need part 2 only

1

Certificate for module

(Foundation degree Course in Business Accounting)

(2020, First Semester)

Individual Assignment

Part A (Total 28 marks)

Users of financial statements include investors, employees, lenders, suppliers and other trade creditors,

customers, government and their agencies and the public.

Please explain the information needs of the above SEVEN user groups of financial information?

Part B (Total 72 marks)

Question 1 (Total 40 marks)

As the Finance Manager of Office Smart Limited, a trading company of office equipment

consumables in Hong Kong.

Closing of year-end financial accounts for the year-ended 30 June 2020 has been completed

(Appendix 1), you are going to prepare a report on the financial position and performance to

the board of directors next week. Use the below accounting ratios and corresponding trend

for two years to prepare your report.

(1) Gross Profit Margin

(2) Net Profit Margin.

(3) Inventory Turnover in number of days (using year-end figures)

(4) Debtors' Turnover in number of days ( using year-end figures)

(5)

(6)

(7)

(8)

Current Ratio

Liquid Ratio

Return on Capital employed ( based on Owners' equity )

Sales/Fixed Assets

(Note: Ratios calculation 24 marks, Comment on the financial positions and performance 16 marks)

2

Question 2 (Total 32 marks)

For a business expansion, a new product will be launched in January 2021, you have been provided

the below budget information.

New bank account will be set up for this new product line and $400,000 bank loan will be applied as

the business expansion funds.

(1) Extra office and computer equipment of $200,000 will be purchased in

January 2021 and two second hand motor vans of $100,000 each will be

purchased in January and March 2021 by cash.

(2)

Two additional headcounts will be hired in January 2021 and the budgeted

salaries are totally $40,000 per month.

(3)

The goods will be purchased in 2021:

Jan Feb Mar Apr May Jun

Units 1,500 1,250 1,500 1,750 2,000 1,500

Each unit costs $100

The supplier will be paid at next month following the units are purchased.

(4)

(5)

The 2021 sales are forecasted as:

Jan Feb Mar Apr May Jun

Units 1,000 1,000 1,500 1,500 2,000 2,000

Each unit will be sold at $150

20% of the sales will be received in cash and the others are credit sales

which the customers are expected to pay in next month following the sale.

Other expenses will be $10,000 per month payable in the month following

that the expenses are incurred.

You need to prepare a cash budget for the 6 months period from January to June 2021 for presentation

to the board any cash flow shortage, if any during the period and suggest additional sources of finance

to meet the cash deficits

3

Office Smart Ltd.

Appendix 1

Balance Sheet as at 30 June, 2020 2019

$,000 $,000

Non-current assets Property, plant and equipment 5,000 4,000

Current assets Inventory 600 200 Debtors 980 700 Bank 2,350 2,550

3,930 3,450

8,930 7,450

Financed by: $,000 $,000 Current liabilities Creditors 1,140 950 Other payables 380 150 Expense accruals 180 200

1,700 1,300

Owners' equity Issued Share Capital 3,200 3,200 General reserve 1,800 1,800 Profit & Loss account 2,230 1,150

7,230 6,150

8,930 7,450

Profit and Loss account for the year ended 30 June

2019 2018

$,000 $,000

Sales 6,590 4,900 Less: Cost of goods sold (3,760) (2,940) Gross profit 2,830 1,960 Less: Expenses (1,750) (1,139) Net profit 1,080 821

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