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Page No 4.100:

Question 111:

Answer:

Operating Ratio = 82.59%

Operating Ratio + Operating Profit Ratio = 100%

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

Page No 4.100:

Question 112:

Operating Ratio = 82.59%

Operating Ratio + Operating Profit Ratio = 100%

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

Answer:

Page No 4.100:

Question 113:

Answer:

Net Sales = 6,00,000

Net profit = 60,000

Page No 4.100:

Question 114:

Net Sales = 6,00,000

Net profit = 60,000

Answer:

Net Sales= Rs 8,20,000*

Gross Profit= Net Sales-Cost of Goods Sold                       =8,20,000-5,20,000                       =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                  =1,31,500

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

Note: The answer given in the book is different from our answer as we are already given with the figure of Net Sales which means Sales Returns have already been adjusted. Therefore, we have not deducted the figure of Sales Returns from Net Sales.

Page No 4.100:

Question 115:

Net Sales= Rs 8,20,000*

Gross Profit= Net Sales-Cost of Goods Sold                       =8,20,000-5,20,000                       =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                  =1,31,500

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

Note: The answer given in the book is different from our answer as we are already given with the figure of Net Sales which means Sales Returns have already been adjusted. Therefore, we have not deducted the figure of Sales Returns from Net Sales.

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 4.100:

Question 116:

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

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 4.100:

Question 117:

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

Answer:

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

Capital Employed = 10,00,000

Page No 4.100:

Question 118:

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

Capital Employed = 10,00,000

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 4.100:

Question 119:

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

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 4.101:

Question 120:

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

Answer:

Long-term Debts = 12% Mortgage Loan = 3,60,000

Equity = Equity Share Capital + 10% Preference Share Capital + General Reserve + Balance in Statement of Profit and Loss

= 8,00,000 + 2,08,000 + 84,000 + 84,000 = 11,76,000

Total Assets = Land and Building + Furniture + Machinery + Inventory + Debtors + Bills Receivables

= 4,80,000 + 3,60,000 + 2,52,000 + 3,00,000 + 1,05,600 + 2,40,000 = 17,37,600

Let Net Profit before Tax be = x

∴ Tax = 0.4x

Net Profit after Tax = Net Profit before Tax − Tax

3,00,000 = x 0.4x

x = 5,00,000

Net Profit before Tax = x = 5,00,000

Net Profit before Interest and Tax = Net Profit before Tax + Interest

Net Profit before Interest and Tax = 5,00,000 + 43,200 = 5,43,200

Page No 4.101:

Question 121:

Long-term Debts = 12% Mortgage Loan = 3,60,000

Equity = Equity Share Capital + 10% Preference Share Capital + General Reserve + Balance in Statement of Profit and Loss

= 8,00,000 + 2,08,000 + 84,000 + 84,000 = 11,76,000

Total Assets = Land and Building + Furniture + Machinery + Inventory + Debtors + Bills Receivables

= 4,80,000 + 3,60,000 + 2,52,000 + 3,00,000 + 1,05,600 + 2,40,000 = 17,37,600

Let Net Profit before Tax be = x

∴ Tax = 0.4x

Net Profit after Tax = Net Profit before Tax − Tax

3,00,000 = x 0.4x

x = 5,00,000

Net Profit before Tax = x = 5,00,000

Net Profit before Interest and Tax = Net Profit before Tax + Interest

Net Profit before Interest and Tax = 5,00,000 + 43,200 = 5,43,200

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 4.101:

Question 122:

(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

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 4.102:

Question 123:

(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)

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 4.102:

Question 124:

(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

Answer:

(i)

Liquid Assets = Trade Receivables + Cash and Cash Equivalents

= 50,000 + 20,000 = 70,000

Current Liabilities = Trade Payables + Other Current Liabilities

= 95,000 + 35,000 = 1,30,000

(ii)

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

= 25,000 + 1,00,000 + 8,000 − 30,000 = 1,03,000

Opening Stock = 25,000

Closing Stock = 30,000

(iii)

Net Profit = 70,000

Capital Employed = Share Capital + Reserves and Surplus

= 1,00,000 + 70,000 = 1,70,000



Page No 4.103:

Question 125:

(i)

Liquid Assets = Trade Receivables + Cash and Cash Equivalents

= 50,000 + 20,000 = 70,000

Current Liabilities = Trade Payables + Other Current Liabilities

= 95,000 + 35,000 = 1,30,000

(ii)

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

= 25,000 + 1,00,000 + 8,000 − 30,000 = 1,03,000

Opening Stock = 25,000

Closing Stock = 30,000

(iii)

Net Profit = 70,000

Capital Employed = Share Capital + Reserves and Surplus

= 1,00,000 + 70,000 = 1,70,000

Answer:

(i)

Current Assets = Sundry Debtors + Stock + Cash + Bank

= 10,000 + 15,000 + 10,000 + 5,000

= 40,000

Current Liabilities = Bills Payable + Creditors

= 6,000 + 14,000

= 20,000

(ii)

Sales = 60,000

Operating Expenses = 12,000

Cost of Goods Sold = 18,000

Page No 4.103:

Question 126:

(i)

Current Assets = Sundry Debtors + Stock + Cash + Bank

= 10,000 + 15,000 + 10,000 + 5,000

= 40,000

Current Liabilities = Bills Payable + Creditors

= 6,000 + 14,000

= 20,000

(ii)

Sales = 60,000

Operating Expenses = 12,000

Cost of Goods Sold = 18,000

Answer:

(i)

Opening Inventory = 28,000

Closing Inventory = 22,000

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

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

(ii)

Operating Expenses = Office Expenses + Selling and Distribution Expenses

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

Net Sales = Sales − Sales Return

= 90,000 − 10,000 = 80,000

(iii)

Working Capital = 40,000

Page No 4.103:

Question 127:

(i)

Opening Inventory = 28,000

Closing Inventory = 22,000

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

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

(ii)

Operating Expenses = Office Expenses + Selling and Distribution Expenses

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

Net Sales = Sales − Sales Return

= 90,000 − 10,000 = 80,000

(iii)

Working Capital = 40,000

Answer:

 

**It has been assumed that Other Current Assets includes Prepaid Expenses.

 

(i)

 

 

Page No 4.103:

Question 128:

 

**It has been assumed that Other Current Assets includes Prepaid Expenses.

 

(i)

 

 

Answer:

(i)

Long-term Debts = 15% Loan = 1,20,000

Shareholders’ Funds = Share Capital + Reserves and Surplus

= 1,00,000 + 90,000 = 1,90,000

(ii)

Net Sales = 1,80,000

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

= 40,000 + 90,000 + 50,000 = 1,80,000

Current Liabilities = Trade Payables = 50,000

Working Capital = Current Assets − Current Liabilities

= 1,80,000 − 50,000 = 1,30,000

(iii)



Page No 4.104:

Question 129:

(i)

Long-term Debts = 15% Loan = 1,20,000

Shareholders’ Funds = Share Capital + Reserves and Surplus

= 1,00,000 + 90,000 = 1,90,000

(ii)

Net Sales = 1,80,000

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

= 40,000 + 90,000 + 50,000 = 1,80,000

Current Liabilities = Trade Payables = 50,000

Working Capital = Current Assets − Current Liabilities

= 1,80,000 − 50,000 = 1,30,000

(iii)

Answer:

(i)

Net Sales = 30,00,000

Cost of Goods Sold = 20,00,000

Gross Profit = Net Sales − Cost of Goods Sold

= 30,00,000 − 20,00,000 = 10,00,000

(ii)

Working Capital = Current Assets − Current Liabilities

= 6,00,000 − 2,00,000 = 4,00,000

(iii)

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

Equity = Paid-up Share Capital

= 5,00,000

Page No 4.104:

Question 130:

(i)

Net Sales = 30,00,000

Cost of Goods Sold = 20,00,000

Gross Profit = Net Sales − Cost of Goods Sold

= 30,00,000 − 20,00,000 = 10,00,000

(ii)

Working Capital = Current Assets − Current Liabilities

= 6,00,000 − 2,00,000 = 4,00,000

(iii)

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

Equity = Paid-up Share Capital

= 5,00,000

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 4.104:

Question 131:

(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

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 4.105:

Question 132:

(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

Answer:

(i)

Net Sales = Sales − Sales Return

= 90,000 − 10,000

= 80,000

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

= 28,000 + 46,000 + 4,000 − 22,000

= 56,000

(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

(iii)

Gross Profit = Net Sales − Cost of Goods Sold

= 80,000 − 56,000 = 24,000

Page No 4.105:

Question 133:

(i)

Net Sales = Sales − Sales Return

= 90,000 − 10,000

= 80,000

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

= 28,000 + 46,000 + 4,000 − 22,000

= 56,000

(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

(iii)

Gross Profit = Net Sales − Cost of Goods Sold

= 80,000 − 56,000 = 24,000

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 4.105:

Question 134:

(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

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 4.105:

Question 135:

(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

Answer:

(i)

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

= 48,000 + 5,00,000 + 30,000 − 52,000

= 5,26,000

Operating Expenses = Selling and Distribution Expenses = 6,000

Operating Cost = Cost of Goods Sold + Operating Expenses

= 5,26,000 + 6,000 = 5,32,000

Net Sales = 8,00,000

(ii)

Current Assets = Closing Stock + Other Current Assets

= 52,000 + 2,00,000 = 2,52,000

Current Liabilities = 1,50,000

(iii)

(iv)

Long-term Debts = 12% Debentures = 2,40,000

Equity = Equity Share Capital + 9% Preference Share Capital + General Reserve

= 5,00,000 + 4,00,000 + 40,000 = 9,40,000



Page No 4.106:

Question 136:

(i)

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

= 48,000 + 5,00,000 + 30,000 − 52,000

= 5,26,000

Operating Expenses = Selling and Distribution Expenses = 6,000

Operating Cost = Cost of Goods Sold + Operating Expenses

= 5,26,000 + 6,000 = 5,32,000

Net Sales = 8,00,000

(ii)

Current Assets = Closing Stock + Other Current Assets

= 52,000 + 2,00,000 = 2,52,000

Current Liabilities = 1,50,000

(iii)

(iv)

Long-term Debts = 12% Debentures = 2,40,000

Equity = Equity Share Capital + 9% Preference Share Capital + General Reserve

= 5,00,000 + 4,00,000 + 40,000 = 9,40,000

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 4.106:

Question 137:

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


Answer:

(i)

Cost of Goods Sold = Cost of Materials Consumed + Wages + Manufacturing Expenses

= 2,00,000 + 2,00,000 + 1,00,000 = 5,00,000

Net Sales = 10,00,000

Gross Profit = Net Sales − Cost of Goods Sold

= 10,00,000 − 5,00,000

= 5,00,000

(ii)

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

= 2,50,000 + 1,00,000 + 50,000 = 4,00,000

Current Liabilities = Trade Payables = 1,50,000

(iii)

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

Equity = Share Capital + Reserves and Surplus

= 2,00,000 + 1,00,000 = 3,00,000

(iv)

Opening Stock = 1,50,000

Closing Stock = 2,50,000

(v)

Liquid Assets = Current Assets − Inventories

= 4,00,000 − 2,50,000

= 1,50,000

(vi)

Total Assets = Fixed Assets+ Current Assets

= 2,50,000 + 4,00,000 = 6,50,000

(vii)

(viii)

Working Capital = Current Assets − Current Liabilities

= 4,00,000 − 1,50,000 = 2,50,000

(ix)

Average Debtors = Trade Receivables = 1,00,000

Note: In the Absence of information, Closing Debtors are considered as Average Debtors and Sales are considered to be on Credit Basis.

(x)

Operating Expenses = Administrative Expenses + Selling and Distribution Expenses

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

Operating Cost = Cost of Goods Sold + Operating Expenses

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



Page No 4.82:

Question 1:

(i)

Cost of Goods Sold = Cost of Materials Consumed + Wages + Manufacturing Expenses

= 2,00,000 + 2,00,000 + 1,00,000 = 5,00,000

Net Sales = 10,00,000

Gross Profit = Net Sales − Cost of Goods Sold

= 10,00,000 − 5,00,000

= 5,00,000

(ii)

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

= 2,50,000 + 1,00,000 + 50,000 = 4,00,000

Current Liabilities = Trade Payables = 1,50,000

(iii)

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

Equity = Share Capital + Reserves and Surplus

= 2,00,000 + 1,00,000 = 3,00,000

(iv)

Opening Stock = 1,50,000

Closing Stock = 2,50,000

(v)

Liquid Assets = Current Assets − Inventories

= 4,00,000 − 2,50,000

= 1,50,000

(vi)

Total Assets = Fixed Assets+ Current Assets

= 2,50,000 + 4,00,000 = 6,50,000

(vii)

(viii)

Working Capital = Current Assets − Current Liabilities

= 4,00,000 − 1,50,000 = 2,50,000

(ix)

Average Debtors = Trade Receivables = 1,00,000

Note: In the Absence of information, Closing Debtors are considered as Average Debtors and Sales are considered to be on Credit Basis.

(x)

Operating Expenses = Administrative Expenses + Selling and Distribution Expenses

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

Operating Cost = Cost of Goods Sold + Operating Expenses

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

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 4.82:

Question 2:

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


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 4.82:

Question 3:

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

Answer:

(i) Current Ratio
Current Assets = Inventories + Cash and Cash Equivalents + Trade Receivables
                         = Rs 2,40,000 + 60,000 + 1,80,000 = Rs 4,80,000

Current Liabilities = Short-Term Borrowings + Trade Payables + Short-Term Provisions
                              = Rs 68,000 + Rs 4,00,000 + 12,000 = Rs 4,80,000




(ii) Liquid Ratio
Quick Assets = Currents Assets – Inventories
                      = Rs 4,80,000 – Rs 2,40,000 = Rs 2,40,000

Or
Quick Assets = Trade Receivables + Cash and Cash Equivalents
                      = Rs 1,80,000 + Rs 60,000 = Rs 2,40,000

Current Liabilities = As calculated in (i) = Rs 4,80,000



Conclusion:
As we know, ideal current ratio = 2:1, here the ratio computed is 1:1 which implies current assets are exactly equal to the current liabilities. The shortage of Working Capital (Current Assets – Current Liabilities) implies that the firm cannot carry-on its regular production activities smoothly.
An ideal Liquid Ratio is 1:1 which implies that the company will be able to dispose off its liabilities in time. However, a low liquid ratio will not help easy functioning of the business.



Page No 4.83:

Question 4:

(i) Current Ratio
Current Assets = Inventories + Cash and Cash Equivalents + Trade Receivables
                         = Rs 2,40,000 + 60,000 + 1,80,000 = Rs 4,80,000

Current Liabilities = Short-Term Borrowings + Trade Payables + Short-Term Provisions
                              = Rs 68,000 + Rs 4,00,000 + 12,000 = Rs 4,80,000




(ii) Liquid Ratio
Quick Assets = Currents Assets – Inventories
                      = Rs 4,80,000 – Rs 2,40,000 = Rs 2,40,000

Or
Quick Assets = Trade Receivables + Cash and Cash Equivalents
                      = Rs 1,80,000 + Rs 60,000 = Rs 2,40,000

Current Liabilities = As calculated in (i) = Rs 4,80,000



Conclusion:
As we know, ideal current ratio = 2:1, here the ratio computed is 1:1 which implies current assets are exactly equal to the current liabilities. The shortage of Working Capital (Current Assets – Current Liabilities) implies that the firm cannot carry-on its regular production activities smoothly.
An ideal Liquid Ratio is 1:1 which implies that the company will be able to dispose off its liabilities in time. However, a low liquid ratio will not help easy functioning of the business.

Answer:

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

                         = 62,000 + 32,000 + 56,000 + 10,000 = 1,60,000

Current Liabilities = Short-term Borrowings + Trade Payables

= 20,000 + 60,000 = 80,000

Note: Value of Inventories (Rs 72,000) as given in the book is incorrect, it should be Rs 62,000 (including Loose Tools).

Page No 4.83:

Question 5:

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

                         = 62,000 + 32,000 + 56,000 + 10,000 = 1,60,000

Current Liabilities = Short-term Borrowings + Trade Payables

= 20,000 + 60,000 = 80,000

Note: Value of Inventories (Rs 72,000) as given in the book is incorrect, it should be Rs 62,000 (including Loose Tools).

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 4.83:

Question 6:

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

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 4.83:

Question 7:

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

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 4.84:

Question 8:

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

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 4.84:

Question 9:

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

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 4.84:

Question 10:

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

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 4.84:

Question 11:

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)

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 4.84:

Question 12:


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.

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 4.84:

Question 13:

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.

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 4.84:

Question 14:

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.

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 4.84:

Question 15:

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

Answer:

Current Ratio = 3:1

Let Current Assets be = Rs 30,000

Current Liabilities = Rs 10,000

(i) Repayment of Current Liabilities- Improve

Reason: Repayment will result in decrease in Current Assets and Current Liabilities with same amount.

Example: Amount paid to Creditors Rs 5,000

Current Asset = 30,000 − 5,000 (Cash) = Rs 25,000

Current Liabilities = 10,000 − 5,000 (Creditors) = Rs 5,000

(ii) Purchase of goods for Cash- No change

Reason: Increase in Stock and decrease in Cash both with the same amount. This will result in no change in the sum of total Current Assets. This transaction will have no effect on Current Liabilities.

(iii) Sale of office equipment for Rs 4,000 (Book value Rs 5,000)- Improve

Reason: Amount received from sale of office equipment will result in Increase in Current assets

(iv) Sale of goods for Rs 11,000 (Cost Rs 10,000)- Improve

Reason: This transaction will result in Increase in Current Assets of Rs 10,000.

Current Assets = 30,000 − 10,000 (Stock) + 11,000 (Debtors/Cash) = 31,000

(iv) Payment of Dividend- Improve

Reason: Decrease in Current Assets and Current Liabilities with same amount. This will increase the Current Ratio.

Page No 4.84:

Question 16:

Current Ratio = 3:1

Let Current Assets be = Rs 30,000

Current Liabilities = Rs 10,000

(i) Repayment of Current Liabilities- Improve

Reason: Repayment will result in decrease in Current Assets and Current Liabilities with same amount.

Example: Amount paid to Creditors Rs 5,000

Current Asset = 30,000 − 5,000 (Cash) = Rs 25,000

Current Liabilities = 10,000 − 5,000 (Creditors) = Rs 5,000

(ii) Purchase of goods for Cash- No change

Reason: Increase in Stock and decrease in Cash both with the same amount. This will result in no change in the sum of total Current Assets. This transaction will have no effect on Current Liabilities.

(iii) Sale of office equipment for Rs 4,000 (Book value Rs 5,000)- Improve

Reason: Amount received from sale of office equipment will result in Increase in Current assets

(iv) Sale of goods for Rs 11,000 (Cost Rs 10,000)- Improve

Reason: This transaction will result in Increase in Current Assets of Rs 10,000.

Current Assets = 30,000 − 10,000 (Stock) + 11,000 (Debtors/Cash) = 31,000

(iv) Payment of Dividend- Improve

Reason: Decrease in Current Assets and Current Liabilities with same amount. This will increase the Current Ratio.

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 4.84:

Question 17:

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

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 4.85:

Question 18:

(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

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 4.85:

Question 19:

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

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 4.85:

Question 20:

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

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 4.85:

Question 21:

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

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 4.85:

Question 22:

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

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 4.85:

Question 23:

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

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 4.85:

Question 24:

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

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 4.85:

Question 25:

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

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 4.85:

Question 26:

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

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 4.85:

Question 27:

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

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 4.85:

Question 28:

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

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 4.85:

Question 29:

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

Answer:

Quick Assets = 12,00,000

Current Assets = Quick Assets + Stock

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

Page No 4.85:

Question 30:

Quick Assets = 12,00,000

Current Assets = Quick Assets + Stock

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

Answer:

Quick Assets = 1,50,000

Inventory = 50,000

Current Assets = Quick Assets + Inventory

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

Working Capital = Current Assets − Current Liabilities

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

Current Liabilities = 80,000

Page No 4.85:

Question 31:

Quick Assets = 1,50,000

Inventory = 50,000

Current Assets = Quick Assets + Inventory

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

Working Capital = Current Assets − Current Liabilities

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

Current Liabilities = 80,000

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 4.86:

Question 32:

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

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 4.86:

Question 33:

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

Answer:

Current Ratio = 2.5 : 1

Let Current Assets be = Rs 25,000

Current Liabilities = Rs 10,000

(i) Payment to trade Creditors- Increase

Reason-Payment to creditor will result in decrease in current assets and Current Liabilities both with the same amount.

Example: Payment to trade creditors Rs 5,000

(ii) Sell Machinery for cash- Increase

Reason- sale of machinery results in inflow of cash and cash eqivalents.

Example: Sale of machinery Rs 5,000

(iii) Purchase of goods for Cash- No change

Reason- Purchase of goods will result in increase and Stock and decrease in Cash with equal amount. Both stock and cash are Current Assets. Therefore, no change in the total amount of Current Assets. Current Liabilities will remain unaffected by this transaction.

Example: Purchase of goods Rs 10,000

(iv) Issue of equity shares- Increase

Reason: Issue of equity shares will result in Increase in Cash.

Example: Issue of shares of Rs 20,000

Page No 4.86:

Question 34:

Current Ratio = 2.5 : 1

Let Current Assets be = Rs 25,000

Current Liabilities = Rs 10,000

(i) Payment to trade Creditors- Increase

Reason-Payment to creditor will result in decrease in current assets and Current Liabilities both with the same amount.

Example: Payment to trade creditors Rs 5,000

(ii) Sell Machinery for cash- Increase

Reason- sale of machinery results in inflow of cash and cash eqivalents.

Example: Sale of machinery Rs 5,000

(iii) Purchase of goods for Cash- No change

Reason- Purchase of goods will result in increase and Stock and decrease in Cash with equal amount. Both stock and cash are Current Assets. Therefore, no change in the total amount of Current Assets. Current Liabilities will remain unaffected by this transaction.

Example: Purchase of goods Rs 10,000

(iv) Issue of equity shares- Increase

Reason: Issue of equity shares will result in Increase in Cash.

Example: Issue of shares of Rs 20,000

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 4.86:

Question 35:

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.

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 4.87:

Question 36:

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

Answer:

Long-term Debts = Long-term Borrowings + Other Long-term Liabilities

= 7,50,000 + 1,42,500 = 8,92,500

Equity = Share Capital + Reserves and Surplus − Unamortized Loss on Issue of Debentures** − Unamortized Share Issue Expenses**

= 7,50,000 + (1,15,000) − 30,000 − 75,000 = 5,30,000

** Unamortised Loss on Issue of Debentures and Unamortised Share Issue Expenses are fictitious assets, therefore these are deducted while computing Equity.

Note: The answer given in the text book (1.41 : 1) is different from our solution (1.68 : 1).



Page No 4.88:

Question 37:

Long-term Debts = Long-term Borrowings + Other Long-term Liabilities

= 7,50,000 + 1,42,500 = 8,92,500

Equity = Share Capital + Reserves and Surplus − Unamortized Loss on Issue of Debentures** − Unamortized Share Issue Expenses**

= 7,50,000 + (1,15,000) − 30,000 − 75,000 = 5,30,000

** Unamortised Loss on Issue of Debentures and Unamortised Share Issue Expenses are fictitious assets, therefore these are deducted while computing Equity.

Note: The answer given in the text book (1.41 : 1) is different from our solution (1.68 : 1).

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 4.88:

Question 38:

Equity = Equity Share Capital + General Reserve + Accumulated Profits

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

Debt = 10% Debentures = 1,30,000

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 4.88:

Question 39:

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

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 4.88:

Question 40:

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


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 4.88:

Question 41:

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.

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 4.88:

Question 42:

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

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 4.88:

Question 43:

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

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 = 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

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

Current Assets = 12,00,000

Current Liabilities = 8,00,000

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 4.89:

Question 44:

(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 = 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

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

Current Assets = 12,00,000

Current Liabilities = 8,00,000

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.

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 4.89:

Question 45:

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.

Answer:

Long-term Debts = 4,00,000

Total Assets = 7,70,000

Page No 4.89:

Question 46:

Long-term Debts = 4,00,000

Total Assets = 7,70,000

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 4.89:

Question 47:

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

Answer:

Total Assets = Investments + Land + Trade Receivables + Cash and Cash Equivalents
                     =  Rs 2,00,000 + Rs 10,00,000 + Rs 3,00,000 + Rs 3,00,000 = Rs 18,00,000

Long-Term Debt = 10% Debentures = Rs 10,00,000

Page No 4.89:

Question 48:

Total Assets = Investments + Land + Trade Receivables + Cash and Cash Equivalents
                     =  Rs 2,00,000 + Rs 10,00,000 + Rs 3,00,000 + Rs 3,00,000 = Rs 18,00,000

Long-Term Debt = 10% Debentures = Rs 10,00,000

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 4.89:

Question 49:

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


Answer:

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

= 6,00,000 + 1,50,000 + 2,50,000 + 90,000 + 10,000 = 11,00,000

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



Page No 4.90:

Question 50:

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

= 6,00,000 + 1,50,000 + 2,50,000 + 90,000 + 10,000 = 11,00,000

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

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 4.90:

Question 51:

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

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 4.90:

Question 52:

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

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 4.91:

Question 53:

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

Answer:

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

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

Total Assets = Fixed Assets + Trade Receivables + Cash and Cash Equivalents

= 95,000 + 57,000 + 25,000 + 40,000 = 2,17,000

Long-term Debts = Long-term Borrowings = 60,000





Total Assets = Fixed Assets (Tangible + Intangible) + Trade Receivable + Cash and Cash Equivakent
= 1,52,000 (95,000 + 57,000) + 25,000 + 40,000 = 2,17,000

Long-term Debts = Long-term Borrowings = 60,000

Page No 4.91:

Question 54:

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

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

Total Assets = Fixed Assets + Trade Receivables + Cash and Cash Equivalents

= 95,000 + 57,000 + 25,000 + 40,000 = 2,17,000

Long-term Debts = Long-term Borrowings = 60,000





Total Assets = Fixed Assets (Tangible + Intangible) + Trade Receivable + Cash and Cash Equivakent
= 1,52,000 (95,000 + 57,000) + 25,000 + 40,000 = 2,17,000

Long-term Debts = Long-term Borrowings = 60,000

Answer:

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

Interest = 1,00,000

Page No 4.91:

Question 55:

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

Interest = 1,00,000

Answer:

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

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

Page No 4.91:

Question 56:

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

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

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 4.91:

Question 57:

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

Answer:

Cost of Goods Sold = 4,50,000



Page No 4.92:

Question 58:

Cost of Goods Sold = 4,50,000

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 4.92:

Question 59:

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



Answer:

Opening  Stock = Opening Inventory + Opening WIP + Opening Stock of Finished Goods
                          = Rs 1,50,000 + Rs 75,000 + Rs 1,75,000 = Rs 4,00,000


Closing Stock = Closing Inventory + Closing WIP + Closing Stock of Finished Goods
                     = Rs 1,00,000 + Rs 50,000 + Rs 75,000 = Rs 2,25,000


Cost of Goods Sold = Opening Stock + Purchases – Closing Stock
                               = Rs 4,00,000 + 9,50,000 – Rs 2,25,000 = Rs 11,25,000





Page No 4.93:

Question 60:

Opening  Stock = Opening Inventory + Opening WIP + Opening Stock of Finished Goods
                          = Rs 1,50,000 + Rs 75,000 + Rs 1,75,000 = Rs 4,00,000


Closing Stock = Closing Inventory + Closing WIP + Closing Stock of Finished Goods
                     = Rs 1,00,000 + Rs 50,000 + Rs 75,000 = Rs 2,25,000


Cost of Goods Sold = Opening Stock + Purchases – Closing Stock
                               = Rs 4,00,000 + 9,50,000 – Rs 2,25,000 = Rs 11,25,000



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 4.93:

Question 61:

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

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 4.93:

Question 62:

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


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 4.93:

Question 63:

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

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 4.93:

Question 64:

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

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 4.93:

Question 65:

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)


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

Page No 4.93:

Question 66:

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

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 4.94:

Question 67:

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.

Answer:

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

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

Page No 4.94:

Question 68:

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

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

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 4.94:

Question 69:

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

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 4.94:

Question 70:

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

Answer:

Gross Profit = 25% on Cost

Sales = Cost of Goods Sold + Gross Profit

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

Page No 4.94:

Question 71:

Gross Profit = 25% on Cost

Sales = Cost of Goods Sold + Gross Profit

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

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 4.94:

Question 72:

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

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 4.94:

Question 73:

Let Closing Inventory = x

Opening Inventory = 2x + x = 3x

Closing Inventory = x = Rs 18,750

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

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 4.95:

Question 74:

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

Answer:

Page No 4.95:

Question 75:

Answer:

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

= 1,00,000 − 1,500 − 23,500 = 75,000

Page No 4.95:

Question 76:

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

= 1,00,000 − 1,500 − 23,500 = 75,000

Answer:

Let Credit Sales be = x

Total Sales = Cash Sales + Credit Sales

Credit Sales = 4,80,000

Closing Trade Receivables (Debtors) = Opening Trade Receivables (Debtors) + 40,000

1,00,000 = Opening Trade Receivables (Debtors) + 40,000

Opening Trade Receivables (Debtors) = Rs 60,000

Page No 4.95:

Question 77:

Let Credit Sales be = x

Total Sales = Cash Sales + Credit Sales

Credit Sales = 4,80,000

Closing Trade Receivables (Debtors) = Opening Trade Receivables (Debtors) + 40,000

1,00,000 = Opening Trade Receivables (Debtors) + 40,000

Opening Trade Receivables (Debtors) = Rs 60,000

Answer:

Net Sales = Sales − Sales Return

In 2013 = 9,00,000 − 1,00,000

= Rs 8,00,000

In 2014 = 7,50,000 − 50,000

= Rs 7,00,000

Page No 4.95:

Question 78:

Net Sales = Sales − Sales Return

In 2013 = 9,00,000 − 1,00,000

= Rs 8,00,000

In 2014 = 7,50,000 − 50,000

= Rs 7,00,000

Answer:

Let Opening Debtors = x

∴ Closing Debtors = x + 7,000

∴ Opening Debtors = x = 18,375

Closing Debtors = x +7,000 = 25,375

Page No 4.95:

Question 79:

Let Opening Debtors = x

∴ Closing Debtors = x + 7,000

∴ Opening Debtors = x = 18,375

Closing Debtors = x +7,000 = 25,375

Answer:

Credit Sales = 8,00,000

Average Debtors = 1,00,000

Page No 4.95:

Question 80:

Credit Sales = 8,00,000

Average Debtors = 1,00,000

Answer:

Let Credit Sales be = x

Total Sales = Cash Sales + Credit Sales

Opening Debtors (Trade Receivables) = Closing Debtors (Trade Receivables) − 2,00,000

= 4,00,000 − 2,00,000 = 2,00,000

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

Page No 4.95:

Question 81:

Let Credit Sales be = x

Total Sales = Cash Sales + Credit Sales

Opening Debtors (Trade Receivables) = Closing Debtors (Trade Receivables) − 2,00,000

= 4,00,000 − 2,00,000 = 2,00,000

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

Answer:

Page No 4.95:

Question 82:

Answer:

.

(iii) Let the Opening Debtors be x

∴ Closing debtors = x + 6,000

∴ Opening Debtors = x = 37,000

Closing Debtors = x + 6,000 = 43,000



Page No 4.96:

Question 83:

.

(iii) Let the Opening Debtors be x

∴ Closing debtors = x + 6,000

∴ Opening Debtors = x = 37,000

Closing Debtors = x + 6,000 = 43,000

Answer:

Let the Opening Debtors = x

∴ Closing Debtors = 2x

∴ Opening Debtors = x = 30,000

Closing Debtors = 2x = 2 × 30,000 = 60,000

Page No 4.96:

Question 84:

Let the Opening Debtors = x

∴ Closing Debtors = 2x

∴ Opening Debtors = x = 30,000

Closing Debtors = 2x = 2 × 30,000 = 60,000

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 Debtors (Trade Receivables) = x

Closing Debtors (Trade Receivables) = x + 1,00,000

Opening Debtors = x = RS 50,000

Closing Debtors = x + 1,00,000 = 50,000 + 1,00,000 = Rs 1,50,000

Case 2:

Let Opening Debtors = x

Closing Debtors = 3 x

Opening Stock = x = Rs 50,000

Closing Stock = 3x = 3 × 50,000 = Rs 1,50,000

Case 3:

Let Opening Debtors = x

Closing Debtors = x + 3 x = 4x

Opening Debtors = x = Rs 40,000

Closing Debtors = 4 x = 4 × 40,000 = Rs 1,60,000

Page No 4.96:

Question 85:

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 Debtors (Trade Receivables) = x

Closing Debtors (Trade Receivables) = x + 1,00,000

Opening Debtors = x = RS 50,000

Closing Debtors = x + 1,00,000 = 50,000 + 1,00,000 = Rs 1,50,000

Case 2:

Let Opening Debtors = x

Closing Debtors = 3 x

Opening Stock = x = Rs 50,000

Closing Stock = 3x = 3 × 50,000 = Rs 1,50,000

Case 3:

Let Opening Debtors = x

Closing Debtors = x + 3 x = 4x

Opening Debtors = x = Rs 40,000

Closing Debtors = 4 x = 4 × 40,000 = Rs 1,60,000

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 4.96:

Question 86:

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

Answer:

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

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

Closing Debtors = 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 debtors. Increase in closing debtors, in turn, will lead to an increase in the average debtors.

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

Closing Debtors = 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 debtors.

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

Closing Debtors = 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 4.97:

Question 87:

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

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

Closing Debtors = 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 debtors. Increase in closing debtors, in turn, will lead to an increase in the average debtors.

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

Closing Debtors = 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 debtors.

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

Closing Debtors = 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.

Answer:

Page No 4.97:

Question 88:

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 4.97:

Question 89:

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



Answer:

Case 1

Net Credit Purchases = Net Purchases − Cash Purchases

= 3,60,000 − 90,000 = 2,70,000

Note: The answer as per the above solution does not match with that given in the book. This is because, Net Purchases signify Purchases less Purchases Return, so Purchases Return will be not deducted while calculating Net Credit Purchases. However, the answer given in the book takes into account 'Purchases Return' and hence the answer is 6 times.

Case 2

Net Purchases = 3,60,000

Case 3

Case 4

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

= 55,000 − 25,000 = 30,000

Page No 4.97:

Question 90:

Case 1

Net Credit Purchases = Net Purchases − Cash Purchases

= 3,60,000 − 90,000 = 2,70,000

Note: The answer as per the above solution does not match with that given in the book. This is because, Net Purchases signify Purchases less Purchases Return, so Purchases Return will be not deducted while calculating Net Credit Purchases. However, the answer given in the book takes into account 'Purchases Return' and hence the answer is 6 times.

Case 2

Net Purchases = 3,60,000

Case 3

Case 4

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

= 55,000 − 25,000 = 30,000

Answer:

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

Page No 4.97:

Question 91:

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

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 4.97:

Question 92:

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

Answer:

Net Sales = Cash Sales + Credit Sales − Sales Returns

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

Page No 4.97:

Question 93:

Net Sales = Cash Sales + Credit Sales − Sales Returns

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

Answer:

Net Sales = Cost of Goods sold + Gross Profit

Let Net Sales =  x


Page No 4.97:

Question 94:

Net Sales = Cost of Goods sold + Gross Profit

Let Net Sales =  x


Answer:

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

Cost of Goods Sold = 20,00,000



Page No 4.97:

Question 95:

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

Cost of Goods Sold = 20,00,000



Answer:

Cost of Goods Sold = 40,00,000

Gross Profit = 20% of Cost



Page No 4.98:

Question 96:

Cost of Goods Sold = 40,00,000

Gross Profit = 20% of Cost

Answer:

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

Gross ProfitRatio=Gross ProfitNet Sales×100                                 =50,0005,50,000×100                                 =9.09%

Note: Since we know that Net Sales= Gross Sales - Sales Returns or COGS+Net Profit,
but here as we are already given with figure of Net Sales, it means Sales Returns have already been adjusted. So they are not deducted from Net Sales.

Answer given in the book is different from our answer as they have deducted the figure of Sales return from the Net Sales, considering the Net sales to be normal sales.

Page No 4.98:

Question 97:

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

Gross ProfitRatio=Gross ProfitNet Sales×100                                 =50,0005,50,000×100                                 =9.09%

Note: Since we know that Net Sales= Gross Sales - Sales Returns or COGS+Net Profit,
but here as we are already given with figure of Net Sales, it means Sales Returns have already been adjusted. So they are not deducted from Net Sales.

Answer given in the book is different from our answer as they have deducted the figure of Sales return from the Net Sales, considering the Net sales to be normal sales.

Answer:

Sales = Cost + Gross Profit

Cost = x = Rs 3,20,000

Page No 4.98:

Question 98:

Sales = Cost + Gross Profit

Cost = x = Rs 3,20,000

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 4.98:

Question 99:

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


Answer:

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



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



*As per the Text Book the ratio of Cash Sale to Credit Sale is 4:1 but with this ratio the answer cannot be derived. Therefore, it has been taken as 1:4.

Page No 4.98:

Question 100:

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



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



*As per the Text Book the ratio of Cash Sale to Credit Sale is 4:1 but with this ratio the answer cannot be derived. Therefore, it has been taken as 1:4.

Answer:

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


Cost of Goods sold = 25,60,000
Debtors’s 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 4.98:

Question 101:

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


Cost of Goods sold = 25,60,000
Debtors’s 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

Answer:

Net Sales = Rs 6,00,000
Cost of Goods Sold = Rs 5,40,000


Page No 4.98:

Question 102:

Net Sales = Rs 6,00,000
Cost of Goods Sold = Rs 5,40,000


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 4.98:

Question 103:

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

Answer:

Page No 4.98:

Question 104:

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 Returns have not been considered since Net sales are given which means Sales Returns have already been adjusted in the Sales figure.

The answer printed in the book is different from our answer because, the Net Sales have been taken as Total sales and further Sales Returns have been deducted from them.

Page No 4.98:

Question 105:

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 Returns have not been considered since Net sales are given which means Sales Returns have already been adjusted in the Sales figure.

The answer printed in the book is different from our answer because, the Net Sales have been taken as Total sales and further Sales Returns have been deducted from them.

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 4.98:

Question 106:

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

Answer:



Page No 4.99:

Question 107:

Answer:

Operating Expenses = Administrative Expenses + Selling and Distribution Expenses
                               = 18,000 + 30,000 = Rs 48,000

Cost of Goods Sold = Opening Stock + Purchases – Closing Stock
                               = (Opening Stock – Closing Stock) + Purchases
                              = Change in Inventory + Purchases
                             = (25,000) + 3,25,000 = Rs 3,00,000

 
Operating Cost = Cost of Goods Sold + Operating Expenses + Employee Benefit Expenses *
                         = 3,00,000 + 48,000 + 60,000 = 4,08,000

Net Sales = Rs 6,00,000


*Since no information is provided regarding non-operating expenses, all the expenses have been assumed to be operating expenses.

Page No 4.99:

Question 108:

Operating Expenses = Administrative Expenses + Selling and Distribution Expenses
                               = 18,000 + 30,000 = Rs 48,000

Cost of Goods Sold = Opening Stock + Purchases – Closing Stock
                               = (Opening Stock – Closing Stock) + Purchases
                              = Change in Inventory + Purchases
                             = (25,000) + 3,25,000 = Rs 3,00,000

 
Operating Cost = Cost of Goods Sold + Operating Expenses + Employee Benefit Expenses *
                         = 3,00,000 + 48,000 + 60,000 = 4,08,000

Net Sales = Rs 6,00,000


*Since no information is provided regarding non-operating expenses, all the expenses have been assumed to be operating expenses.

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 4.99:

Question 109:

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

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 4.99:

Question 110:

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%
 

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%



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