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You are provided with the Financial Statements of Commercial Hospitality Traders for the year ended 30 June 2017. Analyse the statements and provide advice to the owners.
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Commercial Hospitality Traders |
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Income Statement |
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For the year ended 30 June 2017 |
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$ |
$ |
$ |
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Sales |
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178,000 |
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Less Cost of Goods Sold |
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95,000 |
83,000 |
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Less Inventory adjustment |
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230 |
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Gross Profit |
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82,770 |
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Add other revenue |
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Rent Received |
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15,600 |
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Gain on disposal of furniture |
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290 |
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98,660 |
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Less Other Operating Expenses |
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SELLING AND DISTRIBUTION |
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Advertising |
2,600 |
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Sales commission expense |
1,340 |
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Sales salaries |
26,000 |
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Delivery expenses |
1,240 |
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3,200 |
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Depreciation - shop fittings |
1,520 |
35,900 |
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GENERAL AND ADMINISTRATIVE |
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Rates |
1,200 |
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Wages |
17,420 |
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Insurance |
1,400 |
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Telephone |
3,650 |
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Electricity |
3,560 |
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Donations |
2,650 |
29,880 |
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FINANCE EXPENSES |
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550 |
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Bank Charges |
310 |
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Provision for Doubtful Debts |
650 |
1,510 |
67,290 |
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Net |
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31,370 |
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Commercial Hospitality Traders |
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as at 30 June 2017 |
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$ |
$ |
$ |
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Current Assets |
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Petty Cash |
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260 |
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Bank |
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6,230 |
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Inventory Control |
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26,000 |
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34,870 |
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Less Provision for doubtful debts |
890 |
33,980 |
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GST Clearing |
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2,000 |
68,470 |
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Less Current Liabilities |
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Accounts Payable Control |
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32,000 |
32,000 |
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36,470 |
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Add Non Current Assets |
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PROPERTY PLANT AND EQUIPMENT |
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Land and Buildings |
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350,000 |
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Delivery Vehicles |
48,000 |
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Less |
13,500 |
34,500 |
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Shop Fittings |
45,000 |
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Less Accumulated Depreciation - Shop Fittings |
16,900 |
28,100 |
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INVESTMENTS |
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Shares in XYZ Ltd |
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5,000 |
417,600 |
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Less: Non-current liabilities |
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Mortgage on land |
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120,000 |
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Bank Loan |
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15,000 |
135,000 |
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NET ASSETS |
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319,070 |
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REPRESENTED BY: |
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Owner's Equity |
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Capital |
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300,300 |
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Add net profit |
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31,370 |
331,670 |
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Less Drawings |
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12,600 |
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Total Owners Equity |
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319,070 |
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USE FORMULA PROVIDED IN EXERCISE 1 AND EXERCISE 2 ABOVE WHEN CALCULATING RATIOS
- Calculate the gross profit percentage for 2017.
- Calculate the net profit percentage for 2017.
- Comment on the profitability of Commercial Hospitality Traders and provide 1 suggestion to Commercial Hospitality Traders to help them increase their profitability
- Calculate the
current ratio for 2017. - Calculate the acid test ratio for 2017.
- Do you think that the business will experience liquidity problems in the near future? Explain briefly.
- Calculate the Equity Ratio
- Comment on the results of the Equity ratio.
- Calculate the Debt Ratio for 2017.
- Interpret the debt ratio and comment on Commercial Hospitality Traders financial stability.
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