Mgt. Advisory Services Problem No. 1: KAPA Community Ministry

Ito ay follow-up problem na sinosolve natin regarding sa KAPA.

Maiiwasan sana ang reklamo ng ibang miyembro na hindi pa nababayaran, kung may budget sila. Dito nila makikita kung saan nagkamali ang grupo, at magagawan nila ng paraan para maging “realistic” ang kanilang pangako sa mga miyembro.

(Pahabol: Congrats sa mga nag-oath taking kanina ng mga bagong CPAs! Wish you all the best of luck!)

Kung may promise ang management ng KAPA sa mga miyembro nito, ano ang dapat gawin para matupad ito? Use all of the skills that you learned in Management Advisory Services. Solve this problem:


You were hired by your firm to conduct consultancy services to KAPA Community Ministry. Your task is to give recommendations to management.

In connection with the engagement, SEC provided you the business’ financial statements:

Required:

  1. (Cash Flow Statement) Provide Statement of Cash Flows for December 31, 2017. Assume that this is their first year of operations.
  2. (Financial Mgmt.) Provide computation for these ratios:
    • Liquidity ratio
    • Solvency ratio
    • Debt ratio
    • Equity ratio
    • Profit ratio
    • Asset turnover ratio
    • Return on investment (ROI). This will be computed as: Net Income divided by Members’ Equity, Beginning Balance.
  1. (Budgeting) KAPA claims to have five million members. Provide Budgeted FS (Budgeted Financial Position, Comprehensive Income, Cash Flow Statement) for Dec. 31, 2019. Assume the following:
    • All five million members will invest P5,000.00 each, and will pay P100.00 membership fees.
    • Four GenSan fishing boats with P300,000.00 each will be included in Noncurrent Asset as: “Equipment and other NCA.”
    • Farms dedicated to lobsters, bangus, poultry, mango, rice, and mining have 1,200 hectares each (12 million sq. meters). Fair value per square meter is P300.00. Include in cost of land.
    • Their cryptocurrency is valued at P50 million; and heavy equipments at P100 million. Include these in “Equipment and Other NCA.”
    • A member claims that there’s 1,200 hectare banana plantation, or a total of 12 million square meters. That’s almost as large as Navotas City. Assume fair value of P250.00 per square meter.
    • Hospital building amounted to P70 million. Their school, convention center, and hotel amounted to P50 million each. Admin building is at P5 million. Place all of them under “Buildings” account.
    • All disbursements on non-current assets are deducted against Cash on Hand.
    • Journalize entries and post it to respective accounts.
    • A member claims that income from mining runs to P10 billion. Include in Revenues.
    • Revenues from other businesses were at P800 billion. Include in Revenues under “Other Income” account.

Budgeted schedule of expenses were as follows:

Communication, Light, and Water 81,050,000,000.00
Community Services 40,525,000,000.00
Fire Victims Assistance 48,630,000,000.00
Honorarium 96,000.00
Salaries and Wages 397,000.00
Solicitation 8,105,000,000.00
Spiritual Upliftment 120,000.00
SSS, PhilHealth, HDMF 27,790.00
Thanksgiving 500,000.00
Transportation and Travel 40,525,000,000.00

Accounts Receivables totalled P591,664,029,210.00. Total liabilities will still remain the same.

      1. (Financial Mgmt.) Compute for the financial ratios stated in no. 2, this time, on budgeted FS.

Discussion Questions

      1. What will be your analysis of financial ratios on their actual and budgeted FS?
      2. As computed, total compounded interest to be paid to members would be at P582.5 billion. State positive and/or negative effects to KAPA using compounded interest instead of simple interest.
      3. What would be the required revenue to meet the promised 30% “love gift”?
      4. Based on these assumptions, what will you recommend to the management?
      5. (Time Value of Money) Assume that P25 billion “donation” is invested in ten years, 30% compounded monthly interest. Determine the maturity value for (1) all members, and (2) each member.

Suggested answers will be available via e-mail, upon request.


MAS Problem prepared by: TweetNewscaster