|
Date |
Particulars |
Units |
Cost P.U |
Total cost |
|
|
1st April 2016 |
Opening inventory |
180 |
$ 22.00 |
$ 3,960.00 |
|
|
30th May 2016 |
Purchase |
550 |
$ 23.00 |
$ 12,650.00 |
|
|
31st August 2016 |
Purchase |
450 |
$ 21.00 |
$ 9,450.00 |
|
|
30th November 2016 |
Purchase |
1050 |
$ 24.00 |
$ 25,200.00 |
|
|
28th February 2017 |
Purchase |
1050 |
$ 23.00 |
$ 24,150.00 |
$75,410.00 |
|
Net purchase |
3100 |
$ 71,450.00 |
|||
|
31st March 2017 |
Inventory on hand |
465 |
|||
|
Sales revenue for October |
2815 |
$ 105,070.00 |
|
180 units @ 22 |
$ 3,960.00 |
|
285 units @ 23 |
$ 6,555.00 |
|
Cost of 465 units |
$ 10,515.00 |
Cost of goods sold
|
Cost of units available for sale |
$ 75,410.00 |
|
Less: cost of ending inventory |
$ 10,515.00 |
|
COGS for (3280-465) = 2815 units |
$ 64,895.00 |
Cost of ending inventory
|
Total cost of units available for sale |
$ 75,410.00 |
|
Total units available for sale |
3280 |
|
Average cost per unit |
$ 22.99 |
|
Cost of ending inventory |
$ 10,690.75 |
Cost of goods sold
|
Cost of units available for sale |
$ 75,410.00 |
|
Less: cost of ending inventory |
$ 10,690.75 |
|
COGS for (3280-465) = 2815 units |
$ 64,719.25 |
Reports
|
FIFO $ |
Average cost |
|
|
Beginning inventory |
$ 3,960.00 |
$ 3,960.00 |
|
Net purchase |
$ 71,450.00 |
$ 71,450.00 |
|
Cost of goods available |
$ 75,410.00 |
$ 75,410.00 |
|
Ending inventory |
$ 10,515.00 |
$ 10,690.75 |
|
Cost of goods sold |
$ 64,895.00 |
$ 64,719.25 |
|
Particulars |
FIFO |
Average method |
|
Sales revenue |
$105,070.00 |
$ 105,070.00 |
|
Less: COGS |
$ 64,895.00 |
$ 64,719.25 |
|
Gross profit |
$ 40,175.00 |
$ 40,350.75 |
Question 2
Financial statements of ABC Company Ltd shall be prepared in compliance with the NZ GAAP. Further, it must be complied with the NZ equivalent to the International Financial Reporting Standards that is NZ IFRS as applicable for the for-profit companies and other financial reporting standards applicable to it. Moreover, the accounting policies shall be selected and applied in a way which assures that resulting financial information satisfies concepts of reliability and relevance which in turn assure that substance of underlying transactions or the other events have been reported (Bradbury & Mear, 2017).
The financial statement shall be prepared in compliance with NZ GAAP (New Zealand Generally Accepted Accounting Practice) and must be complied with State-Owned Enterprises Act of 1986, Financial reporting Act 2013 and requirement of Companies Act 1993. Financial statement shall also be prepared on the basis of historical cost except for few derivatives and non-financial instrument those are valued at the fair values. Unless it is specified otherwise all the dollar amounts in the financial statement and the accompanying notes shall be stated in NZ dollars. Further, all the values shall be expressed in million dollars ($m). Presentation and functional currency shall be in New Zealand dollars (Houqe, Monem & van Zijl, 2016).
Inventories are required to be measured at lower of cost and the net realisable value. Cost of the inventories shall include purchase costs, conversion costs and other costs required for bringing inventories in their present condition and location. When the inventories are sold, its carrying value shall be recorded as expense under the period when the associated revenues are recognised (Kantayya & Panduranga, 2017). Cost of the inventories for the items those are not interchangeable ordinarily and services or goods segregated and produced for particular projects must be assigned through using the specific identification of their individual costs. Further, the financial statement shall disclose (i) accounting policies adopted by the company while measuring the inventories inclusive of used cost formula (ii) carrying value of the inventories and carrying amount in classification (iii) amount of the inventories that is carried at the fair values reduced by selling costs (iv) inventory’s amount recorded as expenses during the period and (v) carrying amount of the inventories those are pledged against securities (Ordia & Bhanawat, 2017).
Flexible budget –
|
ABC Company Limited |
||||
|
Flexible budget performance report |
||||
|
For the month ended February 2017 |
||||
|
Revenue and spending variances |
||||
|
Particulars |
Budget |
Actual |
Variance(Amt) |
Variance |
|
Revenue |
$ 18,000.00 |
$18,950.00 |
$ 950.00 |
F |
|
Technician wages |
$ 6,450.00 |
$ 6,450.00 |
$ – |
None |
|
Mobile lab operating expenses |
(2950+(50*35)) $ 4,700.00 |
$ 4,530.00 |
$ 170.00 |
F |
|
Office expenses |
(2650+(50*2)) $ 2,750.00 |
$ 3,050.00 |
$ (300.00) |
U |
|
Advertising expenses |
$ 1,020.00 |
$ 995.00 |
$ 25.00 |
F |
|
Insurance |
$ 1,730.00 |
$ 1,680.00 |
$ 50.00 |
F |
|
Miscellaneous expenses |
(550+(50*3)) $ 700.00 |
$ 465.00 |
$ 235.00 |
F |
|
Total expenses |
$ 17,350.00 |
$17,170.00 |
$ 180.00 |
F |
|
Net operating income |
$ 650.00 |
$ 1,780.00 |
$ 1,130.00 |
F |
Cost of debt
kd =
kd =
kd =
kd = 83.05/969.5
kd = 0.085 or 8.6%
After tax –
ki = kd * (1-t)
ki = 8.6 * 0.72 = 6.1%
Cost of preferred stock
ks = Dp / Np
ks = 96*8% / (96 – 5)
ks = 7.68 / 91
ks = 0.084 or 8.4%
Cost of common stock
Ks = (D1 / P0) + g
Ks = 7 / 91 +0.06
Ks = 0.077 + 0.06
Ks = 0.1369 = 13.7%
Cost of new common stock
Ks = (D1 / P0) + g
Ks = 7/(91-7-5) + 6%
Ks = 8.9% + 6% = 14.9%
|
Source of capital |
Cost of capital |
Weights |
WACC |
|
Long term debt |
6.1 |
0.3 |
1.83 |
|
Preferred stock |
8.4 |
0.2 |
1.68 |
|
Common stock |
13.7 |
0.5 |
6.85 |
|
Total |
1 |
10.36 |
BPCommon equity = BPi = Afi / Wi
= 100000 / 0.5 = 200,000
Range of new financing = 0 to 100,000
|
Source of capital |
Cost of capital |
Weights |
WACC |
|
Long term debt |
6.1 |
0.3 |
1.83 |
|
Preferred stock |
8.4 |
0.2 |
1.68 |
|
Common stock |
13.7 |
0.5 |
6.85 |
|
Total |
1 |
10.36 |
|
Source of capital |
Cost of capital |
Weights |
WACC |
|
Long term debt |
6.1 |
0.3 |
1.83 |
|
Preferred stock |
8.4 |
0.2 |
1.68 |
|
Common stock |
14.9 |
0.5 |
7.45 |
|
Total |
1 |
10.96 |
|
Source of capital |
Cost of capital |
Weights |
WACC |
|
Long term debt |
6.1 |
0.3 |
1.83 |
|
Preferred stock |
8.4 |
0.2 |
1.68 |
|
Common stock |
15.2 |
0.5 |
7.6 |
|
Total |
1 |
11.11 |
|
Year 1 |
Year 2 |
Year 3 |
Year 4-12 |
|
|
Sales in units |
6100 |
12100 |
15100 |
18300 |
|
Sales price |
$ 35.00 |
$ 35.00 |
$ 35.00 |
$ 35.00 |
|
Sales revenue |
$ 213,500.00 |
$ 423,500.00 |
$ 528,500.00 |
$ 640,500.00 |
|
Less: Variable cost |
$ 91,500.00 |
$ 181,500.00 |
$ 226,500.00 |
$ 274,500.00 |
|
Contribution margin |
$ 122,000.00 |
$ 242,000.00 |
$ 302,000.00 |
$ 366,000.00 |
|
Less: Fixed expenses |
||||
|
Salaries and other |
$ 135,100.00 |
$ 135,100.00 |
$ 135,100.00 |
$ 135,100.00 |
|
Advertising cost |
$ 181,000.00 |
$ 181,000.00 |
$ 151,000.00 |
$ 121,000.00 |
|
Total fixed expenses |
$ 316,100.00 |
$ 316,100.00 |
$ 286,100.00 |
$ 256,100.00 |
|
Net cash flow(outflow) |
$ (194,100.00) |
$ (74,100.00) |
$ 15,900.00 |
$ 109,900.00 |
|
Net cash flow |
Working capital |
Salvage value |
Net cash flow |
Disc value @ 14% |
Discounted cash flow |
|
|
Year 0 |
-320000 |
0 |
0 |
0 |
1 |
-320000 |
|
Year 1 |
-168683.3333 |
-60100 |
0 |
-228783.3333 |
0.8772 |
-200688.74 |
|
Year 2 |
-48683.33333 |
0 |
0 |
-48683.33333 |
0.7695 |
-37461.825 |
|
Year 3 |
41316.66667 |
0 |
0 |
41316.66667 |
0.675 |
27888.75 |
|
Year 4 |
135316.6667 |
0 |
0 |
135316.6667 |
0.5921 |
80120.99833 |
|
Year 5 |
135316.6667 |
0 |
0 |
135316.6667 |
0.5194 |
70283.47667 |
|
Year 6 |
135316.6667 |
0 |
0 |
135316.6667 |
0.4556 |
61650.27333 |
|
Year 7 |
135316.6667 |
0 |
0 |
135316.6667 |
0.3996 |
54072.54 |
|
Year 8 |
135316.6667 |
0 |
0 |
135316.6667 |
0.3506 |
47442.02333 |
|
Year 9 |
135316.6667 |
0 |
0 |
135316.6667 |
0.3075 |
41609.875 |
|
Year 10 |
135316.6667 |
0 |
0 |
135316.6667 |
0.2697 |
36494.905 |
|
Year 11 |
135316.6667 |
0 |
0 |
135316.6667 |
0.2366 |
32015.92333 |
|
Year 12 |
135316.6667 |
60100 |
15000 |
210416.6667 |
0.2076 |
43682.5 |
|
NPV |
$ (62,889.30) |
The project will be not recommended as the net present value of the project is in negative that is $ (62,889).
|
1st Quarter |
2nd Quarter |
3rd Quarter |
4th Quarter |
Year |
|
|
Budgeted unit sales |
8050 |
7050 |
6050 |
7050 |
28200 |
|
Add: Desired ending inventory |
1410 |
1210 |
1410 |
1700 |
1700 |
|
Total requirement |
9460 |
8260 |
7460 |
8750 |
29900 |
|
Less: beginning inventory |
1600 |
1410 |
1210 |
1410 |
1600 |
|
Required production |
7860 |
6850 |
6250 |
7340 |
28300 |
|
1st Quarter |
2nd Quarter |
3rd Quarter |
4th Quarter |
Year |
|
|
Required production |
8050 |
7050 |
6050 |
7050 |
28200 |
|
Raw material per unit |
2 |
2 |
2 |
2 |
2 |
|
Production needs |
16100 |
14100 |
12100 |
14100 |
56400 |
|
Closing inventory |
2820 |
2420 |
2820 |
3140 |
3140 |
|
Total requirement |
18920 |
16520 |
14920 |
17240 |
59540 |
|
Less: opening inventory |
3220 |
2820 |
2420 |
2820 |
3220 |
|
Raw material required to be purchased |
15700 |
13700 |
12500 |
14420 |
56320 |
|
Cost per unit of raw material |
$ 4.00 |
$ 4.00 |
$ 4.00 |
$ 4.00 |
$ 4.00 |
|
Cost of raw material |
$ 62,800.00 |
$ 54,800.00 |
$ 50,000.00 |
$ 57,680.00 |
$ 225,280.00 |
|
1st Quarter |
2nd Quarter |
3rd Quarter |
4th Quarter |
Year |
|
|
Beginning payable |
$ 14,884.00 |
$ 14,884.00 |
|||
|
1st quarter purchase |
(62800*75%) $ 47,100.00 |
(62800*25%) $ 15,700.00 |
$ 62,800.00 |
||
|
2nd quarter purchase |
(54800*75%) $ 41,100.00 |
(54800*25%) $ 13,700.00 |
$ 54,800.00 |
||
|
3rd quarter purchase |
(50000*75%) $ 37,500.00 |
(50000*25%) $ 12,500.00 |
$ 50,000.00 |
||
|
4th quarter purchase |
(57680*75%) $ 43,260.00 |
$ 43,260.00 |
|||
|
Total cash disbursement |
$ 61,984.00 |
$ 56,800.00 |
$ 51,200.00 |
$ 55,760.00 |
$ 225,744.00 |
Reference
Bradbury, M. E., & Mear, K. M. (2017). Interpreting the Impact of IFRS Adoption. Australian Accounting Review, 27(2), 214-219.
Houqe, M. N., Monem, R. M., & van Zijl, T. (2016). The economic consequences of IFRS adoption: evidence from New Zealand. Journal of International Accounting, Auditing and Taxation, 27, 40-48.
Kantayya, R., & Panduranga, V. (2017). A Comparative Study of Balance Sheets Prepared under Indian GAAP and IFRS with Special Reference to Select IT Companies. Europe, 44, 29.
Ordia, S., & Bhanawat, S. S. (2017). The Impact of Adoption of IFRS on Shareholders’ Wealth: A Study of Select Indian Companies. IUP Journal of Accounting Research & Audit Practices, 16(2), 7.
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