ALARM company ltd has the following list of assets and liabilities as at Dec 31 2013: GHS Goodwill Patent right Land and buildings Plant and Machinery Motor vehicle Inventories Receivables Cash and bank balance 12 bank loan Finance lease obligation Other creditors The following additional information is relevant: 1. 2. 3. 4. 5. 6. 11,200 10,900 157,500 76,000 50,700 89,600 73,000 45,400 (50,000) (24,700) (55,600) Included in the plant and machinery is a plant with a carrying amount of GHs28,000, which is used to produce a special local food, mainly for export; therefore, its cash flows are in USD. Its expected useful life is 3 years, and it is expected to generate USD 7,800 p.a averagely, has a scrab vale of USD 1,900 and expected removal cost of US 3,100 One of the motor vehicles was involved in an accident on Dec 31, 2013, and has an expected scrap value of GHs 2,100. Its carrying amount included in the above carrying amount of motor vehicles is GHs 12,300. The market value of Ayim Itd as at the close of Dec 31 2012 was GHs 330,100 on the Ghana Stock Exchange. It was believed the Value in Use of the entire entity as at that date was not materially different from its market value. The cost of borrowing in USD to Ayim Itd was 10%. The spot rate of USD to GHS on Dec 31 2013 is 2.1. Corporate tax rate is 25%. Required: Show how the above will be treated in the FS of Ayim ltd as at Dec 31 2012 in accordance with IAS 36.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
M 24
Step by step
Solved in 2 steps
