Following Balance Sheet of M/S Combined Industriesrelates to the year ended Dece
ID: 2433285 • Letter: F
Question
Following Balance Sheet of M/S Combined Industriesrelates to the year ended
December 31, 2000.
Assets
Rs
Liabilities & Equity
Rs.
cash
200,000
Accrued expenses
25,000
Accounts receivable
650,000
Loan payable
200,000
inventory
800,000
Accounts payable
650,000
Un-expired insurance
40,000
Capital stock
1,000,000
Plant and equipment
1,150,000
Surplus
965,000
2,840,000
2,840,000
Additional information:
1. Possibility of bad debts on AccountsReceivable has not been considered yet. It is
estimated that bad debts will Rs. 20,000.
2. Rs. 150,000 representing cost of large scalenewspaper. Advertising campaign to
be completed in year 2000 has been included in the inventories.It is also found
that inventories include merchandise Rs. 65,000 received onDecember 31, 2000
has not been recorded as purchases.
3. Un-expired insurance consists of Rs. 4,000.The cost of fire insurance for the year
2000 is Rs. 31,000 includes the cash surrender value of officerlife insurance
policy.
4. Books show that plant & equipment has acost of Rs. 2,000,000 with
depreciation of Rs. 850,000 recognized in prior years. However,the balances
include fully depreciated equipment of Rs. 150,000 that has beenscraped and is
no longer in hand.
5. Accrued expenses of Rs. 25,000 representaccrued salaries of Rs. 35,000 less non
current advances of Rs. 10,000 made to company officials.
6. Loan payable represents a loan from bankthat is payable in regular quarterly
installments of Rs. 20,000. Interest of Rs. 2,000 accrued on theloan on December
31, 2000 has been recorded in the books.
7. Tax liability not shown is estimated at Rs.45,000.
8. Capital stock had been issued for a totalconsideration of Rs. 1,850,000 the
amount received is in excess of par and stated values of thestock being reported
as surplus. Capital stock represents 100,000 shares of Rs. 10each.
Required:
By considering IAS (1) Presentation of FinancialStatements, you are required to
prepare corrected Balance Sheet with accounts properlyclassified.
Assets
Rs
Liabilities & Equity
Rs.
cash
200,000
Accrued expenses
25,000
Accounts receivable
650,000
Loan payable
200,000
inventory
800,000
Accounts payable
650,000
Un-expired insurance
40,000
Capital stock
1,000,000
Plant and equipment
1,150,000
Surplus
965,000
2,840,000
2,840,000
Explanation / Answer
1) Provision for Bad debts to be shown under Currentliabilities and deduct Provision form Accounts receivables. 2) Deduct from Inventory 150,000(advertising Compaign) anddeduct from Surplus. For merchandise Deduct from Surplus and Add toAccounts Payable 3) not clear 4) Deduct 150,000 from Plant & Equipment and deduct fromSurplus 5) Accrued Expenses 35,000 and Staff Advance 10,000(AccountsReceiveable - Non-Trade) 6) No adjustment required since entry has already been madefor accrued interest. 7) Provision for Tax Liability should be shown on libilityside and surplus should be reduced by 45,000 8) Capital Reserve (1,850,000 - 1,000,000) should be shownunder separate head in liability side and Surplus should be reducedto that extent.Related Questions
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