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.
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