INDIVIDUAL ASSESSMENT (30%) With reference to the given information, attempt the questions that follows; Fruit-Cut Enterprise Income Statement For the Year Ended June 30, 2013 Net sales Cost of goods sold Gross margin Operating expenses Income before income taxes Income taxes Net income $24,000 12,000 $12,000 8,000 $4,000 1,600 $2,400 Current assets Investments Assets Property, plant, and equipment Intangible assets Fruit-Cut Enterprise Balance Sheet June 30, 2013 $ 4,000 Current liabilities 2,000 Long-term liabilities Total liabilities Liabilities $ 4,000 6,000 $10,000 12,000 2,000 Stockholders' Equity Common stock $ 8,000 Retained earnings 2,000 Total stockholders' equity $10,000 Total assets $20,000 Total liabilities and stockholders' equity $20,000 After completing your unusual Zumba workout, you ran into your old good friend. She immediately invites you to a tea tarik session at the nearby Mamak stall. Without knowing what her actual intention was, she began telling the story about her current potential business venture. You innocently admit that you are currently studying an MBA course at IMU. When she heard this, she prepared a financial report for the company she was interested in and asked you for an explanation and judgment on the company The business involves the delivery of cut fruits to the food retail sector in Sogo. The statement she received from the business owner was prepared by a qualified accountant, but the problem is that the owner and your friend have no knowledge of accounting at all!! So...the owner used his own interpretations for the statement he gave to your friend. Among others, the owner claim; 1. Included in the sales is profit on asset disposal worth RM5 000 2. The net sales amount is underestimated since there are sales made in December 2012 in which the cash collection has not received and hence not recorded. 3. Depreciation was included for in the operating expenses and that will reduce the tax charged, which result more cash for the business. 4. There was a purchase of 2nd van for RM 2000 included in the operating expenses, which has increased the expenses and resulted in smaller net income. 5. Part of intangible assets appears in Balance Sheet is "Appointment Letters" as sole cut-fruit distributor for TNB and Syabas. 6. Included in the operating expanses is the Insurance payment paid in November for next 12 month, which again underestimates the income (smaller income). Required; Based on the knowledge acquired in the accounting course 1. Address your comments based on the owner's claims and explain the accounting conventions required marks) (10 2. Compute and provide your recommendation based on the following ratio analysis i.e. a. Profit margin b. Return on assets c. Debt to equity d. Return on equity e. Asset turnover to guide your answer. (20 marks)