School of Accountancy

 

 

115.112 Accounting

 

Assignment 2

 

Semester 2, 2017

 

Assignment 2 will be marked out of 45 and will contribute 15% to your final grade.

 

Assignment 2 Instructions

How to Approach this Assignment

• Please read all instructions before starting the assignment.
• You should first study the relevant material in the text and make sure you understand the concepts covered.

 

Naming Convention and backups

88888888. Use the following naming convention for the file that you create: use
          your Last Name Student ID number as the name of the file [Do not change the file extension or you (and the marker) will not be able to use the file]. For example, if your Last Name is Smith and your Student ID number is 88888888; your file will be smith88888888.docx

1. Once you have started working on an assignment you should make backups. It pays to rename different versions of your work. A simple way to do this is to use the Save as file instruction and add a number or letter to the end of the file name.  (This allows you to go back to an earlier version.)

Assignment brief

 

Eugenie Joseph has successfully operated a trading business called the Jounieh Emporium for many years but at the beginning of the 2017 financial year Eugenie passed more of the management of the business to her daughter Pearl Joseph. Recently when Eugenie was opening the mail she was horrified to see that the business now had an overdraft, something that had never happened when she managed the business. When challenged on the overdraft Pearl retorted to her mother that the business has never been better and that sales this year have increased substantially thanks to a marketing campaign and a new range of products

Required:

 

• Use the information in Appendix A to calculate the ratios for the business for the year ended 31 March 2017

Note: The ratio calculations must be shown in the Appendix C, ANALYSIS RATIOS on page 7 of this document. Your calculations on this sheet may be typed or hand written and then attached at the end of your report as required in (ii). Calculations should not appear in the body of the report.  A list of analysis ratios for use with Cunningham is included in Appendix B.

• Write a report, discussing the following points:

1. The profitability of the Jounieh Emporium compared with that of the previous year.

1. The liquidity of the Jounieh Emporium identifying the causes of the change from Cash at Bank to a large Bank Overdraft.

1. In relation to the state of the business identified in (ii)a and (ii)b give recommendations as to how the business should be conducted in the future.

• Use relevant ratios from (i) in Appendix C to justify your answers.

• Marks will be allocated for the presentation of your report (refer marking grid Appendix D). Guidelines for writing reports are given in Appendix 2 of the Course Guide.

Appendix A FINANCIAL STATEMENTS

 

 

 

 

 

 

 

 

 

 

Appendix A FINANCIAL STATEMENTS continued

 

 

Further information	$
Accounts receivable 1 April 2015	296,000
Inventory 1 April 2015	502,000
Total Assets 1 April 2015	1,340,000
Total Owners Equity 1 April 2015	705,000

 

 

 

 

 

Appendix B ANALYSIS RATIOS FOR USE WITH CUNNINGHAM

	TYPE OF RATIO	REFERENCE
	PROFITABILITY	Chapter/ Page
1	Profit Margin	Ch. 7 p.293 (280)	Net Income  x 100 Net Sales
2	Gross Profit Percentage	Ch. 7 p.293 (281)	Gross Profit  x 100 Net Sales
3	Return on Total Assets	Ch.8 p.343 (323)	(Net Income + Interest Expense) x 100 Average Total Assets
4	Return on Owner’s Equity	Ch.8 p.324 (344)	Net Income x 100 Average Owner’s Equity
	EFFICIENCY
5	Inventory Turnover	Ch. 8 p.326 (345)	Cost of Goods Sold  Average  Inventory
6	Number of Days in Selling Period	Ch. 8 p.327 (346)	365 Inventory Turnover
7	Accounts Receivable Turnover	Ch. 8 p.327 (347)	Net Credit Sales Average Accounts Receivable
8	Number of Days in Collection Period	Ch.8 p.328 (347)	365 Accounts Receivable Turnover
	LIQUIDITY
9	Current Ratio	Ch. 8 p.337 (318)	Current Assets Current Liabilities
10	Quick Ratio	Ch.8 p.338 (318)	Quick Assets Current Liabilities Where Quick Assets = Cash + Accounts Receivable + Short Term Marketable Securities + Short Term  Notes Receivable
	FINANCIAL GEARING
11	Debt Ratio	Ch. 8 p.339 (320)	Total Liabilities x 100 Total Assets
12	Interest Coverage	Not in text	Net Income + Interest Expense Interest Expense
	OTHER
13	Sales % Increase	Not in text	(Sales Year 2 – Sales Year 1) x 100 Sales Year 1

 

Appendix C ANALYSIS RATIOS TO BE COMPLETED

		2017	2016
1	Profit Margin	= Net income*100/ Net sales =290,000*100/3,150,000 = 9.2%	15.7%
2	Gross Profit Percentage	= Gross profit*100/ Net sales = 945,000*100/3,150,000 = 30%	35%
3	Return on Total Assets	= (Net income + interest expenses) *100 / Average total assets = (290,000+21,000) *100 (1,870,000+1,410,000) 2 = 18.96%	28.15%
4	Return on Owner’s Equity	= Net Income*100 / Average Owner’s Equity = 290,000*100 (873,500+734,400) 2 = 36.07%	50.72%
5	Inventory Turnover	= Cost of Goods Sold / Average Inventory = 2,205,000 (790,000+540,000) 2 =3.3x	2.9x
6	Number of Days in Selling Period	= 365 / Inventory turnover = 111 days	126 days
7	Accounts Receivable Turnover	= Net Credit Sales / Average Accounts Receivable =2,700,000 (580,000+310,000) 2 = 6.07x	5.61x
8	Number of Days in Collection Period	= 365 / Accounts Receivable Turnover = 61 days	65 days
9	Current Ratio	= Current Assets / Current Liabilities = 1,370,000 / 594,500 = 2.30	3.49
10	Quick Ratio	= Quick Assets / Current Liabilities = (0+580,000) 594,500 = 0.98	1.36

Appendix D Marking Grid

115.112 ASSIGNMENT 2 1702 MARKING CRITERIA GRID

 

Student Name______________________________           ID __________________

 

Qualities	Fail	C Pass	B Pass	A Pass	Max Mark	Student Mark
Calculation of ratios (i)					10
Addressing requirement (ii) a.	Work does not address the assignment brief or the focus is very inadequate. 0-1	Work makes some relevant points but is not adequately focused on the assignment brief 4-5	Work displays an understanding of the brief and provides a range of relevant evidence in answering it. 6-7	Work which engages closely with the assignment brief and addresses its implications as well as its “surface sense” 8-10	10
Addressing requirement (ii) b.	Work does not address the assignment brief or the focus is very inadequate. 0-3	Work makes some relevant points but is not adequately focused on the assignment brief 4-5	Work displays an understanding of the brief and provides a range of relevant evidence in answering it. 6-7	Work which engages closely with the assignment brief and addresses its implications as well as its “surface sense” 8-10	10
Conclusion (ii) c.	Does not adequately identify problem areas nor propose relevant actions 0-3	Identifies three problem areas and proposes  limited action 4-5	Identifies three significant problem areas and proposes appropriate action 6-7	Clearly identifies three significant problem areas and proposes effective action 8-10	10
Communication of ideas (Report format)	Does not present ideas clearly 0	Presents ideas in a clear manner 2	Presentation of ideas is achieved clearly in a coherent, fluent manner 3-4	Presentation of ideas has impact. 5	5
Total					45

 

Assignment Queries

Please feel free to keep in touch with the 115.112 team regarding this assignment, preferably through the assignment 1 forum. That way all students benefit and often we have found that the best way of learning is through discussion with your peers as well as teaching staff.

Please note that this assignment is at individual, not group level. Discussion is fine but do not post your answers to the assignment on STREAM through discussion forums, as that will lead to penalties. If you are uncertain, please contact the teaching staff.

There are a large number of students in this course, but that does not mean that you are not each individually very important to us. We value each student and will try to provide appropriate guidance to the best of our ability.

Assignment submission

Follow the instructions “Submitting Assessments to Stream Assignment boxes”. STREAM records the submission date and time. See the Course Guide for policies re extensions and late submissions. Penalties will be applied to late submissions for which an extension has not been granted, but note the cut off time of a week after the due date, after which no assignments will be accepted for marking.

Return of marked assignments

 

You will be informed when your marks are available. A break-down of the mark will be given on a marking sheet will be available at the same point as where you uploaded your assignment.  Note that the normal turnaround of assignments is three working weeks. However, we will be working to return the assignment sooner than that.

There will be feedback in the form of suggested solutions and overall comments by the marker.

All the best with your assignment! 

 

 

The 115.112 Teaching Team