Country : Australia
Assignment Task

QUESTION ONE 
Part A 
The Franco brothers opened a Mobile Phone pop up kiosk in a regional shopping centre on 1 May 2019. The business trades under the name of ‘Franco Pty Ltd’ and sells one type of phone; the Apple iPhone XR 64GB (white). All credit sales are made on the following terms: payable in 30 days. 
The following selected information is available for the business for the month ended 31 May 2019: 
1. Invested $60,000 cash to commence business as Francis Pty Ltd. 2. Borrowed $10,000 cash from Grandma at zero% interest. 3. Paid one month rent $500. 4. Purchased one Microsoft Surface Book 2 – 15” Display/256 GB / Intel Core i7 to use in 
business, $3,699 cash. 5. Purchased one Apple iPhone XS Max 256GB (gold) to use in business, $2,100 cash. 6. Purchased 80 Microsoft Surface Pro 256 GB Tablets for $640 each, paying cash. 7. Sold 50 Microsoft Surface Pro 256 GB Tablets for $1,599 each, on credit. 8. Purchased 40 Microsoft Surface Pro 256 GB Tablets for $640 each, on credit. 9. Sold 30 Microsoft Surface Pro 256 GB Tablets for $1,599 each, for cash. 10. Paid wages $3,200, cash. 11. The estimated useful life of the Microsoft Surface Book 2 – 15” Display/256 GB / Intel Core i7 is three years, and two years is the estimated useful life of the Apple iPhone XS Max 256GB (gold). Both have an estimated scrap value of zero at their end of life. 
REQUIRED: 
a. Prepare a worksheet using the format presented below to record each transaction for the 
month ended 31 May 2019

b. Total the column amounts

c. Prove the accounting equation is in balance. 
QUESTION TWO 
Pasta Ltd and Omelette Ltd are listed on the Kilda Securities Exchange. The 31 August 2019 closing price of Pasta Ltd shares was $7.93, whereas the closing price of Omelette Ltd shares was $16.26. 
Other available information. 
Table1.JPG

REQUIRED: 
A. Calculate the market cap, current P/E, and price to book ratio for Pasta Ltd and Omelette 
Ltd based on the above information (show all workings). B. Based on information above which firms are bigger? Which indicator(s) need(s) to be 
considered in this case? 
QUESTION THREE 
Part A 
Denny Maguire has just been offered a contract by Melbourne FC as the most expensive player in Australia. As part of his compensation he has the option to either receive payment as a lump-sum (with bonus) or annual salary (without bonus) with a given discount rate of 5%. The details are below: 
a. One off lump-sum payment received today worth $5,000,000. Further, Melbourne FC will 
also provide him with an annual stipend as royalty bonus worth $100,000 for the next 5 years (paid at the end of the year). b. Annual payment of $1,200,000 for the next 5 years (paid at the beginning of the year) and 
without any royalty bonus. 
REQUIRED:

Advise Denny on which compensation package is the best for him (show all workings). 
(6 marks) 
Part B 
Robert is thinking to deposit his heritage of $5,000,000 in the Commonwealth bank for 5 years; a bank teller offers him an interest rate of 3% per year and asks him whether he wants his interest rate to be compounded. 
A. Annually

B. Monthly

C. Daily 
REQUIRED:

Which compounding interest rate should Robert choose, given he is interested to maximise his Future value of the heritage? What is difference in FV value between the highest and the lowest compounding? (show all workings). 
QUESTION FOUR 
Based on recent published accounting and finance studies below: 
a. Hopkins et al. (2014) find that the ascension of lawyers to top management is associated with higher earning management, which ultimately reduces the shareholders’ belief in the company. b. Dole et al. (2019) argue that the economic uncertainty condition aggravates the ability of 
analysts to accurately predict the company’s future earnings. c. Fiordelisi and Ricci (2014) state that firms with aggressive corporate culture are associated 
with higher CEO turnover due to high expectation from the Board of Directors and majority shareholders. 
Explain whether the studies above indicate a systematic or unsystematic risk of investing? 
Can those situations above be diversified and/or managed? Explain. 
(6 + 2 = 8 marks) 
QUESTION FIVE 
Summarised statements of financial position and other financial information for Ballarat Ltd and Bendigo Ltd are presented below. Both companies own and operate retail shops in Victoria. 
Statements of financial position as at 30/6/19: 
Table3.JPG

 

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