ASSIGNMENT 02 FRONT SHEET

Qualification BTEC Level 4 HND Diploma in Business

Unit number and title Unit 5: Accounting Principles

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Re-submission date Date received (2nd Submission)

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Class No. Assessor Name

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I certify that the assignment submission is entirely my own work and I fully understand the consequences of plagiarism.
I understand that making a false declaration is a form of malpractice.
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P3 P4 P5 P6 P7 M2 M3 M4 D2 D3

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Task 1: Producing Financial Statements.
1. Adjusting journal entries.
ABC
Adjusting journal entries
a, Dr acc Insurance expense 4,000
Cr acc Prepaid insurance 4,000
b Dr acc Teaching supplies expense 5,000
,
Cr acc Teaching supplies 5,000
c, Dr acc Depreciation expense - Equipment 10,000
Cr acc Accumulated depreciation - Equipment 10,000
d Dr acc Depreciation expense - Professional Library 12,000
,
Cr acc Accumulated depreciation - Professional Library 12,000
e, Dr acc Unearned training fees 9,000
Cr acc Training fees earned 9,000
f, Dr acc Accounts Receivable 7,000
Cr acc Tuition fees earned 7,000
g Dr acc Salaries expense 1,200
,
Cr acc Salaries payable 1,200
h Dr acc Rent expense 3,000
,
Cr acc Prepaid rent 3,000
2. Extended trial balance as of 31 Dec 2020.
ABC
Extented trial balance as at 31 Dec 2020
Unadjusted TB as 31 Adjustments Adjusted TB at 31
Dec Dec
Accounts Debit Credit Debit Credit Debit Credit
Cash 34,000 34,000
Accounts receivable - 7,000 7,000
Teaching supplies 8,000 5,000 3,000
Prepaid insurance 12,000 4,000 8,000
Prepaid rent 3,000 3,000 -
Professional library 35,000 35,000
Accumulated depreciation,
professional 10,000 12,000 22,000
library
Equipment 80,000 80,000
Accumulated depreciation, 15,000 10,000 25,000
equipment
Accounts payable 26,000 26,000
Salaries payable - 1,200 1,200
Unearned training fees 12,500 9,000 3,500
ABC, capital 90,000 90,000
ABC, withdrawals 50,000 50,000

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 Tuition fees earned 123,900 7,000 130,900
Training fees earned 40,000 9,000 49,000
Depreciation expense, - 12,000 12,000
Professional library
Depreciation expense, - 10,000 10,000
Equipment
Salaries expense 50,000 1,200 51,200
Insurance expense - 4,000 4,000
Rent expense 33,000 3,000 36,000
Teaching supplies expense - 5,000 5,000
Advertising expense 6,000 6,000
Utilities expense 6,400 6,400
Total 317,400 317,400 51,200 51,200 347,600 347,600

3. Income Statement for the year ended on 31 December 2020.

ABC
Income Statement for the year ended at 31 December 2021
Revenue
Tuition fees earned 130,900
Training fees earned 49,000
Total revenue 179,900
Expenses
Depreciation expense, Professional library 12,000
Depreciation expense, Equipment 10,000
Salaries expense 51,200
Insurance expense 4,000
Rent expense 36,000
Teaching supplies expense 5,000
Advertising expense 6,000
Utilities expense 6,400
Total expenses 130,600
Net income 49,300
Currency: USD
4. Balance Sheet as of 31 December 2020.
Balance Sheet as at 31 December 2020
Assets
Current assets
Cash 34,000
Accounts receivable 7,000
Teaching supplies 3,000
Prepaid insurance 8,000
52,000
Non-current assets
Professional library 35,000
Accumulated depreciation, professional library (22,000)
Equipment 80,000
Accumulated depreciation, equipment (25,000)
68,000
Total assets 120,000

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 Liabilities
Accounts payable 26,000
Unearned training fees 3,500
Salaries payable 1,200
30,700
Owner's Equity
ABC, Capital 90,000
Retained earnings (700)
89,300
Total liabilities and equity 120,000
Currency: USD

Task 2: Analysing and Interpreting Financial Statements.

2017 2018 2019 2020 2021
Ratios related to the company's
liquidity
Current ratio 2,29 1,97 1,5 2,0 1,9
Quick ratio 1,67 1,43 1,1 1,9 1,4
Ratios related to the company's
efficiency
Inventory turnover ratio 5,78 5,82 5,45 5,02 4,19
Assets turnover ratio 1,73 1,56 1,46 1,23 0,88
Ratios related to the company's
solvency
Debt to Equity ratio 3,71 4,31 4,08 7,32 4,69
Asset to Equity ratio 4,71 5,31 5,08 8,32 5,69
Ratios related to the company's
profitability
Gross profit margin 34,34% 36,14% 37,63% 41,04% 38,00%
Net profit margin 15,51% 15,30% 15,07% 15,26% 8,73%
Return on Assets 26,83% 23,83% 21,98% 18,82% 7,72%
Return on Equity 154,52% 119,18% 113,93% 122,62% 52,01%
Ratios related to the company's
market prospect
Earnings per Share 441 416 435 472 223
Price to Earnings 9,16 11,98 10,97 15,23 34,62

Task 3: Preparing budgets.

HAC
Cash Budget
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cash inflows
15,701 19,530 12,201 15,344 13,244 17,073 16,030 20,216 20,559 24,045 26,831 28,231
Sale on two month's
credit 8,400 9,100 4,900 7,000 4,900 5,600 5,600 7,700 7,000 8,400 9,100 10,500
Sale settled within the
month 4,900 7,000 4,900 5,600 5,600 7,700 7,000 8,400 9,100 10,500 11,900 11,900
Sales via credit card

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 2,401 3,430 2,401 2,744 2,744 3,773 3,430 4,116 4,459 5,145 5,831 5,831
Cash outflows
11,595 12,075 13,350 10,645 11,600 13,600 11,195 12,550 17,400 15,395 16,525 36,625
Eliminating the over 16,000
draft
Payment for 3,000 3,000 3,000 3,000
advertising
Selling expense 2,275 1,225 1,750 1,225 1,400 1,400 1,925 1,750 2,100 2,275 2,625 2,975
Cost of materials 4,550 3,150 2,100 2,450 2,800 3,500 3,500 4,200 4,900 5,250 5,600 5,950
purchase
Direct labour cost 3,200 3,600 2,400 2,800 3,200 4,000 4,000 4,800 5,600 6,000 6,400 6,800
Fixed production 1,570 1,600 1,600 1,670 1,700 1,700 1,770 1,800 1,800 1,870 1,900 1,900
overhead
Purchased a new 2,500 2,500 2,500 2,500
machine
Net cash 4,106 7,455 (1,149) 4,699 1,644 3,473 4,835 7,666 3,159 8,650 10,306 (8,394)
Opening cash balance 10,000 14,106 21,561 20,412 25,111 26,755 30,228 35,063 42,729 45,888 54,538 64,844
Ending cash balance 14,106 21,412 20,412 25,111 26,755 30,228 35,063 42,729 45,888 54,538 64,844 56,450
Currency: USD
1. Prepare the budgeted income statement (operating profit) for next year.
HAC
Budget income statement for next year
Revenue 236,259
Cost of goods sold 135,000
Gross profit 101,250
Expepses 36,570
Adversiting expense 12,000
Selling expense 23,625
Credit card charge 945
Net income 64,680

1. Furthermore, how the actual operating profit would be changed due to the impacts of the
scenarios below (using variance analysis).
HAC
Income statement for next year under 3
senarios
Revenue 249,480
Cost of goods sold 148,500
Gross profit 100,980
Expenses 39,146
Selling expense 13,200
Credit card charge 24,948
Depreciation expense 998
Net income 61,834

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