Q1.

Case #5
Journal
Entries
Items
Cash
Capital
(Being capital invested by
Niti)
Cash
Loan
(Being loan taken from
bank)
Chowpati lease

Dr.

Cr.
280000
28000
0
150000
15000
0
124000

Cash
(Being signed two year Chowpati lease)
Supplies
100000
Sundry creditors
(Being purchased supplies
on credit)
New warehouse
80000
Cash
(Being purchased a new
warehouse)
Sundry
Creditors
50000
Cash
(Being paid cash to
sundry creditor)
Cash
126000
Sale
(Being sold toys on cash)
Account
Receivables
54000
Sale
(Being sold toys on credit)
Electricity Bill
15000
Cash
(Being paid electricity bill
on cash)
Telephone bill
1200
Unpaid telephone bill
(Being used telephone on
credit)

12400
0
10000
0

80000

50000

12600
0

54000
15000

1200

Dividends

201000
20100
0

Cash
(Being paid
dividends)

Ledger
Entries
Cash
Capital
Loan
Sale

Chowpati
280000 Lease
New
150000 warehouse
Sundry
126000 Creditors
Electricity Bill
Dividends
Balance

Total

556000 Total

12400
0
80000
50000
15000
20100
0
86000
55600
0

Capital
Balance

280000 Cash

Total

280000 Total

28000
0
28000
0

Loan
Balance

150000 Cash

Total

150000 Total

15000
0
15000
0

Supplies
Sundry
Creditors
Total

100000 Balance
100000 Total

10000
0
10000

0
Sundry Creditors
Cash
Balance
Total

50000 Supplies
50000
100000 Total

10000
0
10000
0

Chowpati Lease
Cash

124000 Balance

Total

124000 Total

Cash
Total

New Warehouse
80000 Balance
80000 Total

12400
0
12400
0
80000
80000

Sale
Balance

Total

180000 Cash
Account
Receivables
180000 Total

12600
0
54000
18000
0

Sale
Total

Accounts Receivables
54000 Balance
54000 Total

54000
54000

Cash
Total

Electricity Bill
15000 Balance
15000

15000
15000

Telephone Bill
Unpaid
telephone bill
Total

Balance
Total

1200 Balance
1200 Total
Unpaid telephone bill
1200 Telephone bill
1200 Total
Dividends

1200
1200

1200
1200

Cash

201000 Balance

Total

201000 Total

20100
0
20100
0

Adjustment
entries
Items
Supplies
consumed

Dr.

Cr.
75000

Supplies
(Being supplies consumed)
Depreciation
expense
8000
Acc Depreciation
(Being depreciation of
warehouse)
Lease expense
62000
Chowpati Lease
(Being expense of year 1
lease)
Interest expense
15000
Interest payable
(Being interest expense payable for year 1)

75000

8000

62000

15000

Ledger
Original Trial Balance
Adjustments
Dr.
Cr.
Dr.
Cr.
86000
280000
150000
6200
Chowpati Lease
124000
0
New
Warehouse
80000
Sundry
Creditors
50000
7500
Supplies
100000
0
Accounts
Receivables
54000
Unpaid
telephone bill
1200
Ledger items
Cash
Capital
Loan

Acc
Depreciation
Interest
payable
Sale
Electricity Bill
Telephone Bill
Dividends
Supplies
Consumed
Depreciation
expense
Lease expense
Interest
expense
Balance
Total

Ledger items
Cash

8000
1500
0
180000
15000
1200
201000
75000
8000
62000
15000
661200

661200

Adjusted Trial Balance

Dr.
Cr.
86000

Capital

280000

Loan

150000

Chowpati Lease
New
Warehouse
Sundry
Creditors
Supplies

62000
80000
50000
25000

16000
0

1600
00

Income
Summary
Dr.
Cr.

Balance
Sheet
Dr.
Cr.
8600
0
2800
00
1500
00
6200
0
8000
0
5000
0
2500

Accounts
Receivables
Unpaid
telephone bill
Acc
Depreciation
Interest
payable
Sale
Electricity Bill
Telephone Bill
Dividends
Supplies
Consumed
Depreciation
expense
Lease expense
Interest
expense

0
5400
0

54000
1200

1200

8000

8000
1500
0

15000
15000
1200
201000

15000
1200
20100
0

75000

75000

8000
62000

8000
62000

15000

15000
19720
0
18000
0

Balance
Total

684200

Income
Statement
Sale
Supplies
Consumed
Gross Profit
Electricity Bill
Telephone Bill
Lease expense
Depreciation
expense
Operating
income
Interest
expense
Profit before
tax
Dividends

1800
00

180000

180000
75000
105000
15000
1200
62000
8000
18800
15000
3800
201000

684200

1800
00

3070
00

1972
00
3070
00

Net Profit

197200

Balance
Sheet
Assets
Cash
Fixed Asset
New
Warehouse
Depreciation
Net warehouse
Non cash
Current
Assets
Chowpati Lease
Accounts
Receivables
Other current
asset
Supplies
Total Assets
Liabilities
Long Term
Liability
Loan
Current
Liabilities
Sundry
Creditors
Unpaid
telephone bill
Interest
payable
Total Liability

86000
80000
-8000
72000

62000
54000
25000
299000

150000

50000
1200
15000
216200

Answers to questions
Q1: Gross margin = Gross profit / sales =105000/180000 = 58.3 %
Answer Option: C
Q2: The net income of the firm is negative. Answer Option: A
Q3: Non- cash current asset are the biggest items among assets. Answer
option: C

Q4: The maximum amount Niti can withdraw in cash is 296000. Hence
option D is correct.
Q5: Account Receivables after 14000 bad debt = 40000
Inventory = Supplies = 25000
Prepaid rent = Chowpati Lease = 62000
Accounts payable = Sundry Creditors = 50000
None of the equations in option a, b or c follow these numbers, so the
correct answer is D.
Case #6
1. Assuming Opening Stock is Nil.
Purchases = Rs. 82500
Sales = Rs. 75800
Closing Stock = Rs. 135000
Here, closing stock is more than the purchase of the stock if we assume opening
stock is nil. So there should be some information regarding the opening stock
that can explain why the closing stock is greater than the purchases. Otherwise,
there has to be purchases unaccounted for. In either case, more information is
required.
Therefore, Option C is the answer.
2. The information provided is not sufficient to arrive at the Capital balance.
Therefore, Option D is the answer.
3. Sundry Debtors is given as Rs. 143000 2200 (Goods sent on approval basis)
= Rs. 140800.
Sundry Creditors = Rs. 27000.
Therefore, Option D is the answer.
4. For this we have to calculate first the depreciation on the furniture.

The useful life is given as 4 years

The scrap value is nil.
The cost of furniture is Rs. 20000
No. of days of use according to the given question is 117
We are assuming straight line method of depreciation

Depreciation = (20000/4)*117/365 = 1602.74

Fixed Asset = Rs. 2000 Rs. 1602.74 = Rs. 18397.26
Assuming that payment of Mrs. Chatterjees loan is on July 1, 2010, loan
balance remains Rs. 160000.

Therefore Loan Balance>Net Fixed Assets.

Hence, Option C is the answer.
5. Cash = Rs. 4000
Net Fixed Assets = Rs. 18397.26
Net Fixed Assets>Cash
Therefore, Option B is the answer.

Question Number 2:
From the profit and loss statement of Gayatri Bio Organics Limited, some NonCash items identified by us are:
1. Depreciation: Though the companys assets lose value over a period of time,
the company does not write a check for it. So it is a clear non cash item.
2. Other expense: The company has issued 50 crore shares and the process of
issuing of these shares (Professional and Registration Fees) might have costed
the company which it dispenses as Other expenses over the maturity period of
these shares. It might also include expenses such as deferred expenses
(Advertisement expenditure).