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Fin Accounting-Class Exercise

The document provides account balances for Dr. Maniklal's company as of June 1 and June 30. It states that Dr. Maniklal paid himself a INR 11,700 dividend from the company on June 30 and used it to repay a loan. The balances show that retained earnings increased by INR 19,365 but do not account for the full net income amount due to the dividend payment.

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renjith
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66 views2 pages

Fin Accounting-Class Exercise

The document provides account balances for Dr. Maniklal's company as of June 1 and June 30. It states that Dr. Maniklal paid himself a INR 11,700 dividend from the company on June 30 and used it to repay a loan. The balances show that retained earnings increased by INR 19,365 but do not account for the full net income amount due to the dividend payment.

Uploaded by

renjith
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Case 1

Millennium Company
Dr. Maniklal made the following request of a friend:
My book keeper has quit, and I need to see the Balance sheets of my company. He has
left behind a book with the numbers already entered in it. Would you be willing to prepare
balance sheets for me? Also, any comments you care to make about the numbers would be
appreciated. The Cash Account is healthy, which is a good sign, and he has told me that the net
income in June was INR 19,365.
The book contained a detailed record of transactions, and from it the friend was able to copy off
the balances at the beginning of the month and at the end of the month as shown in exhibit A. Dr.
Maniklal owned all the stock of Maynard Company. At the end of June, he paid himself INR
11,700 dividend and used the money to repay her loan from the company.
Questions:
a. Prepare balance sheets as of June and as of 30th June, in proper format.
b. Make comments about how the financial condition as of the end of June compared with
that at the beginning of June.
c. Why do retained earnings not increase by the amount of June Net income?
d. As of June 30, do you feel that Dr. Maniklal’s equity, INR 619,446? Explain.
EXHIBIT A Account Balances

June 1 June 30
Accounts payable 8517 21315
Accounts receivable 21798 26505
Accrued wages payable 1974 2202
Accumulated depreciation on building 156000 157950
Accumulated depreciation on equipment 5304 5928
Bank notes payable 8385 29250
Building 585000 585000
Capital stock 390000 390000
cash 34983 66660
Equipment (at cost) 13260 36660
Land 89700 89700
Merchandise Inventory 29835 26520
Note receivable, Dr. Maniklal 11700 0
Other non-current assets 4857 5265
Other non-current liabilities 2451 2451
Prepaid insurance 3150 2826
Retained earnings 221511 229446
Supplies on hand 5559 6630
Taxes payable 5700 7224
Case 1
Consider KK Ltd. Having the following position of Assets and Liabilities as on 31-3-2006.

ASSETS INR (lacs)


Land and Building 120
Plant and machinery 235
Furniture and fittings 35
inventory 90
debtors 40
Cash and Bank 25
Total 545
LIABILITIES
Equity 345
Long term loan 140
Short term loan 25
creditors 35
Total 545

The following are the transactions during 2006-07.

a. Purchased a piece of land for INR 5 lakhs in cash.


b. Collected INR 35 Lakhs from debtors outstanding
c. Repaid on installment Long-term loan INR 15 lakh
d. Paid INR 25 lakhs to creditors.

Show the effect of the above on Accounting equation.

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