A business was commenced on 1st January and it purchased 5 vehicles, each costing Rs 5,000. During the year the business managed to sell 2 vehicles at the price of Rs 12,000. The current market price of the vehicles is Rs 10,000. How should the remaining 3 vehicles be valued if the business is going to continue its operations in the next year?

Rs 10,000

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Rs 5,000

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Rs 12,000

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None of the above

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Solution

The correct option is B
Rs 5,000

The going concern concept assumes that the entity will continue running for a foreseeable future & it is valid, all the inventory shall be valued cost price or current market price whichever is lower i.e. Rs 5000 in this case.

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PRACTICAL PROBLEMS

Miss Kavita Commenced her business with a Capital of Rs 1,30,000 on 1^st April 2010. Her financial Position was as follows as on 31^st March, 2011, Cash Rs 9,120, Stock Rs 10,250, Bills Payable Rs 12,880, Creditors Rs 17,180, Debtors Rs 31,550, Bill Receivable Rs 29,120, Premises Rs 85,750, Vehicles Rs 40,250.

Additional Information:

1) She brought additional capital Rs 20,000 on 30^th September 2010. Interest on capital is to be provided at 5% p.a.

2) She withdrew Rs 10,000 for personal use on which interest is to be charged at 6% p.a.

3) R.D.D. is to be provided at 2½% p.a. after providing bad debts Rs 1,000.

4) Depreciate Vehicles at 2% and Premises at 4%.

On 1 Jan 2011, Company A purchased a vehicle costing Rs20,000. The company expects the vehicle to be operational for 4 years at the end of which it can be sold for Rs5,000. It was sold at the end of year 2012 for Rs 10000. Calculate profit or loss.

A firm owns a fleet of vehicles acquired at a total cost of Rs. 2,64,800.
Accumulated depreciation up to the beginning of the current year is Rs. 1,12,400. Vehicles are depreciated at 20% per annum using the straight-line method.
The value of depreciation for the current year would be?

Vinod has the following transactions.Show accounting equation for the same:

(i) Commenced business with Cash Rs.50,000; and Stock Rs.30,000 and Machinery Rs.20,000.

(ii) Goods purchases on credit Rs.10,000.

(iii) Rent Received Rs.5,000.

(iv) Sold goods costing Rs.9,000 for Cash Rs.12,000.

Look at the graph shown, it is a horizontal graph, the thickness of bars and gap between bars are identical, it shows details of vehicles purchased by members of the residences of the same apartment during the year.
1 unit of length represents 2 vehicles purchased.

Number of Vehicles Purchased during the Year

Who has purchased the maximum number of vehicles during the year?

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The correct option is B Rs 5,000 The going concern concept assumes that the entity will continue running for a foreseeable future & it is valid, all the inventory shall be valued cost price or current market price whichever is lower i.e. Rs 5000 in this case.

The correct option is B
Rs 5,000

The going concern concept assumes that the entity will continue running for a foreseeable future & it is valid, all the inventory shall be valued cost price or current market price whichever is lower i.e. Rs 5000 in this case.