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ACC501 Business Finance Assignment No. 01 Solution and Discussion Fall 2013 Due Date: November 26, 2013

BUSINESS FINANCE (ACC501) ASSIGNMENT NO. 01
(NON-GRADED)
DUE DATE: 26TH NOVEMBER, 2013
MARKS: 20
LEARNING OBJECTIVES:
After attempting this assignment whole-heartedly, the students will be able to:
 Prepare cash flow statement and Common size statements.
QUESTION:
ABC Company is engaged in manufacturing of electronic appliances. Following are the income statement and comparative balance sheet of ABC Company for the years 2010 and 2011. You are required to prepare Cash Flow Statement for ABC Company for the year ended 31st December, 2011 and Common Size Income Statement.
Cash Flow Statement Marks:15
Common Size Income Statement Marks:05

Notes:
1. Sales of old Machinery for Rs. 100,000 and purchased new for Rs. 150,000.
2. Purchased new land and building costing Rs. 150,000 for storing inventories.
3. Issued long-term 10% interest bearing bond of Rs. 126,000 and previously issued bonds also have the interest rate of 10%.
IMPORTANT:
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lets discus it 

simple example of cash flow statement

During the year Shiner Corporation paid dividends of $18,000. Shiner also issued $150,000 in bonds and purchased land, a building, and some equipment for cash.

Comparative Balance Sheet

Shiner Corporation

Assets Dec 31, 1996 Dec 31, 1995
Cash $37,000 $49,000
Accounts Receivable $26,000 $36,000
Prepaid Expenses $6,000 $0
Land $70,000 $0
Building $200,000 $0
Accumulated Depreciation $11,000 $189,000 $0
Equipment $68,000 $0
Accumulated Depreciation $10,000 $58,000 $0
Total Assets $386,000 $85,000
Liabilities and Stockholder Equity
Accounts Payable $40,000 $5,000
Bonds Payable $150,000 $0
Common Stock $60,000 $0
Retained Earnings $136,000 $20,000
Total Liabilities and Stockholder Equity

$386,000

$85,000

Income Statement
Shiner Corporation
Revenue $492,000
Operating Expenses $269,000
Depreciation $21,000

$290,000

Income before Income Taxes $202,000
Income Tax Expense $68,000
Net Income $134,000

 

Step 1: Change in Cash: Dec 31, 96 Balance minus Dec 31, 95 balance ($37,000-$49,000)=($12,000)
Step 2: Net Cash flow from Operating Activities
Direct Method:
Cash collected from Revenues $502,000
Cash payments for Expenses $240,000
Income before Income Taxes $262,000
Cash payment of taxes $68,000
Net cash flow from Operating Activities

$194,000

Comments: The $502,000 was derived by adding the change in Accts Receivable to Revenues for the period. The cash payments for expenses was derived by adding the increase in prepaid assets and subtracting the change in Accts Payable.
Indirect Method:
Net Income $134,000
Adjustments to reconcile net income to net cash
Accts Receivable decrease $10,000
Prepaid Expense ($6,000)
Accts Payable Increase $35,000
Depreciation $21,000
$60,000
Net cash flow from Operating Activities $194,000
Step 3:
Investing Activities:
Land Purchase $70,000
Building Purchase $200,000
Equipment Purchase $68,000
Financing Activities :
Dividend payment to shareholders $18,000
Issuance of Bonds Payable $150,000

Statement of Cash Flows
Cash Flow from Operating Activities
Net Income $134,000
Adjustments to reconcile net income to net cash
Accts Receivable decrease $10,000
Prepaid Expense increase ($6,000)
Accts Payable Increase $35,000
Depreciation $21,000
$60,000
Net cash provided from Operating Activities $194,000
Investing Activities
Land Purchase ($70,000)
Building Purchase ($200,000)
Equipment Purchase ($68,000)

($338,000)

Financing Activities
Dividend payment to shareholders ($18,000)
Issuance of Bonds Payable $150,000 $132,000
Net Decrease in Cash ($12,000)
Cash Jan 1, 1996 $49,000
Cash Dec 31, 1996 $37,000

can u explain how to calculate financing activities.

kindly explain the adjustment which is given in the question

thanks

simple example of Common Size Income Statements
                                                                                                                                Industry
                                                                                         1997           1998           1998
Net Sales                                                                        100.0%        100.0%        100.0%
Costs excluding depreciation                                             87.6             87.2              87.6
Depreciation                                                                       3.2               3.3               2.8
  Total Operating Costs                                                     90.8              90.5             90.4
Earnings before interest & taxes                                          9.2                9.5               9.6
  Less interest                                                                     2.1                2.9               1.3
Earnings before taxes                                                          7.1                6.5               8.3
  Taxes (40%)                                                                    2.8                 2.6              3.3
Net income before preferred dividends                               4.3                 3.9              5.0
  Preferred dividends                                                          0.1                 0.1               0.0
Net income available to common stockholders                     4.1               3.8                5.0

============================================================
 

Common Size Balance Sheets
                                                                                       Industry
                                                        1997         1998        1998
Assets
Cash & Marketable securities            4.8%        0.5%        3.2%
Accounts receivable                          18.8           18.8         17.8
Inventories                                         24.7          30.8         19.8
  Total Current Assets                        48.2          50.0         40.8
Net plant & equipment                       51.8          50.0         59.2
Total Assets                                     100.0        100.0       100.0

Liabilities & Equity
Accounts payable                                 1.8%        3.0%        1.8%
Notes payable                                      3.6            5.5           4.4
Accruals                                               7.7            7.0           3.6
  Total current liabilities                        13.1          15.5           9.8
Long term bonds                                 34.5          37.7         30.2
  Total Debt                                        47.6          53.2         40.0
Preferred equity                                    2.4            2.0           0.0
Common equity                                  50.0          44.8          60.0
Total Liab. & Equity                          100.0        100.0       100.0
 

that's only the idea... now do ur own...

Gud Luck...
remember me in ur pray.....

common size statements main percentage kaisay calculate ki jati ha?????

Kindly paste the full assignment plzzzzzzzzzzzzzzzzzzzzzzzzz,,,,,,,,

DEAR COMMON SIZE AGR INCOM STATMENT PERCENTAGE LENA HAI TU SALES KI PERCENTAGE LI JATI HAI WITH ALL COMPONENT OF INCOME STATMENT..OK 

Sibgha ur working is very helpful, but mjhe kuch smjh nai ayiii, plz again se explain kr do ??

ok and cash flow from invensting activities main "aquisition of fixed assets" and " sales of fixed assets" kaisy maalom ki jati ha?

common size statment me agr income statment ko common size krna ha to netsales ko 100%le lete han dor example

net sales agr 2311RS han to hm ise 100% lelen ge r baqi us income statment me maujood tamam entries ko us per devide krdete han or 100 se multiply kr dete han 

agr

maslan

net sales =2311

Cost of goods sold=1344

Ebit=691

Depreciation=276

dividend=121

returned earnings= 242

common size statment

Net sales=2311

Cost of goods sold=1344=1344/2311*=58.2%

Ebit=691/2311*100=29.9%

Depreciation=276/2311*10011.9%

dividend=121/2311*100=5.25%

returned earnings= 242/2311*100=10.5%

this is the simple and easy way to make comon size income statment 

tc alls 

very soon i will upload solve assiment but u should be do with ur own efforts 



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