Int Med Acc2 Assignment
GROUP ASSIGNMENT
2012
Submitted by:
Harjinder Deol
Submitted by:
Irtiza Noor
Gaurav Singh
Rohit Bhardwaj
Victor Zhang
8/15/2012
Introduction
Darcy Limited (DL) is a manufacturer of equipment for the oil and gas industry. They are a subsidiary of Micah Holdings Limited (MHL). Their earning has improved over the last two years and the purpose of this report is to highlight if DL is a company worthy of being bought out, and what are some of the areas of concern. Below, we have discussed my in depth findings about the company.
Exchange Rate & Accounts Receivable
ASPE accounting standards suggest recording the transactions as they happen. DL recorded a transaction during the year which was done in US dollars. At the time of the transaction, exchange rate was different than at the end of the year. The value of the transaction in the financial statements is $7,620. At the end of the year, the exchange rate had changed to US $1 = CDN $1.12. Therefore, the USD transaction is worth CDN $220 more than it was at that time of the year when it was recorded. (1, Appendix A) As per Darcy Limited Balance Sheet, the Accounts receivable for the year 2007 is $18,720, of which $270 has already been taken into account as allowance for doubtful accounts. “Allowance for doubtful accounts is a contra current asset account associated with Accounts Receivable” ("allowance for doubtful,"). The actual amount of Accounts receivable is $18,641.50, and the calculation is shown in 4, Appendix A.
Most of the companies have a yearly percentage setup where they allocate some balance of accounts receivable into the allowance for doubtful accounts. Darcy Limited uses 5% of Accounts receivable as allowance for doubtful accounts. Based on the 5% of Accounts Receivable balance, the allowance for doubtful account credit should be $568.50 (3, Appendix A). This number does not match with the $270 provided by DL on their Balance Sheet for the allowance.
It is important to know
2012
Submitted by:
Harjinder Deol
Submitted by:
Irtiza Noor
Gaurav Singh
Rohit Bhardwaj
Victor Zhang
8/15/2012
Introduction
Darcy Limited (DL) is a manufacturer of equipment for the oil and gas industry. They are a subsidiary of Micah Holdings Limited (MHL). Their earning has improved over the last two years and the purpose of this report is to highlight if DL is a company worthy of being bought out, and what are some of the areas of concern. Below, we have discussed my in depth findings about the company.
Exchange Rate & Accounts Receivable
ASPE accounting standards suggest recording the transactions as they happen. DL recorded a transaction during the year which was done in US dollars. At the time of the transaction, exchange rate was different than at the end of the year. The value of the transaction in the financial statements is $7,620. At the end of the year, the exchange rate had changed to US $1 = CDN $1.12. Therefore, the USD transaction is worth CDN $220 more than it was at that time of the year when it was recorded. (1, Appendix A) As per Darcy Limited Balance Sheet, the Accounts receivable for the year 2007 is $18,720, of which $270 has already been taken into account as allowance for doubtful accounts. “Allowance for doubtful accounts is a contra current asset account associated with Accounts Receivable” ("allowance for doubtful,"). The actual amount of Accounts receivable is $18,641.50, and the calculation is shown in 4, Appendix A.
Most of the companies have a yearly percentage setup where they allocate some balance of accounts receivable into the allowance for doubtful accounts. Darcy Limited uses 5% of Accounts receivable as allowance for doubtful accounts. Based on the 5% of Accounts Receivable balance, the allowance for doubtful account credit should be $568.50 (3, Appendix A). This number does not match with the $270 provided by DL on their Balance Sheet for the allowance.
It is important to know