FINANCE ASSIGNMENT

Finance Assignment

Assessment of Learning Outcomes

The questions have been designed to enable students to develop an understanding of the core business discipline of finance. Successfully completing this assessment will provide the student with the ability to:

Prepare financial statements for a simple business organisation

Calculate the break-even and margin of safety for an organisation

Understand how to use investment appraisal techniques to evaluate capital investment projects

Mode of Working

This is an individual assignment and students are expected to complete this work on their own. College policy will apply in cases of plagiarism or other methods by which students have obtained an unfair advantage.

Format for Submitted Work

Appropriate formats for financial statements should be used. A high level of overall presentation is expected. In terms of written work, you are expected to reference any relevant reading undertaken using the college's referencing guidelines. It is also highly recommend that you carefully proof-read your work before its submission.

Trial balance for the business at 31st December 2010:

£ £

Sales244,275

Capital196,375

Creditors 3,550

Opening Stock1,450

Rates3,050

Motor expenses4,025

Purchases67,000

Insurance2,825

Fixtures and Fittings32,500

Motor Vehicles 15,000

Office equipment14,000

Debtors15,000

Bank4,750

Wages and salaries75,000

Premises 186,200

Repairs and renewals850

Advertising4,900

Drawings17,650 444,200444,200

In addition, you are provided with the following information:

Closing stock of food and beverages at 31 December 2010 was £2,875.

The organisation expects 1000 customers throughout the year

Expenses are to be split 75% (Fixed) and 25% (Variable)

Cost of Sales are variable.

ASSIGNMENT REMIT:

PART 1 (50%)

Prepare:

(1) Trading, Profit and Loss account for the year ended 31st December 2010

(2) A Balance Sheet as at 31st December 2010.

(3) Calculate the Accounting Rate of Return (ARR) using the capital employed on the balance sheet at31st December 2010

PART 2 (50%)

(1) Calculate the BEP and MOS using Information from the Profit and Loss A/C in part 1

(2) Plot the BEP and MOS onto a graph

(3) Comment upon the organisations performance in relation to the BEP and MOS.

PART 1 (50%)

Prepare:

Trading, Profit and Loss account for the year ended 31st December 2010

A Balance Sheet as at 31st December 2010.

Calculate the Accounting Rate of Return (ARR) using the capital employed on the balance sheet at31st December 2010

(1) Trading, Profit and Loss account for the year ended 31st December 2010.

£

£

Sales

244,275

Less: Cost of Goods Sold

Opening Stock

1,450

Add: Purchases

67,000

Less: Closing Stock

(2,875)

(65,575)

Gross Profit

178,700

Less: Operating Expenses

Rates

(3,050)

Motor expenses

(4,025)

Insurance expenses

(2,825)

Wages and salaries

(75,000)

Repairs and renewals

(850)

Advertising expenses

(4,900)

(90,650)

Net Profit

88,050

(2) Balance Sheet as at 31st December 2010.

£

£

Assets

Fixed Assets

Premises

186,200

Fixtures and Fittings

32,500

Motor Vehicles

15,000

Office equipment

14,000

247,700

Current Assets

Stock

2,875

Bank

4,750

Debtors

15,000

22,625

Total Assets

270,325

Liabilities

Long-term Liabilities

Current Liabilities

Creditors

3,550

Owner's Equity

Capital as on 31st December 2009

196,375

Add: ...