Reference no: EM13656441

This assignment consists of 5 analytical covering the syllabus till Analysis of Financial Statements.

Problem 1:

Journalize the following transactions in the books of Mr. Walter:

a) Paid rent of building $ 12,000 half of the building is used by the proprietor for residential use.

b) Paid fire insurance of the above building in advance $ 1,000.

c) Paid life insurance premium $ 2,000.

d) Paid income-tax $ 3,000.

e) Salary due to clerk $ 500.

f) Charge depreciation on furniture @ 10% p.a. for 1 month (furniture $ 12,000).

g) Provide interest on capital ($ 60,000) at 15% p.a. for 6 months.

h) Charge interest on drawing (10,000) at 18% p.a. for 6 months.

i) Provide interest on loan to Ram ($ 100,000) at 18% p.a. for 2 months.

j) Charge interest on loan to Shyam ($ 200,000) at 18% p.a. for 2 months.

k) Received commission $ 1,000 half of which is in advance.

l) Brokerage due to us $ 500.

Problem 2:

From following figures extracted from the books of Mr. XYZ, you are required to prepare a Trading & Profit & Loss Account for the year ended 31^st March, 2008 and a Balance Sheet as on that date after making the necessary adjustments.

	$		$
Mr. XYZ's Capital	228,800	Stock 1.4.2007	38,500
Mr. XYZ ' Drawings	13,200	Wages	35,200
Plant & Machinery	99,000	Sundry creditors	44,000
Freehold property	66,000	Postage & Telegrams	1,540
Purchases	110,000	Insurance	1,760
Rtuens outwards	1,100	Gas & fuel	2,970
Salaries	13,200	Bad debts	660
Office Expenses	2,750	Office rent	2,860
Discount A/c (Dr.)	5,500	Loose tools	2,900
Sundry Debtors	29,260	Factory lighting	1,100
Loan to Mr. Krish @10% p.a.	44,000	Provision for doubtful debts	880
Balance on 1.4.2007		Interest on loan to Mr. Krish	1,100
Cash at bank	29,260	Cash in hand	2,640
Bills payable	5,500	sales	231,440

Adjustments:

a) Stock on 31^st March, 2008 was valued at $ 72,600

b) A new machine was installed during the year costing $15,400 but it is not recorded in the books as on payment was made for it. Wages $ 1,100 paid for its erection has been debited to the wages account.

c) Depreciate :

a. Plant & machine by 33.33%

b. Furniture by 10%

c. Freehold property by 6%

d) Loose tools were valued at $ 1.760 as on 31.3.2008

e) Of the sundry debtors Rs.660 are bad and should be written off.

f) Maintain a provision of 5% on sundry debtors for doubtful debts.

g) The manager is entitled to a commission of 10% of the net profits after charging such commission.

Problem 3:

Following is the Trial Balance of M/s. Trinity Foods as on 30^th June 2007 (after closing Nominal Accounts). Prepare a Balance Sheet on the basis of this trial balance.

Particulars	Debit (Rs.)	Credit (in Rs.)
Cash	10,000
Capital		100,000
Bank	77,000
Furniture	25,000
Ram		15,000
Rahim	50,000
Trading & Profit & Loss		47,000
	162,000	162,000

Problem 4:

Given below are the financial statements of Safal Enterprises, using the tool of ratio analysis comment on the profitability and liquidity position of the firm for the year 2006-07. Total no. of shares outstanding for the firm is 2.69crores. In the view of growth opportunities in the near future the firm has been maintaining a policy of 45% payout.

Summarized P & L of Safal Enterprises

For the year ended 31 March

Particulars	2006	2007
	( Rs. In crores)
Sales	132.00	144.00
Other income	12.00	15.00
Cost of sales	102.96	110.02
Gross margin	29.04	33.98
Operating expenses
Administration	12.44	14.36
Selling & distribution	4.42	5.36
Profit before interest & tax (PBIT)	24.18	29.26
Interest	3.00	4.01
Profit before tax (PBT)	21.18	25.26
Provision for taxes	7.94	9.47
Profit after tax (PAT)	13.24	15.79

Balance Sheet of Safal Enterprises

Particulars	31/03/06	31/03/07
	(Rs in crores)
Assets
Fixed assets	31.25	37.50
Current assets
Inventory	14.56	16.64
Accounts receivable	13.20	15.43
Cash	1.50	1.75
Less: Current liabilities	8.55	11.25
Net current assets	20.71	22.57
Total Assets	51.96	60.07
Liabilities &owners equity
Share capital	27.00	27.00
Reserves & Surplus	4.96	6.36
Debt(long term)	20.00	26.71
Total	51.96	60.07

Problem 5:

Given below are the balance sheets of the two firms- Gloria Ltd and Victoria Ltd as on 31^st March 2007.

	Gloria Ltd.	Victoria Ltd.
Assets
Cash and Bank balance	12.70	38.60
Marketable securities	10.00	21.00
Sundry debtors	22.00	23.70
Prepaid expenses	93.50	162.45
Current Assets	1.12	2.14
Fixed Assets (Net)	139.32	247.90
Total Assets	589.00	642.00
	728.323	889.895
Liabilities and Owners Equity
Sundry creditors	6.75	26.45
Notes payable	6.56	6.45
Long term debt	130.01	345.00
Equity	585.00	512.00
Total	728.323	889.895

1. Can the financial positions of the two firms be compared assuming that the two firms fall in the same industry?