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y BUS5IAF – INTRODUCTION TO ACCOUNTING AND FINANCE
PART 2: PREPARING THE FINANCIAL STATEMENTS
Thank you for submitting your advice regarding sources of finance.  Your client has carefully considered your advice in setting up the new business.  As you will see below, the client may have acted on all, some or none of your advice.  That is the nature of being a consultant.  Nevertheless, the client is happy with the advice you offered and seeks further assistance from you.
As the client looked further into the feasibility of the new business, it soon became clear that there was much more demand than previously realised, and immediate plans were made to increase the size of the operation.  This meant raising significant amounts of capital, and it was felt that this would be difficult as a private company.  It was therefore decided to set up a public company.
New Business Name: ____________________
The new business commenced operations on 31 December 2017.  It is now just over one year later – the middle of January 2019.  Your client has asked you for assistance in preparing financial statements.
Your task: Prepare the following financial statements, based on the information below.
1.   Balance Sheet as at 31 December 2017.
2.   Profit and Loss Statement for the year ending 31 December 2018.
3.   Balance Sheet as at 31 December 2018.
4.   Statement of Cash Flows for the year ending 31 December 2018.
Financial Information: The company was initially set up by issuing ________ shares at an issue price of $__ each.
A factory was purchased at a cost of $______.
The new factory was largely financed by taking out a $_________ mortgage loan.
In addition to the mortgage loan, the company took out a $____________ interest-only unsecured bank loan.
In addition to the factory, the company purchased the following:
Plant and Equipment to the value of $__________.
Furniture, Fixtures and Fittings to the value of $_________.
Inventory to the value of $_________.
All of the above transactions occurred late in December 2017.
Any cash remaining after these purchases was put into a bank account.
On 1 March 2018, the company took out a bank overdraft.  The outstanding balance on 31 December 2018 was $______. (This is to be recorded separately from the cash balance rather than combined.)
On 1 July 2018, motor vehicles to the value of $_______ were purchased.
On 31 December 2018, the company issued corporate bonds to the value of $__________, and used the proceeds to purchase an additional factory costing $___________.
On 31 December 2018, the company issued _______ new ordinary shares at a price of $__ each and ________ new preference shares at a price of $__ each.  Some of the amount raised was used to buy additional plant and equipment for the new factory at a cost of $____________.
During the course of the year ending 31 December 2018, the following transactions occurred:
Products to the value of $_________ were sold and delivered.  These sales were made on the basis of one month’s credit.  Of the $_________ in sales occurring in 2018, products to the value of $______ were delivered in December 2018 and will not be paid for until January 2019.
Raw materials to the value of $_________ were ordered and taken delivery of.  These purchases were made on the basis of one month’s credit.  Of the $__________ in raw materials purchased in  2018, raw materials to the value of $_____________ were ordered and taken delivery of in December 2018 and will not be paid for until January 2019.
Payment of Wages ($________).
Payment of Rent for 2018 ($_________).
Payment of Motor Vehicle Running Expenses ($_________).
Payment of Insurance for 2018 ($_________).
Payment of Interest ($________).
Payment for Printing & Stationery ($________).
Payment for Heating and Lighting for 2018 ($_________).
Payment for  Telephone, Postage and Internet Charges ($_________).
In addiition, an additional $_________ was paid in December for January’s insurance.
In addition to the above interest payment, the principal owing on the mortgage loan was reduced by $_________.
Additional Information: The value of inventory on 31 December 2018 was $___________.
Depreciation on motor vehicles, plant and equipment and furniture, fixtures and fittings is calculated on a straight-line basis at the rate of 10% per year.  Land and Buildings is not depreciated.
The company faces a tax rate of ______.  The company’s Dividend Payout Ratio is ____.
Instructions:  Complete the boxes in the “Part 2 (A) to (D)” tabs, save this file and upload it as your submission.  You do not need to complete every cell in those tabs.  Complete as many cells as you need to construct the various financial statements.  Enter whole numbers, in thousands of dollars (i.e. round off numbers to the nearest whole number of thousands of dollars).

 

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