Rs. 2,500 spent on the overhaul of a machine purchased second-hand is _________
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Solution
Amount spent for overhauling of second hand machine is capital expenditure.
Rs. 200 paid as wages for erecting a machine should be debited to _________
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Solution
Wages for erecting machine should be debited to machinery account.
When preparing a Bank Reconciliation Statement, if you start with the debit balance as per Cash Book, cheques issued but not presented within the period should be _________
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Solution
Cheques issued (not presented) will be added to the balance as per cash book in the given case.
Consider the following data pertaining to H Ltd. for the month of March 2010:
Particulars As on March 1, 2010 (Rs.) As on March 31, 2010 (Rs.) Inventory 1,80,000 90,000 The company made purchases amounting Rs. 3,30,000 on credit. The goods are sold at
25% above the cost. The sales for the month of March 2010 were:
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Solution
The cost of goods sold = opening inventory + purchases - closing inventory = 1,80,000 + 3,30,000 – 90,000 = 4,20, 000
Sales = cost of goods sold + profit = 4,20,000 + 25% of 4,20,000 = Rs. 5,25,000
The total cost of goods available for sale with a company during the current year is Rs.12,00,000 and the total sales during the period are Rs.13,00,000. If the gross profit margin of the company is 33(1/3) % on cost, the closing inventory during the current year is
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Solution
Let the cost of goods sold = x
Then sale price will be = x + 1/3 of x = 4/3 x = 13,00,000
Thus x = 13,00,000 × 3/4 = 9,75,000
Thus closing inventory = opening inventory - cost of goods sold = 12,00,000 – 9,75,000 = Rs. 2,25,000
In the books of D Ltd. the machinery account shows a debit balance of Rs. 60,000 as on April 1, 2009. The machinery was sold on September 30, 2010 for Rs. 30,000. The company
charges depreciation @ 20% p.a. on diminishing balance method. Profit / Loss on sale of the mahinery will be _________
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Solution
To calculate the gain or loss on the sale of a fixed asset, one has to figure out the asset’s book value up
to the date of sale.
Under WDV method, depreciation is charged at a fixed rate every year, on the reducing balance. A
certain percentage is applied to the previous year’s book value, to arrive at the current year’s depreciation/
book value, which shows a declining balance, weighted for earlier years, and lower and lower for later
years, as the machine grows older.
Lets find the WDV as on 30-9-2010 of the machine in question
original cost as on 1-3-2009 = 60,000
31-3-2010 depreciation @ 20% pa = 60,000 × 0.2 = Rs. 12,000
31-3-2010 wdv = 60,000 – 12,000 = Rs. 48,000
30-9-2010 depreciation for the half year = 48, 000 × 20% × ½ = Rs. 4,800
30-9-2010 wdv = 48,000 – 4,800 = Rs. 43,200
30-9-2010 sale price = 30,000
Thus loss on sale = 43,200 – 30,000 = Rs. 13,200
Amit Ltd. purchased a machine on 1.1.2009 for Rs 1,20,000. Installation expenses were Rs. 10,000. On 01.07.2009, expenses for repairs were incurred to the extent of Rs. 2,000. Depreciation is provided under straight line method. Depreciation rate is 10%. Annual Depreciation will be ________
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Solution
Straight line method depreciates cost evenly through out the useful life of the fixed asset.
Straight line depreciation is calculated as follows:
Depreciation per annum = (Cost – Residual Value) / Useful Life
Where:
Cost includes the initial and any subsequent capital expenditure.
Residual Value is the estimated scrap value at the end of the useful life of the asset. As the residual value is expected to be recovered at the end of an asset’s useful life, there is no need to charge the portion of
cost equaling the residual value.
Useful Life is the estimated time period an asset is expected to be used from the time it is available for use to the time of its disposal or termination of use.
Since repair on the machinery was made on 1.7.2009 and not before the machinery was put to use and it was also not a capital expenditure, it will not be considered while calculating the cost of the machinery.
Cost of the machinery = purchase price + installation expenses = 1,20,000 + 10,000 = 1,30,000
Depreciation = 10% of 1,30,000 = Rs. 13,000
If sales are Rs. 2,000 and the rate of gross profit on cost of goods sold is 25%, then the cost of goods sold will be _________
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Solution
Cost of Goods Sold = Sales “ Gross Profit.
Let x be the cost of goods sold
Then profit = 25% of x
Thus sales = x + 25% of x = 1.25x = Rs. 2,000
Or x = 2,000/1.25 = Rs. 1,600
If sales revenue are Rs. 4,00,000; cost of goods sold is Rs. 3,10,000 and operating expenses are Rs.60,000 the gross profit is _________
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Solution
Gross profit = Sales revenue – cost of goods sold = Rs. 4,00,000 – Rs. 3,10,000 = Rs. 90,000
A of Kolkata sends out 500 boxes to B of Delhi costing Rs. 200 each. Consignor’s expenses Rs 5000. 1/5th of the boxes were still in transit. 3/4th of the goods received by consignee, were sold. The value of goods still in transit will be:
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Solution
Cost of Goods Sold = Sales – Gross Profit.
Cost of Goods Sold = Opening inventory + Purchases + Direct Expenses – Closing inventory
Total cost of goods sent on consignment = Cost of the goods + expenses incurred by the consignor
= 1,00,000 + 5,000 = Rs. 1,05,000
1/5th of the consignment is still in transit = 1/5 of 1,05,000 = Rs. 21,000