Exercise on Balance Sheet Preparation

Grocers Ltd. commenced business of trading in non-perishable groceries on January 1, 2015.

The opening balance sheet of Grocers is as given below (accounting year starts on January 1 and
ends on December 31):

Liabilities and owners’ Amount Assets Amount

Equity
Loan at 6% p.a interest on 8,00,000 Showroom Building 10,00,000
showroom
Furniture 1,00,000
Share Capital 6,00,000 Inventories 2,00,000
Share Premium 4,00,000 Cash balance 5,00,000
TOTAL 18,00,000 TOTAL 18,00,000
 Share capital comprised of 6,00,000 shares with a face value of Rs. 1 each.
 The company paid Rs. 2,00,000 down payment for the showroom and the rest was in the
form of a loan carrying an interest rate of 6%. The entire loan was repayable after 4 years.
The showroom had a useful life of 20 years.

The following information was available about the company’s business in year 2015:
(a) On January 1, the company acquired a license to operate its showroom. The cost of the
license was Rs.160,000 and the license was valid for 4 years.
(b) On March 31, the company insured its properties for 5 years beginning on 31/03/2105 by
paying a total insurance premium of Rs. 100,000 for all 5 years.
(c) On April 1 the company invested Rs. 5,00,000 in 10% government bonds for 3 years. The
interest on these bonds was yet to be received on 31/12/2015.
(d) On July 1, a customer paid the company Rs.12,00,000 as advance for goods that were to
be delivered in equal installments over the next 8 months.
(e) On October 1, the company purchased new furniture worth Rs. 40,000. All the furniture
of the company had a useful life of 5 years.
(f) Total sales were Rs.50,00,000 of which 20% were on credit.
(g) Total salaries and wages for the year amounted to Rs. 14,00,000. Salaries and wages
worth Rs. 100,000 pertaining to the last week of December 2015 were to be paid on
January 5, 2016. Cash Payments for utilities amounted to Rs. 200,000.
 (h) The company purchased inventory worth Rs. 12,00,000 on credit. The company used up
inventory worth Rs. 12,00,000 during the year. Accounts payable worth Rs 8,00,000 were
paid off during the year.
(i) The company decided to declare dividends at the rate of Rs. 2 per share. The dividend
was actually paid in January 2016.
(j) The interest due on the loan was not paid as of 31st December, 2015.
Required: Prepare an Income Statement for the year ended on 31 st December 2015 and the
Balance Sheet as on 31st December 2015. Provide your answers in the answer sheets given.
Ignore income Taxes in the preparation of the statements.