Time: 3Hours Marks: 100
N.B.:
(1) Question No. one is compulsory.
(2) Solve any five questions out of Q. Nos. 2 to 9.
(3) All working Notes should from part of answer.
(4) Figures to the right indicate full marks assigned to question.
(5) Specify assumptions, if any, while solving the question.
(6) This paper contains NINE questions.
Q.1.
The following balances have been extracted from the books of Sehwag Ltd. as on 31st March 2003.
| Debit Rs. | Credit Rs. | |
| Administration Expenses | 2,08,000 | - |
| Cash on Hand, Cash at Bank | 1,14,000 | - |
| Sale of Furniture | - | 5,000 |
| Long Term Loan | - | 35,000 |
| Interest on Long Term Loan | 7,000 | |
| Investments | 1,00,000 | - |
| Income on Investments | - | 15,000 |
| Depreciation on Furniture & Equipments as on 1-4-2002 | - | 1,30,000 |
| Distribution Costs | 1,21,000 | - |
| Furniture and Equipments at Cost | 3,40,000 | - |
| Profit & Loss A/c as on 1st April 2002 | - | 40,000 |
| Purchase of Equipments during the year | 60,000 | - |
| Purchases | 8,55,000 | - |
| Sale | - | 15,00,000 |
| Equity Share Capital | - | 5,00,000 |
| Stock on 1st April 2002 | 70,000 | - |
| Sundry Creditors | - | 40,000 |
| Sundry Debtors | 3,90,000 | - |
| Advance Income Tax paid (for 2001-2002) | 35,000 | - |
| TDS Payable (2002-2003) | - | 5,000 |
| Provision for Tax (for 2001-2002) | - | 30,000 |
| 23,00,000 | 23,00,000 |
The following additional information is provided to you:
(1) The stock on 31st March 2003, was valued at Rs. 1,00,000.
(2) Provide Depreciation at 20% p.a. on cost on Furniture & Equipments A full year's depreciation is charged in the year of acquisition, but no depreciation is charged in the year of disposal.
(3) The company has sold some Furniture (which had original cost of Rs. 30,000)for Rs. 5,000 and for which depreciation of Rs. 15,000 had been set aside.
(4) Market value of lnvestments is Rs. 1,30,000.
(5) Long term loan is secured against hypothecation of Furniture & Equipments.
(6) Make a provision for Income tax @ 40%.
(7) The company transfers Rs. 25,000 to general reserve including statutory transfers and proposes to pay a dividend @ 20%.
(8) The Income Tax Assessment for the Year 2001-2002 has been completed during the year,determining the tax payable at Rs. 37,000.
(9) Ignore Corporate Dividend Tax and previous year's figures.
(10) The Authorised Capital of the company is Rs. 10,00,000 divided into Equity Shares of Rs. 10 each. All the shares are issued on which Rs. 5 per share is called up.
Prepare Profit & Loss A/c of Sehwag Ltd. for the year ended 31st March 2003 and Balance Sheet as at that date in accordance with the Companies Act 1956, giving effect to the above mentioned adjustments. (20)
Q.2.
Manasi Ltd. was incorporated on 1-7-2002 to take over the business of Maithili w.e.f. 1-4-2002. The following information was made available for the year ended 31-3-2003.
Gross Profit Rs. 98,000; Commission paid Rs. 2,625; Advertisement Rs. 5,250; Discount Allowed Rs. 350; Directors Fees Rs. 9,000; Salaries Rs. 18,000; Depreciation Rs. 2,800; Insurance Rs. 600; Preliminary Expenses Rs. 700; Rent & Taxes Rs. 3,000; Bad Debts Rs. 1,250; Interest to Maithili (upto 1-10-2002) Rs. 2,000; Audit Fees Rs. 2,000; Bad Debts Recovered (on 1-5-2002) Rs. 500.The following additional information is also available:
(1) Average monthly turnover from September onwards was double than that of average monthly turnover of the first four months. However in August 2002, the turnover was 150% of the turnover in the following month i.e. September 2002.
(2)Rent for the first three months was Rs. 20 per month and thereafter it was increased by Rs. 50 per month.
(3)Bad debts for the period from 1-9-02 to 31-3-03 amounted to Rs. 550 only.
(4) Audit Fees was allocated on time basis.
You are required to prepare the Profit & Loss Account for the pre and post incorporation period clearly showing the basis of allocation. (16)
Q.3.
The Directors of Hopeful Ltd. decided to recommend to the shareholders certain steps to put the affairs of the company back on the rails. On 30th June 2003, the Balance Sheet of the company was as under:
| Liabilities | Rs. | Assets | Rs. | |
| Share Capital- | Fixed Assets- | |||
| Authorised-1 ,00,000 Equity | Goodwill at cost | 22,600 | ||
| Shares of Re. 1 each | 1,00,000 | Building at cost | 50,000 | |
| Issued and Paid up - | Less: Depreciation | 8,500 | 41,500 | |
| 85,000 Equity Shares of | Computer at cost | 1,19,000 | ||
| Re. 1 each fully paid up | 85,000 | Less: Depreciation | 59,000 | 60,000 |
| Reserves & Surplus - | Investments in Shares | 46,000 | ||
| Securities Premium | 15,000 | Current Assets - | ||
| Loan from Bank | 6 ,000 | Stock | 23,000 | |
| Current liabilities - | Debtors | 19,600 | ||
| Creditors | 64,000 | Profit & Loss Account | 68,300 | |
| Bank Overdraft (including interest) | 57,000 | |||
| 2.81,000 | 2,81,000 |
(1) The issued equity shares were reduced to 5 paise each paid up; the unpaid value of the share was subsequently called up by the company and paid by all the shareholders.
(2) The balance of unissued capital was allotted to the bank in part discharge of the loan; the balance due was paid in cash.
(3) The Authorised Capital of the company is to be increased by another 50,000 shares and these are to be issued to the existing shareholders as rights issue at Re. 1 each. The amount due from the shareholders was realised.
(4) Creditors are to give up 25% of their claims and the balance due to them to be converted into 12% secured Debentures of Rs.. 100 each.
(5) Interest of Rs. 7,000 on Bank Overdraft to be waived by the Bank and the balance Overdraft to be paid off.
(6) All amounts available including the securities premium to be utilised to write off losses and goodwill fully and the investment in shares to the maximum possible extent.
Show the Journal entries to record the above, and also draw the Balance Sheet of the company after the scheme is fully implemented. All workings should form part of your answer. (16)
Q.4.
Balance Sheet of Gladrag Ltd. as at 31st March 2004.
| Liabilities | Rs. | Assets | Rs. | ||
| 8 % Redeemable Preference Shares | Fixed Assets (WDV) | 50,00,000 | |||
| of Rs. 10 each fully paid up | 27,00,000 | Investments | 8,10,000 | ||
| Equity Shares of Rs. 10 each fully paid up | 27,00,000 | Current Assets | 21,40,000 | ||
| Securities Premium | 81,000 | Bank Balance | 6,00,000 | ||
| General Reserve | 12,80,000 | Profit & Loss Account | 14,20,000 | ||
| Creditors | 3,69,000 | ||||
| 85,50,000 | 85,50,000 |
Q.5.
The following is the summarised Balance Sheet of Virendra Ltd. as on 31st March 2004:
| Liabilities | Rs. | Assets | Rs. |
| 50,000 Equity Shares of | Machinery | 4,80,000 | |
| Rs. 20each fully paid up | 10,00,000 | Furniture | 2,00,000 |
| Securities Premium A/c | 2,00,000 | Stock | 12,40,000 |
| General Reserve | 4,78,800 | Debtors | 4,12,000 |
| Profit and Loss A/c | 3,14,000 | Cash in hand | 6,800 |
| Sundry Creditors | 8,18,000 | Cash at bank | 8,68,000 |
| Provision for taxation | 3,96,000 | ||
| 32,06,800 | 32,06,800 |
The company transfers 20% of its profits (after tax) to General Reserve. Net profits before taxation for the last three years have been as follows:
For the year ended 31st March 2002 Rs. 5,44,000
For the year ended 31st March 2003 Rs.7,32,000
For the year ended 31st March 2004 Rs. 7,88,000
Machinery is valued at Rs. 6,37,200.Average yield in this type of business is 20%. The rate of tax is 50%. Use simple average. Calculate the value of one Equity Share on the basis ofa) Intrinsic worth b) Yield basis. (16)
Q.6.
Following are the Balance Sheets of Galaxy Ltd. And Gemini Ltd. as on 31st March 2003.
| Liabilities | Galaxy Ltd. Rs. | Gemini Ltd. Rs. | Assets | Galaxy Ltd. Rs. | Gemini Ltd. Rs. |
| Share Fund | 50,000 | 1,00,000 | Fixed Assets | 60,000 | 1,25,000 |
| (Rs. 10 each) | Loan toGemini Ltd. | 5,000 | - | ||
| Capital Reserve | 20,000 | 30,000 | Debtors | 15,000 | 10,000 |
| Foreign Projects Reserve | 5,000 | - | Stock | 10,000 | 15,000 |
| Creditors | 15,000 | 20,000 | Cash at Bank | - | 5,000 |
| Loan from Galaxy Ltd. | - | 5,000 | |||
| 90,000 | 1,55,000 | 90,000 | 1,55,000 |
Gemini Ltd. agreed to absorb Galaxy Ltd. On the following terms:Gemini Ltd. shall give one share of Rs. 10 each at Rs. 35
per share for every 3 shares held in Galaxy Ltd., the amount for the fraction of shares shall be paid in cash calculated as per the market price of the share of Gemini Ltd.Stock of Galaxy Ltd. includes goods worth Rs. 7,500 purchased from Gemini Ltd. which has a profit margin of 20% on cost.Debtors of Gemini Ltd. includes Rs. 2,500 being amount due from Galaxy Ltd. but the Creditors of Galaxy Ltd. include Rs. 2,000 only being the amount due to Gemini Ltd. The differencebetween the Debtors and Creditors is due to cash in transit.The shares of Gemini Ltd. are quoted in the market at Rs.45 per share.You are requested to pass the journal entries in the books of Gemini Ltd. and the Balance Sheet after the absorption, assuming that the Foreign Projects Reserve is still to be maintained for 3 years.Assume that the amalgamation is in the nature of Purchase. (16)
Q.7.
On 1-1-2001 Irfan Ltd. issued 20,000 12% Debentures of Rs. 100 each at par. According to the terms of the issue, the Debenture-holders had the option of getting the debentures converted into Equity Shares of Rs. 100 each at a premium of Rs. 50 each after 1-1-2003. The company had the right to buy at anytime its debentures in the open market for cancellation.On 1-3-2002, the company purchased 2,000 Debentures at Rs. 99 cum interest and on 1st September 2003, it purchased 3,000 Debentures at Rs. 95 ex interest, the Debentures being cancelled in both cases immediately. On 31-12-2003, holders of 12,000 Debentures exercised the option of getting the debentures converted into Equity Shares.Date of payment of interest is 30th June and 31st December. You are required to prepare: 1) 12% Debentures A/c
2) Debenture Interest A/c for the years 2001, 2002 and 2003.
Calendar year is the Accounting year. (16)
Q.8.
From the following details of foreign currency transactions of M/s Fema Ltd. for the year ended 31st March 2003, prepare the Foreign Exchange Fluctuation A/c for the year 1st April 2002 to 31st March 2003.Import Particulars – (a) On 15-4-2002, goods worth $ 5,000 purchased from C of China. The rate of exchange is $ 1 = Rs. 48.60. Payment is made on 30-5-2002 when the rate of exchange is $ 1 = Rs. 48.90.
(b) On 12-6-2002, advance amount $ 1,000 paid to F of France. The rate of exchange is $ 1 = Rs. 48.50. On 20-6-2002, goods imported worth $ 10,000 from F of France. The rate of exchange is1 $ = Rs. 48.00. On 30-6-2002, payment made to F of France $ 9,000. The rate of exchange is $ 1 = Rs. 47.90.
(c) On 10-7-2002, Machinery purchased from G of Germany for $ 50,000. The rate of exchange is $ 1 = Rs. 46.80. On 28-7-2002, payment made to G of Germany $ 50,000. The rate of exchange is $ 1 = Rs. 47.20.
(d) On 28-1-2003, goods purchased from K of Korea $ 15,000. Rate of exchange is $ 1 = Rs. 47.30. On 20-4-2003, payment made to K of Korea $ 15,000. The rate is $ 1 = Rs. 47.80.
Export particulars
(e) On 28-5-02, exported goods to C of Canada worth $1,20,000. Rate of exchange is $1 = Rs. 47.35On 28-6-2002, payment received from C of Canada, $40,000 at exchange rate of $1 = Rs. 7.60.On 28-8-2002, payment received from C of Canada, $80,000 at exchange rate of $1 = Rs. 47.00.
(f) On 1-10-2002, advance received from J of Japan $ 10,000. Exchange rate being $ 1 = Rs. 46.00. On 15-10-2002, exported goods worth $ 30,000 to J of Japan at exchange rate of $ 1 = Rs. 6.25. On 28-12-2002, payment received from J of Japan, $ 20,000 at exchange rate of $ 1 = Rs. 6.25.
(g) On 2-1-2003, exported goods to S of Sri Lanka $ 40,000. Exchange rate is $ 1 = Rs. 45.40.On 20-3-2003, $ 20,000 received from S of Sri Lanka, exchange rate being $ 1 = Rs. 46.30.On 20-5-2003, $ 20,000 received from S of Sri Lanka, exchange rate being $ 1 = Rs. 48.80.
The rate of exchange on 31st March 2003 was $ 1 = Rs. 45.60. Show proper workings. (16)
Q.9.
Write Short notes on any four:-
1) Amalgamation Adjustment Account
2) Fair Value of Shares
3) Different basis of allocation of expenses
4) Foreign exchange fluctuations
5) Own Debentures - Purchase and cancellation
6) Accounting Standard – 1 (16)
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