Semester “Spring 2010”
“Financial Statement Analysis (FIN621)”
Assignment No. 01 Marks: 20
The Company ABC Ltd is operating in tax free zone and exempted from tax for five years (2005-2010). The company was established with the mission to provide highest quality food products at affordable prices. In fiscal year 2007 the company deteriorated due to the worse economic conditions, the balance sheet of year 2007 shown Cash balance of Rs. 25,000 and the marketable securities Rs. 20,000. However during the year the credit sales increased rapidly, the accounts receivable and inventories had closing balances of Rs. 160,000 and 120,000 respectively. Plant and equipment was Rs. 300,000 (written down value).The accounts Payable amounted Rs. 75,000 shown in the balance sheet was Rs. 15,000 less than the previous year. Most of the expenses were paid in cash therefore the company was left with Rs. 30,000 outstanding expenses at the end of 2007. Bonds payable (due after 10 years) was Rs. 250,000 at the year end 2007. Additional shares were not issued during the year therefore the share capital was Rs. 80,000 and the retained earnings of Rs. 190,000 at the year end.
In the year 2008, Net income was reported Rs. 125,000 after charging depreciation of Rs. 30,000 on plant & equipment, dividend was declared and paid in cash Rs. 70,000. Cash book shown the balance of Rs. 22,500 at year end 2008. In August 2008, Marketable securities costing Rs. 7,500 were sold for Rs. 17,500. During the year the credit sales increased therefore the accounts receivable and inventories had closing balances of Rs. 165,000 and 117,500 respectively. The company planned to expand its operations and purchased additional plant for Rs. 50,000 on January 01, 2008 paying Rs. 15,000 in cash and issued mortgage notes payable (payable after 5 years) for the remaining amount. Accounts payable at the year end was Rs. 80,000 and accrued expenses Rs. 22,500. Further more Bonds payable had been decreased to Rs. 175,000 at the year end 2008.Required:
1) Prepare the Balance Sheet as on 31st December 2008, assume no additional share capital was issued not any reserve has been created from the retained earnings during the year. (14 marks)
2) Prepare the cash flows statement for the year ended 2008 by using indirect method to calculate the net cash provided by operating activities only, from the given information. (6 marks)
Show complete working as it carries marks too.