LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
B.Com. DEGREE EXAMINATION – COMMERCE
SIXTH SEMESTER – APRIL 2012
CO 6606 – ADVANCED CORPORATE ACCOUNTING
Date : 20-04-2012 Dept. No. Max. : 100 Marks
Time : 1:00 – 4:00
PART – A
Answer ALL Questions: (10 x 2 =20 marks)
- What is ‘Reinsurance’?
- What is rebate on bills discounted?
- Write a short note on ‘Minority Interest’.
- Mention any two features of double account system.
- Distinguish between ‘Net Assets’ and ‘Intrinsic value’.
- Sadan Ltd. agrees to purchase the business of Krish Ltd. on the following terms :
- For each of the 10,000 shares of Rs.10 each in Krish Ltd. 2 shares in Sadan Ltd. of Rs.10 each will be issued at an agreed value of Rs.12 per share. In addition Rs.4 per share cash also will be paid.
- 8% Debentures worth Rs.80,000 will be issued to settle Rs.60,000 9% debentures in Krish Ltd.
- 10,000 will be paid towards purchase consideration.
Calculate purchase consideration.
- Calculate the net claim to be shown in the Revenue account of an Insurance Company :
Claims paid during year ended 31st March 2010 Rs.5,60,000
Claims outstanding on 1.4.2009 52,000
Claims outstanding on 31.3.2010 92,000
Claims covered under re-insurance 25,000
- The trial balance of a bank as on 30th June 2010 shows the following balances :
Interest and discount Rs. 45,40,600
Rebate on bills discounted(1.7.2009) 4,750
Bills discounted and purchased 3,37,400
The unexpired discount as on 30th June 2010 is estimated to be Rs.5,560. Calculate the amount of interest and discount to be credited to Profit and Loss account.
- H Ltd. purchased 75% shares in S Ltd. on 1.7.2010. On 31.12.2010 the balance sheet of S Ltd. showed reserve fund balance on 1.1.2010 Rs.40,000, profit earned during 2010 Rs.60,000 and preliminary expenses unwritten off 20,000. Calculate capital profits and Revenue profits.
- Ascertain the amount to be capitalized from the following particulars, under double account system :
Original cost of an asset Rs.3,00,000
Present cost or replacement cost 3,90,000
Amount spent for replacement 4,70,000
PART – B
Answer any FIVE Questions: (5 x 8 =40 marks)
- What is Valuation Balance sheet ? Explain the need for preparing the same and state how the surplus is dealt with.
- Explain any 8 schedules to be prepared by a commercial bank.
- Distinguish between ‘Net Assets’ and ‘Net Payments’ as basis for computation of purchase consideration.
- The life fund of a Life Insurance Company on 31.12.2010 showed a balance of Rs.54,00,000. However the following items were not taken into account while preparing the revenue account for 2010. Ascertain the correct life fund balance.
- Interest and dividends accrued on investments 20,000
- Income tax deducted at source on the above 6,000
- Reinsurance claims recoverable 7,000
- Commission due on reinsurance premium paid 10,000
- Bonus in reduction of premiums 3,000
- On 31st March 2010 a bank held the following bills, discounted by it earlier :
Date of bill 2010 Term of bill month Discounted % Amount of bill
- 17 4 17 7,30,000
- 7 3 18 14,60,000
- March 9 3 5 3,64,000
You are required to calculate the rebate on bills discounted . Also show the necessary Journal entry for the rebate.
- The Balance Sheets of Cee Ltd and Dee Ltd. as at 31st December 2010 are as follows :
Liabilities Cee Ltd. Rs. Dee Ltd. Rs.
Share capital (in shares of Rs.10 each) 2,00,000 1,00,000
General reserve 18,000 20,000
Profit and loss account 24,500 23,000
Creditors 30,000 15,200
__________________________
2,72,500 1,58,200
__________________________
Assets
Sundry assets 1,32,500 1,38,200
Goodwill – 20,000
Shares in Dee Ltd. at cost 1,40,000 –
__________________________
2,72,500 1,58,200
__________________________
In the case of Dee Ltd.profit for the year ended 31st December 2010 is Rs.12,000 and
transfer to general reserve is Rs.5,000. The holding of Cee Ltd. in Dee Ltd. is 90%
acquired on June 30th 2010.
Prepare a consolidated Balance sheet of Cee Ltd. and its subsidiary.
- City Electricity Ltd. earned a profit of Rs.8,45,000 during the year ended 31st March 2010 after debenture interest at 71/2% on Rs.2,50,000. With the help of the information given below, show the disposal of profits :
Original cost of fixed assets 1,00,00,000
Formation and other expenses 5,00,000
Monthly average of current assets (net) 25,00,000
Reserve fund (represented by 4% Govt.securities) 10,00,000
Contingencies reserve fund investments 2,50,000
Loan from Electricity board 15,00,000
Total depreciation written off to date 20,00,000
Tariff and dividend control reserve 50,000
Security deposits received from customers 2,00,000
Assume bank rate to be 6%.
- AKS Railway Company decided to replace the old main with a new main at an estimated Cost of Rs.50,00,000. The cost of old main was Rs.10,00,000 in 2000 the built. Due to inflation the cost of laying including materials, labour and other expenses is doubled. The sale of old materials is Rs. 40,000 and the old materials reused in the new main is estimated Rs.60,000. Pass necessary Journal entries in the books of AKS Railway Company.
PART – C
Answer any TWO Questions: (2 x 20 =40 marks)
- From the following , you are required to prepare the Profit and loss account and the Balance sheet of Madras Bank Ltd. as on 31.12.2010 according to Banking Regulation Act 1949 :
Trial balance as on 31.12.2010
Debit Credit
( Rs. in thousands )
Issued capital :
20,000 shares of Rs.100 each 2,000
Money at call and short notice 800
Reserve fund 700
Cash in hand 650
Deposits 2,500
Cash at bank 950
Borrowings from SBI 500
Investment in govt. securities 900
Secured loans 1,500
Cash credits 500
Premises less depreciation 580
Furniture less depreciation 120
Rent 5 60
Interest and discount 800
Commission and brokerage 70
Interest paid on deposits 300
Salary and allowances to staff 150
Interest paid on borrowings 50
Audit fees 10
Director’s fees 8
Non-banking assets 80
Depreciation on bank’s property 13
Printing 3
Advertisement 1
Stationary 5
Postage and telegrams 2
Other expenses 3
6,630 6,630
Adjustments :
- Provide Rs.20,000 for doubtful debts
- Provide Rs.10,000 on bills discounted but not matured on 31.12.2010
- Acceptances and endorsements on behalf of customers amounted to Rs.4,00,000
- Provide Rs.60,000 for taxes.
- Hon Ltd. purchased 750 shares in Sen Ltd. on 1.7.2010. The following were their Balance Sheets on 31.12.2010 :
Liabilities Hon Ltd. (Rs.) Sen Ltd. (Rs.)
Sharecapital – Shares of Rs.100 each 3,00,000 1,00,000
General reserve 1.1.2010 1,00,000 70,000
Profit and loss account 1,00,000 60,000
Creditors 80,000 40,000
Bills payable 50,000 20,000
Current Account :
Hon Ltd. – 20,000
6,30,000 3,10,000
Assets
Buildings 2,05,000 1,25,000
Stock 1,00,000 80,000
Debtors 1,00,000 40,000
Investments in Sen Ltd. 1,00,000 –
Bills receivable 40,000 45,000
Cash at bank 60,000 20,000
Current Account :
Sen Ltd. 25,000 –
__________________________
6,30,000 3,10,000
Additional information :
- Bills receivable of Hon Ltd. include Rs.10,000 accepted by Sen Ltd.
- Debtors of Hon Ltd. include Rs.20,000 payable by Sen Ltd.
- A cheque of Rs.5,000 sent by Sen Ltd. on 28th December was not yet received by Hon Ltd. on 31st December 2010.
- Profit and loss account of Sen Ltd. showed a balance of Rs.20,000 on 1.1.2010.
You are required to prepare a consolidated Balance Sheet of Hon Ltd. and Sen Ltd. as on 31.12.2010.
- The Balance sheet of Jai Ltd and Hai Ltd. as on 31.3.2011 were as follows :
Liabilities Jai Ltd. (Rs.) Hai Ltd.(Rs.)
Share capital :
Shares of Rs.100 each 5,00,000 –
Shares of Rs.10 each – 4,00,000
Capital reserve 1,00,000 –
General reserve 35,000 4,00,000
Secured loan – 2,50,000
Unsecured loan 1,00,000 –
Sundry creditors 1,55,000 1,80,000
__________________________
8,90,000 12,30,000
Assets
Goodwill 40,000 –
Fixed assets 4,00,000 8,00,000
Cash at bank – 1,00,000
Other current assets 4,50,000 3,30,000
8,90,000 12,30,000
It was proposed that Jai Ltd. should be taken over by Hai Ltd. The following arrangements were accepted by both the companies.
- Goodwill of Jai Ltd. is considered worthless.
- Arrears of depreciation in Jai Ltd. amounted to Rs.20,000.
- The holder of every 2 shares in Jai Ltd. was to receive: as fully paid , at par 10 shares in Hai Ltd. and so much cash as is necessary to adjust the rights of shareholders of both the companies in accordance with the intrinsic values of the shares as per their Balance sheets after the adjustments mentioned above.
You are required to : Determine the purchase consideration and show the Balance Sheet of Hai Ltd. after the absorption, if the amalgamation is in the nature of purchase.
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