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Imran Fabrics (Pvt.) Limited had purchased locally manufactured new machinery costing Rs. 5 Millions during the year 2005. Expected useful life of Machine was 5 years. After 5 years of usage the machine was sold at Rs 2,218,527/-. The company had adopted Straight Line Method for calculating depreciation. However in compliance with Tax Laws of Pakistan the financial statements for the purpose of taxation had been prepared using Written Down Value Method at the rate of 15% per annum. Required: i. Prepare Depreciation Schedules for the year 2005 2009, using both methods (mentioned above) in the following format. S. No Year Starting Value Book Depreciation During the year Ending Book Value
Taking GP at Rs. 5 Million, Tax Rate 35% and All other P&L expense (excluding depreciation) at Rs. 3 Million, prepare Income Statements and Balance Sheets for the years 2005 2009. Discuss the year wise Tax Impact / Deferred Taxes. Ignoring useful life of machinery, perform trend analysis graphically on Net Profit and predict NP for the year 2010. List the situations in which a) The Company would like to opt Straight Line Method b) The Company would opt WDV for computing depreciation.
Q:
Following is a comparison of the affairs of Habib Pvt. Ltd. and Ahmed Karim Pvt. Ltd. as on 3006-2010.
Tot Non-Cur Liabilities Total Liabilities Preferred Equity Common Equity* Retained Earnings* Total Equity Tot Liab & SH Equity
Required:
a. Perform Common Size Analysis for the aforementioned TEN rows shown in italic (marked with *) and comment on the results / percentages.
Q2.
XYZ (Pvt.) Limited manufactures fans and sells in open market. As per estimates, per fan manufacturing cost includes Direct Material of Rs. 500/-, Direct Labor of Rs. 200/- and variable Factory overhead of Rs. 100/-. XYZ (Pvt.) Limited is having Fixed Factory Overhead of Rs. 1 Million per year. During the 2009 - 10, the company manufactured 25,000 fans and sold 18000 fans @ Rs. 2200/- per fan. During the year under review Admin & Selling expenses (excluding FFOH) were Rs. 3 Million. Prevailing corporate Tax rate in the country is 35%. Required: viii. Prepare Income Statement and Balance Sheet for the year 2009-10, using a) Absorption Costing b) Marginal Costing ix. Assuming NIL production during the year 2010 11 and sales of all the left over fans (7000 in number) prepare Income Statement & Balance Sheet for the year 2010 11, with the same assumptions. What was the amount of Deferred Tax during the year 2009-10? Are there any ratios that may be affected with the change in Costing Method? Perform Vertical / Common Size Analysis and comment.
KK (Pvt.) Limited purchased new machinery costing Rs. 2 Millions during the year 2005. Expected useful life of Machine was 5 years. After 5 years of usage the machine was sold at Rs 887,410/-. The company had adopted Straight Line Method for calculating depreciation. However in compliance with Tax Laws of Pakistan the financial statements for the purpose of taxation had been prepared using Written Down Value Method at the rate of 15% per annum. Required: vi. Prepare Depreciation Schedules for the year 2005 2009, using both methods (mentioned above) in the following format. Year Starting Book Value Depreciation Ending During the Book year Value
vii.
viii. ix. x.
Taking GP at Rs. 2 Million, Tax Rate 35% and All other P&L expense (excluding depreciation) at Rs. .8 Million, prepare Income Statements and Balance Sheets for the years 2005 2009. Discuss the Tax Impact / Deferred Taxes. Perform Horizontal / Trend Analysis and predict NP for the year 2010. List the situations in which c) The Company would like to opt Straight Line Method d) The Company would opt WDV for computing depreciation.