financial management - imm
Page 1 of 8
**FIRST LEVEL MODULE – NEW PROGRAMME – NOT FOR STUDENTS REGISTERED FOR FM (FINANCIAL MANAGEMENT)** ASSIGNMENT 1st SEMESTER :
FINANCIAL MANAGEMENT 1 (FM101)
STUDY UNITS COVERED
:
STUDY UNITS 1 and 2
CHAPTERS COVERED
:
CHAPTERS 1, 2, 3, 4 and 5
DUE DATE
:
3:00 p.m. 18 March 2014
TOTAL MARKS
:
100
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, IMM GSM recognised Additional Tuition 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 made up from 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 on plain A4 paper. You must show all working calculations, including and where appropriate multiple-choice working calculations.
6.
A separate assignment cover, which is provided by the IMM GSM, must be attached to the front cover 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 18 March 2014. Late assignments will be accepted, but 25 marks will be deducted from the maximum mark, if received after 3:00 p.m. on 18 March 2014 and 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 Friday, 2 May 2014.
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 2 of 8
Answer ALL questions Question 1
[7]
As a recent Financial Management graduate you have been tasked with assisting the financial director (fd) with some queries relating to the December 2013 year end. The following conversation took place: Financial director: “I have heard that a liability is defined as a present obligation resulting from past events, the settlement of which leads to decreases in economic benefits.” You: “That is correct. I remember the use of the terms ‘present obligation’, ‘past event’ and ‘settlement resulting in the outflow of resources’ from my studies.” Financial director: “Great. We have recently purchased a new display stand at a local mall. This investment was financed through funds raised from a loan taken out on the 21st of November 2013 to the value of R55 000. The loan contract (which will be repaid in six years’ time) and purchase of the stand were all finalized on the 21st of November. However, I am not entirely sure how to account for the loan.” REQUIRED 1.1
By applying all the key terms of the definition of a liability, explain to the financial director whether the loan should be accounted for as a liability as at the 31st December 2013. (4)
1.2
Discuss whether the loan would be shown in the balance sheet (statement of financial position) as at 31 December 2013. If so, you are required to identify AND explain which section the R55 000 would be disclosed in. (3)
Question 2
[4]
Indicate which type of business activity each of the companies is involved in: 2.1
Company A – this company buys ink, paper and other raw materials. It uses these raw materials to manufacture labels.
2.2
Company B – this company buys fresh fruit and vegetables from the fruit and vegetable market in town. It then sells the fruit and vegetables to the general public.
2.3
Company C – this company is a company of attorneys that provides legal consulting and counsel in exchange for fee income.
2.4
Company D – this company buys clothes in bulk from China. It brings shipments of clothes to South Africa and sells these to retailers. (1x4) (4)
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 3 of 8
Question 3
[23]
Super Trading (Pty) Ltd is a company that sells motor spares. As at 31 December 2013 the company has vehicles to the value of R150 000, a property to the value of R1 200 000 and a bank account with a positive bank balance of R20 000. The entity has a long term loan with the bank of R560 000, and a creditors (accounts payable) balance of R15 000. The inventory balance is R32 000, and the debtors balance is R15 000. REQUIRED 3.1
Taking the above information into account answer the following questions: 3.1.1 What was the total value of ASSETS for Super Trading (Pty) Ltd as at 31 December 2013? (3) 3.1.2 What was the total value of LIABILITIES for Super Trading (Pty) Ltd as at 31 December 2013? (2) 3.1.3 What was the value of OWNERS’ EQUITY as at 31 December 2013? (Hint: Use the basic accounting equation to assist you.) (3)
3.2
In light of the following independent scenarios calculate: 3.2.1 The LIABILITES if the assets and owners’ equity total R70 000 and R30 000 respectively. (3) 3.2.2 The ASSETS if the liabilities and owners’ equity total R155 000 and R75 000 respectively. (3) 3.2.3 The OWNERS’ EQUITY if the assets and liabilities total R72 000 and R28 000 respectively. (3)
3.3
You are provided with the following balances of CDE Traders for the year ended 31 December 2013: R Current assets Current liabilities Drawings Non-current assets Capital (1/1/2013)
150 000 190 000 12 000 300 000 185 000
3.3.1 Calculate the NET PROFIT for the period ended 31 December 2013. (6)
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 4 of 8
Question 4
[19]
T and T International Pty Ltd is a company that provides logistics services. The year end of the entity is 31 December 2013. Part A The company owns the following assets: Asset 1 –
A vehicle with a cost price of R140 000 was purchased on 1 July 2013. The asset will be depreciated over 5 years (i.e. 20% straight-line).
Asset 2 –
The company owns equipment, purchased on 1 August 2012 with a cost of R 40 000. This equipment is written off over a period of 4 years (i.e. 25% straight-line).
REQUIRED 4.1
Calculate the depreciation expense for the period ended 31 December 2013. (Show ALL workings for each asset leading to the total depreciation amount.) (5)
4.2
Show the depreciation journal entry for the period ended 31 December 2013. You are encouraged to use the following headings in presenting your journal entry: Account name
4.3
Debit (R)
Credit (R)
(3)
What would be the balance of the vehicle in the statement of financial position (balance sheet) as at 31 December 2013? (3)
Part B The following balances appeared, amongst others, T and T International (Pty) Ltd as at 31 December 2013: Debtors control account Provision for doubtful debts
in
the
books
of
R 65 200 R 2 150
Adjustments (not yet taken into account in preparing the above balances): 1. B. Brown, who owes the company R750, has been declared insolvent and his debt must be written off. 2. The provision for bad debts must be adjusted to 6% of outstanding debtors. 4.4
Show the journal entries (account debited and credited) for the above two (2) adjustments (Show ALL necessary workings.) (8)
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 5 of 8
Question 5
[10]
You are required to indicate whether the following items belong in the balance sheet or income statement. For the balance sheet items – indicate whether the item is a current asset, current liability, non-current asset, non-current liability or equity. For the income statement items – indicate whether the items are incomes or expenses. Use the tabular format below to present your answer to the question: Account
Income Statement/Balance Sheet
Current asset/Current liability/ Non-current asset/Non-current liability/Equity/Income/Expense
Insurance Rental income received in advance Bank overdraft Business trade-mark Dividends received
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 6 of 8
Question 6
[32]
The financial accountant, who is now on leave, had correctly drafted the financials but unfortunately spilt his coffee on the working papers. As the financial manager you have been asked to assist in the finalisation of the financial statements by filling in the missing figures and accounting for the information provided. The following balances, amongst others, relate to the year ended 30 June 2013: Debit (R) Credit (R) Rent received 27 500 Rent expense 21 600 Water and electricity 8 840 Bad debts 5 600 Accumulated depreciation on 100 000 equipment Debtors 150 000 Inventory 200 000 Equipment (at cost) 880 000 Creditors 50 000 Additional Information: 1. 2. 3. 4. 5. 6.
7. 8. 9.
Only 11 months of rental was received and accounted for as rent received. The rental space had been occupied by the tenants for the entire year. An amount, owed by debtors, of R7 500 must be written off as irrecoverable. The depreciation for the year on the equipment was correctly calculated as R25 000 but has not yet been taken into account. The water and electricity for July 2013 was paid in advance during June 2013, R570. This amount was included in the water and electricity balance provided. A provision for bad debts was correctly calculated at R7 125. No entry has been made to record the amount calculated. A creditor’s (supplier) invoice, relating to the purchase of office refreshments for the month of June 2013 to the value of R5 000, has not yet been accounted for. The office refreshments are classified as an expense. The company has decided to write off stock (goods) to the value of R20 000 which they can no longer sell. No entry was made to account for this. Interest on the loan for the month of June has not yet been accrued for. Interest is set at 27.6% per annum on the loan. All other balances and accounts have been correctly prepared and accounted for.
REQUIRED: 6.1
Complete the statement of financial position (balance sheet) of Success Limited as at 30 June 2013 by calculating the missing items represented by ‘???’. You are required to present the entire/completed statement of financial position as your answer. (12)
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 7 of 8
Statement of Financial Position of Success Limited as at 30 June 2013 R R ASSETS Non-current Assets ??? Current Assets ??? ??? ??? ??? TOTAL ASSETS
??? ??? ??? ??? ???
EQUITY AND LIABILITIES Shareholders’ equity Ordinary share capital Retained income
916 145 495 000 421 145
Non-current Liabilities Long-term loan Current Liabilities ??? ???
100 000 100 000 ??? ??? ???
TOTAL EQUITY AND LIABILITIES 6.2
At what AMOUNT should the following accounts be reflected in the statement of comprehensive income (income statement) of Success Limited for the year ended 30 June 2013? a) Rent income (2) b) Water and electricity (2) c) Bad debts (2)
6.3
Indicate how each of the points in the additional information (No. 1–7) would impact the accounting equation of Success Limited. Indicate a +/- to represent the effect that the transaction has on the respective accounting elements. An example and suggested format is provided below: E.g. Wages were still owed to a casual worker at year end to the value of R1 500. **this example is for illustrative purposes only.**
No. E.g.
Assets
Owners’ Equity - R 1 500
Liabilities + R 1 500 (14)
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 8 of 8
Question 7
[5]
Pleasing Providers Co. (PP Co.) is an entity that does not manufacture goods. It imports goods and then resells these goods to the South African market. Using the information provided below, calculate the COST OF SALES for the year ended 31 December 2013 (showing ALL workings in a uniform format). R Revenue for the period Credit notes (not yet taken into account above) Opening stock (01/01/2013) Purchases Closing stock (31/12/2013) Customs duties Import tax Transportation costs (incurred in getting inventory to PP Co.’s warehouse) Purchases returns
850 000 155 000 27 500 550 000 65 000 15 000 22 000 7 500 25 000 ASSIGNMENT TOTAL: 100
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
**FIRST LEVEL MODULE – NEW PROGRAMME – NOT FOR STUDENTS REGISTERED FOR FM (FINANCIAL MANAGEMENT)** ASSIGNMENT 1st SEMESTER :
FINANCIAL MANAGEMENT 1 (FM101)
STUDY UNITS COVERED
:
STUDY UNITS 1 and 2
CHAPTERS COVERED
:
CHAPTERS 1, 2, 3, 4 and 5
DUE DATE
:
3:00 p.m. 18 March 2014
TOTAL MARKS
:
100
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, IMM GSM recognised Additional Tuition 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 made up from 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 on plain A4 paper. You must show all working calculations, including and where appropriate multiple-choice working calculations.
6.
A separate assignment cover, which is provided by the IMM GSM, must be attached to the front cover 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 18 March 2014. Late assignments will be accepted, but 25 marks will be deducted from the maximum mark, if received after 3:00 p.m. on 18 March 2014 and 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 Friday, 2 May 2014.
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 2 of 8
Answer ALL questions Question 1
[7]
As a recent Financial Management graduate you have been tasked with assisting the financial director (fd) with some queries relating to the December 2013 year end. The following conversation took place: Financial director: “I have heard that a liability is defined as a present obligation resulting from past events, the settlement of which leads to decreases in economic benefits.” You: “That is correct. I remember the use of the terms ‘present obligation’, ‘past event’ and ‘settlement resulting in the outflow of resources’ from my studies.” Financial director: “Great. We have recently purchased a new display stand at a local mall. This investment was financed through funds raised from a loan taken out on the 21st of November 2013 to the value of R55 000. The loan contract (which will be repaid in six years’ time) and purchase of the stand were all finalized on the 21st of November. However, I am not entirely sure how to account for the loan.” REQUIRED 1.1
By applying all the key terms of the definition of a liability, explain to the financial director whether the loan should be accounted for as a liability as at the 31st December 2013. (4)
1.2
Discuss whether the loan would be shown in the balance sheet (statement of financial position) as at 31 December 2013. If so, you are required to identify AND explain which section the R55 000 would be disclosed in. (3)
Question 2
[4]
Indicate which type of business activity each of the companies is involved in: 2.1
Company A – this company buys ink, paper and other raw materials. It uses these raw materials to manufacture labels.
2.2
Company B – this company buys fresh fruit and vegetables from the fruit and vegetable market in town. It then sells the fruit and vegetables to the general public.
2.3
Company C – this company is a company of attorneys that provides legal consulting and counsel in exchange for fee income.
2.4
Company D – this company buys clothes in bulk from China. It brings shipments of clothes to South Africa and sells these to retailers. (1x4) (4)
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 3 of 8
Question 3
[23]
Super Trading (Pty) Ltd is a company that sells motor spares. As at 31 December 2013 the company has vehicles to the value of R150 000, a property to the value of R1 200 000 and a bank account with a positive bank balance of R20 000. The entity has a long term loan with the bank of R560 000, and a creditors (accounts payable) balance of R15 000. The inventory balance is R32 000, and the debtors balance is R15 000. REQUIRED 3.1
Taking the above information into account answer the following questions: 3.1.1 What was the total value of ASSETS for Super Trading (Pty) Ltd as at 31 December 2013? (3) 3.1.2 What was the total value of LIABILITIES for Super Trading (Pty) Ltd as at 31 December 2013? (2) 3.1.3 What was the value of OWNERS’ EQUITY as at 31 December 2013? (Hint: Use the basic accounting equation to assist you.) (3)
3.2
In light of the following independent scenarios calculate: 3.2.1 The LIABILITES if the assets and owners’ equity total R70 000 and R30 000 respectively. (3) 3.2.2 The ASSETS if the liabilities and owners’ equity total R155 000 and R75 000 respectively. (3) 3.2.3 The OWNERS’ EQUITY if the assets and liabilities total R72 000 and R28 000 respectively. (3)
3.3
You are provided with the following balances of CDE Traders for the year ended 31 December 2013: R Current assets Current liabilities Drawings Non-current assets Capital (1/1/2013)
150 000 190 000 12 000 300 000 185 000
3.3.1 Calculate the NET PROFIT for the period ended 31 December 2013. (6)
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 4 of 8
Question 4
[19]
T and T International Pty Ltd is a company that provides logistics services. The year end of the entity is 31 December 2013. Part A The company owns the following assets: Asset 1 –
A vehicle with a cost price of R140 000 was purchased on 1 July 2013. The asset will be depreciated over 5 years (i.e. 20% straight-line).
Asset 2 –
The company owns equipment, purchased on 1 August 2012 with a cost of R 40 000. This equipment is written off over a period of 4 years (i.e. 25% straight-line).
REQUIRED 4.1
Calculate the depreciation expense for the period ended 31 December 2013. (Show ALL workings for each asset leading to the total depreciation amount.) (5)
4.2
Show the depreciation journal entry for the period ended 31 December 2013. You are encouraged to use the following headings in presenting your journal entry: Account name
4.3
Debit (R)
Credit (R)
(3)
What would be the balance of the vehicle in the statement of financial position (balance sheet) as at 31 December 2013? (3)
Part B The following balances appeared, amongst others, T and T International (Pty) Ltd as at 31 December 2013: Debtors control account Provision for doubtful debts
in
the
books
of
R 65 200 R 2 150
Adjustments (not yet taken into account in preparing the above balances): 1. B. Brown, who owes the company R750, has been declared insolvent and his debt must be written off. 2. The provision for bad debts must be adjusted to 6% of outstanding debtors. 4.4
Show the journal entries (account debited and credited) for the above two (2) adjustments (Show ALL necessary workings.) (8)
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 5 of 8
Question 5
[10]
You are required to indicate whether the following items belong in the balance sheet or income statement. For the balance sheet items – indicate whether the item is a current asset, current liability, non-current asset, non-current liability or equity. For the income statement items – indicate whether the items are incomes or expenses. Use the tabular format below to present your answer to the question: Account
Income Statement/Balance Sheet
Current asset/Current liability/ Non-current asset/Non-current liability/Equity/Income/Expense
Insurance Rental income received in advance Bank overdraft Business trade-mark Dividends received
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 6 of 8
Question 6
[32]
The financial accountant, who is now on leave, had correctly drafted the financials but unfortunately spilt his coffee on the working papers. As the financial manager you have been asked to assist in the finalisation of the financial statements by filling in the missing figures and accounting for the information provided. The following balances, amongst others, relate to the year ended 30 June 2013: Debit (R) Credit (R) Rent received 27 500 Rent expense 21 600 Water and electricity 8 840 Bad debts 5 600 Accumulated depreciation on 100 000 equipment Debtors 150 000 Inventory 200 000 Equipment (at cost) 880 000 Creditors 50 000 Additional Information: 1. 2. 3. 4. 5. 6.
7. 8. 9.
Only 11 months of rental was received and accounted for as rent received. The rental space had been occupied by the tenants for the entire year. An amount, owed by debtors, of R7 500 must be written off as irrecoverable. The depreciation for the year on the equipment was correctly calculated as R25 000 but has not yet been taken into account. The water and electricity for July 2013 was paid in advance during June 2013, R570. This amount was included in the water and electricity balance provided. A provision for bad debts was correctly calculated at R7 125. No entry has been made to record the amount calculated. A creditor’s (supplier) invoice, relating to the purchase of office refreshments for the month of June 2013 to the value of R5 000, has not yet been accounted for. The office refreshments are classified as an expense. The company has decided to write off stock (goods) to the value of R20 000 which they can no longer sell. No entry was made to account for this. Interest on the loan for the month of June has not yet been accrued for. Interest is set at 27.6% per annum on the loan. All other balances and accounts have been correctly prepared and accounted for.
REQUIRED: 6.1
Complete the statement of financial position (balance sheet) of Success Limited as at 30 June 2013 by calculating the missing items represented by ‘???’. You are required to present the entire/completed statement of financial position as your answer. (12)
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 7 of 8
Statement of Financial Position of Success Limited as at 30 June 2013 R R ASSETS Non-current Assets ??? Current Assets ??? ??? ??? ??? TOTAL ASSETS
??? ??? ??? ??? ???
EQUITY AND LIABILITIES Shareholders’ equity Ordinary share capital Retained income
916 145 495 000 421 145
Non-current Liabilities Long-term loan Current Liabilities ??? ???
100 000 100 000 ??? ??? ???
TOTAL EQUITY AND LIABILITIES 6.2
At what AMOUNT should the following accounts be reflected in the statement of comprehensive income (income statement) of Success Limited for the year ended 30 June 2013? a) Rent income (2) b) Water and electricity (2) c) Bad debts (2)
6.3
Indicate how each of the points in the additional information (No. 1–7) would impact the accounting equation of Success Limited. Indicate a +/- to represent the effect that the transaction has on the respective accounting elements. An example and suggested format is provided below: E.g. Wages were still owed to a casual worker at year end to the value of R1 500. **this example is for illustrative purposes only.**
No. E.g.
Assets
Owners’ Equity - R 1 500
Liabilities + R 1 500 (14)
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
Page 8 of 8
Question 7
[5]
Pleasing Providers Co. (PP Co.) is an entity that does not manufacture goods. It imports goods and then resells these goods to the South African market. Using the information provided below, calculate the COST OF SALES for the year ended 31 December 2013 (showing ALL workings in a uniform format). R Revenue for the period Credit notes (not yet taken into account above) Opening stock (01/01/2013) Purchases Closing stock (31/12/2013) Customs duties Import tax Transportation costs (incurred in getting inventory to PP Co.’s warehouse) Purchases returns
850 000 155 000 27 500 550 000 65 000 15 000 22 000 7 500 25 000 ASSIGNMENT TOTAL: 100
© IMM Graduate School of Marketing Assignment 1st Semester 2014
FM101
