Introductory Accounting Assignment

ACCT 2060 Introductory invoice Assignment Semester 2, 2011 This engagement is designed to lay you to locate the Annual informs for a association and become familiar with the table of contents of an Annual Report, particularly the pecuniary statements and the honours to the financial statements. While we have looked at very basic formats of the financial statements, the financial statements for a high society look into a little to a greater extent detail and instruction on round items you may not have been introduced to yet.Pay particular attention to the entropy provided in the vernaculargonrs bills to the financial statements as you al let loose find a view of multipurpose information in them that may help with some of the interrogates. REQUIRED You ar required to obtain the 2010 Annual Report of Blackmores Limited and then settlement the questions that follow in Part A and Part B. class A THE COMPANY (8 x 1 = 8 label) Question 1 hound the unions principal operating activities. Ans Blackmores Limited manufactures & develops wellness products. Ref Blackmores AR Report August 2010, scallywag 2Question 2 An auditing firm allow have received remuneproportionn for their services. What services did the auditing firm provide for this federation in 2010? Ans The auditing firm, DELOITTE TOUCHE TOHMATSU, audited the Remune balancen Report included in pages 41 to 48 of the directors report card for the year ended 30June 2010. Theirresponsibility is to present an opinion on the Remune dimensionn Report, based on their audit conducted in accordance with Australian Auditing Standards. Ref Blackmores AR Report August 2010, rascal 41 to 48, page 50 and 51 Question 3 victimisation the 2010 Annual Report, identify the number of the note that deals with Significant Accounting Policies and identify the system of depreciation the comp any expends to decry property, plant and equipment. What is the underlying assertion of this method in relati on to the public utility company of property, plant and equipment? Ans bestow numbers of notes dealing with Significant Accounting Policies be 22. Ref Blackmores AR Report August 2010, Page 58 64. The method of depreciation the company adopt onto depreciation of property, plant and equipment is the straight-line method.The underlying assumption is that the residual value is estimated based on the cost of addition everyplace the expected put onful life. Freehold land is not depreciated. The pastime estimated useful lives be apply in the calculation of depreciation Buildings 2540 historic period Leasehold improvements 313 age Plant and equipment 320 years Ref Blackmores AR Report August 2010, Page 59. Question 4 The yearbook report contains a number of reports with only some of these being financial reports. Name all of the financial reports in the 2010 annual report shown for this company in their annual report.Ans The financial reports in the 2010 annual report are a vowal of Financial position as at 30 June 2010, Statement of Comprehensive Income for the. Statement of Changes in Equity and Statement of hard currency flows. Ref Blackmores AR Report August 2010, Page 53-57. Question 5 Directors of the company will often own shares in the company as well. Identify the shout out of the chairman of the board of directors and identify the number of shares the chairman held in the company at the end of their 2010 financial year (financial year ends June 30, 2010). Ans chair of the board of directors is Marcus C Blackmore AM Ref Blackmores AR Report August 2010, Page 36. The number of fully paid ordinary shares he has is 4,479,278 Ref Blackmores AR Report August 2010, Page 38. Question 6 Describe the purpose of the orthogonal auditors report. Ans The external auditors report is to ensure that the financial reports produced by Blackmores internally are true & fair, terminate & accurate. Ref Blackmores AR Report August 2010, Page 51. Question 7 With credit to the consolidated entity What is the total center of revenue and former(a) income in 2010? What are the two revenue items? What is the other income comprised of? (You must refer to the relevant note to find the answer to this. ) Ans The total amount of revenue and other income in 2010 is $217,093,000 The two revenue items are Sales and Royalties. The other income comprises of bank deposits / Net foreign exchange gains. Ref Blackmores AR Report August 2010, Page 53 and 67. Question 8 Again with beginning to the consolidated entity What is the amount of cash receipts from customers in 2010? Why does this amount protest from the 2010 gross revenue numeral? AnsThe amount of cash receipts from customers is 2010 is $237,522,000 The amount differ from the 2010 sales figures as not all customer pay cash on payment, some may pay on credit which import in account receivable. Ref Blackmores AR Report August 2010, Page 57. PART B analysis of financial information (12 marks) Question 1 (4 marks) Using the consolidated figures for Blackmores Ltd, calculate the following balances for the years 2009 and 2010. Ratios are to be shown at oneness decimal place. You must show all your whole shebang. (Where no workings are shown you will receive zero for this section) . reliable proportionality ii. sharp test ratio iii. Gearing ratio iv. rice beer c everyplace ratio Ans Current ratio = Current assets / Current liabilities Acid ratio = Current assets (excluding inventory and prepayments) / Current liabilities Gearing ratio = Long-term liabilities / (Share working capital + Reserves + Long-term liabilities) Interest reach outing fire ratio = Profit sooner reside and taxation / Interest Expense Ref School of Business, MBA 2011, Introductory bill, Course Notes from ACCT2060_1160, Lecture 6, Unit 6 Financial Ratio Analysis, Page102-107 , RMIT University, Melbourne Yr 2009 (Working) Yr 2009 Ratio Yr 2010 (Working) Yr 2010 Ratio Current ratio 69,544 / 31 ,903 2. 2 82,985 / 34,457 2. 4 Acid Test ratio (69,544-16,072) / 31,903 1. 7 (82,985-22,555) / 34,457 1. 8 Gearing ratio 48,043 / (58,563 + 48,043) 0. 5 48,102 / (71,790 + 48,102) 0. Interest cover ratio 30,335 / 1,372 22. 1 36,746 / 2,442 15. 0 Ref Blackmores AR Report August 2010, Page 53 and 55. Question 2 (2 marks) You have been provided with the following information about some other company, high society X, in the same industry as Blackmores Ltd COMPANY X Ratio 2010 2009 Current ratio 2. 1. 8 Acid test ratio 1. 2 1. 5 Gearing ratio 1. 2 0. 8 Interest cover ratio (times) 10. 9 13. 1 Using the information in a higher place and the calculations in Part B Question 1, you are required to take apart the liquid and financial gearing (leverage) of Blackmores Ltd and high society X by providing ) a description of the operation in each of the ratios for Blackmores Ltd b) a description of the movement in each of the ratios for Company X c) an explanation of what each of these ratios rank you about Blackmores Ltd d) an explanation of what each of these ratios tell you about Company X Ans A) The true ratio for Blackmores Ltd indicates that the company is experiencing a slight increment in current asset over current obligation. The stifling ratio for Blackmores Ltd indicates that the company has slight enlarge in current asset over the current liability excluding inventories.The gearing ratio for Blackmores Ltd indicates that the company has marginal emergence in long term liability over equity. The interest cover ratio for Blackmores Ltd indicates that the company has increase in interest expense. B) The current ratio for Company X indicates that the company is experiencing a slight increase in current asset over current liability. The acid ratio for Company X indicates that the company has slight eliminate in current asset over the current liability excluding its inventories.The gearing ratio for Company X indicates that the company has mar ginal increase in long term liability over equity. The interest cover ratio for Company X indicates that the company has increase in interest expense. C) In Blackmores Ltd current ratio, we consume a 20cents increase in liquidity to repay for every 1 horse of obligation in the next operating cycle. By zooming progress into acid ratio test, it becomes clearer that the company has only a 10cents increase in liquidity to repay for every 1 dollar of obligation within 90days as it excludes inventories and prepayment.In gearing ratio, we can conclude that Blackmores Ltd has lowered their long term by 10cents per 1 dollar obligation. As for interest ratio, it reflects that Blackmores Ltd has to pay more interest on outstanding debt. D) In Company X current ratio, we see an increase in 30cents in liquidity to repay for every 1 dollar of obligation in the next operating cycle. Looking further into the acid ratio test, it becomes clearer that the company actually have a 30cents decline in liquidity to repay for every 1 dollar of obligation within 90days and we also can subscribe that the company has a lot of inventories or prepayments.In gearing ratio, we can assume that Company X has change magnitude their long term liabilities in certain aspect. In interest cover ratio of Company X, it also reflects that Company X has to pay more interest on outstanding debt. Question 3 (2 marks) Assume you are considering becoming a creditor for Blackmores Ltd or Company X (from Part B Question 2 above). That is, you will only be providing credit to one of them. Explain which company you would prefer to provide goods to on credit and why you have chosen this company. You may consider some(prenominal) financial and non-financial information in making this decision.Ans I would provide goods on credit to Blackmores Ltd because Blackmores Ltd has a higher ability to pay off obligations as compare to Company X reference from their current and acid ratio. Also, Blackmores Ltd shows t hat the company is relatively low in term of leverage shown from gearing ratio. Question 4(4 marks) Prepare a table similar to the table below. Complete the table by inserting information from Blackmores financial statements (consolidated figures). Calculate each item as a helping (%) of sales revenue. Financial Item 2010 ($) % 2009 ($) % Sales 214,934,000 100. 0 200,314,000 100. 0 Total expenses 180,347,000 83. 9 171,380,000 85. 6 Promotional and other rebates 19,054,000 8. 9 18,581,000 9. Raw materials and consumables used 65,748,000 30. 6 71,338,000 35. 6 Employee benefits expense 48,179,000 22. 4 42,212,000 21. 1 Selling and merchandising expenses 19,134,000 8. 9 21,078,000 10. 5 Net profit attributable to equity holders of the advert 24,297,000 11. 20,782,000 10. 4 Refer to the table above to explain the performance of Blackmores in 2010 compared to 2009. Ans Based on the above table, Blackmores Ltd performance in 2010 is has increase in sales by 7. 3% compared to 200 9. By looking at the table, we can determine that the company has cut down on expenses. bad-tempered area is the buying of raw materials and other consumables and marketing expenses. With these we can assume that marketing is successful. The other reason is because the companys equity has change magnitude as well.This means more dividends for the shareholder. Ref Blackmores AR Report August 2010, Page 53 and 55. OTHER IMPORTANT INFORMATION Format and unveiling The assignment guides to be presented and formatted according to the guidelines shown in this semesters Course Guide. You need to ensure that the numeric answers you provide are accurate. For example, some figures are shown in thousands while others are not showing an answer as $102 kinda of $102,000 will result in a mark of zero for much(prenominal) a question as there is obviously quite a difference between these two figures.Also ensure that you read each question carefully as some questions will ask for a figure for a particular year and for either the Group (Consolidated) Financial Reports or the Parent Entity (Company). Referencing As you will be using a companys Annual Report as the basis for answering galore(postnominal) of the questions asked in this assignment, you need to ensure that you acknowledge this in your assignment. In fact, any sources that you use need to be acknowledged in order to bend plagiarism. Information on referencing can be found in the Guidelines for Referencing and Presentation at the RMIT website using the following address (http//www. mit. edu. au/bus/students). A copy can also be found on the blackboard under the Course Documents folder. From the Blackboard site there is also an online referencing resource that you might find useful. It can be found by following these links External Links / hear and Learning Centre / Study Skills/Referencing/Referencing for Business Students. In-Text Referencing and the Reference List Sources of information must be cited both i n the body of the text (in-text referencing) and the end of the assignment (reference call). Failure to do so will result in penalties.Remember that when referencing an Annual Report it is a corporate document that does not have a particular condition but it will still require referencing any time you use information from it. Any other documents or books or other references you use will also require referencing. Penalties Regarding Referencing No in-text referencing deduct 1. 5 marks Some in-text referencing only deduct 1 mark No reference list deduct 1. 5 marks Incomplete reference list deduct 1 mark Policy on Late Submissions The form _or_ system of government on late submissions can be found in the current semesters course guide. ASSIGNMENT TOTAL 20 Marks