Acct 101 Assignment 4 Last Due Date For Submission 13 Decemb

Acct 101assignment 4last Due Date For Submission 13 December 2017

Acct 101assignment 4last Due Date For Submission 13 December 2017

Instructions: · The answer must be in English . · Students must include your details (Name, Student ID, CRN, Date of submission) · Please READ the instructions carefully and FOLLOW them. Answer the ALL questions. · Do NOT write the questions in the answer papers JUST write the question number. · Do NOT put images, you must TYPE answers in the MS document . · Font should be Times New Roman with 14 points . · It is an INDIVIDUAL task, NOT a group task. · You should submit the assignment via the Blackboard . · Students who submit assignments after deadline, will get ZERO . · If you engaged in plagiarism , you will get ZERO marks in the assignment or course.

Paper For Above instruction

This assignment encompasses several fundamental aspects of accounting principles and practices. It includes analyzing and preparing a cash flow statement using the direct method based on provided cash account data, explaining the concept and types of equity share capital, and understanding treasury stock with journal entries related to its transactions. These topics are vital for developing a comprehensive understanding of corporate finance and accounting management, particularly in terms of financial statement preparation, equity financing, and treasury stock management.

Q1. Prepare a Cash Flow Statement for Khaled Co for the year ended 31st March 2017 using the direct method based on the provided cash account summary.

The cash flow statement is a vital financial report that shows the cash inflows and outflows during a specific period. For Khaled Co, conducting this using the direct method involves listing actual cash receipts and payments to determine the net cash from operating, investing, and financing activities.

Based on the cash account summary provided:

  • Starting balance as of April 1.
  • Cash received from customers: 2800.
  • Payments to suppliers: 2000.
  • Overhead expenses: 200.
  • Wages & salaries: 100.
  • Taxation paid: 250.
  • Dividends paid: 50.
  • Purchase of fixed assets: 200.
  • Sale of fixed assets: 100.
  • Repayment of long-term loans: 300.
  • Ending balance: c/d.

Calculation of cash flows is as follows:

Operating Activities

  • Cash received from customers: 2800
  • Less: Payments to suppliers: (2000)
  • Less: Overhead expenses: (200)
  • Less: Wages & salaries: (100)
  • Less: Taxation: (250)

Net cash from operating activities: 2800 - 2000 - 200 - 100 - 250 = 250

Investing Activities

  • Purchase of fixed assets: (200)
  • Proceeds from sale of fixed assets: 100

Net cash used in investing activities: (200 - 100) = (100)

Financing Activities

  • Repayment of long-term loans: (300)
  • Dividends paid: (50)

Net cash used in financing activities: (300 + 50) = (350)

Convert each component into a complete cash flow statement, adding detailed calculations and ensuring proper heading structure, leading to an understanding of the company's cash management during the period.

Q2. Explain the concept of Equity Share Capital and its Types?

Equity share capital represents the amount of capital invested by shareholders in a company in the form of equity shares. It signifies ownership in the company and confers voting rights and participation in profits through dividends. As a form of equity financing, it forms the core capital contributing to the company's working capital and growth initiatives.

There are primarily two types of equity share capital:

  1. Authorized Share Capital: This is the maximum amount of share capital that a company is authorized to issue legally as per its memorandum of association. It signifies the upper limit set by the company's governing documents, beyond which the company cannot issue shares without amending its constitution.
  2. Issued and Paid-up Share Capital: This is the portion of authorized share capital that has actually been issued to shareholders and for which the company has received payment. It reflects the actual capital invested in the company by shareholders and is a crucial figure in the company's balance sheet.

Understanding these types helps investors and management gauge the company's financing structure and capital adequacy, as well as enabling strategic decisions on issuing new shares or repurchasing existing ones.

Q3. Explain treasury stock and journalize transactions related to stock repurchase and sale

Treasury stock, also known as repurchase or reacquired stock, refers to shares previously issued by the company that have been bought back and held in the company's treasury. These shares are not considered outstanding shares and do not confer voting rights or dividends until reissued.

Repurchasing treasury stock can be strategic, aiming to increase share prices, improve financial ratios, or utilize excess cash. The accounting treatment involves recording the repurchase at cost and reissuing at either the same or different price, which affects the company's equity accounts.

Journal Entries for Given Transactions:

  1. On May 8, Whitt, Inc. purchased 2,000 of its own shares at $8 per share.
  • Journal Entry:
  • Debit: Treasury Stock (2,000 shares × $8) = $16,000
  • Credit: Cash = $16,000
  • On June 30, Whitt sold 100 shares of treasury stock at $4 per share.
    • Journal Entry:
    • Debit: Cash (100 × $4) = $400
    • Credit: Treasury Stock (at cost, $8 per share): (100 × $8) = $800
    • Credit: Paid-in Capital from Treasury Stock (difference): $400
  • On July 19, Whitt sold 500 treasury shares for $8 per share.
    • Journal Entry:
    • Debit: Cash (500 × $8) = $4,000
    • Credit: Treasury Stock (500 × $8) = $4,000
  • On August 27, Whitt sold 400 treasury shares at $1.50 per share.
    • Journal Entry:
    • Debit: Cash (400 × $1.50) = $600
    • Credit: Treasury Stock (400 × $8) = $3,200
    • Debit/Credit: Paid-in Capital from Treasury Stock (if applicable) to balance the entries.

    These entries reflect how treasury stock transactions affect the company's equity accounts and cash flows. The differences between the purchase and sale prices determine the recognition of gains or losses, which are recorded in paid-in capital accounts if applicable.

    References

    • Anthony, R., & Govindarajan, V. (2014). Management Control Systems (12th ed.). McGraw-Hill Education.
    • Brigham, E. F., & Houston, J. F. (2015). Fundamentals of Financial Management (13th ed.). Cengage Learning.
    • Higgins, R. C. (2012). Analysis for Financial Management (10th ed.). McGraw-Hill Education.
    • Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2014). Financial Statement Analysis (11th ed.). McGraw-Hill Education.
    • Gibson, C. H. (2013). Financial Reporting and Analysis (13th ed.). Cengage Learning.
    • Penman, S. H. (2012). Financial Statement Analysis and Security Valuation. McGraw-Hill.
    • White, G. I., Sondhi, A. C., & Fried, D. (2003). The Analysis and Use of Financial Statements. Wiley.
    • Fraser, L. M., & Ormiston, A. (2016). Understanding Financial Statements. Pearson.
    • Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting. Wiley.
    • Ross, S. A., Westerfield, R. W., & Jaffe, J. (2013). Corporate Finance. McGraw-Hill Education.

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