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