Loyola College B.Com Corporate & Secretaryship April 2007 Corporate Accounting Question Paper PDF Download



HO 07






Date & Time: 21/04/2007 / 9:00 – 12:00          Dept. No.                                                     Max. : 100 Marks



Section: A

Answer any ten only:                                                                                         10 x 2 = 20


  • What do you understand by ‘Calls in Advance”? How much interest should be paid on them?


  • Write short note on: Firm Underwriting


  • Redemption of 20,000 preference shares of Rs.100 each was carried out by utilization of reserves and by issue of 8000 Equity shares of Rs.100 each at Rs.125. How much should be credited to capital redemption reserve a/c?


  • Journalize in the following cases, where debenture issue price is Rs.1, 00,000. Rate of interest 8%.
    1. Issued at a discount of 10% and redeemable at par.
    2. Issued at premium of 5% and redeemable at par.
  • Distinguish between ex-interest and cum – interest.


  • State “True” or “False”.
    1. Pre-incorporation loss may be treated as goodwill and debited to goodwill account.
    2. Gross profit is to be divided between pre and post incorporation periods in time ratio
    3. Profit prior to incorporation are capital profits and are not available for dividend
    4. Expenses such as directors fees, discount on issue of shares, underwriting commission, interest on debentures etc., are to be charged fully to post incorporation period.
  • Define “Goodwill”.


  • Write short note on: Internal reconstruction.


  • S Ltd was taken over by R.Ltd the following position was mutually agreed upon:

S.Ltd.                R.Ltd.

No.of shares                            60,000               90,000

Face Value of share                Rs.100                 Rs.10

Net Assets                  Rs.3,60,00,000     Rs.72,00,000

Ascertain intrinsic values of the shares, ratio of exchange of shares and No of shares to be issued.

  • Who are preferential creditors?

Section – B

Answer any five only.                                                                               8 x 5 = 40


  • Explain in detail the requirements for the redemption of preference shares as per Section 80 of the Companies act 1956?
  • Distinguish between Merger method and Purchase method of Accounting for Amalgamation.


  • Explain the main factors affecting the value of goodwill of a joint stock company and also explain any one method of valuation of goodwill.


  • T Ltd, issued 50,000 equity shares of Rs.10 each at par. The entire issue was underwritten as follows:


  • 30,000 shares (firm underwriting 4,000)
  • 15,000 shares (firm underwriting 5,000)
  • 5,000 shares (firm underwriting 1.000)

Total applications including firm underwriting were for 40,000 shares. The marked applications were as follows:

  • 10,000 shares; B-7,000 shares; and C-3,000 shares.

The underwriting contract provides that credit of for unmarked applications are given to the underwriters in proportion to the shares underwritten.

Determine the liability of each underwriter and amount of commission payable to them assuming that rate to be 2% on issue price.


  • X Ltd. buys its own 6% debentures of the nominal value Rs.20, 000 at Rs.96 on 31st March 2005. Record the transaction in the books of X Ltd. If the quotation is (1) cum interest, and (2) ex – interest. X Ltd. pays debenture interest half-yearly on 30th June and 31st X Ltd cancels the debentures purchased on 31st March 2005. Record the entries for cancellation when debentures were purchased on (1) cum interest, and (2) ex – interest.


  • On 1st July2000 a Ltd., purchased the business of Mr. Remi a sole trader, taking over all the assets with the exception of book debts amounting to Rs.1,25,000 and creditors amounting to Rs.75,000. The company undertook to collect all the book debts and pay off the creditors and for this service; it has to be paid a commission of 3% on the amounts collected and 1% on amounts paid. The debtors realized Rs.1,12,000 out of which Rs.68,000 was paid to creditors in full settlement. The company was also forced to meet a contingent liability of Rs.3,000 on account of a claim against the vender for damages. The vendor received Rs.30,000, 10% debentures of Rs.100 each at 95 and the balance in cash in settlement of his account with the company. Journalize the above transactions in the books of the company.


  • The Balance Sheet of S Ltd., disclosed the following positions as on 31st December 2005


Liabilities                          Rs                    Assets                                Rs


Share capital:

6,000 equity shares

of Rs.100 each            3,00,000               Goodwill                        82,500

Profit &Loss A/c             37,500               Investments                 2,62,500

General Reserve           1,12,500               Stock                           3,30,000

6% Debentures             2.25,000               Debtors                       1,95,000

Creditors                      2,25,000               Cash                               30,000

9,00,000                                                   9,00,000


The profits for the past five years were: 1996-Rs.15,000; 1997-Rs.35,000;

1998-Rs.25,000; 1999-Rs.27,500; 2000-Rs.47,500.


The Market value of investments was Rs.1,65,000


Goodwill is to be valued at three years purchase of the average annual profits for the last five years.


Find out the intrinsic value of each share.



  • ABC Company Ltd., Passed resolution and got court permission for the reduction of its share capital by Rs.5,00,000 for the purposes mentioned as under:


  • To write off the debit balances of R&L A/c pf Rs.2,10,000


  • To reduce the value of Plant & Machinery by Rs.90,000 and goodwill by Rs.40,000.


  • To reduce the value of investments by Rs.80,000


The reduction was made by converting 50,000 preference shares of Rs.20 each fully paid to the same number of preference shares of  Rs.15 each fully paid and by converting 50,000 equity shares of Rs.20 each on which Rs.15 is paid up into 50,000 shares of Rs.10 each fully paid up.


Pass journal entries to record the share capital reduction.


Section – C


Answer any two only.                                                                         2 x 20 = 40


19) K Ltd went into liquidation on 31.12.2005 when their Balance Sheet read as follows:

Liabilities                                Rs.                   Assets                          Rs.

Issued & Subscribed                                       Land & Building         7, 50,000

Capital:                                                            Plant & Machinery   18, 75,000

15000 10% cumulative                                   Patents                                    3, 00,000

Preference shares of                                        Stock                           4, 02,500

Rs.100 each fully paid                        15, 00,000       Debtors                       8, 25,000

7500 equity shares of                                      Bank                            2, 25,000

Rs.100 each, Rs.75 paid          5, 62,500        Profit &loss a/c           8, 53,750

22500 equity shares of

Rs.100 each, Rs.60 paid         13, 50,000

15% debenture secured by

a floating charge                     7,50,000

Interest outstanding on

Debenture                               1, 12,500

Creditors                                 9, 56,250

52, 31,250                                           52, 31,250


Preference dividends were in arrears for 2 years and the creditors included preferential creditors of Rs.38, 000.


The assets realized as follows: Land and building Rs.9,00,000; Plant and machinery Rs.15,00,000; Patents Rs.2,25,000; Stock Rs.4,50,000; Debtors Rs.6,00,000.

The expenses of liquidation amounted to Rs.27, 250. The liquidator is entitled to a commission of 3% on assets realized except cash. Assuming that the final payments including those on debentures were made on 30.06.2001, show the liquidator’s final statement of account.








20) S Ltd issued a prospectus inviting applications for 50,000 equity shares of Rs.10

each, payable Rs.5 on application (including Rs.2 as premium), Rs.4 on allotment and the balance towards first and final call. Applications were received for 65,000 shares. Application money received on 5000 shares was refunded and allotment was made pro-rata to applicants of 60,000 shares. Money overpaid on applications including premium was adjusted on account of sums due on allotment.


Mr.Pradeep to whom 700 shares were allotted failed to pay the allotment money and his shares were forfeited on his subsequent failure to pay the call money.


All the forfeited shares were subsequently sold to Mr.Remi credited as fully paid for Rs.9 per share.


You are required to set out the journal entries.


  • M Ltd., and N Ltd., agreed to amalgamate on the basis of the following Balance sheet as on 31.03.2005

Liabilites                     M                     N           Assets                     M                N

Rs.                   Rs.                                        Rs.              Rs.

Share Capital               75,000             50,000 Goodwill               30,000       ——–

Rs.25 each

P&L A/C                       7,500               2,500 Fixed Assets         31,500      38,800

Creditors                       3,500               3,500 Stock                     15,000      12,000

Depreciation Fund      ——–                2,500 Debtors                   8,000        5,200

Bank                        1,500        2,500

86,000             58,500                                86,000      58,500


The assets and liabilities are to be taken over by anew company formed called P Ltd., at book values P.Ltd’s capital is Rs.2,00,000 divided into 10,000  equity shares of Rs.10 each and 10,000 9% preference shares of Rs.10 each.


P Ltd issued the 5000 shares of Rs.10 each to each company and the preference shares were issued for the balance of purchase price.


Pass journal entries in the books of P Ltd and prepare its Balance Sheet, if the amalgamation is in the nature of purchase.




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