Question
Statements of Financial Position for Tyler Ltd as at 30 June 2021 and 30 June 2020 are provided below: Tyler Ltd Statement of Financial Position
Statements of Financial Position for Tyler Ltd as at 30 June 2021 and 30 June 2020 are provided below:
Tyler Ltd Statement of Financial Position as at 30 June |
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| ||
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2021 |
| 2020 |
| |
Assets | $ |
| $ |
|
Cash at bank | 110,000 |
| 38,400 |
|
Accounts Receivable | 92,800 |
| 35,000 |
|
Inventory | 112,500 |
| 102,850 |
|
Prepaid Expenses | 18,400 |
| 14,000 |
|
Machinery and Equipment | 310,000 |
| 282,500 |
|
Less: Accumulated Depreciation | -50,000 |
| -52,000 |
|
Total Assets | 593,700 |
| 420,750 |
|
Liabilities |
|
|
|
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Accounts Payable | 92,000 |
| 67,300 |
|
Accrued Expenses | 16,700 |
| 17,000 |
|
Notes payable | 125,000 |
| 130,000 |
|
Total Liabilities | 233,700 |
| 214,300 |
|
Shareholders' Equity |
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|
|
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Share Capital | 126,000 |
| 101,000 |
|
Retained Earnings | 234,000 |
| 105,450 |
|
Total Shareholders' Equity | 360,000 |
| 206,450 |
|
Total Liabilities and Shareholders' Equity | 593,700 |
| 420,750 |
|
The Income Statement of Tyler Ltd for the financial year ended 30 June 2021 is provided below:
Tyler Ltd Income Statement for the year ended 30 June 2021 $ | ||
Sales | 372,000 | |
Less: | ||
Cost of sales | 130,460 | |
Depreciation Expense | 46,500 | |
Other Operating Expense | 27,410 | |
Loss on sale of equipment | 7,500 | |
Total Expenses | 211,870 | |
Profit | 160,130 |
(Question 2 continued on the next page)
QUESTION 2 (Continued)
Additional Information:
- New machinery was purchased for cash during the year. No sale of machinery took place during the year.
- Equipment having an original cost of $57,500 was sold for cash during the year. Accumulated depreciation of the equipment sold was $48,500 at the point of sale.
- Cash dividend was declared and paid during the year.
- Additional shares were issued for cash during the year.
- All sales and purchases were made on credit throughout the year ending 30 June 2021.
- Accounts Payable reflects inventory purchases on credit from suppliers.
REQUIRED:
- The cash return on sales ratio is a profitability ratio and is one of the important cash based ratios that can be used to evaluate an entity. Calculate the cash return on sales ratio for Tyler Ltd and comment on the profitability of Tyler Ltd for the year ending 2021. (A formulae sheet is provided at the end of this assessment paper)
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