Page 1 of 6 ASSIGNMENT 2 nd SEMESTER : FINANCIAL MANAGEMENT 1 () CHAPTERS COVERED : CHAPTERS 1-5, 7, 8 DUE DATE : 3:00 p.m. 16 AUGUST 2011 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, the relevant Student Support 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 16 August 2011. Late assignments will be accepted, but 25 marks will be deducted from the maximum mark, if received after 3:00 p.m. on 16 August 2011 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, 7 October 2011.
Page 2 of 6 SPECIFIC INSTRUCTIONS: Answer ALL the questions. The use of calculators is permitted. Show ALL calculations. Read all questions carefully to determine exactly what is required before attempting to answer. Number your answers clearly and set them out under appropriate headings and sub-headings. ANSWER ALL QUESTIONS QUESTION 1 [25] 1.1 In each of the following situations calculate the unknown element: a) In a business with capital of R30,000 and retained profit of R25,000 and liabilities of R10,000, what would the assets be? b) The owner s contribution during the year if the business has assets of R90,000, liabilities of R35,000 and owner s equity (excluding capital contributed by the owner during the year) of R10,000. 1.2 Calculate the missing figures using the basic accounting equation. a) Bank = R40,000 Vehicles = R15,000 Equipment = R215,000 Capital =? b) Capital = R150,000 Mortgage loan = R1,850,000 Bank =? Machinery = R300,000 Debtors = R190,000 c) Bank overdraft = R150,000 Debtors = R25,000 Buildings = R800,000 Equipment = R50,000 Creditors = R250,000 Capital = R? 1.3 You are required to enter the transactions on the accounting equation for Alpha Builders as per the example provided below. The following transactions appeared in the books of the business for the month of July 2010: (20) 01 July Bought wheelbarrows for R2800 on credit 05 July Bought 20 bags of cement from Cash & Carry Building Supplies and paid by cheque R15400. 06 July Returned wheelbarrow ing R320 to supplier as it was defective. The supplier granted full credit. 08 July Bought brickforce from Speedy Building Supplies on credit R2500 09 July Owner took a cheque for his personal use R4500
Page 3 of 6 10 July Complete a small building project and receive R18000 cash 11 July Draw a cheque for R2000 to pay creditors 15 July Paid R1500 cash to subcontractor to remove rubble 16 July Received R26000 cash from debtors 21 July Owner invested R40000 into the business 26 July Complete a small renovation project and issue an invoice for R18000 USE THE LAYOUT AS PER THE EXAMPLE GIVEN BELOW. OWNER S DATE ASSETS = LIABILITIES EQUITY + Capital/ Vehicles Equipment Debtors Bank Income/expense Loan Creditors drawings 1 +2800 +2800 Please note that no marks will be awarded if the sign is omitted! QUESTION 2 [30] Given the trial balance and additional information as it relates to Mega Traders, you are required to draw up an income statement (16 marks) and balance sheet (14 marks) as at 31 December 2010. Show detailed notes to reflect depreciation and changes in equity.
Page 4 of 6 Additional information which has not been taken into account calculating the above: 1. Inventory on 31 December 2010: a. Trading stock = R42 000 b. Packing material = R2 600 2. A debtor is insolvent; the debt of R900 has to be written off as irrecoverable. 3. An employee is on compassionate leave and her salary of R7000 has been paid to her in advance (This employee s salary was accounted for in the figures above). 4. Delivery fees of R1000 on purchases have not been paid yet. 5. An insurance premium of R400 per month, included in the figure above, has been paid until the end of October 2010. 6. Rent represented in the trial balance has been received until the end of March 2011. 7. Commission to the value of R600 was earned on 28 December 2010. This amount is still outstanding.
Page 5 of 6 8. Provision must be allowed for depreciation as follows: a. Forklifts R4000 b. Equipment R2000 QUESTION 3 [15] 3.1 Classy Stores, a VAT vendor, marks its goods up by 60% on. They receive R9120 from Petty Boutique for goods sold. Calculate output tax and of goods sold. (3) 3.2 Complete the table by writing your answer next to the corresponding letter in your script: (7) Cost price % mark-up Selling price VAT Marked price 14% R3000 40% on A B C D 80% on selling price R9000 E F G 25% on R45000 H I J 20% on K L R17100 R65000 25% on price M R11375 N 3.3 Classify the following items as taxable (T), exempt supplies (E), zero rated supplies (Z) or deemed supplies (D) (5) a) Bus, train and taxi fares b) Vegetables c) Maize meal d) Renting of accommodation for use as private residence e) Goods and services withdrawn by vendor for her own use QUESTION 4 [30] 4.1 Classify the s below according to the following terms: product, period, fixed, variable, mixed, sunk, opportunity. Use the layout provided below. Take note that more than one answer is possible. Each correct answer is only worth ½ mark. (15) Cost item Var. Fixed Mixed Period Direct product Example: Wood used in manufacture of a piece of furniture Indirect product Sunk Opp. X X a) Salary of the ing clerk b) Overtime paid to builders c) Electricity used for operating machinery d) Photocopier in the general office, leased at basic monthly charge plus an additional amount for each copy made e) Depreciation on concrete mixer, using the straight-line method f) Commissions paid to property salespersons
Page 6 of 6 g) Trade discount granted to customers h) Bricks used in building of a house i) Wages of builders, who are paid per hour j) Lease of vehicle k) Salary of foreman l) Rental income forgone on factory space m) Salary of storeman in warehouse. 4.2 Zeta Manufacturing wants to drop product Candy from its range of products. You are required to calculate the differential income/expenses and profit/loss if the product is dropped and comment/conclude which direction would be most beneficial for the firm, given the data below: (10) Income & Expenses associated with product Candy Income (revenue) R 2 850 000 Less: Variable 925 000 Marginal income 1 925 000 Less: Fixed s 3 285 000 Rental* 260 000 Salaries and wages 1 340 000 Depreciation on equipment * 880 000 Advertising 90 000 Other administrative expenses* 715 000 Net profit/(loss) (1 360 000) Costs indicated with an * are unavoidable (non-relevant) s. 4.3 Quantum Products provided the following data relating to job number QP3256: Direct materials R80 000 Direct labour R140 000 Manufacturing overheads (75% fixed, 25% variable) R250 000 Selling and administrative overheads (60% fixed, 40% variable) R90 000 You are required to determine the following: a) Prime s b) Conversion c) Total variable (3) ASSIGNMENT TOTAL: 100