GRAND MARK INTERNATIONAL COLLEGE
POST GRADUATE PROGRAM
COLLEGE OF BUSINESS ADMINISTRATION (MBA)
Financial and Management Accounting
GROUP ASSIGNMENT 1
Student Name: ID No.
1. AREGAHEGN BISET TAREKE …………………….
2.
3.
4.
5.
6.
Submitted to: DR.
JUN 11: 2022
ADDIS ABEBA, ETHIOPIA
Group Assignment 1
1. A. The following data apply to Jacobus and Associates (millions of dollars):
Cash and marketable securities $ 100.00
Fixed assets =$ 283.50
Net income= $ 50.00
Sales =$1,000.00
Quick ratio =2.0
Current ratio= 3.0
DSO =40.55 days
ROE =12%
Jacobus has no preferred stock—only common equity, current liabilities, and long-
term debt. Find Jacobus’s
A. Accounts receivable,
B. Current liabilities,
C. Current assets,
D. Total assets,
E. ROA,
F. Common equity, and
G. Long-term debt.
Solution
A. Accounts receivable
Days Sales
Outstanding (DSO)=
(Account Receivable
(AR)
/Sales) *365Days
40.55Days= (Account
Receivable (AR)
/1000) *365
(Account Receivable
(AR) =
(40.55*1000)/365Days
Account Receivable
(AR) =111.10
Group Assignment 1
The following data apply to
Jacobus and Associates
(millions of dollars):
Cash and marketable securities
$ 100.00
Fixed assets =$ 283.50
Net income= $ 50.00
Sales =$1,000.00
Quick ratio =2.0
Current ratio= 3.0
DSO =40.55 days ROE
=12%
Jacobus has no preferred stock
—only common equity, current
liabilities,
and long-term debt. Find
Jacobus’s
A. Accounts receivable,
B. Current liabilities,
C. Current assets,
D. Total assets,
E. ROA,
F. Common equity, and
G. Long-term debt.
Solution
A. Accounts receivable
Days Sales Outstanding
(DSO)= (Account Receivable
(AR)
/Sales) *365Days
40.55Days= (Account
Receivable (AR) /1000) *365
(Account Receivable (AR) =
(40.55*1000)/365Days
Account Receivable (AR)
=111.10
Solution
A. Accounts receivable
Days Sales Outstanding = (Account Receivable /Sales) *365Days
40.55Days = (Account Receivable /1000) *365
Account Receivable = (40.55*1000)/365 Days
Account Receivable =111.10
Current liabilities
Current Liability=Net income
+Account Receivable (AR)
= 50+111.10
Current Liability = 161.10
B. Current liabilities
Quick ratio= (Cash + receivables) / Current liabilities
2.00 = (111.10 + 100.00) / Current Liabilities
Current Liabilities = $105.55
C. Current assets
Current asset=current ratio*current liability
Current asset = 3.0*105.55
Current asset =316.65
D. Total assets
Total asset=Current asset + Fixed asset
Total asset = 316.65+283.50
Total asset = 600.15
E. Return On Assets
Return on Assets = (Net income/Total asset) *100
Return on Assets = (50/600.15) *100
Return on Assets = 8.33%
F. Common equity
Common equity = Net Income / Return on Equity
Common equity = 50/ 12%
Common equity =416.66
G. Long-term debt
Long-term debt =Total assets - Equity - Current liabilities
Long-term debt = 600.15 - 416.67 - 105.55
Long-term debt = $77.93
B. in part a, you should have found Jacobus’s accounts receivable = $111.1
million. If Jacobus could reduce its DSO from 40.55 days to 30.4 days while
holding other things constant, how much cash would it generate? If this cash were
used to buy back common stock (at book value), thus reducing the amount of
common equity, how would this affect
I. The ROE
Jacobus new DSO OF 30.4 would cause A/R =30.4(2.73) =83.3. the
reduction in receivables would be 111.1 – 83.3 =27.8
New equity = old equity – stock bought back
New equity = 466.67-27.8
New equity = 438.87
New ROE = (Net income/new equity) *100
New ROE = 70/438.87 =15.95%
ii. The ROA
New ROA =net income /total
asset –reduction in A/R
=70/600-27.8
=12.23%
New ROA =net income / (total asset –reduction in A/R)
New ROA =70/ (600-27.8)
New ROA =12.23%
iii. The ratio of total debt to total assets?
Total debt to total asset
Debt =total
claim – equity
= 600-466.67 = $133.33
New total asset = old total asset
– reduction in A/R
= 600-27.8
=572.2
Therefore, total debt/total asset
= 133.33/572.2
=23.3%
Total debt to total asset =total claim – equity
Total debt to total asset = 600-466.67 = $133.33
New total asset = old total asset – reduction in A/R
New total asset = 600-27.8
New total asset =572.2
Therefore, The ratio of total debt to total assets = (total debt/total asset) *100
The ratio of total debt to total assets = (133.33/572.2) *100
The ratio of total debt to total assets =23.3%
2. Assume that RAS AMBA Hotel has annual fixed costs applicable to its
operation of Birr 182,500 for its 60-rooms motel; daily room rent income of Birr
150; and variable costs of Birr 50 for each room rented. It operates 365 days a
year. Required:
A. Operating income on rooms will be generated, if the motel is fully occupied
throughout an entire year?
Given
Fixed = 182,500.00
Daily room Rental Income for one room = 150.00 per room
Variable =50.00 birr per room
Required
Operating income on rooms will be generated, if the motel is fully
occupied throughout an entire year?
Solution
Operating Income= Total revenue – Fixed Asset-Operation Expense
N.B, cost good sold is Fixed asset
Total revenue =150-birr x 60 room
Daily revenue = 9,000.00
Annually revenue = 9000.00x365 days
Annually revenue = 3,285,000.00 birr
Variable cost = 50.00-birr x 60.00 room
Total Daily VC =3000.00
Annual VC = 3000x365 days
Annual VC = 1,095,000.00 birr
Operating income =3,285,000.00-182,500-1,095,000.00
Operating income =2,007,500.0 birr
B. How much operating income on rooms will be generated if the motel is
half full during a year?
Total Revenue =150.00-birr x 30 room
Daily room =4,500.00
Annual revenue = 4,500.00 x 365 days
Annual revenue = 1,645,500.00 birr
Fixed cost = 182,500.00
Variable cost =50.00-birr x 30 Room
Daily variable =1,500.00
Annual Variable =547,500.00
Operating Income = TR-FC-VC
Operating Income = 1,642,500.00-182,500.00-547,500.00
Operating Income =912,500.00
C. What is the breakeven point in number of rooms rented assuming that the motel
is fully occupied throughout the year?
BE= FC/(OP-VC)
BE = 182,500/ (150-50)
BE =1,825 room
3, a.1, Raw materials, beginning
$ 75,000
Add: Raw materials purchased
X
Deduct: Raw materials, ending
(85,000)
Direct materials used
$326,000
$75,000 + X ‐$85,000 =
$326,000
X = $326,000 ‐$75,000 +
$85,000 = $336,000
a.2, Direct labor cost
Direct materials
$326,000
