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FIN621 Financial Statement Analysis Assignment No 01 Fall 2019 Solution & Discussion Due Date: 27-11-2019

FIN621 Financial Statement Analysis Assignment No 01 Fall 2019 Solution & Discussion Due Date: 27-11-2019

FIN621 FINANCIAL STATEMENT ANALYSIS Assignment 1 Solution & Discussion Fall 2019


SEMESTER FALL 2019

FINANCIAL STATEMENT ANALYSIS (FIN621)
ASSIGNMENT NO. 01

DUE DATE: 27TH NOV, 2019

MARKS: 10

 

Learning Outcomes

After going through this assignment, the students should be able to:

ü Critically evaluate the elements of balance sheet.

 

Assignment

Below given is the Balance Sheet of Haider Mills Ltd. The company is involved in the business of Textile and Weaving and is operating as a public limited company since year 2010. 

 

Requirement

Critically evaluate the Balance Sheet of Haider Mills Ltd and specify your criticism on the items of Balance Sheetwhich are incorrectly recorded and explain their proper treatment.

 

For example; 

 Land and building are disclosed net value Rs. 270,000 which is incorrect. The Accumulated depreciation of land and building should be disclosed too.

 

Haider Textile Limited

Balance Sheet

For the year ended June 30, 2019

 

Assets

 

Current Assets:

Cash 

70,000

Marketable Securities

27,000

Accounts Receivables, net

50,000

Inventory

35,000

Treasury Stock

17,000

Total Current Assets

199,000

Plant Assets:

Land and Building, net

270,000

Investments:

Short Term Notes

24,000

Other Assets:

Supplies

7000

Total Assets

500,000

Liabilities & Stockholders' Equity

 

Current Liabilities:

Bonds Payable

137,000

Accounts Payable

48,000

Wages Payable

15,000

Total Liabilities

195,000

Stockholders' Equity

Common Stock (Rs, 20 par, 20,000 shares authorized, 10,000 shares outstanding

200,000

Retained Earnings

70,000

Redeemable Preferred Stock

30,000

Total Stockholders' Equity

300,000

Total Liabilities and Stockholders' Equity

 500,000

 

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Replies to This Discussion

Dear all

kindly arrange the solution of fin 621

yes i have

Attachments:

but chek if some error

please check it

Attachments:

FIN621 Assignment 1 Solution Fall 2019
Solution:
Land is not depreciated as it is assumed to have an unlimited useful life. So, it should not be clubbed with building and should b shown as a separate asset under property, plant and equipment category. Further land and building is disclosed at net value Rs. 270000 which is incorrect. The accumulated depreciation of building should be disclosed too.

Accounts receivable are shown at a net value of Rs. 50000/- Which is incorrect. Provision for doubtful debts should also be disclosed in the balance sheet.
Treasury stock is shown as a part of current assets in the above balance sheet which is incorrect. It is should be presented in the category of stockholder’s Equity as a deduction.
Short term notes can be classified in current assets below cash. Further supplies should also be classified as current assets below inventory.
Total of current liabilities is shown at Rs.195000 which is incorrect due to casting error. Correct total is Rs. / 20000.
Further, order of presentation of current liabilities incorrect. Accounts payable should be on top, after that wages payable should be presented. Further all these three heads can be clubbed less than one head of accounting naming ‘’Trade and other payables’’.
Bounds payable should be presented as long term liabilities because normally these types of certificates are to be matured after 1 year.
Redeemable preferred stock should be reported on tope in stockholder’s Equity and then common stock should be presented after it. After that, treasury stock should be reported as a deduction from stockholder’s Equity. Retained earnings should be reported at the end in the stockholder’s Equity.
The balance presented above is poorly formatted without any subtotal borders for total current assets and current liabilities.

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