60093064-Accounts5-2 - Case 5.2 Q-1 Income Statements :...

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Unformatted text preview: Case 5.2 Q-1 Income Statements : Particulars Sales Method Sales 5,22,000 Sales meth: 1,80,000*$2.90 Less : CGS Op. stock/inventory 0 + production 1,07,730 [2,10,000* 0.513] - cl. Stock 15,390 [ 30,000* 0.513] CGS 92,340 Gross profit 4,29,660 Less: Other expenses 1,83,000 Net Profit/ Income 2,46,660 Particulars Collection Method Sales 4,62,400 Sales meth: 1,80,000*$2.90 [ 1,80,000*2.90 -20,000*2.98] Less : CGS Op. stock/inventory 0 + production 1,07,730 [2,10,000* 0.513] - cl. Stock 25,650= [ 30,000 +20,000]*0.513 CGS 82,080 Gross profit 3,80,320 Less: Other expenses 1,83,000 Net Profit/ Income 1,97,320 Particulars Production method Sales 6,14,100 Sales meth: 1,80,000*$2.90 [ 1,80,[email protected]+ 30,000*3.07] Less : CGS Op. stock/inventory 0 + production 1,07,730 [2,10,000* 0.513] - cl. Stock 0 [ no inventory under production method] CGS 1,07,730 Gross profit 5,06,370 Less: Other expenses 1,83,000 Net Profit/ Income 3,23,370 Balance Sheets: Balance Sheet Grennell Farm [in $] (Sales Method) Assets Particulars Liabilities + Owners Equity Amount Particulars Amount Cash 30,900 Current Liabilities 33,000 A/R 59,600 Owners Equity + Common paid up stock 457,500 R.E (balance) 102,890 Total Liabilities 593,390 [20,000*2.98] Inventory 15,390 Land 3,75,000 Net Building& machinery 1,12,500 Total Assets 5,93,390 Balance Sheet Grennell Farm [in $] (Collection Method) Assets Particulars Cash Liabilities + Owners Equity Amount Particulars Amount 30,900 Current Liabilities 33,000 Owners Equity + Common paid up stock 457,500 R.E (balance) 53550 Total Liabilities 544,050 A/R 0 Inventory 25,650 Land 3,75,000 Net Building& machinery 1,12,500 Total Assets 544,050 Balance Sheet Grennell Farm [in $] (Production Method) Assets Particulars Liabilities + Owners Equity Amount Particulars Amount Cash 30,900 Current Liabilities 33,000 A/R 151,700 Owners Equity + Common paid up stock 457,500 R.E (balance) 179,600 Total Liabilities 670,100 [(20,000*2.98) + (30000 * 3.07)] Inventory 0 Land 3,75,000 Net Building& machinery 1,12,500 Total Assets 670,100 Q-2 Under GAAP the value of the land should be recorded at the original price of buying + depreciation without considering the appreciation cost. But if it s actual worth is to be calculated it can be done as follows: 225000(for 100 acres) + 1995000 (1900 * 1050) = 2220000 (2.22 million dollars) Q-3 ROI = Net Income / Investment Sales Method ROI=246660/2405390(560390 + 1845000) =10.25% Collection Method ROI=197320/2356050(511050 + 1845000) = 8.37% Production Method ROI = 323370/2482100(637100 + 1845000) = 13.03% The return of Investment is good in all cases. Hence she should retain the farm. ...
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This note was uploaded on 12/07/2011 for the course MBA 0001 taught by Professor Akshat during the Spring '09 term at Institute of Management Technology.

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