Sunday, October 31, 2010

FIN623 Ass # 1 Idea Solution

 Ahmad Foods Limited is famous for its food products. The company is engaged in agricultural as well as industrial activities. It has its own farms where fruits, tomato, etc., are produced. These items along with those purchased from the market are used in manufacturing ketchup, Jams, Jelly and Marmalade.
Compute the business and the agricultural income from the following information for the
year ended on 30th June, 200A:
Sales of goods manufactured..........Rs. 11,250,000
Expenses on agriculture.......................1,500,000
Purchases from the market....................2,250,000
Manufacturing expenses ......................1,125,000
Selling expenses.............................750,000
Financial expenses............................375,000
Administrative expenses......................1,275,000
The market value of the goods produced by the company and utilized in manufacturing is Rs. 3,750,000.

Solution:- 


TWO PORTIONS TO SOLVE THIS QUESTION:

1- BUSINESS INCOME
2- AGRICULTUREAL INCOME


1-SOLUTION:

SALES RS. 11,250,000

LESS: COST OF SALES:

MKT VALUE OF GOODS PRODUCED BY
THE COMPANY IS RS. 3,750,000*
RAW MATERIAL PURCHASED 2,250,000
MANUFACTURING EXPENSES 1,125,000
TOTAL COST OF SALES ( 7,125,000)

GROSS PROFIT 4,125,000

LESS OPERATING EXPENSES:
SELLING + ADMIN + FINANCE COSTS (2,400,000)

NET PROFIT RS. 1,725,000

AGRICULTURAL INCOME:

MKT VALUE OF GOODS PRODUCED AND USED AS RAW MATERIAL RS. 3,750,000
LESS: EXPENSES ON AGRICULTURE (1,500,000)

NET AGRICULTURE INCOME RS. 2,250,000



NOTE* RULE 11 ( AGRICLUTURE PRODUCE AS RAW MATERIAL)

Where a cultivator or receiver of rent in kind uses the agriculture produce as raw material, in his business, then the income chargeable to tax under the head " INCOME FFROM BUSINESS" SHALL BE COMPUTED AS FOLLOW

TOTAL INCOME - MKT VALUE OF AGRICULTURE PRODUCE UTILIZED IN BUSINESS ARE RAW MATERIAL.
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