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Accounting Assignment Question

QUESTIONS 1

The investors of Lennox Surfers P/L have been provided the following financial statements for 2014 and 2015 financial year . Calculate the following ratios and comment on the profitability and efficiency of the business:

Profitability ratios

Net profit margin

Gross profit margin

ROA

Efficiency ratios

Inventory turnover period

Average accounts receivable period

Asset turnover

QUESTIONS 2

In relation to recent corporate crashes, what have been the main lessons/faults associated with the accounting information system and/or process? Explain

Question 3

For each of the following items, state whether it is either;

Revenue or Expense or Asset or Liability or Equity.

A loan to another company
Shares issued to the public
Inventory purchased last week
Depreciation of equipment
Provision for long service leave
Excess payment to the tax department
Shares owned in another company
Accounts payable
Prepaid insurance premiums
Deposit paid by a customer for work yet to be done
Credit sales
Cash sales
Retained profit
Advertising
Bad debts
Dividend declared, not yet paid
Singed a contract for a $300,000 building
Undertook basic research for $40,000 on a new product
Delivered goods to a customer related to credit sales contract
Special staff training program related to new regulations cost $10,000
Cash purchase of a new computer for $23,000
Paid initial payment of $5,000 related to the financial lease of a bus

Accounting Assignment Solution

Question 1:

The following ratios will be calculated on the basis of the financial statements which have been provided by Lennox Surfers for the years 2014 and 2015.

Profitability Ratios:

The following ratios would be calculated to understand the profitability of the firm.

Gross Profit Margin:

Gross Profit Margin=Gross Profit ($’000) /Sales ($’000) (Robert N Anthony, 2010)

For the year 2014:

Gross Profit Margin=1440/3600

=40%

For the year 2015:

Gross Profit Margin=1590/3840

=41.4%

Net Profit Margin:

Net Profit Margin=Net Profit ($’000) /Sales ($’000) (Investopedia, 2015)…………………..