Crescent Cotton Mills Limited

Crescent Cotton Mills Limited

Advance accounting projectCrescent Cotton Mills LimitedCrescot Mills LimitedSubmitted by:Ammar HassanShahzaibKhaliq YounasSection : HSubmitted to: Dr. Nayyer ZaidiLahore School of Economics

Table of ContentsIntroduction3Subsidiary3Intercompany Transactions4Shares4Dividends4Income4Intercompany Sales5Inventories5Bonds8Plant Assets10Consolidated financial statements (2012)11Income Statement11Balance sheet12Cash flow13Consolidated financial statements (2013)14Income statement14Balance sheet15Cash Flow16Conclusion17References18

IntroductionCrescent Cotton Mills Limited (formerly Crescent Sugar Mills & Distillery Limited) was incorporated on March 07, 1959. The Company operated a Sugar and Distillery Unit and then later on setup Spinning Units. Initially this company was a subsidiary of The Crescent Textile Mills Limited and was separately listed on the Karachi Stock Exchange in 1965. Now the Company is listed on all the three stock exchanges of the country. Crescent Cotton Mills Limited is proud of its reputation, its honest treatment of customers, directors and employees. The professionalism of management and employees of CSM and the corporate principles and ethics abided by them continue to be an essential factor in the development of the company. These factors continue to shape and strengthen its present position in the business community. We believe that aCrescent Cotton Mills Limitederence to these principles is key to a successful future for Crescent Cotton Mills LimitedCrescent Cotton Mills Limited has one subsidiary company Crescot Mills Limited

Subsidiary

Crescot Mills Limited is a spinning unit situated at B-10, SITE Kotri district Hyderabad. Crescent Cotton Mills Limited holds 66.15 % of the equity of Crescot Mills Limited. Due to heavy losses the company has ceased all production activities since August 2014 and has disposed off some of its plant and machinery. The management of the Company is now undergoing the process of getting the Company de-listed from Karachi Stock Exchange (Guarantee) Limited, the sole stock exchange on which it is listed.

Intercompany TransactionsSharesAs the company is having more than 50% of voting stock i.e. 100% so equity method is used for buying shares of the company. Crescent Cotton Mills Limited bought 10 million shares of Crescot Mills Limited in 2012 @ 11.25 PKR. Following entry is made by Crescent Cotton Mills Limited in 2012.Debit (PKR)Credit (PKR)

Investment in CRESCOT MILLS LIMITED 112500000

Cash112500000

DividendsCrescent Cotton Mills Limited also received dividend from the CRESCOT MILLS LIMITED of 205450000 PKR in 2012. However the company received no dividends from CRESCOT MILLS LIMITED in 2011. Following entry is made by Crescent Cotton Mills Limited in 2013.Debit (PKR)Credit (PKR)

Cash 205450000

Investment in CRESCOT MILLS LIMITED205450000

IncomeIncome of CRESCOT MILLS LIMITED in 2012 was 2,514,000,000 PKR and 2011 it was 2,060,000,000 PKR. As the company is having 100% interest in CRESCOT MILLS LIMITED so following entries shall be made.Entry for 2012 income is as follows. Whole income will be recorded, as CRESCOT MILLS LIMITED is 100% wholly owned subsidiary of Crescent Cotton Mills Limited. Following entry is made by Crescent Cotton Mills Limited.

Debit (PKR)Credit (PKR)

Investment in CRESCOT MILLS LIMITED2,514,000,000

Income from CRESCOT MILLS LIMITED2,514,000,000

Entry for 2011 income is as follows. Whole income will be recorded, as CRESCOT MILLS LIMITED is 100% wholly owned subsidiary of Crescent Cotton Mills Limited. Following entry is made by Crescent Cotton Mills Limited.Debit (PKR)Credit (PKR)

Investment in CRESCOT MILLS LIMITED2,060,000,000

Income from CRESCOT MILLS LIMITED2,060,000,000

However CRESCENT COTTON MILLS LIMITED did not buy any more shares in 2013. So, there are no more entries for investment or buying any shares.Intercompany SalesInventories2011The CRESCENT COTTON MILLS LIMITED-Fertilizers sold Rs. 5,340,294 of fertilizers to Crescent Cotton Mills Limited that cost Rs. 2,512,476 31st December 2011. In 2012 Dawood sold these fertilizers for Rs. 2,620,396. The reported net income of Dawood for 2012 is this The Crescent Cotton Mills Limited fertilizer is a 100%owned subsidiary. Work papers entries by Crescent Cotton Mills LimitedDebit (PKR)Credit (PKR)

Inventory5,340,294

Accounts Payables5,340,294

Sales2,620,396

Cash2,620,396

Cost of Sales2,512,476

Inventory2,512,476

Work Paper entries by Dawood Hercules FertilizersDebit (PKR)Credit (PKR)

Accounts Receivables5,340,294

Sales5,340,294

Cost of Sales2,512,476

Inventory2,512,476

Elimination EntriesFollowing are the elimination entries on 31st December 2011.Debit (PKR)Credit (PKR)

Sales5,340,294

Cost of Sales5,340,294

Elimination Of Intercompany transaction AccountsFollowing are the elimination entries for intercompany transaction on 31st December 2012.Debit (PKR)Credit (PKR)

Cost of Sales2,827,818

Inventory2,827,818

(Unrealized Gain)

31st December 2012Debit (PKR)Credit (PKR)

Accounts Payables5,340,294

Accounts Receivables5,340,294

In 2012 Crescent Cotton Mills Limited was liable to pay Rs. 5340294 in thousands to Crescent Cotton Mills Limited fertilizers, but on consolidated balance sheet because of intercompany transactions accounts payable of Crescent Cotton Mills Limited and accounts receivable of CRESCENT COTTON MILLS LIMITED-fertilizers was eliminated.In the end of 2012 company reported unrealized gain on consolidation by increasing the cost of goods sold which decrease the consolidated income and by Debit (PKR)ing the inventory which in turn decrease the final inventory on consolidated balance sheet.In the beginning of 2013 the unrealized gain will be realized by increasing the investment of parent company in subsidiary company CRESCENT COTTON MILLS LIMITED-fertilizers. And by decreasing the cost of Goods sold on consolidated income statement.2012The CRESCENT COTTON MILLS LIMITED-Fertilizers sold Rs. 2,718,411 of fertilizers to Crescent Cotton Mills Limited that cost Rs. 1,820,437 on 31st December 2012. In 2013 Dawood sold these fertilizers for Rs. 3056808. The reported net income of Dawood for 2013 is this The CRESCENT COTTON MILLS LIMITED fertilizer is a 100%owned subsidiary. Work papers entries by Crescent Cotton Mills LimitedDebit (PKR)Credit (PKR)

Inventory2,718,411

Accounts Payables2,718,411

Sales3,056,808

Cash3,056,808

Cost of Sales1,820,437

Inventory1,820,437

Work Paper entries by Dawood Hercules FertilizersDebit (PKR)Credit (PKR)

Accounts Receivables2,718,411

Sales2,718,411

Cost of Sales1,820,437

Inventory1,820,437

Elimination EntriesFollowing elimination entry was made on 1st January 2013 for realizing the gain.Debit (PKR)Credit (PKR)

Investment in CRESCENT COTTON MILLS LIMITED-fertilizers2,827,818

Cost of Sales2,827,818

(Realization of gain at the Beginning of new year 2013)

Following entry was on 1st January 2013Debit (PKR)Credit (PKR)

Sales2,718,411

Cost of Sales2,718,411

Elimination of Intercompany sales31st December 2013Debit (PKR)Credit (PKR)

Cost of Sales236,371

Inventory236,371

(Unrealized Gain)

31st December 2013Debit (PKR)Credit (PKR)

Accounts Payables2,718,411

Accounts Receivables2,718,411

Plant AssetsCrescent Cotton Mills Limited sold Machinery to its wholly owned subsidiary Crescot Mills Limited on December 30, 2012. The undepreciated cost of machinery is Rs. 1,440,000 i.e., cost: Rs. 1,500,000 and accumulated depreciation: Rs. 60,000. This machinery was sold to Crescot Mills Limited for Rs. 1,940,000.To record the unrealized gain in the parents books, the investment income for 2012 was adjusted for the full amount of the unrealized gain which was Rs. 500,000.The consolidation adjustment shows a Debit (PKR) in gain on sale of machinery at Rs. 500,000 and Credit (PKR)s machinery for the same amount. Crescent Cotton Mills Limited should show the depreciated cost of machinery in the consolidated balance sheet at Rs. 1,440,000 instead of showing gain on machinery in the consolidated income statement.Elimination entries for worksheet in 2012 DOWNSTREAM SALE OF DEPRECIABLE PLANT ASSETS Debit (PKR)Credit (PKR)

Crescent Cotton Mills Limited books:

Cash 1,940,000

Accumulated Depreciation60,000

Machinery1,500,000

Gain on sale of machinery500,000

Crescot Mills Limited books:

Machinery2,000,000

Cash2,000,000

Crescent Cotton Mills Limited books:

Income from Crescot Mills Limited500,000

Investment in Crescot Mills Limited500,000

Gain on sale of machinery500,000

Machinery500,000

Consolidated financial statements (2012)Income Statement

Balance sheet

Cash flow

Consolidated financial statements (2013)Income statement

Balance sheet

Cash Flow

ConclusionAfter making the eliminations we came up with the consolidated statement for Crescent Cotton Mills Limited and it can be concluded by looking at its net income that the company is profit making company and is doing well and can have more income in future. In short company is financially performing well and is financially stable. There are no liquidity or solvency risk issues for this Company. As far as cash in hand is concern company needs to have more cash to be more liquid.

References

1. Annual report of Crescent Cotton Mills Limited2. Annual report of Crescot Mills Limited Limited3. Crescent Cotton Mills Limited Website4. Crescot Mills Limited Limited Website

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