Case Study: 1 PART-A (5 Marks) Oman Arab Bank is one of the most active banks in Trade and Project Finance in the Sultanate of Oman. The bank derives its strength from its close association with Arab Bank Jordan and its access to its large network of branches globally (400 branches in over 33 countries) gives it a competitive edge in the Trade and Corporate Finance areas. Oman Arab Bank offers a wide range of services in the following area of Trade Finance: Bank Guarantee, Standby Letters of Credit, and Discounting of bills of exchange. You are a newly joined assistant in the accounts department and the following particulars are extracted from the books of OAB for the year ending 31 March 2020: OAB purchased bills from its various Corporate Customers on different dates throughout the year worth OMR 3,300,000. Rebate on bills discounted balance at the beginning of the year 2019 OMR 110,500; Discount received during the year was OMR 730,500 While calculating the rebate on bills discounted the bank generally considers 365 per annum except for a leap year. Additional information on bills discounted during the year is as follows: Date of bills Amount (OMR) Term months 15th November 25th December 1st January 28th January 20 February 19th March 650,000 350,000 150,000 750,000 900,000 500,000 4 4 2 3 4 4 Discounted at % per annum 8 12 10 11 9 10 You are required to prepare: a) Calculate the rebate on bills discounted for the above bills. b) Show the discount account in the books of OAB bank. (4 Marks) (1 Mark) Case Study: 1 PART - B (5 Marks) Mr.Faisal is a local exporter in Oman and exports baby products to various countries. He also owns a dates and Omani Halwa factory located at Barka. He sells baby products and Omani Halwa to various shops and Hypermarkets in Oman. Mr. Ali is an importer of Bahrain. Faisal's transactions with its customers are on a cash and credit basis. On 2nd February 2019, Faisal sold goods to Ali for OMR 42,000 and drew a four months bill on the later. Ali accepted the bill and returned it to Faisal. On 3rd March, Faisal needed funds. Being a customer of Oman Arab Bank he got the bill discounted at 9% p.a. It was observed that the due date was falling on a public holiday. The bill was duly honored as per the terms. One of his local customers 'Barka Omani Halwa' located in Barka, regularly buys Halwa from Mr. Faisal. On 15 March 2019, Faisal supplied Halwa for OMR 5000 to Barka Omani Halwa and a bill was drawn as payable at sight. Faisal follows a practice of collecting bills due to his local customers every 15 days. Assume that the bank prepares its financial statements at the end of the year as on 31 March. You are required to: a) Explain the impact of the above events on the maturity dates of both the bills. (100 words minimum/1.5 Marks) b) Calculate the amount received by Mr. Faisal on discounting the bills (100 words minimum/ 1.5 Marks) c) Give journal entries in the books of the bank as the bill is met at the maturity (2 Marks)
