Analysis Of Financial Statements Ts Grewal 2017 Solutions for Class 12 Commerce Accountancy Chapter 3 Accounting Ratios are provided here with simple step-by-step explanations. These solutions for Accounting Ratios are extremely popular among class 12 Commerce students for Accountancy Accounting Ratios Solutions come handy for quickly completing your homework and preparing for exams. All questions and answers from the Analysis Of Financial Statements Ts Grewal 2017 Book of class 12 Commerce Accountancy Chapter 3 are provided here for you for free. You will also love the ad-free experience on Meritnation’s Analysis Of Financial Statements Ts Grewal 2017 Solutions. All Analysis Of Financial Statements Ts Grewal 2017 Solutions for class 12 Commerce Accountancy are prepared by experts and are 100% accurate.

Page No 4.100:

Answer:

Cost of Goods Sold = Opening Stock + Purchases + Closing Stock

= 40,000 + 3,20,000 − 1,20,000 = 2,40,000

(a) Sale of goods for Rs 40,000 (Cost Rs 32,000)- Increase

Reason: This transaction will decrease stock at the end (closing stock). Decrease in closing stock will result increase the proportion of Cost of Goods Sold and decrease in Average Stock

(b) Increase in value of Closing Stock by 40,000- Decrease

Reason: Increase in Closing Stock results decrease in Cost of Goods Sold and increase in Average Stock.

(c) Goods purchased for Rs 80,000- Decrease

Reason: This Transaction increases the amount of Closing Stock. Increase in Closing Stock reduces the proportion of Cost of Goods Sold and Increase in Average Stock.

(d) Purchase Return Rs 20,000- Increase

Reason: It will result decrease in Cost of Goods Sold and Average Stock with same amount.

(e) Goods costing Rs 10,000 withdrawn for personal use- Increase

Reason: Drawing of goods will decrease the amount of Closing Stock and increase in Cost of Goods Sold.

(f) Goods costing Rs 20,000 distributed as free sample- Increase

Reason: Goods distributed as free sample reduces Closing Stock. Reduction in Closing Stock will result increase in Cost of Goods Sold and decrease in Average Stock.

Page No 4.100:

Answer:

Cost of Goods Sold = Opening Stock + Purchases + Carriage Inwards − Closing Stock

= 20,000 + 50,000 + 5,000 − 10,000 = 65,000

Page No 4.100:

Answer:

Let Cost of Goods Sold be = x

Cost of Goods Sold = x = Rs 3,84,000

Cost of Goods Sold = Opening Inventory (Stock) + Purchases − Closing Inventory (Stock)

3,84,000 = Opening Inventory + 3,60,000 − 68,000

Opening Inventory = 3,84,000 − 2,92,000 = Rs 92,000

Page No 4.100:

Answer:

Sales = 2,00,000

Gross Profit = 25% on Sales

Cost of Goods Sold = Total Sales − Gross Profit

= 2,00,000 − 50,000 = 1,50,000

Let Opening Inventory = x

Closing Inventory = x + 4,000

Opening Inventory = x = Rs 28,000

Closing Inventory = x + 4,000 = 28,000 + 4,000 = Rs 32,000

Page No 4.100:

Answer:

Gross Profit = 25% on Cost

Sales = Cost of Goods Sold + Gross Profit

= 6,40,000 + 1,60,000 = 8,00,000

Page No 4.100:

Answer:

Let Opening Inventory = x

Closing Inventory = 2.5x + x = 3.5 x

Opening Inventory = x = Rs 1,68,000

Closing Inventory = 3.5 x = 3.5 × 1,68,000 = Rs 5,88,000

Page No 4.100:

Answer:

Let Closing Inventory = x

Opening Inventory = 2x + x = 3x

Closing Inventory = x = Rs 18,750

Opening Inventory = 3x = 3 ×18,750 = Rs 56,250

Page No 4.100:

Answer:

Average Inventory=30,000+90,0002=Rs 60,000Opening Inventory=3,00,000×10%=Rs 30,000Closing Inventory=30,000×3=Rs 90,000Cost of Revenue from Operations=Revenue from Operations-Gross Profit                                                    =4,00,000-1,00,000=Rs 3,00,000Inventory  Turnover  Ratio=Cost  of  Revenue  from  OperationsAverage  Inventory                                       =3,00,00060,000=5 Times



Page No 4.101:

Answer:

Case 1

Credit Sales = 3,00,000

Cash sales = 25% of Credit Sales

Total Sales = Cash Sales + Credit Sales

= 3,00,000 + 75,000 = 3,75,000

Gross Profit = 20% on Sales

Cost of Goods Sold = Total Sales − Gross Profit

= 3,75,000 − 75,000 = 3,00,000

Case 2

Let Total Sales = x

Total Sales = Cash Sales + Credit Sales

Gross Profit = Sales − Cost of Goods Sold

Page No 4.101:

Answer:

Cost of Goods Sold = Opening Stock + Purchases + Direct Expenses – Closing Stock
                                = Rs 1,25,000 + Rs 3,00,000 + Rs 15,000 – Rs 75,000 = Rs 3,65,000



Page No 4.101:

Answer:

Page No 4.101:

Answer:

Net Credit Sales = Total Sales − Sales Return − Cash Sales

= 1,00,000 − 1,500 − 23,500 = 75,000



Page No 4.102:

Answer:

Let Credit Sales be = x

Total Sales = Cash Sales + Credit Sales

Credit Sales = 4,80,000

Closing Trade Receivables = Opening Trade Receivables + 40,000

1,00,000 = Opening Trade Receivables + 40,000

Opening Trade Receivables = Rs 60,000

Page No 4.102:

Answer:

Average Debtors =Opening Debtors + Closing Debtors2In 2015 = 83,000 + 1,17,0002 = Rs 1,00,000In 2016 =  1,17,000 + 83,0002 = Rs 1,00,000


Debtors Turnover Ratio = Net SalesAverage Debtors               In 2015         = 8,00,0001,00,000 = 8 Times               In 2016         = 7,00,0001,00,000 = 7 Times

Page No 4.102:

Answer:



Let Opening Trade Receivables = x

∴ Closing Trade Receivables = x + 7,000

∴ Opening Trade Receivables = x = 18,375

Closing Trade Receivables = x +7,000 = 25,375

Page No 4.102:

Answer:

Credit Sales = 8,00,000

Average Debtors = 1,00,000

Page No 4.102:

Answer:

Let Credit Sales be = x

Total Sales = Cash Sales + Credit Sales

Opening Trade Receivables = Closing Trade Receivables − 2,00,000

= 4,00,000 − 2,00,000 = 2,00,000

Trade Receivables Turnover Ratio=Net Credit SalesAverage Trade Receivables                                            =12,00,0003,00,000                                            =4Therefore, Trades Receivable Turnover Ratio is 4 Times

Page No 4.102:

Answer:

Page No 4.102:

Answer:





(iii) Let the Opening Trade Receivables be x

∴ Closing Trade Receivables = x + 6,000

∴ Opening Trade Receivables = x = Rs 37,000

Closing Trade Receivables = x + 6,000 = 43,000

Page No 4.102:

Answer:


Let the Opening Trade Receivables = x

∴ Closing  Trade Receivables = 2x


∴ Opening Trade Receivables = x = 30,000

Closing Trade Receivables = 2x = 2 × 30,000 = 60,000

Page No 4.102:

Answer:

Total Sales = Cost of Goods Sold + Gross Profit

= 3,50,000 + 1,50,000 = 5,00,000

Credit Sales = Total Sales − Cash Sales

= 5,00,000 − 2,00,000 = 3,00,000

Case 1:

Let Opening Trade Receivables = x

Closing Trade Receivables = x + 1,00,000

Opening Trade Receivables = x = RS 50,000

Closing Trade Receivables = x + 1,00,000 = 50,000 + 1,00,000 = Rs 1,50,000

Case 2:

Let Opening Trade Receivables = x

Closing Trade Receivables = 3 x

Opening Trade Receivables = x = Rs 50,000

Closing Trade Receivables = 3x = 3 × 50,000 = Rs 1,50,000

Case 3:

Let Opening Trade Receivables = x

Closing Trade Receivables = x + 3 x = 4x

Opening Trade Receivables = x = Rs 40,000

Closing Trade Receivables = 4 x = 4 × 40,000 = Rs 1,60,000



Page No 4.103:

Answer:

Trade Receivable Turnover Ratio =Credit Revenue from OperationsAverage Trade Receivables                                                    3 =3,00,000Average Trade ReceivablesAverage Trade Receivables = 3,00,0003=Rs 1,00,000Average Trade Receivables=Opening Trade Receivables+Closing  Trade Receivables2                            1,00,000 =x+4x2So, x would be Rs 40,000 Opening receivables would be Rs 40,000 and, Closing Receivables would be Rs 1,60,000(40,000×4)Revenue from Operations=3,00,000+2575×3,00,000=Rs 4,00,000Credit Revenue from Operations=Total Revenue from OperationsCash Revenue from Operations                                                   x=4,00,000-13xCredit Revenue from Operations=Rs 3,00,000

Page No 4.103:

Answer:

Case 1

Case 2

Net Credit Sales = Total Sales −Cash Sales

= 30,00,000 6,00,000 = 24,00,000


Case 3

Cost of Goods Sold = 3,00,000

Gross Profit = 25% on Cost

Total Sales = Cost of Goods Sold + Gross Profit

= 3,00,000 + 75,000 = 3,75,000

Cash Sales = 20% of Total Sales

Credit Sales = Total Sales − Cash Sales

= 3,75,000 − 75,000 = 3,00,000



Case 4

Let Sales be = x

Let Credit Sales be = a



Page No 4.103:

Answer:



(i) Collection from Trade Receivables Rs 40,000- Increase

Reason: Collection from Trade Receivables will result in decrease in the amount of closing Trade Receivables which will reduce the amount of average Trade Receivables.

Closing Trade Receivables = 2,00,000 − 40,000 = Rs 1,60,000


(ii) Credit Revenue from Operations, i.e. Sales Rs 80,000- Decrease

Reason: This transaction will result in increase in both credit sales as well as closing Trade Receivables. Increase in closing Trade Receivables, in turn, will lead to an increase in the average Trade Receivables.

Credit Sales = 8,00,000 + 80,000 = Rs 8,80,000

Closing Trade Receivables = 2,00,000 + 80,000 = Rs 2,80,000


(iii) Sales Return Rs 20,000- Increase

Reason: This transaction will result in decrease in both sales and average Trade Receivables.

Credit Sales = 8,00,000 − 20,000= Rs 7,80,000

Closing Trade Receivables = 2,00,000 − 20,000 = Rs 1,80,000


(iv) Credit Purchase Rs 1,60,000- No Change

Reason: Credit Purchase does not affect the Debtors Turnover Ratio.

Page No 4.103:

Answer:

Average Trade Payables = Opening Creditors & B/P + Closing Creditors & B/P2                           = 1,50,000 + 50,000 + 4,50,000 + 1,50,0002 = Rs 4,00,000Net Credit Purchases = Total Purchases - Purchases Return - Cash Purchases                                = 21,00,000 - 1,00,000 - 4,00,000 = Rs 16,00,000

Trade Payables Turnover Ratio = Net Credit PurchasesAverage Trade Payables = 16,00,0004,00,000 = 4 times
Average Debt Payment Period = 12Trade Payable Turnover Ratio = 124 = 3 months
 
 

 



Page No 4.104:

Answer:

Net Credit Purchases = Purchases – Cash Purchases – Purchase Return
                                  = Rs 9,50,000 – Rs 1,00,000 – Rs 45,000 = Rs 8,05,000




Page No 4.104:

Answer:

Case 1

Net Credit Purchases = Net Purchases − Cash Purchases

= 3,60,000 − 90,000 = 2,70,000
Trade Payables Turnover Ratio = Net Credit PurchasesClosing Trade Payables                                      = 2,70,00045,000 = 6 times

Case 2

Net Purchases = 3,60,000
Average Trade Payables = Opening Trade Payables + Closing Trade Payables2                                                     = 15,000 + 45,0002 = 30,000
Trade Payables Turnover Ratio = Net Credit PurchasesAverage Trade Payables  = 3,60,00030,000 = 12 times

Case 3

Trade Payable Turnover Ratio = Net Credit PurchasesClosing Trade Payables = 3,60,00045,000 = 8 times

Case 4

Net Credit Payables for Goods = Trade Payables − Creditors for Machinery

= 55,000 − 25,000 = 30,000

Trade Payables Turnover Ratio = Net Credit PurchasesAverage Trade Payables = 3,60,00030,000 = 12 times

Page No 4.104:

Answer:

Working Capital = Current Assets – Current Liabilities
                            = 5,00,000 – 3,00,000 = 2,00,000

Page No 4.104:

Answer:

Current Assets = Marketable Securities + Inventory + Sundry Debtors + Bills Receivable + Cash at Bank + Cash in Hand

= 1,50,000 + 50,000 + 2,00,000 + 50,000 + 1,00,000 + 50,000

= 6,00,000

Current Liabilities = Bills Payable + Sundry Creditors + Provision for Tax

= 30,000 + 2,00,000 + 20,000

= 2,50,000

Working Capital = Current Assets − Current Liabilities

= 6,00,000 − 2,50,000 = 3,50,000

Page No 4.104:

Answer:

Net Sales = Cash Sales + Credit Sales − Sales Returns

= 5,00,000 + 6,00,000 − 1,00,000 = 10,00,000

Page No 4.104:

Answer:

Net Sales = Cost of Goods sold + Gross Profit

Let Net Sales =  x


Page No 4.104:

Answer:

Gross Profit = 25% on Cost
Let Cost be = Rs x

Cost of Goods Sold = 20,00,000



Page No 4.104:

Answer:

Cost of Goods Sold = 40,00,000

Gross Profit = 20% of Cost

Page No 4.104:

Answer:

Working Capital Turnover Ratio=Net SalesWorking CapitalRevenue from Operations (Net Sales)=Rs 30,00,000 (Given)Working Capital=Current Assets-Current LiabilitiesCurrent Assets=12,50,000 (Given)Current Liabilities=?Total Assets=Total Liabilities=Rs 20,00,000 (Given)Total Liabilities=Shareholders' Funds + Non-Current Liabilities+Current Liabilities20,00,000=5,00,000+10,00,000+Current LiabilitiesCurrent Liabilities=Rs 5,00,000Working Capital=12,50,000-5,00,000=Rs 7,50,000Working Capital Turnover Ratio=30,00,0007,50,000=4 times

Page No 4.104:

Answer:

Gross Profit = Revenue from Operations – Cost of Revenue from Operations
                       = 6,00,000 – 5,40,000
                      = Rs 60,000
Gross Profit Ratio = Gross Profit Revenue from Operations × 100                             = 60,0006,00,000 × 100                              = 10%



Page No 4.105:

Answer:

Net Sales = Rs 5,00,000Gross Profit = Rs 50,000

Gross Profit Ratio = Gross Profit Net Sales × 100                             = 50,0005,00,000 × 100 = 10%
Note: Here we will not deduct the amount of sales return because the amount of net sales has already been provided in the question.

Page No 4.105:

Answer:

Sales = Cost + Gross Profit

Cost = x = Rs 3,20,000

Page No 4.105:

Answer:

Credit Sales = 5,00,000
Cash sales = 20% of Total Sales
 
Let Total Sales be ‘x’
Therefore, Cash Sales = 20% of x

Total Sales = Cash Sales + Credit Sales


Cost of Goods Sold = Purchases – Excess of Closing Stock over Opening Stock
                                = Rs 4,00,000 – Rs 25,000 = Rs 3,75,000

Gross Profit = Total Sales – Cost of Goods Sold
                    = Rs 6,25,000 – 3,75,000 = Rs 2,50,000


Page No 4.105:

Answer:

Credit Sale = Rs 5,00,000
Rate of Credit Sale to Cash Sale = 4:1

Cash Sale = 14 × 5,00,000 = Rs 1,25,000

Total Sales = Cash Sales + Credit Sales = Rs 1,25,000 + Rs 5,00,000 = Rs 6,25,000
Cost of Goods Sold = Purchases – Return Outward + Carriage Inwards + Wages + Decrease in Inventory
                              = Rs 3,00,000 – Rs 10,000 + Rs 10,000 + Rs 50,000 + Rs 10,000
                              = Rs 3,60,000

Gross Profit = Total Sales – Cost of Goods Sold
                    = Rs 6,25,000 – Rs 3,60,000 = Rs 2,65,000


Gross Profit Ratio = Gross Profit Net Sales × 100 = 2,65,0006,25,000 × 100 = 42.40%

Page No 4.105:

Answer:

Inventory Turnover Ratio = 8 times
Average Inventory = Rs 3,20,000


Cost of Goods sold = 25,60,000
Trade Receivables Turnover Ratio = 6 times
Average Trade Receivables = Rs 4,00,000



Net Credit Sales = 24,00,000
Total Sales = Cash Sales + Credit Sales
Total Sales = 25% of Total Sales + Credit Sales
75% of Total Sales = 24,00,000



Gross Profit = Total Sales – Cost of Goods Sold
                    = 32,00,000 – 25,60,000 = 6,40,000

Page No 4.105:

Answer:

Cost of Goods Sold = 8,00,000

(ii) Average Stock = 1,60,000

Stock Turnover Ratio = 6 Times

Gross Profit = 25% on Cost

(iii) Opening Inventory = 1,00,000

Closing Inventory = 60,000

Gross Profit = 25% on Cost

Page No 4.105:

Answer:

Transactions

Effect on Gross Profit Ratio

Reason

(i) Purchase of Stock-in-Trade Rs 50,000

No Change

Both purchases and closing inventory will increase by Rs 50,000; therefore, cost of revenue from operations will not be affected. So, Gross Profit Ratio will remain same.

(ii) Purchase Return Rs 15,000

No Change

Both purchases and closing inventory will decrease by Rs 15,000; therefore, cost of revenue from operations will not be affected. So, Gross Profit Ratio will remain same.

(iii) Cash Sale of Stock-in-Trade Rs 40,000

No Change

Revenue from operations will increase by Rs 40,000 and Gross Profit will increase by 10,000 (40,000 x 25%), Therefore, both revenue from operations and gross profit will increase by 25%. So, Gross Profit Ratio will remain same.

(iv) Stock-in-trade costing Rs 20,000 withdrawn for personal use

No Change

Both purchases and closing inventory will decrease by Rs 20,000; therefore, cost of revenue from operations will not be affected. So, Gross Profit Ratio will remain same.

(v) Stock-in-Trade costing Rs 15,000 distributed as free sample

No Change

Both purchases and closing inventory will decrease by Rs 15,000; therefore, cost of revenue from operations will not be affected. So, Gross Profit Ratio will remain same.

Page No 4.105:

Answer:

Page No 4.105:

Answer:

Revenue from Operations (Net Sales)= Rs 6,00,000*

Operating Ratio = 92%

Operating Ratio=Operating CostNet Sales×10092=Operating Cost6,00,000×100Operating Cost= 6,00,000×92100=5,52,000

Operating Cost = Cost of Goods Sold + Operating Expenses

5,52,000 = Cost of Goods Sold + 94,000

Cost of Goods Sold = Rs 4,58,000

*Note: Sales Return will not be considered since net sales are given which means sales return have already been adjusted in the sales figure.

Page No 4.105:

Answer:

Cost of Goods Sold = 2,20,000

Operating Cost = Cost of Goods Sold + Operating Expenses

Operating Cost = 2,20,000 + 26,000 = 2,46,000

Sales = 3,20,000

Operating Expenses = Office and Selling Expenses = 50,000



Page No 4.106:

Answer:

Net Sales = Gross Sales - Sales Return               = 88,000 - 8,000 = Rs 80,000

Operating Cost = Cost of Goods Sold + Operating Expenses                       = 52,000 + 18,000 = Rs 70,000Operating Ratio = Operating CostNet Sales × 100                         = 70,00080,000 × 100 = 87.5% 

Page No 4.106:

Answer:

Given:Revenue from Operations (Net Sales)=Rs 12,00,000Operating Ratio=75%Operating Expenses=Rs 1,00,000Find out: Cost of Revenue from OperationsOperating Ratio=Operating CostNet Sales×1000.75=Operating Cost12,00,000Operating Cost=Rs 9,00,000Operating Cost=Cost of Revenue from Operations+Operating Expenses9,00,000=Cost of Revenue from Operations+1,00,000Cost of Revenue from Operations=Rs 8,00,000

Page No 4.106:

Answer:

Given:Operating Cost=Rs 6,80,000Operating Expenses=Rs 80,000Gross Profit Ratio=25%Find out: Operating RatioOperating Cost=Cost of Revenue from Operations+Operating Expenses6,80,000=Cost of Revenue from Operations+80,000Cost of Revenue from Operations=Rs 6,00,000Gross Profit=14th of sales=13rd of costGross Profit=13×6,00,000=Rs 2,00,000Gross Profit Ratio=Gross ProfitNet Sales×10025=2,00,000Net Sales×100Net Sales=Rs 8,00,000Operating Ratio=Operating CostNet Sales×100                            =6,80,0008,00,000×100=85%

Page No 4.106:

Answer:

Cost of Goods Sold = Opening Inventory + Purchases – Closing Inventory
                               = 1,00,000 + 10,00,000 – 1,50,000 = 9,50,000

Operating Expenses = Administrative and Selling Expenses = 1,70,000
Operating Cost = Cost of Goods Sold + Operating Expenses
                         = 9,50,000 + 1,70,000 = 11,20,000

Net Sales = 14,70,000

Operating Profit Ratio = 100 – Operating Ratio = 100 – 76.19 = 23.81%

Page No 4.106:

Answer:

Cost of Goods Sold = 2,00,000
Operating Expenses = Office and Administrative Expenses = 50,000

Operating Cost = Cost of Goods Sold + Operating Expenses
                         = 2,00,000 + 50,000 = 2,50,000

Net Sales = 5,00,000


Operating Profit Ratio = 100 – Operating Ratio = 100 – 50 = 50%

Page No 4.106:

Answer:

Operating Ratio = 82.59%

Operating Ratio + Operating Profit Ratio = 100%

Operating Profit Ratio = 100% − 82.59% = 17.41%

Page No 4.106:

Answer:

Case 1

Case II

Case III

Net Sales = 3,60,000

Gross Profit = 20% on Sales

Case IV

Net Sales = 4,50,000

Case V

Sales = Cost Goods Sold + Gross Profit

∴Sales = 10,00,000

Page No 4.106:

Answer:

Gross Profit = 9,00,000×25125= Rs 1,80,000Operating Profit=Gross Profit-Operating Expenses                           =1,80,000-45,000=Rs 1,35,000   Operating  Profit  Ratio=Operating  ProfitRevenue  from  Operations×100                                       =1,35,0009,00,000×100=15%                    

Page No 4.106:

Answer:

Cost of Revenue from Operations=Operating Cost-Operating Expenses                                                     =3,40,000-20,000=Rs 3,20,000Gross Profit = 3,20,000×2080=Rs 80,000Revenue from Operations=Cost of Revenue from Operations + Gross Profit                                        =3,20,000+80,000=Rs 4,00,000Operating Profit=Revenue from Operations - Operating Cost                           =4,00,0003,40,000=Rs 60,000Operating  Profit  Ratio=Operating  ProfitRevenue  from  Operations×100                                        =60,0004,00,000×100=15%                      



Page No 4.107:

Answer:

Page No 4.107:

Answer:

Net Sales = 6,00,000

Net profit = 60,000

Page No 4.107:

Answer:

Net Sales= Rs 8,20,000

Gross Profit = Net Sales - Cost of Goods Sold                 = 8,20,000 - 5,20,000                 = Rs 3,00,000

Net Profit = Gross Profit - Operating Expenses - Interest on Debentures + Profit on Sale of Fixed Asset               = 3,00,000 - 2,09,000 - 40,500 + 81,000               =Rs 1,31,500

Net Profit Ratio=Net ProfitNet Sales×100                            =1,31,5008,20,000×100=16.04%

Page No 4.107:

Answer:

Net Profit=Operating Profit + Non Operating Incomes-Non Operating Expenses                =40,000+22,000- 2,000=Rs 60,000Operating Profit Ratio=100Operating Ratio =100-90 =10%Operating Profit=4,00,000×10%=Rs 40,000Net  Profit  Ratio=Net  ProfitRevenue  from  operations×100                       =60,0004,00,000×100=15%

Page No 4.107:

Answer:

Net Fixed Assets = Fixed Assets (at cost) − Accumulated Depreciation

= 22,50,000 − 2,50,000 = 20,00,000

Capital Employed = Net Fixed Assets + Current Assets − Current Liabilities

= 20,00,000 + 12,00,000 − 4,00,000

= 28,00,000

Interest on 10% Debentures = 10% of 10,00,000 = 1,00,000

Let Profit before Tax be = x

Profit after Tax = Profit Before Tax − Tax

Tax Rate = 50%

∴ Tax = 0.5 x

x − 0.5 x = 6,50,000

x = 13,00,000

Net Profit before Tax = x = 13,00,000

Profit before Interest and Tax = Profit before Tax + Interest on Long-term Debt

= 13,00,000 + 1,00,000

= 14,00,000

Page No 4.107:

Answer:

Net Profit before Interest and Tax = 2,50,000

Capital Employed = 10,00,000

Page No 4.107:

Answer:

Net Profit before Interest and Tax = 6,00,000

Capital Employed = Net Fixed Assets + Net Working Capital

= 20,00,000 + 10,00,000 = 30,00,000

Page No 4.107:

Answer:

Net Profit before Interest and Tax = 4,00,000

Capital Employed = 15% long-term Debt + Shareholders’ Funds

= 8,00,000 + 4,00,000 = 12,00,000

Page No 4.107:

Answer:

Net Profit after Tax (as per Statement of Profit and Loss) = 45,000

Provision for Taxation = 10,000

Net Profit before Interest and Tax = 45,000 + 10,000 = 55,000

Capital Employed = Share Capital + Reserves and Surplus + Long-term Borrowings

= 2,00,000 + 1,00,000 + 1,00,000 = 4,00,000



Page No 4.108:

Answer:

(i)

Opening Inventory = 80,000

Closing Inventory = 1,60,000

Cost of Goods Sold = Opening Inventory + Purchases + Direct Expenses − Closing Inventory

= 80,000 + 4,30,900 + 4,000 − 1,60,000

= 3,54,900

(ii)

Sales = 10,00,000

Gross Profit = Net Sales − Cost of Goods Sold

= 10,00,000 − 3,54,900 = 6,45,100

(iii)

Operating Expenses = Administration Expenses + Selling and Distribution Expenses

= 21,100 + 40,000 = 61,100

Page No 4.108:

Answer:

(i)

Sales = 1,50,000

Gross Profit = 30,000

(ii)

Opening Inventory = 29,000

Closing Inventory = 31,000

Cost of Goods Sold = 1,20,000

(iii)

Page No 4.108:

Answer:

(i)

Current Assets = Quick Assets + Closing Stock + Prepaid Expenses

= 6,00,000 + 50,000 + 10,000 = 6,60,000

Current Liabilities = 4,00,000

(ii)

Long-term Debts = 9% Debentures = 5,00,000

Shareholder’s Funds = Equity Share Capital + General Reserve

= 7,00,000 + 3,00,000 = 10,00,000

(iii)

Sales = 1,00,000

Cost of Goods Sold = 80% of Sales = 80,000

Operating Expenses = 10,000

Page No 4.108:

Answer:

(i)

Opening Inventory = 28,000

Closing Inventory = 22,000

Average Inventory = Opening Inventory + Closing Inventory2                            = 28,000 + 22,0002 = Rs 25,000

Cost of Goods Sold = Opening Inventory + Purchases + Carriage Inwards − Closing Inventory

= 28,000 + 46,000 + 4,000 − 22,000 = 56,000

Inventory Turnover Ratio = Cost of Goods SoldAverage Inventory = 56,00025,000 = 2.24 Times

(ii)

Operating Expenses = Office Expenses + Selling and Distribution Expenses

= 4,000 + 2,000 = 6,000

Net Sales = Rs 80,000*

Operating Ratio = Operating CostNet Sales × 100                          = 62,00080,000 × 100 = 77.5%
 

(iii)

Working Capital = 40,000
Working Capital Turnover Ratio = Net SalesWorking Capital = 80,00040,000 = 2 Times

*Note: Sales return will not be considered as amount of net sales is provided in the question.

Page No 4.108:

Answer:

A) Current Ratio = Current Assets Current Liabilities                        
Current Assets = Total Assets – Non Current Assets
                           = 1,00,000 – 50,000
                           = Rs 50,000
Total Assets = Total Liabilities = Shareholders’ Funds + Non Current Liabilities + Current Liabilities
     1,00,000 = 60,000 + 20,000 + Current Liabilities
Current Liabilities = Rs 20,000
Current Ratio = 50,00020,000 = 2.5 : 1

B) Working Capital Turnover Ratio = Revenue from Operations Working Capital                                                         
Working Capital = Current Assets – Current Liabilities
                              = 50,000 – 20,000
                              = Rs 30,000
Working Capital Turnover Ratio = 1,50,00030,000 =  5 times

Page No 4.108:

Answer:

(i)

Current Assets = 70,000

Current Liabilities = 35,000

(ii)

Liquid Assets = Current Assets − Inventory

= 70,000 − 30,000 = 40,000

(iii)

Net Sales = 1,20,000

Operating Cost = Cost of Goods Sold + Operating Expenses

= 60,000 + 40,000 = 1,00,000

(iv)

Gross Profit = Net Sales − Cost of Goods Sold

= 1,20,000 − 60,000 = 60,000



Page No 4.109:

Answer:

(i)

Net Sales = 5,00,000

Cost of Goods Sold = 3,00,000

Gross Profit = Net Sales − Cost of Goods Sold

= 5,00,000 − 3,00,000 = 2,00,000

(ii)

Current Assets = 2,00,000

Current Liabilities = 1,40,000

Working Capital = Current Assets − Current Liabilities

= 2,00,000 − 1,40,000 = 60,000

(iii)

Long-term Debts = 13% Debentures = 1,00,000

Equity = Paid-up Share Capital = 2,50,000

(iv)

Total Assets = Total Liabilities

= Current Liabilities + Paid-up Share Capital + 13% Debentures

= 1,40,000 + 2,50,000 + 1,00,000

= 4,90,000

Page No 4.109:

Answer:

(i)

Cost of Goods Sold = Opening Inventory + Purchases + Carriage Inwards − Closing Inventory

= 28,000 + 46,000 + 4,000 − 22,000

= 56,000

Average Inventory=OpeningInventory+ClosingInventory2                          =28,000+22,0002=25,000

Inventory TurnoverRatio=CostofGoodsSoldAverage Inventory                                   =56,00025,000 = 2.24 Times

(ii)

Operating Expenses = Office Expenses + Selling and Distribution Expenses

= 4,000 + 2,000 = 6,000

Operating Cost = Cost of Goods Sold + Operating Expenses

= 56,000 + 6,000 = 62,000

OperatingRatio=OperatingCostNetSales×100                       =62,00080,000×100 = 77.5%

(iii)

Gross Profit = Net Sales − Cost of Goods Sold

= 80,000 − 56,000 = 24,000

GrossProfitRatio=GrossProfitNetSales×100                          =24,00080,000×100 = 30%
Note: Sales return will not be considered because amount of net sales is provided in the question.

Page No 4.109:

Answer:

(i)

Long-term Debts = 6% Debentures + 9% Loan from Bank

= 3,00,000 + 7,00,000 = 10,00,000

Equity = Paid-up Share Capital + Debenture Redemption Reserve

= 17,00,000 + 3,00,000 = 20,00,000

(ii)

Current Assets = Other Current Assets + Inventory

= 8,00,000 + 1,00,000

= 9,00,000

Working Capital = Current Assets − Current Liabilities

= 9,00,000 − 4,00,000

= 5,00,000

Net Sales = Cash Sales + Credit sales

= 40,00,000 + 20,00,000

= 60,00,000

Page No 4.109:

Answer:

1) Return on Investment





2) Total Assets to Debt to Ratio

Total Assets to Debt Ratio = Total AssetsDebtTotal Assets = Fixed Assets + Current Assets                   =Rs (75,00,000 + 40,00,000)                   =Rs 1,15,00,000Debt = Rs 80,00,000Total Assets to Debt Ratio = 1,15,00,00080,00,000 = 1.44:1

Page No 4.109:

Answer:

(i)

Current Assets = Inventory + Prepaid Expenses + Other Current Assets

= 30,000 + 2,000 + 50,000 = 82,000

Current Liabilities = 40,000

(ii)

Liquid Assets = Current Assets − Inventory − Prepaid Expenses

= 82,000 − 30,000 − 2,000 = 50,000

(iii)

Long-term Debts = 12% Debentures = 30,000

Equity = Accumulated Profits + Equity Share Capital

= 10,000 + 1,00,000 = 1,10,000

Page No 4.109:

Answer:

Net Profit before tax = 6,00,000
Net Profit before interest, tax and dividend = Net Profit before tax + Interest on long-term borrowings
= 6,00,000 + 10% of 20,00,000 = 6,00,000 + 2,00,000 = 8,00,000


Capital Employed = Share Capital + Reserves and Surplus + Long-term borrowings
                            = 5,00,000 + 2,50,000 + 20,00,000 = 27,50,000




Page No 4.90:

Answer:

Current Assets = Trade Receivables + Pre-paid Expenses + Cash and Cash Equivalents +
Marketable Securities + Inventories
= Rs 1,80,000 + Rs 40,000 + Rs 50,000 + 50,000 + 80,000 = Rs 4,00,000


Current Liabilities = Bills Payable + Sundry Creditors + Expenses Payable
                             = Rs 20,000 + Rs 1,00,000 + Rs 80,000 = Rs 2,00,000


Page No 4.90:

Answer:

Total Assets = Fixed Tangible Assets + Non - Current Investments + Current Assets
5,00,000 = 2,50,000 + 1,50,000 + Current Assets
Current Assets = 5,00,000 – 4,00,000 = Rs 1,00,000
 
Total Assets = Shareholder’s Funds + Non – Current Liabilities + Current Liabilities
5,00,000 = 3,20,000 + 1,30,000 + Current Liabilities
Current Liabilities = 5,00,000 – 4,50,000 = Rs 50,000

Page No 4.90:

Answer:

Current  Ratio=Current  AssetsCurrent  Liabilities2.5=Current AssetsCurrent LiabilitiesCurrent Assets=2.5 Current LiabilitiesWorking  Capital=Current  Assets-Current  Liabilities1,50,000=2.5 Current LiabilitiesCurrent LiabilitiesCurrent Liabilities=1,50,0001.5Current Liabilities=Rs 1,00,000Current Assets=2.5 Current LiabilitiesCurrent Assets=2.5×1,00,000=Rs 2,50,000

Page No 4.90:

Answer:

Working Capital = Rs 9,00,000
Current Liabilities = Trade Payables + Other Current Liabilities
                              = Rs 90,000 + Rs 2,10,000 = Rs 3,00,000

Working Capital = Current Assets – Current Liabilities
       Rs 9,00,000 = Current Assets – Rs 3,00,000

Current Assets = Rs 9,00,000 + Rs 3,00,000 = Rs 12,00,000

Page No 4.90:

Answer:

Total Debts = 3,90,000

Long-term Debts = 3,00,000

Current Liabilities = Total Debts − Long-term Debts

= 3,90,000 − 3,00,000 = 90,000

Working Capital = Current Assets − Current Liabilities

1,80,000 = Current Assets − 90,000

Current Assets = 2,70,000

Page No 4.90:

Answer:

Current Assets = Rs 7,50,000
Working Capital = Rs 2,50,000
Working Capital = Current Assets – Current Liabilities
       2,50,000 = 7,50,000 – Current Liabilities
Current Liabilities = 7,50,000 – 2,50,000 = Rs 5,00,000

Page No 4.90:

Answer:

Let the Current Liabilities be = x

Current Assets = 2.5x

Working Capital = 60,000

Working Capital= Current Assets − Current Liabilities

60,000 = 2.5x − x

or, x = 40,000

Current Liabilities = x = 40,000

Current Assets = 2.5x = 2.5 × 40,000 = 1,00,000
Therefore, Current Assets = Rs 1,00,000 and
                  Current Liabilities = Rs 40,000

Page No 4.90:

Answer:

Working  Capital=Current  Assets-Current  Liabilities9,00,000=Current Assets3,00,000Current Assets=9,00,000+3,00,000=Rs 12,00,000Current  Ratio=Current AssetsCurrent Liabilities                      =12,00,0003,00,000=4:1



Page No 4.91:

Answer:

Current Assets = Rs 4,50,000
Current Liabilities = Rs 2,00,000
Purchase of Goods on Credit for Rs 30,000 will have two effects:

  1. Increase Stock by Rs 30,000, Current Assets will thereby increase to Rs 4,80,000 (Rs 4,50,000 + Rs 30,000)
  2. Increase Creditors by Rs 30,000 and therefore Current Liabilities will now be Rs 2,30,000 (Rs 2,00,000 + Rs 30,000)

Page No 4.91:

Answer:


Current Liabilities = Rs 1,75,000  
Payment of Rs 30,000 to a Creditor will have two effects:

  1. Decrease in Cash by Rs 30,000 and therefore Current Assets will decrease to Rs 3,20,000.
  2. Decrease in Creditors by Rs 30,000 and this will decrease Current Liabilities to Rs 1,45,000.

Page No 4.91:

Answer:

The company is interested in maintaining the Current Ratio of 2:1 by paying off the liability.

Let the liability paid-off by the company = x

∴ New Current Assets = 3,00,000 − x

New Current Liabilities = 2,00,000 − x

Therefore, liability of Rs 1,00,000 need to be paid-off by the company in order to maintain the Current Ratio of 2 : 1.

Page No 4.91:

Answer:

Current Assets = Rs 8,75,000
Current Liabilities = Rs 3,50,000
Current Ratio = 2.5:1

The business is interested to maintain its Current Ratio at 2:1 by purchasing goods on credit.
Let the amount of goods purchased on credit be ‘x’
Current Liabilities = Rs 3,50,000 + x
Current Assets = Rs 8,75,000 + x



8,75,000 + x = 7,00,000 + 2x
8,75,000 – 7,00,000 = 2x – x
1,75,000 = x


Therefore, goods worth Rs 1,75,000 must be purchased on credit to maintain the current ratio at 2:1.

Page No 4.91:

Answer:

Firm disposed off liabilities of Rs 1,00,000 which results in decrease in current liabilities and current assets by the same amount.
After disposing liabilities:
Current Assets = Rs 4,00,000 (Rs 5,00,000 – Rs 1,00,000)
And, Let Current Liabilities be (x – Rs 1,00,000)


4,00,000 = 2x – 2,00,000
6,00,000 =  2x
Therefore, x = 3,00,000


Current Liabilities after payment = x – Rs 1,00,000 = Rs 2,00,000

Working Capital after Payment = Current Assets – Current Liabilities
= Rs 4,00,000 – Rs 2,00,000 = Rs 2,00,000


Current Assets before payment = Rs 5,00,000
Current Liabilities before Payment = Rs 3,00,000
Therefore, Working Capital Before Payment = Current Assets – Current Liabilities
= Rs 5,00,000 – Rs 3,00,000 = Rs 2,00,000

Page No 4.91:

Answer:

Let’s assume Current Assets as Rs 2,00,000 and Current Liabilities as Rs 1,00,000
Current  Ratio=Current  AssetsCurrent  LiabilitiesCurrent Ratio=2,00,0001,00,000=2:1 

 (a) Cash paid to Trade Payables (say Rs 50,000)

     Current Ratio =2,00,00050,0001,00,00050,000=3:1 (Improve)


(b) Bills Payable discharged (say Rs 50,000)

    Current Ratio = 2,00,00050,0001,00,00050,000=3:1 (Improve)

(c) Bills Receivable endorsed to a creditor (say Rs 50,000)

    Current Ratio =2,00,00050,0001,00,00050,000=3:1 (Improve)      

(d) Payment of final Dividend already declared (say Rs 50,000)

    Current Ratio =2,00,00050,0001,00,00050,000=3:1 (Improve)

(e) Purchase of Stock-in-Trade on credit (say Rs 50,000)

     Current Ratio =2,00,000+50,0001,00,000+50,000=1.67:1 (Decline)

(f) Bills Receivable endorsed to a Creditor dishonoured (say Rs 50,000)
  
    Current Ratio =2,00,000+50,0001,00,000+50,000=1.67:1 (Decline)

(g) Purchase of Stock-in-Trade for cash (say Rs 50,000)


     Current Ratio =2,00,000+50,00050,0001,00,000=2:1 (No effect)

(h) Sale of Fixed Assets (Book value of Rs 50,000) for Rs 45,000

    Current Ratio=2,00,000+45,0001,00,000=2.45:1 (Improve)

(i) Sale of Fixed Assets (Book value of Rs 50,000) for Rs 60,000

    Current Ratio =2,00,000+60,0001,00,000=2.6:1 (Improve) 

Page No 4.91:

Answer:

(i)  Let’s assume Current Assets as Rs 1,00,000 and Current Liabilities as Rs 1,00,000

Current  Ratio=Current  AssetsCurrent  LiabilitiesCurrent Ratio =1,00,0001,00,000=1:1


(a) Cash paid to Trade Payables (say Rs 50,000)
 
   Current Ratio =1,00,00050,0001,00,00050,000=1:1 (No change)

(b) Purchase of Stock-in-Trade on credit (say Rs 50,000)
   
    Current Ratio=1,00,000+50,0001,00,000+50,000=1:1(No change)

(c) Purchase of Stock-in-Trade for cash (say Rs 50,000)

    Current Ratio =1,00,000+50,00050,0001,00,000=1:1 (No change)

(d) Payment of Dividend (say Rs 50,000)
  
    Current Ratio =1,00,00050,0001,00,00050,000=1:1 (No change)

(e) Bills Payable discharged (say Rs 50,000)

    Current Ratio =1,00,00050,0001,00,00050,000=1:1 (No change)

(f) Bills Receivable endorsed to a Creditor (say Rs 50,000)
 
    Current Ratio=1,00,00050,0001,00,00050,000=1:1 (No change)

(g) Bills Receivable endorsed to a Creditor dishonoured (say Rs 50,000)
  
     Current Ratio =1,00,000+50,0001,00,000+50,000=1:1 (No change)


(ii) Let’s assume Current Assets as Rs 80,000 and Current Liabilities as Rs 1,00,000

Current  Ratio=Current  AssetsCurrent  LiabilitiesCurrent Ratio =80,0001,00,000=0.8:1


(a) Cash paid to Trade Payables (say Rs 50,000)
 
   Current Ratio =80,00050,0001,00,00050,000=0.6:1 (Reduce)

(b) Purchase of Stock-in-Trade on credit (say Rs 50,000)
   
    Current Ratio=80,000+50,0001,00,000+50,000=0.87:1(Improve)

(c) Purchase of Stock-in-Trade for cash (say Rs 50,000)

    Current Ratio =80,000+50,00050,0001,00,000=0.8:1 (No change)

(d) Payment of Dividend (say Rs 50,000)
  
    Current Ratio =80,00050,0001,00,00050,000=0.6:1 (Reduce)

(e) Bills Payable discharged (say Rs 50,000)

    Current Ratio =80,00050,0001,00,00050,000=0.6:1 (Reduce)

(f) Bills Receivable endorsed to a Creditor (say Rs 50,000)
 
    Current Ratio=80,00050,0001,00,00050,000=0.6:1 (Reduce)

(g) Bills Receivable endorsed to a Creditor dishonoured (say Rs 50,000)
  
     Current Ratio =80,000+50,0001,00,000+50,000=0.87:1 (Improve)



Page No 4.92:

Answer:

Quick Assets or Liquid Assets = Currents Assets – Inventories – Pre-paid Expenses
= Rs 2,00,000 – Rs 50,000 – Rs 10,000 = Rs 1,40,000

Current Liabilities = Rs 70,000

Page No 4.92:

Answer:

Quick Assets = 1,50,000

Inventory = 40,000

Prepaid Expenses = 10,000

Current Assets = Quick Assets + Inventory + Prepaid Expenses

= 1,50,000 + 40,000 + 10,000 = 2,00,000

Working Capital = Current Assets − Current Liabilities

1,20,000 = 2,00,000 − Current Liabilities

Current Liabilities = 80,000

Page No 4.92:

Answer:

Current Liabilities = Current Assets − Working Capital

= 3,00,000 − 2,52,000 = 48,000

Quick Assets = Current Assets − Stock

= 3,00,000 − 60,000 = 2,40,000

Page No 4.92:

Answer:

Current Liabilities = Total Debts − Long-term Debts

= 7,80,000 − 6,00,000 = 1,80,000

Current Assets = Current Liabilities + Working Capital

= 1,80,000 + 3,60,000 = 5,40,000

Quick Assets = Current Assets − Stock

= 5,40,000 − 1,80,000 = 3,60,000

Page No 4.92:

Answer:

Current Liabilities = 6,00,000

Current Assets = 3 × Current Liabilities

= 3 × 6,00,000 = 18,00,000

Liquid Assets = 1 × 6,00,000 = 6,00,000

Inventory = Current Assets − Liquid Assets

= 18,00,000 − 6,00,000 = 12,00,000

Page No 4.92:

Answer:

Let Current Liabilities be = x

Current Assets = 3.5 x

Quick Assets = 2 x

Stock = Current Assets − Quick Assets

24,000 = 3.5 x − 2 x

or, 24,000 = 1.5 x

x = 16,000

Current Liabilities = x = Rs 16,000

Current Assets = 3.5 x = 3.5 × 16,000 = Rs 56,000

Page No 4.92:

Answer:

Inventory = 36,000

Let Current Liabilities be = x

Current Assets = 4.5x

Quick Assets = 3x

Stock = Current Assets − Quick Assets

36,000 = 4.5x − 3x

x = 24,000

Current Assets = 4.5x = 4.5 × 24,000 = 1,08,000

Liquid Assets= 3x = 3 × 24,000 = 72,000

Page No 4.92:

Answer:

Inventory = 6,00,000

Let Current Liabilities be = x

Current Assets = 4x

Quick Assets = 2.5x

Stock = Current Assets − Quick Assets

6,00,000 = 4x − 2.5x

x = 4,00,000

Current Assets = 4x = 4 × 4,00,000 = 16,00,000

Liquid Assets = 2.5x = 2. 5× 4,00,000 = 10,00,000

Page No 4.92:

Answer:

Current Liabilities = 1,50,000

Current Assets = 3 × Current Liabilities

= 3 × 1,50,000 = 4,50,000

Liquid Assets = 1 × 1,50,000 = 1,50,000

Inventory = Current Assets − Liquid Assets

= 4,50,000 − 1,50,000 = 3,00,000

Page No 4.92:

Answer:

Let the Current Liabilities be = x

Current Assets = 4x

Quick Assets = 2.5x

Stock = Current Assets − Quick Assets

6,00,000 = 4x − 2.5x

or, x = 4,00,000

Current Liabilities = x = Rs 4,00,000

Page No 4.92:

Answer:

Current Assets = 5,00,000

Liquid Assets = Current Liabilities × 1 = 2,00,000

Inventory = Current Assets − Quick Assets

= 5,00,000 − 2,00,000 = 3,00,000

Page No 4.92:

Answer:

Quick Ratio = 2:1

Let Quick Assets be = Rs 20,000

Current Liabilities = Rs 10,000

(a) Purchase of goods for Cash- Reduce

Reason: This transaction will result decrease in cash and increases in stock. Liquid Asset will decrease due payment for goods purchased.

Example: Purchase of goods Rs 5,000 for cash

Quick Assets = 20,000 − 5,000 (Cash) = Rs 15,000

(b) Purchase of goods on Credit- Reduce

Reason: Purchase of goods on credit will result increase in Current Liabilities and no change in Quick Assets.

Example: Purchase of goods on Credit Rs 5,000

Current Liabilities = 10,000 + 5,000 (Creditors) = Rs15,000

(c) Sale of goods for Rs 10,000- Improve

Reason: Sale of goods will result in increase in Quick Assets by the amount of Rs 10,000 in the form of either in cash or debtor. This transaction will result no change in current liabilities.

(d) Sale of goods costing Rs 10,000 of or Rs 11,000- Improve

Reason: This transaction will increase the Quick Assets by Rs 11,000 in the form of either in cash or debtors but no effect on the Current Liabilities.

Quick Assets after sale of goods = 20,000 + 11,000 = Rs 31,000

Quick Ratio after sale of goods= (20,000+11,000)10,000=3.1:1

(e) Cash received from debtors- No change

Reason: This transaction results increase in one quick asset in the form of cash and decrease in other quick asset in the form of debtor with equal amount. Therefore it result in no change in the total of Quick Assets.

Example: Cash received from debtors Rs 5,000

Quick Assets = 20,000 + 5,000 (Cash) − 5,000 (Debtors) = 20,000



Page No 4.93:

Answer:

Quick Assets = 12,00,000

Current Assets = Quick Assets + Stock

= 12,00,000 + 3,00,000 = 15,00,000

Page No 4.93:

Answer:

Current Assets = Total Assets − Fixed Assets

Fixed Assets = 10,00,000

Total Assets = 22,00,000

∴ Current Assets = 22,00,000 − 10,00,000 = 12,00,000

Current Liabilities = Total Assets − Capital Employed

= 22,00,000 − 20,00,000 = 2,00,000

Page No 4.93:

Answer:

Capital Employed = 10,00,000

Fixed Assets = 7,00,000

Current Assets = Capital Employed + Current Liabilities − Fixed Assets

= 10,00,000 + 1,00,000 − 7,00,000 = 4,00,000

Page No 4.93:

Answer:

(i) Current Ratio
Current Assets = Inventories + Cash and Cash Equivalents + Debtors + Bills Receivable + Marketable Securities
= Rs 5,00,000 + Rs 50,000 + Rs 3,10,000 + Rs 30,000 + Rs 1,50,000 = Rs 10,40,000

Current Liabilities = Short-Term Borrowings + Creditors + Bills Payable
= Rs 1,00,000 + 3,00,000 + Rs 1,20,000 = Rs 5,20,000




(ii) Liquid Ratio
Quick Assets = Currents Assets – Inventories
= Rs 10,40,000 – Rs 5,00,000 = Rs 5,40,000

Or
Quick Assets = Cash and Cash Equivalents + Debtors + Bills Receivable + Marketable Securities
                      = Rs 50,000 + Rs 3,10,000 + Rs 30,000 + Rs 1,50,000 = Rs 5,40,000

Current Liabilities = As calculated in (i) = Rs 5,20,000

Page No 4.93:

Answer:

Current Assets = Inventories + Trade Receivables + Cash and Cash Equivalents

= 18,600 + 9,600 + 19,800

= 48,000

Current Liabilities = Short-term Borrowings + Trade Payables

= 6,000 + 18,000

= 24,000



Page No 4.94:

Answer:

Current Assets = Inventory + Trade Receivables + Cash and Cash Equivalents

= 50,000 + 30,000 + 20,000 = 1,00,000

Current Liabilities = Short-term Borrowings + Trade Payables + Provision for Tax

= 3,000 + 13,000 + 4,000 = 20,000

Quick Assets = Trade Receivables + Cash and Cash Equivalents

= 30,000 + 20,000 = 50,000

Comments:

1. Ideal Current Ratio for a business is considered to be 2:1. But in this case the ratio is quite high i.e. 5:1. This may be due to the following reasons:

(i) Blockage of Funds in Stock

(ii) High Amount outstanding from Debtors

(iii) Huge Cash and Bank Balances

2. Ideal Quick Ratio of a business is supposed to be 1:1. This implies that Liquid Assets should be equal to the Current Liabilities. But in the given case Quick Ratio is 2.5 : 1 which indicates that the Liquid Assets are quite high in comparison to the Current Liabilities.

Page No 4.94:

Answer:

(i) Current RatioCurrent Assets=Total Assets-Fixed Assets-Non-Current Investment - Long term Loans and Advances                       =8,00,000-3,00,000-50,000-50,000=Rs 4,00,000Current Liabilities=Total Debt - Non-Current Liabilities                             =6,00,000-2,00,000-2,00,000=Rs 2,00,000Current  Ratio=Current  AssetsCurrent  Liabilities                     =4,00,0002,00,000=2:1(ii) ​ Quick Ratio Quick Assets=Current Assets-Stock-Prepaid Expenses                   =4,00,000-95,0005,000=Rs 3,00,000Quick  Ratio=Quick  AssetsCurrent  Liabilities                     =3,00,0002,00,000=1.5:1

Page No 4.94:

Answer:

Equity = Equity Share Capital + General Reserve + Accumulated Profits

= 5,00,000 + 90,000 + 50,000 = 6,40,000

Debt = 10% Debentures = 1,30,000

Page No 4.94:

Answer:

Total Debts = 1,80,000

Current Liabilities = 20,000

Long-term Debts = Total Debts − Current Liabilities

= 1,80,000 − 20,000 = 1,60,000

Equity = Total Assets − Total Liabilities

= 2,60,000 − 1,80,000 = 80,000

Page No 4.94:

Answer:

Long-Term Debt = Debentures = Rs 75,000
Shareholder’s Funds = Equity Share Capital + Preference Share Capital + General Reserve + Surplus
= Rs 1,00,000 + Rs 50,000 + Rs 45,000 + Rs 20,000 = Rs 2,15,000




Page No 4.95:

Answer:

Debt-Equity Ratio = 2:1

Let Long-term loan = Rs 20,00,000

Shareholders’ Funds = Rs 10,00,000

(i) Sale of Land (Book Value Rs 4,00,000) for Rs 5,00,000- Decrease

Reason: This transaction will result increase in Shareholders’ Funds by Rs 1,00,000 as profit on sale of Land.

Shareholders’ Funds after adjusting profit on sale of land = 10,00,000 + 1,00,000 = Rs 11,00,000

(ii) Issue of Equity share for the purchase of plant and Machinery worth Rs 10,00,000- Decrease

Reason: This transaction will increase the amount of Shareholders Fund by Rs 10,00,000 in the form of equity shares and have no effect on Long-term Loans.

(iii) Issue of preference Shares for redemption of 13% Debentures worth Rs 10,00,000- Decrease

Reason: This transaction will lead to decrease in Long-term Loan by Rs 10,00,000 in the form of redemption of debentures and increase in Shareholders’ Funds with the same amount in the form of Preference Shares.

Page No 4.95:

Answer:

Total Assets = 12,50,000

Total Debts = 10,00,000

Equity = Total Assets − Total Liabilities

= 12,50,000 − 10,00,000 = 2,50,000

Long-term Debts = Total Debts − Current Liabilities

= 10,00,000 − 5,00,000 = 5,00,000

Page No 4.95:

Answer:

Shareholders’ Funds = 2,00,000

Capital Employed = 8,00,000

Long- Term Debts = Capital Employed − Shareholders’ Funds

= 8,00,000 − 2,00,000 = 6,00,000

Page No 4.95:

Answer:

(i) Debt-Equity Ratio is an indicator of Long-term financial health. It shows the proportion of Long-term loan in comparison of shareholders’ Funds.

Debt-Equity Ratio = Long Term DebtsEquity

Debt = Loan from IDBI @ 9% = 30,00,000

Equity = 10% Preference Share Capital + Equity Share Capital + Reserves & Surplus

= 5,00,000 + 15,00,000 + 4,00,000 = 24,00,000

Debt-Equity Ratio = 30,00,00024,00,000 = 1.25:1

(ii) Current Ratio is an indicator of short-term financial portion. It shows the proportion of Current Assets in comparison of Current Liabilities.
Current Ratio = Current AssetsCurrent Liabilities

Current Assets = 12,00,000

Current Liabilities = 8,00,000

Current Ratio = 12,00,0008,00,000 = 1.5:1

Note: In the above question, Securities Premium Reserve is not considered while computing Equity because it is already included in the amount of Reserves and Surplus.

Page No 4.95:

Answer:

Debt=Long Term Borrowings+Long Term Provisions        = 4,20,000+1,40,000 = Rs 5,60,000Equity=Total Assets - Total Debts           = (8,40,000 -1,40,000+14,000+56,000+3,50,000) - (4,20,000 -1,40,000 -2,80,000)= Rs 2,80,000Debt  to  Equity  Ratio=DebtEquity                                  =5,60,0002,80,000=2:1

Page No 4.95:

Answer:

Debt Equity Ratio = 0.5:1

Let Long- term Loan be = Rs 5,00,000

Shareholders’ Funds = Rs 10,00,000

(i) Issue of Equity shares- Decrease

Reason: Issue of equity shares results in increase in Shareholders’ Funds in the form of equity shares but there will be no change in Long-term Loan.

Example: Issue of equity share Rs 5,00,000

Shareholders’ Funds after issue of equity shares = 10,00,000 + 15,00,000

= Rs 15,00,000

(ii) Cash received from Debtors- No Change

Reason: Cash received from debtors will increase one current asset in the form of cash and decrease other asset in the form of debtors. This transaction will have no effect on Long-term Loan and Shareholders’ Funds.

(iii) Redemption of Debentures- Decrease

Reason: This transaction will result decrease in Long-term Loans in the form of reduction in debtors and no change in Shareholders’ Funds.

Example: Redemption of Debentures Rs 2,00,000

Long-term Loan = 5,00,000 − 2,00,000 = 3,00,000

(iv) Purchased of goods on Credit- No Change

Reason: Neither Long-term loan nor share holders’ funds will be affected by this transaction because purchase of goods results no change in Long-term Loan and Shareholders’ Funds.

Page No 4.95:

Answer:

Let’s take Debt and Equity as Rs 2,00,000 and Rs 1,00,000

Debt  to  Equity  Ratio=DebtEquity                                  =2,00,0001,00,000=2:1

(i) Issue of new shares for cash (say Rs 50,000)

    Debt to Equity Ratio =2,00,0001,00,000+50,000=1.33:1(Decrease)

(ii) Conversion of debentures into equity shares (say Rs 50,000)
 
    Debt to Equity Ratio =2,00,0001,00,000+50,000=1.33:1(Decrease)

(iii) Sale of a fixed asset at profit (say Rs 50,000 profit)

    Debt to Equity Ratio =2,00,0001,00,000+50,000=1.33:1(Decrease)

(iv) Purchase of fixed asset on long term payment basis (say Rs 50,000)

    Debt to Equity Ratio =2,00,000+50,0001,00,000=2.5:1(Increase)

(v) Payment to creditors (say Rs 50,000)

     Debt to Equity Ratio =2,00,0001,00,000=2:1(No Change)



Page No 4.96:

Answer:

Long-term Debt = Debentures = 2,50,000

Equity = Equity Share Capital + 10% Preference Share Capital + Reserves and Surplus

= 5,00,000 + 5,00,000 + 2,40,000 = 12,40,000

Page No 4.96:

Answer:

Long-term Debts = 4,00,000

Total Assets = 7,70,000

Page No 4.96:

Answer:

Total Debts = 3,60,000

Shareholders’ Funds = 1,60,000

Current Liabilities = 40,000

Total Assets = Total Debts + Shareholders’ Funds

= 3,60,000 + 1,60,000 = 5,20,000

Long-term Debts = Total Debt − Current Liabilities

= 3,60,000 − 40,000 = 3,20,000

Page No 4.96:

Answer:

Total Assets to Debt Ratio =  Total AssetsLong Term Debt
Total Assets = Land and Buildings + Trade Receivables + Cash and Cash Equivalents + Investments (Trade)
                       = 60,00,000 + 4,00,000 + 5,00,000 + 1,00,000
                       = Rs 70, 00,000
Long Term Debts = Capital Employed - Shareholders’ funds
                              = 50,00,000 – 40,00,000
                              = Rs 10,00,000
Shareholder’s Fund = Share Capital + Reserve and Surplus
                                 = 35,00,000 + 3,00,000 + 2, 00,000
                                 = Rs 40,00,000

Total Assets to Debt Ratio = 70,00,00010,00,000 = 7 : 1

Page No 4.96:

Answer:

Total Assets to Debt Ratio =  Total AssetsLong Term Debt
Working Capital = Current Assets – Current Liabilities
           5,00,000 = 25,00,000 – Current Liabilities
              Current Liabilities = Rs 20,00,000
Long Term Debts = Total Debt – Current Liabilities
                              = 60,00,000 – 20,00,000
                              = Rs 40,00,000
Total Assets = Total Liabilities = Total Debt + Shareholders’ Funds
                     = 60,00,000 + 10,00,000
                    = Rs 70,00,000
Total Assets to Debt Ratio = 70,00,00040,00,000 = 7 : 4 or 1.75 : 1



Page No 4.97:

Answer:

Total Assets to Debt Ratio =  Total AssetsLong Term Debt

Capital Employed = Total Assets – Current Liabilities
            15,00,000 = Total Assets – 5,00,000
         Total Assets = Rs 20,00,000
Long Term Debt = Total Debt – Current Liabilities
                              = 15,00,000 – 5,00,000
                              = Rs 10,00,000

Total Assets to Debt Ratio = 20,00,00010,00,000 = 2 : 1

Page No 4.97:

Answer:

Total Assets = Rs 15,00,000
Current Liabilities = Creditors + Bills Payable + Bank Overdraft + Outstanding Expenses
                              = Rs 90,000 + Rs 60,000 + Rs 50,000 + Rs 20,000 = Rs 2,20,000

Long-Term Debt = Total Debt – Current Liabilities
= Rs 12,00,000 – Rs 2,20,000 = Rs 9,80,000


Page No 4.97:

Answer:

Working Capital=Current Assets-Current Liabilities1,00,000=5,00,000-Current LiabilitiesCurrent Liabilities=Rs 4,00,000Debt=Total Debt-Current Liabilities=12,00,000 - 4,00,000 = Rs 8,00,000Total Assets=Shareholders' Funds+ Total Debt                    =2,00,000+12,00,000=Rs 14,00,000Total  Assets  to  Debt  Ratio =Total  AssetsDebt                                           =14,00,0008,00,000=1.75:1

Page No 4.97:

Answer:

Debt=Total Debt-Current Liabilities=12,00,0004,00,000=Rs 8,00,000Total Assets=Capital Employed+ Current Liabilities                    =12,00,000+4,00,000=Rs 16,00,000Total  Assets  to  Debt  Ratio =Total  AssetsDebt                                           =16,00,0008,00,000=2:1

Page No 4.97:

Answer:

Debts=Long-term Borrowings+Long Term Provisions=3,00,000+1,00,000=Rs 4,00,000Total Assets=Non-Current Assets + Current Assets                    =6,00,000 -1,00,000+10,000+2,50,000+40,000=Rs 8,00,000Total  Assets  to  Debt  Ratio =Total  AssetsDebt                                       =8,00,0004,00,000=2:1

Page No 4.97:

Answer:

Total Assets = Fixed Assets + Inventories + Trade receivables + Cash and Cash Equivalents

= 6,00,000 + 1,50,000 + 2,50,000 + 1,00,000 = 11,00,000

Long-term Debts = Long-term Borrowings = Rs 2,00,000



Page No 4.98:

Answer:

Total Assets = Fixed Assets + Current Assets + Investments

= 3,75,000 + 1,50,000 + 2,25,000 = 7,50,000

Shareholders’ Funds = Equity Share Capital + Preference Share Capital + Reserves and Surplus

= 3,00,000 + 1,50,000 + 75,000 = 5,25,000

Page No 4.98:

Answer:

Total Assets = Fixed Assets + Trade Investments + Current Assets

= 7,00,000 + 2,45,000 + 3,00,000 = 12,45,000

Shareholders’ Funds = Equity Share Capital + 10% Preference Share Capital + Reserves and Surplus

= 4,50,000 + 3,20,000 + 65,000 = 8,35,000

Page No 4.98:

Answer:

Total Assets = Fixed Assets + Short-term Investments + Inventories + Trade Receivables + Cash and Cash Equivalents

= 5,00,000 + 1,50,000 + 1,00,000 + 1,50,000 + 1,00,000 = 10,00,000

Shareholders’ Funds = Share Capital + Reserves and Surplus

= 6,00,000 + 1,50,000 = 7,50,000

Page No 4.98:

Answer:

Net Profit before Interest and Tax = 5,00,000

Interest = 1,00,000

Page No 4.98:

Answer:

Profit before Interest and Tax = Profit after Tax + Tax +Interest

= 1,70,000 + 30,000 + 50,000 = 2,50,000



Page No 4.99:

Answer:

Profit before Interest and Tax = Profit after Tax + Tax + Interest on Debentures + Interest on Long-term Loans from Bank

= 75,000 + 9,000 + 5,000 + 5,000 = 94,000

Total Interest Amount = Interest on Debentures + Interest on Long-term loans from Bank

= 5,000 + 5,000 = 10,000

Page No 4.99:

Answer:

Cost of Goods Sold = 4,50,000

Page No 4.99:

Answer:

Cost of Goods Sold = Opening Inventory + Purchases − Closing Inventory

5,00,000 = 1,00,000 + 5,50,000 − Closing Inventory

Closing Inventory = 1,50,000

Page No 4.99:

Answer:

Cost of Goods Sold = Net Sales – Gross Profit
                               = Rs 6,00,000 – 30% of Rs 6,00,000
                               = Rs 6,00,000 – Rs 1,80,000 = Rs 4,20,000


Cost of Goods Sold = Opening Inventory + Purchases – Closing Inventory
  Rs 4,20,000  = Rs 50,000 + Rs 3,90,000 – Closing Inventory
Closing Inventory =  Rs 50,000 + Rs 3,90,000 – Rs 4,20,000
                              = Rs 20,000


Page No 4.99:

Answer:

Sales = 3,20,000

Gross Profit = 25% on Sales

Cost of Goods Sold = Total Sales − Gross Profit

= 3,20,000 − 80,000 = 2,40,000

Page No 4.99:

Answer:

Cost of Revenue from Operations=Revenue from Operations+Gross Loss                                                    =16,00,000+80,000=Rs 16,80,000Inventory  Turnover  Ratio=Cost  of  Revenue  from  OperationsAverage  Inventory                                       =16,80,0002,20,000=7.64Times       

Page No 4.99:

Answer:

Sales = 4,00,000

Gross Profit = 1,00,000

Cost of Goods Sold = Sales − Gross Profit

= 4,00,000 − 1,00,000 = 3,00,000

Let Opening Inventory = x

Closing Inventory = x + 40,000

1,20,000 = x + 40,000

x= 80,000

Opening Inventory = 80,000

Page No 4.99:

Answer:

Cost of Goods Sold = Net Sales (Sales – Sales Return) – Gross Profit
                               = Rs 5,00,000 – Rs 50,000 – Rs 90,000 = Rs 3,60,000

Closing Inventory = Rs 1,00,000
Closing Inventory is Rs 20,000 more than the Opening Inventory

Therefore, Opening Inventory = Rs 80,000 (Rs 1,00,000 – Rs 20,000)


Page No 4.99:

Answer:

Let Opening Inventory = x

Closing Inventory = 1.5 × x = 1.5 x

Opening Inventory = x = Rs 20,000

Closing Inventory = 1.5 x = 20,000 × 1.5 = Rs 30,000



View NCERT Solutions for all chapters of Class 15