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CA Intermediate · Advanced Accounting · Financial Statements of Companies

Godavari Foods Ltd. had the following during the year: Revenue from operations Rs. 80,00,000; other income Rs. 4,00,000 (including Rs. 1,50,000 profit on sale of a machine); cost of materials consumed Rs. 38,00,000; purchases of stock-in-trade Rs. 6,00,000; opening finished goods Rs. 5,00,000; closing finished goods Rs. 8,00,000; employee benefit expense Rs. 12,00,000; finance costs Rs. 3,00,000; depreciation Rs. 4,00,000; other expenses Rs. 9,00,000. Its tax expense is 25% of profit before tax, and an exceptional loss of Rs. 2,00,000 is disclosed separately before PBT. What is the profit for the period?

The profit for the period is Rs. 9,75,000. Total revenue of Rs. 84,00,000 less expenses of Rs. 69,00,000, which are net of the Rs. 3,00,000 inventory increase, gives Rs. 15,00,000; after the Rs. 2,00,000 exceptional loss PBT is Rs. 13,00,000 and 25% tax leaves Rs. 9,75,000.

  1. ARs. 9,75,000Correct
  2. BRs. 7,50,000
  3. CRs. 8,25,000
  4. DRs. 10,50,000

Explanation

Total revenue = 80,00,000 + 4,00,000 = 84,00,000. Expenses = 38,00,000 + 6,00,000 + (5,00,000 - 8,00,000 = -3,00,000) + 12,00,000 + 3,00,000 + 4,00,000 + 9,00,000 = 69,00,000. Profit before exceptional items = 15,00,000; less exceptional 2,00,000 = 13,00,000 PBT. Tax 25% = 3,25,000; profit = 9,75,000. Ignoring the inventory change gives a wrong lower expense base.

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