Arun Cinemas Time: 25 Minutes Arun was thinking about a new venture (operating a cinema hall) after graduating from a well-known management institute. Due to shortage of resources and lack of experience, he decided to lease an old cinema hall, rather than owning one. He was lucky to find an old cinema hall which was not in operation in Ahmedabad. The owner of the hall (Mr Seth) was happy with the proposal of leasing out the cinema hall to Arun for a period of three years starting from 1 April 2011. As per the agreement, Arun had to pay 50,000 on 15th of each month as rent from the date the cinema hall became operational. Any expenses on renovation or cost of any new assets inside the cinema hall will become property of the old owner (without any payment) after the agreement period. However, Arun was free to take possession of any assets created outside the main Cinema hall (like on ticket counter). He brought 600,000 as capital, which he realized from selling some of his existing investments. He was able to arrange an interest free loan of 600,000 from his best friend. Arun spent 180,000 on renovation of the Screen and 420,000 on installing a new Air Conditioner inside the cinema hall. 300,000 was spent on constructing the ticket counter, which included 200,000 on furniture and 100,000 on computers and cash registers. The cinema hall became operational on April 1, 2011 under the name "Arun Cinemas". The expected life of the Screen was 4 years, of the Air Conditioner was 8 years, of furniture in the ticket counter was 4 years and of computers and cash registers was 5 years. The expected residual value of all assets at the end of their respective economic life was zero. Summary of transactions during the year were as under: Salary per month: 40,000. Salary of a given month was paid on 7th of the subsequent month. Electricity charges per month: 20,000. Electricity charges for the second quarter of 2012 (April to June) was paid in advance in March 2012. Collection from ticket sale: 4,000,000 Cash paid to distributor of movies: 2,000,000. On March 31, 50,000 was payable to the distributor of a movie which was released on 28 March 2012. Receipts from advertisements: 300,000 Payment for advertisements in local newspaper: 400,000 Commission received on sale of refreshments by vendors: 240,000 Arun had repaid 200,000 to his best friend during the year. He had withdrawn 30,000 from the business to purchase an iphone for his new girlfriend. Prepare in the attached format: Income Statement of Arun Cinemas for the period 1/4/2011 to 31/3/2012 Balance Sheet of Arun Cinemas as on 31/3/2012 Selected Answers: Total Revenues: 45,40,000; Expenses: Depreciation: Screen: 60,000; AC: 140,000; furniture: 50,000; Computer and Cash Register: 20,000; Distributor for rights: 2050000; Net Profit: 5,00,000; = Total Liabilities Total Assets 15,60,000 (Retained Earnings -4,70,000, Salary Payable: 40,000. Prepaid electricity 60,000)