The following are the changes in the account balance taken from the Balance Sheets of Dada Ltd at the beginning and end of the year:
|
Changes in Rupees in Debit (or Credit) |
|
|
Equity Share Capital of 30,000 Shares of Rs. 10 each, issued and fully paid |
0 |
|
Capital Reserve |
(49,200) |
|
8% Debentures |
(50,000) |
|
Debenture Discount |
1,000 |
|
Freehold Property at Cost/Revaluation |
43,000 |
|
Plant and Machinery at Cost |
60,000 |
|
Depreciation on Plant and Machinery |
(14,400) |
|
Debtors |
50,000 |
|
Stock and Work-in-progress (WIP) |
38,500 |
|
Creditors |
(11,800) |
|
Net Profit for the year |
(76,500) |
|
Dividend Paid in respect of earlier year |
30,000 |
|
Provision for Doubtful Debts |
(3,300) |
|
Trade Investments at Cost |
47,000 |
|
Bank |
(64,300) |
|
0 |
You are informed that:
- Capital Reserve as at the end of the year represented realized profits on the sale of one freehold property together with the surplus arising on the revaluation of the balance of freehold properties.
- During the year, the plant costing Rs. 18,000, against which a depreciation provision of Rs. 13,500 was lying, was sold for Rs. 7,000.
- During the middle of the year, Rs. 50,000 debentures were issued for cash at a discount of Rs. 1,000.
- The Net Profit for the year was after crediting the profit on sale of plant and charging debenture interest.
You are required to prepare a statement which will explain, why bank borrowing has increased by Rs. 64,300 during the year-end. Ignore taxation.