# CIE Accounting Paper-2: Specimen Questions 67 - 69 of 103

## Passage

The following information is provided by Micromax Ltd:

Net Sales £100000; Cost of goods sold £60000; operating expenses £15000; Current assets £30000; Current liabilities £15000; Capital employed 120000; Long term debts £80000

## Question number: 67 (5 of 6 Based on Passage) Show Passage

### Write in Short

Calculate the following ratios of Micromax Ltd

(ii) Debt equity ratio

(iii)

(ii)

## Question number: 68 (6 of 6 Based on Passage) Show Passage

### Write in Short

Calculate the following ratios of Micromax Ltd

(i) Operating profit ratio

(i

## Passage

Singer and Dancer are partners sharing profit in the ratio of 3: 2. Their balance sheet on 31st March 2014 was as follows:

 Liabilities Amount Assets Amount Singer’s Capital 32500 Bank 40500 Dancer’s Capital 11500 Stock 7500 Creditors 48000 Debtors - 21500 Less: Provision for doubtful debts - 500 21000 Reserve fund 13500 Fixed Assets 36500 105500 105500

On 31st March 2014, they decided to dissolve the firm and the following information was provided by them: (i) Debtors were realized at a discount of 5%; (ii) Stock at £7000; (iii) Fixed assets at £42000; (iv) realization expenses were £1500; (v) All the creditors were fully paid.

## Question number: 69 (1 of 5 Based on Passage) Show Passage

### Write in Short

What is Realization Account?

### Explanation

When the dissolution of a firm takes place, all assets are sold and all liabilities are paid off in full settlement. Any profit or loss arising has to be computed as the same has to be shared between the partners. For this purpose a separate account called as the realization account is opened. In this account the net profit or loss after realizing the assets and paying the liabilities is computed and the amount is transferred to the partner’s capital account in their sharing ratios.

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