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RATIO ANALYSIS EXERCISES Exercise 1 In reference to the financial statements of Parry's Bakery, complete questions (a)-m). Michael Parry's Bakery INCOME STATEMENT FOR THE YEAR

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RATIO ANALYSIS EXERCISES Exercise 1 In reference to the financial statements of Parry's Bakery, complete questions (a)-m). Michael Parry's Bakery INCOME STATEMENT FOR THE YEAR ENDED SO JUNE 2016 Sales 6,794 Less Cost of Goods Sold 2,765 4,019 Less Inventory Adjustment 5 Gros Profit 4024 Michael Parry's Bakery BALANCE SHEET AS AT 1 JUNE 2016 CURRENT ASSETS Bank Account Receivable Control Inventores Control 513 14 512 4,464 LESS CURRENT LABILITIES Accounts Payable Control GST Clearing Working Capital A9S 5 1,56 Less Expenses SELLING AND DISTRIBUTION Advertising Packaging Rent Expense-shopfront Sales staff wages Telephone sales 55 145 462 450 215 ADO NON CURRENT ASSETS Property Plant and temen Equipment Les Accumulated Depreciation Equipment 2.70 575 2.155 Term Deposit ANZ Bank 114 GENERAL AND ADMINISTRATIVE Depreciation - Equipment Insurance Office staff wages Stationery Vehicle Expenses Telephone - office Rent Expense-office Intangibles Good 120 2,39 5,955 525 15 233 5 56 LESS NON CURRENT LIABILITIES Mortgage CBA Bank 2.250 NET ASSETS 3203 FINANCE Bad Debts Bank Charges Interest Expense NET PROFIT 26 9 178 213 2,470 REPRESENTED BY: OWNERS EQUITY Capital Net Profit Less Drawing 2.860 1.554 1.554 4,415 212 3.203 Exercise 2 Enter the following transactions in the General Journal starting on page 3. Assume balance day is on 30 June 2017 in each of the following circumstances 1. A 12-month insurance policy on office equipment had been taken out on 1 March 2017. An amount of $600 was paid on that date. We have received rent for the premises of $5400. This is received annually in June but only applies to the next accounting period. 3. A 12-month insurance policy on a building was taken out on 1 April 2017. The annual premium of $6300 was due immediately but will only be paid on 1 July 2017 4. A 6-month advertising contract was signed on 30 April 2017. An amount of $3000 was paid on that date 2. 6. 8 5. A 4-month advertising contract was signed and will take effect on 31 March 2017. $600 for this contract will be paid on 30 July 2017 Commission has been received but not yet earned $500 7. Rent on equipment of $6000 is paid annually, in arrears, on 30 September 4 month's rent had been paid in advance on 30 April 2017. The yearly rental was $2400 9. A business made an advertising contract with radio station. The radio station agreed to play 20 commercials at a cost of $900 per commercial. All commercials were paid for before the first commercial was played on air. Up to balance date only 8 commercials had been played on air. 10. An investment of $15000 incurs interest at 10%pa received in November each year. Interest is owing at 30 June 2017 for the period from 30 November 2016. 11. A bill for electricity is received quarterly. We receive the bill in July 2017 for the months ending 30 July, $225. 12. An order from a client of S4000 has been paid for but only half of the goods have been delivered up to balance day. The full revenue has been recorded and therefore hall must be recorded as unearned (ignore GST for this exercise) 13. The employees of a business are paid a total of $1000 wages for working a five-day week. Payday Is Monday of each week. The employees are paid for all work completed up to and including payday. Balance day falls on a Thursday this year. 14. The employees of a business are paid a total of $1600 wages for working a five-day week. Payday is Thursday of each week. The employees are paid for all work completed up to and including payday. Balance day falls on a Monday this year. 15. A business invested $6000 in government bonds on 1 March 2017. Interest is payable at the rate of 10% pa and the first interest payment is due to be received on 1 August 2017 16. A business invested $3000 in government bonds on 1 Feb 2017. Interest is payable at the rate of 10% pa and the first interest payment is due to be received on 1 August 2017 17. The accounts receivable balance 30 June 2017 is $45890. Provide for doubtful debts at 5% of the total accounts receivable. 14 Page RATIO ANALYSIS EXERCISES Exercise 1 In reference to the financial statements of Parry's Bakery, complete questions (a)-m). Michael Parry's Bakery INCOME STATEMENT FOR THE YEAR ENDED SO JUNE 2016 Sales 6,794 Less Cost of Goods Sold 2,765 4,019 Less Inventory Adjustment 5 Gros Profit 4024 Michael Parry's Bakery BALANCE SHEET AS AT 1 JUNE 2016 CURRENT ASSETS Bank Account Receivable Control Inventores Control 513 14 512 4,464 LESS CURRENT LABILITIES Accounts Payable Control GST Clearing Working Capital A9S 5 1,56 Less Expenses SELLING AND DISTRIBUTION Advertising Packaging Rent Expense-shopfront Sales staff wages Telephone sales 55 145 462 450 215 ADO NON CURRENT ASSETS Property Plant and temen Equipment Les Accumulated Depreciation Equipment 2.70 575 2.155 Term Deposit ANZ Bank 114 GENERAL AND ADMINISTRATIVE Depreciation - Equipment Insurance Office staff wages Stationery Vehicle Expenses Telephone - office Rent Expense-office Intangibles Good 120 2,39 5,955 525 15 233 5 56 LESS NON CURRENT LIABILITIES Mortgage CBA Bank 2.250 NET ASSETS 3203 FINANCE Bad Debts Bank Charges Interest Expense NET PROFIT 26 9 178 213 2,470 REPRESENTED BY: OWNERS EQUITY Capital Net Profit Less Drawing 2.860 1.554 1.554 4,415 212 3.203 Exercise 2 Enter the following transactions in the General Journal starting on page 3. Assume balance day is on 30 June 2017 in each of the following circumstances 1. A 12-month insurance policy on office equipment had been taken out on 1 March 2017. An amount of $600 was paid on that date. We have received rent for the premises of $5400. This is received annually in June but only applies to the next accounting period. 3. A 12-month insurance policy on a building was taken out on 1 April 2017. The annual premium of $6300 was due immediately but will only be paid on 1 July 2017 4. A 6-month advertising contract was signed on 30 April 2017. An amount of $3000 was paid on that date 2. 6. 8 5. A 4-month advertising contract was signed and will take effect on 31 March 2017. $600 for this contract will be paid on 30 July 2017 Commission has been received but not yet earned $500 7. Rent on equipment of $6000 is paid annually, in arrears, on 30 September 4 month's rent had been paid in advance on 30 April 2017. The yearly rental was $2400 9. A business made an advertising contract with radio station. The radio station agreed to play 20 commercials at a cost of $900 per commercial. All commercials were paid for before the first commercial was played on air. Up to balance date only 8 commercials had been played on air. 10. An investment of $15000 incurs interest at 10%pa received in November each year. Interest is owing at 30 June 2017 for the period from 30 November 2016. 11. A bill for electricity is received quarterly. We receive the bill in July 2017 for the months ending 30 July, $225. 12. An order from a client of S4000 has been paid for but only half of the goods have been delivered up to balance day. The full revenue has been recorded and therefore hall must be recorded as unearned (ignore GST for this exercise) 13. The employees of a business are paid a total of $1000 wages for working a five-day week. Payday Is Monday of each week. The employees are paid for all work completed up to and including payday. Balance day falls on a Thursday this year. 14. The employees of a business are paid a total of $1600 wages for working a five-day week. Payday is Thursday of each week. The employees are paid for all work completed up to and including payday. Balance day falls on a Monday this year. 15. A business invested $6000 in government bonds on 1 March 2017. Interest is payable at the rate of 10% pa and the first interest payment is due to be received on 1 August 2017 16. A business invested $3000 in government bonds on 1 Feb 2017. Interest is payable at the rate of 10% pa and the first interest payment is due to be received on 1 August 2017 17. The accounts receivable balance 30 June 2017 is $45890. Provide for doubtful debts at 5% of the total accounts receivable. 14 Page

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