Financial Management assigment

| September 29, 2018

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ASSIGNMENT 1ST
SEMESTER : FINANCIAL MANAGEMENT (FM)

CHAPTERS
COVERED : CHAPTERS 1 – 8, 10
& 21 – 24

LEARNER
GUIDE :
UNITS 1 – 4 & 8

DUE DATE : 3:00
p.m. 19 MARCH 2013

TOTAL
MARKS : 100
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INSTRUCTIONS TO
CANDIDATES FOR COMPLETING AND SUBMITTING
ASSIGNMENTS

The complete ‘Instructions to
Students for Completing and Submitting Assignments’ must be collected from any
IMM GSM office, the relevant Student Support Centre or can be downloaded from
the IMM GSM website. It is essential that the complete instructions be studied
prior to commencing your assignment. The following points highlight only a few
important notes.

1.
You are required to submit
ONE assignment per subject.

2.
The assignment will
contribute 20% towards the final examination mark, and the other 80% will be
contributed by the examination, however, the examination papers will count out
of 100%.

3.
Although your assignment will
contribute towards your final examination mark, you do not have to earn credits
for admission to the examinations; you are automatically accepted on
registering for the exam.

4.
Number all the pages of your
assignment (e.g. page 1 of 4) and write your name and surname, student number
and subject at the top of each page.

5.
The IMM GSM requires
assignments to be presented in a typed format, on plain A4 paper. Unless
otherwise specified, this assignment must be completed within a limit of 1500
words, excluding the bibliography. Students who exceed the
word limit may find that only part of the submitted assignment will be marked.

6.
A separate assignment cover,
which is provided by the IMM GSM, must be attached to the front of each
assignment.

7.
Retain a copy of each
assignment before submitting, in case the original does not reach the IMM GSM.

8.
The assignment due date
refers to the day up to which assignments will be accepted for marking
purposes. The deadline is 3:00 p.m. on 19 March 2013. Late assignments will be
accepted, but 25 markswill be deducted from the maximum mark, if
received after 3:00 p.m. on 19 March 2013and up to 5:00 p.m. the
following day, after which no assignments will be accepted.

9.
If you fail to follow these
instructions carefully, the IMM Graduate School of Marketing cannot accept
responsibility for the return of the assignment. It may even result in your
assignment not being marked.

Results will be
available on the IMM GSM website, www.immgsm.ac.za,
on 3 May 2013.
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© IMM Graduate School
of Marketing
Assignment:
1st
Semester 2013 FM

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2 of 7
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SPECIFIC
INSTRUCTIONS:

Answer ALL the
questions
The use of
calculators is permitted. Show ALL calculations.

Read
all questions carefully to determine exactly what is required before attempting
to answer.

Number
your answers clearly and set them out under appropriate headings and
sub-headings.

QUESTION
1

[25]

Mark each of the
accounts listed in the following table as follows:

1.1
In column (1), indicate in
which statement – income statement (IS) or balance sheet (BS) – the account
belongs.

1.2
In column (2), indicate
whether the account is a current asset (CA), current liability (CL), expense
(E), non-current asset (NCA), non-current liability (NCL), revenue (R) or
shareholder’s equity (SE). The type of account must be in terms of IS and BS
entries and not the basic accounting equation (BAE).

(1)

(2)

Account
name

Statement

Type
of account

Trade
and other payables (Creditors)

Trade
receivables (Debtors)

Accumulated
depreciation

Administrative
expense

Buildings

Cash

Ordinary
share capital (at par)

Cost of
goods sold

Depreciation

Equipment

General
expense

Finance
cost

Inventories

Land

Long-term
debt

Machinery

Short-term
borrowings

Operating
expense

Preference
share capital

Redeemable
preference share dividends

Retained
earnings

Sales
revenue

Selling
expense

Taxation
on profits

Vehicles

© IMM
Graduate School of Marketing

Assignment:
1st Semester
2013

FM

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QUESTION
2

[40]

The following pre-adjusted
balances have been extracted from the general ledger of Trendline Traders for
the year ended 31 December 2012.

R

Capital

2 000 000

Cash at bank

90 000

Buildings

600 000

Vehicles

300 000

Furniture

210 000

Salaries

215 000

Lights and Water

15 500

Carriage on sales

22 000

Commission received

19 300

Rent received

14 000

Insurance

4 800

Packing Material

10 200

Drawings

13 500

Bad Debts

15 200

Debtors

313 800

Creditors

287 700

Accumulated
Depreciation: Vehicles

150 000

Accumulated Depreciation:
Furniture

95 000

ADDITIONAL
INFORMATION

a.
The following transactions
took place in respect of the particular product that Trendline Traders sold
during 2012.

Date

Units

Cost price per unit

01-Jan-12

Stock on hand

10 000

R 100

03-Feb-12

Issued
stock

4 000

04-Mar-12

Received
stock

16 000

R 120

05-Jun-12

Issued
stock

4 000

06-Aug-12

Issued stock

6 000

31-Dec-12

Returned stock to
supplier: 2 000 units received on 4 March.

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b.
Depreciation must be provided for the current
year as follows:

i.
Vehicles – 20% per annum on the cost price

ii.
Furniture – 10% per annum on
the reducing balance method (No vehicles or items of furniture were bought or
sold during the year)

c.
Trendline Traders requires a 30% mark-up on
cost price.

d.
Trendline Traders uses a periodic inventory
system. Ignore VAT.
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© IMM Graduate School
of Marketing
Assignment:
1st
Semester 2013 FM

Page 4 of 7

REQUIRED:

2.1.

Calculate the value
of the closing stock using the FIFO method.

(10)

Use the
following format and show the balance after each transaction.

Received

Issued

Balance

Date

Units

Price

Amount

Units

Price

Amount

Units

Price

Amount

2.2
2.2.1
Prepare the income statement (statement of comprehensive income)

for the year ended
31 December 2012.

(17)

2.2.2

Prepare the balance
sheet (statement of financial position)

as at

31 December 2012.

(13)

QUESTION

3

[21]

Your friend Joe is
planning to open a small gymnasium and he has asked you as marketing expert to
help him determine the viability of the gymnasium.

Initial
costs have been estimated to be as follows:

Refurbishment of
the premises

R 120 000

Training
equipment

R

80 000

Sauna
equipment

R

60 000

R 260
000

These initial costs
will be depreciated to a zero book value over 5 years.

The gymnasium will result in annual
maintenance charges of R26 000 and annual insurance charges of R13 000.

It is estimated that the
variable operating costs will be approximately R60 per month per member.
The R60 excludes a 5% commission calculated on each membership fee
that Joe will pay to his sales people.

Market research has shown
that an annual membership fee of R3 200 per member can be charged.

REQUIRED:

3.1

Calculate the
annual unit contribution expected to be realised.

(3)

3.2

Calculate the number
of members required to break-even.

(5)

3.3

Calculate the break-even
revenue.

(2)

3.4
Assume that Joe wants to make
a profit of R89 000. How many members

does
Jo need to enrol and what will be the value of his revenue to break-even
at the required level of profit? (You may assume that the commission rate and

all other costs
remain unchanged.)

(4)

© IMM
Graduate School of Marketing

Assignment:
1st Semester
2013

FM

Page
5 of 7

Joe is considering a more
aggressive approach to marketing and intends spending R20 000 on advertising as
well as increasing the sales commission to 6% and reducing the membership fee
to R3 000. As a result of his strategy he would like to make a profit of R70
000.

3.5
Assuming
all other costs
remain unchanged calculate
the number of

membershe needs
to enrol in order to break-even.

(7)

QUESTION 4

[14]

Provided on the next page are
a statement of financial position (balance sheet) and a statement of
comprehensive income (income statement) correctly prepared for a given
entity for the 2012 financial period.

Required:

4.1
Using the given financial
statements calculate the following ratios for the 2012financial
year, rounded off to the nearest second decimal:

(Note: averages are not
required and you may assume 360 days in the year and all sales are on credit.)

4.1.1

Total asset
turnover

(2)

4.1.2

Mark up %

(2)

4.1.3

Current ratio

(2)

4.1.4

Debtors collection
period

(2)

4.1.5

Creditors Payment
Period

(2)

(Assume
average daily credit purchases of R50 000)

4.1.6

Quick ratio

(2)

4.2
Based on your answers for 4.1.3 – 4.1.6
comment generally on the liquidity

and activity
of the given entity for 2012.

(2)

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© IMM Graduate School
of Marketing
Assignment:
1st
Semester 2013 FM

Page
6 of 7
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Statement of financial position

Assets

2012

Property, plant and
equipment (PPE) at cost price

192 000

Accumulated depreciation

-22 000

PPE at carrying value

170 000

Investment in shares

3 000

Non-current
assets

173 000

Inventories

30 000

Trade receivables

45 000

Cash and cash equivalents

24 000

Current
assets

99 000

Total
assets

272 000

Equity
and liabilities

Share capital

50
000

Reserves

4
000

Retained earnings

28
000

Ordinary shareholders’ equity

82
000

Preference shares

28
000

Shareholders’ equity

110
000

Total
equity

110 000

Long-term debt

80
000

Non-current
liabilities

80 000

Trade payables

25
000

Bank overdraft

1
000

Tax payable

1
000

Dividends payable

5 000

Short-term loans

50
000

Current
liabilities

82 000

Total
equity and liabilities

272 000

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© IMM Graduate School
of Marketing
Assignment:
1st
Semester 2013 FM

Page 7 of 7

Statement
of comprehensive income

2012

Turnover

150 000

Cost of sales and
services rendered

-70 000

Gross profit

80 000

Operating expenses

-40 000

Operating income

4 000

Operating profit

44 000

Investment income

2 000

Finance cost

-14 660

Profit before tax

31 340

Tax

-9 400

Profit after tax

21 940

Preference share
dividends

-2 800

Attributable earnings

19 140

Ordinary dividends

-10 000

Retained
earnings (for the year)

9 140

ASSIGNMENT TOTAL: 100
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© IMM Graduate School
of Marketing
Assignment:
1st
Semester 2013 FM

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