The trial balance of Greenwoods Limited, a company involved in the production of garden equipment, as at 31 March 2019, is given below:
|Debit (£)||Credit (£)|
|Allowance for receivable||1,800|
|Salaries and wages||98,420|
|Inventory at 1 April 2018||42,300|
|General distribution costs||22,225|
|Land at cost||80,000|
|Motor vehicles at cost||23,700|
|Motor vehicles accumulated depreciation at
1 April 2018
|£1 Ordinary Shares||30,000|
|Buildings at cost||92,400|
|Buildings accumulated depreciation at 1
|8% Loan notes||75,000|
|Loan note interest paid||3,000|
The following information should also be taken into account:
- Motor Vehicles are depreciated at 25% per annum using the reducing balance method.
- Buildings are to be depreciated at 5% per annum using the straight-line method.
- The closing inventory was valued at £52,830.
- Corporation tax on profits was estimated at £8,700.
- Administrative expenses accrued were £3,760.
- A customer who owed £2,600 has gone bankrupt and Greenwoods Limited has decided to treat the amount as a bad debt.
- Distribution costs prepaid amounted to £1,850.
- The allowance for receivables is to be adjusted so as to represent 5% of the trade receivables.
Prepare the following statements for Greenwoods Limited:
- Income Statement for the year ended 31 March 2019
- Statement of Financial Position as at 31 March 2019
Mark and Jenny are sole traders. Both are wholesalers dealing in furniture industry. Summaries of Income Statement and Statement of Financial Position for the same year have been made available to you as follows:
Income Statement for the year ended 31 December 2019
|Mark £000s||Jenny £000s|
|Cost of goods sold||(225)||(312)|
|Depreciation -equipment and vehicle||(5)||(10)|
Statement of Financial Position as at the end of the year
|Mark £000s||Jenny £000s|
|Equipment and vehicles||31||38|
|Bank and cash||4||0|
|Capital plus reserves
Long term loan
- Calculate the following ratios for both Mark and Jenny:
- Gross profit margin
- Net profit margin
- Return on capital employed
- Inventory turnover (in days)
- Accounts receivables turnover (in days)
- Accounts payables turnover (in days)
- Current ratio
- Quick ratio
- Compare the performance and position of the two businesses on the basis of the above figures.
IDS plc, who are a major sports equipment manufacturer, have recently developed and tested a new trail running shoe. The management are now considering a limited launch of the new shoe over a six-month period. As the project manager for the development of the new product you have compiled and collated the following sales and cost information for the review period.
1. Expected sales are:
|Month||Number of shoes|
Projected selling price is £40.
All sales are expected to be on credit and customers are to pay in the month following the month of sale.
2. The number of shoes produced each month is based on expected sales. It is planned to keep stock levels constant at their current level throughout the trial period.
3. Each pair of shoes requires 0.2 kg of raw materials, which costs £10 per kg. All purchases of materials are on credit and suppliers are to be paid in the second month following the month of purchase.
4. To produce one pair of shoes requires two hours of direct labour at £6 per hour. Wages are paid in the month the shoes are produced.
5. Variable production overheads are to be charged at the rate of £2 per unit (pair of shoes) produced. These are to be paid in the month the units are produced.
6. Fixed monthly production overheads are as follows:
|Rent and rates||£1000|
|Heat and light||£800|
These are to be paid in the month the units are produced.
7. Other monthly fixed overheads are as follows:
These are to be paid in the month the units are produced/sold.
Prepare a cash budget for the period from January until June. Assume the initial cash balance is zero.
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