Question

Help me on the Finance homework. Please show me in excel.

Assume that you are a financial manager for Varsity Sweaters a wholesaler of university branded clothing to college and university book stores. On December 31, 2013 Varsity Sweaters had sold $2,500,000 in products on account to various campus book stores for year. Its collections policies are typically net 30 days. It had collected $1,000,000 by December 31, 2013. The clothing it had sold during the year had been purchased on account from various textile mills for $1,200,000 of that amount the firm had paid $950,000 as of December 31, 2013.

Enter the above financial information into Varsity Sweater’s General Ledger.

Using accrual accounting and the information above in the General Ledger what is the net profit for Varsity Sweater during the year 2013?

Using cash accounting and the information above in the General Ledger what is the net cash for Varsity Sweater during the year 2013?

Which of the statements you just calculated is most useful to the financial manager? Why?

Answer 1

File Home InsertPage LayoutFormulas DataReview View DeveloperNitro Pro8 5 EX 11.A. A-=-9- Ewrap Text General Copy Fill 田·ク·A· 迴F 国Merge & Center, % , aiog Conditional Format Cell Insert Delete Format Sort & Find & Blu. Format Painter 2 Clear Filter Select Editing Formatting as Table Styles Clipboard M18 Font Alignment Number Cells Varsity Sweaters Profit & Loss Ac For the Year ended on 31st December, 2013 Particulars To Purchase To Net Profit Particular S 1,200,000 By Sales S 2,500,000 S1,300.000 S 2,500,000 Total s 2,500,000 Va Sweaters 12 13 Cash Ac As on 31st December, 2013 Particulars To Trade Receivables S1,000,000 By Trade Payables Amount Particular S 950,000 By Balance c/f 16 17 18 19 S 1,000,000 S 1,000,000 Total 21 4H SheetiSheet2Sheet3 Sheet4 Sheet5 Ready

File Home Insert Page Layout﹁ Formulas Data Review View Developer Nitro Pro 5 EX a궈 Trace Precedents Eshow Formulas Trace Dependents Eror Checking @oetine Name▼ Calculate Now Use in Formula Insert Autosum Recently Financial Logical Text Date & Lookup & Math More Used - Time- Reterence - & Trig - FunctionsManager ECreate from SelectionRemove Arrows-Evaluate Formula Windo Options ction Function Library Defined Names Formula Auditing Calculation EA ti Varsity Sweaters Profit & Loss Ac For the Year ended on 31st December, 2013 Particulars To Purchase To Net Profit Amount 1200000 -F6-D6 Particular By Sales 2500000 SUM(D6:DS) SUM(F6:FS) 12 13 Varsity Sweaters Cash Ac As on 31st December, 2013 Particulars To Trade Receivables Amount 1000000 Particular By Trade Payables By Balance c/f Amounts 950000 -D18-F15 16 17 18 19 SUMDIS:D17) SUM(F15:F17 21 23 14 ㅔ ト | Sheet1 . Sheet2 . Sheet3 / Sheet4 、Sheet5 Ready !

What is more relevant for a Financial Manager:

For a Financial Manager, figure of profit is more relevant as compared to Cash Balance. Because, it is general practice of Varsity Sweaters to sold goods on credit basis for a period of 30 day and such credit period doesn't affects company's profitability i.e. profit of $1.30 million remains same (Whether company sold goods on credit basis or cash basis).

Further, Profit is a figure which can be use to assess Market price and various financial ratios of the company.

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