AC4052QA Financial Accounting – APR22INTAKE
Assessment Component: Coursework
Weighting: This Coursework contributes 100% to the Overall Module Mark
Word count (1500 words Max): Section A 1200 words(max) and Section B 300 words(max)
Submission: Students to submit to Turnitin via module Weblearn
Deadline: Monday 25 July 2022
INSTRUCTIONS:
This coursework has two sections. Section A has ONE question and Section B has TWO questions.
- Answer all question
- Show all working out.
- It is mandatory to use the template provided
- You must show all working out. You may use Excel, but you must show the formula for the excel calculations
SECTION A [30marks]
QEUESTION 1
This assignment requires each student to work on the published financial statements of ASOS PLC for two years from 2020 to 2021.
You are required:
Write a brief report on the performance of ASOS over the financial periods 2020 to 2021.You should use the financial statements provided below to calculate the required accounting ratios shown below and use any other information relevant to ASOS PLC for your comments. Information can be accessed from the annual report and accounts and any other source of evidence that you believe helps to explain the company’s performance and position. (30Marks)
Calculate ratios from ASOS 2020 and 2021 annual reports and comment on the comparative performance
| ASOS year end 31 August 2020-21 | |||
| 2021 | 2020 | ||
| Income statement | £m | £m | |
| Sales revenue | 3,911 | 3,264 | |
| Cost of sales | 2,134 | 1,716 | |
| Gross profit | 1,776 | 1,547 | |
| Operating profit (use for PBIT) | 190 | 151 | |
| Interest paid | 13 | 10 | |
| 2021 | 2020 | ||
| Balance sheet | £m | £m | |
| Non-current assets | 1,325 | 970 | |
| Current assets | 1,560 | 1,020 | |
| Inventories | 807 | 532 | |
| Trade and other receivables | 58 | 60 | |
| Current assets less inventories | 753 | 487 | |
| Current liabilities | 998 | 818 | |
| Trade and other payables | 956 | 770 | |
| Non-current liabilities | 1,034 | 810 | |
| Total equity | 1,034 | 810 | |
| Capital employed | 2,068 | 1,621 | |
| SOLUTION: A1 | ||||||
| 2021 | 2020 | |||||
| Ratios: [9marks]
Profitability |
||||||
| Return on capital employed | ||||||
| Net profit margin | ||||||
| Asset turnover | ||||||
| Comments | ||||||
| Working capital: [9marks] | 2021 | 2020 | ||||
| Inventory days | ||||||
| Receivable days | ||||||
| Payable days | ||||||
| Comments | ||||||
| Liquidity: [6marks] | 2021 | 2020 | ||||
| Current ratio | ||||||
| Acid test | ||||||
| Comments | ||||||
| Long- term financing: [3marks] | 2021 | 2020 | ||||
| Gearing | ||||||
| Comments | ||||||
Marking criteria for section A:
| Explanatory comments on the assessment criteria | Maximum marks for each section
Recommended marks |
|
| Assessment criteria:
(Guidelines – suggested –under FOUR MAIN HEADINGS) |
||
| Correct answers | Calculations | (18 marks): 2marks each –
1mark for 2020, 1 mark for 2021 |
| Interpretation of ratios (comparative comments)
|
Relevance, clear demonstration of understanding and applied in context | (9 Marks): 1marks for each specific ratio |
| Conclusion/
Recommendations |
Identifying the key points raised | (3marks)
|
SECTION B [70marks]
Question B1 (58marks)
| GIORGIO F PLC: | ||
| The following balances were extracted from the accounting records of Giorgio F PLC | ||
| Trial Balance as of 31 March 2020 | ||
| DR | CR | |
| Purchases | 372,000 | |
| Trade payables | 80,000 | |
| Salaries and wages | 54,000 | |
| Directors’ remuneration | 10,000 | |
| Audit fees | 3,000 | |
| Heat and light | 25,000 | |
| Inventory, 01 April 2019 | 125,000 | |
| Debenture Interest | 10,000 | |
| Interim dividend paid | 120,000 | |
| Building at cost | 500,000 | |
| Building – accumulated depreciation 01 Apr 2019 | 50,000 | |
| Fixtures and fittings at cost | 100,000 | |
| Fixtures and fittings – accumulated depreciation, 01 Apr 2019 | 20,000 | |
| 10% Debentures – 2023 | 90,000 | |
| Ordinary share capital (fully paid) | 800,000 | |
| Trade receivables | 120,000 | |
| Bank | 267,000 | |
| Revenue | 940,000 | |
| Share premium account | 150,000 | |
| Retained earnings | 145,000 | |
| Communications expenses | 20,000 | |
| General reserve | 22,000 | |
| Long-term investments | 571,000 | |
| 2,297,000 | 2,297,000 | |
| The following additional information as of 31 March 2020 should be considered: | ||
| (i) Inventory was valued at £127,000 | ||
| (ii) Audit fees of £500 were outstanding | ||
| (iii) The prepaid debenture interest is to be accounted for | ||
| (iv) Depreciation is to charge on buildings at 10% on the straight-line basis and on | ||
| fixtures and fittings at 15% on the reducing balance basis | ||
| (v) The directors decided to transfer £30,000 to the general reserve account | ||
|
Required: |
||
| Prepare for Giorgio F PLC: | ||
| (a) the statement of profit or loss for the year ended 31 March 2020 [22marks] | ||
| (b) the statement of changes in equity for the year ended 31 March 2020 [14marks] | ||
| (c) the statement of financial position for the year ended 31 March 2020 [22marks] | ||
SOLUTION: B1
- (22marks)
| GIORGIO F PLC | ||
| STATEMENT OF PROFIT OR LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2020 | ||
| £ | £ | |
| Revenue | ||
| Cost of Sales | (W1) | |
| Gross Profit | ||
| Operating expenses | (W2) | |
| Profit from operations | ||
| Finance costs | ||
| Profit for the year | ||
| WORKINGS | £ | £ | |
| (W1) | COST OF SALES | ||
| Opening inventory | |||
| Purchases (+) | |||
| Closing inventory (-) | |||
| (W2) | OPERATING EXPENSES | ||
| Heat and light | |||
| Audit fee | |||
| Communication expenses | |||
| Salaries & wages | |||
| Directors’ remuneration | |||
| Provision for depreciation: | |||
| Buildings | |||
| Fixtures &Fitting | |||
- (14marks)
| STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED | |||||
| 31 MARCH 2020 | |||||
| Ordinary share capital | Share premium | Retained earnings | General reserves | Total | |
| Bal as of 01 April 2019 | |||||
| Profit for the year | |||||
| Dividends paid | |||||
| Transfer to general reserves | |||||
| Total | |||||
- (22marks)
| GORGIO F LIMITED | |||
| STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2020 | |||
| £ | £ | £ | |
| Non-current assets | |||
| Property, Plant & Machinery (W3) | |||
| Long-term investments | |||
| Total | |||
| Current assets | |||
| Prepaid Debenture Interest | |||
| Inventory | |||
| Trade Receivables | |||
| Bank | |||
| Total assets | |||
| Equity and Liabilities | |||
| Ordinary Share Capital | |||
| Share premium | |||
| Retained Earnings | |||
| General Reserves | |||
| Non-current liabilities | |||
| 10% Debentures – 2020 | |||
| Current liabilities | |||
| Trade Payables | |||
| Accrued audit fees | |||
| Equity and total liabilities | |||
| (W3) | Non-current assets | |||
| Property, Plant & Machinery | ||||
| Cost | Accumulated Depreciation | NBV | ||
| £ | £ | £ | ||
| Buildings | ||||
| Fixtures & Fittings | ||||
| Total |
Question B2 (12marks)
Grazyna Ltd, a new business, starts trading in sports shoes on 1st January 2021 and expects to make the following transactions for the 6 months ending 30th June2021:
(i) Sales are expected to be 300 units (sports shoes) per month for the 4months from January to April then 400 units per month from May to June.
(ii) The selling price will be £50 per unit.
(iii) All sales will be cash sales with cash received in the same month the sale takes place.
(iv) Purchases of inventory (sports shoes) will take place on month after the sales take place. (i.e., purchase takes place in January will be paid in February). Each unit of inventory will cost £30.
(v) Wages are expected to be £1000 per month and will be paid in the month in which they are incurred.
(vi) Rent will be £2000 per month to be paid quarterly in advance (i.e., the rent payment for January, February and March 2021 will be made on 1st January 2021).
(vii) General overheads are expected to cost £1000 per month and will be paid in the month in which they are incurred.
Required
- a) Prepare a cash budget for the 6 months from January to June 2021. Show the cash receipts and cash payments the business expects to have each month and the cash balance at the end of each month. (7marks)
- b) Prepare a profit budget for the 6 months ending 30th June 2021 (the month-by-month breakdown is not required only the total for the 6 months). (5marks)
Tip: You will need to work out the value of total sales revenue and total purchases of inventory for the 6 months to arrive at gross profit. There is no opening or closing inventory to worry about.
SOLUTION B2 (12marks)
- (7marks)
| Grazyna Ltd Cash Budget for 6 Months to 30/6/21 | |||||||
| Month | January | Feb. | March | April | May | June | Total |
| £ | £ | £ | £ | £ | £ | £ | |
| Sales | |||||||
| Purchases | |||||||
| Wages | |||||||
| Rent | |||||||
| Overheads | |||||||
| Monthly net cash flow | |||||||
| Balance @ beginning of the month | |||||||
| Balance @ the end of the month | |||||||
- (5marks)
| Grazyna Ltd Profit Budget for 6 Months to 30/6/21 | ||
| £ | £ | |
| Sales | ||
| Less Cost of sales: | ||
| Inventory purchases | ||
| Gross Profit | ||
| Less expenses: | ||
| Rent | ||
| Wages | ||
| Overheads | ||
| Net profit | ||
Academic Integrity and Plagiarism
Academic integrity requires honesty in your studies. You should not present another person’s sentences or ideas as your own work. You should clearly identify quotations through the use of quotation marks and references to the sources. Failure to adhere to these academic standards may lead to allegations of academic misconduct, which will be investigated by the Academic Integrity team at QA.
Academic misconduct covers a variety of practices, such as:
- Plagiarism: copying another person’s ideas or words and presenting them as your own work, without the use of quotation marks and/or references.
- Self-plagiarism: reproducing parts of one of your assignments in another piece of work.
- Inventing, altering or falsifying the results of experiments or research.
- Commissioning another person to complete an assessment.
- Collaborating with others in the production of a piece of assessed work which is presented as entirely your own work.
- Cheating in an exam (e.g. by taking revision notes into the exam room).
- Ghosting ( e.g you buy a piece of work )
For full details of academic misconduct and how allegations are investigated, see the relevant section of the University’s academic regulations: https://student.londonmet.ac.uk/your-studies/student-administration/rules-and-regulations/academic-misconduct/.