Essays on Advanced Accounting M SP5 2009 Assignment 2: Annual Report Assignment

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Notes to Financial Statements9 - 10Annual Report of the Board of DirectorsGeneral overviewThe financial position as presented in the financial statements evidently shows the economic stability of the company. While the business venture is not extraordinarily impressive, the picture of sustainability and positive survival is apparent. Results of operationsThe company has earned a net income from its regular operations in the amount $ 50,000 which is equivalent to a yield of about $ . 09 per share for the total of 550,000 ordinary shares. However, overall net income after tax is $ 63,000 or $ . 1145 per share.

Stockholders’ equityIn view of the realization of net income after tax of $ 63,000, retained earnings could have been increased by this figure. However, part of the retained earnings in the sum of $ 30,000 was transferred to the general reserve fund for purposes which may be identified and outlined upon the sound discretion and decision of the board of directors, the top decision-maker in the management echelon. A larger chunk of retained earnings was distributed for dividends. This amounted to $ 80,000.AcquisitionsSeveral fixed assets were acquired from Hugo Ltd.

consisting of land, machinery and vehicles. Total historical value per books is $ 180,000 while total fair market value is $ 160,000 at valuation pegged as at 29 June 2009. Final terms on consideration and payment will be made after the year-end cut-off date. Building constructionIt is knowledge to stockholders that the company does not have its own building the one presently in use being a rented edifice. For the matter, the board of directors resolved on 20 July 2009 to cause the construction of a building in one of company’s lots.

The project will have a total budgeted cost of $ 500,000. Funding for this plan will be sourced via the issuance of additional shares scheduled in November 2009. Since the project will be commenced after 30 June 2009, the cost and other factors will necessarily be presented after than date. DividendsA declaration for $ 80,000 dividends was made and decided upon on 30 June 2009. The undertaking did not need further authorization. The said dividends declaration was charged against retained earnings. Item in litigationThis is to make known the fact that a customer filed a civil litigation allegedly for defect in the product which caused some physical injury in an incident in February 2009.

It has been opined by the lawyers of the company that the probability of an adverse decision can be safely placed at 25%. Declarations of the Board of DirectorsThe board of directors had made the following official declarations during the covered fiscal year. 1. Distribution of dividends with no further requirement for authorization in the sum of $80,000. This is likewise mentioned in the foregoing report of the board of2.

Construction in the company’s own land of a building for an estimated cost of $500,000 to be financed by the issuance of additional shares set in November 2009.3. Transfer of the amount of $30,000 from retained earnings to the general reserve for specific purposes that may hereafter approved by the board of directors in its sound discretion. Report of the Independent AuditorThe Stockholders and the Members of the Board of Directors

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