This case is based on your Birth Day (say, PQ) and Birth Month (say, RS). You are

Question:

This case is based on your Birth Day (say, PQ) and Birth Month (say, RS). You are starting a firm with a capital equal to PQRS + 1 crore. Suppose, you are having a date of birth as per official records as 01-01-1979 then in your case the capital of your firm would be 101 plus 1 crore = ₹102 crore (as PQRS would be 0101). Similarly, suppose your date of birth is 20-10-2015 then in your case the capital would be ₹2,011 crore (being 2010 + 1).

Transactions:

(i) Day 1: You start a firm named ‘Kanchan Polymers Limited’ with a capital of ₹(PQRS +1) crores.

(ii) Day 1: You buy machinery worth ₹PQRS crore from Raj Machineries Limited. Half of the amount is paid on the same day. Rest half of the payment would be done by the end of the month.

(iii) You take an interest free loan from a friend of a size equal to twice the capital of the firm.

(iv) The firm makes credit sales of ₹1,000 crore during the year. The end of the year trade receivables balance is ₹100 crores. It is expected that 10% of the same would turn out to be bad debt.

(v) Marketing and distribution expenses for the year are ₹10 crore. Salaries for the year stand at ₹5 crore. Electricity and other charges for the year are at ₹10 crore. All these expenses are paid and no dues remain at the end of the year.

(vi) The firm makes cash purchases of raw materials worth ₹100 crore. The firm makes credit purchases of ₹100 crore. The yearend payables balance remained at ₹28 crore.

(vii) End of the year survey reveals a raw material inventory of ₹1 crore. No other inventory exists for the firm.

(viii) The machinery is to be depreciated on a written down value basis @ 20% per annum. Corporate income tax rate is applicable at the rate of 35%. Fringe benefit tax is estimated to be ₹1 crore. Taxes are not yet paid by the firm and provision for the same has to be made.

You are required to prepare Kanchan Polymer balance sheet and income statement at the end of first year and answer the following questions:

(a) The Cash and Bank Balances are equal to: ₹____________

(b) The Retained Earnings are equal to: ₹________________

(d) The Gross Profit would be equal to: ₹________________

(e) The Current Liabilities and provisions would be equal to: ₹________________

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