GTI Ltd negotiates with Bharat Oil Corporation Ltd, Accounting help

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GTI Ltd negotiates with Bharat Oil Corporation Ltd, Accounting help

1) GTI Ltd negotiates with Bharat Oil Corporation Ltd (BOCL), for construction of “Retail Petrol & Diesel Outlet Stations”. Based on proposals submitted to different Regional Offices of BOCL, the final approval for one outlet each in Region X, Region Y, Region Z is awarded to GTI Ltd. A single agreement is entered into between two. The agreement lays down values for each of the three outlets, i.e. ` 102 Lakhs, ` 150 Lakhs, ` 130 Lakhs for Region X, Region Y, Region Z respectively. Agreement also lays down completion time for each Region. Comment whether GTI Ltd will treat it as single contract or three separate contracts with reference to AS–7. 

2) Hema Ltd purchased a Machinery on 01.04.2008 for ` 15,00,000. The Company charged straight–line depreciation based on 15 years working life estimate and Residual Value ` 3,00,000. At the beginning of the 4th year, the Company by way of systematic evaluation, revalued the Machinery upward by 20% of Net Book Value as on date and also re–estimated the useful life as 7 years and Scrap Value as Nil. The increase in Net Book Value was credited directly to Revaluation Reserves. Depreciation (on SLM basis) later on was charged to Profit & Loss Account. At the beginning of 8th year, the Company decided to dispose off the Machinery and estimated the Realizable Value to ` 2,00,000. 

3) How you will deal with following in the Financial Statement of Paridhi Electronics Ltd as on 31.03.2016 with reference to AS–13?

 (a) Paridhi Electronics Ltd invested in the Shares of another Unlisted Company on 1st May 2012 at a cost of ` 3,00,000 with the intention of holding more than a year. The Published Accounts of Unlisted Company received in Jan 2016 reveals that the Company has incurred Cash Losses with decline market share and investment of Paridhi Electronics Ltd may not fetch more than ` 45,000. 

(b) Also Paridhi Electronics Ltd has Current Investment (X Ltd’s Shares) purchased for ` 5 Lakhs, which the Company wants to re–classify as Long–Term Investment. The Market Value of these Investments as on date of Balance Sheet was ` 2.5 Lakhs.