I have an intercompany statement with an overseas company which is agreed in sterling but converted to the foreign currency using a budgeted fx rate for the whole year. However we have cash settled for the balance owing in sterling at the spot rate of the currency that day as we are paying from a sterling bank account. as the spot rate was much lower than the budget rate they didnt get near the anticipated amount in foreign currency.

I would have thought they would have to put an fx journal through to take the hit?

However they feel they should get the foreign currency amount in full as they paid this and getting paid via sterling is not near what they paid on our behalf.

The only way i can see to do this is getting the spot rate on the day and converting but this renders the company policy of the budget rate on all other items useless.

If we do settle the fx difference in the foreign currency in our books we will then not balance in sterling as we will effectively take the fx hit...if anyone can shed any light would be thankful

A company is considering a new project that costs £25 million. The project will generate after-tax (year-end) cash flow of £5 million for the first three years, then £6 million for the next four years. The company has 1 million shares of stock outstanding with a current value of £7 per share. The debt represents 30% of total asset and the cost of debt (rB) is 8%. The beta of equity is 1.5 and the tax rate is 30%. Assume that CAPM holds, and the expected return on market is 12% and the risk-free rate is 4%.
a. What is the market value of equity?
b. What is the value of debt?
c. What is the cost of equity (re)?
d. What is the firm’s weighted average cost of capital (WACC)?
e. If the project has the same risk as that of the overall firm, should the company take on the project?

Thanks in advance.

Gina

If i raised a bill before the VAT change and now after the VAT change I need to raise a credit note for the invoice - the credit should be for the old VAT right?

Now I am reissuing the above invoice because it was incorrect. The reissue date of the invoice is after the new VAT rate but the sale took place on the old VAT rate which rate is applicable?

Hi guys. Im just doing some tidy up work on the GRNI. On the balance sheet we have £51k liability worth of GRNI most of these relate to prior years 2004,2005,2006 etc I am a bit suprised there still on surely this is not right?

Am i right in saying we have received goods put the liability on the balance sheet and the cost on the p/l once the goods were received but not received an invoice so far. this seems odd surely a company would send an invoice does this mean we have paid for these goods?

Also some GRNI have come through but have been cleared off once the invoice has arrived but with a diffrent amount therefore leaving a balance of a couple of quid here and there what do we do about these?

Can any give any background, tips, tricks etc on GRNI incase I have got the logic wrong.

Company A supplies Company B with a service. Both companies are based in the UK. However the job is quoted by company A in dollars. Can company A raise their invoice in dollars to there fellow UK client? and should VAT be applicable and how is this calculated?

I have a query relating to F7 paper.  When you do the consolidation P and L account you have to adjust for PURP and intercompany sales.  If you look at the workbook, it tells you to deduct sales from turnover, then ADD to cost of sales then DEDUCT PURP.  Now, when I am looking at the exam paper, June 2008 to be specific, in the answers, intercompany cost of sales are DEDUCTED, rather than added, and PURP is ADDED rather than deducted.  Why is this the case, when the book teaches otherwise?  I am confused and would appreciate some help please.

Louise

But what if they are NOT doing this but are stating on the payslip that they are? I know this is fraud but my question is from the view point of the employee.

Who is liable to pay that contribution into the pot? Does the employee pay and then sue the company or will the HMRC deal with the company direct?