Following information is provided for X Ltd: Balance Sheet of X Ltd. (As on 31st March, 2023) I. Equity and Liability Amount (in lakh) Amount (in lakh) 1. Shareholders' Funds (a) Share Capital Equity Capital Divided in s

CS Executive · Corporate Accounting and Financial Management · PYQS · June 2024
Following information is provided for X Ltd: Balance Sheet of X Ltd. (As on 31st March, 2023) I. Equity and Liability Amount (in lakh) Amount (in lakh) 1. Shareholders' Funds (a) Share Capital Equity Capital Divided in shares of face value ₹ 10/- XX Preference Capital Divided in shares of face value ₹ 1,000/- XX XX (b) Reserves and Surplus General Reserve 7,800 P & L A/c 15,000 22,800 2. Non-Current Liabilities (a) Long-term Borrowings XX 3. Current Liabilities Short-term Borrowings 5,000 Trade Payables 3,000 Short-term Provisions 500 Outstanding Expenses 100 8,600 II. Assets 1. Non-Current Assets (a) Property, Plant and Equipment and Intangible Assets (i) Property, Plant and Equipment 30,000 (ii) Intangible Assets 1,000 (iii) Capital Work in Progress 2,500 33,500 2. Non-Current Assets XX 3. Current Assets (a) Inventories XX (b) Trade Receivables 5,000 (c) Cash and Cash Equivalents 300 XX Complete the above balance sheet. Other relevant information is given below : (i) The investments are in fixed income securities and have an interest rate of 8%. The payout of interest is ₹ 100 lakh. (ignore tax or TDS). (ii) Inventory turnover ratio is 5. The Cost of Goods sold is ₹ 15,000 lakh. Opening and Closing inventory figures are same. (iii) Issued equity share capital of ₹ 10 each is twice of preference share capital. (v) Long-term borrowings have an interest payout of ₹ 1,000 lakh and rate of interest is 10%.

Answer & Explanation:

Answer 2(a) (i) Calculation of Non-Current Investments Long term investments = Interest Payout / Interest Rate = ₹ 100 lakh / 8% = ₹ 1,250 Lakh (ii) Inventory Turnover Ratio Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory 5 = ₹ 15,000 lakh / Average Inventory Average Inventory = ₹ 15,000 lakh / 5 = ₹ 3,000 lakh Since Opening and Closing inventory figures are same, Inventories = ₹ 3,000 Lakh (iii) Shareholders' Funds and Capital Structure Total Equity Shares Issued = 2 x Preference Share Capital Let Preference Share Capital = P. Then Equity Share Capital = 2P. Total Issued Capital = 2P + P = 3P From the Balance Sheet, Total Shareholders' Funds = Reserves and Surplus + Total Issued Capital 22,800 Lakh + 3P = Shareholders' Funds Long-term Borrowings = Interest Payout / Interest Rate = ₹ 1,000 lakh / 10% = ₹ 10,000 Lakh Completing the Balance Sheet: Total Liabilities Side: Shareholders' Funds: Reserves and Surplus = ₹ 22,800 Lakh (Given) Total Equity and Preference Capital (XX in the table) needs to be determined. Non-Current Liabilities: Long-term Borrowings = ₹ 10,000 Lakh Current Liabilities: Short-term Borrowings = ₹ 5,000 Lakh Trade Payables = ₹ 3,000 Lakh Short-term Provisions = ₹ 500 Lakh Outstanding Expenses = ₹ 100 Lakh Total Current Liabilities = ₹ 5,000 + ₹ 3,000 + ₹ 500 + ₹ 100 = ₹ 8,600 Lakh Total Assets Side: Non-Current Assets: Property, Plant and Equipment = ₹ 30,000 Lakh Intangible Assets = ₹ 1,000 Lakh Capital Work in Progress = ₹ 2,500 Lakh Total PPE & Intangible Assets = ₹ 33,500 Lakh Non-Current Investments = ₹ 1,250 Lakh (Calculated above) Current Assets: Inventories = ₹ 3,000 Lakh (Calculated above) Trade Receivables = ₹ 5,000 Lakh Cash and Cash Equivalents = ₹ 300 Lakh Total Current Assets = ₹ 3,000 + ₹ 5,000 + ₹ 300 = ₹ 8,300 Lakh Total Assets = Total Non-Current Assets + Total Current Assets = (₹ 33,500 + ₹ 1,250) + ₹ 8,300 = ₹ 43,050 Lakh Since Total Liabilities must equal Total Assets, Total Liabilities = ₹ 43,050 Lakh Total Liabilities = Shareholders' Funds + Long-term Borrowings + Current Liabilities ₹ 43,050 = Shareholders' Funds + ₹ 10,000 + ₹ 8,600 Shareholders' Funds = ₹ 43,050 - ₹ 10,000 - ₹ 8,600 = ₹ 24,450 Lakh Shareholders' Funds = Reserves and Surplus + Total Issued Capital ₹ 24,450 = ₹ 22,800 + 3P 3P = ₹ 24,450 - ₹ 22,800 = ₹ 1,650 Lakh P = ₹ 1,650 Lakh / 3 = ₹ 550 Lakh Preference Share Capital = ₹ 550 Lakh Equity Share Capital = 2P = 2 x ₹ 550 Lakh = ₹ 1,100 Lakh Division of share capital in 2:1 Equity Share Capital ₹ 1,100 Lakh Preference Share Capital ₹ 550 Lakh ₹ 1,650 Lakh Balance Sheet of X Ltd. (As on 31st March 2023) I. Equity and Liabilities Amount (in lakh) Amount (in lakh) 1. Shareholders' Funds a. Share Capital Equity Capital: Divided in shares of face value ₹ 10/- 1,100 Preference Capital: Divided in shares of face value ₹ 1,000/- 550 Total issued capital 1,650 b. Reserves and Surplus General Reserve 7,800 P&L A/c 15,000 22,800 Shareholders' funds 24,450 2. Non-Current Liabilities a. Long term Borrowings 10,000 10,000 3. Current Liabilities Short Term Borrowings 5,000 Trade Payables 3,000 Short Term Provisions 500 Outstanding Expenses 100 8,600 43,050 II. Assets Non-Current Assets a. Property, Plant and Equipment and Intangible Assets i. Property, Plant and Equipment 30,000 ii. Intangible Assets 1,000 iii. Capital Work in Progress 2,500 33,500 2. Non-Current Investments 1,250 3. Current Assets a. Inventories 3,000 b. Trade Receivables 5,000 c. Cash and Cash Equivalents 300 8,300 43,050

Topics: Corporate Accounting

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic