Below is a Statement of Financial Position for a small business as at the end of 2019 with the total liability and total equity figures removed.

($000) ($000)

Current Assets Current Liabilities

Cash 6 Suppliers Accounts Payable 13

Inventory 24

Prepayments 7 Non-Current Liabilities

Fixed Interest Bank Loan 40

Non-Current Assets

Property, Plant & Equipment 40 Equity

Accumulated Depreciation (5) Contributed Capital 5

----- Retained Earnings ?

Total Assets 72

Question 3

Below is a list of some of the account totals from the trial balance at the end of 2020 for the business in Question 2.

Account Totals $

Credit Sales 180,000

Cash Sales 30,000

Cost of Goods Sold 96,000

Inventory Purchases 90,000

New Equipment Purchases 2,000

Lease Expenses 7,000

Utilities Expenses 4,000

Depreciation Expense 3,000

Interest on Bank Loan 4,000

Drawings 10,000

1. Using the information from Question 2 & 3, explain why the total inventory on hand at the end of 2020 should be $18,000. (2 marks)

Answer:

2. Calculate the Inventory Turnover ratio for 2020. (2 marks)

Answer:

3. Hence or otherwise, calculate the Inventory Days for 2020. (2 marks)

Answer:

4. Comment on your calculated answers for the Current & Quick ratios in Question 2 and the Inventory Days in Question 3 part c). (4 marks)

Answer:

5. The business pays a flat tax rate of 30%. Construct a Statement of Financial Performance for the business for 2020 showing:

i) gross profit ii) operating profit & iii) net profit after tax (8 marks)