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Financial
Modelling Class: Naija Limited Case Study
Tunde, Ahmed, Ebiri and Emeka have been friends for 30 years
since their university days and are now at the peak of their chosen careers.
They decided to come together and start a company called Naija Limited that
will source for high quality Nigerian made goods, repackage them and sell to
supermarkets.
1.
On January 1, 2016 they pulled funds together
and started the business with a cash amount of N500 million and incorporated
the company as a 1 billion authorized shares company at 50 kobo per share.
2.
On January 16, 2016 they bought with cash a
building at Ikeja, Lagos for N250 million naira to use as office, repackaging
factory and warehouse.
3.
On January 24, 2016 they bought with cash some packaging
equipment and setup factory plant for N100 million.
4.
On January 26, 2016 they bought with cash an
inventory of N80 million.
5.
On February 1, 2016 they hired 10 people to make
up the company staff and pay them a total monthly cash salary of N8 million on
the last day of each month (note: first payment will happen on 29th
February 2016)
6.
On February 12, 2016 they recorded their first
sale of N15 million from an inventory of N8 million and were paid instantly by
bank deposit (cash)
7.
On February 25, 2016 they recorded another sale
of N30 million from an inventory of N14 million but were not paid immediately
by the customer.
8.
Every month, the company incurs general office
expense (cleaning, office supplies, etc.) of N2 million but the expense is paid
for in advance on the first day of the month starting from month of March.
9.
Starting from March the company began incurring monthly
telephone bills, internet bill, electricity bill and water bill (grouped as
utility bills) all totaling N1 million and are postpaid every 10th of
the month.
10.
On March 5, 2016 the payment for the N30 million
sales came in as cash payment.
11.
On March 15, 2016 the company took a loan of
N300 million from Zenith Bank to be paid back over six (6) years with a bi-yearly
payment of N30 million split into N3 million to cover interest and N27 million
to repay principal on February 15th and August 15th of
every year.
12.
On April 12, 2016 the company struck a deal with
Shoprite to supply products of N100 million on the 15th of every month
starting from April for sales across Shoprite nationwide supermarkets. It is on
a NET 30 term so payment comes exactly one month after sales is
invoiced/recorded. Inventory costs for the products are N35 million.
13.
To support sales, the company partnered with a
key supplier of its inventories to supply it inventory worth of N35 million every
first day of the month on a NET 45 term (payment to be made of the 15th
of the next month) starting from May 2016.
14.
On December 31 2016, the company declared
dividends of N60 million for its owners.
15.
The company’s income tax is N20 million and will be
paid the next year (2017).
16.
The capital assets of the company will be
depreciated by N20 million in the first year (2016).
Tasks:
1.
Build a Journal for Naija Limited detailing the
year’s transactions
2.
Build a T-Accounts for Naija Limited from the
Journal
3.
Build a General Ledger for Naija Limited
4.
Build a Trial Balance for Naija Limited using
the General Ledger
5.
Adjust the trial balance on an accrual basis
6.
Build the Income Statement, Balance Sheet and
Cash Flow Statement from the Trial Balance
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