LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
B.Com. DEGREE EXAMINATION – COMMERCE
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FOURTH SEMESTER – April 2009
CO 4502 – COMPANY ACCOUNTS
Date & Time: 24/04/2009 / 9:00 – 12:00 Dept. No. Max. : 100 Marks
SECTION – A
Answer any TEN questions. (10 x 2 = 20)
- What conditions must a company satisfy for issuing shares at discount?
- Distinguish between marked and unmarked applications.
- How do you value goodwill under capitalization of super profit?
- Write short notes on (i) rights issue of shares, (ii) bonus shares.
- What is the need for valuation of shares?
- A company purchased assets for Rs. 5,00,000. The vendors were paid Rs. 1,40,000 in cash and the balance in 10% debentures of 100 each is issued at 90%. Journalise.
- From the following particulars determine maximum remuneration available to full- time director of a manufacturing company.
The P&L A/c of the company showed net profit of Rs. 40,00,000 after taking into account the following
items:
- i) depreciation Rs. 1,00,000(including special depreciation Rs. 40,000
- ii) provision for income tax Rs. 2,00,000
iii) donation to political party Rs. 50,000,iv) capital profit on sale of assets Rs. 15,000
- A company forfeited 10 shares of Rs. 10 each. Rs. 6 called up, issued at a discount of 10% on which Rs. 2 per share was paid. These shares were reissued at Rs. 8 called up for Rs. 5 per share. Pass forfeiture and reissue entries.
- Company has following shares as a part of its share capital. 20,000 equity shares of Rs. 10 each, Rs. 8 called up and paid up and 10,000, 10% preference shares of Rs. 10 each. The company decided to alter the share capital as follows: i)To convert the partly paid-up equity shares into fully paid-up shares of Rs. 8 each, ii) To consolidate the preference share into shares of Rs. 50 each. Journalise the alterations.
- X Ltd. decides to redeem Rs. 2,00,000, 10% preference shares at a premium of 10% out of profits. The company has general reserve balance of Rs. 3,00,000. Write entries for redemption.
SECTION-B
Answer ANY 5 questions (5 x 8 = 40)
- How do you ascertain underwriter’s liability in the following cases:
(a) Complete underwriting
(b) Partial underwriting
(c) Firm underwriting
- Write short notes on: (i) Capital Redemption Reserve, and (ii) Ex-Interest and Cum- Interest Quotations
- A company earned the following net profits during the last four years after taxes:
1996-Rs. 60,000, 1997-Rs. 65,000,1998-Rs. 75,000, and 1999-Rs. 70,000. The capital employed in the business was Rs. 60,000. Reasonable rate of return, normal in the industry was 10%. Super profits of the company can be maintained for l5 years.
Find out goodwill of the company:
- If the present value of annuity of Re. 1 for five years at 10% is 3.78 and the goodwill should be valued
on Annuity basis.
2) If the super profit should be capitalized at normal rate of return.
3) If goodwill is 5 years purchase of the super profits.
- The Quick Ltd., went into voluntary liquidation on 31-3-05 at which date its capital consisted of 2,000
shares of Rs. 100 each fully paid and particulars of the assets and liabilities were as under:
Cash in hand 1,000
Machinery which realized 35,000
Stock which realized 20,000
Debtors which realized 10,000
Unsecured creditors (including Rs. 5,000 preferential creditors) 55,000
Secured creditors(securities realized Rs. 30,000 by themselves) 22,000
8% Debentures(having floating charge) 40,000
The liquidator’s remuneration was fixed at 4% commission on the assets realized by him including surplus from secured creditors and 2% on the distribution made to unsecured creditors. The liquidation expenses came to Rs. 2,380 and the interest on debentures was due for one year to the date of winding up.
Prepare the liquidator’s final statement of account showing the rate and amount distributed as final dividend
to the unsecured creditors.
- Ashok Ltd. was incorporated on 1st April to take over as from 1st January in the same year an existing
business of Desai Bros. Under the agreement all the profits made from 1st January are to belong to the
company. The following balances appeared in the company’ ledger as at 31st December:
| Share Capital
Bank Overdraft Sundry Creditors Fixed Deposits Freehold Land Building at Cost Furniture Transport Vehicles Stock on 1st January Book Debts Cash at Hand Goodwill |
4,50,000
1,65,000 65,000 35,000 50,000 1,30,000 15,000 35,000 4,20,000 95,000 12,000 3,100 |
Preliminary Expenses
Written off Salaries Rent Received Rates and Taxes Repairs to Building Miscellaneous Expenses Directors Fees Interest to Vendors (upto 30th June) Purchases Sales |
8,000 48,000 13,000 7,000 3,000 22,000 2,400 17,500
7,70,000 9,10,000 |
Stock on 31st December amounted to Rs. 4,80,000. Bad debts amounting to Rs. 1,000 of which Rs. 500
related to book debts taken over by the company and a provision of Rs. 5,000 to be made for doubtful debts.
Depreciation has to be written off at 5% on buildings, 10% on furniture and 20% on Vehicles.
Prepare(a) Trading Account (b) Profit and Loss Account showing profit post and prior to incorporation of the company (assuming that the sales are evenly spread over throughout the year)
- A company has 10,000 9% redeemable preference shares of Rs. 100 each fully paid. The company
decides to redeem the shares on 31st Dec. 2007 at a premium of 10%. The company makes the following
issues:
- 6,000 equity shares of Rs. 100 each at a premium of 10%
- 4,000 8% Debentures of Rs. 100 each.
The issue was fully subscribed and allotments were made. The redemption
was duly carried out. The company has sufficient profits.
You are required to give the necessary entries.
- On 31st Dec. 1998, the balance sheet of a limited company disclosed the following position.
| Liabilities | Rs. | Assets | Rs. |
| Issued capital in Rs. 10 shares
Profit & Loss A/c Reserves 5% Debentures Current Liabilities |
8,00,000
40,000 1,80,000 2,00,000 2,60,000 |
Fixed assets
Current assets Goodwill |
10,00,000
4,00,000 80,000 |
| 14,80,000 | 14,80,000 |
On Dec. 31, 1998, the fixed assets were independently valued at Rs. 7,00,000 and the goodwill at
Rs. 1,00,000. The net profits for the three years were:
1996-Rs. 1,03,000;1997-Rs. 1,04,000;and 1998-Rs. 1,03,300 of which 20% was placed to reserve, this proportion being considered reasonable in the industry in which the company is engaged and where a fair return on investment may be taken at 10%. Compute the value of the company’s share by (a) the net assets method and (b) the yield method.
- Ltd. was promoted as a Joint Stock Company in 2000. The working of company was not successful. On 31-12-2001 company’s balance sheet stood as under:
| Liabilities | Rs. | Assets | Rs. |
| Share Capital- Authorised
Subscribed & paid up: 12000 shares of Rs. 100 each fully paid Debentures Creditors |
20,00,000
12,00,000 5,00,000 7,00,000
|
Land & Buildings
Machinery Furniture Stock Debtors Goodwill Profit & Loss Account Preliminary Expenses Discount on Issue of shares |
5,00,000
2,60,000 20,000 3,70,000 1,80,000 2,00,000 5,00,000 2,00,000
1,70,000 |
| 24,00,000 | 24,00,000 |
It is resolved to reconstruct the company on the basis of the following scheme:
(1) The 12,000 shares of Rs. 100 each are to be reduced to an equal number of fully Paid shares of Rs. 50 each.
(2) Debenture holders are to be discharged by the issue of 8,000 unissued shares as fully paid up shares of
Rs. 50 each in full settlement of their claim
(3) The claims of creditors be reduced by 50% as agreed by them.
(4) The amount available be used to write off Profit and Loss Account, Preliminary Expenses, Discount on issue of shares, 50% off Goodwill; Rs. 20,000 off Stock; and Rs. 30,000 off Machinery; and also provision for doubtful debts to be made to the extent of Rs. 10,000.
Give the necessary Journal entries:
SECTION—C
Answer ANY 2 Questions: (2 x 20 = 40)
- The balance sheets of Gargi Ltd., as at December 31, 2006 and 2007 are given below:
Assets 2007 2006
Cash Balances Rs 60,000 50,000
Trade Debtors 1,00,000 75,000
Inventory 1,20,000 1,40,000
Land 80,000 1,00,000
Plant & Machinery 2,50,000 2,00,000
Accumulated depreciation on plant (80,000) (60,000)
Total of assets 5,30,000 5,05,000
Liabilities and Capital
Trade creditors 40,000 30,000
Debentures 90,000 1,50,000
Equity share capital 2,40,000 2,00,000
Retained Earnings 1,60,000 1,25,000
Total of liabilities and capital 5,30,000 5,05,000
Cash dividends of Rs. 25,000 have been paid during the year.
You are required to prepare a cash flow statement.
- On 1st April 1999, ABC Ltd. issued 1,00,000 equity shares of Rs. 10 each at Rs. 12 per share, payable as to Rs. 5 on application, Rs. 4 on allotment, and the balance on 1st July 1999.
The lists closed on 12th April 1999 by which date applications for 1,40,000 shares had been received. Of the cash received, Rs. 80,000 was returned and Rs. 1,20,000 was applied to the amount due on allotment, the balance of which was paid on 19th April 1999. All share holders paid the call due on 1st July 1999, with the exception of one allottee for 1,000 shares. These shares were forfeited on 30th November 1999 and reissued as fully paid at Rs. 8 per share on 2nd January 2000.
Pass Journal entries in the books of ABC Ltd.
- From the following trial balance of Vishal Trading Co. Ltd. as at 31.3.2000 and the adjustments given
below prepare the trading and profit and loss account, profit and loss appropriation account and the
balance sheet:
| Dr | Cr | |
|
Share Capital 6000 shares of Rs. 10 each………………………….. Buildings ……………………………………………. Furniture(including Rs. 2,500 additions made on 1.4.1999)
Shares of Rs. 10 in X Co Ltd. , Rs. 8 paid…………. Stock on 1.4.1999……………………………………. Dividend Equalisation Reserve …………………….. 10% Debentures …………………………………… Interest on Debentures(paid for ½ year) Goodwill . . . . . . . . ………………………………….. Bank Overdraft(unsecured) Bill Receivable and Bills Payable…………………… Debtors and Creditors Loans to Employees Discount on Issue of Shares Purchases and Sales………………………………… Carriage Inwards Carriage outwards Salary to Staff Salary to Managing Director General Expenses Interest on Bank Overdraft Legal Charges
Profit & Loss Appropriation Account(1.4.1999) ….. Discount …………………………………………….. Miscellaneous Income ………………………………. Cash in hand………………………………………….
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40,000 8,000
8,000 20,000
500 32,500
8,000 14,000 3,500 3,600 2,00,000 5,000 600 6,000 4,000 5,000 300 400
100 ———— 3,59,500 |
60,000
2,000 10,000
7,000 4,500 19,000
2,40,000
15,000 1,400 600
————– 3,59,500 |
Adjustments:
- Closing stock was valued at Rs. 25,000
- Provide for ½ year’s outstanding interest on debentures
- Write off ¼ of discount on issue of shares
- Provide for Rs. 10,000 for income tax and 10% tax on proposed dividend
- The directors have proposed dividend at 15%
- Transfer Rs. 3,000 to dividend equalization reserve
- Depreciate buildings at 2.5% and furniture at 10%.
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