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financial accounting for managers
Financial Accounting For Managers 3rd Edition Sanjay Dhamija - Solutions
Satyam Machines Limited is a manufacturer of high tech fabrication machines. Each machine is sold on cash down price of ₹3 million. The company also offers the same machine on instalment payment basis. The customers buying on instalment basis can pay the amount in three equated annual instalments
Reliable Construction Limited is a real estate subcontractor. It completed some work for a large construction company for a consideration of ₹8 million. In addition to the work scope defined in the beginning, the company also did some extra work at the request of the client. The cost of the extra
What is the impact of uncertainty on revenue recognition?
RS Finance Limited is a nonbanking finance company in the business of providing loans. On 1st October 2016, it gave a loan of ₹1,000,000 to Mr. Ram at 10% per annum to be repaid after three years. Interest is to be paid quarterly. Mr. Ram duly paid interest on 31st December 2016. However, it
Please complete the income statement for the year 2016–17 based upon the information given: Particulars Sales Opening stock Purchases Closing stock Cost of goods sold Gross profit Operating expenses Profit and loss before tax P Limited 12,200 1,700 7,280 1,700 ?? ?? ?? 3,200 (in Thousands) Q
What are the different types of inventories?
The Drink Well Beer Limited runs a number of outlets for selling beer. Some of the bottles sold at these outlets are carried by the customers and are consumed later. In other cases, the beer is consumed by the customer in the bar operated by the company near the beer outlets. In such cases the
‘Valuation of closing stock affects both the Balance Sheet and the Profit and Loss Statement’. Do you agree with the above statement?
The Bombay Dyeing and Manufacturing Company Limited was established in the year 1879. It is a leading player offering products like stylish linens, towels, home furnishings, leisure clothing and kids wear, etc. As per the accounting policy of the company, the inventories are valued at lower of cost
Super Star Trading Limited is evaluating the effect of various inventory costing methods (FIFO, LIFO, Average Cost) on the financial statements of the company. The company expects moderate to high inflation in the coming years in respect of its inventory items. Which of the method will: 1. Result
The profit and loss statement of Ace Trading Limited for the years 2016 and 2017 is given below: While reviewing the numbers, it was revealed that the closing stock for the year 2016 was understated by ₹ 2,300,000. You are required to restate the profit and loss statement for both the years
Differentiate between periodic and perpetual method of keeping inventory records?
STU Electronics Limited is a trader in electronic items and maintains its inventory using periodic inventory system. The following data pertains to quarter ended 31st December 2017 for one of its high selling products: The sales of the company during the quarter amounted to ₹ 14,400,000. The
How is conservatism principle applied while valuing closing stock?
Explain different steps in inventory valuation?
Due to the introduction of the new model, STU Limited estimates that the remaining 170 units could be sold only at ₹ 12,200 per unit. The company also estimates that it will have to pay ₹ 500 per unit as salesman commission. Based upon this additional information, work out the value of closing
Using the following information, determine the closing inventory to be shown in the financial statements: Item A B с D Number of units in stock 20 12 10 22 Cost Per Unit (2) 80 120 150 60 Market Price per unit (2) 120 100 200 70 Additional per unit estimated cost to be incurred before sale
Compare the impact on LIFO, FIFO and average cost method on the financial statements in case of an inflationary economy.
High Power Instruments Limited uses FIFO method for issue of components from its stores department. The details of purchases and issues in respect of a component HT1 during the quarter ended 31st December 2017 are given below. Based upon the information available calculate the cost of material
If High Power Instruments Limited uses LIFO or Weighted Average Method for valuation of inventory what will be the impact on the cost of material consumed and value of closing stock.
HCL Technologies Limited is a leading IT solution provider company with operations is 32 countries and 116,000 employees. The global revenue of the company exceeded USD 7.2 billion. HCL Technologies provides solutions built around digital, IoT, cloud, automation, cybersecurity, analytics,
‘All expenses necessary to be incurred to bring the asset to its intended use are capitalized’. Explain with suitable examples.
High Fashions Limited is a recognized export house. In the month of January 2017, it imported a highly sophisticated embroidery machine from US at a cost of $ 200,000. At the time of import, the prevailing exchange rate was $ = ₹ 65. The company incurred an amount of ₹ 100,000 towards freight
Sam Limited incurred the following expenditure during the year 2016–17. Please state whether each of them should be treated as operating expenses for the year or capitalized as an asset. 1. A calculator was purchased for office use for ₹ 400. 2. Incurred ₹ 50,000 towards repair of a machine
Differentiate between: 1. Operating expenses and capital expenses 2. Tangible and intangible assets 3. Depreciation, depletion and amortization 4. Repair and improvement 5. Finance lease and operating lease
Satluj Cements Limited purchased a machine costing ₹ 15 million. As per suppliers warranty, the physical life of the machine is estimated to be eight years. However, the management would like to replace the machine after five years. At that time, the machine is expected to fetch a residual value
Biocon Limited is India’s largest and fully integrated biopharmaceutical company that develops, manufactures and supplies advanced, lifesaving biopharmaceuticals for diabetes, cancer and autoimmune conditions at price points that make them affordable and thus accessible. The company has
King Kong Limited acquired a piece of land for setting up a factory for ₹ 50 million on 1st October 2016. It took a loan of ₹ 30 million from the State Bank of India at 10% for this purpose, the balance being met from internal resources. It also incurred 1% of the cost of land towards
Do you agree with the following statements? Give reasons. 1. A company may follow different methods and rates of depreciation for financial accounting and tax accounting.2. Fixed assets are normally shown at their historical cost less accumulated depreciation. 3. Depreciation is a source of cash
M P Precision Limited bought equipment for ₹ 14.50 million. The company estimates that the useful life of the equipment is 10 years with a residual value of ₹ 2.5 million. 1. Prepare the depreciation schedule of the equipment using straight line method (SLM) of depreciation. 2. Assuming that
GE Shipping is the largest shipping company in private sector in India. As on 31st March 2009, it had 39 ships in its fleet with a total tonnage of 2,881,624. The company reviews the carrying amounts of tangible and intangible assets each balance sheet date to determine whether there is any
How is straight line method different from written down value method?
Patni Computers Limited, a leading company in IT sector in India, is engaged in consulting, software development and business process outsourcing. It has grown organically and also through acquisition route. It acquired business and assets of LOI, a European telecommunications consulting services
Pantaloon Retail (India) Limited is the leading retailer of India operating through multiple retail formats. The company was incorporated in the year 1987 and went public during 1992 through its maiden initial public offer (IPO). Over a period of time, the company has established itself in Indian
Prepare the depreciation schedule for Satluj Limited using SOYD method. 1. Compare the depreciation schedule of SOYD with WDV and SLM.2. Why are WDV and SOYD methods called accelerated methods of depreciation?
Hind Alloy Limited follows straight line method of depreciation for plant and machinery. The company charges proportionate depreciation in the year of acquisition. It bought a machine for ₹ 5 million on 1st October 2015. The machine was expected to have a useful life of eight years with residual
How is the cost model different from revaluation model for the subsequent measurement of PPE?
Fast Track Limited is a provider of cab services in New Delhi. The company purchased a new car with a list price of ₹ 800,000 in exchange of an old car and cash consideration of ₹ 680,000. The old car was purchased four years back at a cost of ₹ 500,000 and the accumulated depreciation of the
Hero Moto Corp Ltd. (Formerly Hero Honda Motors Ltd.) is the world’s largest manufacturer of two-wheelers, based in India. In 2001, the company had achieved the coveted position of being the largest two-wheeler manufacturing company in India and also the ‘World No.1’ two-wheeler company
Sona Software Limited acquired Mona Hardware Limited for a cash consideration of ₹ 300 million. The fair value of assets and liabilities taken over are as follows: 1. Ascertain the value of goodwill to be recorded in the above transaction. 2. How will the goodwill amount be treated in the books
Italian Ceramics Limited acquired Sonia Tiles Limited for a purchase consideration of ₹ 20 million. The fair value of assets and liabilities taken over are as follows: 1. Ascertain the value of goodwill to be recorded in the above transaction. 2. How will the goodwill amount be treated in the
Briefly explain the accounting for revaluation of an item of PPE.
How is impairment different from depreciation?
‘Depreciation is a noncash expense’. Explain.
How are selfgenerated intangible assets—brand and goodwill—accounted for?
Clarity Printers Limited bought a printing press on 1st April 2008 at a cost of ₹ 3 million. The management estimated the useful life of the press to be 10 years with a residual value of ₹ 200,000. The machine was depreciated using SLM till 2016–17. On 1st April 2017, based upon a technical
What is the treatment of expenditure incurred on property, plant and equipment subsequent to its initial capitalization?
Please refer to the Problem 2 above. After depreciating the machine for three years using SLM, in the fourth year Satluj Cements decided to change the method of depreciation to WDV at 20% per annum. How will the change affect the profit and loss statement and balance sheet of the company?Problem
PQR Limited invested ₹10 million in government bonds with coupon rate of 8% and maturity of 10 years. After one year, the fair value of the bonds has increased to ₹10.5 million. How would you classify the bonds and treat the increase in fair value if: 1. The bonds are intended to be held for
Super Invest Limited invested ₹15 million in government bonds with coupon rate of 8% and maturity of five years. After one year, the fair value of the bonds has declined to ₹1 million. How would you classify the bonds and treat the increase in fair value if: 1. The bonds are intended to be
Briefly explain the classification of investments as per Ind AS, 109.
ABC Limited invested ₹2 million in the equity shares of another company. The current market price of the investment is ₹1.7 million due to a fall in market. What are the options available to ABC Limited to classify these investments? How would you treat the fall in the market price under these
Starfin Limited invested ₹1 million in the equity shares in the stock market. The management wants this investment to be measured at amortized cost as this is intended to be held for longterm. Please advise options available to the company for classification.
What is the impact of subsequent measurement of investments on the financial statements of a company.
Finvest Limited investments in corporate bonds amounting to ₹12 million. These investments were classified as FVTOCI in line with the business model of the company. With the change in the business model, the company would like to reclassify these investments. The carrying amount of this
From the following Balance Sheets and Profit and Loss Statement prepare the Cash Flow Statement for the year 2016–17 Balance Sheet as at 31st March (Amount in *) A. Assets Non-current assets Property, plant & equipment Current assets Cash and bank Current investments Inventories Trade
Mr. Know-It-All is the chairman and managing director (CMD) for New Age Limited that completed its first year of operations on 31st March 2018. Mr. Kuber is the chief financial officer (CFO) of the company. They are reviewing the financial results of the company (balance sheet and profit and
XXX Investment Limited invested ₹10 million in corporate bonds. These investments were classified as FVTPL in line with the business model of the company. With the change in the business model, the company would like to reclassify these investments. The carrying amount of these bonds currently is
On the basis of information given fill the missing entries:Comment upon the cash flows of the respective companies. Particulars Increase or decrease in cash Cash & cash equivalent At the end of the year At the beginning of the year Increase or (decrease) in cash Cash flow during the year i)
Is it possible to reclassify an investment from one class to another? What would be the impact of such reclassification on carrying amount and profit or loss.
On the basis of the following information, prepare the cash flow statement for Seven Wonders Limited for the year 2016–17. Additional Information: 1. Shortterm investments represent investment of shortterm cash surplus in highly liquid and risk free instruments. 2. The company issued bonus
Calculate the cash flow from operating activities on the basis of the following information using indirect method: Profit and loss account for the year ended 31st December 2017 Particulars Sales Interest earned Total income Material consumed Other expenses Depreciation Interest & finance
Container Corporation of India Ltd. (CONCOR) commenced operation from November 1989. It is now an undisputed market leader having the largest network of 68 inland containers depots (ICDs). In addition to providing inland transport by rail for containers, it has also expanded to cover management of
The profit and loss statement for the year ended 31st March 2017 and the balance sheets as on 31st March 2016 and 2017 are given below. You are required to prepare the cash flow statement for the year ended 31st March 2017 and explain the main reasons for the decline in cash and cash
Suzlon Energy Limited, founded in the year 1995, is a leading wind power company. It has presence in 21 countries in the continents of America, Asia, Australia and Europe. It has emerged as the third largest wind power supplier. The year 2009–10 proved to be a disappointing year for Suzlon as it
What is the purpose of preparing cash flow statement?
YYY Investment Limited invested ₹6 million in corporate bonds. These investments were initially classified as ‘measured at the amortized cost’ in line with the business model of the company. With the change in the business model, the company would like to reclassify these investments. The
Pee Cee Limited sold some of its investments for a consideration of ₹40,00,000. These investments were purchased at ₹32,00,000 and initially were classified as FVTOCI. The carrying amount of this investment is ₹38,00,000 million and the cumulative gain previously recognized in the OCI
From the following balance sheets of XYZ Limited, prepare the cash flow statement for the year ended 31st March 2018 and explain the reasons for the decline in the cash and cash equivalents: Balance Sheet of XYZ Limited as on 31st March ( in Crore) 2017 2018 Particulars A. Assets 1. Non-current
Glaxo has a wholly owned subsidiary—Biddie Sawyer Limited (Biddie). Both the companies follow financial year as their accounting year. The summary of separate balance sheets of both the companies as on 31st December 2017 and the statement of profit and loss statement for the year ended on that
‘The expression ‘‘cash’’ is used in a wider sense to include ‘‘cash equivalents’’ as well while preparing the cash flow statement’. What kinds of items are included in ‘cash equivalents’?
Avon Limited made a provision of ₹ 103 million towards income tax for the year 2016–17. The provision for income tax in the current year balance sheet is ₹ 108 million compared to ₹ 97 million in the last year balance sheet. Ascertain the income tax paid during the year.
Explain the three broad headings under which cash inflows and cash outflows are reported while preparing cash flow statement?
Identify the main reasons for difference between cash flow from operating activities and reported profit for the year.
Differentiate between direct and indirect method of calculating cash flow from operating activities.
How do we treat the income tax paid in the cash flow statement?
What are noncash transactions? Give three examples.
‘Intragroup transactions and intragroup transactions need be eliminated while consolidating’. Explain the statement with suitable examples.
The equity share capital of Black Pearl Limited as on 31st December 2017 stood at ₹ 250 million. The company has been in losses for the last few years and the accumulated losses in the balance sheet stood at ₹ 165 million. The promoters holding 60% stake in the company are not very hopeful
Big Bull Limited acquired 70% of equity shares of Small Cow Limited for a total consideration of ₹ 435.45 million. At the time of acquisition the equity share capital of Small Cow Limited stood at 20 million equity shares of ₹ 10 each and the other equity balance at ₹ 320 million. 1. Compute
What is the purpose behind preparation of consolidated financial statements?
HR Limited holds 100% equity of SR Limited. At the year end, in addition to presenting their separate financial statements, HR Limited presents consolidated financial statements as well. During the year the following transaction took place between these two companies: 1. HR Limited sold goods to
How do we define the expression ‘group’ for the purpose of consolidation?
Satya Limited acquired 80% of equity capital of Sundra Limited on 1st April 2016 for ₹ 575 million in an allcash deal. The balance sheets of the two companies immediately before the transaction are given in the following:You are required to prepare the consolidated balance sheet of Satya
S Limited, a 100% subsidiary company of H Limited, sold goods costing ₹ 120 million to H Limited for ₹ 160 million during the year. Out of these, 40% of the goods are still unsold and are included in the balance sheet of H Limited at cost to it. How will the above transaction be treated in the
From the following balance sheets of H Limited and S Limited and additional information prepare the consolidated balance sheet of H Limited. Additional Information1. The face value of shares of both companies is ₹ 10. 2. H Limited holds 60% share in S Limited at a cost of ₹ 78.52 million. 3.
After one year of acquisition both the companies presented their respective balance sheets as on 31st March 2017 as follows: Additional Information 1. During the year Sundra Limited sold goods costing ₹ 660 million to Satya Limited for ₹ 800 million which in turn sold it to its customers for
Hero Limited acquired the entire equity share capital of Zero Limited on 1st January 2017 for a consideration of ₹ 600 million. At the time of acquisition the share capital of Zero Limited consisted on 20 million equity shares of ₹ 10 each. The company had other equity amounting to ₹ 560
How is the cost of investment in the subsidiary company treated?
Define the expression ‘minority interest’. How is minority interest disclosed in the consolidated financial statements?
On the basis of the following information and assumption, determine which of the two companies have a higher economic value added: The applicable tax rate is 30%. Particulars Earnings before interest and tax (EBIT) Interest expenses Profit before tax (PBT) Tax Profit after tax (PAT) Capital
What are the different sources of disclosures in the annual reports of companies?
Engineers India Limited was set up in 1965 to provide engineering and related technical services for petroleum refineries and other industrial projects. Its range of services includes project management consultancy (PMC), project implementation services (PMS), engineering, procurement and
What are the different types of audit reports?
How is ‘segment reporting’ helpful in understanding the financial performance of a company?
How is Economic Value Added different from the reported profit?
Value added statement has a stakeholders’ focus rather than stock holders’ focus’. Do you agree?
Human resources are the most valuable assets for a knowledge based business, still they are not treated as assets in the balance sheet. Why?
ACC Limited has prepared its financial statements using the calendar year as its accounting period. The last financial statements were prepared for the year ended 31st December 2013. The Companies Act 2013, has now made it mandatory for the Indian companies to keep their accounts using financial
What is the need for accounting standards?
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