Accounting

Select a company listed on the Dubai Fin” rel=”nofollow”>inancial Market or Abu Dhabi Exchange satisfyin” rel=”nofollow”>ing the followin” rel=”nofollow”>ing criteria

1. Should be a manufacturin” rel=”nofollow”>ing company
2. Should be profit makin” rel=”nofollow”>ing
3. Has both long and short term borrowin” rel=”nofollow”>ings

Obtain” rel=”nofollow”>in 3 years of audited accounts from the stock exchange/company website. Answer the followin” rel=”nofollow”>ing questions usin” rel=”nofollow”>ing the details in” rel=”nofollow”>in the audited accounts.

1. Review the key accountin” rel=”nofollow”>ing policies and highlight any changes in” rel=”nofollow”>in accountin” rel=”nofollow”>ing policies, if any, and its impact on profits and treatment

2. Look at the quantum of receivables as at the end of the latest fin” rel=”nofollow”>inancial year. To improve its cash position, it offers its customers a credit policy of 2/10 Net 30. Assumin” rel=”nofollow”>ing 25% of its customers accept the credit discount, evaluate the impact on its balance sheet and in” rel=”nofollow”>income statement. Prepare appropriate journal entries.

3. Review the quantum of payables as at the end of the latest fin” rel=”nofollow”>inancial year. Assume that this was from one sin” rel=”nofollow”>ingle supplier. Assume that your company converts 50% of these payables in” rel=”nofollow”>into a 6 month zero in” rel=”nofollow”>interest bearin” rel=”nofollow”>ing note payable as on 1stJanuary 2016 and assume further that the market in” rel=”nofollow”>interest rates are 8%. Calculate the amount payable on maturity and prepare appropriate journal entries on each of the key dates as also at end of fin” rel=”nofollow”>inancial year 2016.

4. Review the dividends announced by the company for the year ended 31st December 2015. Figure out the key dates relevant to this dividend. List out the journal entries for each of these three dates.

5. Look up the amount of long terms in” rel=”nofollow”>interest bearin” rel=”nofollow”>ing liabilities as at 31st December 2015. Your company has the option of refin” rel=”nofollow”>inancin” rel=”nofollow”>ing these long-term liabilities by a bond issue of face value of AED 100 per bond on 1st January 2016 with a coupon rate of 7% p.a. paid semiannually and maturity of 5 years. Is it advisable for your company to do so? Assumin” rel=”nofollow”>ing that it does refin” rel=”nofollow”>inance and that current market rates to be 8% p.a. for bonds of similar nature, estimate the present value of your company’s bond. Prepare an amortization schedule. Prepare Journal entries on the appropriate dates in” rel=”nofollow”>in the year 2016.

6. Now assume that your company has refin” rel=”nofollow”>inanced the long-term liabilities by a convertible bond issue on 1st January 2016 with a coupon rate of 2% p.a. paid annually and maturity of 3 years. Each bond has a face value equivalent of 10 equity shares as per the current market price and will be converted in” rel=”nofollow”>into 10 shares at the end of 3 years. Estimate the fully diluted EPS of the company for the year ended 31st December 2016 assumin” rel=”nofollow”>ing a 10% in” rel=”nofollow”>increase in” rel=”nofollow”>in net profits.

7. Your company decides to repurchase 10% of its outstandin” rel=”nofollow”>ing shares at market price. By 1st July, the market price of your company has in” rel=”nofollow”>increased by 10% and the company sells 50% of the repurchased shares at this price. Prepare appropriate journal entries both on repurchase and on sale.

8. Your company has issued stock options to its employees on 1st January 2016. The total number of options are 500,000, each givin” rel=”nofollow”>ing the right to purchase one share of the company at a price which is 80% of the current market price. Assumin” rel=”nofollow”>ing that the market average market price of your company for the year 2016 is 10% of the current market price. Assume that no options were exercised durin” rel=”nofollow”>ing the year. Estimate the fully diluted EPS of the company for the year ended 31st December 2016 assumin” rel=”nofollow”>ing a 10% in” rel=”nofollow”>increase in” rel=”nofollow”>in net profits.

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