Sample Paper

Financial Accounting & Decision Making - 1 (November, 2010 batch)

Professor DV Ramana, Mid-Term Exam

Question 1 - iGate Corporation provides outsourcing solutions that offer a business outcome based pricing model through an integrated technology and operations (iTops) structure with global service delivery. (35 Marks)

Financial Items of I-Gate on 31st December 2009
Treasury Stock	14714
Equity	191318
Common Stock	561
Long Term Liabilities	1035
Short Term Loans	2116
Other CA	8875
Other LTA	12956
Retained Earnings	25193
Cash	29565
Intangible Assets	32603
Payables	33691
Receivables	34287
PPE	42682
Short Term Investment	67192
Total CA	139919
Capital Surplus	180278
Total Assets	228160

Price on 29^th December 2010 the last day trading was 20.67. On 1^st December 2010, the price was 19.32.

Hypothetical situation during the year ending 2010

ü Depreciation on PPE – 1852

ü Sold 50% of the short term investments for 34857

ü Stock dividend – 30% of the retained earning

ü Collections from receivables – 60%

ü Revenue for the period – 193099 (70% received on cash)

ü Cost of providing revenue – 117693 (50% paid annually)

ü Selling and other expenses – 35433 (60% on credit)

ü Amortization of intangible assets – 20%

ü Tax rate – 20%

Required relevant Financial statements

Question 2 – Following is the balance sheet of A-ltd: (Marks – 40)

Balance Sheet as on 31st March, 2009
Common shares (2)	100000	Plant (1)	400000
Retained Profit	450000	Accumulated Dep.	-240000
Non-redeemable preference stock	100000	Shares (X ltd)	100000
6% convertible bonds	300000	Stock (5000 units)	250000
Creditors	50000	Advance Premium	60000
Outstanding salary	30000	Cash	460000
Total	1030000	Total	1030000

Additional Information: Plant (1) is three years old. Company uses SLM.

Transactions:

ü Purchase 6000 units @ 60 on credit

ü Purchased 1000 5% bonds of M ltd of 100 at 110

ü Sold 60% stock @ 200 to Mr. John on credit. Company uses FIFO for inventory valuation.

ü Market price stock @ 52

ü Acquired know-how costing 50,000 by issuing shares at the market price of 50. Life of the know-how is 4 years.

ü Interest is paid by Mltd on 1^st October and 1^st April.

ü Company changed the date of interest payment of 6% convertible bonds to 31^st December from the current year.

ü Company bought back 10% shares at the market price of 50.

ü On 1^st January 2010, 50% of the convertible bonds were converted into shares at the market price of 50.

ü On 1^st January 2010, sold plant for 120,000.

ü On 1^st February 2010, acquired a new plant for 300,000 for cash. Depreciation = 25%.

ü Annual premium = 30,000 and salary per month is 10,000. In the current year, the company paid full salary along with the previous year’s outstanding amount.

ü Tax Rate – 20%

Required:

ü Financial Statements. Prepare the CFS as per the IAS-7.

ü Explain in brief the relevant IAS used while preparing the financial statements.

Question 3 – Pease refer to the financial statements of the 2 companies belonging to 2 different industries: Unilever and Oracle (2010). You are required to observe the balance sheet and cash flow statement and answer the following:

ü How do they finance their business?

ü How is the cash generated during the latest year?

ü Examine the composition of cash from the investment activities?