ACC 101
Topic- Financial Statement Analysis And Adjusting Entries
Extracts from the Tammy Ltd’s annual report for 2021 are presented below:
XXXXXXXXXXTammy Ltd
XXXXXXXXXXStatement of profit or loss
XXXXXXXXXXFor the year ended 30 June
XXXXXXXXXXAUD$’000)
2021
2020
Sales
XXXXXXXXXX
XXXXXXXXXX
Less: Sales returns and allowances
-80.000
XXXXXXXXXX
Net Sales
XXXXXXXXXX
XXXXXXXXXX
Cost of Sales
840.000
800.000
Gross profit
640.000
520.000
Operating expenses
300.000
240.000
Finance expenses
-40.000
-40.000
Profit before income tax
300.000
240.000
Income tax
-90.000
-72.000
Profit after income tax
210.000
168.000
XXXXXXXXXXTammy Ltd
XXXXXXXXXXStatement of financial position
XXXXXXXXXXAs at 30 June 2021 (AUD$’00)
2021
2020
2019
Cu
ent Assets
Cash at bank
120.000 A$
80.000 A$
36.000 A$
Receivable (net)
140.000
120.000
96.000
Inventory
180.000
170.000
128.000
Total cu
ent assets
440.000
370.000
260.000
Non Cu
ent Assets
Plant and equipment (net)
XXXXXXXXXX
820.000
716.000
Investments
150.000
140.000
90.000
Total non cu
ent assets
XXXXXXXXXX
960.000
806.000
Total Assets
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Cu
ent Liabilities
Trade payables
150.000
160.000
140.000
Total cu
ent liabilities
150.000
160.000
140.000
Non- cu
ent liabilities
Bank loan
160.000
170.000
100.000
Total non- cu
ent liabilities
160.000
170.000
100.000
Total liabilities
310.000
330.000
240.000
Net Assets
XXXXXXXXXX
XXXXXXXXXX
826.000
Equity
Share capital
680.000
600.000
600.000
Retained earnings
600.000
400.000
226.000
Total equity
XXXXXXXXXX
XXXXXXXXXX
826.000
Required:
Calculate the following ratios for Tammy Ltd for 2021 and 2020
Liquidity:
Cu
ent ratio
Inventory turnove
Receivables turnove
Quick ratio
B) Solvency:
Debt to total assets ratio
Times interest earned
Equity ratio
C) Profitability:
Return on ordinary shareholders’ equity
Return on assets
Profit margin
Based on the calculated financial ratios, compare the liquidity, solvency and profitability in relative years and comment on any areas that have improved or of concern of Tammy Ltd’s financial health.
2. Jason Ltd began operations on 1 January 2021. The trial balance at 30 June are as follows:
XXXXXXXXXXJason Ltd
XXXXXXXXXXTrial balance
XXXXXXXXXXAs at 30 June 2021
Account name
Debit
Credit
Accounts receivable
525.000
Cash at bank
164.400
Prepaid insurance
9.600
Supplies
4.500
Office building
900.000
Accumulated depreciation
150.000
Accounts payable
22.200
Unearned revenue
12.000
Share capital
XXXXXXXXXX
Mortgage loan
300.000
Service revenue
140.400
Salaries expense
102.000
Rent expense
6.000
Insurance expense
3.600
Electricity expense
12.000
XXXXXXXXXX
XXXXXXXXXX
Additional information:
Depreciation expenses for the year is $12,000
An electricity bill for $900 has not been recorded and will not be paid until next month
The balance of the prepaid insurance policy is the annual premium for the insurance commencing 1 January 2021.
Service were performed during the period in relation to $9,000 of revenue received in advance.
Invoices representing $13,200 of service performed during the month have not being recorded as of 30 June 2021.
Supplies on hand at 30 June total $3,000
Salaries of $13,800 are owed at 30 June.
Required
Prepare adjusting entries to record above events.
Prepare a statement of financial performance for the year ended 30 June 2021.
Prepare s classified balance sheet under na
ative format as at 30 June 2021.
If the business wanted to report a higher profit, which of the adjusting entries would be avoided?
1200 words (+/- 10%); short report format: title page, executive summary, table of contents, appropriate headings and sub- headings, recommendations/ findings/ conclusions, in- text referencing and reference list ( Harvard Anglia style), single spaced, font times new roman 12pt.