Submitted By: Nimra Babar

Reg No. 190-FMS/BSAF/S18

ASSIGNMENT NO 1
ANALYSIS OF FINANCIAL STATEMENT

SUBMITTED TO:
MA’AM SHUMAILA BIBI
DATE: 31March, 2021
 CASE 3. 1
BALANCE SHEET REVIEW

A) The statement is entitled “Consolidated Balance Sheet”. What does it mean

to have a consolidated balance sheet?

Consolidated Balance Sheet is a statement showing the financial status of more than
one company in the same group taken together. A consolidated balance sheet presents
the assets and liabilities of a parent company and all its subsidiaries on a single
document, with no distinctions on which items belong to which companies. For
example, in the asset section, accounts receivable will list the total amount of
receivables held by all three companies.

B) Does it appear subsidiaries are wholly owned?

A wholly owned subsidiary is one in which the parent company owns all of the shares in
another company. The subsidiaries do not appear to be wholly owned, according to that
statement. Since the consolidated balance sheet is prepared by the parent company
that owns shares in another company, the investor owns approximately 50.1 percent of
the subsidiary shares or voting rights, which is less than 100 percent for wholly owned
subsidiaries.

C) 1.What is the gross receivables at Dec 31st 1995?

Gross receivables => $36204 + $600 = $36804

c) 2. What is the estimated amount that will be collected on receivables

outstanding at Dec 31st, 1995?

The Outstanding receivables are $36204

c) 3. What is the allowance for doubtful accounts at Dec 31st, 1995?

The Allowance for doubtful accounts is $600

D) 1. What are the net property, plant and equipment at Dec 31st, 1995? What
does this figure represent?

The Net property, plant and equipment is $60,823

Property Plant and Equipment is the value of all buildings, land, furniture, and other
physical capital that a business has purchased to run its business. The term "Net" means
that it is "Net" of accumulated depreciation expenses.
This figure represents the company's fixed assets, which include land and
improvements, facilities, machinery, and equipment, less the assets' estimated useful
life.

d) 2. What are gross property, plant and equipment at Dec 31st 1995?

The amount of gross property, plant and equipment is $233,776.

Net PP&E + depreciation= Gross PP&E

d) 3. What depreciation method is used for financial reporting purposes?

Straight line method of depreciation is used for financial reporting purposes

d) 4. What depreciation method is used for tax purposes?

Accelerated depreciation method is used for tax purposes.

d) 5. Does it appear that property, plant and equipment is relatively old? Explain.

Yes, the property plant and equipment seem very old as it can be estimated from the
depreciation value which is very high. Also the expenditures for maintenance and
repairs are given for years 1993, 1994 and 1995.

E) What is the total amount of current assets at December 31, 1995?

The total amount of current asset is $98,111.
F) What is the total shareholder’s equity at dec 31, 1995?
The total shareholder equity is $142,592

G) Describe the account “accrued warranty expenses”.

Warranty expense is an expense related to the repair, replacement, or compensation to
a user for any product defects. And accrued expenses means accruals for estimated
expenses related to warranties are made at the time products are sold or services are
rendered and are recorded as a component of costs of revenue.

In other words, If the company can reasonably estimate the amount of warranty claims
likely to arise under the policy, it should accrue an expense that reflects the cost of
these anticipated claims.

H) 1. Describe treasury stock.

Treasury stock, also known as treasury shares or reacquired stock refers to previously
outstanding stock that is bought back from stockholders by the issuing company. The
result is that the total number of outstanding shares on the open market decreases.

h) 2. How many shares of treasury stock are held on dec 31, 1995?

There are 16,108 share of treasury stock.

I) How many common stock shares have been issued at dec 31, 1995?
6,792,381 shares of common stock have been issued.

i) 2. How many common stock shares are outstanding at dec 31, 1995?

Outstanding coon stock share = issued common stock shares – treasury stock

= 6792381- 16108

= 6776273
J) In general describe deferred taxes.
Deferred tax refers to either a positive (asset) or negative (liability) entry on a
company’s balance sheet regarding tax owed or overpaid due to temporary differences.

K) 1. What is the total amount of assets at dec 31, 1995?

$186,296 is the total amount of asset.

k) 2. What is the total amount of liabilities at dec 31, 1995?

Total Liability: $23,169 + $8500 + $12,035 = $43,704.

k) 3. What is the total amount of shareholder’s equity at dec 31, 1995?

The total amount of shareholder’s equity is $142,592

k) 4. Demonstrate that the balance sheet balances at dec 31, 1995?

Assets = liabilities + Capital

$186,296=$43704+$142,592

$186,296
 CASE 3.2
INSIGHT ON LIABILITIES AND SHAREHOLDERS EQUITY

A) The statement is entitled “Consolidated Balance Sheet”. What does it mean

to have a consolidated balance sheet?

Consolidated financial statements are financial statements of an entity with multiple

divisions or subsidiaries. Companies can often use the word consolidated loosely in
financial statement reporting to refer to the aggregated reporting of their entire
business collectively. However, the Financial Accounting Standards Board defines
consolidated financial statement reporting as reporting of an entity structured with a
parent company and subsidiaries.

B) Does it appear subsidiaries are wholly owned? Explain

No, it doesn’t appear that subsidiaries are wholly owned because the consolidated
balance sheet is prepared by the parent company that have shares in other companies
(subsidiaries) prepared a consolidated balance sheet. This method can only be used
when the investor possesses effective control of the investee or subsidiary, which often,
but not always, assumes the investor owns at least 50.1% of the subsidiary shares or
voting rights and less than 100%.

C) Describe Payables.
Payables is short for account payables—bills to be paid as part of the normal course of
business. This is a standard accounting term, one of the most common liabilities, which
normally appears in the balance sheet listing of liabilities. Businesses receive goods or
services from a supplier, receive an invoice, and until that invoice is paid the amount are
recorded as part of “accounts payable.”
D) Describe deferred income tax credits.
As discussed above, deferred tax refers to either a positive (asset) or negative (liability)
entry on a company’s balance sheet regarding tax owed or overpaid due to temporary
differences. Deferred income tax is a result of the difference in income recognition
between tax laws (i.e., the IRS) and accounting methods (i.e., GAAP). Deferred income
tax shows up as a liability on the balance sheet. Deferred income tax can be classified as
either a current or long-term liability.

E) Describe long term borrowings.

In finance, long-term debt generally refers to a company's loans and other liabilities that
will not become due within one year of the balance sheet date. (The amount that will be
due within one year is reported on the balance sheet as a current liability.)

F) Describe retained earnings.

Retained Earnings (RE) are the accumulated portion of a business’s profits that are not
distributed as dividends to shareholders but instead are reserved for reinvestment back
into the business. Normally, these funds are used for working capital and fixed asset
purchases (capital expenditures) or allotted for paying off debt obligations.

G) Describe accumulated translation adjustments.

The cumulative translation adjustment (CTA) for a currency translation adjustment is an
entry in the “Accumulated Other Comprehensive Income” section of the translated
balance sheet, reflecting gains and losses caused by exchange rate fluctuations over the
years.

H) Define treasury stock.

Treasury stock, also known as treasury shares or reacquired stock refers to previously
outstanding stock that is bought back from stockholders by the issuing company. The
result is that the total number of outstanding shares on the open market decreases.
I) 1. How many shares of common stock have been issued at Dec 31, 1995?
The Issued common shares is $389574619

i) 2. How many shares of treasury stock are held at Dec 31,1995?

The Treasury stock shares is $43685196

i) 3. How many shares of common stock are outstanding at Dec 31,1995?

Common stock outstanding = 389574619 – 43685196

= $345889423
J) 1. What are the total liabilities at Dec 31, 1995?
The Total liabilities is $9356

j) 2.What is the total shareowners equity at Dec 31, 1995?

The Total shareholder’s equity is $5121

j) 3.What is the total asset amount at Dec 31, 1995?

Total Assets => liabilities + owners’ equity = $14,477