Financial Reporting and Analysis

End-term Examination
Answer ALL Questions. Show your workings
Time: 2&1/2 Hrs Full Marks: 70
(25)
1. X Ltd has provided the following information for the year ending 31 st March 2021.

Particulars Amount(Rs.)
Inventory as on 1st April, 2020 312,500
Purchases 3,125,000
Freight 22,500
Salary expenses 937,500
Traveling expenses 37,500
Interest on debentures 75,000
Selling and distribution expenses 62,500
Directors’ remuneration 298,750
Building 6,250,000
Land 1,875,000
Furnitures 1,375,000
Motor vehicles 900,000
Trade receivables 437,500
Prepaid insurance 31,250
Advance against purchase of new building 1,625,000
Cash in hand 268,750
Cash at Bank 592,500
12% Debentures 625,000
Equity Share Capital 5,000,000
General reserve 625,000
Unclaimed dividend 81,250
Trade payables 1,362,500
Retained earnings 101,250
Sales Revenue 6,375,000
Other income 81,250
Accumulated Depreciation on
Building 2,500,000
Furnitures 1,250,000
Motor Vehicles 225,000

The following additional information is also available:

a) Inventory as at 31st March, 2021 was Rs. 375,000
b) Depreciation is to be charged as under:
i) Building Rs. 100,000
ii) Furnitures Rs. 25,000
iii) Motor Vehicles Rs. 25,000
c) Salary unpaid at the year end is Rs. 50,000
d) Create a provision for bad and doubtful debts Rs. 35,000
e) Create a provision for taxation for Rs. 250,000
Required:
Prepare an Income statement clearly showing Gross Profit, EBITDA, EBIT, PAT and a
Balance Sheet for the year ending 31st March 2021 (vertical format).
(20)
2. The comparative balance sheets of Y Ltd. for the period ending 31st March, 2020
and 2021 are given below:

Balance sheets

2021 2020
Assets
Cash 94,560 27,360
Accounts receivables 102,430 75,430
Inventory 112,890 137,890
Prepaid expenses ---- 20,000
Land 25,000 ----
Building 137,000 --
Accumulated Depreciation-building (15,000) ---
Equipment 33,000 34,000
Accumulated Depreciation-equipment (14,500) (24,000)
Patents 4,000 6,000
-------------- ------------
Total assets 479,380 276,680
======= =======
Liabilities and equity
Accounts payable 10,750 36,750
Loan payable(current) 10,000 ---
Accrued liabilities -- 12,300
Mortgage payable 162,000 --
Equity share capital 180,000 150,000
Securities premium 57,200 37,200
Retained earnings 59,430 40,430
------------ -------------
Total liabilities and equity 479,380 276,680
======= ========

Additional information:
a) Net income for the current year 31st March 2021 is Rs. 28,000
b) Building and equipment depreciation expenses amounts to Rs. 15,000 and
Rs. 3000 respectively
c) Equipment that cost Rs. 13,500 with accumulated depreciation of Rs. 12,500
sold at a gain of Rs. 5,300
d) Cash was paid for the purchase of equipment
e) Patent amortization Rs 3000, purchase of patent, Rs. 1000
f) Funds borrowed by taking loan, Rs. 25,000, loan repaid, Rs. 15000
g) Land and building purchased for Rs. 162,000 by signing a mortgage for the
total cost
h) 1500 shares of Rs. 20 par value equity shares issued for a total of Rs. 50,000
i) Dividend was paid in cash

Required:

Using indirect method, prepare a cash flow statement.

 (25)
3. Z Ltd has provided its comparative income statements and balance sheets for
the year ended 31st March, 2020 and 2021

Income statements 2021 2020

Net sales 800,400 742,600

Cost of goods sold 454,100 396,200
Selling expenses 130,100 104,600
Administrative expenses 140,300 115,500
Interest expenses 25,000 20,000
Income tax expense 14,000 35,000
------------ -----------
Net income 36,900 71,300
======= =======

Balances sheets

Assets
Cash 31,100 27,200
Accounts receivables 72,500 42,700
Inventory 122,600 107,800
Property, Plant, and Equipment(net) 577,700 507,500
------------ -------------
Total Assets 803,900 685,200
======= ========
Liabilities and equity
Accounts payable 104,700 72,300
Loan payable 50,000 50,000
Bonds payable 200,000 110,000
Equity share capital(Rs. 10 each) 300,000 300,000
Retained earnings 149,200 152,900
------------ -------------
Total liabilities and equity 803,900 685,200
======= ========
Required:

Analyze the financial performance of the company for the year ending 31 st March,
2020 and 2021
A) Prepare a profitability and total asset management analysis by calculating
 Gross profit margin
 Net profit margin
 Asset turnover
  Return on total assets
 Return on net worth
 Earnings per share
B) Prepare a liquidity analysis by calculating
 Current ratio
 Quick ratio
 Inventory holding period
 Collection period
C) Prepare a solvency analysis by calculating
 Debt to equity ratio
 Interest coverage ratio