ABC Ltd. is a diversified business group operating in multiple business segments across different parts of the world. It maintains its books of…

ABC Ltd. is a diversified business group operating in multiple business segments across different parts of the world. It maintains its books of accounts and publishes its annual financial statements under Indian Accounting Standards. The finance team has been working on closing the books of accounts and generating financial statements for the year ended 31 st March 20X3 and are facing issues in the following transactions while finalization of financial statements: (i) One of the businesses of ABC Ltd. is of manufacturing sugar and chemicals. The Company has taken a term loan for 5 crores from State Bank to buy certain plant and machinery during the year ended 31 March 20X2. The loan is repayable over a period of 5 years. The terms and conditions of the loan agreement requires the company to maintain a current ratio of 1.33 : 1 and debt-equity ratio of 1 : 2. If these loan covenants fall below this level, then the bank has a right to recall the entire loan. The loan outstanding as on 31 March, 20X3 was - 4.25 crores. The current ratio of ABC Ltd. was 1 : 1 and debt equity ratio was 0.5 : 2. State Bank sent a notice on 5 April 20X3 demanding repayment of loan, on account of breach of terms of the loan agreement. The financials were signed on 10 May, 20X3. On receiving the notice, the CFO of ABC Ltd. negotiated with the bank and ensured to rectify the breach. As a result, on 25 April, 20X3, the Bank has agreed not to recall the loan and allowed the Company to achieve the contracted current and debt-equity ratio by 20X5. (ii) ABC Ltd. has inventory of raw material Y of 10,000 units as at 31 March, 20X4 with a carrying amount of 100 each. The current market value of that raw material is 95 each. ABC Ltd. will use the raw material to manufacture a component for a customer. The conversion cost for making the finished goods would be 130 each. ABC Ltd. estimates costs to completion and sale of 50 each and a selling price for the component is estimated to be 290 each. (iii) ABC Ltd. sold a machinery Z for 900 thousand to a new customer. To get into long term relationship with the customer, the terms of sale also include after sales service to be provided for next three years free of cost. The company also sells the sales service contract separately where the customer buys it after the initial warranty period at 100 thousand. Analyze the transactions mentioned above and choose the most appropriate option in the below questions 1 to 4 in line with relevant Ind AS: