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Model Test Papers M.227

Working Notes:
1. Calculation of Net Profit before Tax and Extraordinary Items: `

Surplus, i.e., Balance in Statement of Profit and Loss (Closing) 1,70,000
Less: Surplus, i.e., Balance in Statement of Profit and Loss (Opening) 1,00,000
70,000
Add: Transfer to General Reserve (` 1,50,000 – ` 1,20,000) 30,000
Provision for Tax 40,000
Net Profit before Tax and Extraordinary items 1,40,000

2. Dr. MACHINERY ACCOUNT Cr.

Particulars ` Particulars `
To Balance b/d 7,00,000 By Bank A/c (Sale) 25,000*
To Gain (Profit) on Sale of Machinery A/c 10,000 By Accumulated Depreciation A/c 55,000
(Statement of Profit and Loss) By Balance c/d 10,70,000
To Bank A/c (Bal. Fig.)—Purchase 4,40,000
11,50,000 11,50,000

`
*Book Value on the date of Sale (` 70,000 – ` 55,000) 15,000
Add: Profit on Sale 10,000
Sale Value of Machinery 25,000

3. Dr. ACCUMULATED DEPRECIATION ACCOUNT Cr.
Particulars ` Particulars `
To Machinery A/c (Transfer) 55,000 By Balance b/d 95,000
To Balance c/d 1,20,000 By Statement of Profit and Loss (Dep.) 80,000
—Balancing Figure
1,75,000 1,75,000

4. Dr. NON-CURRENT INVESTMENT ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d 1,00,000 By Bank A/c (Sale) 48,000
To Gain (Profit) on Sale of Investment A/c 8,000 By Balance c/d 1,35,000
(Statement of Profit and Loss)
To Bank A/c (Purchase)—Balancing Figure 75,000
1,83,000 1,83,000

5. It has been assumed that New Debentures of ` 60,000 have been issued at the end of current accounting
year. So, interest on debentures has been provided on ` 1,00,000.