Analysis of the Operation and Financial Condition of the Enterprise

Analysis of the Operation and Financial Condition of the EnterpriseExercise 2.The enterprise prepared its income statement and balance sheet as of 31 December, 2006,however, there were three adjustment postings missing. In the incorrect income statementnet profit has been reflected in the amount of 40,00 CU. In the accounting balance sheetthe amount of total assets was 120,000 CU, liabilities – 50,000 CU, while the share capitalwas 70,000 CU.The following information on the three adjustment postings is available:1. No provisions for depreciation were posted in the amount of 9,000 CU.2. Salaries for the two final days in December of 6,000 were not paid and recorded inthe accounts. The next disbursement of salaries is planned for January.3. 30. On 30 th of December rent was paid for two months ahead of 10,000 CU. Theentire amount was recognised as the rent expense for the reporting year (in theincome statement).Complete the following table for adjustment of the data reflected in the financial statements(any deductible amounts should be put in brackets).Solution to Exercise 2ItemWrongly recorded balances:Net profit Total Total Equityassets liabilities capital40,000 120,000 50,000 70,000amounts not included in therecordsDepreciation (9000) (9000) (9000)Salary(6000) 6000 (6000)Rent payment 10 000 10000 10 000Adjusted balances 35 000 121 000 56 000 65 000Exercise 3.Below individual transactions of Company ‘AAA’ are listed:1. Ordinary shares were sold at a price above their par value.2. Debentures have been issued in exchange for cash.3. Interest has been received on short-term bills of exchange with the redemption term due.4. Goods have been sold for cash.5. Purchases of the stock of goods and materials have been made in cash.6. Equipment has been bought for which it has been paid by a 10% bill of exchange withthe redemption period of up to three years.7. Dividends on ordinary shares have been announced and paid out.8. 100 shares of Company ‘XYZ’ have been purchased in cash.9. Land has been sold in cash according to the book value.120