Trail balance of ABC Company as on 31st April XXXXDebit ($)Credit ($)Banking equipment10000DebtorsBank5000Capital16000Drawings600Loan1800CreditorsServices18000Salaries9500Telephone expenses7002580025800SolutionThe solution is as follows −While preparing income statement, we consider only expenses and income.Income => services => 18000Expenses => salaries + telephone expenses => 9500 + 700 => 10200Income statement for the company ABC for period ... Read More

Sales volumes of A (units)1500016500182001900020000Probability0.150.180.190.210.22Selling price per unit is Rs. 8/- with marginal cost = Rs. 4.80/- and fixed cost = Rs. 42000/-Calculate probability of company’sa) Break evenb) Makes profit of minimum Rs.20000/-SolutionThe solution is explained below −a) Break evenCalculated contribution costContribution cost= sales cost – marginal costContribution cost= 8 ... Read More

In the annuity deprecation, method investment asset is considered as investment which yields fixed interest rate until the book value of asset becomes zero. Based on annuity table amount is calculated. This method is also known as compound interest method. This method is not approved by Generally Accepted Accounting Principles ... Read More

SolutionThe solution is given below −Depreciable cost = 5000000 – 250000 => Rs.4750000/- Sinking fund value = [interest/ {(1+interst) ^period -1} => [0.1/{(1+0.1)^15-1} => 0.03147 Annual depreciation = depreciable cost * sinking fund factor => 4750000*0.03147 =>Rs. 149482.5/- Book value (year 1) => 5000000 – 149482.5 => Rs.4850517.45/- Interest earned ... Read More

                    Journal entryDateParticularsDrCrXX/XX/XXXXDepreciation A/cTo sinking fund A/c(Being depreciation is transferred to sinking fund account)XXXXXXXX/XX/XXXXProfit and Loss A/cTo Depreciation A/c(Being depreciation is charged to profit and loss account)XXXXXXXX/XX/XXXXSinking fund investment A/cTo Bank A/c(Being amount of depreciation invested)XXXXXXXX/XX/XXXXBank A/cTo interest on sinking fund ... Read More

Sinking fund depreciation is also called as depreciation fund account. Amount generated through sinking fund depreciation is used to replace the asset when it needed. In this amount, charge is credited in sinking fund account, which is shown in liability side in balance sheet and asset value has its original ... Read More

Modified internal rate of return (MIRR) is the adjusted rate of return to eliminate difference between investment rate and return. MIRR sorted out some issues in internal rate of return (IRR). MIRR tells about viability of the project. If the result is more than expected return, then the projects will ... Read More

The major differences between internal rate of return (IRR) and modified internal rate of return are as follows −Internal rate of return (IRR)Calculates discount rate based on internal factors.NPV = 0.Cash flows are Reinvested at project’s IRR.Provides two solutions.Less accurate.Higher than MIRR.Low precision.Modified internal rate of returnCost of capital is ... Read More

The factors considered by venture capitalist before investing are as follows −Management Team − Investors look for management team that have skills, knowledge, and their record of accomplishment. Commitment towards the goal is the key.Viability of the project − Capital firm will look at product market, end user, competitors and ... Read More

Securitization is the procedure of converting assets into securities. In other words, securitization means all assets of a company are consolidated into securities.An originator, special purpose vehicle (SPV), investment bank, credit rating agency, insurance company, obligator and investor are required in securitization.The process involved in debt securitisation is as follows ... Read More