You, as Auditor, are required to fix the `fair value’ of the shares of T Ltd., on 31st March, 2011. The company’s position was as follows:
|
Liabilities |
Rs |
Rs |
Assets |
Rs |
Rs |
|
Capital 5,000 shares of |
|
|
Bldgs. at cost |
|
80,000 |
|
Rs.100 each |
|
|
Furniture at cost |
|
3,000 |
|
fully paid |
|
5,00,000 |
Stock in trade |
|
|
|
Reserve fund |
|
1,50,000 |
at market value |
|
4,50,000 |
|
Depreciation Funds: |
|
|
Investment at Cost: |
|
|
|
Buildings |
10,000 |
|
G.P. Notes for |
|
|
|
Investments |
45,000 |
55,000 |
Rs.2,00,000 |
1,80,000 |
1,80,000 |
|
Creditors |
|
48,000 |
Indian Gold Loan |
|
|
|
Bad debts reserve |
|
20,000 |
Repayable 2014 |
2,00,000 |
3,80,000 |
|
Profit and Loss: |
|
|
|
|
|
|
Balance from 2009 10 |
80,000 |
|
Books debts consi |
|
|
|
Profit for 2010 11 |
4,30,000 |
5,10,000 |
dered good |
|
3,00,000 |
|
(subject to tax of 40%) |
|
|
Cash and bank balance |
|
70,000 |
|
|
12,83,000 |
|
|
|
12,83,000 |
You are given the following information:
(1) The company’s prospects for 2012 12 are equally good.
(2) Its buildings are now worth Rs.3,50,000.
(3) Public companies doing similar business show a profit earning capacity of 15 per cent on market value of their shares.
(4) Profits for the past three years have shown an increase of Rs.50,000 annually.
(5) Investments yield 8% net on the book value on the whole.