Question
In: Accounting
Ravi and Kishor starts a business of Fruit and Vegetable processing and registered a company with...
Ravi and Kishor starts a business of Fruit and Vegetable processing and registered a company with the name Fruity Flavours Pvt Ltd having registered office in Kashipur in January 2020. Both the promoters contributed Rs 5.00 lakh each in the equity capital (divided in one lakh shares the face value of Rs 10 each). They also arranged a loan of Rs 10 lakhs from a bank under Stand-Up India Scheme. Kishor provided a building owned by him for processing facility for which the company agreed to pay him a rent of Rs 20,000 per month. Kishor will look after the production and operations; while Ravi is responsible for marketing. They will be entitled for a monthly salary of Rs 15,000 each. They also hired five employees. During first nine months the following transactions took place:
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Legal and other expenses for incorporation of the company Rs 80,000.
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Equipment purchased in January, 2020 for Rs 15 lakhs. Rs 10 lakh have been paid while Rs 5 lakhs still to be paid.
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Raw material purchased Rs 25 lakhs directly from farmers. Rs 2 lakhs still to be paid to farmers. There was no raw material inventory on 30th September.
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Chemicals and stores purchased Rs 2.50 lakhs, Chemicals and stores costing Rs 2.15 lakhs were consumed till 30th September.
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Salary and wages paid (including salary to Ravi and Kishor) Rs 5,20,000. Salary to be paid for the month of September Rs 72,000 (this will be paid in the first week of October).
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Power fuel and other expenses Rs 15 lakh.
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Rent paid to Kishor Rs 1,80,000.
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Sales revenue till 30th September was Rs 58.30 Lakh; of which Rs 15.00 lakhs still to be received.
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Interest on loan Rs 50,000 charged by the bank. Instalment (including interest) paid to bank 2.50 lakhs.
The Company decides to change depreciation on equipment @ 20% per annum and write-off all the legal expenses.
Prepare the Income Statement for nine months and the Balance Sheet of Fruity Flavours Pvt Ltd as on 30th September, 2020, and answer the following questions:
(Question 1 carries 3 marks; remaining questions carry 2 marks each)
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What is the Cash and Bank Balance as on 30th September, 2020?
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What is the Cost of Raw Material and Stores consumed?
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What is EBITDA for the nine months? [treat write-off also as depreciation].
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What is the Net Profit for the period?
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What is EPS for the period?
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What is the value of Total Assets as on 30th September, 2020?
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What is Total Equity as on 30th September, 2020?
Solutions
Expert Solution
| 1 | FRUITY FLAVOURS PVT LTD | ||
| INCOME STATEMENT | |||
| For Year Ended 30th September 2020 | |||
| Paticulars | Amount | Amount | |
| Sales | 58,30,000 | ||
| Cost of Goods Sold | |||
| Raw Materials | 25,00,000 | ||
| Chemicals and Stores | 2,15,000 | ||
| Overhead - Power Fuel and Other Expenses | 15,00,000 | 42,15,000 | |
| Gross Margin | 16,15,000 | ||
| Operating Expenses and Administrative Expense | |||
| Salaries to Employees | 2,50,000 | ||
| Salary to Directors | 2,70,000 | ||
| Legal and Other Expenses (Writtenoff) | 80,000 | ||
| Rent | 1,80,000 | ||
| Depreciation | 2,25,000 | 10,05,000 | |
| Operating Income | 6,10,000 | ||
| Other Expenses | |||
| Interest Expense | 50,000 | ||
| Income before Tax | 5,60,000 |
| 2 | FRUITY FLAVOURS PVT LTD | ||
| BALANCE SHEET AS ON 30TH SEPTEMBER 2020 | |||
| Note | As at | ||
| PARTICULARS | No | 30th September, 2019 | |
| I. EQUITY AND LIABILITIES | |||
| 1. Shareholders' Funds | |||
| (a) Share Capital | 1 | 10,00,000 | |
| (b) Reserves & Surplus | 2 | 5,60,000 | |
| (2) Non-Current Liabilities | |||
| (a) Long-Term Borrowings | 3 | 8,00,000 | |
| (3) Current Liabilities | |||
| (a) Sundry Creditors | 4 | 2,00,000 | |
| (b) Other Payables | 5 | 5,72,000 | |
| Total Equity & Liabilities | 31,32,000 | ||
| II. ASSETS | |||
| (1) Non-Current Assets | |||
| (a) Fixed Assets | |||
| Tangible Assets | |||
| i) Gross Block | 6 | 15,00,000 | |
| Less: Depreciation | 2,25,000 | ||
| Net Block | 12,75,000 | ||
| (2) Current Assets | |||
| (a) Sundry Debtors | 7 | 15,00,000 | |
| (b) Consumables Stock | 8 | 35,000 | |
| (b) Cash and cash equivalents | 9 | 3,22,000 | |
| Total Assets | 31,32,000 | ||
| SCHEDULES | |||
| 1 | Equity Shares Issued | 10,00,000 | |
| 2 | Profit Earned transferred to Reserves (Ref 1) | 5,60,000 | |
| 3 | Loan Taken 10 lakh and repaid 250000 out of which 2lakh is principal | 8,00,000 | |
| 4 | Raw Materials Purchased for 2500000 and 2 lakhs is due | 2,00,000 | |
| 5 | Equipment 5 lakhs Due | 5,00,000 | |
| Salary 72000 due | 72,000 | 5,72,000 | |
| 6 | Equipment Purchased for 1500000 | 15,00,000 | |
| 7 | Sales was 58.3 out of which 15 lakhs was due | 15,00,000 | |
| 8 | Chemicals and stores purchased 2.5 lakh but consumed only 2.15 lakh | 35,000 | |
| 9 | Cash Balance (Ref 3) | 3,22,000 |
| 3 | Cash and Bank A/c | |||
| Particulars | Amount | Particulars | Amount | |
| To Amount received from Shares | 10,00,000 | By Rent | 1,80,000 | |
| To Loan from Bank | 10,00,000 | By Salary to Employees | 1,78,000 | |
| To Cash Received from Customers | 43,30,000 | By Salary to Directors | 2,70,000 | |
| By Legal Expenses | 80,000 | |||
| By Raw Materials Purchased | 23,00,000 | |||
| By Chemincals Purchased | 2,50,000 | |||
| By Power and Fuel | 15,00,000 | |||
| By Amount Loan paid to Bank | 2,50,000 | |||
| By Equipment Purchased | 10,00,000 | |||
| By Balance C/d |
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