Ms4 Assignment 2013

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.

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