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georges b asked:


Harry Houdini’s business:
Houdini always had an ambition to be a magician. As a child, he took great delight in making his younger brothers and sisters disappear and he was often asked to perform conjuring tricks at birthday parties. It was a natural career choice for him when, at the age of 21, he decided to leave college in 1 July 2007 and make his fortune in the world, setting up in business as a magician. He made the following payments in his first week in business

On 1st July he paid £1500 for a glittering costume with a top hat and cloak. On 2nd July he paid £1000 for a set of rare and valuable books, “The Ancient Secrets of Magic” and other magician’s equipment.

On 3rd July, he received and was invoiced for four packs of magicians’ playing cards from Alf Cooks Limited for £50 each. Houdini expected to use these items for many years. He paid cash from his own savings for the costume, the books and magician’s equipment, but he agreed that he would pay for the playing cards on 14 July from the business bank account.

His first appearance as a magician was on 7 July at Annual International Day of Magic and Conjuring Show, for which he was paid a fee of £650 by cheque, with which he opened a business account on the same day. He incurred £15 travel expenses, which he paid from his own savings.

The TASK:
1(a)From the information provided above, prepare a summary of Houdini’s income and expenses for the week ended 7th July, showing the profit earned. Please ignore any depreciation on Harry Houdini’s assets.
1(b)Draw up a list, as at 7 July, of Houdini’s fixed assets, current assets and current liabilities and then calculate what Harry Houdini’s net assets are at that date.

TMA02, question 1, part 2: (10 marks)

Houdini the magician entered his second week of business with £650 in his business bank account and has agreed to appear as entertainer at three parties during the week. Realising that he had no rabbits to pull out of his top hat, he contacted a rabbit breeder, who, on 8th July, supplied and received a cheque for six white rabbits at cost of £30 each, on the condition that Houdini treated them kindly and fed them well. The rabbits were paid for on the same day by cheque.

On 8th July, Houdini also bought a large quantity of rabbit food from Rabbit Food plc. for which he paid £150 from the business account on 9th July. On the same day, Rabbit Food plc supplied several sacks of scrap wood at no cost, for building rabbit hutches (small houses for rabbits).

10th July, Houdini travelled to William Green’s party, which was a success and he was paid £100 cash. Travel expenses were £15 cash. On 11th July, he paid a cheque for £15 for cleaning his costume, which became soiled after handling the rabbits. On 12th July, he paid £8 for a train ticket in cash to travel to Violet Cartwright’s party. This event was also successful and he received a fee of £100 by cheque. On 13th July, he performed at Jasper Peter’s party, which was only partially successful, since a child felt sorry for the rabbits and let them all escape.
The rabbits were never seen again.

Houdini gave an invoice to Mr Peter for £250 in total, to cover the cost of the escaped rabbits and a reduced performance fee for himself. As the performance was not a complete success, he agreed to waive some of his performance fee on this occasion, which Mr Peter paid in cash on the same day. As the party was local, he incurred no travel expenses on this occasion.

On 14th July, Houdini returned the unused rabbit feed to Rabbit Food plc, which gave him back £50 for the unused feed. He also paid Alf Cooke’s account for the playing cards bought in the first week.

The TASK:
2 (a)From the information provided above in Question 2, construct a simple cash account for Houdini the magician for the week from 8 to 14 July

2(b)Explain the purpose of a cash account (also called cash flow statement in B120, Book 3) and what an analysis of the cash account can reveal about a business.

TMA 02, question 1, part 3: (20 marks)

The busiest time for any children’s entertainer in Europe, in North America, Australia, New Zealand, among other countries, is at Christmas time, Christmas Day being 25th December. Christmas time can start from early December.

As the year progressed he was in great demand. He felt that he needed as assistant so he decided to employ Safire, who had previously been chief inventor at Wizard Limited, a company that makes equipment for magic tricks and novelties. As a leaving gift, the company had given Safire a ‘disappearing lady’ apparatus. Being unsentimental about such things, she sold it to Harry Houdini on 1 December 2007 for £2500. Safire started to appear (and disappear) as part of Harry Houdini’s magic act.

After two months in her new job, Safire persuaded Houdini to diversify by buying items made by her former employer and selling them at the children’s parties to the parents and guests.

During

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