Case 1- Millennium Company

Dr. Maniklal made the following request of a friend:

My book keeper has quit, and I need to see the Balance sheets of my company. He has
left behind a book with the numbers already entered in it. Would you be willing to prepare
balance sheets for me? Also, any comments you care to make about the numbers would be
appreciated. The Cash Account is healthy, which is a good sign, and he has told me that the net
income in June was INR 19,365.
The book contained a detailed record of transactions, and from it the friend was able to copy off
the balances at the beginning of the month and at the end of the month as shown in exhibit A. Dr.
Maniklal owned all the stock of Maynard Company. At the end of June, he paid himself INR
11,700 dividend and used the money to repay her loan from the company.
Questions:
a. Prepare balance sheets as of June and as of 30th June, in proper format.
b. Make comments about how the financial condition as of the end of June compared with
that at the beginning of June.
c. Why do retained earnings not increase by the amount of June Net income?
d. As of June 30, do you feel that Dr. Maniklal’s equity, INR 619,446? Explain.
EXHIBIT A Account Balances

June 1 June 30
Accounts payable 8517 21315
Accounts receivable 21798 26505
Accrued wages payable 1974 2202
Accumulated depreciation on building 156000 157950
Accumulated depreciation on equipment 5304 5928
Bank notes payable 8385 29250
Building 585000 585000
Capital stock 390000 390000
cash 34983 66660

Equipment (at cost) 13260 36660

Land 89700 89700
Merchandise Inventory 29835 26520
Note receivable, Dr. Maniklal 11700 0
Other non-current assets 4857 5265
Other non-current liabilities 2451 2451
Prepaid insurance 3150 2826
Retained earnings 221511 229446
Supplies on hand 5559 6630
Taxes payable 5700 7224
Answer:

ASSETS Jun-01 Jun-30

Land 89,700 89,700
Equipment(at cost) 13,260 36,660
Accumulated depreciation on equipment 5,304 5,928
Building 5,85,000 5,85,000
Accumulated depreciation on building 1,56,000 1,57,950
Other noncurrent assets 4,857 5,265

5,31,513 5,52,747
Merchandise inventory 29,835 26,520
Accounts receivable 21,798 26,505
Cash 34,983 66,660
Note receivable,Diane Maynard 11,700
Prepaid insurance 3,150 2,826
Supplies on hand 5,559 6,630

TOTAL 6,38,538 6,81,888

Equity and Liabilities

Capital stock 390000 390000.00

Retained Earnings 221511 229446.00 619446.00

Bank notes payable 8,385 29,250

Other non current liabilities 2,451 2,451

Accounts payable $8,517 $21,315

Accrued Wages payable 1,974 2,202
Taxes payable 5,700 7,224

TOTAL 638538 681888

 Case 1
Consider KK Ltd. Having the following position of Assets and Liabilities as on 31-3-2006.

ASSETS INR (lacs)

Land and Building 120
Plant and machinery 235
Furniture and fittings 35
inventory 90
debtors 40
Cash and Bank 25
Total 545
LIABILITIES
Equity 345
Long term loan 140
Short term loan 25
creditors 35
Total 545

The following are the transactions during 2006-07.

a. Purchased a piece of land for INR 5 lakhs in cash.

b. Collected INR 35 Lakhs from debtors outstanding
c. Repaid on installment Long-term loan INR 15 lakh
d. Paid INR 25 lakhs to creditors.

Show the effect of the above on Accounting equation.