Answer to Question #158653 in Economics for Ali

Question

HnH Solutions acquired a machine by making the following payments:

Net cash price Rs. 116,000 including 16% Sales tax; Carriage in Rs. 6,000; Insurance in transit Rs. 5,000; Fire insurance for the next 4 years Rs. 8,000; Installation charges Rs. 20,000; Overhauling Charges (Before Use); Charges to repair the damage caused during installation Rs. 2,000.

 

REQUIRED:

1)    Classify the above payments into capital expenditures and revenue expenditures.

2)    Give and entry to record acquisition of machine, and another entry to record expenditures by Debiting General Expenses Account.                                                         

Question no 2

On December 31, 2010 and 2011 Balance Sheet of ABC Ltd. Shows the following

ASSETS

2011

2010

Cash

7000

4800

Accounts Receivable

8500

9500

Merchandise Inventory

32500

33200

Equipment

30100

24000

TOTAL

78100

71500

 

 

 

EQUITIES

 

 

Accumulated Depreciation Equipment

6100

4800

Accounts Payable

16800

19400

Mortgage Payable

6000

10000

Share Capital – Rs. 10 per share

30000

25000

Share Premium

2500

 

Retained Earnings

16700

12300

TOTAL

78100

71500

Additional Information:

1. A fully depreciated equipment that costs of Rs. 800 was discarded and related accounts were closed.

2. Cash dividend of Rs. 4,000 were declared and paid.

Required: Prepare a Cash Flow Statement. Showing Operating, Investing, Financing activities.

Answer 1

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