Kay Ltd. sold goods of ₹22,00,000 to Mr. Ravi Kumar on 1st February, 2024 but at the request of the buyer, these goods were delivered on 10th April 2024. Kay Ltd. also sold ₹2,00,000 goods on approval basis on 1st January, 2024 to Sheetal Enterprises. The period of approvals 3 months after which they were considered sold. Buyer sent disapproval for 25% of goods and approval for 50% of goods till 31 March, 2024. Mr. Ravi Kumar has commenced legal action against Kay Ltd. for supply of faulty goods to claim damages. The lawyers of Kay Ltd. have advised that it is not remote yet that resources may be required to settle the claim. Legal cost to be incurred irrespective of the outcome of the case is ₹45,000. Settlement amount if the claim is required to be paid ₹5,00,000, Sheetal Enterprises, a trade receivable of Kay Ltd. suffered a heavy loss due to an earthquake that occurred on 30th March, 2024. The loss was not covered by any insurance policy. In April, 2024, Sheetal Enterprises became bankrupt. The Balance due from Sheetal Enterprises as on 31 March, 2024 is ₹75,000. Kay Ltd. makes provision for doubtful debts @ 5%. Based on the information given in above Case Scenario, answer the following Question No. 5-7
Sub-questions (3)
What is the amount to be recognized as Revenue as per AS 9 in the books of Kay Ltd. as on 31 March, 2024?
(A) ₹23,50,000
(B) ₹1,50,000
(C) ₹23,00,000
(D) ₹1,00,000
What will be the treatment of legal cost and claim for legal action commenced by Mr. Ravi Kumar in the Books of Kay Ltd. as on 31 March, 2024 as per AS 29?
(A) Create a Provision for ₹5,45,000
(B) Create a Provision for ₹5,00,000
(C) Create a Provision for ₹45,000 and make a disclosure of contingent liability of ₹5,00,000
(D) Make a disclosure of contingent liability of ₹5,45,000
What is the treatment of insolvency of Sheetal Enterprises in the Books of Kay Ltd. as on 31st March, 2024 as per AS 4?
(A) An Adjusting Event, full provision of ₹75,000 should be made in the Final Accounts for the year ended 31 March, 2024.
(B) An Adjusting Event, provision of ₹3,750 should be made in the Final Accounts for the year ended 31 March, 2024.
(C) A Non-adjusting event, no provision is required to be made as Sheetal Enterprises became bankrupt in April, 2024.
(D) A Non-adjusting event, only disclosure is required in the Final Accounts for the year ended 31st March, 2024.