MGT278CAssignment1.docx

    MGT 278C Assignment 1

    NNS Hospitals Ltd. is a publicly owned company which owns a chain of hospitals. The Balance Sheet of NNS as of 31/3/2015 is given below:

    Liabilities and Owners’ Equity

    Accounts Payable

    120,000

    Salaries Payable

    10,000

    Provision for Taxes (2013-14)

    90,000

    Provision for Taxes (2014-15)

    100,000

    8% Bank Loan

    160,000

    Share Capital

    400,000

    Share Premium

    200,000

    Retained Earnings

    20,000

    TOTAL

    1,100,000

    Assets

    Cash

    80,000

    Inventories of Medical Supplies

    120,000

    Accounts Receivable

    100,000

    Less: Allowance for Doubtful Debts

    -5,000

    95,000

    Advance Taxes Paid (2013-14)

    95,000

    Advance Taxes Paid (2014-15)

    100,000

    Prepaid Insurance

    20,000

    Investments in 10% Government Bonds

    200,000

    Land

    150,000

    Building

    200,000

    Less: Accumulated Depreciation

    -20,000

    180,000

    Equipment

    100,000

    Less: Accumulated Depreciation

    -40,000

    60,000

    TOTAL

    1,100,000

    Majority of the cash payments and receipts made during the year are given below:

    Cash Receipts

    Cash Payments

    Total Cash Collected from Patients

    700,000

    Cash Paid for Staff Salaries

    110,000

    Interest Received on Govt. Bonds

    20,000

    Cash Paid for Accounts Payable

    300,000

    Sale of Equipment (31/12/2015)

    15,000

    Cash Paid for Utilities

    50,000

    Dividends received

    5,000

    Loan Repaid (31/3/2016)

    20,000

    Doctors Honorarium

    140,000

    Equipment Purchase (30/9/2015)

    30,000

    Advance Tax Paid

    100,000

    Dividends paid

    50,000

    Investment in Stock of ND Co.

    20,000

    Additional Details:

    1. NNS provides services to certain patients on a credit basis. During the current financial year, $300,000 worth of services was provided to such patients on a credit basis and $310,000 was collected from such patients. Due to poor financial condition of certain patients, $6,000 was written-off as bad debts in March 2016. $2,000 worth of previously written-off amounts was collected in January 2016. The firm wishes to maintain a balance of 5% of year-end Accounts Receivable as an allowance for doubtful debts.

    2. NNS purchases all inventory of medical supplies on credit. The total purchase in the current financial year amounted to $250,000. The ending balance of inventory of medical supplies was $90,000.

    3. The interest on 8% Bank Loan is accrued, but due to a computer glitch, could not be paid till 10th April 2016. The company had to pay a penalty of $10,000 along with the interest on 10th April 2016 for late payment of interest. The penalty becomes due in the year of default.

    4. The equipment has a useful life of 5 years and Building has a useful life of 10 years. The equipment that was sold on 31/12/2015 was two years old at the beginning of the year and had a historical cost of $20,000.

    5. Salaries for the last two weeks of March 2015 will be paid on 5th April 2016. Such salaries amounted to $15,000. Salaries payable for previous years were paid off in the current year.

    6. The prepaid insurance is valid for another 15 months starting from 1/4/2015.

    7. Tax assessment for the years 2013-14 and 2014-15 was completed in the current year and the tax was assessed to be Rs. 100,000 for 2013-14 and 95,000 for 2014-15. Shortfall (refund), if any, was paid (received) during the year 2015-16. Provision for taxes for the current year is 25% of Profit before Tax.

    8. 10,000 new shares were issued. The face value of shares was $1 and Market value was $20.

    Based on the above information, prepare the Balance Sheet, Income Statement, and Cash Flow Statement (Use Indirect Method) for the year ended on 31/3/2016.

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