Reference no: EM133334763

Financial Accounting

SECTION A

QUESTION 1
This assignment requires each student to work on the published financial statements of ASOS PLC for two years from 2020 to 2021.

The figures below are extracted from ASOS 2020 and 2021 annual reports.

	2021	2020
Income statement	£m	£m
Sales revenue	3,911	3,264
Cost of sales	2,134	1,716
Gross profit	1,777	1,548
Operating profit (use for PBIT)	190	151
Interest paid	13	10
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	488
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	1,620

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 above to calculate the required accounting ratios shown below and use any other information relevant 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.

Calculate the following ratios. Show all your working out Long term financing ratio
1. 1 Gearing

Working capital Ratios

1. 2 Inventory days
2. 3 Receivable days
3. 4 Payable days Liquidity Ratios
1. 5 Current ratio
2. 6 Acid test Profitability Ratios
1. 7 Return on capital employed
2. 8 Net profit margin
3. 9 Asset turnover Interpretation
Interpret the ratios above by making comparative relevant comments with clear demonstration of understanding applied in context

SECTION B

Question 2

Ana-maria Tial Balance

The following balances were extracted from the accounting records of Ma- maria Plc
Trial Balance as of 31 November 2022

Purchases	DR 372,000	CR
Trade payables		10,000
Salaries and wages	54,000
Directors' remuneration	10,000
Audit fees	3,000
Heat and light	30,000
Inventory, 01 April 2021	130,000
Debenture Interest	27,000
Interim dividend paid	120,000
Building at cost	500,000
Building - accumulated depreciation 01 Dec 2021		50,000
Fixtures and fittings at cost	150,000
Fixtures and fittings - accumulated depreciation, 01 Dec 2021		20,000
10% Debentures		220,000
Ordinary share capital (fully paid)		800,000
Trade receivables	120,000
Bank	260,000
Sales		940,000
Share premium account		150,000
Retained earnings		120,000
Communications expenses	20,000
General reserve		57,000
Long-term investments	571,000
	2,367,000	2,367,000

The following additional information as of 31 December 2022 should be taken into account:

(i) Inventory was valued at £150,000

(ii) Audit fees of £1000 were outstanding

(iii) 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 20% on the reducing balance basis
(v) The directors decided to transfer £70,000 to the general reserve account Required:
Prepare for Ana - Maria Plc:

(a) the statement of profit or loss for the year ended 31 December 2022

(b) the statement of changes in equity for the year ended 31 December 2022

(c) the statement of financial position for the year ended 31 December 2022

Question 3
Elena 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 500 units (sports shoes) per month for the 4months from January to April then 300 units per month from May to June.

ii. The selling price will be £60 per unit.

iii. All sales will be cash sales with cash received in the same month the sale takes place.

iv. Payment for Purchases of inventory (sports shoes) will take place on the month after receiving the inventory. Each unit of inventory will cost £40.

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.

viii. Bought a laptop for the business in April for £1,500

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.

b) Prepare a profit budget for the 6 months ending 30th June 2021.