Question

In: Accounting

From the following data prepare the balance sheet of X Ltd., as on 31st December, 1999....

From the following data prepare the balance sheet of X Ltd., as on 31st December, 1999.

Current ratio 2.5;

Quick ratio 1.5;

Net working capital Rs.3,00,000

Gross profi t ratio 20%

Fixed Assets turnover ratio 2 times

Stock turnover ratio (Cost of sales/ Closing stock) 6 times.

Average Collection period 2 months

Super quick ratio .25

Fixed Assets to shareholders equity .8

Reserves and surpluses to share capital .5

Debt equity ratio .2

Expert Solution

Solution

CA = Current Asset

CL = Current Liabilities

CA - CL = Working Capital = 300000

CA/CL = 2.5

There for CA = 2.5CL

Ie , 2.5CL – CL = 300000

1.5CL = 300000

CL = 300000/1.5

CL = 200000

CA = 2.5CL

= 2.5*200000

= 500000

Quick Ratio = (CA – Inventory)/Current Liabilities

Let Inventory be “X”

(500000-X)/200000 = 1.5

500000-X = 1.5*200000

500000 – X = 300000

X = 200000

Inventory value = 200000

Stock turnover ratio (Cost of sales/ Closing stock) 6 times.

Let Cost of sales be “Y”

Y/200000 = 6

Y = 6*200000

Y = 1200000

Net Sales = (Cost of sales / 80) * 100

= 1500000

Fixed Assets turnover ratio 2 times

Let fixed asset Value be “Z”

Fixed Assets turnover = Net Sales / Average Net Fixed Asset

1500000/Z = 2

Z = 1500000*2 = 3000000

Fixed Assets to shareholders equity .8

There for Shareholders equity = 3000000/0.8

= 3750000

Debt equity ratio 0.2

So Value of Debt = 3750000 * 0.2

= 750000

Reserves and Surplus = 50% of Share capital

= 3750000 * 50%

= 1875000

Lets Value of (Cash + Bank + Short Term Securities) be “M”

Super quick ratio .25

Super Quick Ratio = Super Quick Assets / Current Liabilities

Super Quick Ratio = (Cash + Bank + Short Term Securities) / Current Liabilities

M/200000 = 0.25

M = 0.25*200000

M = 50000

Average Collection Period = Accounts Receivable / (Net sales/365) = 2 Months

Lets Accounts Receivable Value be “R”

= R/(1500000/365) = 2 Months(60 Days)

R = 60*4109.6 = 246575

Values from ratios

Current Asset - 500000

Current Liabilities - 200000

Inventory - Included in Current Asset - 200000

Cost of Sales - 1200000

Net Sales - 1500000

Fixed Asset - 3000000

Shareholders Equity - 3750000

Debt - 750000

Reserves and Surplus - 1875000

Cash and Cash Equivalents - 50000

Accounts Receivable = 246575

Balance Sheet of X Ltd
LIABILITIES	Rs.	Assets	Rs.
Equity and Liabilities		Assets
Share Capital	3750000	Fixed Assets	3000000
Reserves and Surplus	1875000	Trade Receivables	246575
		Current Assets	300000
Long term Debts	750000	Inventory	200000
		Cash and Cash Equivalents	50000
Current Liabilities	200000	Other Assets - Adjusted	2778425
Total	6575000	Total	6575000

Thank You

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