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ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)
END SEMESTER EXMAINATION – OCTOBER 2013
B.B.M – III SEMESTER
CORPORATE ACCOUNTING
TIME: 3 HOURS MARKS: 100
SECTION – A
I) ANSWER ALLTHE FOLLOWING QUESTIONS. (10X2=20)
1. What is the meaning of Statutory Reserve?
2. What is Reduction of share capital?
3. What are Preferential Creditors? Give example.
4. What is the meaning of External Reconstruction?
5. What is the meaning of Amalgamation of Company’s?
6. What is the difference between Interim Dividend and Final Dividend?
7. What is an intangible asset? Give two examples.
8. How do you deal with the balance in capital Reduction A/C?
9. What is ‘Net Assets’?
10. Who is a contributory?
SECTION – B
II) Answer ANY FOUR questions. (4×5=20)
11. Balance Sheet of Jordan Company stood as follows on 31/12/2012.
Balance Sheet
Liabilities Amount (Rs) Assets Amount (Rs)
19,000 Shares of 100 each 19,00,000 Land & Buildings 1,00,000
Creditors 1,00,000 Machinery 2,60,000
Debentures 1,00,000 Furniture 20,000
Stock 3,70,000
Debtors 1,80,000
Goodwill 2,00,000
Profit & Loss A/c 9,70,000
21,00,000 21,00,000
The company is to be reconstructed as follows:
(i) Shares of Rs. 100 are to be reduced to an equal number of fully paid shares of Rs. 40
each.
(ii) To issue 1,000 new shares of Rs. 40 each as fully paid up to debenture holders in full
settlement.
(iii) The amount available is to be utilized in writing off the Goodwill and Profit and loss
A/c and the balance in writing down the value of machinery.
(iv) Authorised capital of the company is 20,000 shares of Rs. 100 each.
Give the necessary Journal Entries.
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12. Calculate the purchase consideration from the following:
Total assets at book value – Rs. 5,00,000
Assets are taken over at 10% less than book value.
Total liabilities – Rs. 2,00,000
Liabilities not taken over – Rs. 50,000
Liquidation expenses of Rs. 5,000 is to be borne by the purchasing company .
13. Explain briefly the differences between Amalgamation by Merger and Amalgamation by
Purchase Method.
14. Calculate liquidator’s remuneration and amount available to pay unsecured creditors:
(i) Balance of cash after paying preferential creditors Rs. 2,10,000
(ii) Other unsecured creditors are Rs. 2,50,000.
(iii) Liquidator’s remuneration is 5% on the amount paid to other unsecured creditors.
15. Briefly explain the functions of Accounting Standard Board.
16. What are the differences between Internal Reconstruction and External Reconstruction?
SECTION – C
III) Answer any THREE out the following : (3×15=45 )
17. American Ltd was absorbed by India Ltd on 31/12/2012 on which date the Balance Sheet of
American Ltd was as follows:
Liabilities Amount (Rs) Assets Amount (Rs)
Equity Share Capital 6,00,000 Buildings 4,00,000
5% Preference Share Capital 4,00,000 Plant 2,00,000
Sundry Creditors 1,10,000 Current Assets 2,00,000
Development Rebate Reserve 40,000 P& L A/c 3,50,000
11,50,000 11,50,000
India Ltd took over buildings at Rs. 3,00,000. Plant at Rs. 1,40,000 and Stock at Rs. 60,000.
The purchase consideration is to be satisfied by the issue of 8% Preference Shares of Rs. 100
each and Equity Shares of Rs. 10 each in 3:2 ratio.
The Preference Shareholders are to be settled in full by the allotment of new Preference
Shares. Sundry debtors realized Rs. 1,50,000 and Rs. 1,00,000 was paid to Sundry Creditors
in full settlement (There were no other current assets). Cost of liquidation Rs. 10,000.
Development Rebate Reserve is a Statutory Reserve to be continued to 2 more years.
Prepare necessary ledger accounts in the books of American Ltd. Opening Journal Entries
of India Ltd and its Balance Sheet.
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18. Fast Consumption Ltd went into voluntary liquidation on 31/12/2012. The Balance Sheet as
on that date was:
Liabilities Amount (Rs) Assets Amount (Rs)
Share Capital:
5,000 , 6% Cumulative
preference Shares of Rs. 100
each fully paid
5,00,000
Land and Buildings
2,50,000
2,500 Equity Shares of Rs. 100
each Rs. 75 paid up
1,87,500
Machinery 6,25,000
7,500 Equity Shares of 100
each Rs. 60 paid up
4,50,000
Patents 1,00,000
5% Mortgage debentures 2,50,000 Stock 1,37,500
Interest outstanding on
debentures
12,500
Debtors 2,75,000
Creditors 3,62,500 Cash at Bank 75,000
Profit and Loss A/c 3,00,000
17,62,500 17,62,500
The liquidators is entitled to a commission of 3% on all assets relised except cash and 2%
on amounts distributed to unsecured creditors.
Creditors include Rs. 17,500 for Income tax due to Government Rs. 5,000 outstanding
Salaries of employees and an award of Rs. 15,000 made under Workmen’s Compensation
Act. It also includes a loan for Rs. 1,25,000 secured by mortgage on Land and Buildings. The
preference dividends were in arrears for two years. The assets realized as follows:
Assets Amount (Rs)
Land and Buildings 3,00,000
Machinery 5,00,000
Patents 75,000
Stock 1,50,000
Debtors 2,00,000
Expenses of Liquidation
amounted to
27,250
Prepare the Liquidators Final Statement of Accounts.
19. Briefly explain the following Accounting Standards.
AS-2 AS-6 AS-8
20. The State of Affairs of Texas Co Ltd on 31/12/2012 was as follows:
Liabilities Amount (Rs) Assets Amount (Rs)
20,000 Equity Shares of Rs. 10
each
2,00,000 Goodwill 80,000
15,000 7% preference shares of
Rs. 10 each
1,50,000 Buildings 1,75,000
13,000 5% preference shares of 65,000 Machinery 3,25,000
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Rs. 10 each . Rs. 5 paid
5% Debentures 1,50,000 Patents 54,000
8% Debentures 3,00,000 Furniture 15,000
Sundry Creditors 4,50,000 Investments 75,000
Debenture interest due 19,500 Sundry Debtors 4,15,000
Cash 2,000
Bank 18,000
Profit and Loss A/c 1,75,500
13,34,500 13,34,500
The following scheme of capital reduction was submitted and approved by the court.
(a) Equity Shares of Rs. 10 each were to be reduced to Shares of Rs. 5 each.
(b) 7% preference shares of Rs. 10 each fully paid were to be reduced to 6% preference
shares of Rs. 10 each ,Rs. 6 per share paid.
(c) 5% preference shares of Rs. 10 each , Rs. 5 paid up were to be reduced to 4 ½ preference
shares of Rs. 10 each, Rs. 3 per share paid up.
The debenture holders agreed to forego the interest due to them. The company in the
meantime recovered as damages a sum of Rs. 84,000 from a third party and it was
decided to use this amount also to write off the Capital losses.
The reconstruction expenses comes to Rs. 7,250.
Give Journal Entries to record the above and draw the Reconstructed Balance Sheet.
21. P Ltd and Q Ltd agreed to Amalgamation by transferring their undertaking to a new
company to PQ Ltd. formed for that purpose. On the date of the transfer, Balance Sheets of
the two companies were as under:
Liabilities P Ltd Q Ltd Assets P Ltd Q Ltd
Equity Shares of Rs.
10 each
7,50,000 2,50,000 Sundry Assets 6,00,000 3,10,000
5% Debentures — 30,000 Freehold
property
30,000 —–
Reserve —- 20,000 Debtors 1,80,000 50,000
Mortgage Loan on
freehold property
50,000 —– Investments 1,30,000 30,000
Sundry Creditors 40,000 1,00,000 Bank 1,00,000 20,000
Profit & Loss A/c 2,00,000 10,000
10,40,000 4,10,000 10,40,000 4,10,000
The Purchase Consideration consisted of :
(i) The assumption of liabilities of both the companies.
(ii) The discharge of Debentures in Q Ltd by the issue of Rs. 35,000 4% Debentures in PQ
Ltd
(iii) The issue at a premium of Rs. 5 each to both the vendor companies equity shares of
Rs. 10 each in PQ Ltd.
For the purpose of transfer the assets are to be revalued as under:
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Particulars P Ltd Q Ltd
Sundry Assets 6,50,000 3,56,000
Freehold property 50,000
Debtors 1,71,000 45,000
Investments 1,49,000 40,000
Goodwill 1,10,000 40,000
Write up Realisation account and the Shareholders account and PQ Ltd account in
each of the vendor company and Journal Entries in the Book of PQ Ltd. Under
amalgamation in the nature of purchase.
SECTION – D
IV) Compulsory question. (15 Marks)
22. Following is the trial balance of Indore Co.Ltd as at 31 March 2013:
Particulars Amount (Rs) Amount (Rs)
Stock 31/03/2012 70,000
Sales 3,50,000
Purchase 2,50,000
Wages 50,000
Discount 5,000
Furniture and Fittings 17,000
Salaries 7,000
Rent 4,950
Sundry Expenses 7,550
Surplus Account 31/03/2012 15,030
Dividends paid 4,000
Share Capital 1,00,000
Debtors and Creditors 37,500 17,500
Plant and Machinery 29,000
Cash and Bank 18,200
Reserve 15,500
Patents and Trade Mark 7,830
5,03,030 5,03,030
Prepare Statement of Profit and Loss for the year ended 31/03/2013 and Balance Sheet
as at the date. Take into consideration the following adjustments:
(i) Stock on 31/03/2013 was valued at Rs. 82,000.
(ii) Depreciation on fixed assets @ 10%.
(iii) Make a provision for income tax @ 50%
(iv) Ignore corporate dividend tax
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