Master of Commerce (M.COM) First (1st) Semester (MCO-05) Solved Assignments for January 2022 and July 2022 Admission Cycle
MCOM First (1st) Semester (MCO-05) Tutor Marked Solved Assignment
Course Code : MCO – 05
Course Title : Accounting of Managerial Decisions
Assignment Code : MCO-05/TMA/2022
Coverage : All Blocks
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MCO – 05 Accounting of Managerial Decisions – Semester 1 Solved Assignment for 2022
Question 3.
From the following particulars compute leverage ratios
Balance Sheet of Ram Ltd.
as on March 31, 2020
| Liability | Rs. | Assets | Rs. |
| Equity Share Capital | 40,000 | Land | 22,000 |
| 8% Preference Share Capital | 20,000 | Building | 24,000 |
| Reserves | 10,000 | Plant and Machinery | 38,000 |
| Profit and Loss account | 5,000 | Furniture | 5,000 |
| 10% Debentures | 45,000 | Sundry Debtors | 22,000 |
| Trade Creditors | 9,000 | Stock | 13,000 |
| Outstanding Expenses | 2,000 | Cash | 14,000 |
| Provision for Taxation | 3,000 | Prepaid Expenses | 2,000 |
| Proposed Dividend | 6,000 | ||
| Total | 1,40,000 | Total | 1,40,000 |
=
ANSWER:
Solution: Leverage Ratios
Long-term Debt = 10% Debentures= Rs. 45,000
Owners’ Equity = Equity Share Capital + 8% Pref. Share Capital + Reserves + Profit and Loss A/c
= 40,000 + 20,000 + 10,000 + 5,000
= Rs. 75,000
= 0.6 : 1
Total Debt = 10% Debentures + Trade Creditors + Outstanding Expenses + Provision for taxation + Proposed Dividend
= 45,000 + 9,000 + 2,000 + 3,000 + 6,000
= Rs. 65,000
Owners’ Equity = Rs. 75,000 …(as calculated above)
= 0.87 : 1
Owners’ Equity = Rs. 75,000 …(as calculated above)
Total Assets = Land + Building + Plant and Machinery + Furniture + Sundry Debtors + Stock + Cash + Prepaid Expenses
= 22,000 + 24,000 + 38,000 + 5,000 + 22,000 + 13,000 + 14,000 + 2,000
= Rs. 1,40,000
= 0.54 : 1
Equity Funds = Equity Share Capital + Reserves + Profit and Loss Account
= 40,000 + 10,000 + 5,000
= Rs. 55,000
Fixed Interest-Bearing Securities = 10% Debentures + 8% Preference Share Capital
= 45,000 + 20,000
= Rs. 65,000
= 0.85 : 1