1. Use the information from the 2019 annual report for Kathmandu Holdings Ltd ,hereafter referred to as Kathmandu, to complete questions 1 and 2. The 2019 annual report for Kathmandu Holdings Ltd can be accessed from their website. Download the pdf https://www.kathmanduholdings.com/investor-relations/reports/. The Consolidated Financial Statements and Notes to the Consolidated Financial Statements are on page 31 – 73. The current share price for Kathmandu can be found from the www.nzx.com website..
a) Calculate the market capitalisation for Kathmandu based on the current share price and number of shares that have been issued as at 31 July 2019. Find the current share price for Kathmandu using the information above. Find the number of shares that have been issued from the annual report.
b) Compare the market capitalisation calculated in (a) above with the value of equity as recorded in the balance sheet as at 31 July 2019.
c) Provide two reasons why the book value of equity is different from the market capitalisation.
2. Assets, Liabilities and Equity of Kathmandu Holdings Ltd
a) Read Note 1.1 of the Notes to the Consolidated Financial Statements of Kathmandu on page 38 of the annual report. Use this information and other information from Kathmandu’s company website to describe the business of Kathmandu in your own words.
b) You have been asked by one of your friends to explain some of the items included in the Consolidated Balance Sheet (page 35) for Kathmandu as at 31 July 2019. You are required to describe what each item represents and provide reasons for its classification as either current or non-current asset/liability or equity using only the information provided in the financial statements. Also, give details of where the information on each item is located within the consolidated financial statements of Kathmandu. That is, your answers should relate specifically to Kathmandu Holdings Ltd., and not a general description of each item. i. Inventory ii. Trade and other receivables iii. Property, plant and equipment iv. Share capital
3. Charlene Jackson’s business, Hair Today, has been operating in Auckland for the month of February 2020. It is set up as a sole trader. You call in for a haircut, and while she is trimming your hair, she tells you how business is going. “I think it’s going very well,” she says. “Last time I went to the bank there were a lot of deposits. There were cash deposits of $100, $110, $105 and so on, totalling exactly $10,500 for February, the first month’s business. These don’t include the $500 still owed me for haircuts provided to the builders working on the new Recreation Centre at the University and the $1,000 prepaid by staff at the nearby office block. Of course the bank account also includes the $25,000 of savings that I put into the business when I started it up and the $10,000 loan that the bank gave me. Not to mention the balance of $20,000 in my personal savings account that I can always use, if necessary”. “I have spent $12,000 on the furniture and equipment for the business, $9,500 on hairdressers’ supplies and then there is the lease of this place. It is a TWO-year lease, but I paid six months rent in advance (from February to July), that’s $5,400 and a lease deposit of $2,000 that I can get back.” “The furniture and equipment should last 5 years with no residual value. Straight-line depreciation method is used. And the supplies, well I still have $4,000 worth unopened and sitting in the storeroom. I also get a cleaning company to come and do the floors; they charge $25 a week. I haven’t had to pay them anything yet, and I still owe them for four weeks work. Oh, there’s Marama. I just hired her yesterday at a salary of $2,000 per month. Today’s her first day of work. I also drew out $300 in cash to take my sister out to dinner on her birthday”
a) Prepare a worksheet using the template in the Answer workbook showing how the above accounting events will affect the Balance Sheet Equation. Note: calculate one month’s depreciation on the furniture and equipment. Ignore tax.
b) Prepare an Income Statement for the month of February 2020 and a Balance Sheet as at 29 February 2020 using the template in the Answer booklet.