Aims1 to allow students to explore in greater detail the

Assignment Help Financial Management
Reference no: EM13348064


1. To allow students to explore in greater detail the major learning outcomes of the module and to demonstrate a detailed knowledge and understanding thereof.

2. To assess students' ability to

(i) appropriately summarise and structure information

(ii) evaluate relevant information from a given set of literature

(iii) understand and argue the chosen relevant information, and

(iv) present it in an appropriate written form

Assignment brief:

Bellever plc entered into a non-cancellable agreement on 1st January 2010 to lease new industrial equipment.  The terms of the agreement, which may not be terminated by either party, were that Bellever will pay four annual rental payments of £30,000 in arrears with the first payment due on 31st December 2010.  Bellever may retain the vehicle after the end of the primary lease term on payment of a nominal amount which is not material.

Bellever plc will bear the cost of any loss of or damage to the machine as well as all insurance and maintenance costs during the period of the lease.  The equipment is new and is expected to have a useful life of 5 years after which time it is deemed to have a negligible residual value.  The cash price of the equipment would have been £95,100.

Bellever plc considers this to be a finance lease.  The company depreciates it property, plant and equipment using the straight line method charging a full year's depreciation in the year of purchase.  Finance charges are allocated using the interest rate implicit in the lease which is 10%.


(a) Explain why Bellever believes this lease should be categorised as a finance lease. You should refer to relevant international accounting standards to justify your answer.

(b) Calculate the total finance charge, annual allocation of finance charge, annual obligation under finance lease (the annual finance lease liability) and net book value of the asset for each of the four years of the lease term. 

(c) Show how the transaction would be reflected in the financial statements of Bellever plc for the year ended 31st December 2010. This should include both income statement and statement of financial position disclosures.

(d) The major issue surrounding the capitalisation of leases is one of substance over form'.  Comment upon this assertion with reference to relevant international accounting standards'.

Solvent Ltd is considering expanding its business and comparing between two potential opportunities for investment in either company X or company Y.

The president of Solvent has asked the controller to prepare a report that summarises the financial aspects of the two potential investees for the last year.

The controller has presented a number of financial ratios that can assist in the identification and interpretation of trends for each investee. The following ratios have been calculated for the year ended 31st December 2012 for each company:


Company X

Company Y


Current ratio



Acid-test ratio



Accounts receivable days



Inventory turnover (times)



Accounts payable days



Percent of long-term debt to total assets






Gross profit percentage



Operating profit percentage



Return on capital employed



Return on equity



Interest cover (times)



Earnings per share



Operating cash flow per share




a) Write a report to the Board of Directors of Solvent Ltd to analyse the performance of companies X and Y and to give recommendation as which of those two investment opportunities is better. Your report should include comments on as much performance areas as data allow.

b) Discuss and analyse the limitations of ratio analysis for both cross-sectional and time-series comparisons.

By using the regulatory discussions and relevant international accounting standards (IASs) which are taught in the module APC311, you are required to provide a critical evaluation of the following areas of financial reporting.

i. Impairment of both tangible and intangible assets in accordance with IAS 36: Impairment of Assets

ii. Ways in which creative accounting activities are exercised in financial reporting and the extent to which the responses of UK and US legislators and standard setters have succeeded in minimising the scope for such activities.

Your assignment should aim to provide readers with comprehensive knowledge and critical reviews of these areas covering, for example:

  • A knowledge of different accounting treatments in individual accounting standards
  • A knowledge of implications of different accounting treatments on usefulness of financial statements
  • Your own understandings of, comments on, arguments and contributions to the topic, such as key qualitative characteristics, true and fair view/fair presentation, creative accounting, etc..
  • Any other important issues which you think should be addressed

Learning outcomes:

The assignment covers all module learning outcomes.

Further details:

This assignment contributes 100% to the final assessment mark for this course.

Please note that the University policy on cheating collusion and plagiarism will be applied to this piece of work.

Reference no: EM13348064


Write a Review


Financial Management Questions & Answers

  Explain bankruptcy and its equity holders will be wiped out

Suppose the funds to purchase or lease the plane will come from equity holders (for ex-ample, by reducing the amount of Western's current dividend). Western also has one-year debt outstanding, and there is a 10% (risk-neutral) probability that ove..

  Problem 1arbitrage financial is offering two possible

problem 1arbitrage financial is offering two possible investments with the same level of risk.nbsp investment 1 is a

  A sample is provided in the doc sharing area.

A sample is provided in the Doc Sharing area.

  Explain the reasons why it is an incomplete hedge

If 6% coupon three year Commonwealth bond Futures contracts are currently trading at a price of 95.505, how many contracts does the portfolio manager need to buy/sell to hedge the portfolio? Explain the reasons why you think this may be an incompl..

  Compute the firm''s market capitalization

Calculate the firm's market capitalization and then calculate the enterprise value. b) Use the CAPM formula to determine the firm's cost of equity

  Unbiased predictor of future exchange rates

Provide proof and please be specific about required conditions on relations between financial variable(s) such as of both countries.

  Should the reduced tax rate on dividends

Discuss the topic- Should the reduced tax rate on dividends affect a multinational firm's capital structure

  Compare and contrast the yields and maturities

Compare and contrast the yields and maturities for each of the securities and discuss which you would hold and why relative to interest rate risk.

  Problem 130 year monthly mortgage was 450000 with annual

problem 130 year monthly mortgage was 450000 with annual interest rate of 5.what is the principal for first year

  Determine the bonds face value

Draw a clear completely labeled cash flow diagram of the entire bond transcation using dollar accounts where they are are known and $X to represent the bond's face value.

  Stock analysis - calculate the required rate of return

The purpose of this project is to familiarize you with the stock market - calculate the required rate of return on your stock using CAPM:BAD 350- Managerial Finance

  You are interested in proposing a new venture to the

you are interested in proposing a new venture to the management of your company. pertinent financial information is

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd