Reference no: EM132629419

Questions -

Q1) How would you analyze the financial statements of a firm? Explain each step thoroughly?

Q2) Suppose two companies acquire a machinery for use in operations. Company A expenses the transaction whereas, company B capitalizes the same transaction. What repercussions will this have on the financial reporting?

Q3) Statement of projected future cash flows is least likely be required by SECP for a company filing for registration. Why?

Q4) Hihotech Company reported net income of 2.3 million for the year ended 20XX and had a weighted average of 800,000 common shares outstanding. At the beginning of the fiscal year, the company has option of 30,000 with an average exercise price 35. No potentially dilutive securities are outstanding. Over the fiscal year, the company's market price averaged 55 per share.

Required:

a) Calculate company's basic and diluted EPS under IFRS and US GAAP

It has been argued that both methods will yield the same results but the underlying justification employed by both methods is different. Explain these justifications.

Q5) Firms may hold financial assets to earn returns. How the firm would classify financial assets? What treatment will such financial assets get in the financial statements in accordance with US GAAP and IFRS standards?

Q6) Company owner contributes 100,000, which is invested in a twenty year bond with a 5% coupon paid semi-annually. After six months the firm receives the coupon payment of 2500 and the market price has reached to 102,000. Show the balance sheet and income statement treatment under each of the following categorization: held for trading, available for sale, held to maturity.

Q7) At the start of year 1 owner contribute 100. After year 1 the company purchases the financial assets categorized as AFS worth 10. During year 1 the net income is 20 which is retained. The value of financial assets goes up to 12. During year 2 there is treasury stock operation worth 30 Net income is 40 which is retained. Financial asset goes up to 15. Show the relevant equity components at the end of year 1 and 2.