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01-10-2009, 06:16 PM
:TMA 02, Question 1, part 1: (4 mark)business:
Houdini always had an ambition to be a magician. As a child, he took great delight in making his younger brothers and sisters disappear and he was often asked to perform conjuring tricks at birthday parties. It was a natural career choice for him when, at the age of 21, he decided to leave college in 1 July 2007 and make his fortune in the world, setting up in business as a magician. He made the following payments in his first week in business
On 1st July he paid £1500 for a glittering costume with a top hat and cloak. On 2nd July he paid £1000 for a set of rare and valuable books, “The Ancient Secrets of Magic” and other magician’s equipment.
On 3rd July, he received and was invoiced for four packs of magicians’ playing cards from Alf Cooks Limited for £50 each. Houdini expected to use these items for many years. He paid cash from his own savings for the costume, the books and magician’s equipment, but he agreed that he would pay for the playing cards on 14 July from the business bank account.
His first appearance as a magician was on 7 July at Annual International Day of Magic and Conjuring Show, for which he was paid a fee of £650 by cheque, with which he opened a business account on the same day. He incurred £15 travel expenses, which he paid from his own savings.
The TASK:
1(a) From the information provided above, prepare a summary of Houdini’s income and expenses for the week ended 7th July, showing the profit earned. Please ignore any depreciation on Harry Houdini’s assets.
1(b) Draw up a list, as at 7 July, of Houdini’s fixed assets, current assets and current liabilities and then calculate what Harry Houdini’s net assets are at that date.
TMA02, question 1, part 2: (10 marks)
Houdini the magician entered his second week of business with £650 in his business bank account and has agreed to appear as entertainer at three parties during the week. Realising that he had no rabbits to pull out of his top hat, he contacted a rabbit breeder, who, on 8th July, supplied and received a cheque for six white rabbits at cost of £30 each, on the condition that Houdini treated them kindly and fed them well. The rabbits were paid for on the same day by cheque.
On 8th July, Houdini also bought a large quantity of rabbit food from Rabbit Food plc. for which he paid £150 from the business account on 9th July. On the same day, Rabbit Food plc supplied several sacks of scrap wood at no cost, for building rabbit hutches (small houses for rabbits).
10th July, Houdini travelled to William Green’s party, which was a success and he was paid £100 cash. Travel expenses were £15 cash. On 11th July, he paid a cheque for £15 for cleaning his costume, which became soiled after handling the rabbits. On 12th July, he paid £8 for a train ticket in cash to travel to Violet Cartwright’s party. This event was also successful and he received a fee of £100 by cheque. On 13th July, he performed at Jasper Peter’s party, which was only partially successful, since a child felt sorry for the rabbits and let them all escape.
The rabbits were never seen again.
Houdini gave an invoice to Mr Peter for £250 in total, to cover the cost of the escaped rabbits and a reduced performance fee for himself. As the performance was not a complete success, he agreed to waive some of his performance fee on this occasion, which Mr Peter paid in cash on the same day. As the party was local, he incurred no travel expenses on this occasion.
On 14th July, Houdini returned the unused rabbit feed to Rabbit Food plc, which gave him back £50 for the unused feed. He also paid Alf Cooke’s account for the playing cards bought in the first week.
The TASK:
2 (a) From the information provided above in Question 2, construct a simple cash account for Houdini the magician for the week from 8 to 14 July
2(b) Explain the purpose of a cash account (also called cash flow statement in B120, Book 3) and what an analysis of the cash account can reveal about a business.
TMA 02, question 1, part 3: (20 marks)
The busiest time for any children’s entertainer in Europe, in North America, Australia, New Zealand, among other countries, is at Christmas time, Christmas Day being 25th December. Christmas time can start from early December.
As the year progressed he was in great demand. He felt that he needed as assistant so he decided to employ Safire, who had previously been chief inventor at Wizard Limited, a company that makes equipment for magic tricks and novelties. As a leaving gift, the company had given Safire a ‘disappearing lady’ apparatus. Being unsentimental about such things, she sold it to Harry Houdini on 1 December 2007 for £2500. Safire started to appear (and disappear) as part of Harry Houdini’s magic act.
After two months in her new job, Safire persuaded Houdini to diversify by buying items made by her former employer and selling them at the children’s parties to the parents and guests.
During January 2008, Harry Houdini received a letter from his bank, asking for financial summaries for his first 6 months in business. January is a quiet month for him (following all of the Christmas activities, so he spent time producing the following information.
Cash and cheques received £
Sales of novelties bought from Wizard Ltd. 1,500
Appearance fees as entertainer 17,350
Cash and cheques paid
To Wizard Ltd for novelties to be sold 1,000
Wages 1,200
To Alf Cooke limited for playing cards 200
Travel expenses 1,500
Rabbits and rabbit food 280
Cleaning 110
To Safire for the ‘disappearing lady’ apparatus 2,500
Houdini’s drawings from his business (that is, the money Houdini withdrew from the business for his own living as he is not paying himself a salary) 11,495
Other Information
Cash balance at 31 December 2007 460
Back balance at 31 December 2007 120
Total invoices received from Wizard Ltd up to 31 December 2007 1,100
Stock of unsold novelties at cost price at 31 December 2007 50
Amount owing from customers for novelties 350
Other fixed assets still owned at 31 December 2007
Costume at cost 1,500
Magic books and equipment at cost 1,000
Owner’s Capital (Costume, Magic books and equipment and £15 initial travel expenses from owner’s savings) 2,515
Notes:
The costume, the magic books and the playing cards are to be grouped as ‘Magician’s equipment’ and depreciated at £540 in the period to 31 December 2007
The ‘disappearing lady’ apparatus is to be depreciated at £400 in the period to 31 December 2007
Harry Houdini owed £100 wages to Safire at 31 December and had paid £50 in December for a train ticket which was going to be used in January 2008
The TASK:
3(a) From the information provided in Question 3 above, prepare Houdini’s profit and loss account (or income statement) for the six months to 31December 2007. (Note: you should use the format of the profit and loss account as it has been used in Section 3 of Book 3) (12 marks)
3(b) Explain the purpose of a profit and loss statement and what an analysis of the profit and loss statement can reveal abut a business (8 marks)
TMA02, question 1, part 4: (16 marks)
The TASK:
4(a) From the information given in questions 1 to 3 above, prepare Houdini’s Balance Sheet as at 31 December 2007 (12 marks)
4(b) Explain the purpose of a Balance Sheet and what an analysis of the Balance Sheet can reveal about a business (4 marks)
Houdini always had an ambition to be a magician. As a child, he took great delight in making his younger brothers and sisters disappear and he was often asked to perform conjuring tricks at birthday parties. It was a natural career choice for him when, at the age of 21, he decided to leave college in 1 July 2007 and make his fortune in the world, setting up in business as a magician. He made the following payments in his first week in business
On 1st July he paid £1500 for a glittering costume with a top hat and cloak. On 2nd July he paid £1000 for a set of rare and valuable books, “The Ancient Secrets of Magic” and other magician’s equipment.
On 3rd July, he received and was invoiced for four packs of magicians’ playing cards from Alf Cooks Limited for £50 each. Houdini expected to use these items for many years. He paid cash from his own savings for the costume, the books and magician’s equipment, but he agreed that he would pay for the playing cards on 14 July from the business bank account.
His first appearance as a magician was on 7 July at Annual International Day of Magic and Conjuring Show, for which he was paid a fee of £650 by cheque, with which he opened a business account on the same day. He incurred £15 travel expenses, which he paid from his own savings.
The TASK:
1(a) From the information provided above, prepare a summary of Houdini’s income and expenses for the week ended 7th July, showing the profit earned. Please ignore any depreciation on Harry Houdini’s assets.
1(b) Draw up a list, as at 7 July, of Houdini’s fixed assets, current assets and current liabilities and then calculate what Harry Houdini’s net assets are at that date.
TMA02, question 1, part 2: (10 marks)
Houdini the magician entered his second week of business with £650 in his business bank account and has agreed to appear as entertainer at three parties during the week. Realising that he had no rabbits to pull out of his top hat, he contacted a rabbit breeder, who, on 8th July, supplied and received a cheque for six white rabbits at cost of £30 each, on the condition that Houdini treated them kindly and fed them well. The rabbits were paid for on the same day by cheque.
On 8th July, Houdini also bought a large quantity of rabbit food from Rabbit Food plc. for which he paid £150 from the business account on 9th July. On the same day, Rabbit Food plc supplied several sacks of scrap wood at no cost, for building rabbit hutches (small houses for rabbits).
10th July, Houdini travelled to William Green’s party, which was a success and he was paid £100 cash. Travel expenses were £15 cash. On 11th July, he paid a cheque for £15 for cleaning his costume, which became soiled after handling the rabbits. On 12th July, he paid £8 for a train ticket in cash to travel to Violet Cartwright’s party. This event was also successful and he received a fee of £100 by cheque. On 13th July, he performed at Jasper Peter’s party, which was only partially successful, since a child felt sorry for the rabbits and let them all escape.
The rabbits were never seen again.
Houdini gave an invoice to Mr Peter for £250 in total, to cover the cost of the escaped rabbits and a reduced performance fee for himself. As the performance was not a complete success, he agreed to waive some of his performance fee on this occasion, which Mr Peter paid in cash on the same day. As the party was local, he incurred no travel expenses on this occasion.
On 14th July, Houdini returned the unused rabbit feed to Rabbit Food plc, which gave him back £50 for the unused feed. He also paid Alf Cooke’s account for the playing cards bought in the first week.
The TASK:
2 (a) From the information provided above in Question 2, construct a simple cash account for Houdini the magician for the week from 8 to 14 July
2(b) Explain the purpose of a cash account (also called cash flow statement in B120, Book 3) and what an analysis of the cash account can reveal about a business.
TMA 02, question 1, part 3: (20 marks)
The busiest time for any children’s entertainer in Europe, in North America, Australia, New Zealand, among other countries, is at Christmas time, Christmas Day being 25th December. Christmas time can start from early December.
As the year progressed he was in great demand. He felt that he needed as assistant so he decided to employ Safire, who had previously been chief inventor at Wizard Limited, a company that makes equipment for magic tricks and novelties. As a leaving gift, the company had given Safire a ‘disappearing lady’ apparatus. Being unsentimental about such things, she sold it to Harry Houdini on 1 December 2007 for £2500. Safire started to appear (and disappear) as part of Harry Houdini’s magic act.
After two months in her new job, Safire persuaded Houdini to diversify by buying items made by her former employer and selling them at the children’s parties to the parents and guests.
During January 2008, Harry Houdini received a letter from his bank, asking for financial summaries for his first 6 months in business. January is a quiet month for him (following all of the Christmas activities, so he spent time producing the following information.
Cash and cheques received £
Sales of novelties bought from Wizard Ltd. 1,500
Appearance fees as entertainer 17,350
Cash and cheques paid
To Wizard Ltd for novelties to be sold 1,000
Wages 1,200
To Alf Cooke limited for playing cards 200
Travel expenses 1,500
Rabbits and rabbit food 280
Cleaning 110
To Safire for the ‘disappearing lady’ apparatus 2,500
Houdini’s drawings from his business (that is, the money Houdini withdrew from the business for his own living as he is not paying himself a salary) 11,495
Other Information
Cash balance at 31 December 2007 460
Back balance at 31 December 2007 120
Total invoices received from Wizard Ltd up to 31 December 2007 1,100
Stock of unsold novelties at cost price at 31 December 2007 50
Amount owing from customers for novelties 350
Other fixed assets still owned at 31 December 2007
Costume at cost 1,500
Magic books and equipment at cost 1,000
Owner’s Capital (Costume, Magic books and equipment and £15 initial travel expenses from owner’s savings) 2,515
Notes:
The costume, the magic books and the playing cards are to be grouped as ‘Magician’s equipment’ and depreciated at £540 in the period to 31 December 2007
The ‘disappearing lady’ apparatus is to be depreciated at £400 in the period to 31 December 2007
Harry Houdini owed £100 wages to Safire at 31 December and had paid £50 in December for a train ticket which was going to be used in January 2008
The TASK:
3(a) From the information provided in Question 3 above, prepare Houdini’s profit and loss account (or income statement) for the six months to 31December 2007. (Note: you should use the format of the profit and loss account as it has been used in Section 3 of Book 3) (12 marks)
3(b) Explain the purpose of a profit and loss statement and what an analysis of the profit and loss statement can reveal abut a business (8 marks)
TMA02, question 1, part 4: (16 marks)
The TASK:
4(a) From the information given in questions 1 to 3 above, prepare Houdini’s Balance Sheet as at 31 December 2007 (12 marks)
4(b) Explain the purpose of a Balance Sheet and what an analysis of the Balance Sheet can reveal about a business (4 marks)