Comprehensive Problem 1. Mr. Tushar decided to start a computer business. For this purpose he built the first floor of his house at a cost of Rs. 2,00,000 and invested a further sum of Rs. 3,50,000 in his business. He wanted to start with 12 computers costing Rs. 40,000 each. He approached approached ICICI Bank and secured a loan to the extent of 75 % of the cost of computers. It was agreed that the loan will be repaid in four annual instalments as follows: At the end of First First year
: Rs. 90,000 + Rs. 36,000 for for interest
At the end of second second year
: Rs. 90,000 + Rs. 27,000 for for interest
At the end of third year
: Rs. 90,000 + Rs. 18,000 for interest interest
At the end of fourth fourth year
: Rs : 90,000 + Rs. 9,000 for interest
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He started business on 1 April, 2002 . On the same date he deposited Rs. 3,30,000 in the Bank. He purchased Computers and paid 25% of the value of computers from his bank and Rs. 3,60,000 out of ban k loan availed. He deposited Rs . 10,000 for the electric connection with the Electricity Board and also deposited deposited Rs. 1,50,000 with the VSNL for internet and telephone telephone connection He spent Rs. 40,000 for getting the Computer Café furnished and also spent Rs. 6,000 in getting the pamphlets printed printed and distributed. All payments payments were to be made made by cheques and all the receipts were to be deposited deposited in the bank on on same day.
At the end of the year, results were: were: Purchases of computer stationary like floppy discs, CD’s etc.
Revenue from fees received from students of Computer classes
Rs. 92,000 2,70,000
Revenue on Account of Internet Facility
2,20,000
Revenue from sale of Computer Stationary
1,60,000
Wages paid to servant
12,000
Electricity Charges
48,000
Telephone Charges
73,000
Entertainment Expenses
7,000
General Expenses
5,200
He Withdrew Rs. 5,000 by cheque each month for his personal expenses and duly paid the bank loan. You are required to: {i} Journalize the above transactions, post them into the Ledger and prepare a trial balance.
{ii} Prepare Profit and Loss Account and Balance Sheet talking into considera tion that a telephone bill of RS. 6,800 is yet to be paid.
{iii} Depreciate Building by 5%, furniture by 20 % and computers by 30 % . {iv} Calculate profitability ratios and comment on the efficiency of the business if the norms set for Gross Profi t Ratio and Net Profit Ratio in similar type of business enterprises are 60% and 25% respectively. {v} Mr. Tushar wants to expand his business. He approached the bank for a further loan. Compute the ratios that the bank manager will take into consideration before granting the loan (Current ratio, Quick ratio ,and Debt Equity Ratio).