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Ngee Ann Polytechnic
School of Business & Accountancy
April 2013 Semester
Fundamentals of Financial Management

Tutorial 3: Financial Accounting Fundamentals (Part II) for Week Beginning 6 May 2013.

Read the Business Times article, “Beginner’s Guide to Equities”, dated on 25 April 2011 and answer the following questions:

In event of liquidation, what right clearly distinguishes a shareholder from a creditor (who has lent money to the company)?

Creditor is the priority of pay

What privileges do preference shareholders enjoy that ordinary shareholders do not have?

Privilege of preference shareholders :

- Fixed rates of dividends
- Priority of claim in liquidation
- Possibilty of redemtion of shares
- Priority of payment of dividends

Which class of shareholders would expect to reap greater benefits from a highly profitable company? Why?

2.The following items are provided for RS Enterprise on 30 September 2011: Cash $7,635
Office Equipment $14,160
Other Receivables $1,680
Rent Expense $7,200
Retained Losses (1 October 2010) $27,000
Share Capital $30,630
Trade Payables $15,420
Trade Receivables $7,650

With reference to the Statement of Comprehensive Income prepared in Tutorial 2, complete the Statement of Financial Position for RS Enterprise.

$
$
Current Assets

Cash
7635

Trade receivables
7650

Other receivables
1680

Sub-total

16965
Non-current Assets

Fixed Assets

Office equipment

14160

Total Assets

31125

Current Liabilities

Trade payables

15420

Non-current Liabilities

0

Total Liabilities

15420

Equity

Share capital
30630

Retained losses (-27,000 + 12,075)
14925

15075
Total Liabilities and Equity

31125

The following items are provided for EFS Limited on 31 December 2012:

Accounts payable $3,500
Accounts receivable $3,400
Bank overdraft $2,000
Cash $15,100
Equipment $27,000
Furniture & Fixtures $15,000
Retained earnings (1 Jan 2011) $11,430
Share capital $40,000

With reference to the Statement of Comprehensive Income prepared in Classwork 2, complete the Statement of Financial Position for EFS Limited

$
$
Current Assets

Cash
15100

Accounts receivable
3400

18500
Non-current Assets

Fixed Assets

Furniture and fixtures
15000

Equipment
27000
42000
Total Assets

60500

Current Liabilities

Accounts payable
3500

Bank Overdraft
2000

5500
Non-current Liabilities

0

Total Liabilities

5500

Equity

Share capital
40000

Retained Earnings (11,430 + 3,570 )
15000

55000
Total Liabilities and Equity

60500
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