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Accounting Assignment
TRADING PROFIT AND LOSS ACCOUNT
|
Particulars |
$ |
$ |
| Sales |
21,600 |
|
| Less Returns Inwards |
(300) |
|
|
21,300 |
||
| Less Cost of Goods Sold |
|
|
| Purchases |
15,000 |
|
| Less Returns Outwards |
(140) |
|
| Add Carriage Inwards |
80 |
|
| Cost of Goods Sold |
|
14,940 |
| Gross Profit |
|
6,360 |
|
|
|
|
| Add Incomes |
|
|
| Discount Received |
|
350 |
| Rent Received |
|
520 |
|
|
7,230 |
|
|
|
|
|
| Less Expenses |
|
|
| Carriage Outwards |
450 |
|
| Salaries |
1,460 |
|
| Insurance and Rates |
270 |
|
| General Expense |
650 |
|
| Discount Allowed |
760 |
3,590 |
|
|
|
|
| Net Profit |
3,640 |
BALANCE SHEET
|
Particulars |
$ |
$ |
$ |
| Fixed Assets | |||
| Plants and Machinery |
1,200 |
||
| Fixtures and Fittings |
1,200 |
||
| Premises |
3,300 |
||
|
|
5,700 |
||
| Current Assets |
|
|
|
| Debtors |
8,840 |
|
|
| Cash in Hand |
100 |
|
|
|
8,940 |
8, 940 |
||
| Total Assets |
|
14,640 |
|
|
|
|
||
| Equity and Liabilities |
|
|
|
| Current Liabilities |
|
|
|
| Creditors |
2,724 |
|
|
| Bank Overdraft |
576 |
3,300 |
|
| Financed by |
|
|
|
| Capital |
8,300 |
|
|
| Profit and Loss Account |
3,640 |
|
|
| Less Drawings |
(600) |
|
|
| Total Owners Equity |
|
14,640 |
Finance Assignment
My friend Susan will be turning thirty years of age in her next birthday. She would like to retire at the age of sixty and has therefore approached me for financial assistance with regard to the best savings schedule for her in preparation for the retirement period. Susan has decided that her thirtieth birthday will mark her initial contribution period up to her sixtieth year. Susan wants to spend the retirement funds for a period of twenty years until she is eighty with equal monthly withdrawals of three thousand five hundred dollars each. With her present level of earnings, Susan will only be able to contribute two thousand dollars on a monthly basis. The retirement funds will be deposited in a savings account and therefore Susan would like to know that best yearly rate she should look for in order to support her present contribution levels in a manner that meets the future needs.
Computation of Yearly Return Rate
Present Savings Schedule
From 30yrs to 60 yrs = 30 saving yrs
Monthly contribution = $ 2,000 pm
Total contributions for the saving period before retirement = 30yrs * $ 2,000 * 12 months
= $ 720,000
Future Drawings Requirements
From retiring age to the last withdrawal = 20yrs
Monthly withdrawal = $ 3,500 pm
Total withdrawals after retirement period = 20yrs * $ 3,500 * 12 months
= $ 840,000
Yearly Return Rate
Using the formula A = P (1+ r/n)t
Where A= future amount
P = initial contribution
r = interest rate
n = years of investment
Using the trial and error method:
12% interest rate 24,000(1+0.12)30 A = $ 719,038
13% interest rate 24,000(1+0.13)30 A = $ 938,781
12.5% interest rate 24,000(1+0.125)30 A = $ 821,839
12.6% interest rate 24,000(1+0.126)30 A = $ 844,039
With the 12% percent rate, the future amount totals to $ 719,038 which is less than Susan’s intended $ 840,000. Trying a higher interest rate of 13% yields $ 938,781 which is higher than the required level. This means that the required rate lies between 12% and 13%. Using 12.5% amounts to $ 821,839 which is slightly lower than the required amount and 12.6% offers $ 844,039.
Conclusion
Therefore, Susan should invest the funds within a bank that offers a yearly return rate of 12.6%. However, a rate higher than this would also be desirable as it will lead to higher earnings.
