act 501 - assignment

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Financial Accounting ACT 501 Assignment

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Set out below is your assignment covering the entire syllabus from week 1 to week 12.

Please read the following instructions carefully:

1. This assignment will represent 15% of this subject in your MBA course2. You are required to complete this as a Group assignment3. You are free to choose members of your Group, but the Group size must be no more than 8 and no

less than 5 unless pre-approved by me

4. The assignments must be submitted with a coversheet in which the following must be included:a. Group Nameb. Names of each member of the Groupc. Student I/D of each member of the Groupd. Signatures of each member of the Group

5. You must communicate your Group name and members of who is in your Groups to me by 17 March2012. Anyone not a Group by 17 March 2012 and not communicated to me by 17 March 2012 will not

be accepted, resulting in nil marks being awarded

6. The deadline for submission of the assignment is the 07 April 2012. Papers submitted after thisdeadline will not be accepted, resulting in nil marks being awarded

7. The assignments must be completed using Microsoft word, hand written submissions will not beaccepted. Tables prepared in Microsoft Excel may be inserted (cut & paste) into the Microsoft word

submissions


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Q1 Network is a company that sells laptops and provides maintenance services for IT equipment.

The business was established on 01 January 2008 as a limited company. Set out below is the

Trial balance as on 31 December 2010 and a list of adjustments to be made. You are required to

prepare the following:

a) Calculate all the required adjustments showing your calculations (and T accounts ifrequired, although this is not compulsory)

b) The journals for all the adjustments requiredc) The adjusted trial balance as on 31 December 2010d) Statement of Financial Position as at 31 December 2010e) Statement of Comprehensive Income for the year ended 31 December 2010f) Statement of changes in Equity as at 31 December 2010

Read all the adjustments carefully before you start as some will impact other adjustments.

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Trial Balance for Networld Limited on 31 December 2010 DebitBDT

CreditBDT

Fixed AssetsCars 15,000,000

Accumulated Depreciation - Cars 5,000,000

Fixed Assets - Office Fixture & fittings 6,500,000

Accumulated Depreciation - Office Fixture & Fittings 731,250

Fixed Assets - Building 46,000,000

Inventory 5,500,000

Trade Debtors 16,636,000

Allowance for Doubtful Debt Provision 368,140

Cash 41,766,500Trade Creditors 19,725,000

Loan 45,000,000

Ordinary Shares (Owners Equity) 20,000,000

Retained Earnings 11,765,610

SalesLaptops 139,500,000

Sales Returns - Laptops 1,550,000

Sales Discounts - Laptops 6,897,500

Sales - Maintenance fees 7,000,000

PurchasesLaptops 85,150,000

Purchase Returns - Laptops 910,000Salaries expense 15,000,000

Rent expense 6,600,000

Insurance expense 900,000

Advertising expense 1,500,000

Utility expense 1,000,000

Totals 250,000,000 250,000,000


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1. 5 cars were purchased on 01 Jan 2008 at a cost of BDT3,000,000 each. The cars were estimated to have aresidual value of BDT500,000 each and a useful economic life of 5 years. The cars are depreciated on a

straight line basis and depreciation is charged on a yearly basis. The depreciation charge for 2010 has not

yet been accounted for.

2.

On 15 December 2010, one car was sold for BDT1,600,000 for which cash was received. This has not yetbeen accounted for.

3. On 25 April 2009 the company purchased fixtures and fittings for BDT6,500,000. The company uses thereducing balance method of depreciation for fixtures and fittings at the rate of 15% per annum. The

company charges depreciation on a monthly basis and the cost of depreciation for 2010 has not yet been

posted.

4. The company opens a new office on 15/08/10. Costs associated with the office include: Construction materials 30,000,000 Architects fees 1,000,000 Administrative staff costs 2,000,000 Legal fees 1,000,000

Management staff costs 5,000,000 Construction labour costs 4,000,000 Site preparation costs 3,000,000

The accountant has included all of these costs as part of the initial cost of this asset, as recorded on the trial

balance on 31 December 2010. Correct any errors made.

The useful life of the office is estimated to be 15 years and it is estimate that the residual value of the

branch is 15% of its initial cost. The company uses the straight line method of depreciation. The company

charges a full years depreciation in the year of acquisition and the cost of depreciation for 2010 has not yet

been posted in the accounts

5. Included within the Trade Debtor balance were two debtors who were considered to be irrecoverable,Customer A owed BDT250,000 and Customer G owed BDT90,000, both of these balances were more than

90 days overdue. These trade debtor balances need to be written off.

6. The trade debtor balance and its aging analysis is provided below (this is prior to adjustments required in 5above). The estimation basis for doubtful debts is also provided below. Update the Allowance for doubtful

debt account and any other accounts affected by this adjustment.

Debtors Ledger as at 31/12/10 - before write off

Number of days past due

Total Not Yet

Due

1 - 30

days

31 - 60

days

61 - 90

days

Over 90

days

Total 16,636,000 5,490,000 5,086,000 2,140,000 2,580,000 1,340,000

Estimation 0.0% 1.0% 2.5% 5.0% 25.0%

7. On 01 July 2010 the company rented new premises for 5 years. The total amount paid was BDT6,600,000which represented 25% advance for 5 years plus the remaining rent due for 2010. The accountant debited

the rental expense account for the full amount paid. Make the required corrections.

8. The insurance for fixed assets was renewed for 1 year on 01 October 2010 for which BDT900,000 waspaid. The accountant debited the rental expense account for the full amount paid. Make the required

corrections.


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9. The company paid BDT1,500,000 for a billboard 1 year advertising contract which started on 01 April2010. The accountant debited the advertising expense account for the full amount paid. Make the required

corrections.

10. The utility company issues its bills two months after the end of the month to which the bill relates. Thecompany had paid BDT1,000,000 in 2010 covering the bills relating to 2010 received to date

11. The company took out a loan of BDT45,000,000 for 10 years on 01 May 2010. Interest is payable annuallyat 13.5%

12. Included within maintenance sales fee is an amount of BDT3,600,000 relating to a 2 year maintenancecontract starting from 01 August 2010

13. The stock shown in the trial balance is the opening stock vlue relating to 5,000 units. The company uses theperiodic inventory system and uses the FIFO stock valuation system. No purchase discounts are received

from suppliers. The unit selling price of laptops in 2010 was BDT1,550.

Purchases & Purchase Returns

Date Details Units Unit Cost

15-Feb-10 Purchase 20,000 1,000

15-Mar-10 Purchase returns (200) 1,000

15-May-10 Purchase 16,000 1,000

15-Jun-10 Purchase 18,000 950

15-Jul-10 Purchase returns (300) 950

15-Aug-10 Purchase 14,000 850

15-Sep-10 Purchase 19,000 850

15-Oct-10 Purchase returns (500) 850

31-Dec-10 Purchase 5,000 800

14. BDT10,000,000 of dividends was paid in cash on 31 December 2010 but this transaction has not yet beenrecorded

15. Retained profit shown in the trial balance is the opening balance for 2010.


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Q2 Set out below is the Statement of Financial Position for Glaxo SK (BD) as at 31 DEC 2009 &

31 DEC 2010.

31-Dec-10 31-Dec-09

ASSETS:

Non-Current Assets: 390,107,000 367,218,000

Property, Plant and Equipment-Carrying Value 368,102,000 348,815,000

Deferred tax asset 22,005,000 18,403,000

Current Assets: 1,824,178,000 1,334,284,000

Inventories 695,231,000 610,525,000

Trade Debtors 410,286,000 369,661,000

Other Debtors 52,618,000 39,803,000

Cash and Cash Equivalents 666,043,000 314,295,000

TOTAL ASSETS 2,214,285,000 1,701,502,000

SHAREHOLDERS' EQUITY AND LIABILITIES:

Shareholders' Equity: 1,381,151,000 1,163,718,000

Share Capital 120,465,000 120,465,000

Retained Earnings 1,260,686,000 1,043,253,000

Non-Current Liabilities: 129,738,000 108,627,000

Retirement benefit obligations 80,020,000 66,919,000

Loans 3,639,000 4,939,000

Deferred Tax Liability 46,079,000 36,769,000

Current Liabilities: 703,396,000 429,157,000

Current tax liabilities 69,219,000 66,521,000

Trade Creditors 504,501,000 256,500,000

Other Creditors 128,378,000 104,963,000

Loans 1,298,000 1,173,000

TOTAL SHAREHOLDERS' EQUITY AND

LIABILITIES 2,214,285,000 1,701,502,000

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Set out below is an extract from the Statement of Comprehensive Income for Glaxo SK (BD)

for the year 2010 9numbers in red are negative numbers, i.e. expenses.

2010

PROFIT FROM OPERATIONS 531,456,000

Other Income 4,141,000

Finance Income 17,983,000

Finance Expense 820,000

NET PROFIT BEFORE TAX 552,760,000

Provision for Income Tax 136,875,000

Provision for Deferred Income Tax 5,708,000

NET PROFIT AFTER TAX 410,177,000

Prepare the Statement of Cash Flow for Glaxo SK (BD) for the year ending 31 DEC 2010

showing your calculations where relevant.

Additional information required is as follows:

1. The fixed asset notes to the accounts provided the following data (presented in BDT 000s):Fixed Asset Note

Cost Opening

Balance

Additions Disposals Closing

Balance

2010 796,776 75,626 - 21,450 850,952

Accumulated Depreciation Opening

Balance

Charged Disposals Closing

Balance

2010 447,962 53,691 - 18,803 482,850

2. Items included within Other Income are as follows (presented in BDT 000s):Other Income Note

Gain on disposal included in the Profit for the year 2,257

Other income 1,884

4,141

3. There were no accruals or prepayments relating to finance income or finance expense as at31 DEC 2009 and 31 DEC 2010.

act 501 - assignment

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