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Hi,
Can you please answer the following question:

1.    Fairdeals Ltd. presents the balance sheets as at 31.12.2009 and 31.12.2010 as follows:

         31.12.09        31.12.10
Assets          Rs.          Rs.
Fixed Assets at cost      31,30,000       36,05,000
Less: Depreciation        6,80.000         8,20,000
         24,50,000        27,85,000
Investments          12,50,000        13,50,000
Marketable Securities         60,000         30,000
Inventories          4,10,000         5,20,000
Book Debts          5,30,000        5,05,000
Cash and Bank          1,20,000        1,40,000
Preliminary Expenses        1,00,000          50,000
         49,20,000       53,80,000
Liabilities

Share Capital          20,00,000        25,00,000
Reserve and Surplus          4,20,000         4,70,000
Profit and Loss Account      3,80,000         4,00,000
13.5% Debentures (Convertible)10,00,000       8,00,000
Mortgage Loan          3,00,000        2,50,000
Current Liabilities          8,20,000        9,60,000
         49,20,000       53,80,000

You are informed that during 2010
(i)     Rs. 2,00,000 of debentures were converted into shares at par;
(ii)    Rs. 1,00,000 shares were issued to a vendor of fixed assets;
(iii)   A machine costing Rs. 50,000 book value Rs. 30,000 as at 31st December, 2009 was disposed off for Rs. 20,000;
(iv)    Rs. 30,000 of marketable securities (cost) was disposed off for Rs. 36,000.
You are required to prepare a schedule of working capital changes and funds flow statement of the company for 2010.

Regards,
Krishna

Answer
2.   Fairdeals Ltd. presents the balance sheets as at 31.12.2009 and 31.12.2010 as follows:

  31.12.09   31.12.10
Assets   Rs.       Rs.
Fixed Assets at cost    31,30,000   36,05,000
Less: Depreciation      6,80.000      8,20,000
  24,50,000   27,85,000
Investments   12,50,000   13,50,000
Marketable Securities          60,000        30,000
Inventories     4,10,000     5,20,000
Book Debts     5,30,000      5,05,000
Cash and Bank      1,20,000      1,40,000
Preliminary Expenses      1,00,000         50,000
  49,20,000    53,80,000
Liabilities
Share Capital    20,00,000   25,00,000
Reserve and Surplus      4,20,000     4,70,000
Profit and Loss Account      3,80,000     4,00,000
13.5% Debentures (Convertible)   10,00,000      8,00,000
Mortgage Loan      3,00,000      2,50,000
Current Liabilities      8,20,000      9,60,000
  49,20,000   53,80,000

You are informed that during 2010
(v)   Rs. 2,00,000 of debentures were converted into shares at par;
(vi)   Rs. 1,00,000 shares were issued to a vendor of fixed assets;
(vii)   A machine costing Rs. 50,000 book value Rs. 30,000 as at 31st December, 2009 was disposed off for Rs. 20,000;
(viii)   Rs. 30,000 of marketable securities (cost) was disposed off for Rs. 36,000.
You are required to prepare a schedule of working capital changes and funds flow statement of the company for 2010.

Solution:  (i) Schedule of changes in Working Capital for the year 2010





















Particulars   2009
Rs.   2010
Rs.   Net effect on working capital
        Increase
Rs.   Decrease
Rs.
Current Assets

Marketable Securities
Inventories
Book Debts
Cash & Bank
Total (A)

Current Liabilities

Total (B)

Working Capital (A-B)
Decrease in Working Capital   

60,000
4,10,000
5,30,000
1,20,000   

30,000
5,20,000
5,05,000
1,40,000   

-
1,10,000
-
20,000



-



65,000   

30,000
-
25,000
-



1,40,000



-
  11,20,000   11,95,000      
  
8,20,000   
9,60,000      
  8,20,000   9,60,000      
  
3,00,000
-   
2,35,000
65,000      
  3,00000   3,00,000   1,95,000   1,95,000


Preparation of Non-Current Account
(a)   Calculation of Purchased of Fixed Asset for cash:
Fixed Asset Account
Particulars

To Balance b/d
To share Capital Purchase
To Bank (Purchase) (Balancing Fig.)   Rs.

31,30,000
1,20,000

4,05,000   Particulars

By Accumulated Depreciation A/C
By Bank (Sale)
By Adjusted profit & loss A/C (loss on sale)
By Balance c/d    Rs.

20,000
20,000

10,000
36,05,000
  36,55,000      36,55,000

(b)   Calculation of depreciation on Fixed Asset:
Accumulated Depreciation A/C
Particulars

To Fixed Assets a/c (Depreciation on machine sold)
To Balance c/d   Rs.



20,000
8,20,000   Particulars

By balance b/d
By adjusted profit & Loss a/c (Current year’s depreciation) (Balancing Figure)   Rs.

6,80,000

1,60,000
  8,40,000      8,40,000

Calculations of Funds from Operation
Adjusted profit and Loss A/C
Particulars

To Proposed Dividend
To Depreciation
To Preliminary expenses

To loss on sale of machine
To bonus share
To Balance c/d    Rs.

4,00,000
1,60,000
50,000

10,000
2,00,000
4,70,000   Particulars

By balance b/d
By premium on issues of shares
By funds from operations (Balancing Fig.)   Rs.

4,20,000
20,000
8,50,000


  12,90,000      12,90,000

(ii)   Funds Flow Statement for the Year 2010
Sources

Funds from operations
Sale of Machine

Decrease in Working Capital   Rs.

8,50,000
20,000

65,000
  Applications

Payment of Dividend
Purchase of fixed asset (for cash)
Purchase of trade investments
Repayment of Mortgage Loan
  Rs.

3,80,000
4,05,000
1,00,000
50,000
  9,35,000      9,35,000  

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