1. Calculate EVA from the following data for the year ended 31/03/08 (Rs. in lakhs)(ICAI Adapted)
Average debt 50
Average equity 2766
Cost of debt (post tax) 7.72%
Cost of equity 16.7%
Weighted average cost of capital 16.54%
Profit after tax, before exceptional item 1541
Interest after tax 5
2. The Income Statement and Balance Sheet of Narayanan Ltd is given below:
Income Statement
Particulars | Rs. (in Lakh) | Rs. (in Lakh) |
Sales Interest on Investments Profit on sale of old assets Total Income Less: Manufacturing cost Administration Cost Selling and distribution cost Depreciation Loss on sale of an old M/C EBIT Less: Interest EBT Less: Tax (30%) PAT EPS(119 Lakh/ 5 Lakh) P/E ratio | 500 10 5 180 60 50 30 5 | 515 325 190 20 170 51 119 Rs. 23.8 2 |
Balance Sheet
Liabilities | Rs. | Assets | Rs. |
Equity Capital (Rs. 10 share) | 50 | Building | 80 |
Retained earnings | 40 | Machinery | 70 |
Long term loan | 60 | Stock | 10 |
Creditors | 15 | Debtors | 12 |
Provisions | 13 | Bank | 6 |
TOTAL | 178 | TOTAL | 178 |
The cost of equity and cost of debt is 10% and 12% respectively. The company pays 30% corporate tax. From the information given you are required to calculate the EVA. Also, calculate MVA on the basis of Market Value of equity capital.
3. ABC Co. Ltd. started business on 1/04/2001. Following information is available from records of the ABC Co. Ltd. Profit before depreciation, amortization of preliminary expenses & taxes: -
Year Rs.
2001-02 100000
2002-03 150000
2003-04 250000
2004-05 300000
The co. has purchased following Plant & Machinery:-
Date of purchase Purpose Amount (Rs.)
1/04/2001 General 30000
1/04/2002 Research 25000
1/11/2004 Research 36000
Company charges depreciation on plant & machinery @ 15% on Straight Line Method where as the rates of depreciation as per Income Tax Act for general machinery @ 25% on Written Down Value Method & for research purpose @ 100% The tax rates for relevant years were 45%, 40%, 35% & 35.875% respectively. During the year 2001-02 Company has written off Rs. 30000/- preliminary expenses to Profit & Loss A/c. Under Income Tax Act the qualifying sum for amortization for 5 years is Rs. 25000. During 2003-2004 payment of Rs. 140000/- made by bearer cheque, which will be disallowed @ 20 % under section 40A(3). Prepare Profit and Loss Statement using AS 22.
4. Mr. H is carrying out retail business in electronic items. After observing trade practices, he has decided to start a small scale manufacturing unit to produce electrical fittings. His Balance Sheet as on 31 -3-2007, before starting manufacturing activities, is as under:
Liabilities | Assets | ||
Capital | 5,55,500 | Furniture Computer Investments Fixed Deposits with bank Cash and Bank balance | 40,000 60,000 1,50,000 2,00,000 1,05,500 |
Rs. | 5,55,500 | Rs. | 5,55,500 |
In order to carry out new activity he will take factory premises on rental basis @ Rs. 10,000 p.m. from 1.9.2007 and from 1.4.2008 the rent will be Rs. 15,000 p.m. He is confident of setting up manufacturing unit by 30.8.2007 and start manufacturing and selling from 1st September 2007.
The cost of machineries will be Rs. 10,00,000 for which he will be approaching Bank of Baroda for term loan of Ps. 8,00,000, balance being his own contribution. The loan repayment will start from 1.4.2008, in the quarterly installment of Rs. 50,000 payable on 1st April, 1st July, 1st October and 1st January every year.
He will have no income in financial year 2007-08 till setting up of the unit i.e. upto 30-8-2007. Thereafter he expects his Sales to be Rs. 80,000 p.m. from 1-9-2007 to 31-3-2008 and afterwards every year Rs. 18,00,000 with yearly increment of 10% over previous year.
His cost structure will remain more or less unchanged upto 31-3-2010 and Cost break up on Sales will be: Direct Cost @ 40%, Office Overheads 20%; Selling and Distribution 5%, Depreciation will be charged on all fixed assets @ 10% under W.D.V.(full year’s depreciation even if the assets are used for a part of the year) and interest for first year ending 31 -3-2008 will be Rs. 59,000 and thereafter it will be at Rs. 70,000, Rs. 54,000 and Rs. 43,000 respectively for subsequent years.
You are required to prepare Projected Statement of Profit and Loss for the financial years 2007-08 08-09 and 2009-10.
5. B & P Ltd. availed a lease from N&L Ltd. The conditions of the lease terms are as under : (i) Lease period is 3 years, in the beginning of the year 2009, for equipment costing Rs. 10,00,000 and has an expected useful life of 5 years.
(ii) The Fair market value is also Rs. 10,00,000.
(iii) The property reverts back to the lessor on termination of the lease.
(iv) The unguaranteed value is estimated at Rs. 1,00,000 at the end of the year 2011.
(v) 3 equal annual payments are made at the end of each year.
Consider IRR = 10%. The present value of Re. 1 due at the end of 3rd year at 10% rate of interest is Re. 0.7513. The present value of annuity of Re. 1 due at the end of 3rd year at 10% IRR is Rs. 2.4868. State whether the lease constitute finance lease and also calculate unearned Finance income.
6. Z Ltd. presents the following information for the year ending 31.03.2008 and 31.03.2009 from which you are required to calculate the Deferred Tax Asset/Liability assuming tax rate of 30% and state how the same should be dealt with as per relevant accounting standard.
31.03.2008 31.03.2009
Rs. (lakhs) Rs. (lakhs)
Depreciation as per books 4,010.10 4,023.54
Unabsorbed carry forward business loss and
depreciation allowance 2,016.60 4,110.00
Disallowance under Section 43B of Income tax Act, 1961 518.35 611.45
Deferred Revenue Expenses 4.88 —
Provision for Doubtful Debts 282.51 294.35
Z Ltd. had incurred a loss of Rs. 504 lakhs for the year ending 31.03.2009 before providing for Current Tax of Rs. 26.00 lakhs
7. A machinery is sold on hire purchase. The terms of payment is four annual installments of Rs.6000/- at the end of each year commencing from date of agreement. Interest is charged at 20% and included in the annual payment. Show machinery account and hire vendor ac in the books of purchaser who defaulted the payment of third yearly payment and the vendor re possessed the machinery. The purchaser provides 10% depreciation pa. Show necessary workings as part of answer.
8. Mr. Taitler purchased raw materials from M/s Richo Inc. of USA on 1st October, 2008 for US $ 8,400. Amount to be paid in four equal half yearly installments commencing from 31st March, 2009 along with interest @ 12% per annum. Rate of exchange per US $ as on various dates was as follows :
1st October, 2008 Rs.45 per US $
31st March, 2009 Rs.46 per US $
30th September, 2009 Rs.43 per US $
31st March, 2010 Rs.44 per US $
Pass necessary journal entries in the books of Mr. Taitler for the years ended 31st March, 2009 and 31st March, 2010
9. Z Ltd. acquired a machine on 1.4.2006 costing US $ 1,00,000. The suppliers agreed to the following terms of payment: 1.4.2006 : down payment 50%; 1.4.2007 : 25%; 1.4.2008 : 25%. The company depreciates machinery @ 10% on the Straight Line Method. The rate of exchange is steady at US $ 1= Rs.40 upto 30.9.2007. On 1.10.07, due to an official revaluation of rates, the exchange rate is adjusted to US $ 1= Rs.48. Show the extracts of the relevant entries in the Profit and Loss Account for the year ending 31st March, 2008 and the Balance Sheet as on that date, showing such workings as necessary
10. Calculate economic value added (EVA) with the help of the following information Sun Limited. Financial leverage: 1.4 times; Equity Capital Rs.170 lakh; Reserve and surplus Rs.130 lakh; 10% Debentures Rs.400 lakh; Cost of Equity: 17.5% Income Tax Rate: 30%
11. On jan 1 2008 Priyesh & CO acquired pick up van from Prasad-praveen associates. The terms of contract as under:-
- Cash price rs.100000
- While signing contract 40000 Balance in annual installments of rs20000 plus int @ 6% on balance o/s
- Depreciation at 20% pa using straight line method
You are required to give journal entries and ledger accounts in the books of priyesh & co and show balance sheet at the end of each year.
12. On 1st January, 2009, a company entered into a foreign currency transaction by taking a loan of US $ 1 Lakh. The amount of loan is required to be paid on 30th June, 2009. On 1st January 2009 itself, the company entered into a forward exchange contract for the transaction to mitigate the risks associated with changes in exchange rates. The exchange rates (Rs. per US $) are as below:
Period | 01.01.09 | 31.03.09 | 30.06.09 |
Spot rate | 45 | 47 | 52 |
Forward rate (for six months) | 48 | - | - |
Forward rate (for three months) | - | 51 | - |
Assuming that the accounting year of the company is the financial year, pass the journal entries for the above transactions.
13. Anu & Co purchases truck on Hire purchase System. As per terms he needs to pay: Rs. 70,000 down payment, At the end of first year 53,000, and Rs 49,000 and end of second year 55,000 at the end of third year. Interest is charged 10% p.a. You are required to calculate price of the truck and interest paid in each installment
14. A machinery is sold on hire purchase. The terms of payment is four annual installments of Rs.6000/- at the end of each year commencing from date of agreement. Interest is charged at 20% and included in the annual payment. Show machinery a.c and hire vendor ac in the books of purchaser who defaulted the payment of third yearly pmnt and the vendor re possessed the machinery. The pur provides 10% depreciation pa. Show necessary workings as part of answer.
15. Wagmare sells goods on Hire purchase at cost plus 50%. Prepare hire purchase trading account from the information given below: Particulars Rs.
Goods with customers in jan 2010 , installments not yet due 5400
Goods sold on hire purchase during 2010 25500
Cash received from customers 20100
Installments due but not yet rcvd at the end of yr 1800
All figures are on basis of hire purchase price.
No comments:
Post a Comment