Mr. Tanumoorthy was contemplating the acquisition of Kochi Oil Mills. The balance sheet of Kochi Oil Mills as of December 31, 20X0, as supplied to Mr. Tanumoorthy by the current owners, is provided here:

Mr. Tanumoorthy had no training in accounting and, therefore, decided to consult a management consultant. He approached KMG, well-known management consultants in Kochi.

Mr. Gopinath of KMG, who was dealing with this account, had detailed discussions with the accountant of Kochi Oil Mills. He collected the following information with respect to the balance sheet on the basis of the available working notes on the balance sheet and the discussions he had with the accountant.

The information gathered by Mr. Gopinath showed the following:

(a) Included in the computation of the cash balance is an amount of ₹14,500, received against cash sales and payments of ₹32,800, made on account of accounts payable during January 20X1.

(b) Invoices were raised against customers for an amount of ₹28,400 against orders received during December, even though deliveries will be made only during January and February.

(c) Inventory was valued and recorded on the basis of the expected selling price. The cost of the inventory was computed at ₹1,985,000.

(d) Rentals amounting to ₹65,000 and insurance premium for 20X1 in the amount of ₹35,000, have been paid in advance as of December 31.

(e) Plant and equipment was revalued during December, raising the cost by ₹9,24,000. The accumulated depreciation represents the actual amount accumulated to date.

(f) It was found that goodwill was recorded on the basis of a suggestion made by a public accountant, using a formula. The calculation was made by taking the average rate of return of the coconut oil industry, multiplied by the net assets of the company at the beginning of 20X0 and multiplying this product, by five.

After the above information was collected, Mr. Gopinath had a meeting with his principal and they decided that the first step should be to revise the balance sheet on the basis of the generally accepted accounting principles.

Questions

Prepare a revised balance sheet as Mr. Gopinath would have prepared. Also taken note of the accounting principles involved in every change you make.

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ASSETS Current Assets: Cash Accounts receivable Inventory Prepaid rent and insurance Current assets Property, Plant and Machinery Freehold land Plant and equipment Less: Accumulated depreciation Goodwill Total assets Liabilities and Owners' Equity *'000 750 1,650 2,200 160 4,850 3,200 *'000 4,760 2,100 1,650 3,700 12,210