The balance sheet of a sole trader revealed the following position: Fixed assets Land and buildings...

 

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The balance sheet of a sole trader revealed the following position: Fixed assets Land and buildings Equipment at cost less depreciation Goodwill at cost less amounts written off Investment in shares at cost Current assets Trading stock Sundry debtors less bad debts written off Cash at bank Less current liabilities Sundry creditors and accruals Owner's interest Capital Profit for the year R9 170 15 570 10 250 R45 840 19 350 10 920 R28 400 7300 (a) Are the assets correctly classified? If not, rearrange them and give your reasons for doing so. (b) What is the current ratio? Is it satisfactory? (c) What is the acid test ratio? Is it satisfactory? (d) Is the business solvent? Give your reasons. (e) Is the business overtrading? Give your reasons. (f) What is the profitability ratio of the business? R34 990 2 200 76 110 113 300 77 600 R35 700 R35 700 (1) (4) (4) (3) (6) (2) [20] The balance sheet of a sole trader revealed the following position: Fixed assets Land and buildings Equipment at cost less depreciation Goodwill at cost less amounts written off Investment in shares at cost Current assets Trading stock Sundry debtors less bad debts written off Cash at bank Less current liabilities Sundry creditors and accruals Owner's interest Capital Profit for the year R9 170 15 570 10 250 R45 840 19 350 10 920 R28 400 7300 (a) Are the assets correctly classified? If not, rearrange them and give your reasons for doing so. (b) What is the current ratio? Is it satisfactory? (c) What is the acid test ratio? Is it satisfactory? (d) Is the business solvent? Give your reasons. (e) Is the business overtrading? Give your reasons. (f) What is the profitability ratio of the business? R34 990 2 200 76 110 113 300 77 600 R35 700 R35 700 (1) (4) (4) (3) (6) (2) [20] The balance sheet of a sole trader revealed the following position: Fixed assets Land and buildings Equipment at cost less depreciation Goodwill at cost less amounts written off Investment in shares at cost Current assets Trading stock Sundry debtors less bad debts written off Cash at bank Less current liabilities Sundry creditors and accruals Owner's interest Capital Profit for the year R9 170 15 570 10 250 R45 840 19 350 10 920 R28 400 7300 (a) Are the assets correctly classified? If not, rearrange them and give your reasons for doing so. (b) What is the current ratio? Is it satisfactory? (c) What is the acid test ratio? Is it satisfactory? (d) Is the business solvent? Give your reasons. (e) Is the business overtrading? Give your reasons. (f) What is the profitability ratio of the business? R34 990 2 200 76 110 113 300 77 600 R35 700 R35 700 (1) (4) (4) (3) (6) (2) [20] The balance sheet of a sole trader revealed the following position: Fixed assets Land and buildings Equipment at cost less depreciation Goodwill at cost less amounts written off Investment in shares at cost Current assets Trading stock Sundry debtors less bad debts written off Cash at bank Less current liabilities Sundry creditors and accruals Owner's interest Capital Profit for the year R9 170 15 570 10 250 R45 840 19 350 10 920 R28 400 7300 (a) Are the assets correctly classified? If not, rearrange them and give your reasons for doing so. (b) What is the current ratio? Is it satisfactory? (c) What is the acid test ratio? Is it satisfactory? (d) Is the business solvent? Give your reasons. (e) Is the business overtrading? Give your reasons. (f) What is the profitability ratio of the business? R34 990 2 200 76 110 113 300 77 600 R35 700 R35 700 (1) (4) (4) (3) (6) (2) [20]

Answer rating: 100% (QA)

Answer a The assets are not correctly classified The correct classification of assets is as follows Fixed assets Land and buildings R15570 Equipment at cost less depreciation R10250 Goodwill at cost l... View the full answer