Purpose: This assignment aims to reinforce and extend students’ knowledge and understanding of key topics in this course (HC1010) including: Statement of Financial Position, Statement of Financial...

Purpose: This assignment aims to reinforce and extend students’ knowledge and understanding of key topics in this course (HC1010) including: Statement of Financial Position, Statement of Financial Performance, Cash Flow Statement, Financial Statement Analysis, Accounting for Business Transactions through independent research and application of knowledge and skills. Assignment details: PART A Financial Ratios and Financial Statement analysis (6 marks) The following financial data relate to Big Bang Pty Ltd for the years ended 30 June Year 2019 and 30 June Year 2018. Financial item 30 June Year 2019 Year 2018 Net credit sales Cost of goods sold Cash Accounts receivable Inventory Current liabilities $ XXXXXXXXXX XXXXXXXXXX105 000 $ XXXXXXXXXX XXXXXXXXXX81 000 Additional information: The amount of Accounts receivables at 30 June Year 2017 was $ XXXXXXXXXXnet). The inventory figure at 30 June Year 2017 was $ XXXXXXXXXXThe company provides its credit customers 30 days to pay. The average inventory turnover for the industry in which the company operates is 101 days. a. You are required to explain and calculate the following ratios for the years ended 30 June Year 2019 and 30 June Year 2018: – current ratio; – quick ratio; – accounts receivable turnover (times and in days); and – inventory turnover (times and in days). b. Comment on the short-term solvency, including the efficiency of the business, given the ratio results obtained in your answer in part a. PART B. Income and Revenue (4 marks) The core business of Green Apple Ltd involves the sale of anti-virus software. The following took place during the financial year ended 30 June. The company earned $ XXXXXXXXXXfrom the sale of software; $ XXXXXXXXXXfrom update downloads; and $50 000 in interest from investing on the short-term money market. The company also received a $2000 discount arising out of the early settlement of a liability; and issued shares in exchange for $ XXXXXXXXXXcash during the year. Page 3 of 7 HC1010 Accounting for Business Discuss whether the foregoing five financial items would meet the definition of income to the company during the year? Give reasons for your answer. Which, if any, of the items would meet the definition of revenue to the company for the year? Give reasons for your answer. PART C. Comparing balance sheet (7 marks) ABC company and XYZ company conduct the same type of business. Both are recently formed entities. the balance sheets of the two companies as at 30 June 2020 are as follows: ABC Company Balance sheet As at 30 June 2020 $ $ $ $ Assets Current assets Cash at bank 2 400 Accounts receivable 4 800 Total current assets 7 200 Noncurrent Assets Office equipment 6 000 land XXXXXXXXXXbuilding XXXXXXXXXXTotal non-current assets XXXXXXXXXXTotal assets XXXXXXXXXXliabilities Current liabilities Accounts payable XXXXXXXXXXLoan payable due 30 September XXXXXXXXXXTotal current liabilities XXXXXXXXXXTotal liabilities XXXXXXXXXXNet assets 8 400 Owner’s equity P. Cable Capital 8 400 Total owners’ equity 8 400 XYZ Company Balance sheet As at 30 June 2020 $ $ $ $ Assets Current assets Cash at bank 2 000 Page 4 of 7 HC1010 Accounting for Business Accounts receivable XXXXXXXXXXTotal current assets XXXXXXXXXXNoncurrent Assets Office equipment 600 land XXXXXXXXXXbuilding 6 000 Total non-current assets XXXXXXXXXXTotal assets XXXXXXXXXXliabilities Current liabilities Accounts payable 4 800 Loan payable due 30 September XXXXXXXXXXTotal current liabilities XXXXXXXXXXTotal liabilities XXXXXXXXXXNet assets XXXXXXXXXXOwner’s equity P. Cable Capital XXXXXXXXXXTotal owners’ equity XXXXXXXXXXYou are required to answer the following questions based on the information provided above: a. assuming that you are a banker and that the owner of each business has applied for a short- term loan of $6000 (repayable in six months), which application would you select as being the more favourable? Explain. b. assuming that you are a businessperson interested in buying one or both companies, and both owners have indicated their intentions to sell, for which business would you be willing to pay the higher price, assuming you will be taking over the existing liabilities of the company? explain. c. if the existing owners agreed to be accountable for all existing liabilities, how would this change your decision in (b), if at all?