28 Jun JAGUAR IN ENGINE PLANT PLAN FOR CHINA
ection A: Read the stimulus material and answer the questions below (4 marks available)
Jaguar in engine plant plan for China
Henry Foy in London and Tom Mitchell in Beijing
The Financial Times Thursday June 12 2014
Jaguar Land Rover plans to build and engine factory in China as it steps up a strategy to internationalise its production footprint. Yesterday the company confirmed
that the engine plant its first outside the UK would be built on the same site as its car factory in China, which is due to start production this year.
Car makers printing cash in China
The Financial Times Thursday June 12 2014
Hefty profits from joint ventures are proving controversial as the market confounds expectations writes Tom Mitchell
In the 1950s a former GM president reportedly observed that whats good for General Motors is good for the US. Charles Erwin Wilson was in fact misquoted, but 60
years later it would appear that what is really good for GM is the China market.
In the first quarter of this year, GMs China joint ventures reported net income of $595 m compared with just $100 m for the companys global operations.
While GMs quarterly results have were affected by a $3.1 bn charge for its recall crisis and another $400 m loss related to its Venezuelan operations, China has for
years been an extremely lucrative market for the US company.
China is also a cash cow for Volkswagen which last year just beat its US rival for the No. 1 spot in the worlds largest car market. While China accounted for 31
percent of VWs vehicle sales last year, its joint ventures in the country reported operating profits of 9.6 bn Euro compared with 11.7 bn Euro for VW world wide.
Ford commits to Cologne Fiesta plant in union deal
Financial Times June 11 2014
Henry Foy
Ford will continue to build small cars in Germany after striking a new agreement with unions in the country that it says will save it $80 m a year.
The US car maker will reduce working hours and decrease production at its Cologne factory as part of the deal, which ends speculation that Ford would shift output out
of Germany and into a lower cost market.
Answer the questions below:
Jaguar in engine plant plan for China
1. How would the decision to build an engine factory and a car factory affect the statement of financial position and the income statement of Jaguar Land Rover?
(0.8 marks)
2. What different methods of finance could be used by Jaguar Land Rover for the construction of an engine factory and a car factory in China? (0.4 marks)
3. What are the advantages and disadvantages of the different forms of finance? (0.8 marks)
Car makers printing cash in China
1. If GM and Volkswagen ceased to operate in China how, what would be the effect on their income statements? (0.4 marks)
2. How has the recall crisis affected GMs income statement?
(0.4 marks)
Ford commits to Cologne Fiesta plant in union deal
1. How will the action taken by Ford affect its income statement? (0.4 marks)
2. What would be the affect of Ford relocating its output to a lower cost market? (0.4 marks)
3. How would shareholders view the actions taken by Ford?
(0.4 marks)
Total marks for Section A: 4 marks
Section B (16 marks available)
Required
1. Record the transactions below using T accounts. (4 marks)
2. Balance off the accounts showing the balance on each account (4 marks)
3. Produce an income statement (4 marks) and a statement of financial position (4 marks)
Marking
1. There will be a deduction of 0.2 marks for each numerical or logical error made
2. Students will not be penalised an error has an affect on future calculations, for example a numerical error in the T accounts affects the figure which is
recorded in the income statement or statement of financial position
Transactions
Sept 1 B Smith starts a business by investing £100 000 of his own money
Sept 3 B Smith borrows £500 000 from the bank
Sept 5 B Smith purchases land and buildings for £300 000 cash
Sept 7 B Smith purchases machinery for £200 000 cash
Sept 9 B Smith purchases inventory worth £20 000 on credit from R James
Sept 11 B Smith purchases inventory worth £30 000 for cash
Sept 12 B Smith sells inventory for £40 000 cash
Sept 14 B Smith sells inventory for £10 000 on credit to J White
Sept 15 B Smith pays wages of £2 000
Sept 17 B Smith pays insurance of £1 000
Note
At the end of the month there is a stock take the value of stock is £10 000
Total marks for section B: 16 marks
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