Q NO.1:- From the following you are required tocomment a upon the long term as w
ID: 2433714 • Letter: Q
Question
Q NO.1:- From the following you are required tocomment a upon the long term as well as short term solvency of thecompany:
Liabilities
Rs.
Assets
Rs.
Share Capital
5,00,000
Fixed Assets
6,00,000
Long term liabilities
2,50,000
Liquid Assets
3,00000
Current liabilities
2,500,000
Stock In Trade
1,00,000
Total
10,00,000
Total
10,00,000
Calculate debt-equity ratio, fixed assets to total assets ratio,current ratio and Assets ratio.
Q NO.2: Tariq and Co. signed an operating leasecontract effective for five year from January 1, 2008. He is to payRs.18000 at the start of the lease plus Rs.4000 monthly rentalthrough out the lease term. During January 2008, He spend Rs.10000for renovating the leased asset and also made additionalconstruction in the building with leaser’s consent at a costof Rs.50000 , the estimated life of the additional construction is10 years, and its residual value is zero. The lease contract doesnot contain renewal option and may be terminated by the lessee with3 months notice.
You are required to give general entries inthe books of Tariq & Co. to reflect the renovation expenses,and rental payments for lease period.
Liabilities
Rs.
Assets
Rs.
Share Capital
5,00,000
Fixed Assets
6,00,000
Long term liabilities
2,50,000
Liquid Assets
3,00000
Current liabilities
2,500,000
Stock In Trade
1,00,000
Total
10,00,000
Total
10,00,000
Explanation / Answer
Debt to Equity ratio = Debt(liabilities) / Equity = 500,000/ 500,000 = 1Fixed assets to total assetsratio = 600,000 /1,000,000 = 0.6 Currentratio = Current Assets /Current Liabilities = 400,000 /250,000 = 1.6 2. Year 1
Lease Renovation 50,000 ToCash 50,000 Renovationexpenses incurred ______________________________________________________ Operating RentExpense 48,000 Amortization of Renovatedexpense 10,000 Cash 48,000 LeaseRenovation 10,000 Lease rent for the yearxxxx and amortization of renovationexpense. _______________________________________________________ Repeat last entry for all remaining 4 years.
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