...The asset cost RM1000 on 1.1.x1 and the depreciation rate is 50 % of the book value or reduced balance. Full year depreciation is adopted. Difference btw straight line method(on cost basis) and Reducing Balance Method (on net book VALUE) Using Straight Line Method, the % of depeciation is based on the COST Yr x 1 the depreciation is = 50 x RM1000 = RM500 Effect is the NET BOOK VALUE = COST OF ASSET – DEPRECIATION of ASSET Yr 1 = THE BOOK VALUE = 1000 – 500 = RM500 Yr x 2 the depreciation is = 50 x RM1000 = RM500 YR 2 = THE BOOK VALUE = 1000 -500 -500 =NIL THE ECONOMIC LIFE = 100% /50% = 2 YRS Let THE DEPRECIATION RATE = 20% WHAT IS THE ECONOMIC LIFE OF THE ASSETS = 100% / 20% = 5 YEARS ANNUAL DEPRN CUM DEPN BOOK VALUE Y1 DEPN = 1000 X 20% = 200 200 800 (1000-200) Y2 DEPN =1000 X 20% = 200 400 600(1000-400) Y3 DEPN = 1000 X 20%= 200 600 400(1000-600) Y4 DEPN =1000 X 20%= 200 800 200(1000-800) Y5 DEPN =1000X20% = 200 1000 0 (1000-1000) The asset cost RM1000 on 1.1.x1 and the depreciation rate is 50 % of the book value or reduced balance. Full year depreciation is adopted METHOD = REDUCING BALANCE METHOD OR BOOK VALUE METHOD YEARLY DEPN CUMULATIVE BOOK DEPRN VALUE Y1 DEPN (1000 X 50%) 500 500 1000-500= 500 Y2 DEPN (500 X 50%) 250 750 1000-750= 250 Y3 DEPN (250 X 50%) 125 875 1000-875 = 125 Y4 DEPN (125 X 50%) 63 938 1000-938 = 62 Y5 DEPN (62 X 50%) 31 969 1000-969 = 31 IMPACT OF DEPRECIATION...
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...estimates its bad debt expense to be 1½% of net sales. Determine its bad debt expense for 2014. 2. An analysis and aging of Stuart Corp. accounts receivable at December 31, 2014, disclosed the following. Amounts estimated to be uncollectible ………. $ 180,000 Accounts receivable ………………………….. 1,750,000 Allowance for doubtful accounts (per books) …. 125,000 What is the net realizable value of Stuart’s receivables at December 31, 2014? 3. Shore Co. provides for doubtful accounts based on 3% of credit sales. The following data are available for 2014. Credit sales during 2014 …………………….. $2,400,000 Allowance for doubtful accounts 1/1/14 ………… 17,000 Collection of accounts written off in prior years ….. 8,000 Customer accounts written off as uncollectible during 2014 … 30,000 What is the balance in Allowance for Doubtful Accounts at December 31, 2014? 4. At the end of its first year of operations, December 31, 2014, Darden Inc. reported the following information. Accounts receivable, net of allowance for doubtful accounts … $950,000 Customer accounts written off as uncollectible during 2014 ……. 24,000 Bad debt expense for 2014 ………………………………………. 84,000 What should be the balance in accounts receivable at December 31, 2014, before subtracting the allowance for doubtful accounts? 5. The following accounts were taken from Bullock Inc.’s trial balance at December 31, 2014. .:. If doubtful accounts are 3% of accounts receivable, determine the bad debt expense to be reported...
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...Group 1 Apollo 7: Control evaluation and testing in the revenue cycle – evaluate the results of the control testing of the revenue cycle using the materials in the case. Look for patterns in errors that may indicate specific weaknesses over assertions. Refer to chapter materials for basic audit procedures and discussion of how to evaluate the results of your tests based on the preliminary risk assessment. Try to identify trends or specific areas of concern based on the results of control tests that were performed. Some specific trends/areas of concern: * Although Sales went down by 4% Sales Returns increased by 202.39%. * As mentioned in a previous report, the loan to the CEO’s secretary is incorrectly accounted for under Other Receivables. * Apollo sent Mall-Warts an unsolicited order in December even though Mall-Warts had informed Apollo in November that they were going into bankruptcy. * The accounting and control manual has not been kept current. * Customers who are shopping at Apollo’s location are allowed to pick their own orders. * 33% of the errors found were overbilling errors. While the amount is not material, over 70% of the errors occurred a month before the end of a quarter. Also, none of the billing errors were under billing. * Several transactions were missing the bill of lading. * Two invoices out of 51 were found with no information other than the invoice number and overcharge amounts. * 55.82% of sales were made with...
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...7.1 Receivable turnover ratio=Net credit sales/ [(Average accounts receivable)/2] =34,529.9/ [(1726.4+1194.8)/2] =34,529.9/1460.6 =23.64 =23.64*1460.6 =$34,528.58 This means that the company collected account credit sales 23.64 times in a year. Therefore the amount collected from customers in the year 2015 will be 7.2 Ratio analysis: a.) Trade receivable turnover is an effectiveness proportion or activity proportion that measures how frequently a business can transform its trade receivable into money during a period. As it were, the trade receivable turnover proportion measures how often a business can gather its normal trade receivable during the year. It is calculated using the formula below; Receivable turnover ratio=Net credit sales/ [(Average accounts receivable)/2] For example, if the trade receivable is equal to 2, it implies that the firm collected its trade receivables twice a year. It is recommended that the number of times of collection to be above two because, the firm is said to be efficient. An examination of the receivables to the business movement of a business is known as the trade receivable collection period. This examination is utilized to assess to what extent clients are taking to pay an organization. A low figure is viewed as best, since it implies that a business is locking up less of its assets in trade receivable, thus can utilize the assets for different purposes. Additionally, when receivables stay unpaid for a decreased timeframe...
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...accounts receivable that are doubtful according to accrual accounting model. As the text mentioned, “the answers to questions such as ‘for how many periods will a machine generate revenues’ or ‘how many of our credit customers will not pay” involve estimates’. “Accountants must constantly use judgment when applying the accrual accounting model”, and Contra Asset Accounts record changes in accounting estimates. If the buildings and the furniture and equipment from 5% and 10% to 4% and 8%, Depreciation Expense will increase, and net income will decrease. If allowance for bad debts was reduced to $1,000, Bad Debts Expense would also reduced to 1,000, and net income would increase. Accounting is an art. Because textbook shows that adjusting entries are recorded on the basis of an analysis of the circumstances at the close of each accounting period. Keiso et al. (2010) say “Using past experience, a company can estimate the percentage of its outstanding receivables that will become uncollectible, without identifying specific accounts” It asks accounts use judgment to determine adjusting entries. Accountants cannot determine exactly how well a company has done for a period. Corporate executives may be tempted to manage earnings because they want to please their company’s investors, because they own company stock themselves, or because they will receive bonuses based on their company’s reported earnings. And accountants can judge the allowance for doubtful accounts. If accountants...
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...MFRS 110 :EVENTS AFTER THE REPORTING DATE CIA 1003 INTERMEDIATE FINANCIAL ACCOUNTING AND REPORTING CAEA 1214 FINANCIAL ACCOUNTING AND REPORTING II Semester 2, 2015/2016 Learning outcome • Determine the different types of events after the reporting period in accordance with MFRS110. • Apply MFRS 110 to account for events after the reporting period either to: • Make adjustments in the financial statements • Prepare the necessary disclosures • Present the different types of events after the reporting period in the financial statements in compliance with MFRS110. Lecture outline • Introduction • Definitions • Types of Events -Adjusting Events -Non Adjusting Event • Other Issues -Date of authorization for issue -Dividends -Going concern -Disclosure Introduction • Bursa Malaysia requires large publicly traded companies to lodge their unaudited financial statements within 2 months of fiscal year-end and full financial statements within 4 months • Business continues during this “subsequent period” and events could take place that have an impact upon the firm’s financial statements for the preceding year • These events are referred to in the accounting literature as subsequent events or post-balance sheet events. Introduction • The IASB has released IAS 10, dealing specifically with the accounting for subsequent events. • IAS 10 requires that companies adjust the reported amount of assets and liabilities if...
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...Corporate Debt Restructuring in India Despite of best intentions and efforts, corporate find themselves in financial difficulty because of factors beyond their control or due to internal reasons. The trigger for difficulty might be an unstable macro-economic environment or changes in government policy or regulation or due to an incorrect strategic decision or problems within the company. If a company goes down, it takes an entire ecosystem of creditors, distributors, employees, customers, etc down with it. So at times, for the revival of corporate and for the safety of the money lent by banks and FIs, timely support through restructuring in genuine cases is called for. However, delay in agreement amongst different lending institutions often comes in the way of such endeavours. Based on the experience in countries like the UK, Thailand, Korea, Malaysia, etc. of putting in place an institutional mechanism for restructuring of corporate debt and need for a similar mechanism in India, a Corporate Debt Restructuring System was evolved and detailed guidelines were issued by Reserve bank of India on August 23, 2001 for implementation by financial institutions and banks. CDR is a non-statutory mechanism which is a voluntary system based on Debtor-Creditor Agreement (DCA) and Inter-Creditor Agreement (ICA). The accounts where recovery suits have been filed by the creditors against the company, may be eligible for consideration under the CDR system provided, there is approval by at least...
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...n 1 January, 2011 Shadow Stormz Ltd. started their company, depositing $2,10,000 in cash in the name of the company, in exchange for 21,000 shares of $10 per value stock of the corporation. Jan 10: Purchased goods on cash $1,00,000 from ABC. 21: Sold goods on cash $80,000 to Pro Asia. Feb 05: Purchased goods on credit $88,000 from ABC. 16: Sold goods on credit $49,000 to Pro Asia. 25: Paid advertisement bill of $5,000. 28: Sold goods to Sarmon’s Brothers for $1,000. Mar 07: Purchased store equipment for $30,000. 17: Paid $50,000 to ABC. 29: Received cash $30,000.for Pro Asia. Apr 01: Store equipment purchased on credit $50,000. 30: Opened a bank account for $30,000. May 06: Paid $40,000 to equipment supplier. 31: Took loan from IDLC for $ 1,70,000 on 12% interest. 31: Pro Asia returned goods worth $5,000. Jun 03: Returned goods worth $8,000 to ABC. 05: The amount of Sarmon’s Brothers had to be written off as uncollectable. 11: Paid electricity bill of $10,000. 15: Purchased land worth $70,000. Jun 31: Paid rent $6,000 and salary $6,000 for the first six months. Jul 20: Purchased 3,000 shares of Beximco. 25: Bought furniture of $7,000. 26: Sold goods worth $1,00,000 on notes receivable to XYZ. 31: Paid $12,000 for insurance policy of one year. Aug 07: Purchase goods for notes payable of $30,000 from Anderson. 09: Paid $500 for carriage...
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...ASIAN JOURNAL OF MANAGEMENT RESEARCH Online Open Access publishing platform for Management Research © Copyright 2010 All rights reserved Integrated Publishing association Review Article ISSN 2229 – 3795 Non performing assets: Issues, Causes and remedial Solution Poongavanam.S H.O.D., Department of Management studies, Ranippettai Engineering College, Thenkaddapanthangal, Walaja Taluk, Vellore District. -632513 Tamil Nadu. s.poongavanam@gmailo.com ABSTRACT The banking industry has undergone a sea change after the first phase of economic liberalization in 1991 and hence credit management. While the primary function of banks is to lend funds as loans to various sectors such as agriculture, industry, personal loans, housing loans etc., in recent times the banks have become very cautious in extending loans, this is due to mounting nonperforming assets (NPAs). Therefore, an NPA account not only reduces profitability of banks by provisioning in the profit and loss account, but their carrying cost is also increased which results in excess & avoidable management attention. Apart from this, a high level of NPA also puts strain on a banks net worth because banks are under pressure to maintain a desired level of Capital Adequacy and in the absence of comfortable profit level, banks eventually look towards their internal financial strength to fulfill the norms thereby slowly eroding the net worth. Considering all the above facts banking industry has to give more importance to...
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...Necole Willis Homework Week 4 May 31, 2013 E 6-5 (a) $30,000 X 4.96764 = $149,029.20. (b) $30,000 X 8.31256 = $249,376.80. (c) ($30,000 X 3.03735 X .50663 = $46,164.38. E 6-12 Building A—PV = $600,000. Building B— Rent X (PV of annuity due of 25 periods at 12%) = PV $69,000 X 8.78432 = PV $606,118.08 = PV Building C— Rent X (PV of ordinary annuity of 25 periods at 12%) = PV $7,000 X 7.84314 = PV $54,901.98 = PV Cash purchase price $650,000.00 PV of rental income – 54,901.98 Net present value $595,098.02 Building C is more advantageous E 7-2 1. $925,000.00 2. Checking account balance $600,000 Overdraft (17,000) Petty cash 300 Coin and currency 1,350 $584,650 3. Checking account balance $590,000 Certified check from customer 9,800 $599,800 4. Checking account balance $37,000 Money market mutual fund 48,000 $85,000 5. Checking account balance $700,000 Cash advance received from customer 900 $700,900 ...
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...Week 3 Homework E14-3 (Entries for Bond Transactions) Presented below are two independent situations. 1 A 1/1/12 Cash 300,000 Bonds payable 300,000 B 7/1/12 Interest Expense 6,750 300,000*.09*3/12 Cash 6,750 C 12/31/12 Interest Expense 6,750 Interest Payable 6,750 2 A Cash 210,000 Bond payable 200,000 Interest Expense 10,000 200,000*.012*5/12 B Interest Expense 12,000 200,000*.12*6/12 Cash 12,000 C Interest Expense 12,000 Interest payable 12,000 E14-7 (Amortization Schedule—Effective-Interest) Assume the same information Date Cash Paid Interest Expense Discount Amortized Carrying Bond 1/1/12 2,783,724 1/1/13 300,000 334,046.88 34,046.88 2,817,770.88 1/1/14 300,000 338,132.51 38,132.51 2,855,903.39 1/1/15 300,000 342,708.41 42,708.41 2,898,611.80 1/1/16 300,000 347,833.42 47,833.42 2,946,445.22 1/1/17 300,000 353,554.78 53,554.78 3,000,000.00 3,000,000*.10= 300,000 300,000*.62092=1,862,760 300,000*3.79079=1,137,237 1,862,760+1,137,237=2,999,997 E14-10 (Entries for Bond Transactions) A Cash 860,651.79 Premium Payable 60,651.79 Bonds Payable 800,000 B Date Cash Paid Interest Expense Amortized Premium Carrying Bond 1/1/12 860,651.79 1/1/13 96,000 86,065.18 9,934.82 850,716.97 1/1/14 96,000 85,071.70 10,928.30 850,716.97 1/1/15 96,000 83,978.87 12,021.13 827,767.54 1/1/16 96,000 1/1/17 96,000 C Interest Expense 86,065.18 Bonds Payable...
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...the classification, provision estimates, and treatment of unrealized interest were carried out on advances as of 31 December each year and completed within three months. The loans were usually classified by the lending bank, whenever the bank had reasons to believe that the borrower would not be able to repay the loan regardless of whether the loan was overdue or not. Loans extended by a bank were classified into the following three categories: Substandard-Advances or portions of which appear substantial degree of risk to bank by reason of unfavorable record or other unsatisfactory characteristics. If an advance or any portion of an advance or interest thereon remained overdue for one year or more but less than three years; Doubtful-Advances or portions, the ultimate realization...
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...ASSIGNMENT SAIMA SHARMIN ID 3-08-14-025 BATCH - 14 DEPARTMENT OF MANAGEMENT STUDIES FACULTY OF BUSINESS STUDY UNIVERSITY OF DHAKA ASSIGNMENT – 1 General Principles of Bank Management A Bank manages its assets and liabilities in four ways. 1. Asset Management 2. Liquidity Management 3. Capital Adequacy Management 4. Liability Management 1. Asset Management Asset management is to acquiring assets with the highest return and the lowest risk. To maximize its profits, a bank must simultaneously seek the highest returns possible on loans and securities, reduce risk, and make adequate provisions for liquidity by holding liquid assets. Asset Management involves four basic principles: 1. Finding borrowers who will pay high interest rates but who are unlikely to default. Banks seek out loan business by advertising their borrowing rates and by approaching corporations directly to solicit loans. It is up to the bank’s loan officer to decide if potential borrowers are good credit risks who will make interest and principal payments on time. 2. Purchase securities with high returns and low risk. 3. Lower risk by diversifying - Diversifying the bank’s asset holdings to minimize risk: holding many types of securities and making many types of loans offers protection when there are losses in one type of security or one type of loan. In managing their...
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...11 4, 5, 6, 7, 8, 9, 10, 11, 13, 14, 15 12, 13, 14, 15 16, 17, 18 19 1, 2, 3, 4, 5, 6, 7, 10 1, 2, 3, 4, 5, 6, 7, 10, 11 2, 4, 5, 6, 7, 10 8, 9 10 1, 3, 6 3. 1, 2, 3, 4 4. 5. 6. Retirement and refunding of debt. Imputation of interest on notes. Disclosures of long-term obligations. Troubled debt restructuring. 12, 13 14, 15, 16, 17, 18 19, 20, 21, 22, 23, 24 27, 28, 29, 30, 31, 32 11 12, 13, 14, 15 9 3, 4, 5 1, 3, 5 *7. 20, 21, 22, 23, 24, 25, 26 13, 14, 15 *This material is discussed in the Appendix to the Chapter. Copyright © 2010 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 13/e, Solutions Manual (For Instructor Use Only) 14-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives 1. 2. Describe the formal procedures associated with issuing long-term debt. Identify various types of bond issues. 1, 2 Brief Exercises Exercises Problems 3. Describe the accounting valuation for bonds at date of issuance. Apply the methods of bond discount and premium amortization. Describe the accounting for the extinguishment of debt. Explain the accounting for long-term notes payable. Explain the reporting of off-balance sheet financing arrangements. Indicate how to present and analyze long-term debt. Describe the accounting for debt restructuring. 1, 2, 3, 4, 5, 6, 7, 8 2, 3, 4, 5, 6, 7, 8, 10 11 12, 13, 14, 15 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15 3, 4, 5, 6, 7, 8, 9, 10, 12, 13, 14, 15 12, 13,...
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...COMPETITOR ANALYSIS Exxon Mobil’s leading competitors are Royal Dutch Shell, British Petroleum, Chevron and ConocoPhillips. 1. Royal Dutch Shell: (Shell) is an independent oil and gas company. Shell is engaged worldwide in the principal aspects of the oil and gas industry and also has interest in chemicals and other energy-related businesses. Similar to Exxon Mobil, Shell operates in three different segments: Upstream, Downstream and Corporate. 2. British Petroleum: (BP) is an international oil and gas company. BP operates its products in more than 80 countries, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemical products. The company operates in two segments: Exploration & Production and Refining & Marketing. 3. Chevron: Chevron Corporation manages its investments in subsidiaries and affiliates and provides administrative, financial, management and technology support to the United States and international subsidiaries the engage in petroleum operations, chemical operation, mining operations, power generation and energy services. 4. ConocoPhillips: ConocoPhillips is an international, integrated energy company. The company operates in six segments: Exploration & Production, Midstream, Refining & Marketing, Investments, Chemicals, and Emerging Businesses. Competitor 2011 Revenue Comparison In terms of revenue, ExxonMobil is the leader followed by Shell, BP, Chevron, and Conoco. Competitor 2011...
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