The Model Demonstration Farm

MODEL DEMONSTRATION FARM^[1] 

The Model Demonstration Farm (MDF) was set up for providing supervised demonstration of effective ways of using the agricultural inputs and farming technology. On 1st January 2007, it was set up with 2000 capital (face value 10) and 4000 long term loan. With these funds, MDF purchased fixed assets worth 4800, invested 500 in permissible securities and deposited the balance amount in a bank account. On 1st April 2007, the management invited a large fertilizer company to help in providing resources required for expanding the services to other geographical areas. It provided 500 cash for which MDF issued equity shares at face value. These shares were eligible for dividend at the full rate. On 30th June, 2007, MDF sold investments worth 250 resulting into loss of 50. It received only 100 from the buyer and the rest was to be received within 1 week. On 30th June 2007, it also paid 10% interim dividend for 6 months (1 per share).

The income statement for the period January 1 – June 30 is as follows:

The loan was payable in 20 equal half-yearly installments, the first installment was paid on 30th June 2007 along with interest. The interest on this loan was 12% per annum payable along with the half-yearly installments. As on 30th June 2007, it had to receive 120 of fees (included in income statement), had some inventories worth 30 and had to pay 50 to suppliers/creditors.  All other transactions were settled for cash, if applicable. The bank balance as on 30th June was 1470. Assume no income tax.

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