The following is the balance sheet of Good Morning Ltd. as at 31 March 2010:
|
Liabilities |
Assets |
||
|
Share Capital: |
|
Fixed Assets: |
|
|
Equity Shares of |
20,00,000 |
Goodwill |
2,00,000 |
|
Rs.100 Each |
|
Machinery |
10,00,000 |
|
Less: Calls In |
2,00,000 |
Factory Shed |
11,00,000 |
|
Arrears (!20 on |
|
Vehicle |
3,00,000 |
|
Final Call) |
|
Furniture |
1,00,000 |
|
|
18,00,000 |
|
|
|
10% Preference |
8,00,000 |
Investments |
4,00,000 |
|
Shares of Rs. 10 |
|
Current Assets: |
|
|
Each Fully Paid |
|
Stock In Trade |
8,00,000 |
|
Reserves & |
|
Sundry Debtors |
14,00,000 |
|
Surplus: |
|
|
|
|
General Reserve |
8,00,000 |
Cash At Bank |
2,00,000 |
|
Profit & Loss A/c |
6,00,000 |
Miscellaneous |
|
|
Current Liabilities: |
|
Expenditure: |
|
|
Bank Loan |
4,00,000 |
Preliminary |
1,00,000 |
|
Sundry Creditors |
12,00,000 |
Expenses |
|
|
|
56,00,000 |
|
56,00,000 |
Additional information:
- Fixed assets are worth above their book value. Depreciation on approved value of fixed assets is not to be considered for valuation of goodwill.
- Of the investment, 60% is non-trading and the balance is trading. All trade investments are to be valued at 25% the above cost. A uniform rate of dividend @ 15% is earned on all investments.
- For the purpose of valuation of shares, goodwill is to be considered on the basis of 4 years’ purchase of the super profits based on average profit (after tax) of the last 3 years. Profits (after tax) are as follows:
|
|
|
|
2007–08 |
8,00,000 |
|
2008–09 |
8,60,000 |
|
2009–10 |
9,00,000 |
- In a similar business, return on capital employed is 15% (after tax).
- In 2007–08, new machinery costing Rs.40,000 was purchased but wrongly charged to revenue (no effect has been given yet for rectifying the same) Depreciation on machinery is charged @ 10% on reducing balance method. Find out the value of each fully paid and partly paid equity share on net assets basis