The following are account balances of Brandys Boats and Burts Camping shops taken from the entitys records
Question:
The following are account balances of Brandy’s Boats and Burt’s Camping shops taken from the entity’s records for the year ended June 30, 2021:
Brandy’s Boats | Burt’s Camping | ||
$(000) | $(000) | ||
Cash & cash equivalent | 90 | 140 | |
Accounts receivables | 1,220 | 460 | |
Inventories | 1,250 | 680 | |
Accumulated depreciation | 400 | 320 | |
Property, plant and equipment | 1,880 | 1,540 | |
Accounts payable | 1,200 | 650 | |
Revenue (all credit sales) | 7,500 | 5,000 | |
Cost of goods sold | 5,900 | 4,050 | |
Long-term bank loan | 1,300 | 600 | |
Selling expenses | 700 | 400 | |
General & admin expenses | 160 | 200 | |
Interest expense | 125 | 60 | |
Owner's capital (beginning balance) | 925 | 960 |
Additional information
Brandy’s Boats is in the business of selling boat parts. Burt’s Camping is selling camping gear. Like lots of other retail shops, the Covid-19 situation has brought some hard times for the shops. Therefore all owners keep the profits in the business. The credit term for both shops is 5/N30. The accountant in Brandy's Boats has not included the depreciation of the year of $40,000 that is part of the general and admin expenses.
Ratios | Brandy’s Boats | Burt’s Camping |
Gross Profit Margin | 21.3% | 19% |
Profit Margin | 7.7% | 5.8% |
Current Ratio | 2.13 times | 1.97 times |
Quick Ratio | 1.09 times | 0.92 times |
Accounts Receivable Turnover | 6.15 times | 10.87 times |
Days sales in receivables | 59.4 days | 33.6 days |
Inventory Turnover | 4.7 times | 6 times |
Days of inventory on hand | 77 days | 61 days |
Required:
a. Prepare both shops classified income statements. (9 marks)
b. Prepare both shops classified balance sheets. (14 marks)
c. Answer the MCQ (8 questions) below based on the information above and your answers in requirements a and b. (12 marks)
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates