Surname

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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.

 

 

 

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