Acc101
ACC 101 Topic- Financial Statement Analysis And Adjusting Entries Extracts from the Tammy Ltd’s annual report for 2021 are presented below: Tammy Ltd Statement of profit or loss For the year ended 30 June (AUD$’000) 2021 2020 Sales 1.560.000 1.420.000 Less: Sales returns and allowances -80.000 -100.000 Net Sales 1.480.000 1.320.000 Cost of Sales 840.000 800.000 Gross profit 640.000 520.000 Operating expenses 300.000 240.000 Finance expenses -40.000 -40.000 Profit before income tax 300.000 240.000 Income tax -90.000 -72.000 Profit after income tax 210.000 168.000 Tammy Ltd Statement of financial position As at 30 June 2021 (AUD$’00) 2021 2020 2019 Current 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 current assets 440.000 370.000 260.000 Non Current Assets Plant and equipment (net) 1.000.000 820.000 716.000 Investments 150.000 140.000 90.000 Total non current assets 1.150.000 960.000 806.000 Total Assets 1.590.000 1.330.000 1.066.000 Current Liabilities Trade payables 150.000 160.000 140.000 Total current liabilities 150.000 160.000 140.000 Non- current liabilities Bank loan 160.000 170.000 100.000 Total non- current liabilities 160.000 170.000 100.000 Total liabilities 310.000 330.000 240.000 Net Assets 1.280.000 1.000.000 826.000 Equity Share capital 680.000 600.000 600.000 Retained earnings 600.000 400.000 226.000 Total equity 1.280.000 1.000.000 826.000 Required: Calculate the following ratios for Tammy Ltd for 2021 and 2020 Liquidity: Current ratio Inventory turnover Receivables turnover 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: Jason Ltd Trial balance As 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 1.102.500 Mortgage loan 300.000 Service revenue 140.400 Salaries expense 102.000 Rent expense 6.000 Insurance expense 3.600 Electricity expense 12.000 1.727.100 1.727.100 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 narrative 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.