Northstar Record-to-Decision Capstone
Northstar Record-to-Decision Capstone
This case tests the whole chain. Amounts are in £000 unless stated.
Opening balances
| Debit | £000 | Credit | £000 |
|---|---|---|---|
| Cash | 80 | Accumulated depreciation | 60 |
| Trade receivables | 50 | Trade payables | 55 |
| Inventory | 70 | Bank loan | 100 |
| PPE at cost | 240 | Share capital | 100 |
| Retained earnings | 125 | ||
| Total | 440 | Total | 440 |
Unadjusted events
- Purchase inventory on credit for 360.
- Make cash sales of 250 and credit sales of 300. Related inventory cost is 330.
- Collect 270 from customers.
- Pay 330 to suppliers.
- Pay wages of 90 and other operating costs of 30; both relate to this year.
- Receive 26.4 for a bike-and-maintenance bundle. Stand-alone prices are 24 for the bike and 6 for 24 months of maintenance. The bike is delivered immediately; three months of maintenance are completed by year-end. Related bike inventory cost is 12.
- Buy PPE for 80 cash.
- Receive a new bank loan of 40.
- Pay dividends of 10.
- At the start of the year, recognise a three-year lease with an initial right-of-use asset and liability of 64.152. At year-end pay 24, comprising interest 3.849 and principal 20.151.
Year-end adjustments
- PPE depreciation: 30.
- Right-of-use depreciation: 21.384.
- Gross receivables require a 3.2 expected-credit-loss allowance; there is no opening allowance in this condensed case.
- Inventory requires a 2 write-down.
- Wages of 5 are accrued.
- Current tax payable is 18 and the net deferred-tax liability increase is 2; both tax effects enter profit or loss under the supplied facts.
Required work
A. Record
Prepare journals for all events. For each, add a one-line business explanation and source document you would expect.
B. Adjust
Prepare the year-end entries and an adjusted trial balance. Identify which amounts are direct, calculated or estimated.
C. Report
Prepare:
- statement of profit or loss;
- statement of changes in equity;
- statement of financial position;
- condensed cash-flow statement.
For cash flows, classify lease interest as operating and lease principal as financing for this teaching case.
D. Analyse
Calculate and interpret:
- gross and operating margin;
- current and quick ratio after classifying the next lease payment;
- receivable and inventory observations;
- operating cash flow versus profit;
- one accounting-policy or estimate risk.
Do not invent a trend without comparative data.
E. Decide
A customer offers 430 per Cargo bike for 200 bikes:
- variable production cost: 340 per bike;
- special packaging: 15 per bike;
- order needs 400 machine hours;
- 300 hours are idle;
- the last 100 hours displace City production earning 120 contribution per machine hour;
- fixed spending is unchanged.
Prepare an incremental table, recommend accept/reject and name two non-financial constraints.
Check figures
Use these only after completing your work. Minor rounding differences are acceptable.
Adjusted check figures
| Item | £000 |
|---|---|
| Revenue | 571.780 |
| Profit for the year | 24.347 |
| Closing cash | 102.400 |
| Net receivables | 76.800 |
| Inventory | 86.000 |
| PPE, net | 230.000 |
| Right-of-use asset, net | 42.768 |
| Contract liability | 4.620 |
| Lease liability | 44.001 |
| Total assets | 537.968 |
| Total liabilities | 298.621 |
| Total equity | 239.347 |
| Operating cash flow under stated classification | 92.551 |
| Investing cash flow | (80.000) |
| Financing cash flow | 9.849 |
Special order: revenue 86; variable production 68; packaging 3; opportunity cost 12; incremental benefit 3. The numerical screen says accept, subject to constraints.
Assessment guide
| Dimension | Weight | Strong evidence |
|---|---|---|
| Event and source analysis | 15% | Facts, documents and account types are explicit |
| Journals and trial balance | 20% | Complete, balanced and narrated |
| Measurement and adjustments | 20% | Calculations, estimates and framework logic separated |
| Linked statements | 20% | Profit, equity, cash and position reconcile |
| Analysis | 10% | Ratios have drivers, caveats and no invented thresholds |
| Decision | 10% | Opportunity cost and constraints are included |
| Communication and audit trail | 5% | Another reader can reproduce the conclusion |
Postgraduate extension
Add a two-page technical appendix that:
- identifies which capstone conclusions could differ under US GAAP;
- sketches an IFRS 18 presentation for a 2027 period;
- sensitises the special-order result to lost normal contribution and defect rates;
- distinguishes evidence available at year-end from hindsight.