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QUESTION 1:

The Alpha Company Ltd was registered with Nominal Capital of 60,000 Equity shares of Rs.10 each. The following were the ledger balances on 31st March 2011.


Rs

Freehold Buildings at cost

2,00,000

Plant & Machinery at Net Book Value at 1 April 2010

2,40,250

Interim Dividend paid

25,000

Opening Stock

1,90,000

Furniture at cost

5,000

Vehicle at cost

51,500

Patents

40,000

Sundry Debtors

2,77,000

Cash in Hand

4,500

Cash at Bank

88,000

Purchases

6,36,550

Bills Receivable

6,000

Investment in long term securities

50,000

Factory Wages

2,95,000

Repairs & Renewals

12,000

Factory Power

25,000

Rates & Taxes

13,500

Salaries for non-factory staff

11,250

Travelling Expenses

10,750

Discount Allowed

20,200

Directors Fees

4,200

Advertisement

2,500

Debentures Interest

8,000

Taxation provision

2,000

Issued and Subscribed Capital

3,95,000

8% Debentures (Secured)

2,00,000

Profit & Loss A/C

23,400

Bill Payable

90,000

Sundry Creditors

1,77,000

Sales

12,35,000

Discount Received

11,800

Sinking Fund: 1st April 2010: Redemption of Debentures

50,000

Provision for Doubtful Debts

12,500

Royalties Received

3,500

Sale of Machinery

20,000

Additional Information:

1. A machine acquired on 1st April, 2009 at a cost of Rs 25,000 and depreciated every year at 10% on written down value, was sold at the end of the year for Rs 20,000. Its written down value is included in the plant and machinery of Rs 240,250.

2. Provide depreciation on plant and machinery, furniture, vehicle and patents at 10% per annum.

3. Transfer Rs 10,000 to sinking fund for Redemption of Debentures.

4. Maintain a provision for Doubtful Debts at 5% on Sundry Debtors.

5. Closing Stock was valued at Rs 80,750

Required:

(a) The profit and loss account for the period ending 31st March 2011 as per the function format' of the International Accounting Standard (IAS) 1.

(b) The Balance Sheet as at 31st March 2011 as per the IAS 1, showing the Statement of Changes in Equity.

SECTION B:

QUESTION 2:

The following information has been extracted from the books of Total Controls Ltd for the month of April 2011.



Rs

Sales ledger balances at 1 April 2011

Dr

5,000


Cr

76

Purchase ledger balances at 1 April 2011

Dr

124


Cr

3,600

Sales for April

Cash

2,400


Credit

21,790

Purchases for April

Cash

1,020


Credit

14,500

Goods returned by credit customers


1,760

Goods returned to suppliers (originally bought on credit)


440

Cash received from debtors


20,450

Cash paid to creditors


11,120

Discounts allowed


580

Discounts received


276

Bad debts written off


424

Cash received in respect of a bad debt previously written off


70

Debtors' cheques returned by bank unpaid


826

Interest debited to accounts of overdue debtors


36

Balances in sales ledger offset against purchases ledger accounts


1,200

Balance on provision for doubtful debts account at 1 April 2011


200

Sales ledger credit balances at 30 April 2011


150

Purchase ledger credit balances at 30 April 2011


80

The directors of Total Controls Ltd have decided that the provision for doubtful debts should be adjusted to 5% of debtors at 30 April 2011.

Required:

The Sales Ledger Control account and the Purchases Ledger Control account for the month ended 30 April 2011 for Total Controls Ltd.

QUESTION 3:

The trading and profit and loss accounts and balance sheets of Laurel, a sole trader, and Hardy Ltd at 30th June 2011 were as follows:

Trading and Profit and Loss Accounts






Laurel


Hardy Ltd



Rs

Rs

Rs

 Rs

Sales 


1,00,000


2,00,000

Less Cost of sales:





Opening Stock 

6,000


29,000


Purchases

44,000


94,000


Closing stock  

-5,000

45,000

-31,000

92,000

Gross Profit


55,000


1,08,000

Operating expenses


25,000


58,000

Net Profit


30,000


50,000

Balance Sheets





Laurel Hardy Ltd






Rs

Rs

Rs

Rs

Non Current Assets 


80,000


1,45,000

Current Assets:





Stock 

5,000


31,000


Debtors

4,000


25,000


Bank Balance 

6,000


18,000



15,000


74,000


Less Current Liabilities





Creditors

9,000

6,000

51,000

23,000



86,000


1,68,000

Capital


86,000



Ordinary Shares of Rs




1 125,000

Retained Profit




43,000





1,68,000

Both Laurel and Hardy Ltd are in the same line of business. All purchases and sales of both businesses are on credit.

Laurel has been offered a position with another company at a salary of Rs 15,000 per annum. He manages his own business and if he were to employ somebody to manage it for him, he estimates he would have to pay the manager Rs 10,000 per annum. If Laurel sold his business he could reinvest his capital at 15 per cent per annum.

Required:

a) Compute three ratios to compare the profitability of the two businesses.

b) Compute three ratios to compare the liquidity of the two businesses.

c) Comment on the businesses, using the ratios computed in (a) and (b) above.

d) Advise Laurel on the best way of maximizing his income in the future.

QUESTION 4:

The financial year of Jack and Jill Ltd will end on 31 May 2008. At 1 June 2007, the company had in use equipment with a total accumulated cost of Rs 135,620 which had been depreciated by a total of Rs 81,734. During the year ended 31 May 2008, Jack and Jill Ltd purchased new equipment costing Rs 47,800 and sold off equipment which had originally cost Rs 36,000 and which had been depreciated by Rs 28,224, for Rs 5,700. No further purchases or sales of equipment are planned for May. The policy of the company is to depreciate equipment at 40% using the diminishing balance method. A full year's depreciation is provided for on all equipment in use by the company at the end of each year.

Required:

a) Show the following ledger accounts for the year ended 31 May 2008:

  • The equipment account
  • The provision for depreciation on equipment account
  • The asset disposal account

b) Give four reasons why depreciation might occur.

c) Explain briefly two methods of calculating depreciation.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M9585050

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