- JOSEPHS COLLEGE OF COMMERCE (AUTONOMOUS)
END SEMESTER EXAMINATION – SEPT /OCT 2014
B.B.M. – III SEMESTER
CORPORATE ACCOUNTING
Duration: 3 Hours Max. Marks: 100
SECTION – A
- Answer ALL the questions. Each carries 2 marks. (10 x2 =20)
- Give the treatment of following as per the Revised Schedule 6.
- Provision for taxation
- Journalise the following transaction. Creditors have decided to forego 60% of their claim amounting to Rs 1, 00,000.
- Write the journal entry for closing the assets taken over by the purchasing company.
- What are accounting standards?
- Define Purchase Consideration. Which are the methods for calculating Purchase consideration? Show the journal entry for the same with some imaginary figures.
- What is Liquidators Final Statement of Accounts?
- Write a note on Valuation of inventories as per “AS 2”.
- Explain briefly when does goodwill arise in the books of purchasing company?
- What is liquidation? Mention the types of liquidation
- What is Internal Reconstruction?
SECTION – B
- Answer any FOUR Each carries 5 marks. (4×5=20)
- As per AS 14 state the conditions of Amalgamation in the nature of a merger.
- Calculate the purchase consideration from the following
- Agreed value of assets taken over Rs 18, 21,570
- Liabilities as per Balance sheet Rs 3, 21,570
- Liabilities not taken over Rs 21,570
- Payment to Debenture holders of selling Company Rs 1, 50,000
- Show the shareholders fund as per Revised Schedule 6 from the following data
Authorised Capital 2, 00,000 shares of Rs 10 each.
Issued Capital 1, 00,000 shares of Rs 10 each.
Subscribed Capital 90,000 shares of Rs 10 each.
Called up Capital 90,000 shares of Rs 8 each.
Calls in arrears 60,000 shares of Re 1 each.
Opening balance of Profit and Loss Account: Rs 1, 00,000
Profit after tax for the year: Rs 2, 00,000
Equity dividend @ 10 %.
- Prepare Liquidators Final Account from the following data
The following particulars relate to a Limited Company which has gone into voluntary liquidation. You are required to prepare the liquidators Final Account allowing for his remuneration at 2 % on the assets realized and 1 % of payment made to unsecured creditors.
| Preferential Creditors | Rs 10,000 |
| Unsecured Creditors | Rs 32,000 |
| Debentures(having floating charge) | Rs 10,000 |
| The assets realized the following sums
|
|
| Land and Buildings | Rs 10,000 |
| Plant and Machinery | Rs 18,650 |
| Fixtures and Fittings | Rs 1,000 |
The liquidation expenses amounted to Rs 1,000.
- Journalise the following transactions with respect to Internal Reconstruction and prepare the Balance sheet after reconstruction.
| LIABILITIES | Amount (Rs) | ASSETS | Amount (Rs) |
| Equity share capital | Plant and machinery | 3,00,000 | |
| 50,000 shares of 10 fully paid | 5,00,000 | Land and building | 4,00,000 |
| 10 % debentures of Rs 10 each | 2,00,000 | Goodwill | 20,000 |
| Creditors | 2,80,000 | Patents | 30,000 |
| Interest on debenture outstanding | 20,000 | Debtors | 50,000 |
| Preliminary expenses | 25,000 | ||
| Discount on issue of shares | 25,000
|
||
| Profit and Loss A/C | 1,50,000 | ||
| Total | 10,00,000 | Total | 10,00,000 |
It is resolved by the company on the basis of following scheme
- 50,000 shares of Rs 10 each are to be reduced to an equal number of fully paid shares of Rs 2 each.
- The claims of creditors are reduced to 60 %.
- The amount obtained as a result of internal reconstruction is used to write off Profit and Loss account, Goodwill and other miscellaneous expenditure.
- Write a note on the meaning, importance and disclosure requirements of Accounting Standard 1 on disclosure of accounting policy.
SECTION – C
III) Answer any THREE questions. Each carries 15 marks. (3×15=45)
- The following are the Balance sheet of A Ltd and B Ltd as on 31st March 2013.
| Liabilities | A Ltd | B Ltd | Asset | A Ltd | B Ltd |
| Equity Share Capital(Rs 10 each) | 50 L | 30 L | Land& Building | 25 L | 15.5 L |
| 14%preferenceshare capital(Rs 100 each) | 22 L | 17 L | Plant& Machinery | 32.5 L | 17 L |
| General Reserve | 4 L | 2.5 L | Furniture& Fittings | 5.75 L | 3.5 L |
| Export Profit Reserve(statutory Reserve) | 4 L | 2 L | Investments | 6 L | 5 L |
| Investment Allowance Reserve(Statutory) | 1 L | Stock | 13.5 L | 9.5 L | |
| P & L Account | 7.5 L | 5 L | Debtors | 9 L | 10.3 L |
| 13 % debentures(Rs 100 each) | 5 L | 3.5 L | Cash at Bank | 7.25 L | 5.2 L |
| Trade Creditors | 4.5 L | 3.5 L | |||
| Other Current Liabilities | 2 L | 1.5 L | |||
| Total | 99 L | 66 L | Total | 99 L | 66 L |
AB Ltd is formed to take over A Ltd and B Ltd for the following consideration.
A Ltd
.
- Issue of 4, 80,000 Equity Shares of Rs. 10 each of AB Ltd at par to the equity shareholders.
- Issue of 15% preference shares of Rs. 100 each of AB Ltd to discharge the preference shareholders of A Ltd at 5 % premium
B Ltd
- Issue of 3, 50,000 Equity Shares of Rs. 10 each of AB Ltd., at par, to the equity shareholders.
- Issue of 15% Preference Shares of Rs. 100 each of AB Ltd to discharge the liability of preference share holders at par.
Show the opening entries in the books of AB Ltd and prepare the Balance sheet of AB Ltd after amalgamation assuming amalgamation on the nature of merger.
- Green Ltd went into voluntary liquidation .The assets of the company realized Rs 18,000 and their liabilities amounted to Rs 3,000.The capital of the company consisted of 1,000 preference shares of Rs 10 each on which Rs 8 was called up and paid up. The holders of 600 shares how ever paid full Rs 10 as an advance of calls .Holders of 100 share holders had paid only Rs 6 per share. There were also 1,000 equity shares of Rs 10 each on which 9 Rs per share was called. The holders of 150 shares had however paid only Rs 8, while holders of 300 shares had paid the full Rs 10 in advance of calls. Cost of winding up amounted to Rs 150 .The calls in arrears on preference shares and equity shares were duly collected by liquidator.
Prepare Liquidators Final Statement of Accounts and compute deficiency in both the cases
- Assuming the preference shares has no prior rights as to repayment of capital.
- Assuming the preference shares has prior right as to repayment of capital.
- From the following figures prepare Profit and Loss Account for the year ending 31 st March 2013.
.
| Salaries | 2,25,000 |
| Rent paid | 60,000 |
| Telephone Charges | 4,000 |
| Printing and Stationery | 42,000 |
| Freight outwards | 20,000 |
| Carriage inwards | 2,000 |
| Depreciation on machinery | 3,000 |
| Goodwill written off | 5,000 |
| Purchases | 26,00,000 |
| Purchases Returns | 2,000 |
| Sales | 33,17,000 |
| Debtors | 5,00,000 |
| Creditors | 2,00,000 |
| Stock as on 01.04.2012 | 45,000 |
| Discount allowed | 2,000 |
| Sales Returns | 15,000 |
| Profit on sale of machinery | 5,000 |
| Loss on sale of furniture | 6,000 |
| Sale of old newspapers | 800 |
| Interest on debenture | 30,000 |
| Discount received | 1,000 |
| General Expenses | 5,000 |
| Other Income | 2,000 |
| Loss on account of earthquake | 2,000 |
Additional Information
- Stock as on 31 st March 2013 is Rs 40,000(Net Realisable value being 35,000).
- Provision for doubtful debts is to be provided at 1 % on the amount of debtors.
- Debenture interest outstanding Rs 3,000.
- Rent of Rs 12,000 is outstanding.
- Provision for discount on creditors is to be provided at 2 %.
- Prepaid salary amounted to Rs 5,000
- Provide tax @ 40 %.
- Total number of Equity shares of Company is 20,000 shares.
- Write a note on Accounting Standard Board, its functions and also explain the meaning, importance and disclosure requirements of AS 18 on related party disclosure.
- The following is the Balance Sheet of Blue Ltd as on 31.03.2013.
| Liabilities | Rs | Asset | Rs |
| 20,000 shares of Rs 100 each | 20,00,000 | Goodwill | 25,000 |
| 12 % debentures | 5,00,000 | Land and Building | 1,50,000 |
| Outstanding Debenture Interest | 1,20,000 | Plant and Machinery | 3,00,000 |
| Creditors | 3,00,000 | Furniture | 80,000 |
| Stock | 70,000 | ||
| Debtors | 60,000 | ||
| Cash at bank | 2, 35,000 | ||
| Preliminary Expenses | 20,000 | ||
| Profit and Loss A/c | 19,80,000 | ||
| Total | 29,20,000 | Total | 29,20,000 |
The following scheme of reconstruction is executed:
- Equity Shares are reduced by Rs.95 per share. They are then consolidated in to 10000 Equity shares of Rs.10 each.
- Debentures holders agree to forgo outstanding debentures interest. As compensation 12% debentures are converted into 14% Debentures.
- Creditors are given the option to either accept 50% of their claims in cash in full settlement or to convert their claims into equity shares of Rs. 10 each. Creditors for Rs.1, 00,000 opted for shares in satisfaction of their claims.
- To make payment to creditors opting for cash payment and to augment working capital, the company issues 50,000 equity shares of Rs.10 each at par, the entire amount being payable along with the applications. The issued was fully subscribed.
- Land and building are revalued at Rs.2, 00,000/- whereas Plant and machinery is to be written down to Rs.2, 10,000/.
- The balance available is used for writing off accumulated losses, Goodwill and other miscellaneous expenditure.
Pass journal entries and draft the company’s balance sheet immediately after reconstruction.
SECTION – D
ONE Compulsory Case study 1 x 15 = 15 Marks
- The balance sheet of Blue Ltd as on 31 st March 2013 is as under.
| Liabilities | Amount | Asset | Amount |
| Paid up Capital
10,000 6 % preference shares of Rs 10 each |
1,00,000 | Plant and Machinery | 1,50,000 |
| 20,000 equity shares of Rs 10 each | 2,00,000 | Land and building | 1,80,000 |
| Reserve | 20,000 | Stock | 80,000 |
| Profit and Loss Account | 10,000 | Debtors | 70,000 |
| 6 % debentures | 1,20,000 | Bank balance | 15,000 |
| Creditors | 50,000 | Preliminary Expenses | 5,000 |
| Total | 5,00,000 | Total | 5,00,000 |
A company Green Ltd took over the business of Blue Ltd. Green Ltd took over Plant and Machinery and Land and Building for Rs 2, 00,000 and 1, 60,000 respectively. Stock of Blue Ltd was taken over at par. Bank balance of Blue Ltd was also taken over by B Ltd. Debtors which were not taken over by Green Ltd were collected by Blue Ltd at a discount of 10%. The only liability which is taken over by Green Ltd is 6 % debentures of Blue Ltd. Creditors are settled by Blue Ltd at par.
Liquidation expenses borne by Green Ltd amounted to Rs 2,000.
The purchase consideration was satisfied as follows.
- The preference share holders of Blue Ltd were allotted 5 shares of Rs 12 each for every 4 shares held by them.
- The equity share holders were allotted 5 equity shares of Rs 9 paid up for every 4 shares held by them.
Write journal entries in the books of Blue Ltd to close their accounts assuming amalgamation to be in the nature of purchase.
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