Answered

8. Patan Pharmaceuticals is a fast-growing company and has had a successful year, as indicated by the following income statement:

Income Statement for December 31, 2022

- Sales revenue
- Less: Cost of goods sold
- Gross profit
- Less: Operating expenses (including depreciation of Rs. 40,000)
- Income before interest and taxes
- Less: Interest expenses
- Income before tax
- Less: Income tax expenses
- Net income

Presented below are the comparative balance sheets for two periods for Patan Pharmaceuticals:

Balance Sheet
As on December 31, 2021 and 2022

\begin{tabular}{|c|c|c|}
\hline
Particulars & 2021 (Rs.) & 2022 (Rs.) \\
\hline
Cash & 72,000 & 41,600 \\
\hline
Accounts receivable & 104,000 & 90,000 \\
\hline
Inventories & 160,000 & 184,000 \\
\hline
Bills receivable & 20,000 & 66,000 \\
\hline
Land & 480,000 & 600,000 \\
\hline
Plant & 400,000 & 560,000 \\
\hline
Accumulated depreciation & (160,000) & (200,000) \\
\hline
Total assets & 1,076,000 & 1,341,600 \\
\hline
Accounts payable & 118,400 & 104,000 \\
\hline
Other accrued liabilities & 50,400 & 54,400 \\
\hline
Income tax payable & 88,000 & 72,000 \\
\hline
Long term bank loan & 240,000 & 280,000 \\
\hline
Common stock & 320,000 & 440,000 \\
\hline
Retained earnings & 259,200 & 391,200 \\
\hline
Total liabilities and stockholders' equity & 1,076,000 & 1,341,600 \\
\hline
\end{tabular}



Answer :

GinnyAnswer
Sure, let's analyze the financial information for Patan Pharmaceuticals for the years 2021 and 2022, focusing on the given balance sheet data.

### Balance Sheet Analysis

We have two balance sheets: one for December 31, 2021 and one for December 31, 2022. Here is what the data looks like:

#### Assets:
- Cash:
- 2021: Rs. 72,000
- 2022: Rs. 41,600

- Accounts Receivable:
- 2021: Rs. 104,000
- 2022: Rs. 90,000

- Inventories:
- 2021: Rs. 160,000
- 2022: Rs. 184,000

- Bills Receivable:
- 2021: Rs. 20,000
- 2022: Rs. 66,000

- Land:
- 2021: Rs. 128,000
- 2022: Rs. 600,000

- Plant:
- 2021: Rs. 480,000
- 2022: Rs. 560,000

- Accumulated Depreciation:
- 2021: Rs. (160,000)
- 2022: Rs. (200,000)

- Total Assets:
- 2021: Rs. 1,076,000
- 2022: Rs. 1,341,600

#### Liabilities and Stockholders’ Equity:
- Accounts Payable:
- 2021: Rs. 118,400
- 2022: Rs. 104,000

- Other Accrued Liabilities:
- 2021: Rs. 50,400
- 2022: Rs. 54,400

- Income Tax Payable:
- 2021: Rs. 88,000
- 2022: Rs. 72,000

- Long Term Bank Loan:
- 2021: Rs. 240,000
- 2022: Rs. 280,000

- Common Stock:
- 2021: Rs. 320,000
- 2022: Rs. 440,000

- Total Liabilities and Stockholders' Equity:
- 2021: Rs. 1,076,000
- 2022: Rs. 1,341,600

### Observations:

1. Cash: The cash balance decreased from Rs. 72,000 in 2021 to Rs. 41,600 in 2022.
2. Accounts Receivable: The accounts receivable decreased from Rs. 104,000 in 2021 to Rs. 90,000 in 2022.
3. Inventories: Inventories saw an increase from Rs. 160,000 in 2021 to Rs. 184,000 in 2022.
4. Bills Receivable: There was a significant increase in bills receivable from Rs. 20,000 in 2021 to Rs. 66,000 in 2022.
5. Land: The value of land jumped significantly from Rs. 128,000 in 2021 to Rs. 600,000 in 2022.
6. Plant: The value of the plant increased from Rs. 480,000 in 2021 to Rs. 560,000 in 2022.
7. Accumulated Depreciation: The accumulated depreciation increased, indicating additional depreciation expense taken during the year, moving from Rs. (160,000) in 2021 to Rs. (200,000) in 2022.
8. Total Assets: Total assets saw a large increase from Rs. 1,076,000 in 2021 to Rs. 1,341,600 in 2022.

9. Accounts Payable: Decreased from Rs. 118,400 in 2021 to Rs. 104,000 in 2022.
10. Other Accrued Liabilities: Increased slightly from Rs. 50,400 in 2021 to Rs. 54,400 in 2022.
11. Income Tax Payable: Decreased from Rs. 88,000 in 2021 to Rs. 72,000 in 2022.
12. Long Term Bank Loan: Increased from Rs. 240,000 in 2021 to Rs. 280,000 in 2022.
13. Common Stock: Increased from Rs. 320,000 in 2021 to Rs. 440,000 in 2022.
14. Total Liabilities and Stockholders' Equity: Increased from Rs. 1,076,000 in 2021 to Rs. 1,341,600 in 2022.

### Summary:
- Growth in Assets: The company has increased its total assets significantly over the year, primarily due to substantial investments in land and plant.
- Financial Liabilities and Equity: The financial liabilities have seen some changes, but the significant increase in common stock suggests a strong equity position, which aligns with a growing company.
- Operational Performance: The detailed income statement data such as sales revenue, cost of goods sold, gross profit, and net income were not provided. However, the presence of Rs. 40,000 in operating expenses (including depreciation) was noted.

By analyzing the balance sheets and given expenditures, we can conclude that Patan Pharmaceuticals has shown a substantial growth trajectory from 2021 to 2022.