Page 10
Balance sheet exception report as at 30 June 1999
BudgetActualVariance
Current assets$$$%
Cash at bank12 00011 200–800 U–6.7%
Accounts receivable6 5006 350–150 U–2.3 U
Inventory2 6003 800+1 200 F+46.2F
Prepaid expenses1 000950–50 U–5.0 U
22 10022 300+200 F+0.9 F
Non-current assets
Land30 00030 00000
Building and equipment90 00090 00000
Accumulated depreciation(30 000)(30 000)00
90 00090 00000
Total assets112 100112 300+200 F+0.2 F
lessLiabilities
Current liabilities
Accounts payable5 9006 850+950 U+16.1 U
Accrued expenses1 1001 150+50 U+4.5 U
7 0008 000+1 000U+14.3 U
Non-current liabilities
Loan—due 200457 50057 50000
64 50065 500+1 000+1.6 U
Net assets$47 600$46 800–800 U–1.7 U
Owner’s equity
Capital30 00030 00000
Accumulated profits or losses17 60016 800–800 U–4.5 U
$47 600$46 800–800 U–1.7 U
Page 18/19
Hawke Enterprises
Balance sheet as at 30 June 1999
Current assets$$$$
Cash at bank1 20011 200
Accounts receivable3 9004 1005 2506 350
Inventory2 6002 6502 4003 800
Prepaid expenses1 000____0__550__950
7 5006 7509 40022 300
Non-current assets
Land30 00030 00030 00030 000
Building and equipment30 00090 00090 00090 000
Accumulated depreciation(24 000)(26 000)(28 000)(30 000)
36 00094 00092 00090 000
Total assets43 500100 750101 400112 300
lessLiabilities
Current liabilities
Bank overdraft6802 300
Accounts payable6 4008001 3006 850
Accrued expenses__800__150__6001 150
7 8803 2501 9008 000
Non-current liabilities
Loan—due 2004_____057 50057 50057 500
7 88060 75059 40065 500
Net assets$35 620$40 000$42 000$46 800
Pages 34, 39, 40, 42 and 44
Leverage
•Proprietary ratio
Owner’s equity35 620=40 000=42 000=46 800=
Total equities43 500100 750101 400112 300
0.819:10.397:10.414:10.417:1
or 81.9%or 39.7%or 41.4%or 41.7%
Page 41
If you are satisfied with your solution to Activity 1.13 continue with the next topic ‘Accounts receivable turnover’.
Page 42
Business activity
1998 / 1999 / 2000 / 2001• / Inventory turnover / 11.5 times / 12.3 times / 10.7 times
Cost of goods sold
Average inventories
• / Average holding days / 32 days / 30 days / 34 days
• / Accounts receivable turnover
Net credit sales / 56 900 / 62 400 / 67 200
Average accounts receivable / 4,000 / 6,175 / 5,800
= 14.2 times / =13.3 times / =11.6 times
Page 45
Wuthering Weather Meters
Comparative profit and loss statements
Sales (80% are credit)
cost of goods sold
Gross profit
Other operating revenue / $
71 300
33 800
37 500
3 200
40 700 / $
72 400
34 980
37 420
1 800
39 220 / $
75 540
36 580
38 960
2 250
41 210 / $
77 800
38 960
38 840
2 830
41 670 / $
76 350
37 680
38 670
3 440
42 110
Page 47
Competency Review 1.3
Now you may test your competency by completing Competency Review 1.3
You are required to complete the following in the space provided below:
Calculate and briefly discuss the following ratios for The Jolly Jumbuck Store:
•Gross profit ratio•Net profit ratio
- Working capital ratio•Quick asset ratio
•Proprietary ratio•Return on proprietorship
•Inventory turnover•Accounts receivable turnover
•Average holding period•Average collection period
Jolly Jumbuck Store
Comparative profit and loss statements
Sales (all credit)
Cost of goods sold
Gross profit
Operating expenses
Selling expenses
Administrative expenses
Finance expenses
Net profit / $
34 900
20 600
14 300
7 500
5 300
500
1 300
1 000 / $
35 600
19 600
16 600
7 750
5 120
550
13 240
2 580 / $
36 700
20 400
16 300
8 120
5 240
590
13 950
2 350 / $
36 400
21 200
15 240
8 360
5 670
640
16 670
570 / $
36 500
21 500
15 000
8 500
5 890
630
15 020
( 20)
Page 67
1.24You are required to calculate and discuss the significance of the following ratios:
•Gross profit ratio•Working capital ratio
•Net profit ratio•Quick asset ratio
•Proprietary ratio
Florence Furniture
Comparative balance sheets
19971998199920002001
Current assets$$$$$
Cash at bank2 840
Accounts receivable26 38028 54033 66032 34030 180
Inventory31 30030 20028 69029 74030 400
Prepaid expenses 1 000 1 200 960 550 360
58 68059 94063 31062 63063 780
Current liabilities
Bank overdraft3 8108 9905 69013 010
Accounts payable24 63032 82036 40032 00038 360
Revenue—prepaid1 4401 2601 320970800
Accrued expenses 6 800 5 270 4 150 3 650 4 000
36 68048 34047 56049 63043 160
Working capital22 00011 60015 75013 00020 620
Non-current assets
Land100 000100 000100 000100 000100 000
Premises180 000180 000180 000180 000180 000
Accumulated depreciation—
premises(72 000)(73 400)(74 250)(78 000)(81 780)
208 000206 600205 570202 000198 220
230 000218 200221 500215 000218 840
Non-current liabilities
Mortgage on premises100 00095 00090 00085 00080 000
Net assets$130 000$123 200$131 500$130 000$138 840
Owner’s equity
Capital130 000130 000123 200131 500130 000
Net profit (loss)12 50014 39014 60016 24018 840
Drawings (12 500) (21 190) (6 300) (17 740) (10 000)
$130 000$123 200$131 500$130 000$138 840
19971998199920002001
Sales91 000103 200117 300114 850132 800
Gross profit46 40059 80062 20059 70073 040
Page 69
1.26You are required to calculate and discuss the significance of the following ratios:
•Gross profit ratio•Net profit ratio
•Working capital ratio•Quick asset ratio
•Proprietary ratio•Return on proprietorship
•Inventory turnover•Accounts receivable turnover
•Average holding period•Average collection period
Gerry’s Gourmet Deli
Comparative profit and loss statements
19931994199519961997
$$$$$
Sales354 000355 500356 700362 400365 000
Cost of goods sold199 000197 600204 400211 200215 500
Gross profit155 000157 900152 300151 100149 500
Operating expenses
Selling expenses23 40019 60018 90016 15021 850
Administrative expenses84 20088 75094 80095 60092 800
Finance expenses 21 780 20 550 22 100 22 650 23 750
129 380128 900135 800134 400138 400
Net profit$ 25 620$ 29 000$ 17 300$ 16 700$ 11 100
Gerry’s Gourmet Deli
Comparative balance sheets
19931994199519961997
Current assets$$$$$
Cash at bank13 4502 520
Accounts receivable28 75029 83028 60034 30040 700
Inventory34 60041 70036 85047 90050 750
Prepaid expenses 400 300 250 550 200
77 200 74 350 65 700 82 750 91 650
Current liabilities
Bank overdraft2 75024 15032 750
Accounts payable46 40046 10046 80046 35042 700
Accrued expenses 800 750 150 650 425
47 20046 85049 70071 15075 875
Working capital 30 000 27 500 16 000 11 600 15 775
Non-current assets
Premises200 000200 000200 000200 000200 000
Equipment30 00035 00046 00046 00052 100
Accumulated depreciation—
equipment(12 000)(12 500)(14 000)(15 000) (16 000)
218 000222 500232 000231 000236 100
Total assets248 000250 000248 000242 600251 875
Non-current liabilities
Mortgage on premises111 000110 000108 000105 000100 000
Net assets$137 000$140 000$140 000$137 600$151 875
Owner’s equity
Capital130 000137 000140 000140 000137 600
Additional capital20 000
Net profit (loss)25 62029 00017 30016 70011 100
Drawings (18 620)(26 000) (17 300)(19 100)(16 825)
$137 000$140 000$140 000$137 600$151 875