Question 36 Chapter 4 of +2-B – T.S. Grewal 12 Class

Question 36 Chapter 4 of +2-B

Question 36 Chapter 4 of +2-B

Debt to Equity Ratio
36. When Debt to Equity Ratio is 2, State giving a reason, whether this ratio will
increase or decrease or will have no change in each of the following cases:
(i)Sales of Land (Book value Rs. 4,00,000) for Rs. 5,00,000; (ii) Issue of Equity Shares for the purchase of Plant and Machinery worth Rs. 10,00,000; (iii) Issue of preference Share for the redemption of 13% Debentures, worth Rs. 10,00,000.

The solution of Question 36 Chapter 4 of +2-B: –

 
Transactions
Impact on Current Ratio Reason
Sales of Land (Book value Rs. 4,00,000)
for Rs. 5,00,000
Decrease Sale of Land at a profit of Rs. 1,00,000 will increase Shareholder’s
Funds. Hence, Debt to Equity Ratio will decrease.
(ii) Issue of Equity Shares for the purchase
of Plant and Machinery worth Rs. 10,00,000
Decrease Issue of Equity Shares for the purchase of Plant and machinery will increase Shareholders’ Funds, hence the ratio will decrease.
(iii) Issue of Preference Share for the redemption of 13% Debentures, worth Rs. 10,00,000. Decrease Total Long-term Debts are not affected (because debentures
redeemed are Current Liabilities) but total Shareholders’ Funds are
increased by the amount of Rs. 10,00,000, hence the ratio will
decrease
     



 

 

Balance Sheet: Meaning, Format & Examples

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Also, Check out the solved question of previous Chapters: –

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

  • Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
  • Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
  • Chapter No. 3 – Goodwill: Nature and Valuation
  • Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
  • Chapter No. 5 – Admission of a Partner
  • Chapter No. 6 – Retirement/Death of a Partner
  • Chapter No. 7 – Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

  • Chapter No. 1 – Financial Statements of a Company
  • Chapter No. 2 – Financial Statement Analysis 
  • Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
  • Chapter No. 4 – Accounting Ratios
  • Chapter No. 5 – Cash Flow Statement

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

2 Book 3 min 225x300 - Question 36 Chapter 4 of +2-B  - T.S. Grewal 12 Class
T.S. Grewal’s Analysis of Financial Statements

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