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M.432 An Aid to Accountancy—CBSE XII

(iv) Excess application money to be adjusted on Allotment = ` 6,000 – ` 5,600 = ` 400 `
(v) Amount due on Allotment (1,400 × ` 4) 5,600
Less: Excess application money to be adjusted on Allotment 400
Amount not paid on Allotment 5,200
2. Calculation of Total Amount Received on Allotment: `
Total Allotment Money Due 2,80,000
Less: Excess application money adjusted on allotment 20,000
2,60,000
Less: Allotment money not paid by Jonney (WN 1) 5,200
Amount received on allotment 2,54,800
3. Calculation of Gain on reissue of Shares: `
Amount forfeited on 1,400 shares of Jonney 6,000
Amount forfeited on 100 shares of Rommy 800
Gain on reissue transferred to Capital Reserve 6,800

PART B
18. Operating Activities are the principal revenue producing activities of the enterprise
and other activities that are not Investing or Financing Activities.
19. No Flow. Reason: Depreciation on machinery is a non-cash expense.

20. (a) Non-Current Liabilities:
• Long-term Borrowings • Other Long-term Liabilities
• Deferred Tax Liabilities (Net) • Long-term Provisions
(b) (i) Financial Statements ignore the qualitative elements like quality of labour,
public relations.
(ii) Financial Statements prepared on historical cost basis ignore the price level changes
since they are prepared on historical cost basis and not current cost basis.

21. (a) Alpha Co. has got better debt-equity ratio because 100% safety margin is available
for lenders since Owner’s equity is considered as a margin of safety by lenders
whereas as only 50% safety margin is available for lenders in case of Salpha Co.
Debt 3,00,000
Debt to Equity Ratio = = = 3 : 1.
Equity 1,00,000
Notes: 1. Debt = Long-term Borrowings + Long-term Provisions
= ` 2,00,000 + ` 1,00,000 = ` 3,00,000.
2. Equity = Current Assets + Non-Current Assets – Debt – Current Liabilities
= ` 90,000 + ` 3,60,000 – ` 3,00,000 – ` 50,000 = ` 1,00,000.
(b) EFFECT ON CURRENT RATIO

Change Reason
(i) Improve Both the total Current Assets and total Current Liabilities are decreased by the same amount.
(ii) No Change Payment to Vendors of machinery by way of issuing equity shares would neither change Current
Assets nor Current Liabilities.