profit 7,100 4,970 1,560 ______ 13,630 ______ 6,270 1,908 ______ $4,362 ===== Nimbin P/L Statement of changes in Equity For the year ended 30 June 2016 ($000) Share capital Ordinary (7,200.000 shares) Balance at start of period Balance at end of period Preference (250,000 shares) Balance at start of period Balance at end of period Total share capital ACC00724 Accounting for Managers, Assignment 1, S2 2016 $7,200 ______ 7,200 _______ 500 ______ 500 ______ $7,700 ====== Page 3 of 6 Retained Earnings Balance at start of period Total income for the period Dividends paid - ordinary Dividends paid - preference Balance at end of period $4,905 4,362 (2,702) (50) ______ $6,515 ====== Additional information: Payables include $5,620 (2016) and $5,730 (2015) trade accounts payable; the remainder is accrued expenses. Market prices of issued shares at year-end (2016): Ordinary $12; Preference $6.70. Required: A. Calculate the following ratios for 2016. The industry average for similar businesses is shown. (6 marks) 1. Rate of return on total assets 2. Rate of return on ordinary equity 3. Profit margin 4. Earnings per share 5. Price-earnings ratio 6. Dividend yield 7. Dividend payout 8. Current ratio 9. Quick ratio (acid ratio) 10. Receivables turnover 11. Inventory turnover 12. Debt ratio ACC00724 Accounting for Managers, Assignment 1, S2 2016 Industry average 22% 20% 4% 45c 12.0 5% 70% 2.5:1 1.3:1 13 6 40% Page 4 of 6 13. Times interest earned 14. Assets turnover 6 1.8 B. Given the above industry averages, comment on the company's profitability, liquidity and use of financial gearing. (4 marks) Question 2 Total marks for Q5. (10 marks) a) A local restaurant is noted for its fine food, as evidenced by the large number of customers. A customer was heard to remark that the secret of the restaurant's success was its fine chef. Would you regard the chef as an asset of the business? If so, would you include the chef on the balance sheet of the business and at what value? Discuss. (2 MARKS) b) Accounting provides much information to help managers make economic decisions in their various workplaces. You are required to provide examples of economic decisions that the following people would need to make with the use of accounting information: (3 MARKS) A manager of human resources A factory manager The management team of an Australian Football League (AFL) club The manager of a second-hand clothing charity c) Indicate the effect of each of the following transactions on any or all of the three financial statements of a business: (5 MARKS) 1. Statement of financial position 2. Statement of financial performance 3. Statement of cash flows ACC00724 Accounting for Managers, Assignment 1, S2 2016 Page 5 of 6 Apart from indicating the financial statements (s) involved, use appropriate phrases such as 'increase total asset', 'decrease equity', 'increase income', 'decrease cash flow' to describe the transaction concerned. 1. Purchase equipment for cash. 2. Provide services to a client, with payment to be received within 40 days. 3. Pay a liability. 4. Invest additional cash into the business by the owner. 5. Collect an account receivable in cash. 6. Pay wages to employees. 7. Receive the electricity bill in the mail, to be paid within 30 days. 8. Sell a piece of equipment for cash. 9. Withdraw cash by the owner for private use. 10. Borrow money on a long-term basis from a bank. THE END ACC00724 Accounting for Managers, Assignment 1, S2 2016 Page 6 of 6