Prepare a summary of cash transactions and a statement of cash flows

On January 2, 1991, Vivek Singh, a young MBA, set up a manufacturing unit. 500,000 shares were issued at par (Rs 10). During the period—January through June—the company made the following expenditure:

• Jan 15: paid Rs 7,500 in legal fees, printing expenses, etc., associated with the incorporation of the company.

• June 15: spent Rs 62,500 on machinery.

• June 20: purchased Rs 75,000 worth of plastics and chemicals for use in production.

The company started full production during the second-half of 1991. In early July, a consulting engineer was paid Rs 23,750.

During July–December, the company sold goods worth Rs 754,500. A large customer still owed Rs 69,500 at the end of the year. All other customers were paid in full. Additional chemicals and plastics were purchased for a total of Rs 175,000. All of these purchases were paid in cash.

During the year the company spent Rs 22,500 on television and trade journal advertising. The company expended Rs 350,000 on direct labour and other manufacturing related overhead. An additional Rs 80,000 was spent on corporate salaries and other corporate expenses.

In early July, a further Rs 150,000 was spent on machinery

During the year the company had borrowed Rs 50,000 for a short time, and repaid the loan by the year end. The interest paid amounted to Rs 750.

On December 31, the company had Rs 55,000 worth of plastics and chemicals in the warehouse. However, there were no finished goods

The machinery used in the production was expected to last 10 years, six months of which had already passed. Prepare a summary of cash transactions and a statement of cash flows for the year


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