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UPES Assignment 2014 Power Industry Accounting-Ass-1-2014J
 
Product Name : Power Industry Accounting-Ass-1-2014J
Product Code : AC1
Category : UPES
Soft Copy Type B  : Rs. 1000   img
 
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Description :

Section A (20 Marks)

Write short notes on any four of the following:

1.   Differentiate between cash flow and funds flow

2.      Trial Balance

3.      Double Entry System

4.      Methods of Inventory Valuation

5.      Assets and liabilities of Balance Sheet

 

Section B (30 marks)

(Attempt any three)

 

  1. From the following information given by RR Ltd., you are required to prepare cash flow
  2.  

 

               

Additional Information:

RR Ltd., earned profit of Rs. 4,00,000 after charging or crediting the following items to its profit and loss account during the year 2003:

  1. Profit on Sale of Investments Rs. 8,000
  2. Loss on Sale of Building Rs. 18,000
  3. Depreciation on Fixed Assets Rs. 14,000
  4. Good Will Written off Rs. 4,000

 

  1. Rajiv Company firm had stock of goods valued at ` 10,000. During the year, the following transactions took place:

 

 

Calculate the trading account.

  1. what do you understand by Accounting Standards? Discuss the application of accounting standards in power industry.
  2. What are the popular methods of depreciation? Which method will you adopt and why?

 

 

Section C (50 marks)

(Attempt all questions. Every question carries 10 marks)

Read the case “ARM Holdings Plc” and answer the following questions:

Case Study: ARM Holdings Plc

The History of ARM

 

ARM was established in November 1990 as Advanced RISC Machines Ltd., a UK – based joint venture between Apple Computer, Acorn Computer Group and VLSI Technology. Apple and VLSI both provided funding, while Acorn supplied the technology and ARM’s 12 founding engineers. Acorn, developer of the world’s first commercial single-chip RISC processor, and Apple, intent on advancing the use of RISC technology in its own systems, chartered ARM with creating a new microprocessor standard.

ARM immediately differentiated itself in the market by creating the first low-cost RISC architecture. Conversely, competing architectures, which were more commonly focused on maximising performance, were first used in high-end workstations. With the introduction of its first embedded RISC core, the ARM family of processors, in 1991, ARM signed VLSI as its initial licensee. One year later, Sharp and GEC Plessey entered into licensing agreements, with Texas Instruments and Cirrus Logic following suit in 1993. Over the years, ARM has significantly expanded both its IP portfolio and its licensee base.

 After the 1993 addition of Nippon Investment and Finance (NIF) as a shareholder, the company began establishing a global presence, opening new offices in Asia, the US and Europe. In April 1998, the company listed on the London Stock Exchange and Nasdaq. ARM is now a global corporation, employing more than 720 people in facilities in eight countries on three continents. With design centres in Blackburn, Cambridge and Sheffield, UK; Sophia Antipolis, France; Walnut Creek, Calif.; and Austin, Texas; the Company also maintains sales, administrative and support offices in France, Germany, Japan, Korea, Taiwan, Israel, the UK and the US. The Company will be opening an office in Shanghai, China during 2002.

 

Market Overview

 

Intellectual property (IP) is one of the hottest and most highly-coveted commodities in the new economy. Nowhere is this more apparent than in the semiconductor arena, where an IP revolution is defining a new generation of digital electronic products. IP is forming the basis of today’s ever-advancing microprocessors and is driving innovation across a broad spectrum of consumer and business applications; pushing high-speed, high-bandwidth communications and wireless connectivity to new limits.

 

The use of microprocessors in a wide range of electronic devices has escalated to the extent that the use of microprocessor IP is now ubiquitous in system-on-chip (SoC) designs, providing the technology foundation for nearly everything electronic in the world today. With enormous growth potential, the IP market has emerged as one of the most dynamic sectors of the high-technology industry.

 

Andrew Allison, an industry analyst, reports that in 2001, more than 538 million RISC (Reduced Instruction Set Computing) microprocessors were shipped, 74.6 percent of which were based on the ARM microprocessor architecture. Growth in the IP market continues to be driven by the demand for semiconductor devices that the Semiconductor Industry Association reports reached $139 billion in global sales in 2001.

 

Financial Statements

 

Figures are not an exact representation of the company’s situation, and have been summarised for this case.

 

Annual Balance Sheet (Values in £ Millions)

Mar-02

Dec-01

Dec-00

Dec-99

Dec-98

Assets

Current Assets

Cash and Equivalents

107.3

104.5

75.3

51.8

39.6

Short-Term Investments

NA

94.4

69.5

46

37.1

Receivables

33.9

27.2

21.1

16.5

9.5

Inventories

0.7

0.6

0.4

0.2

0.2

Pre-Paid Expenses

NA

NA

NA

NA

NA

Other Current Assets

7.4

125

3.2

2.7

2.8

Total Current Assets

149.3

137.3

100

71.1

52.1

 

Other Investments

NA

3.6

4.1

0

0

Investment in Subsidiaries

NA

0

0

0.1

0.1

Long-Term Receivables

NA

0

0

0

0

Property, Plant & Equipment, Gross

NA

49.3

32.4

20.6

14.7

Accumulated Depreciation

NA

26.6

17.5

11.3

6.8

Property, Plant & Equipment, Net

22.8

20.3

14.9

9.3

7.9

Deferred Charges

NA

0

0

0

0

Intangible Other Assets

11.7

6.1

5.6

1

0

Other Assets

15.5

12.2

5.6

1.1

0

Total Assets

187.6

146.6

124.5

81.5

60.2

 

Liabilities & Shareholder's Equity

Current Liabilities

Accounts Payable

NA

2.4

2

1.1

0.9

Short-Term Debt

NA

0

0

0

0

Other Current Liabilities

NA

29.9

22.4

14.6

10.1

 

Total Current Liabilities

NA

39.4

26.1

16.1

12.3

 

Long-Term Debt

NA

0

0

0

0

Provision for Risks/Charges

NA

0.2

0.2

NA

NA

Deferred Income

NA

0

0

0

0

Deferred Taxes

NA

0

0

0.1

0

Other Liabilities

NA

0

0

0

0

Unrealised Securities Gain/Loss

NA

0

0

0

0

 

Total Liabilities

36.8

42.1

26.3

16.1

12.3

 

Shareholder's Equity

Minority Interest

0.7

0.4

0.3

0.1

0.1

Preference Share or Preferred Stock

NA

0

0

0

0

Ordinary Share or Common Stock

NA

0.5

0.5

0.5

0.5

Capital Surplus

NA

76.1

74.6

53.5

37.9

Retained Earnings

NA

60.8

26.1

13.6

11.1

Treasury Stock

NA

0

0

0

0

 

Ordinary Share Equity

150.1

107.6

98

65.3

47.9

 

Total Liabilities & Share Equity

187.6

161.2

124.5

81.5

60.2

 

 

Annual Income Statement (Values in £ Millions)

Mar-02

Dec-01

Dec-00

Dec-99

Dec-98

Sales

42.1

100

100.7

62.1

42.3

Cost of Goods Sold

4

5.6

3.9

5.1

7.7

Gross Income

38.1

94.4

89.1

52.3

31.4

Depreciation & Amortisation

NA

1.3

7.8

4.7

3.1

Selling, G&A Expenses

NA

15.4

57.9

35.8

NA

Other Operating Expenses

23.2

0

0

0

24

Operating Expenses - Total

NA

56.7

69.6

45.6

34.8

Operating Income

14.9

31.5

31.2

16.5

7.5

Non-Operating Interest Income

NA

3.1

3.9

2.3

1.9

Pre-Tax Equity in Earnings

NA

0

-0.1

0

-0.1

Other Income/Expense - Net

0.9

0.3

0.5

0

0

Interest Expense on Debt

NA

0

0

0

0

Pre-Tax Income

15.8

34.4

35.5

18.8

10.2

Income Tax

5

11.7

5

1.8

3.5

 

 

 

 

 

 

Minority Interest

0.1

0.2

0.2

0.1

0

Equity in Earnings

NA

0

NA

0

0

After Tax Other Inc/Exp

NA

0

0

0

0

Discontinued Operations

NA

0

0

0

0

 

 

 

 

 

 

Net Income before Extraordinary

10.7

9

30.3

16.9

6.6

Extra Items

NA

0

0

0

0

Pref. Dividend Requirements

0

0

0

0

3

 

Net Income

10.7

23.3

30.3

16.9

3.7

 

 

Stock Market Performance

 

The following article appeared in the financial press in late 1999

The Anglo File: ARM Races Ahead After Deal With Intel

Even before Monday's announcement that ARM Holdings had signed a licensing deal with Intel, owning a piece of the U.K. microprocessor chip designer was costly business. And after the euphoria that greeted the news, it will cost you, well, an arm and a leg, and some reckon that may be too high a price to pay.

ARM shares surged 15% following the news that Intel will license ARM's microprocessor designs to build chips for the next generation of handheld devices, such as phones and computers, but the rise in the company's shares is nothing new. Shares of the firm, which began life nine years ago in a barn outside the town of Cambridge, England, have risen more than seven times in the last 18 months on the back of 37 licensing agreements with such luminaries as IBM, Ericsson, Nintendo and Psion.

This string of high-profile deals has helped the company rack up astonishing earnings growth. According to a poll of brokers by Hemmington Scott, a U.K. financial information provider, ARM is expected to notch up earnings growth of 95.9% in 1999 and 25.3% in 2000.

With the shares closing in London Tuesday down 5.1% at 14.5 pounds (about $24), the company has a market cap of about 2.8 billion pounds and is set to join the benchmark FTSE 100 index of leading companies before the end of the year.

What Harm Could Come to ARM?

Yet with ARM now trading at a price-to-earnings ratio of 324 times, compared to 203 times at Rambus, which designs and licenses computer memory, there is little room for any disappointments. And already some murmurings of disquiet are being heard, albeit faintly, from some quarters. "ARM is basically a fantastic company with great fundamentals, but there are a few areas of concern," says one analyst who wished to remain anonymous.

What on earth could they be? "Competition, for one," says the analyst.

Although ARM dominates the 32-bit segment of the RISC, or reduced instruction set computing, processor market, the analyst says he has spoken to Hitachi and MIPS Technologies, and they have both indicated that they intend to compete fiercely in this market. In fact, MIPS is already hawking its 32-bit technology at bargain prices in Japan.

Indeed, companies such as MIPS and Hitachi are much larger and more diversified than ARM, which still relies heavily on supplying the mobile phone market. Some 75% to 80% of ARM's sales this year are expected to be in the cellular market, of which 70% are with a single company, Nokia. Should sales of handsets start to fall -Paribas, the European brokerage, predicts Nokia's handset sales will slow to 69% this year and 44% in 2000 from 90% growth last year . the company's bottom line could be seriously affected.

Questions:

  1. Identify the main strengths and weaknesses of the ARM Holdings.
  2. Discuss the market conditions of ARM Holdings Plc.
  3. What do you understand by “annual balance sheet” and “annual income statement” of  ARM Holdings.
  4. "ARM is basically a fantastic company with great fundamentals, but there are a few areas of concern," what is the thought behind this concept.
  5. Would you purchase stock in ARM Holdings Plc? And why?
 
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