SEMESTER SPRING 2012
Financial Statement Analysis (FIN621)
Assignment No. 02
Due Date: June 20, 2012 Marks: 25
Assignment:
Mr. Accountant has recently joined Class Manufacturing Limited (CML) as a senior accountant in the
pay scale of Alfa-1.These days the company is in close of its books of accounts as the yearly audit is
on. Mr. Accountant has been given an assignment to chart out the balance sheet of Small
Manufacturing Limited (SML) – a subsidiary of CML. For this, he has provided with necessary data
regarding the company’s assets and liabilities along with some other information. But, upon receiving
the balance sheet from him, it came to know that the balance sheet was not correct as lot many errors
were there. The balance sheet and the errors found there in are here as under:
Particulars
Debit
(Rs.)
Credit
(Rs.)
8% Preference Shares (Rs. 100 each) 1,000,000
Ordinary Shares (Rs. 10 each) 25,500,000
Land at cost 460,000
Factory building (Cost Rs. 11,500,000) 4,600,000
Plant & Machinery (Cost Rs. 55,000,000) 16,500,000
Office Furniture & Fittings (Cost Rs. 875,000) 262,500
Capital work-in-Progress 18,000,000
Raw Materials - July 1, 2010 1,800,000
Finished goods - July 1, 2010 1,250,000
Work in process - July 1, 2010 625,000
Surplus on Revaluation of Fixed Assets 6,000,000
Term Finance Redemption Reserve 3,500,000
Sundry Debtors 2,837,500
Long Term Loans 5,000,000
Deferred Costs 1,250,000
Shares in Subsidiary Company (15,000 Ordinary shares a cost) 750,000
Unquoted investments at cost 200,000
General reserve 5,060,000
Quoted investments at cost - market value at 30/06/2011, Rs. 625,000 100,000
Profit and loss account on July 1, 2010 1,875,025
Sundry creditors 631,775
Cash in Hand 125,000
Other Assets 1,786,800
Preference shares dividends for half year to December 31,2010 20,000
12% Term Finance Certificate 2,000,000
Total 50,566,800 50,566,800
1) The company has paid 2 interim dividends each at Rs. 0.025 per share and a final dividend at Rs.
0.050 per share for the year on its ordinary shares. But, the effect of this and dividend on preferred
shares for the 2nd half year is not shown in the yearly profits.
2) During the year, it was decided to shift valuing work-in-process from LIFO to FIFO basis. This
has resulted in an increase of Rs. 35,520 in the value of closing inventory. But same has not been
accounted for in the accounts at all.
3) Owing to lower yearly profits, it was decided to transfer an amount equal to 1/10th of the TFC’s
from general reserves, but the accountant transferred this amount from revaluation surplus.
4) An amount of Rs. 35,460 on account of bank overdraft has been included in creditors.
5) Due to time limitation, it was decided to write off 1/3 of the deferred costs in the yearly profits, but
same has not been done.
6) During the year, a plant (declared as obsolete) costing Rs. 500,000 was sold for Rs. 52,000. The
plant was purchased 6 years earlier and has been depreciated on straight line basis with 10 years
working life and no residual value. But this transaction has not been taken into account at all.
7) Debtors included an amount of Rs. 60,000 payable to one of the debtors Mr. Receivable and
similarly creditors included an amount of Rs. 25,300 receivable from one of the creditors Mr.
Payable. But both these items have not been adjusted in the respective accounts.
8) Long term loans payable half early have the remaining life of 8 years.
9) Other assets included an amount of Rs. 15,000 given to Mr. Director as advance against his salary.
He has been died during the year and his claims against the company excluding this sum are only
Rs. 8,000. This is to be adjusted in the books of accounts.
10) Provision for tax at the rate of 35% on the current year profit of Rs. 552,000 has not been provided
at all. The profit has been transferred to balance sheet at full.
Required:
1) Correct the balance sheet figures while taking into account the above errors; (15 Marks)
2) A new Balance Sheet (revised) as per IAS-1; & (10 Marks)
3) Book Value per Share (05 Marks)
Instructions:
Please read the following instructions carefully before preparing the assignment solution:
· You should provide the complete working of the assignment
· Solution must be in proper format
· No marks will be awarded for just final answers
Note:
Only in the case of Assignment, 24 hours extra / grace period after the due date is
usually available to overcome uploading difficulties which may be faced by the students
on last date. This extra time should only be used to meet the emergencies and above
mentioned due dates should always be treated as final to avoid any inconvenience.
Important Instructions:
Please read the following instructions carefully before attempting the assignment solution.
Deadline:
· Make sure that you upload the solution file before the due date. No assignment
will be accepted through e-mail once the solution has been uploaded by the
instructor.
Formatting guidelines:
· Use the font style “Times New Roman”/ “Arial” and font size “12”.
· It is advised to compose your document in MS-Word 2003.
· Use black and blue font colors only.
Solution guidelines:
· Every student will work individually and has to write in the form of an analytical
assignment.
· Give the answer according to question.
· For acquiring the relevant knowledge don’t rely only on handouts but watch the
video lectures and use other reference books also.
Rules for Marking
Please note that your assignment will not be graded or graded as Zero (0) if:
· It has been submitted after due date
· The file you uploaded does not open or is corrupt
· It is in any format other than .doc (MS. Word)
· It is cheated or copied from other students, internet, books, journals etc…
Financial Statement Analysis (FIN621)
Assignment No. 02
Due Date: June 20, 2012 Marks: 25
Assignment:
Mr. Accountant has recently joined Class Manufacturing Limited (CML) as a senior accountant in the
pay scale of Alfa-1.These days the company is in close of its books of accounts as the yearly audit is
on. Mr. Accountant has been given an assignment to chart out the balance sheet of Small
Manufacturing Limited (SML) – a subsidiary of CML. For this, he has provided with necessary data
regarding the company’s assets and liabilities along with some other information. But, upon receiving
the balance sheet from him, it came to know that the balance sheet was not correct as lot many errors
were there. The balance sheet and the errors found there in are here as under:
Particulars
Debit
(Rs.)
Credit
(Rs.)
8% Preference Shares (Rs. 100 each) 1,000,000
Ordinary Shares (Rs. 10 each) 25,500,000
Land at cost 460,000
Factory building (Cost Rs. 11,500,000) 4,600,000
Plant & Machinery (Cost Rs. 55,000,000) 16,500,000
Office Furniture & Fittings (Cost Rs. 875,000) 262,500
Capital work-in-Progress 18,000,000
Raw Materials - July 1, 2010 1,800,000
Finished goods - July 1, 2010 1,250,000
Work in process - July 1, 2010 625,000
Surplus on Revaluation of Fixed Assets 6,000,000
Term Finance Redemption Reserve 3,500,000
Sundry Debtors 2,837,500
Long Term Loans 5,000,000
Deferred Costs 1,250,000
Shares in Subsidiary Company (15,000 Ordinary shares a cost) 750,000
Unquoted investments at cost 200,000
General reserve 5,060,000
Quoted investments at cost - market value at 30/06/2011, Rs. 625,000 100,000
Profit and loss account on July 1, 2010 1,875,025
Sundry creditors 631,775
Cash in Hand 125,000
Other Assets 1,786,800
Preference shares dividends for half year to December 31,2010 20,000
12% Term Finance Certificate 2,000,000
Total 50,566,800 50,566,800
1) The company has paid 2 interim dividends each at Rs. 0.025 per share and a final dividend at Rs.
0.050 per share for the year on its ordinary shares. But, the effect of this and dividend on preferred
shares for the 2nd half year is not shown in the yearly profits.
2) During the year, it was decided to shift valuing work-in-process from LIFO to FIFO basis. This
has resulted in an increase of Rs. 35,520 in the value of closing inventory. But same has not been
accounted for in the accounts at all.
3) Owing to lower yearly profits, it was decided to transfer an amount equal to 1/10th of the TFC’s
from general reserves, but the accountant transferred this amount from revaluation surplus.
4) An amount of Rs. 35,460 on account of bank overdraft has been included in creditors.
5) Due to time limitation, it was decided to write off 1/3 of the deferred costs in the yearly profits, but
same has not been done.
6) During the year, a plant (declared as obsolete) costing Rs. 500,000 was sold for Rs. 52,000. The
plant was purchased 6 years earlier and has been depreciated on straight line basis with 10 years
working life and no residual value. But this transaction has not been taken into account at all.
7) Debtors included an amount of Rs. 60,000 payable to one of the debtors Mr. Receivable and
similarly creditors included an amount of Rs. 25,300 receivable from one of the creditors Mr.
Payable. But both these items have not been adjusted in the respective accounts.
8) Long term loans payable half early have the remaining life of 8 years.
9) Other assets included an amount of Rs. 15,000 given to Mr. Director as advance against his salary.
He has been died during the year and his claims against the company excluding this sum are only
Rs. 8,000. This is to be adjusted in the books of accounts.
10) Provision for tax at the rate of 35% on the current year profit of Rs. 552,000 has not been provided
at all. The profit has been transferred to balance sheet at full.
Required:
1) Correct the balance sheet figures while taking into account the above errors; (15 Marks)
2) A new Balance Sheet (revised) as per IAS-1; & (10 Marks)
3) Book Value per Share (05 Marks)
Instructions:
Please read the following instructions carefully before preparing the assignment solution:
· You should provide the complete working of the assignment
· Solution must be in proper format
· No marks will be awarded for just final answers
Note:
Only in the case of Assignment, 24 hours extra / grace period after the due date is
usually available to overcome uploading difficulties which may be faced by the students
on last date. This extra time should only be used to meet the emergencies and above
mentioned due dates should always be treated as final to avoid any inconvenience.
Important Instructions:
Please read the following instructions carefully before attempting the assignment solution.
Deadline:
· Make sure that you upload the solution file before the due date. No assignment
will be accepted through e-mail once the solution has been uploaded by the
instructor.
Formatting guidelines:
· Use the font style “Times New Roman”/ “Arial” and font size “12”.
· It is advised to compose your document in MS-Word 2003.
· Use black and blue font colors only.
Solution guidelines:
· Every student will work individually and has to write in the form of an analytical
assignment.
· Give the answer according to question.
· For acquiring the relevant knowledge don’t rely only on handouts but watch the
video lectures and use other reference books also.
Rules for Marking
Please note that your assignment will not be graded or graded as Zero (0) if:
· It has been submitted after due date
· The file you uploaded does not open or is corrupt
· It is in any format other than .doc (MS. Word)
· It is cheated or copied from other students, internet, books, journals etc…
