October 2008
Time: 3 Hours Marks:100
N.B:
1 . Question No. 1 is compulsory.
2 . Attempt any five questions from Question Nos. 2 to 9.
3 . All working notes should form part of answer.
4 . Figures to the right indicate full marks assigned to each question.
Q.1.
Trial Balance of K. Swapnii Ltd. as on 31st March, 2007 is as below:- (20)
| Particulars | Dr. (Rs.) | Cr. (Rs.) |
| 16, 000 equity shares of Rs. 100 each fully paid up - | -- | 16,00,000 |
| Securities Premium - | -- | 15,000 |
| General Reserve | -- | 50,000 |
| Gross Profit - | -- | 8,00,000 |
| Discount Received | -- | 8,700 |
| Creditors | -- | 25,800 |
| Profit and Loss A/c. | -- | 20,000 |
| Provision for Taxation (Accounting year 2005-06) | -- | 70,000 |
| Interest Received (net after TDS) | -- | 9,500 |
| Land (Cost) | 1,55,000 | -- |
| Building | 3,00,000 | -- |
| Plant and Machinery | 2,50,000 | -- |
| Furniture | 1,00,000 | -- |
| Vehicles | 1,50,000 | -- |
| Office Salaries | 1,55,000 | -- |
| Office Rent | 120,000 | -- |
| Establishment Expenses | 58,000 | -- |
| Finance Expenses | 49,000 | -- |
| Debtors | 90,000 | -- |
| Interim Dividend | 80,000 | -- |
| Cash on Hand | 8,000 | -- |
| Bank Balance | 2,00,000 | -- |
| Security Deposit | 7,800 | -- |
| Advance Tax (Accounting Year 2006-07) | 1,00,000 | -- |
| Investments (5% Government Securities) | 2,10,000 | -- |
| Stock-Raw Materials | 1,50,000 | -- |
| Stock - Work -in-progress | 1,75,000 | -- |
| Stock- Finished Goods | 1,25,000 | -- |
| Advance Tax (Accounting Year 2005 - 06) | 80,000 | -- |
| Selling and Distribution Expenses | 36,200 | -- |
| Total | 25,99,000 | 25,99,000 |
After taking into account following adjustments, prepare Profit & Loss account for the year ended
31st March,2007 and Balance Sheet as on the same date, as per Schedule VI requirements, in Vertical form:
| Name | Cost (Rs.) | Rate % |
| Building | 4,00,000 | 2.5% |
| Plant and Machinery | 5,00,000 | 10% |
| Furniture | 2,00,000 | 15% |
| Vehicles | 3,00,000 | 20% |
1. Write off depriciation on fixed Assets on the original cost of fixed assets as hereunder.
2. Market value of Investments is Rs. 2,15,000 while face value is Rs. 2,00,000.
3. Auditor's Remuneration is to be provided for the year Rs. 16,000. It includes their fees as
auditor Rs. 10,000, as consultant on Tax matters Rs. 4,000 while the remaining amount is as consultant on Company law matters.
4. Managing Directors remuneration paid Rs. 5,000 per month is included in office salaries. However, he is entitled to remuneration of Rs. 70,000 p.a..
5. Provide for salaries Rs. 8,000. Rent Rs. 10,000. Establishment Expenses Rs. 7,000 as outstanding expenses for the year.
6. General Reserve includes profit on re-issue of forfeited shares earned Rs. 5,000
7. Provision for taxation to be made Rs. 1,00,000 for current year.
8. Debtors include debts due for more than 6 months Rs. 15,000. All debts are considered to be good and unsecured.
9. The Income Tax Assessment for accounting year 2005-06 was completed resulting into gross demand of Rs. 78,000.
10. Interest received on Government Securities is after deduction of income tax of Rs. 500, for current year.
11. Ignore previous year's figures and Corporate Dividend Tax.
Q.2.
ICL Ltd. was incorporated to take over the running business of BC and CI Brothers with effect from 1st April 2006, The Company was incorporated on list August 2006. The following information was available from the books of accounts, which were closed on 31st March 2007: (16)
| Particular | Rs. | Rs. |
| Gross Profit | 7,00,000 | -- |
| Share Transfer Fees Received | 10,0000 | -- |
| -- | -- | 7,10,000 |
| -- | -- | |
| Office Salaries | -- | 2,10,000 |
| Partners' Salaries | -- | 60,000 |
| Advertising | -- | 63,000 |
| Printing Stationery | -- | 15,000 |
| Travelling Expenses | -- | 40,000 |
| Office Rent | -- | 96,000 |
| Auditors' Remuneration | -- | 6,000 |
| Directors' Fees | -- | 10,000 |
| Bad Debts | -- | 12,000 |
| Sales Commission | -- | 49,000 |
| Preliminary Expenses | -- | 7,000 |
| Debenture Interest | -- | 16,000 |
| Interest on Capital | -- | 18,000 |
| Depriciation | -- | 21,000 |
Additional Information:
1. Monthly sales were Rs. 5,00,000 for pre- incorporation period, while total sales for the year
were Rs. 70,00,000. The sales arose evenly throughout the concerned periods.
2. Office rent was Rs. 84,000 p.a.upto 30th Sept. 2006. It became Rs. 1,08,000 p.a. thereafter.
3. Travelling Expenses included Rs.7,000 towards sales promotion.
4. Auditors' Remuneration was payable for whole year.
5. Bad Debts written off included a debt of Rs. 4,000 taken over from the vendor, while the remaining were in respect of goods sold in September 2006.
6. Depreciation includes Rs. 6,000 for asset acquired in the post incorporation period.
Prepare Profit & Loss accounts for the year ended 31st March 2007 in the columnar form showing profit/loss for the pre and post incorporation period
Q.3.
Smart Company issue on 1st April, 2001, 2600, 7% Preference shares of Rs. 100 each at par redeemable on or after 31-3-2006 in whole or in past. The Company later, issued 8% debentures of the face value of Rs. 1,00,000 on 1-4-2002 redeemable on or after 3-3-2007 also in whole or in part. (16)
On 31-3-2006, the Preference shares of the face value of Rs. 1,80,000 were redeemed out ofprofits.
On 1-3-2007, the Company, for the purpose of redemption of preference shares, issued 5,000 equity shares of Rs. 10 each at a premium of 2%. All the shares were fully subscribed for.
On 31-3-2007, it redeemed the remaining preference shares at par. The company redeemed all the debentures (out of profits) also on the same date at a premium of 5%.
There was sufficient balance in General Reserve Account and Bank Account as on 31-3- 2006 and 31-3-2007.
Ignore preference dividend and debenture interest.
Pass journal entries in the books of the company for the year ended 31st March 2006 and 31 st March, 2007 for redemption of preference shares and debentures in view of provisions of Companies Act, 1956.
Q.4.
Following is the Balance Sheet of Unmesh Ltd. as on 31-3-2007: (16)
| Liabilities | Rs. | Assets | Rs. |
| 6,000 10% Cumulative preference | -- | Goodwill | 2,00,000 |
| Shares of Rs. 100 each fully paid up | 6,00,000 | Land Building | 19,50,000 |
| 15,000 Equity Shares of Rs. 100 each, fully paid up | 15,00,000 | Plant and Machinery | 70,000 |
| Loans | 2,22,000 | Stock | 4,00,000 |
| Creditors | 7,50,000 | Trade Debtors | 2,88,000 |
| -- | -- | Bank Balance | 1,26,000 |
| -- | -- | Profit and Loss A/c. | 38,000 |
| -- | 30,72,000 | -- | 30,72,000 |
Note:
Preference Dividend was in arrears Rs. 1,20,000
The Board of Directors of the Co. decided upon the following scheme of reconstruction, which was approved by all concerned.
1. Paid up value of equity shares shall be reduced to Rs. 50 per share, face value being Rs. 100.
2. Preference shares are to be converted into 13% debentures of Rs. 100 each with regard to their 80% of dues (including arrears of preference dividend) and for the balance (including dividend arrears) equity shares of Rs. 100 each (Rs. 50 paid up) shall be issued.
3. All equity shareholders agreed to pay the balance amount, making shares fully paid up.
4. The Plant-Machinery was revalued at Rs. 90,000.
5. The value of stock was reduced by Rs. 1,00,000
6. Land and Building shall be written down to Rs. 15,50,000.
7. Creditors agreed to forego their claims by 10%.
Loan was fully settled for Rs. 2,00,000.
8. Goodwill, Debit balance of Profit and Loss account shall be written off.
9. Cost of reconstruction Rs. 5,000 was paid. Above resolution was carried out.
You are required to :
1. Pass journal entries in the books of the company
2. Prepare Capital Reduction account.
3. Prepare Balance Sheet after reconstruction.
Q.5.
Following is the Balance Sheet of Golu Ltd, as on 31-3-2007: (16)
| Liabilities | Rs. | Assets | Rs. |
| 10,000 Equity Shares of Rs. 10 each fully paid up | 1,00,000 | Fixed Assets | 4,50,000 |
| 5,000 Equity Shares of Rs. 10 each Rs. 8 paid up | 40,000 | Current assets | 2,20,000 |
| 5,000 Equity Shares of Rs. 10 each Rs. 5 paid up | 25,000 | Preliminary Expense | 10,000 |
| General Reserve | 2,00,000 | -- | -- |
| Profit & Loss a/c. | 1,80,000 | -- | -- |
| Creditors | 1,35,00 | -- | -- |
| -- | 6,80,000 | -- | 6,80,000 |
Additional Information:
1. Fixed Assets are undervalued 10%
2. Current Assets are overvalued by 10%.
3. The normal average profit of the Co. after tax will be maintained at Rs. 99,000.
4. Normal Rate of Return is 10%.
Calculate the value of each type of equity share by,
(i) Asset Backing Method (excluding Goodwill).
(ii)Yield Value Method
Q.6.
Journalise the following transactions in the books of EXIM Ltd. for the year ended 31-3-2007 and also prepare "Foreign Exchange Fluctuation Account" applying AS-11.- (16)
(a) On 1st July, 2006, goods worth US $ 1,05,000 were exported to M/s. Pasco Ltd. The amount was realised as below:
| Date | Amount Paid in US $ |
| 5-11-2006 | 70,000 |
| 11-5-2007 | 35,000 |
(b) Goods worth US $ 5,000 were exported on 15-7-2006 to Joe Co. Ltd, USA. The amount was received after 30 days.
(c) On 15-9-2006, Raw Materials worth US $ 20,000 were imported from Robert Ltd. Payable 50% immediate and the balance on 15-4-2007.
(d) Raw Materials were imported on 31-10-2006 worth US $ 10,000 from Blue Cross Ltd. U.K. The payment wasmade after 45 days.
(e) On 15-12-2006 Goods worth US $ 75,000 were exported to Thomas Ltd., UK. The amount was received as below:.
| Date | Amount Paid in US $ |
| 15-2-2007 | 30,000 |
| 15-3-2007 | 45,000 |
(f) Plant & Machinery was imported from California Equipments Ltd. on 1-1- 2007 for US $ 14,000. The Payment for the same was made on 30-4-2007.
The Exchange Rates for 1 US $ were as below:
| Date | Exchange Rate Rs. | Date | Exchange Rate Rs |
| 01-07-2006 | 41.00 | 01-01-2007 | 42.25 |
| 15-07-2006 | 41.25 | 15-02-2007 | 42.50 |
| 14-08-2006 | 41.50 | 15-03-2007 | 42.75 |
| 15-09-2006 | 41.00 | 31-03-2007 | 42.00 |
| 31-10-2006 | 41.75 | 15-04-2007 | 42.50 |
| 05-11-2006 | 40.00 | 30-04-2007 | 42.75 |
| 15-12-2006 | 42.00 | 11-05-2007 | 42.00 |
Q.7.
Balance Sheet of North Sick Ltd. as on 31-03-2007 is as below:- (16)
| Liabilities | Rs. | Assets | Rs. |
| 5,000 8% Preference Shares of Rs. 10 each | 50,000 | Office Premises | -- |
| fully paid up | -- | At Goregaon | 1,00,000 |
| 25,000 Equity Shares of Rs. 10 each fully paid up | 2,50,000 | At Borivli | 60,000 |
| 10% Debentures | 50,000 | Furniture | 40,000 |
| Creditors | 40,000 | Current Assets | 1,90,000 |
| -- | 3,90,000 | -- | 3,90,000 |
A new Company namely West Healthy Ltd. was formed with Authorised Capital of 50,000 equity shares
of Rs. 10 each. The directors of the Company.
(a)Issued 10,000 equity shares at premium of 10% to the public for cash. The issue was fully subscribed and paid for.
(b)Paid underwriting commission of Rs. 5,000 to the underwriters ICICI Bank Ltd.
(c)Paid Rs. 10,000 to M/s. ANIC & Co. Chartered Accountants, as professional fees for Co. formation.
(d)Decided to take over the business of North Sick Ltd. on the following terms:
(i) To issue 6 equity shares of Rs. 10 each at 10% premium for every 5 equity shares in North Sick Ltd.
(ii) To issue 5,000 equity shares of Rs. 10 each at 10% premiumto the preference shareholders of North Sick Ltd.
(iii) To revalue Goregaon Office at Rs. 1,50,000 and BorivliOffice at Rs. 90,000
(iv) To take over 10% debentures of North Sick Ltd. at facevalue. Then, debentureholders of North Sick Ltd. shall be issued 12% debentures of the face value Rs. 55,000 in West Healthy Ltd.
You are required to :
Write necessary journal entries in the books of West Healthy Ltd. to record the above transactions.
Prepare Balance Sheet of West Healthy Ltd. as on 1-4-2007, after take-over.
Q.8.
On 1-4-2006 Mr. Abhishek had 10,000 equity shares (of Rs 10 each) in Rai Entertainment Ltd-at the cost of Rs. 1,60,000:- (16)
On 1-7-2006 he acquired 4,000 more shares in the same Company for Rs.80,000
On 31-7-2006 he further acquired 6,000 more shares at Rs. 22 per Share
On 10-8-2006 Rai Entertainment Ltd.announced bonus share to the then equity shareholders In the ratio of 1 bonus Share for every 4 shares held as on 5-8-200 6. Abhishek received the bonus shares on 22-8-2006.
The directors of Rai Entertainment Ltd. issued right shares to the equity shareholders on the following terms:
(a) Right shares to be issued to-the existing shareholders as on 31-8-2006.
(b) Right offered was at the rate Of Rs. 15'per share in the ratio 1 share for every 5 shares held. Full amount was payable on or before 15-10-2006.
(c) Shareholders would be entitled to renounce their entitlement either wholly or in part to the outsiders.
(d) Abhishek exercised his right of option under the issue for 3,000 shares and sold the balance to Mr. Raj @ Rs. 4 per share. On, 20-10-2006 Rai-Entertainment Ltd. declared the dividend @ Rs. 4 per share for the year ending 31-3-2006.Abhishek received the dividend on 31-10-2006. On 10-1-2007 Abhishek sold 7,000 shares @ Rs. 40 per share. Prepare investments a/c. in the books of Abhishek for the year ended 31-3-2007.
Q.9.
Attempt any four of the following :- (16)
a. Following information is available from the books of a Company:
| -- | Rs. |
| 1,20,000 equity shares of Rs. 10 each | 12,00,000 |
| Security premium | 70,000 |
| General Reserves | 3,50,000 |
The Company decided to buyback 25% of the equity share capital at Rs. 12 per share. Pass journal entries without narration.
b. Bharat Ltd. issued 50,000 15% Debentures of Rs. 1000 each at Rs. 952 per debenture. The debentures are redeemable in five annual instalments of Rs. 200 each. It is decided to write off discount on debentures in proportion to the amount of debenture finance usage over a period of five years.
Prepare a statement for write off at discount on debentures over a period of five years.
c. Profit before making the following adjustment were as under:
| -- | Pre-incorporation period Rs. | Post-Incorporation period Rs. |
| Profit | 37,000 | 18,600 |
Adjustments to bemade:
The Purchase consideration was agreed at Rs. 2,50,000 for assets valued at Rs. 2,40,000. 20% of the Goodwill is to be written off.
In lieu of interest on purchase consideration the vendor would get 40% of the profit earned prior to incorporation.
Find out profit prior to incorporation and after incorporation.
Determine the no. of fresh issue of shares for the purpose of redemption of preference share, from the following information.
| -- | Rs. |
| Nominal value of redeemable preference share capital | 1,50,000 |
| Premium on redemption of preference shares | 10% |
| Profit & Loss account (Cr. balance) | 34,000 |
| Securities Premium | 5,000 |
Fresh issue is to be made at 5% premium. Face value of each share is Rs. 100.
(e) The net profits of a company after Tax for the past five years are Rs. 40,000, Rs. 42,000, Rs. 45,000, Rs. 46,000 and Rs. 47,000 average capital employed is Rs. 4,00,000 on which a reasonable rate of return is 10%. It is expected that the company will be able to maintain its super profits for the next five years. Calculate the value of Goodwill on the basis of annuity of super Profits, taking the present value of annuity of one rupee for five years @ 10% interest is Rs. 3.78.
(f) 9% debentures (of Rs. 100 each) account in the books of a company shows the balance of Rs. 5,000 of Rs. 5,00,000 as on 1-1-2006.
It purchased its own debentures as under:
On 1-2-2006 - 500 debentures @ Rs. 98 - Cum interest.
On 1-3-2006 - 700 debentures @ Rs. 96 Ex-interest.
Pass journal entries for the purchase of own debentures and immediate cancellation thereof.
Interest was payable on 30th June and 31st December every year.
March 2008
Financial Accounting
Time: 3 Hours Marks: 100
NB:
1. Question No.1 is compulsory.
2. Attempt any five questions from question Nos. 2 to 9.
3. All working notes should form part of answer.
4. Figures to the right indicate full marks assigned to each question.
Q.1 BK Ltd. is formed to takeover 'Bunty Ltd and Kuber Ltd'. Their Balance Sheets on the date of amalgamation are as below: 16
BK Ltd. issued 10,000 equity shares of Rs.10 each to the public at a premium of 10%.Bunty Ltd. and Kuber Ltd. were taken over by BK Ltd. on the following terms.
Re: Bunty Ltd.
1. Equity Shareholders are to be issued 7 Equity Shares of Rs. 10 at par in BK Ltd. and are to be paid Rs.5 in cash for surrender of each 6 Shares.
2. Preference shareholders are to be paid at 10% premium by 12.5% preference shares in BK Ltd. issued at par.
3. All Assets and liabilities are valued at book value except Machinery which is valued at 10% below book value and Debtors are Debtors are worth Rs. 1,60,000.
4. Liquidation expenses of Rs.12,500 are to be borne by BK Ltd.
5. Discharge the debentures of Bunty Ltd. at a discount of 10% by the issue of 13% Debentures of Rs.100 each in BK Ltd.
Re: Kuber Ltd.
1. Cash Rs.3,000 is to be retained for liquidation expenses.
2. Debtors and investments are valued at 90% of cost.
3. Machinery and stock are valued at 10% above cost and other assets and liabilities are valued at book value except Fictitious assets.
4. Prefrence shareholders are to be paid at 10% premium by 12.5% prefrence shares in BK Ltd. issued at par.
5. Balance of Purchase consideration is payable,in equity share at par.
6. Discharge the debentures of Kuber Ltd. at par by the issue of 13% Debentures of Rs.100 each in 'BK' Ltd.
7. The Face value of Equity shares and preference shares in BK Ltd. is of Rs.10 each.
Show the necessary Ledger Accounts in the books of 'Bunty Ltd' and Kuber Ltd'.also calculate purchase considerations.
Q.2 The following trial balance was extracted from the books of M/s. Jhakharia Pvt. Ltd., which had taken over business of Mr. Vardhan on 1st April, 2005. The company was incorporated on 1st July, 2005. However no effect of conversion was given in the books which continued thereafter. 16
Further Information:
1. Gross Profit percentage is fixed. Turnover is doubled in April, November and December as compared to other months.
2. 1/5 of preliminary expenses are to be written off.
3. Purchase consideration Rs. 10, 00,000 to be paid by the issue of 80,000 equity shares of Rs. 10/-each and 2,000 9% preference shares of Rs. 100/- each.
4. Travelling expenses are incurred by, salesmen only.
5. Audit Fee is Rs. 18,000/- for 1st April, 2005 to 31st March, 2006 and is outstanding.
6. Rent of office was paid @ Rs. 2,500/-, per month up to September, 2005 and thereafter, it was increased by Rs. 500/- per month.
7. Provide depreciation @ 10% p.a. on Plant & Machinery, Land & Building and on Furniture.
Prepare profit and loss account for the year ended 31st March, 2006 appropriating between the pre and post incorporation period and Balance Sheet as on 31st March, 2006.
Q.3 The following is the Balance-sheet of Sandeep Limited as on 31st March, 2006: 16
The preference dividend is in arrear for four years. The following scheme of capital reduction was sanctioned by the court and agreed by shareholders:
1. The preference shares are to be reduced to Rs. 50/- each and equity shares to Rs. 2/- each, both being fully paid.
2. Of the preference dividend in arrear three-fourth to be waived and remaining to be paid in cash.
3. The Debenture holders to take over plant and machinery at Rs. 6, 50,000/- in part satisfaction of their claim. The remaining claim should be converted into 14% debentures.
4. Creditors agreed to reduce their claim by Rs. 20,000/-. Bills payable to be paid immediately.
5. Goodwill, Patents, Profit and Loss A/c and Preliminary Expenses are to be written off entirely.
6. The following assets are to be revalued as under Furniture Rs. 25,000/-, Stock-In-Trade Rs. 68,000/- Land and Building Rs. 5, 80,000/- Sundry Debtors Rs. 80,000/-.
7. A Secured Loan of Rs. 1,50,000/- at 12% per annum is to be obtained by mortgaging Land and Building for repayment of bank overdraft, bills payable and reconstruction expenses Rs. 15,000/-.
Pass journal entries to record above scheme and draft the balance sheet of Sandeep Limited after reconstruction.
Q.4 'Piyusha' Limited furnishes the following information and requests you to find out the value of on the basis of capitalisation of Future Maintainable Profits method 16
(a) Balance Sheet as on 31st March, 2006:
(b) In similar business normal returns on capital employed is 15% (After Tax)
(c) All Investments are Non-Trade Investments.
(d) Profits for last four years before tax are follows.
Year ending 31st March, 2003 Rs. 4, 32,000
Year ending 31st March, 2004 Rs. 4, 46,000
Year ending 31st March, 2005 Rs. 4, 36,000
Year ending 31st March, 2006 Rs. 4, 53,000
(e) An average rate of 40% is payable as Income Tax.
(f) In the year 2003-04, there was a fire which resulted in a loss of Rs. 25,000/- and during theYear 2004-05 the company had sold its furniture resulting into a profit of Rs. 40,000/-
(g) The changes expected from ensuing year are:
Increase in Directors' fees @ Rs. 12,000/- per annum.
Reduction inAdvertisement Expenses @ Rs. 42,000/- p.a.
Increase in Distribution Expenses @ Rs. 48,000/- p.a.
(h) All current Assets (excluding cash & Bank) are to be valued at 125% of book value for valuation of Goodwill).
(i) The market value of Land and Buildings is Rs. 9, 50,000/- and Plant and Machinery is Rs. 2, 00,000/
(j) Liability under workmen compensation fund is expected at Rs. 1, 50,000/-.
(k) Use Simple Average.
Q.5 Following is the Balance sheet of RT Ltd. as on 31st March, 2006: 16
On the date of Balance Sheet preference shares are redeemable at premium of 10%.
The calls in arrears on preference shares are @ Rs. 20/- per share.
1. To enable redemption, company took the following measures:-
2. To send reminders for calls to all preference share holders. Holders of 400 preference shares paid of their dues and remaining shares are forfeited and cancelled3. Sold off investments @ 110% of cost.
4. 20,000 Equity shares, of Rs. 10/- each were issued for cash consideration at 20% premium. The issue was fully subscribed and paid for.
5. The company then issued bonus shares at par to the then shareholders after issue of new shares, at the rate of three shares for every four shares held.
Pass necessary journal entries in the books of RT Ltd. for the above transactions and also prepare the Balance Sheet of the company after redemption.
Q.6 Following is the Trial Balance from the books of Diksha Ltd. as c- 31st March, 2006 :- 16
Adjustments:-
1. Motor Car was sold on 1st April, 2005. The cost of sold Motor Car was Rs. 30,000/- and Accumulated depreciation on 1st April, 2005 was Rs. 6,000/- on the same.
2. Depreciation is to be provided on written down value at (i) Land and Building 21/2% p.a., (ii) Plant and Machinery 10% p.a. and (iii) Motor Car 20% p.a.
3. Debtors include debts due for more than 6 months Rs. 20,000/-.
4. Plant & Machinery includes machinery worth Rs. 20,000/- Purchased on 1st April, 2005.
5. Dividend is proposed for the year @ 10%, Ignore tax on proposed dividend.
6. Provision for Taxation is to be made @ 40% on the current year's profit
7. Debentures are secured by a charge on the Land and Buildings
8. The market value of Investments on 31-03-2006 was Rs. 1, 80,000/-.
9. Interest on Investment is due for 6 month but not received.
10. Interest on debentures for 6 months is Accrued & due.
11. Authorised share capital of the company is Rs. 10, 00,000/- divided into 1, 00,000/- Equity shares of Rs. 10 each.
You are required to prepare Profit & Loss Account for the year ended 31st March, 2006 and Balance Sheet as on that date in a vertical form as per provision of the schedule VI. Ignore previous year's figures.
Q.7 Following is the Trial Balance from the books of Diksha Ltd. as c- 31st March, 2006 :- 16
Adjustments:-
Prepare Investment Account of 12% Debentures in the books off Bhagwati for the year ended 31st March,2006. The market value on 31st March, 2006 was Rs. 67,500 of the said Investment. Apply AS-13
Q.8 a) Pass journal entries for the following Foreign Exchange transactions the books 'Deepali Ltd. On 1st January, 2006 Deepali Ltd., an importer,purchased $ 42,500/- worth goods from Tom Trading Company of USA. The payment was made as under. 16
Deepali Ltd. closes its books on 31st March every year the exchange rate for $ 1 was as follows.
(b)Pass journal entries for the following transactions in foreign currency in the books of 'Priyanka Ltd.
Priyanka Ltd. exported goods to 'Jerry Trading Company' Germany worth US $ 90,000/- on 10th January, 2006 on which date
exchange rate of US $ 1 was Rs. 49.50. The payment for the same was received as under :–
'Priyanka Ltd' closes its books on 31st March every year. The exchange rate on 31 st March, 2006 was 1 US $ Rs. 48.75.
Q.9 Answer the following:- 16
Adjustments:-
1. 'S' Ltd is to be taken over by 'R' Ltd. 'S' Ltd. has 9% Debentures of Rs. 100/- each of the face value of Rs. 22,50,000/-. 9% debenture holders of 'S' Ltd. are dischanged by 'R' Ltd. issuing such number of its 15% Debentures of Rs. 100/- each so as to maintain the same amount of interest. Calculate the No. of debentures to be issued by 'R' Ltd. (4)
2. What amount should be set aside to get Rs. 15, 00,000 at the end of 10 years? The amount is expected to earn 4% interest. Sinking Fund Table shows that Re. 0.083290 @ 4% interest will accumulated Re. 1 at the end of 10th year. (2)
3. Prepare a -Schedule of Current Liabilities and provision" giving all the details required under Schedule VI to the Companies Act .(4)
4. 'P' Ltd. Purchased premises worth Rs. 22, 56,000. It issues its debentures at 4% discount insatisfaction of the purchase price. Calculate how many debentures will be issued in case debenture is of Rs. 100/- each. (2)
5. 'A' Ltd. buys its own 6% Debentures of nominal value Rs. 60,000/- at Rs. 97 cuminterest on 1st March, 2006. Company cancels these debentures on 31st March, 2006. Pass journal entries in the books of 'A' Ltd. It pays debentures interest half yearly on 30th June and 31st December. Face value of Debenture is Rs. 100/- each .(4)
Time: 3 Hours Marks: 100
NB:
1. Question No.1 is compulsory.
2. Attempt any five questions from question Nos. 2 to 9.
3. All working notes should form part of answer.
4. Figures to the right indicate full marks assigned to each question.
Q.1 BK Ltd. is formed to takeover 'Bunty Ltd and Kuber Ltd'. Their Balance Sheets on the date of amalgamation are as below: 16
| Liabilities | Bunty Ltd.Rs. | Kuber Ltd.Rs. | Assets | Bunty Ltd.Rs. | Kuber Ltd.Rs. |
| Share Capital of | -- | -- | Goodwill | -- | 25,000 |
| Rs.10 each | -- | -- | Buildings | 1,50,000 | 1,40,000 |
| Equity shares | 2,40,000 | 1,60,000 | Machinery | 80,000 | 60,000 |
| 11% Preference Shares | 1,50,000 | 1,00,000 | Furniture | 10,000 | 5,000 |
| General Reserve | 45,000 | 40,000 | Investments | 1,40,000 | 80,000 |
| Profit & loss A/C | 30,000 | 21,000 | Debtors | 1,65,000 | 60,000 |
| 9% Debentures | 1,00,000 | 1,00,000 | Stock | 75,000 | 90,000 |
| Sundry Creditors | 60,000 | 40,000 | Cash & Bank | 13,000 | 8,000 |
| Other Liabilities | 40,000 | 24,000 | Other Current Assets | 20,000 | 10,000 |
| -- | -- | -- | Preliminary Expenses | 12,000 | 7,000 |
| -- | 6,65,000 | 4,85,000 | -- | 6,65,000 | 4,85,000 |
BK Ltd. issued 10,000 equity shares of Rs.10 each to the public at a premium of 10%.Bunty Ltd. and Kuber Ltd. were taken over by BK Ltd. on the following terms.
Re: Bunty Ltd.
1. Equity Shareholders are to be issued 7 Equity Shares of Rs. 10 at par in BK Ltd. and are to be paid Rs.5 in cash for surrender of each 6 Shares.
2. Preference shareholders are to be paid at 10% premium by 12.5% preference shares in BK Ltd. issued at par.
3. All Assets and liabilities are valued at book value except Machinery which is valued at 10% below book value and Debtors are Debtors are worth Rs. 1,60,000.
4. Liquidation expenses of Rs.12,500 are to be borne by BK Ltd.
5. Discharge the debentures of Bunty Ltd. at a discount of 10% by the issue of 13% Debentures of Rs.100 each in BK Ltd.
Re: Kuber Ltd.
1. Cash Rs.3,000 is to be retained for liquidation expenses.
2. Debtors and investments are valued at 90% of cost.
3. Machinery and stock are valued at 10% above cost and other assets and liabilities are valued at book value except Fictitious assets.
4. Prefrence shareholders are to be paid at 10% premium by 12.5% prefrence shares in BK Ltd. issued at par.
5. Balance of Purchase consideration is payable,in equity share at par.
6. Discharge the debentures of Kuber Ltd. at par by the issue of 13% Debentures of Rs.100 each in 'BK' Ltd.
7. The Face value of Equity shares and preference shares in BK Ltd. is of Rs.10 each.
Show the necessary Ledger Accounts in the books of 'Bunty Ltd' and Kuber Ltd'.also calculate purchase considerations.
Q.2 The following trial balance was extracted from the books of M/s. Jhakharia Pvt. Ltd., which had taken over business of Mr. Vardhan on 1st April, 2005. The company was incorporated on 1st July, 2005. However no effect of conversion was given in the books which continued thereafter. 16
| Trial Balance as on 31st March, 2006 | |||||
|---|---|---|---|---|---|
| Particular | Debit Rs. | Credit Rs. | |||
| Capital Account of Mr. Vardhan on 1/4/05 | ---- | 9,00,000 | |||
| Debtors | 80,000 | ---- | |||
| Creditors | ---- | 1,00,000 | |||
| Rent | 33,000 | ---- | |||
| Office Salary | 1,10,000 | ---- | |||
| Carriage outward | 54,000 | ---- | |||
| Directors Remuneration | 16,000 | ---- | |||
| Travelling Expenses | 28,500 | ---- | |||
| Preliminary Expenses | 15,000 | ---- | |||
| Administrative Expenses | 1,60,000 | ---- | |||
| Bills Receivable | 30,000 | ---- | |||
| Bills payable | ---- | 21,500 | |||
| Cash at Bank | 60,000 | ---- | |||
| Plant & Machinery | 2,00,000 | ---- | |||
| Land & Buildings | 5,00,000 | ---- | |||
| Furniture | 40,000 | ---- | |||
| Stock | 1,90,000 | ---- | |||
| Gross Profit | ---- | 4,95,000 | |||
| Total : | 15,16,500 | 15,16,500 | |||
Further Information:
1. Gross Profit percentage is fixed. Turnover is doubled in April, November and December as compared to other months.
2. 1/5 of preliminary expenses are to be written off.
3. Purchase consideration Rs. 10, 00,000 to be paid by the issue of 80,000 equity shares of Rs. 10/-each and 2,000 9% preference shares of Rs. 100/- each.
4. Travelling expenses are incurred by, salesmen only.
5. Audit Fee is Rs. 18,000/- for 1st April, 2005 to 31st March, 2006 and is outstanding.
6. Rent of office was paid @ Rs. 2,500/-, per month up to September, 2005 and thereafter, it was increased by Rs. 500/- per month.
7. Provide depreciation @ 10% p.a. on Plant & Machinery, Land & Building and on Furniture.
Prepare profit and loss account for the year ended 31st March, 2006 appropriating between the pre and post incorporation period and Balance Sheet as on 31st March, 2006.
Q.3 The following is the Balance-sheet of Sandeep Limited as on 31st March, 2006: 16
| Liabilities | Rs. | Assets | Rs. |
| Issued and Subscribed Capital | -- | Goodwill | 25,000 |
| 10% Preference Shares of | -- | Patents | 15,000 |
| Rs. 100/- each | 4,00,000 | Furniture | 35,000 |
| Equity Shares of Rs. 10/- each | 10,00,000 | Plant & Machinery | 6,00,000 |
| 12% Debentures | 7,50,000 | Land & Building | 6,50,000 |
| Bank Overdraft | 50,000 | Stock-In-Trade | 80,000 |
| Sundry Creditors | 1,40,000 | Sundry Debtors | 90,000 |
| Bills Payable | 35,000 | Bills Receivable | 15,000 |
| -- | -- | Profit and Loss A/c | 8,20,000 |
| -- | -- | Preliminary Expenses | 45,000 |
| -- | 23,75,000 | -- | 23,75,000 |
The preference dividend is in arrear for four years. The following scheme of capital reduction was sanctioned by the court and agreed by shareholders:
1. The preference shares are to be reduced to Rs. 50/- each and equity shares to Rs. 2/- each, both being fully paid.
2. Of the preference dividend in arrear three-fourth to be waived and remaining to be paid in cash.
3. The Debenture holders to take over plant and machinery at Rs. 6, 50,000/- in part satisfaction of their claim. The remaining claim should be converted into 14% debentures.
4. Creditors agreed to reduce their claim by Rs. 20,000/-. Bills payable to be paid immediately.
5. Goodwill, Patents, Profit and Loss A/c and Preliminary Expenses are to be written off entirely.
6. The following assets are to be revalued as under Furniture Rs. 25,000/-, Stock-In-Trade Rs. 68,000/- Land and Building Rs. 5, 80,000/- Sundry Debtors Rs. 80,000/-.
7. A Secured Loan of Rs. 1,50,000/- at 12% per annum is to be obtained by mortgaging Land and Building for repayment of bank overdraft, bills payable and reconstruction expenses Rs. 15,000/-.
Pass journal entries to record above scheme and draft the balance sheet of Sandeep Limited after reconstruction.
Q.4 'Piyusha' Limited furnishes the following information and requests you to find out the value of on the basis of capitalisation of Future Maintainable Profits method 16
(a) Balance Sheet as on 31st March, 2006:
| Liabilities | Rs. | Assets | Rs. |
| Share Capital | -- | Goodwill | 60,000 |
| 7,500 equity shares | -- | Land & Machinery | 7,00,000 |
| of Rs. 100/- each | 7,50,000 | Plant & Machinery | 2,50,000 |
| Reserves | -- | 10% Investments | 4,50,000 |
| Profit & Loss A/c | 3,50,000 | Debtors | 2,60,000 |
| Capital Reserve | 1,50,000 | Stock-In-Trade | 2,40,000 |
| Workmen Compensation Fund | 3,00,000 | Cash and Bank | 1,30,000 |
| 10% Debentures | 3,00,000 | Other Current Assets | 1,10,000 |
| Creditors | 2,30,000 | Preliminary Expenses | 20,000 |
| Other Current Liabilities | 1,40,000 | -- | -- |
| -- | 22,20,000 | -- | 22,20,000 |
(b) In similar business normal returns on capital employed is 15% (After Tax)
(c) All Investments are Non-Trade Investments.
(d) Profits for last four years before tax are follows.
Year ending 31st March, 2003 Rs. 4, 32,000
Year ending 31st March, 2004 Rs. 4, 46,000
Year ending 31st March, 2005 Rs. 4, 36,000
Year ending 31st March, 2006 Rs. 4, 53,000
(e) An average rate of 40% is payable as Income Tax.
(f) In the year 2003-04, there was a fire which resulted in a loss of Rs. 25,000/- and during theYear 2004-05 the company had sold its furniture resulting into a profit of Rs. 40,000/-
(g) The changes expected from ensuing year are:
Increase in Directors' fees @ Rs. 12,000/- per annum.
Reduction inAdvertisement Expenses @ Rs. 42,000/- p.a.
Increase in Distribution Expenses @ Rs. 48,000/- p.a.
(h) All current Assets (excluding cash & Bank) are to be valued at 125% of book value for valuation of Goodwill).
(i) The market value of Land and Buildings is Rs. 9, 50,000/- and Plant and Machinery is Rs. 2, 00,000/
(j) Liability under workmen compensation fund is expected at Rs. 1, 50,000/-.
(k) Use Simple Average.
Q.5 Following is the Balance sheet of RT Ltd. as on 31st March, 2006: 16
| Liabilities | Rs. | Assets | Rs. |
| Share Capital | -- | Plant and Machinery | 4,00,000 |
| 10,000 equity shares | -- | Land and Buildings | 4,00,000 |
| of Rs. 10/- each | 1,00,000 | Investments | 2,00,000 |
| 5,000 9% preference | -- | Stock | 60,000 |
| Shares of Rs. 100/- each | -- | Debtors | 1,40,000 |
| fully paid 5,00,000 | -- | Bank | 1,90,000 |
| (-)call in Arrears 10,000 | 4,90,000 | -- | -- |
| General Reserve | 3,00,000 | -- | -- |
| Securities Premium | 20,000 | -- | -- |
| Profit & Loss A/c | 50,000 | -- | -- |
| 10% Debentures | 2,50,000 | -- | -- |
| Creditors | 1,40,000 | -- | -- |
| Bills Payable | 40,000 | -- | -- |
| -- | 13,90,000 | -- | 13,90,000 |
On the date of Balance Sheet preference shares are redeemable at premium of 10%.
The calls in arrears on preference shares are @ Rs. 20/- per share.
1. To enable redemption, company took the following measures:-
2. To send reminders for calls to all preference share holders. Holders of 400 preference shares paid of their dues and remaining shares are forfeited and cancelled3. Sold off investments @ 110% of cost.
4. 20,000 Equity shares, of Rs. 10/- each were issued for cash consideration at 20% premium. The issue was fully subscribed and paid for.
5. The company then issued bonus shares at par to the then shareholders after issue of new shares, at the rate of three shares for every four shares held.
Pass necessary journal entries in the books of RT Ltd. for the above transactions and also prepare the Balance Sheet of the company after redemption.
Q.6 Following is the Trial Balance from the books of Diksha Ltd. as c- 31st March, 2006 :- 16
| Debit | Rs. | Credit | Rs. |
| Land & Buildings (at cost) | 4,00,000 | Share Capital | -- |
| Plant & Machinery (at cost) | 5,20,000 | 50,000 Equity Shares of | -- |
| Motor Car (at cost) | 1,00,000 | Rs. 10 each | 5,00,000 |
| Goodwill (at cost) | 2,60,000 | 8% Debentures (01-04-2005) | 4,00,000 |
| Salaries and Wages | 72,000 | Provision for Tax | 70,000 |
| Rent and Taxes | 18,000 | (Accounting year 2004-05) | -- |
| Travelling Expenses | 16,000 | Sundry Creditors | 90,000 |
| Printing & Stationery | 17,000 | Bills Payable | 40,000 |
| Motor Car Expenses | 8,000 | General Reserve | 1,80,000 |
| Repairs (Machinery) | 16,500 | Securities Premium | 20,000 |
| Stock 9 | 4,000 | Capital Reserve 1 | 5,000 |
| Debtors | 1,45,000 | Profit & Loss A/c (on 01-04-2005) | 55,000 |
| Cash | 8,000 | Provision for Depreciation (on 01-04-2005) | -- |
| Bills Receivables | 30,000 | (i) Land & Buildings | 40,000 |
| 10% Investments | 1,50,000 | (ii) Plant & Machinery | 1,30,000 |
| Interest on Debentures 1 | 6,000 | (iii) Motor Car | 10,000 |
| Advance Tax | -- | Gross Profit | 4,10,000 |
| For-2004-05(F.Y) | 72,000 | Interest on Investments | 7,500 |
| For-2005-06(F.Y) | 60,000 | Sale of Motor Car | 35,000 |
| -- | 20,02,500 | -- | 20,02,500 |
Adjustments:-
1. Motor Car was sold on 1st April, 2005. The cost of sold Motor Car was Rs. 30,000/- and Accumulated depreciation on 1st April, 2005 was Rs. 6,000/- on the same.
2. Depreciation is to be provided on written down value at (i) Land and Building 21/2% p.a., (ii) Plant and Machinery 10% p.a. and (iii) Motor Car 20% p.a.
3. Debtors include debts due for more than 6 months Rs. 20,000/-.
4. Plant & Machinery includes machinery worth Rs. 20,000/- Purchased on 1st April, 2005.
5. Dividend is proposed for the year @ 10%, Ignore tax on proposed dividend.
6. Provision for Taxation is to be made @ 40% on the current year's profit
7. Debentures are secured by a charge on the Land and Buildings
8. The market value of Investments on 31-03-2006 was Rs. 1, 80,000/-.
9. Interest on Investment is due for 6 month but not received.
10. Interest on debentures for 6 months is Accrued & due.
11. Authorised share capital of the company is Rs. 10, 00,000/- divided into 1, 00,000/- Equity shares of Rs. 10 each.
You are required to prepare Profit & Loss Account for the year ended 31st March, 2006 and Balance Sheet as on that date in a vertical form as per provision of the schedule VI. Ignore previous year's figures.
Q.7 Following is the Trial Balance from the books of Diksha Ltd. as c- 31st March, 2006 :- 16
| Date | No. of Debentures | Terms |
| 01-04-2005 | 800 | Opening Balance at a cost of Rs. 76,000/- |
| 01-06-2005 | 300 | Sold at Rs. 105/- each cum-interest |
| 01-09-2005 | 700 | Purchased at Rs. 98/- each Ex-Interest |
| 01-12-2005 | 400 | Purchased at Rs. 108/- each Cum-Interest |
| 01-02-2006 | 900 | Sold at Rs. 97/- each Ex-Interest. |
Adjustments:-
Prepare Investment Account of 12% Debentures in the books off Bhagwati for the year ended 31st March,2006. The market value on 31st March, 2006 was Rs. 67,500 of the said Investment. Apply AS-13
Q.8 a) Pass journal entries for the following Foreign Exchange transactions the books 'Deepali Ltd. On 1st January, 2006 Deepali Ltd., an importer,purchased $ 42,500/- worth goods from Tom Trading Company of USA. The payment was made as under. 16
| On 15thJanuary, 2006- | $ 8,000 |
| On 15th February, 2006- | $9,000 |
| On 15th March, 2006- | $14,500 |
| On 15th April, 2006- | $11,000 |
Deepali Ltd. closes its books on 31st March every year the exchange rate for $ 1 was as follows.
| 1st January, 2006 | Rs. 48.50 | 15th January, 2006 | Rs. 49.25 |
| 15th February, 2006 | Rs. 48.25 | 15th March, 2006 | Rs. 48.40 |
| 31 st March, 2006 | Rs. 48.75 | 15th April, 2006 | Rs. 48.60 |
(b)Pass journal entries for the following transactions in foreign currency in the books of 'Priyanka Ltd.
Priyanka Ltd. exported goods to 'Jerry Trading Company' Germany worth US $ 90,000/- on 10th January, 2006 on which date
exchange rate of US $ 1 was Rs. 49.50. The payment for the same was received as under :–
| Date of Payment | US $ Received | Exchange Rate for 1 US $ |
| 25th January, 2006 | 25,000/- | Rs. 49.75 |
| 23rd February, 2006 | 24,000/- | Rs. 48.90 |
| 24th March, 2006 | 24,000/- | Rs, 48.60 |
| 28th April, 2006 | 17,000/- | Rs. 48.90 |
'Priyanka Ltd' closes its books on 31st March every year. The exchange rate on 31 st March, 2006 was 1 US $ Rs. 48.75.
Q.9 Answer the following:- 16
Adjustments:-
1. 'S' Ltd is to be taken over by 'R' Ltd. 'S' Ltd. has 9% Debentures of Rs. 100/- each of the face value of Rs. 22,50,000/-. 9% debenture holders of 'S' Ltd. are dischanged by 'R' Ltd. issuing such number of its 15% Debentures of Rs. 100/- each so as to maintain the same amount of interest. Calculate the No. of debentures to be issued by 'R' Ltd. (4)
2. What amount should be set aside to get Rs. 15, 00,000 at the end of 10 years? The amount is expected to earn 4% interest. Sinking Fund Table shows that Re. 0.083290 @ 4% interest will accumulated Re. 1 at the end of 10th year. (2)
3. Prepare a -Schedule of Current Liabilities and provision" giving all the details required under Schedule VI to the Companies Act .(4)
4. 'P' Ltd. Purchased premises worth Rs. 22, 56,000. It issues its debentures at 4% discount insatisfaction of the purchase price. Calculate how many debentures will be issued in case debenture is of Rs. 100/- each. (2)
5. 'A' Ltd. buys its own 6% Debentures of nominal value Rs. 60,000/- at Rs. 97 cuminterest on 1st March, 2006. Company cancels these debentures on 31st March, 2006. Pass journal entries in the books of 'A' Ltd. It pays debentures interest half yearly on 30th June and 31st December. Face value of Debenture is Rs. 100/- each .(4)
October 2007
Financial Accounting
Time: 3 Hours Marks: 100
NB:
1. Question No. 1 is Compulsory.
2. Attempt any five questions from Question Nos. 2 to 9.
3. All working notes should form part of the -answer.
4. Figures to the right indicate full marks assigned to each question.
Q.1 Following are the Balance Sheets of X Ltd. and Y Ltd. (20)
Balance Sheets As on 31st March, 2006
Z Ltd was formed to acquire all assets and liabilities of X Ltd. and Y Ltd. on the following terms:
1. Z Ltd. to have an authorised share capital of Rs. 5 crores dividend into 5,00,000 equity shares of Rs. 100 each.
2. The business of both companies were taken over for a total price of Rs. 1.2 crores to be discharged by Z Ltd. by issue of equity shares of Rs. 100 each at a premium of 20%.
3. The shareholders of X Ltd. and Y Ltd. to get shares in Z Ltd. in the ratio of net assets values of their respective shares.
4. The Debentures of both the companies to be converted into equivalent number of 14% Debentures of Rs. 100 each in Z Ltd. at a discount of 10%.
5. All the tangible assets of both the companies are taken over by Z Ltd. at book values except the following:
6. Sundry creditors of X Ltd. and Y Ltd. are taken over at Rs. 6,50,000 and Rs. 5,00,000 respectively.
7. Statutory Reserves are to be maintained for 3 years more.You are required to:
(i) Compute Purchase consideration of X Ltd. and Y Ltd.
(ii) Pass Journal Entries in the Books of Z Ltd.
(iii) Prepare Balance Sheet after amalgamation. Apply Purchase Method.
Q.2 A Company was incorporated on 31st August, 2006 to take over the business as going concern from 1st March, 2006. Trial Balance drawn on 31st December, 2006. (16)
Additional Information:
1. The Purchase consideration was settled at Rs. 2,50,000 by issuing 2,500 equity shares of Rs. 100 each.
2. Total sales for the period from 1st March, 2006 to 31st December, 2006 was Rs. 2,56,000 and out of which Rs. 1,12,000 was for the period from 1st September, 2006 to 31st December, 2006.
3. In lieu of interest on purchase consideration, the vendors would get 50% of the net profit prior to incorporation.
4. Bad Debts of Rs. 800 are related to sales made in pre-incorporation period.
5. Rent is paid on the basis of floor space occupied which was doubled in post incorporation period.
6. 40% of Goodwill and 20% of formation expenses are to be written off.
Prepare Profit and Loss Account for the period ended 31st December, 2006 showing Pre and Post incorporation Profit and Balance Sheet as on that date.
Q.3 Following is the Balance Sheet of Delta Ltd. as on 31st March, 2006. 16
The following scheme of reconstruction was submitted and approved by the court:
1. 11.5% Preference Shares of Rs. 10 each fully paid were reduced to 14% Preference Shares of Rs. 10 each, Rs. 6 per share paid up.
2. 10% Preference Shares of Rs. 10 catch, Rs. 5 per share paid up, were reduced to 13% Preference Shares of Rs. 10 each, Rs. 3 per share paid up. 3. Equity Shares of Rs. 10 each fully paid were reduced to the denomination of Rs. 5 each fully paid.
4. 11% Debenture holders agreed to accept 50,000 equity shares of Rs. 5 each in full settlement of their claims. 5. Debenture holders agreed to forego the interest due on debentures. 6. Sundry Creditors agreed to forego 10% of their claims.
7. The Company recovered as damages a sum of Rs. 50,000 which was not recorded in the books. 8. Cost of Reconstruction was paid Rs. 2,250. 9. Assets are to be revalued as under:
All intangible assets and accumulated losses are to be written off.You are required to:
(i) Pass Journal Entries in the Books of Delta Ltd.
(ii)Prepare Capital Reduction A/c and Balance Sheet after reconstruction.
Q.4 Following is the Balance Sheet of Ajantha Ltd. as on 31st March, 2006 (16)
A Company decided to value its Equity Shares on the basis of its business assets and Liabilities. To enable the valuation of shares following information is furnished.
1. All, fixed assets (except goodwill) are worth 30% above book value.
2. Stock is overvalued by Rs. 20,000 on 31st March, 2006.
3. Rs. 4,000 due from customers are bad and are to be written off.
4. All investments earn income @ 10%, however only 10% of investment are trade investments.
5. On verification it was noticed that Rs. 40,000 paid on 1-4-2003 for purchasing a plant was debited to repairs as on that date. The depreciation @ 10% p.a. on cost is provided by the company.
6. Goodwill is to be valued at 2 years purchase of past four years average profit.
7. The Profit and Loss Account revealed the following profits before the above adjustments.
As certain the value of fully paid partly paid equity shares.
Q.5 The Balance Sheet of Monica Ltd. as on 31st March,2006 was as follows: (16)
The Company decided to redeem the preference shares at a premium of 5% together with One month's dividend thereon.
Other information is as under:
1. The company issued for cash Rs. 12,000 14% Debentures at a discount of 2 1/2%.
2. Before redemption, the company decided to write off Goodwill from Profit and Loss Account and Preliminary Expenses and discount on issue of debentures out of security Premium Account.
3. The Company issued at par for cash a minimum number of new 15% Preference Shares of Rs. 10 each necessary to provide for redemption of 12% preference shares after utilising available divisible profits.
4. The Company made a bonus issue to equity shareholders of one fully paid share of Rs. 10 each of every five shares held.
Pass necessary journal entries and draft a Balance Sheet after redemption and bonus issue.
Q.6 Following is the Trail Balance of Premier Ltd. as on 31st March, 2006 (16)
Additional Information:-
1. The land was revalued on 1st January, 2006 at Rs. 3,50,000 by an expert valuer, but no effect was given although the directors have decided to adjust the revalued amount.
2. Provision for bad debts is to be made at 5% on Debtors.
3. Equity share capital consists of 36,900 equity shares of Rs. 10 each, out of which 36,400 shares are fully paid up and 500 shares on which final call of Rs. 3 per share remains unpaid.
4. Suspense Account represents money received from new allottees for reissue of 500 shares forfeited during the year for non payment of final call but no entry thereof has been passed.
5. Provision for tax to be made at 33 1/3%.
6. The company is managed by directors who are entitled to remuneration calculated at 3% of annual profits before provision for doubtful debts.
7. Depreciation is to be charged on Building @ 2% and on furniture @ 10% under W.D.V. Method.
8. Dividend on cumulative preference shares was in arrears for 5 years unto 31st March, 2005. The directors recommended payment of preference dividend for 4 Years. Ignore dividend tax.
Prepare Profit and Loss Account for the year ended 31st March, 2006 and Balance Sheet as on that date in a vertical form. Ignore Previous Year's figures.
Q.7 Following is the-Balance Sheet of Suyog Ltd. as on 31st March 2006: (16)
The company decides to buy back the maximum number of equity shares as may be permitted at a price of Rs. 20 per share. Find out maximum number of shares to be bought back and pass Journal Entries and Prepare Balance Sheet after buy back.
Q.8
Mr. Mandar holds as on 1st, April 2005 Rs. 75,000 (Cost price Rs. 78,000) 6% Government Securities as investment on which interest is payable half yearly on 30th June and 31st December every year. The following transactions took place during the accounting year ended 31st March, 2006 (16)
Purchases:
On 1-5-2005 Face Value Rs. 30,000 @ 98 Cum-Interest.
On 1-11-2005 Face Value Rs. 45,000 @ 101 Ex-Interest.
Sales:
On 1-8-2005 Face Value Rs. 36,000 @ 97 Cum-Interest.
On 1-2-2006 Face Value Rs. 24,000 @ 102 Ex-Interest.
Market price of investment at 1% discount on 31st March, 2006.
Write up Investment Account closing it on 31st March, 2006 in the books of Mr. Mandar Investments are to be valued at cost or at Market Value whichever is less. (Apply AS 13)
Q.9
a) A company had 12% Debentures of Rs. 100 each as on 1-1-2006. It purchased its own debentures as below: (4)
(i) On 1-2-2006, 1,000 debentures @ Rs. 97 Cum-Interest.
(ii) On 1-3-2006 1,500 debentures @ Rs. 96 Ex-Interest.
Interest was payable on 30th June and December every year.
Pass journal enteries for purchases of own debentures and immediate cancellation thereof.
b) Prepare a schedule of "Current Assets, Loans and Advances" giving all the details required under schedule VI to the Companies Act 1956.(4)
c) Swapnil Ltd dealer in cosmetics exports goods on 1st January, 2006 worth $ 50,000 to WK Ltd. in New York. The payment was received on 31st March, 2006. On the date of invoice the exchange rate was $ 1 = Rs. 47 and when the payment was received it was $ 1 = Rs. 48
Journalise the above transactions in the books of Swapnil Ltd.(2)
d) X Ltd. an Indian Company advanced $ 16,000 for import of goods from US Company of USA on 1st February, 2006. The goods were received alongwith purchase bill for $ 25,000 on 1st March, 2006. The balance amount was paid on 15th March, 2006.(6)
The rate of exchange on the various dates was as follows.
Pass journal entries for the above transactions in the books of X Ltd.
Time: 3 Hours Marks: 100
NB:
1. Question No. 1 is Compulsory.
2. Attempt any five questions from Question Nos. 2 to 9.
3. All working notes should form part of the -answer.
4. Figures to the right indicate full marks assigned to each question.
Q.1 Following are the Balance Sheets of X Ltd. and Y Ltd. (20)
| Liabilities | X Ltd.Rs. | Y Ltd.Rs. | Assets | X Ltd.Rs. | Y Ltd.Rs. |
| Equity Share Capital of Rs. 10 each | 75,00,000 | 45,00,000 | Building | 25,00,000 | 15,50,000 |
| Export Profit Reserves | 3,00,000 | 3,00,000 | Machinery | 32,50,000 | 17,00,000 |
| Profit and Loss Account | 7,00,000 | 6,00,000 | Stock | 25,50,000 | 18,00,000 |
| General Reserve | 2,00,000 | 4,50,000 | Debtors | 9,00,000 | 10,00,000 |
| 12% Debenture of Rs. 100 each | 5,00,000 | 3,00,000 | Bank | 7,00,000 | 5,50,000 |
| Sundry Creditors | 7,00,000 | 5,50,000 | Preliminary Expenses - | -- | 1,00,000 |
| -- | 99,00,000 | 67,00,000 | -- | 99,00,000 | 67,00,000 |
Z Ltd was formed to acquire all assets and liabilities of X Ltd. and Y Ltd. on the following terms:
1. Z Ltd. to have an authorised share capital of Rs. 5 crores dividend into 5,00,000 equity shares of Rs. 100 each.
2. The business of both companies were taken over for a total price of Rs. 1.2 crores to be discharged by Z Ltd. by issue of equity shares of Rs. 100 each at a premium of 20%.
3. The shareholders of X Ltd. and Y Ltd. to get shares in Z Ltd. in the ratio of net assets values of their respective shares.
4. The Debentures of both the companies to be converted into equivalent number of 14% Debentures of Rs. 100 each in Z Ltd. at a discount of 10%.
5. All the tangible assets of both the companies are taken over by Z Ltd. at book values except the following:
| Assets | X Ltd.Rs. | Y Ltd.Rs. |
| Building | 28,00,000 1 | 8,20,000 |
| Machinery | 31,50,000 | 16,00,000 |
6. Sundry creditors of X Ltd. and Y Ltd. are taken over at Rs. 6,50,000 and Rs. 5,00,000 respectively.
7. Statutory Reserves are to be maintained for 3 years more.You are required to:
(i) Compute Purchase consideration of X Ltd. and Y Ltd.
(ii) Pass Journal Entries in the Books of Z Ltd.
(iii) Prepare Balance Sheet after amalgamation. Apply Purchase Method.
Q.2 A Company was incorporated on 31st August, 2006 to take over the business as going concern from 1st March, 2006. Trial Balance drawn on 31st December, 2006. (16)
| Trial Balance as on 31st December, 2006 . | |||
|---|---|---|---|
| Debit Balances | Rs. | Credit Balances | Rs. |
| Land and Building | 1,50,000 | Vendor's Capital | 2,40,000 |
| Plant and Machinery | 50,000 | Debentures | 10,000 |
| Computer | 20,000 | Sundry Creditors | 2,400 |
| Sundry Debtors | 30,000 | Bills Payable | 2,000 |
| Bank | 30,000 | Interest Received | 5,000 |
| Stock | 25,000 | Gross Profit | 96,000 |
| Management Expenses | 12,000 | -- | -- |
| Rent | 4,200 | -- | -- |
| Office Expenses | 5,500 | -- | -- |
| Directors' Fees | 17,000 | -- | -- |
| Postage and Telegrams | 500 | -- | -- |
| Bad Debts | 2000 | -- | -- |
| Free Samples | 800 | -- | -- |
| Formation Expenses | 2,000 | -- | -- |
| Debenture Interest | 1,000 | -- | -- |
| Commission on Sales | 800 | -- | - |
| Depreciation | 3,000 | -- | -- |
| Careiage Outwards | 1,600 | -- | -- |
| -- | 3,55,400 | -- | 3,55,400 |
Additional Information:
1. The Purchase consideration was settled at Rs. 2,50,000 by issuing 2,500 equity shares of Rs. 100 each.
2. Total sales for the period from 1st March, 2006 to 31st December, 2006 was Rs. 2,56,000 and out of which Rs. 1,12,000 was for the period from 1st September, 2006 to 31st December, 2006.
3. In lieu of interest on purchase consideration, the vendors would get 50% of the net profit prior to incorporation.
4. Bad Debts of Rs. 800 are related to sales made in pre-incorporation period.
5. Rent is paid on the basis of floor space occupied which was doubled in post incorporation period.
6. 40% of Goodwill and 20% of formation expenses are to be written off.
Prepare Profit and Loss Account for the period ended 31st December, 2006 showing Pre and Post incorporation Profit and Balance Sheet as on that date.
Q.3 Following is the Balance Sheet of Delta Ltd. as on 31st March, 2006. 16
| Trial Balance as on 31-03-2006 . | |||
|---|---|---|---|
| Liabilities | Rs. | Assets | Rs. |
| 15,000 11.5% Preference Shares of | -- | Goodwill | 80,000 |
| Rs. 10 each fully paid up | 1,50,000 | Patents | 54,000 |
| 13,000 10% Preference Shares of | -- | Land and Buildings | 1,75,000 |
| Rs 10 each, Rs. 5 per share paid up | 65,000 | Plant and Machinery | 3,25,000 |
| 20,000 Equity Shares of Rs. 10 each full paid up | 2,00,000 | Furniture | 15,000 |
| 12% Debenture of Rs. 100 each | 1,50,000 | Investments | 75,000 |
| 11% Debentures of Rs. 100 each. | 3,00,000 | Sundry Debtors | 3,15,000 |
| Interest due on debentures | 19,500 | Bills Receivable | 1,00,000 |
| Sundry Creditors | 4,50,000 | Bank | 20,000 |
| -- | -- | Profit and Loss A/c | 1,75,500 |
| -- | 13,34,500 | -- | 13,34,500 |
The following scheme of reconstruction was submitted and approved by the court:
1. 11.5% Preference Shares of Rs. 10 each fully paid were reduced to 14% Preference Shares of Rs. 10 each, Rs. 6 per share paid up.
2. 10% Preference Shares of Rs. 10 catch, Rs. 5 per share paid up, were reduced to 13% Preference Shares of Rs. 10 each, Rs. 3 per share paid up. 3. Equity Shares of Rs. 10 each fully paid were reduced to the denomination of Rs. 5 each fully paid.
4. 11% Debenture holders agreed to accept 50,000 equity shares of Rs. 5 each in full settlement of their claims. 5. Debenture holders agreed to forego the interest due on debentures. 6. Sundry Creditors agreed to forego 10% of their claims.
7. The Company recovered as damages a sum of Rs. 50,000 which was not recorded in the books. 8. Cost of Reconstruction was paid Rs. 2,250. 9. Assets are to be revalued as under:
-- | Rs. |
| Land and Buildings | 2,50,000 |
| Plant and Machinery | 2,75,000 |
| Furniture | 10,000 |
| Investments | 90,000 |
| Sundry Debtors | 3,00,000 |
All intangible assets and accumulated losses are to be written off.You are required to:
(i) Pass Journal Entries in the Books of Delta Ltd.
(ii)Prepare Capital Reduction A/c and Balance Sheet after reconstruction.
Q.4 Following is the Balance Sheet of Ajantha Ltd. as on 31st March, 2006 (16)
Liabilities | Rs. | Assets | Rs. |
| 8% Preference Shares of Rs. 10 each | 4,00,000 | Goodwill | 80,000 |
| Less :Calls in arrears (Rs. 2 each) 4,000 | 3,96,000 | Property | 4,80,000 |
| Equity Shares of Rs. 10 each | 8,00,000 | Plant | 4,40,000 |
| Less: Calls in arrears (Rs. 2 each) 20,000 | 7,80,000 | Equipments | 2,40,000 |
| General Reserve | 3,20,000 | Vehicles | 3,20,000 |
| Profit and Loss Account | 64,000 | Investments | 3,20,000 |
| Bank Loan | 2,40,000 | Stock | 2,20,000 |
| Sundry Creditors | 6,20,000 | Debtors | 3,60,000 |
| Bills Payable | 1,20,000 | Bank | 40,000 |
| -- | -- | Preliminary Expenses | 40,000 |
| -- | 25,40,000 | -- | 25,40,000 |
A Company decided to value its Equity Shares on the basis of its business assets and Liabilities. To enable the valuation of shares following information is furnished.
1. All, fixed assets (except goodwill) are worth 30% above book value.
2. Stock is overvalued by Rs. 20,000 on 31st March, 2006.
3. Rs. 4,000 due from customers are bad and are to be written off.
4. All investments earn income @ 10%, however only 10% of investment are trade investments.
5. On verification it was noticed that Rs. 40,000 paid on 1-4-2003 for purchasing a plant was debited to repairs as on that date. The depreciation @ 10% p.a. on cost is provided by the company.
6. Goodwill is to be valued at 2 years purchase of past four years average profit.
7. The Profit and Loss Account revealed the following profits before the above adjustments.
| Year | Profits (Rs.) |
| 2002-2003 | 3,20,000 |
| 2003-2004 | 3,60,000 |
| 2004-2005 | 4,20,000 |
| 2005-2006 | 4,00,000 |
As certain the value of fully paid partly paid equity shares.
Q.5 The Balance Sheet of Monica Ltd. as on 31st March,2006 was as follows: (16)
| Liabilities | Rs. | Assets | Rs. |
| 4,000 12% Redeemable Preference shares of | -- | Goodwill | 7,000 |
| Rs. 10 each fully paid up | 40,000 | Sundry Assets | 1,21,500 |
| 6,000 Equity Shares of Rs. 10 each fully paid up | 60,000 | Bank | 65,000 |
| Security Premium | 20,000 | Preliminary Expenses | 2,000 |
| Profit-and Loss Account | 23,400 | -- | -- |
| Sundry Creditors | 52,100 | -- | -- |
| -- | 1,95,500 | -- | 1,95,500 |
The Company decided to redeem the preference shares at a premium of 5% together with One month's dividend thereon.
Other information is as under:
1. The company issued for cash Rs. 12,000 14% Debentures at a discount of 2 1/2%.
2. Before redemption, the company decided to write off Goodwill from Profit and Loss Account and Preliminary Expenses and discount on issue of debentures out of security Premium Account.
3. The Company issued at par for cash a minimum number of new 15% Preference Shares of Rs. 10 each necessary to provide for redemption of 12% preference shares after utilising available divisible profits.
4. The Company made a bonus issue to equity shareholders of one fully paid share of Rs. 10 each of every five shares held.
Pass necessary journal entries and draft a Balance Sheet after redemption and bonus issue.
Q.6 Following is the Trail Balance of Premier Ltd. as on 31st March, 2006 (16)
| Debit Balances | Rs. | Credit Balances | Rs. | -- |
| Freehold Land | 2,50,000 | 6% Cummulative Preference | -- | -- |
| Building | 1,00,000 | Share Capital | -- | 80,000 |
| Furniture | 30,000 | Equity Share Capital | -- | 3,67,500 |
| Debtors | 50,000 | Security Premium | -- | 20,000 |
| Bills Receivables | 20,000 | Profit and Loss Account (1 -4-2005) | -- | 6,500 |
| Stock (31-3-2006) | 20,000 | Bank Overdraft | -- | 1,00,000 |
| Cash at Bank | 15,000 | (Against Mortgage of Land and Building) | -- | -- |
| Cash in hand | 1,000 | Suspense Account | -- | 2,500 |
| Cost of goods sold | 3,00,000 | Sales | -- | 4,00,000 |
| Salaries | 15,000 | Income from Investments | -- | 12,000 |
| Sundry Expenses | 8,000 | Reserve for Doubtful Debts (1 -4-2005) | -- | 2,000 |
| Investment in shares (Market Value Rs. 1, 85,000) | 2,00,000 | Creditors | -- | 20,000 |
| Interest | 3,000 | Bills Payable | -- | 10,000 |
| Bad Debts | 1,000 | Depreciation written off upto 31-3-2005: | -- | -- |
| Repairs and Maintenance | 1,500 | Building | 5,000 | -- |
| Advance Income Tax | 16,000 | Furniture | 5,000 | 10,000 |
| -- | 10,30,500 | -- | -- | 10,30,500 |
Additional Information:-
1. The land was revalued on 1st January, 2006 at Rs. 3,50,000 by an expert valuer, but no effect was given although the directors have decided to adjust the revalued amount.
2. Provision for bad debts is to be made at 5% on Debtors.
3. Equity share capital consists of 36,900 equity shares of Rs. 10 each, out of which 36,400 shares are fully paid up and 500 shares on which final call of Rs. 3 per share remains unpaid.
4. Suspense Account represents money received from new allottees for reissue of 500 shares forfeited during the year for non payment of final call but no entry thereof has been passed.
5. Provision for tax to be made at 33 1/3%.
6. The company is managed by directors who are entitled to remuneration calculated at 3% of annual profits before provision for doubtful debts.
7. Depreciation is to be charged on Building @ 2% and on furniture @ 10% under W.D.V. Method.
8. Dividend on cumulative preference shares was in arrears for 5 years unto 31st March, 2005. The directors recommended payment of preference dividend for 4 Years. Ignore dividend tax.
Prepare Profit and Loss Account for the year ended 31st March, 2006 and Balance Sheet as on that date in a vertical form. Ignore Previous Year's figures.
Q.7 Following is the-Balance Sheet of Suyog Ltd. as on 31st March 2006: (16)
| Liabilities | Rs. | Assets | Rs. |
| Share Capital: | -- | Fixed Assets: | -- |
| Authorised: | -- | Land and Building | 30,00,000 |
| 10,00,000 Equity shares of Rs. 10 each | 1,00,00,000 | Plant and Machinery | 30,00,000 |
| Issued: | -- | Furniture | 22,00,000 |
| 8,00,000 Equity shares of Rs. 10 each, | -- | Investment: | 15,00,000 |
| Rs 8 paid up | 64,00,000 | Current Assets | -- |
| Reserve: | -- | Debtors | 47,00,000 |
| General Reserve | 10,00,000 | Bills Receivables | 10,00,000 |
| Profit and Loss Account | 50,00,000 | Bank Balance | 40,00,000 |
| Securities Premium | 20,00,000 | Stock | 20,00,000 |
| Secured Loans: | -- | -- | -- |
| 11% Debentures | 20,00,000 | -- | -- |
| Unsecured Loans: | 20,00,000 | -- | -- |
| Current Liabilities: | -- | -- | -- |
| Creditors | 15,00,000 | -- | -- |
| Bills payable | 15,00,000 | -- | -- |
| -- | 2,14,00,000 | -- | 2,14,00,000 |
The company decides to buy back the maximum number of equity shares as may be permitted at a price of Rs. 20 per share. Find out maximum number of shares to be bought back and pass Journal Entries and Prepare Balance Sheet after buy back.
Q.8
Mr. Mandar holds as on 1st, April 2005 Rs. 75,000 (Cost price Rs. 78,000) 6% Government Securities as investment on which interest is payable half yearly on 30th June and 31st December every year. The following transactions took place during the accounting year ended 31st March, 2006 (16)
Purchases:
On 1-5-2005 Face Value Rs. 30,000 @ 98 Cum-Interest.
On 1-11-2005 Face Value Rs. 45,000 @ 101 Ex-Interest.
Sales:
On 1-8-2005 Face Value Rs. 36,000 @ 97 Cum-Interest.
On 1-2-2006 Face Value Rs. 24,000 @ 102 Ex-Interest.
Market price of investment at 1% discount on 31st March, 2006.
Write up Investment Account closing it on 31st March, 2006 in the books of Mr. Mandar Investments are to be valued at cost or at Market Value whichever is less. (Apply AS 13)
Q.9
a) A company had 12% Debentures of Rs. 100 each as on 1-1-2006. It purchased its own debentures as below: (4)
(i) On 1-2-2006, 1,000 debentures @ Rs. 97 Cum-Interest.
(ii) On 1-3-2006 1,500 debentures @ Rs. 96 Ex-Interest.
Interest was payable on 30th June and December every year.
Pass journal enteries for purchases of own debentures and immediate cancellation thereof.
b) Prepare a schedule of "Current Assets, Loans and Advances" giving all the details required under schedule VI to the Companies Act 1956.(4)
c) Swapnil Ltd dealer in cosmetics exports goods on 1st January, 2006 worth $ 50,000 to WK Ltd. in New York. The payment was received on 31st March, 2006. On the date of invoice the exchange rate was $ 1 = Rs. 47 and when the payment was received it was $ 1 = Rs. 48
Journalise the above transactions in the books of Swapnil Ltd.(2)
d) X Ltd. an Indian Company advanced $ 16,000 for import of goods from US Company of USA on 1st February, 2006. The goods were received alongwith purchase bill for $ 25,000 on 1st March, 2006. The balance amount was paid on 15th March, 2006.(6)
The rate of exchange on the various dates was as follows.
| 1-2-2006 | $ 1 = Rs. 47.50 |
| 1-3-2006 | $ 1 = Rs. 48.00 |
| 15-3-2006 | $ 1 = Rs. 49.00 |
Pass journal entries for the above transactions in the books of X Ltd.
March 2007
Financial Accounting
Time: 3 Hours Marks: 100
NB:
Question No.1 is compulsory.
Answer any other four questions from the rest.
Answer any other four questions from the rest.
Q.1 BK Ltd. is formed to takeover 'Bunty Ltd and Kuber Ltd'. Their Balance Sheets on the date
of amalgamation are as below: 16
| Liabilities | Bunty Ltd.Rs. | Kuber Ltd.Rs. | Assets | Bunty Ltd.Rs. | Kuber Ltd.Rs. |
| Share Capital of | -- | -- | Goodwill | -- | 25,000 |
| Rs.10 each | -- | -- | Buildings | 1,50,000 | 1,40,000 |
| Equity shares | 2,40,000 | 1,60,000 | Machinery | 80,000 | 60,000 |
| 11% Preference Shares | 1,50,000 | 1,00,000 | Furniture | 10,000 | 5,000 |
| General Reserve | 45,000 | 40,000 | Investments | 1,40,000 | 80,000 |
| Profit & loss A/C | 30,000 | 21,000 | Debtors | 1,65,000 | 60,000 |
| 9% Debentures | 1,00,000 | 1,00,000 | Stock | 75,000 | 90,000 |
| Sundry Creditors | 60,000 | 40,000 | Cash & Bank | 13,000 | 8,000 |
| Other Liabilities | 40,000 | 24,000 | Other Current Assets | 20,000 | 10,000 |
| -- | -- | -- | Preliminary Expenses | 12,000 | 7,000 |
| -- | 6,65,000 | 4,85,000 | -- | 6,65,000 | 4,85,000 |
BK Ltd. issued 10,000 equity shares of Rs.10 each to the public at a premium of 10%.
Bunty Ltd. and Kuber Ltd. were taken over by BK Ltd. on the following terms.
Re: Bunty Ltd.
1. Equity Shareholders are to be issued 7 Equity Shares of Rs. 10 at par in BK Ltd. and are to be paid Rs.5 in cash for surrender of each 6 Shares.
2. Preference shareholders are to be paid at 10% premium by 12.5% preference shares in BK Ltd. issued at par.
3. All Assets and liabilities are valued at book value except Machinery which is valued at 10% below book value and Debtors are Debtors are worth Rs. 1,60,000.
4. Liquidation expenses of Rs.12,500 are to be borne by BK Ltd.
5. Discharge the debentures of Bunty Ltd. at a discount of 10% by the issue of 13% Debentures of Rs.100 each in BK Ltd.
Re: Kuber Ltd.
1. Cash Rs.3,000 is to be retained for liquidation expenses.
2. Debtors and investments are valued at 90% of cost.
3. Machinery and stock are valued at 10% above cost and other assets and liabilities are valued at book value except Fictitious assets.
4. Prefrence shareholders are to be paid at 10% premium by 12.5% prefrence shares in BK Ltd. issued at par.
5. Balance of Purchase consideration is payable,in equity share at par.
6. Discharge the debentures of Kuber Ltd. at par by the issue of 13% Debentures of Rs.100 each in 'BK' Ltd.
7. The Face value of Equity shares and preference shares in BK Ltd. is of Rs.10 each.
Show the necessary Ledger Accounts in the books of 'Bunty Ltd' and Kuber Ltd'.also calculate purchase considerations.
Q.2 The following trial balance was extracted from the books of M/s. Jhakharia Pvt. Ltd.,which had taken over business of Mr. Vardhan on 1st April, 2005. The company wasincorporated on 1st July, 2005. However no effect of conversion was given in the books
which continued thereafter. 16
| Trial Balance as on 31st March, 2006 | ||
| Particular | Debit Rs. | Credit Rs. |
| Capital Account of Mr. Vardhan on 1/4/05 | ---- | 9,00,000 |
| Debtors | 80,000 | ---- |
| Creditors | ---- | 1,00,000 |
| Rent | 33,000 | ---- |
| Office Salary | 1,10,000 | ---- |
| Carriage outward | 54,000 | ---- |
| Directors Remuneration | 16,000 | ---- |
| Travelling Expenses | 28,500 | ---- |
| Preliminary Expenses | 15,000 | ---- |
| Administrative Expenses | 1,60,000 | ---- |
| Bills Receivable | 30,000 | ---- |
| Bills payable | ---- | 21,500 |
| Cash at Bank | 60,000 | ---- |
| Plant & Machinery | 2,00,000 | ---- |
| Land & Buildings | 5,00,000 | ---- |
| Furniture | 40,000 | ---- |
| Stock | 1,90,000 | ---- |
| Gross Profit | ---- | 4,95,000 |
| Total : | 15,16,500 | 15,16,50 |
Further Information:
1. Gross Profit percentage is fixed. Turnover is doubled in April, November and December as compared to other months.
2. 1/5 of preliminary expenses are to be written off.
3. Purchase consideration Rs. 10, 00,000 to be paid by the issue of 80,000 equity shares of Rs. 10/-each and 2,000 9% preference shares of Rs. 100/- each.
4. Travelling expenses are incurred by, salesmen only.
5. Audit Fee is Rs. 18,000/- for 1st April, 2005 to 31st March, 2006 and is outstanding.
6. Rent of office was paid @ Rs. 2,500/-, per month up to September, 2005 and thereafter, it was increased by Rs. 500/- per month.
7. Provide depreciation @ 10% p.a. on Plant & Machinery, Land & Building and on Furniture.
Prepare profit and loss account for the year ended 31st March, 2006 appropriating between the pre and post incorporation period and Balance Sheet as on 31st March, 2006.
Q.3 The following is the Balance-sheet of Sandeep Limited as on 31st March, 2006: 16
| Liabilities | Rs. | Assets | Rs. |
| Issued and Subscribed Capital | -- | Goodwill | 25,000 |
| 10% Preference Shares of | -- | Patents | 15,000 |
| Rs. 100/- each | 4,00,000 | Furniture | 35,000 |
| Equity Shares of Rs. 10/- each | 10,00,000 | Plant & Machinery | 6,00,000 |
| 12% Debentures | 7,50,000 | Land & Building | 6,50,000 |
| Bank Overdraft | 50,000 | Stock-In-Trade | 80,000 |
| Sundry Creditors | 1,40,000 | Sundry Debtors | 90,000 |
| Bills Payable | 35,000 | Bills Receivable | 15,000 |
| -- | -- | Profit and Loss A/c | 8,20,000 |
| -- | -- | Preliminary Expenses | 45,000 |
| -- | 23,75,000 | -- | 23,75,000 |
The preference dividend is in arrear for four years. The following scheme of capital reduction was sanctioned by the court and agreed by shareholders:
1. The preference shares are to be reduced to Rs. 50/- each and equity shares to Rs. 2/- each, both being fully paid.
2. Of the preference dividend in arrear three-fourth to be waived and remaining to be paid in cash.
3. The Debenture holders to take over plant and machinery at Rs. 6, 50,000/- in part satisfaction of their claim. The remaining claim should be converted into 14% debentures.
4. Creditors agreed to reduce their claim by Rs. 20,000/-. Bills payable to be paid immediately.
5. Goodwill, Patents, Profit and Loss A/c and Preliminary Expenses are to be written off entirely.
6. The following assets are to be revalued as under Furniture Rs. 25,000/-, Stock-In-Trade Rs. 68,000/- Land and Building Rs. 5, 80,000/- Sundry Debtors Rs. 80,000/-.
7. A Secured Loan of Rs. 1,50,000/- at 12% per annum is to be obtained by mortgaging Land and Building for repayment of bank overdraft, bills payable and reconstruction expenses Rs. 15,000/-.
Pass journal entries to record above scheme and draft the balance sheet of Sandeep Limited after reconstruction.
Q.4 'Piyusha' Limited furnishes the following information and requests you to find out the value of on the basis of capitalisation of Future Maintainable Profits method 16
(a) Balance Sheet as on 31st March, 2006:
| Liabilities | Rs. | Assets | Rs. |
| Share Capital | -- | Goodwill | 60,000 |
| 7,500 equity shares | -- | Land & Machinery | 7,00,000 |
| of Rs. 100/- each | 7,50,000 | Plant & Machinery | 2,50,000 |
| Reserves | -- | 10% Investments | 4,50,000 |
| Profit & Loss A/c | 3,50,000 | Debtors | 2,60,000 |
| Capital Reserve | 1,50,000 | Stock-In-Trade | 2,40,000 |
| Workmen Compensation Fund | 3,00,000 | Cash and Bank | 1,30,000 |
| 10% Debentures | 3,00,000 | Other Current Assets | 1,10,000 |
| Creditors | 2,30,000 | Preliminary Expenses | 20,000 |
| Other Current Liabilities | 1,40,000 | -- | -- |
| -- | 22,20,000 | -- | 22,20,000 |
(b) In similar business normal returns on capital employed is 15% (After Tax)
(c) All Investments are Non-Trade Investments.
(d) Profits for last four years before tax are follows.
Year ending 31st March, 2003 Rs. 4, 32,000
Year ending 31st March, 2004 Rs. 4, 46,000
Year ending 31st March, 2005 Rs. 4, 36,000
Year ending 31st March, 2006 Rs. 4, 53,000
(e) An average rate of 40% is payable as Income Tax.
(f) In the year 2003-04, there was a fire which resulted in a loss of Rs. 25,000/- and during theYear 2004-05 the company had sold its furniture resulting into a profit of Rs. 40,000/-
(g) The changes expected from ensuing year are:
Increase in Directors' fees @ Rs. 12,000/- per annum.
Reduction in Advertisement Expenses @ Rs. 42,000/- p.a.
Increase in Distribution Expenses @ Rs. 48,000/- p.a.
(h) All current Assets (excluding cash & Bank) are to be valued at 125% of book value for valuation of Goodwill).
(i) The market value of Land and Buildings is Rs. 9, 50,000/- and Plant and Machinery is Rs. 2, 00,000/
(j) Liability under workmen compensation fund is expected at Rs. 1, 50,000/-.
(k) Use Simple Average.
Q.5 Following is the Balance sheet of RT Ltd. as on 31st March, 2006: 16
| Liabilities | Rs. | Assets | Rs. |
| Share Capital | -- | Plant and Machinery | 4,00,000 |
| 10,000 equity shares | -- | Land and Buildings | 4,00,000 |
| of Rs. 10/- each | 1,00,000 | Investments | 2,00,000 |
| 5,000 9% preference | -- | Stock | 60,000 |
| Shares of Rs. 100/- each | -- | Debtors | 1,40,000 |
| fully paid 5,00,000 | -- | Bank | 1,90,000 |
| (-)call in Arrears 10,000 | 4,90,000 | -- | -- |
| General Reserve | 3,00,000 | -- | -- |
| Securities Premium | 20,000 | -- | -- |
| Profit & Loss A/c | 50,000 | -- | -- |
| 10% Debentures | 2,50,000 | -- | -- |
| Creditors | 1,40,000 | -- | -- |
| Bills Payable | 40,000 | -- | -- |
| -- | 13,90,000 | -- | 13,90,000 |
On the date of Balance Sheet preference shares are redeemable at premium of 10%.
The calls in arrears on preference shares are @ Rs. 20/- per share.
1. To enable redemption, company took the following measures:-
2. To send reminders for calls to all preference share holders. Holders of 400 preference shares paid of their dues and remaining shares are forfeited and cancelled3. Sold off investments @ 110% of cost.
4. 20,000 Equity shares, of Rs. 10/- each were issued for cash consideration at 20% premium. The issue was fully subscribed and paid for.
5.The company then issued bonus shares at par to the then shareholders after issue of new shares, at the rate of three shares for every four shares held.
Pass necessary journal entries in the books of RT Ltd. for the above transactions and also prepare the Balance Sheet of the company after redemption.
Q.6 Following is the Trial Balance from the books of Diksha Ltd. as c- 31st March, 2006 :- 16
| Debit | Rs. | Credit | Rs. |
| Land & Buildings (at cost) | 4,00,000 | Share Capital | -- |
| Plant & Machinery (at cost) | 5,20,000 | 50,000 Equity Shares of | -- |
| Motor Car (at cost) | 1,00,000 | Rs. 10 each | 5,00,000 |
| Goodwill (at cost) | 2,60,000 | 8% Debentures (01-04-2005) | 4,00,000 |
| Salaries and Wages | 72,000 | Provision for Tax | 70,000 |
| Rent and Taxes | 18,000 | (Accounting year 2004-05) | -- |
| Travelling Expenses | 16,000 | Sundry Creditors | 90,000 |
| Printing & Stationery | 17,000 | Bills Payable | 40,000 |
| Motor Car Expenses | 8,000 | General Reserve | 1,80,000 |
| Repairs (Machinery) | 16,500 | Securities Premium | 20,000 |
| Stock 9 | 4,000 | Capital Reserve 1 | 5,000 |
| Debtors | 1,45,000 | Profit & Loss A/c (on 01-04-2005) | 55,000 |
| Cash | 8,000 | Provision for Depreciation (on 01-04-2005) | -- |
| Bills Receivables | 30,000 | (i) Land & Buildings | 40,000 |
| 10% Investments | 1,50,000 | (ii) Plant & Machinery | 1,30,000 |
| Interest on Debentures 1 | 6,000 | (iii) Motor Car | 10,000 |
| Advance Tax | -- | Gross Profit | 4,10,000 |
| For-2004-05(F.Y) | 72,000 | Interest on Investments | 7,500 |
| For-2005-06(F.Y) | 60,000 | Sale of Motor Car | 35,000 |
| -- | 20,02,500 | -- | 20,02,500 |
Adjustments:-
1. Motor Car was sold on 1st April, 2005. The cost of sold Motor Car was Rs. 30,000/- and Accumulated depreciation on 1st April, 2005 was Rs. 6,000/- on the same.
2. Depreciation is to be provided on written down value at (i) Land and Building 21/2% p.a., (ii) Plant and Machinery 10% p.a. and (iii) Motor Car 20% p.a.
3. Debtors include debts due for more than 6 months Rs. 20,000/-.
4. Plant & Machinery includes machinery worth Rs. 20,000/- Purchased on 1st April, 2005.
5. Dividend is proposed for the year @ 10%, Ignore tax on proposed dividend.
6.Provision for Taxation is to be made @ 40% on the current year's profit
7.Debentures are secured by a charge on the Land and Buildings
8. The market value of Investments on 31-03-2006 was Rs. 1, 80,000/-.
9. Interest on Investment is due for 6 month but not received.
10. Interest on debentures for 6 months is Accrued & due.
11. Authorised share capital of the company is Rs. 10, 00,000/- divided into 1, 00,000/- Equity shares of Rs. 10 each.
You are required to prepare Profit & Loss Account for the year ended 31st March, 2006 and Balance Sheet as on that date in a vertical form as per provision of the schedule VI. Ignore previous year's figures.
Q.7 Following is the Trial Balance from the books of Diksha Ltd. as c- 31st March, 2006 :- 16
| Date | No. of Debentures | Terms |
| 01-04-2005 | 800 | Opening Balance at a cost of Rs. 76,000/- |
| 01-06-2005 | 300 | Sold at Rs. 105/- each cum-interest |
| 01-09-2005 | 700 | Purchased at Rs. 98/- each Ex-Interest |
| 01-12-2005 | 400 | Purchased at Rs. 108/- each Cum-Interest |
| 01-02-2006 | 900 | Sold at Rs. 97/- each Ex-Interest. |
Adjustments:-
Prepare Investment Account of 12% Debentures in the books off Bhagwati for the year ended 31st March,2006. The market value on 31st March, 2006 was Rs. 67,500 of the said Investment. Apply AS-13
Q.8 a) Pass journal entries for the following Foreign Exchange transactions the books 'Deepali Ltd. On 1st January, 2006 Deepali Ltd., an importer,purchased $ 42,500/- worth goods from Tom Trading Company of USA. The payment was made as under. 16
| On 15th January, 2006- | $ 8,000 |
| On 15th February, 2006- | $9,000 |
| On 15th March, 2006- | $14,500 |
| On 15th April, 2006- | $11,000 |
Deepali Ltd. closes its books on 31st March every year the exchange rate for $ 1 was as follows.
| 1st January, 2006 | Rs. 48.50 | 15th January, 2006 | Rs. 49.25 |
| 15th February, 2006 | Rs. 48.25 | 15th March, 2006 | Rs. 48.40 |
| 31 st March, 2006 | Rs. 48.75 | 15th April, 2006 | Rs. 48.60 |
(b)Pass journal entries for the following transactions in foreign currency in the books of 'Priyanka Ltd.
Priyanka Ltd. exported goods to 'Jerry Trading Company' Germany worth US $ 90,000/- on 10th January, 2006 on which date
exchange rate of US $ 1 was Rs. 49.50. The payment for the same was received as under :–
| Date of Payment | US $ Received | Exchange Rate for 1 US $ |
| 25th January, 2006 | 25,000/- | Rs. 49.75 |
| 23rd February, 2006 | 24,000/- | Rs. 48.90 |
| 24th March, 2006 | 24,000/- | Rs, 48.60 |
| 28th April, 2006 | 17,000/- | Rs. 48.90 |
'Priyanka Ltd' closes its books on 31st March every year. The exchange rate on 31 st March, 2006 was 1 US $ Rs. 48.75.
Q.9 Answer the following:- 16
Adjustments:-
1. 'S' Ltd is to be taken over by 'R' Ltd. 'S' Ltd. has 9% Debentures of Rs. 100/- each of the face value of Rs. 22,50,000/-. 9% debenture holders of 'S' Ltd. are dischanged by 'R' Ltd. issuing such number of its 15% Debentures of Rs. 100/- each so as to maintain the same amount of interest. Calculate the No. of debentures to be issued by 'R' Ltd. (4)
2. What amount should be set aside to get Rs. 15, 00,000 at the end of 10 years? The amount is expected to earn 4% interest. Sinking Fund Table shows that Re. 0.083290 @ 4% interest will accumulated Re. 1 at the end of 10th year. (2)
3. Prepare a -Schedule of Current Liabilities and provision" giving all the details required under Schedule VI to the Companies Act .(4)
4. 'P' Ltd. Purchased premises worth Rs. 22, 56,000. It issues its debentures at 4% discount in satisfaction of the purchase price. Calculate how many debentures will be issued in case debenture is of Rs. 100/- each. (2)
5. 'A' Ltd. buys its own 6% Debentures of nominal value Rs. 60,000/- at Rs. 97 cum-interest on 1st March, 2006. Company cancels these debentures on 31st March, 2006. Pass journal entries in the books of 'A' Ltd. It pays debentures interest half yearly on 30th June and 31st December. Face value of Debenture is Rs. 100/- each .(4)
October 2006
Financial Accounting
Time: 3 Hours Marks: 100
NB:
Question No. 1 is compulsory.
Attempt any five questions from question Nos. 2 to 9.
All working notes should form part of answer.
Figures to the right indicate full marks assigned to each question.
Specify assumptions, if any, while solving the questions.
Q.1 Shubha Ltd. absorbed Sushma Ltd. with
effect from 1st April, 2005 when their Balance sheets as on 20 31-03-2005 were as under: 20
| Liabilities | Shubha Ltd.Rs. | Sushma Ltd.Rs. | Assets | Shubha Ltd.Rs. | SushmaLtd.Rs. |
| Share Capital: | -- | Fixed Assets | -- | -- | -- |
| 10% Preference Share of | -- | -- | -- | -- | -- |
| Rs. 100 each | 2,00,000 | 2,00,000 | Land & Building | 2,20,000 | 1,40,000 |
| Equity Share of Rs. 100 each | 5,00,000 | 2,00,000 | Plant & Machinery | 4,20,000 | 2,60,000 |
| Reserves & Surplus: | -- | -- | -- | -- | -- |
| Revaluation Reserves | 20,000 | -- | Current Assets, Loans | -- | -- |
| Export Profit Reserves | 40,000 | 20,000 | & Advances | 2,90,000 | 1,60,000 |
| General Reserve | 2,00,000 | 60,000 | Stock | 1,20,000 | 1,40,000 |
| Secured Loans | -- | -- | Sundry Debtors | 1,30,000 | 90,000 |
| 10% Debentures of Rs. 100 | -- | 1,20,000 | Bills Receivable | 20,000 | 10,000 |
| 15% Debentures of Rs. 100 | 80,000 | -- | Bank | -- | -- |
| Current Liabilities & Provisions | -- | -- | -- | -- | -- |
| Sundry Creditors | 1,60,000 | 2,00,000 | -- | -- | -- |
| -- | 12,00,000 | 8,00,000 | -- | 12,00,000 | 8,00,000 |
Terms Of Amalgamation:
Shubha Ltd. will issue Eight equity shares for Five equity shares in Sushma Ltd.
11 % Preference shareholders of Sushma Ltd. will be
issued equal number of Equity shares inShubha Ltd. 10% Debentureholders of Sushma Ltd. aredischarged by Shubha Ltd
by issuing equal numberof its 15% Debentures of Rs. 100 each.
All the Assets and liabilities of Sushma Ltdare
taken over at book values except the following.
(i) Fixed Assets at 10% more than book values.
(ii) Stock
at Rs. 1,44,000
(iii) Debtors at Rs. 1,25,000
(iv) Bills Receivables at Rs. 81,000
You are
required to-
a. Compute Purchase consideration.
b. Prepare Ledger Accounts to close the books of Accounts
of Sushma Ltd.
c. Pass journal entries and prepare Balance-sheet after Amalgamation in the books of Shubha Ltd.
applying Purchase Method.
Q.2 Following is the Balance sheet of PARAMOUNT LTD. as on 31-03-2005 :16
| Liabilities | Rs. | Assets | Rs. |
| Share Capital | -- | Fixed Assets | -- |
| 6,000-8% Preference shares ofRs. 100 each | 6,00,000 | Goodwill | 60,000 |
| 50,000 Equity Shares of Rs, 10 each. | 5,00,000 | Building | 3,00,000 |
| Capital Reserves | 50,000 | Furniture | 1,00,000 |
| Secured Loans : | -- | Current Assets, Loans & Advances | -- |
| 5% Debentures of Rs. 100 each | 3,00,000 | Stock | 1,50,000 |
| Debenture Interest Due | 50,000 | Sundry Debtors | 75,000 |
| Current Liabilities | -- | Bank | 1,00,000 |
| & Provisions : | -- | Cash | 25,000 |
| Sundry Creditors | 1,80,000 | Miscellaneous Expenditure | -- |
| -- | -- | Discount on Debentures | 30,000 |
| -- | -- | Profit & Loss Account | 5,00,000 |
| -- | -- | Patents & Trade Marks | 40,000 |
| -- | 16,80,000 | -- | 16,80,000 |
Note: Preference dividend is in arrears for three years.
The following
scheme of reconstruction was prepared and duly approved by the court.
1. The Preference Shares shall be
converted into equal Number of 9% Preference Shares of Rs. 50 each.
2. The equity shares shall be reduced
to Rs. 3 each. However the face value will remain the same.
3. 5% Debentures shall be converted into equal
number of 6% Debenture, of Rs. 75 each. The debenture holders also agreed to waive 50% of the accrued interest.
4. Arrears of preference dividend are to be reduced to one year's dividend which is paid in cash.
5. The
Sundry creditors agreed to waive 30% of their claims and to accept Equity shares for Rs. 30.000 in part settlement
of their renewed claims.
6. The assets are to be revalued as under :
| Building | Rs. 3.50,000 |
| Plant & Machinery | Rs. 2, 50,000 |
| Furniture | Rs. 80,000 |
| Stock | Rs. 1, 00,000 |
| Sundry Debtors | Rs.70,000 |
7. Intangible assets and fictitious assets to be written off.
Pass journal entries, prepare Capital Reduction Account and Balance Sheets after reconstruction in the books for Paramount Ltd.
Q.3 Following Trial Balance is extracted from the books of Shrikrishna (Pvt.)
Ltd. as on 31-03-2005. The 16 company was Incorporated on 1-08-2004 to take over the business of a proprietary
concern from 1-4-2004. The authorised share capital was 50,000 Equity shares of Rs. 10 each. The Purchase
consideration was settled on 1-10-2004, being Rs. 1, 25,000. It was in the form of 10,000 shares of Rs. 10 each
and the balance in the form of debentures of Rs. 100 each :16
| Particular | Debit Rs. | Particular | Credit Rs. |
| Opening Stock | 23,600 | Sales | 2,14,000 |
| Purchases | 75,800 | Sundry Creditors | 40,200 |
| Carriage Inwards | 5,200 | Bills Payable | 29,000 |
| Salaries | 24,000 | Capital | 1,15,000 |
| Office Expenses | 8,100 | Interest on Investments | 1,800 |
| Postage & Telephones | 9,000 | -- | -- |
| Printing & Stationery | 9,900 | -- | -- |
| Office Rent | 36,600 | -- | -- |
| Carriage Outwards | 7,200 | -- | -- |
| Selling Expenses | 6,900 | -- | -- |
| Directors' Fees | 3,200 | -- | -- |
| Interest on Purchase consideration | 5,625 | -- | -- |
| Preliminary expenses | 7,500 | -- | -- |
| Sundry Debtors | 54,000 | -- | -- |
| Bills Receivable | 5,375 | -- | -- |
| Fixed Assets | 1,00,000 | -- | -- |
| Investments | 18,000 | -- | -- |
| -- | 4,00,000 | -- | 4,00,000 |
If is further informed that:
1. Closing stock is valued at Rs. 11,200.
2. Fixed Assets include furniture of Rs. 10,000 purchased on 01-10-2004;
Depreciation is to be charged on Fixed Assets @ 10% p.a.
3. Total sales for the post-incorporation period are three
times the total sales for the pre-incorporation period.
4. Rate of Interest on debentures is 10% p.a. while on
purchase consideration is 9% p.a.
5. Preliminary expenses should be written off.
6. Investments are purchased
by the proprietor during 2003-04.
Prepare Trading and Profit & Loss Account for the Year ending 31-03-2005 showing
the treatment of Pre-incorporation and post-incorporation profits separately. Prepare Balance Sheet as on the same date.
Q.4(a) Nandlal imported goods from US company worth US $ 5 lac on 10-08-2004 when exchange rate 16 was US $ 1 = R42.90. He agreed to pay 5 installments as below:
16
| Date | Installment (Us S) | Rate of Exchange (Rs.) |
| 10-10-2004 | 75,000 | 42.75 |
| 10-12-2004 | 1, 50,000 | 43.50 |
| 10-02-2005 | 60,000 | 44.80 |
| 10-04-2005 | 75,000 | 42.90 |
| 10-06-2005 | Balance | 43.00 |
The rate of exchange was Rs. 43.00 ason 31-03-2005. Pass journal entries [including those for cash] in the books of Nandlal in accordance with AS-11.
b) Madhav exported goods to US Company worth US $1 lac on 01-03-2004 when exchange rate was US $ 1 = Rs. 43.00. The payment was received as below:
| Date | Installment (Us S) | Rate of Exchange (Rs.) |
| 01-02-2004 | 20,000 (Advance) | 43.25 |
| 15-03-2004 | 25,000 | 43.50 |
| 01-05-2004 | Balance | 42.75 |
The rate of exchange was US $ 1 = Rs. 43.75 as on 31-03-2004.
Pass journal entries in the books of Mr. Madhav [including those for cash] in accordance with AS
Q.5 'Following is the Balance sheet of NINAD LTD. as on 31-03-2005:16
| Liabilities | Rs. | Assets | Rs. |
| Equity Shares of Rs. 10 each | 5, 00,000 | Fixed Assets | 7, 00,000 |
| 8% Preference Shares of Rs. 100 each | 1, 00,000 | Current Assets | 4, 80,000 |
| 7.5% Debentures of Rs. 100 each | 2, 00,000 | Preliminary Expenses | 20,000 |
| Unsecured Loans | 1, 00,000 | -- | -- |
| Reserve and Surplus | 2, 00,000 | -- | -- |
| Current Liabilities | 1, 00,000 | -- | -- |
| -- | 12, 00,000 | -- | 1,20,000 |
Additional Information
1. Details of Sales Expenses and Interests for the last Five years for the year ended are as under:
| Particulars | 31.03-2001 | 31.03-2002 | 31.03-2003 | 31-03-2004 | 31-03-2005 |
| -- | Rs. | Rs. | Rs. | Rs. | Rs. |
| Sales | 4,50,000 | 5,50,000 | 7,00,000 | 4,00,000 | 8,00,000 |
| Expenses | 1,75,000 | 2,90,000 | 3,00,000 | 1,55,000 | 4,00,000 |
| Interest on Loan | 10,000 | 20,000 | 25,000 | 30,000 | 10,000 |
| Interest on Debentures | 15,000 | 15,000 | 15,000 | 15,000 | 15,000 |
2. Rate of Income tax is 40%
3. Normal rate of return is 12.5%
4. Fixed assets are valued at Rs. 10, 00,000 and current assets are valued at Rs. 6,00,000.
Find cut value of Equity
share under:-
(i)Net Assets Method
(ii)Earning Capacity Method
(iii)Fair Value Method.
Q.6 Mr. Confused is the Accountant of M/s Ultimate Confusion Ltd. He presents to you the following Trial Balance
as on 31-03-2005. The cash in hand on 31-03-2005 is Rs. 750. 16
| Particular | Rs. | Particular | Rs. |
| Bank Balance | 72,900 | Subscribed capital | 4,00,000 |
| Calls in Arrears | 7,500 | 6% Debentures | 3,00,000 |
| Land & Building | 3,00,000 | Profit and Loss A/c [Cr.] | 13,625 |
| Machinery | 2,97,000 | Sundry Debtors | 87,000 |
| Interim Dividend Paid | 37,500 | Sales | 4,15,000 |
| Stock [ 1-4-2004] | 75,000 | Preliminary Expenses | 5,000 |
| Sundry Creditors | 40,000 | Sinking Fund | 75,000 |
| Bills Payable | 38,000 | -- | -- |
| Furniture | 7,200 | -- | -- |
| Purchases | 1,85,000 | -- | -- |
| Provision for Bad Debts | 4,375 | -- | -- |
| Investments | 75,000 | -- | -- |
| Salaries & Wages | 1,03,600 | -- | -- |
| Fuel | 13,200 | -- | -- |
| Rent, rates & Taxes | 3,800 | -- | -- |
| Discounts Allowed | 6,400 | -- | -- |
| Directors Fees | 5,700 | -- | -- |
| Bad Debts | 2,100 | -- | -- |
| Debenture Interest | 9,000 | -- | -- |
| Sundry Expenses | 2,350 | -- | -- |
| Deposits from Public | 10,000 | -- | -- |
| -- | 12,95,625 | -- | 12,95,625 |
After locating the mistakes and making the following adjustments, prepae Trading and Profit and Loss Account
for the year ended 31-03-2005 and Balance sheet as on that date in a vertical form. Ignore previous year's figures.
1.Authorised capital of the company is 60,000 Equity shares of Rs. 10 each. The calls in arrears are @ Rs. 5 per share.
2.Stock on 31-03-2005 was Rs. 1, 37,120.
3.Write off 1/5 th of the preliminary expenses.
4.The Details of fixed Assets are as under.
| Particular | Original Cost Rs. | Depreciation till 31-03-2004 Rs. | Rate of Depreciation | Land & Building | 3,50,000 | 50,000 | 5% | Machinery | 4,00,000 | 1,03,000 | 20% | Furniture | 10,000 | 2,800 | 10% |
The depreciation during the year is to be charged on W.D.V. as at the beginning of the year. Therewere no
additions or deductions during the year.
Note: Rectified Trial Balance is not required.
Q.7 Following is the Balance-sheet of INDICA LTD. as on 31-12-2004: 16
| Liabilities | Rs. | Assets | Rs. |
| Share Capital | -- | Fixed Assets | -- |
| Authorised: | -- | Land & Building | 40, 00,000 |
| 10, 00,000 Equity shares of Rs. 10 each | 1,00, 00,000 | Plant & Machinery | 22, 00,000 |
| Issued, Subscribed & Called Up | -- | Furniture | 20, 00,000 |
| 8, 00,000 Equity shares of | -- | Investments | 20, 00,000 |
| Rs. 10 each,Rs. 8 per share paid up | 64, 00,000 | Current Assets, Loans & Advances | -- |
| Reserves & Surplus: | -- | Debtors | 42, 00,000 |
| Profit & Loss Account | 50, 00,000 | Bills Receivables | 10, 00,000 |
| Security Premium Account, | 30, 00,000 | Bank Balance | 45,00,000 |
| Secured Loans: | -- | Stock | 20, 00,000 |
| 10% Debentures | 30, 00,000 | -- | -- |
| Unsecured Loans | 10, 00,000 | -- | -- |
| Current Liabilities & Provisions | -- | -- | -- |
| Sundry Creditors | 20, 00,000 | -- | -- |
| Bills payable | 10, 00,000 | -- | -- |
| Provision for Tax | 5, 00,000 | -- | -- |
| -- | 2, 19, 00,000 | -- | 2,19,00,000 |
Keeping in view the legal requirements ascertain the maximum number of Equity shares that Indica Ltd. Can buyback
@ Rs. 20 per share.
•Pass journal entries to record buyback and prepare a Balance-sheet thereafter.
Q.8 A company issued 10,000-8% Debentures of Rs. 100 each at par on 01-01-2001redeemable on 31-12-2004 at par.
The company decided to invest money outside business to provide funds for redeemption.
The outside investments were made @ 5% p.a. on the last day of each year.
On 31st December, 2004, the company sold all investments for Rs. 7, 25,000 and
redeemed the 8% Debentures. The Sinking Fund value of Re 1 @ 5% interest for
4 years is 0.23012. :16
•Prepare for all the four years:
1.8% Debentures Accounts
2.Sinking Fund Account
3.Sinking Fund Investment Account
•Note: Calculations to be rounded off to the nearest rupee.
Q 9. Answer the following:-
(a)
(i)List out the items under the head "Reserves & Surplus" of a company as per Schedule VI requirements.(4)
(ii)State the Steps to calculate value of Goodwill as per capitalization of future Maintainable Profits Method.(4)
(b)
1.A company has balance as under(2)
Security Premium Rs. 1, 00,000 General Reserves Rs. 1, 50,000 Redeemable Preference Share Capital Rs. 5, 00,000 . Preference shares are to be redeemed at a premium of 10%. Find out the amount of fresh issue of shares as per company law requirement.
2.A company earned a net profit of Rs. 45,000 after debiting all expenses of Rs. 75,000. The sales ratio of Pre-incorporation and Post-incorporation periods is 2: 3. Find out the allocation of Gross Profit amount in pre & post incorporation periods.(2)
3.The profits and the weightage assigned to the profits are as follows (2)
Year 2002 2003 2004
Profits (Rs.) 15,000 20,000 25,000
Weightage 1 2 3
Goodwill should be valued at 21/2, times of purchase of Weighted Average Profit. Find out amount of goodwill.
4.A company has Opening balance of Rs. 10, 00,000 in its Fixed Assets Account [W.D.V.]. Accumulated Depreciation was Rs. 6, 00,000. There was an addition of fixed Assets of Rs. 5, 00,000 at the beginning of the year while there was no sale of fixed asset.(2)
Prepare fixed Assets Schedule if the Depreciation is charged for the year @ 15% on original cost.
April 2006
April 2008
Time: 3Hours Marks: 100
NB:Question No. 1 is compulsory.
Attempt any five questions from Question Nos. 2 to 9.
All working notes should form part of answer.
Figures to the right indicate full marks assigned to each question.
Specify assumptions, if any, while solving the questions.
Q.1 Following are the Balance Sheets of ROHAN Ltd. and SOHAN Ltd. as on 31-3-2005. 20
| Liabilities | ROHAN Ltd.Rs. | SOHAN Ltd.Rs. | Assets | ROHAN Ltd.Rs. | SOHAN Ltd.Rs. |
| Share Capital | -- | -- | Fixed Assets: | -- | -- |
| 9% Preference Shares | -- | -- | Goodwill | 1, 50,000 | 1, 50,000 |
| Of Rs. 100 each | 6,00,000 | 9, 00,000 | Land & Building | 6, 00,000 | 7, 50,000 |
| Equity shares | -- | -- | Plant & Machinery | 4, 50,000 | 6, 00,000 |
| Of Rs. 100 each | 9,00,000 | 15, 00,000 | Computer | 3,00,000 | 4, 50,000 |
| Reserves & Surplus: | -- | -- | Investments: | 1, 50,000 | 1, 50,000 |
| General Reserves | 75,000 | 90,000 | Current Assets, | -- | -- |
| Revaluation Reserves | 45,000 | 60,000 | Loans & Advances | -- | -- |
| Export Profit Reserves | 30,000 | 45,000 | Stock | 3, 00,000 | 4, 50,000 |
| Profit & Loss Account | 15,000 | 30,000 | Sundry Debtors | 1,50,000 | 3,00,000 |
| Secured Loans: | -- | -- | Bills receivables | 75,000 | 1,50,000 |
| 12% Debentures | -- | -- | Bank | 1, 95,000 | 3,75,000 |
| Of Rs. 100 each | 3,00,000 | 4, 50,000 | -- | -- | -- |
| Unsecured Loans Current Liabilities &Provisions: | 1, 50,000 | 75,000 | -- | -- | -- |
| Sundry Creditors | 2, 25,000 | 1, 80,000 | -- | -- | -- |
| Bills payable | 30,000 | 45,000 | -- | -- | -- |
| -- | 23,70,000 | 33,75,000 | -- | 23,70,000 | 33,75,000 |
Mohan Ltd. was formed to take over the business of Rohan Ltd. and Sohan Ltd. with an authorized share capital of Rs. 30,00,000 consisting of 20,000 13% Preference Shares
of Rs. 100 each and 100,000 Equity Shares of Rs. 10 each.Terms of Amalgamation :-
9% Preference shareholders of both the companies are issued equal number of 13%
Preference shares of Mohan Ltd. at a price of 125 each.
Mohan Ltd. will issue four Equity shares for three Equity shares of Rohan Ltd. and four
Equity shares for five Equity shares of Sohan Ltd. The shares are to be issued at Rs. 35
each.
12% Debenture holders of both the companies are discharged by Mohan Ltd. by issuing such number of its 15% Debentures of Rs. 100 each so as to maintain the same amount of interest.
Mohan Ltd. agree to take over all assets and all liabilities at book values except the following
(i) Tangible fixed assets at 10% more than book-values
(ii) Investments and Sundry Debtors at 90% of their book values.
Export Profit Reserves are to be maintained for three more years.
You are required to -
(i) Compute purchase consideration of Rohan Ltd. and Sohan Ltd.
(ii)Pass Journal entries and Prepare Balance Sheet after amalgamation in the books of
Mohan Ltd. applying Purchase Method.
Q.2 M/s. NIMISH Pvt. Ltd. was incorporated on 1st August, 2004 to take over the business of Mr. Chinmay with effect from 1st April, 2004 16
The following profit and loss Account was prepared for the year ended 31st March 2005:-
| -- | Rs. | -- | -- Rs. |
| To Office Salaries | 24,000 | By Gross Profit | 1,00,000 |
| To Chinmay's Salary | 2,000 | Share transfer fees | 2,000 |
| To Advertisement | 18,000 | -- | -- |
| To Printing and Stationery | 1,500 | -- | -- |
| To Travelling Expenses | 4,000 | -- | -- |
| To Office Rent | 9,600 | -- | -- |
| To Electricity charges | 5,100 | -- | -- |
| To Director's fees | 1,200 | -- | -- |
| To Auditor's fees | 600 | -- | -- |
| To Bad debts | 1,200 | -- | -- |
| To Commission on sales | 7,000 | -- | -- |
| To Preliminary expenses | 2,000 | -- | -- |
| To Debenture interest | 2,300 | -- | -- |
| To Interest on capital | 800 | -- | -- |
| To Depreciation | 2,100 | -- | -- |
| To Net Profit | 20,600 | -- | -- |
| To Commission on sales | 1,02,000 | -- | 1, 02,000 |
Q.3 Following is the Balance Sheet of PARADISE Ltd. as on 31-3-2005:- 16
| Liabilities | Rs. | Assets | Rs. |
| Share Capital: | -- | Fixed Assets | -- |
| 10% Preference Shares | -- | Premises | 3,20,000 |
| of Rs. 10 each | 2,40,000 | Plant and Equipments | 5,20,000 |
| Equity Shares of Rs. 10 each | 4,00,000 | Investments | 1,20,000 |
| Secured Loans : | -- | Current Assets, Loans & Advances : | -- |
| 15% Debentures of Rs. 100 each | 4,80,000 | Stock | 1,44,000 |
| Current Liabilities & Provisions | -- | Debtors | 96,000 |
| Sundry Creditors | 2,00,000 | Deposits and Advances | 40,000 |
| Bank Overdrafts | 1,20,000 | Miscellaneous Exp : | -- |
| Other Liabilities | 1,60,000 | Publicity campaign exp. | 1,60,000 |
| -- | -- | Profit & Loss Account | 2,00,000 |
| -- | 16,00,000 | -- | 16,00,000 |
It is observed that the new product launched by the company has not succeeded even after three years of
marketing. The management is of the opinion that the assets and liabilities are not valued correctly and
also finds it difficult to raise finance.
To overcome the situation a scheme of reconstruction is prepared by the Directors and approved by all authorities :
The salient features of the scheme are:
1. Plant and Equipments having book value of Rs. 80,000 is obsolete. This is sold as scrap for Rs. 16,000.
2. The auditors have pointed out that depreciation on plant is not provided to the extent of Rs. 40,000.
3. Stock includes items valued at Rs. 48,000 which is sold at a loss of 50%.
4. The present relisable value of investments is Rs. 56,000.
5. Dividend on Preference shares is in arrears for three years. This amount is not payable.
6. All losses and fictitious assets are to be written off.
7. The expense paid for forming and implementing scheme is Rs. 8,000.
8. The paid up value of Equity share is to be reduced to Rs. 2 per share and Preference shares to Rs. 5 per share. However, the face value remains unchanged.
The creditors due are settled as
(i) 20% immediate payment in cash.
(ii) 40% amount is cancelled.
(iii)40% paid by issue of 16% Debentures.
(10)Other current liabilities include Rs. 40,000 payable to Directors towards remuneration. This liability is to be cancelled.
(11)A call of Rs. 3 per share on Equity Share is made and received.
(12)Bank overdraft is paid off to the extent possible.
You are required to show :
(i) Journal Entries for above scheme of reconstruction and
(ii)Balance Sheet after reconstruction.
Q.4 The Summarized Balance Sheet of COMFORTABLE Ltd. as on 31-3-2005 was as under:- 16
| Liabilities | Rs. | Assets | Rs. |
| Share Capital: | -- | Fixed Assets | -- |
| 7% Redeemable Preference | -- | Goodwill | 2, 00,000 |
| Shares of Rs. 10 each | 3, 00,000 | other fixed assets | 8, 00,000 |
| Equity shares of Rs. 10 each | 5, 00,000 | Current Assets. Loans & Advances: | -- |
| Reserves & Surplus: | -- | Stock | 4, 50,000 |
| Security Premium | 50,000 | Sundry Debtors | 1, 00,000 |
| General Reserves | 1, 00,000 | Bank | 88,000 |
| Profit &Loss Account | 1, 50,000 | Miscellaneous Expenditure | -- |
| Secured Loan: | -- | Discount on IssueofDebentures | 12,000 |
| 8% Debentures of Rs. 100 each | 4, 00,000 | -- | -- |
| Unsecured Loan | 50,000 | -- | -- |
| Current Liabilities & Provisions: | -- | -- | -- |
| Sundry Creditors | 1, 00,000 | -- | -- |
| -- | 16, 50,000 | -- | 16, 50,000 |
The company decided to redeem both the Preference shares and Debentures at a
premium of 10%. For the purpose of redemption, company offered to the Preference
Shareholders and the Debenture holders the option to convert their holdings into
Equity shares which are to be treated as worth Rs. 11 each. Holders of 1/3rd Preference
shares and holders of 50% of Debentures, agreed to this proposal.
The company issued 50,000 Equity shares at Rs. 11 each to the public for cash
and with the funds available paid off the unsecured loan and redeemed the remaining
Preference shares and Debentures. It was also decided to write off Discount on issueof Debentures against Security Premium Account. Pass journal entries and recast
the Balance Sheet after redemption.
Q.5 Pass Journal entries for the following transactions in foreign currency and also
prepare Foreign Exchange 16 Fluctuation Account in the books of NSD Ltd. and DBK Industries Ltd. 16
(a) NSD Ltd. imported raw materials worth US $ 40,000 on 12th December, 2004. The exchange rate for US $ 1 as on 12-12-2004 was Rs. 46.50.
The payment for the above transaction was made as under :
| Date of Payment | Payment made | Exchange rate for US $ 1 |
| 23-02-2005 | US $ 18,000 | Rs. 47.75 |
| 21-03-2005 | US $ 12,000 | Rs. 48.25 |
| 10-04-2005 | US $ 10,000 | Rs. 48.50 |
The accounting year of the company ends on 31st March. The exchange rate as on 31st March, 2005 for US $ 1 was Rs. 45.00.
(b) DBK Industries Ltd. invoiced goods to West Germany worth US $ 100,000 on 10th March, 2005 on which date exchange rate for US $ 1 was Rs. 41.00.
The payment for the same was received as under:
| Date of Receipt | Received | Exchange rate for 1 US $ |
| 20-03-2005 | US $ 40,00 | Rs.42.00 |
| 29-03-2005 | US $ 35,000 | Rs. 41.00 |
| 15-04-2005 | US $ 25,000 | Rs. 44.00 |
The company closes its accounting year on 31st March. The exchange rate as on 31-03-2005 was 1 US $ Rs. 45.00.
Q.6 M/s. SANJAY Co. Ltd. is a registered company with an authorized share capital Rs. 70,000 divided Into 7,000 equity shares of Rs.10 each. Companies trial balance as on 31-03-2005 was as under:16
| Debit Balance. | Rs. | Credit Balance. | Rs. |
| Building (Cost Rs. 50,000) | 40,000 | Share Capitals: | -- |
| Furniture (Cost Rs. 5,000) | 4,000 | 5,000 Equity Shares of Rs. 10 each | 50,000 |
| Vehicles (Cost Rs. 10,000) | 6,500 | 6% Debentures of Rs. 100 each | 10,000 |
| Equity shares of companies | -- | Provision for tax | -- |
| (Market Value Rs. 22,000) | 20,000 | (Accounting Year 2003-04) | 10,000 |
| 500 8% Preference shares of | -- | Sundry Creditors | 7,500 |
| paid up | 3,000 | General Reserves | 10,000 |
| Stock in trade at cost | 20,000 | Profit and Loss Account (1-4-2004) | 2,000 |
| Sundry Debtors | 14,000 | Gross Profit | 55, 000 |
| Cash at Bank | 8,750 | Dividend on Shares (Gross Rs. 1,000) | 700 |
| Discount on Debenture | 400 | Bills Payable | 4,000 |
| Salaries | 10,000 | -- | -- |
| Directors fees | 400 | -- | -- |
| Audit fees | 650 | -- | -- |
| Debentures interesAdvance payment of Income tax: | 500 | -- | -- |
| Accounting Year 2003-04 | 9,000 | -- | -- |
| Accounting Year 2004-05 | 9,000 | -- | -- |
| Advance against construction of building | 3,000 | -- | -- |
| -- | 1, 49,200 | -- | 1, 49,200 |
Adjustments :
1. Provide 10% Depreciation p.a. on cost of fixed assets.
2. The company had given a contract for the construction of a building at Rs. 1,00,000 which is still incomplete.
3. Provide Rs. 10,000 in respect of taxation liability for the year 2004-05.
4. Write back Rs. 200 liability included in Sundry creditors.
5. Due to change in the basis of valuation of stock, its value has come down to Rs. 18,000. This has not been considered as yet.
6. Dividend is proposed for the year @ 10%.
7. Sundry Debtors include Debts due for more than 6 months Rs. 4,000.
8. Income tax assessment for the accounting year 2003-04 has been completed with a gross demand of Rs. 11,000.
9. Ignore previous year's figures and tax on proposed dividend.
Prepare Profit and Loss Account for the year ended 31-03-2005 and Balance Sheet as on that date in a vertical form as per the provisions of the Schedule VI of the Companies Act, 1956 taking into consideration the above mentioned adjustments.
Q.7 The Balance Sheet of MANISH Ltd. as on 31-03-2005 is as follows: 16
| Liabilities | Rs. | Assets | Rs. |
| Share Capital : | -- | Fixed Assets | -- |
| Authorised, Issued, Subscribed | -- | Net Block | 40,00,000 |
| and called-up : | -- | Investments | 15,00,000 |
| Equity shares of Rs. 10 each | 25,00,000 | Current Assets. Loans & Advances | -- |
| Reserves & Surplus | -- | Current Assets (including Bank) | -- |
| Security Premium | 5,00,000 | Balance of Rs. 15,00,000) | 35,00,000 |
| General Reserves | 10,00,000 | Loans andAdvances | 5,00,000 |
| Profit and Loss Account | 10,00,000 | -- | -- |
| Secured Loans : | -- | - | -- |
| 10% Debentures | 25,00,000 | -- | -- |
| Current Liabilities & Provisions | -- | -- | -- |
| Sundry Creditors | 15,00,000 | -- | -- |
| Bills Payable | 5,00,000 | -- | -- |
| -- | 95,00,000 | -- | 95,00,000 |
Keeping in view all the legal requirements ascertain:
(i) Maximum number of Equity shares that Manish Ltd. can buy-back.
(ii) The maximum price it can offer.
Assume that the buy-back is carried out actually at the legally permissible terms, record the entries in the journal of Manish Ltd. and prepare its Balance Sheet thereafter.
Q.8 Banglore Investments hold 1200-6% Debentures of Rs. 100 each in MINERVA Ltd. as on 1st April 2004 16 at a cost of Rs. 140,000. Interest is payable on 30th June and 31st December each year. Other details are as under : 16
| Date | Details | RS. |
| 1-6-2004 | 400 Debentures are purchased cum interest at | Rs. 40,800 |
| 1-11-2004 | 400Debentures are purchased ex-interest at | Rs. 38,400 |
| 30-11-2004 | 600 Debentures are sold cum-interest for | Rs. 64,500 |
| 31-12-2004 | 800 Debentures are sold ex-interest for | Rs. 77,300. |
Prepare Investment Account valuing closing balance on 31-3-2005 at cost or market price whichever is lower. The debentures are quoted at par on 31-3-2005.
Q.9 Answer the following :- 16
(a)(i) A company was incorporated on 1-4-2004 to take over a business from 1-1-2004. Rent was paid @ Rs. 9,000 p.a. till 30-6-2004 and at the rate of Rs. 12,000 p.a. till 31-12-2004. Books of accounts are closed on 31-12-2004. Find out amount of Rent and its allocation between Pre and Post incorporation periods. (2)
(ii)List of out the items under the head 'Investments' of a company as per Schedule VI requirement.(2)
(iii)List out the types of Amalgamation and methods of preparation of purchase consideration. (2)
(iv)Give any two items each of 'Divisible Profits' and 'Non-divisible Profits' for the purpose of redemption of preference share.(2)
(b)(i)A company has following position for the year ended 31-03-2005 (4)
Provision for tax (Cr.) Rs. 5, 00,000 Advance payment of tax (Dr.) Rs. 4,75,000 Tax deducted at source (Dr.) Rs. 20,000. The assessment of a company is completed and tax liability is settled at Rs. 510,000.
Pass journal entries.
(ii)A company forfeits 1000 Equity Shares of Rs. 10 each, Rs. 6 per share paid up. It reissues 4 all these shares at Rs. 8 per share fully paid up. Pass journal entries for forfeiture and reissue and determine Capital Reserve which can be utilised for any purpose at the time of redemption of preference shares. (4)
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