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ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)
END SEMESTER EXAMINATION – OCTOBER 2013
B.COM – III SEMESTER
ADVANCED ACCOUNTING – I
Duration: 3 hours Max. Marks: 100
SECTION – A
I) Answer any TEN of the following: ( 10 x 2 = 20)
1. Why do companies buy back their shares?
2. Why preference shares can not be redeemed out of fresh issue of Debentures?
3. What is the mechanism of using revenue profit to CRR account?
4. What are ex interest and cum interest?
5. Identify in the following cases whether they are merger/acquisition/internal
reconstruction/external reconstruction/neither. Why?
a) Vodafone and Hutch
b) Tata acquired Land Rover and Jaguar
6. How do you calculate Liquidator’s remuneration if amount is not sufficient to
pay to equity shareholders?
7. Who is official liquidator?
8. Mention any two methods of redemption of debentures ?
9. What is the journal entry to redeem debentures if issued at discount but
redeemed at premium?
10. Can we transfer investment allowance to CRR account at the time of redemption
of debentures?
11. Write short notes on Section 78 and 79( in four lines).
12. Who are contributories?
SECTION-B
II) Answer ANY FOUR questions from the following: ( 4 x 5=20)
13. Journalise the following issues of debentures in the books of the respective
company. Also show the relevant extracts of the Balance Sheet.
a) August 15th Limited issued Limited issued 100, 14% debentures of Rs. 10 each at par
and redeemable at the end of 5 years at premium of 10%
b) No more limited issued 5,000, 13% Debentures of Rs. 10 each at a premium of 10%
and are redeemable at the end of four years at a premium of 20%
14. How do you deal the following in the new balance sheet after acquiring S Ltd. ?
a) S Ltd. has taken loan of Rs. 20,000 from H Ltd
b) H Ltd. draws a bill of Rs. 50,000 on S Ltd.
c) S Ltd. issued debentures of Rs. 1,00,000 which are held by H Ltd.
15. Following is the balance sheet of A ltd as on 31/3/2008:
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Liabilities Rs Assets Rs
10,000 equity shares of Rs 10 each 1,00,000 Fixed assets 2,00,000
Reserves & surplus 50,000 Current assets 50,000
12% Debentures 75,000
Creditors 25,000
2,50,000 2,50,000
B Ltd absorbs the business of A Ltd and agrees to discharge the purchase consideration
as under:
a) Cash payment of Rs 2 per share
b) Issue of sufficient number of equity shares of Rs 10 each at a premium of 100%
for the balance
Calculate the purchase consideration and state the number of equity shares issued
assuming that fixed assets are valued at Rs 2,75,000 and current assets at Rs 45,000.
16. Explain Section 77A of the Companies Act 1956 and give the corresponding journal
entries.
17. Explain preferential status and general order of distribution as per the latest
provision of the Companies Act at the time of liquidation.
SECTION-C
III) Answer ANY THREE questions of the following: (3 x 15 = 45)
18. BECOM Ltd. Issues 12% 1,00,000 Preference shares of Rs. 10 each at a premium of
Rs.2 per share and the balance in 8% debentures of Rs. 100 each to BEBEEM
Entertainment & Co as consideration for purchase of the following assets and at the
following values:
Land Rs. 5,00,000
Buildings Rs. 3,00,000
Plant Rs. 2,00,000
Machinery Rs. 8,00,000
a) Pass necessary journal entries in the books of BECOM Ltd under each of the
following circumstances. If debentures are issued :
i) At Par
ii) At 10% discount
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iii) At 12.5% premium
b) Pass journal entry in the books of BEBEEM & Co if debentures are issued :
iv) At Par
v) At 10% discount
vi) At 12.5% premium
19. The following is the Balance Sheet of Angami Ltd. as on 31st March, 2013:
Liabilities Rs. Assets Rs.
12,000, 10% Preference shares of
Rs.100 each
24,000, Equity shares of Rs.100
each
10% Debentures
Bank overdraft
Sundry Creditors
12,00,000
24,00,000
6,00,000
6,00,000
3,00,000
Goodwill
Land & building
Plant & machinery
Stock
Debtors
Cash
Profit & Loss Account
Preliminary expenses
90,000
12,00,000
18,00,000
2,60,000
2,80,000
30,000
14,00,000
40,000
51,00,000 51,00,000
On the above date, the company adopted the following scheme of reconstruction:
(i) The equity shares are to be reduced to shares of Rs.40 each fully paid and the
preference shares to be reduced to fully paid shares of Rs.75 each.
(ii) The debenture holders took over stock and debtors in full satisfaction of their
claims.
(iii) The Land and Building to be appreciated by 30% and Plant and machinery to be
depreciated by 30%.
(iv) The fictitious and intangible assets are to be eliminated.
(v) Expenses of reconstruction amounted to Rs.5,000.
Give journal entries incorporating the above scheme of reconstruction and prepare the
reconstructed Balance Sheet.
20. A part of the Balance Sheet of Palani Valu Murugan Ltd. As on 31st March 2013 was
as follows:
Liabilities Rupees Assets Rupees
10,000 Equity Shares of Rs. 10
each Fully paid up
11% Redeemable Preference
shares of 100 each fully called
up
1,00,000
Less: Calls in arrears
1,00,000
96,000
Fixed Assets
Debtors
Stock
Investments(Face value Rs.
20,000)
Bank
2,62,000
90,000
30,000
30,000
4,000
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@Rs.20 per share 6,000
10% Redeemable preference
shares of Rs. 100 each fully
paid up
General Reserve
Profit and Loss Account
Security premium
Creditors
1,00,000
40,000
20,000
5,000
57,000
11% Redeemable preference shares were due for payment on 1st June 2013 at a premium
of 10%. All Investments were sold at 135% of their face value. The company issued
adequate number of equity shares at par, to the extent available profits were insufficient
to back up redemption. The company has a facility of temporary bank overdraft to the
extent of Rs. 50,000.
Required: Give the necessary journal entries and prepare the Balance sheet of the
company after redemption.
21. The financial position of two companies Hari Ltd. and Vayu Ltd. as on 31st March,
2002 was as under:
Assets Hari Ltd. (Rs.) Vayu Ltd.(Rs.)
Goodwill 50,000 25,000
Buildings 3,00,000 1,00,000
Machinery 5,00,000 1,50,000
Stock 2,50,000 1,75,000
Debtors 2,00,000 1,00,000
Cash at Bank 50,000 20,000
Preliminary Expenses 30,000 10,000
13,80,000 5,80,000
Liabilities Hari Ltd.
(Rs.)
Vayu Ltd.
(Rs.)
Share Capital:
Equity Shares of Rs. 10 each 10,00,000 3,00,000
9% Preference Shares of Rs. 100 each 1,00,000 ––
10% Preference Shares of Rs. 100 each -–– 1,00,000
General Reserve 1,00,000 80,000
Retirement Gratuity fund 50,000 20,000
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Sundry Creditors 1,30,000 80,000
13,80,000 5,80,000
Hari Ltd. absorbs Vayu Ltd. on the following terms:
(a) 10% Preference Shareholders are to be paid at 10% premium by issue of 9%
Preference shares of Hari Ltd.
(b) Goodwill of Vayu Ltd. is valued at Rs. 50,000, Buildings are valued at Rs. 1,50,000
and the Machinery at Rs. 1,60,000
(c) Stock to be taken over at 10% less value and Reserve on Bad and Doubtful Debts to
be created @ 7.5%
(d) Equity Shareholders of Vayu Ltd. will be issued Equity Shares @ 5% premium
Required:
a) Prepare necessary Ledger Accounts to close the books of Vayu Ltd. and show the
acquisition entries in the books of Hari Ltd.
b) Draft the Balance Sheet after absorption as at 31st March, 2002.
22. Balance sheet of X Ltd and Y Ltd given below
Liabilities X. Ltd Y. Ltd Assets X. Ltd Y. Ltd
1,00,000 Equity
shares of 10 each
50,000 shares of
Rs. 10 each
10,000 10%
debentures of Rs.
100 each
10,00,000
–
10,00,000
–
5,00,000
10,00,000
Fixed Assets
Investment in Mary
Ltd(30,000 shares)
Current assets
15,00,000
4,00,000
1,00,000
15,00,000
–
20,00,000 15,00,000 20,00,000 15,00,000
Fixed assets of X. Ltd can be sold for Rs. 20,00,000 and Y. Ltd for Rs. 12,00,000.
Calculate:
a) Intrinsic value of X. Ltd
b) Number of shares will be issued by X. Ltd to Y. Ltd based on intrinsic values if X. Ltd
acquires Y Ltd.
c) Number of shares to be allotted to X. Ltd if Y. Ltd. Acquires X. Ltd based on intrinsic
values
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SECTION-D
IV) Compulsory question. (1×15=15)
23. Following is the Balance Sheet of M Ltd. as at 31st March, 2008:
Liabilities Rs. Assets Rs.
15,000, 10% Preference shares
of
Rs.100 each
35,000 Equity shares of Rs.100
each
Securities Premium account
7% Debentures of Rs.100 each
Creditors
Loan from Director
15,00,000
35,00,000
1,00,000
5,00,000
12,50,000
1,50,000
Goodwill
Land & Buildings
Plant & Machinery
Stock
Debtors
Cash at bank
Preliminary
expenses
Profit & Loss A/c
3,50,000
15,00,000
10,00,000
6,00,000
15,00,000
1,00,000
4,00,000
15,50,000
70,00,000 70,00,000
No dividend on Preference shares has been paid for the last 5 years.
The following scheme of reorganization was duly approved by the court:
(i) Each Equity share to be reduced to Rs.25.
(ii) Each existing Preference share to be reduced to Rs.75 and then exchanged for 1 new
13% Preference share of Rs.50 each and 1 Equity share of Rs.25 each.
(iii) Preference share holders have forgone their right for dividend for four years. One
year’s dividend at the old rate is however, payable to them in fully paid equity Shares
of Rs.25.
(iv) The Debenture holders be given the option to either accept 90% of their claims in cash
or to convert their claims in full into new 13% Preference shares of Rs.50 each issued at
par. One half (in value) of the debenture holders accepted Preference shares for their
claims. The rest were paid cash.
(vi) Goodwill does not have any value in the present. Decrease the value of Plant and
Machinery, Stock and Debtors by Rs.4,00,000, Rs.1,00,000 and Rs.1,50,000 respectively.
Increase the value of Land and Buildings to Rs.18,00,000.
Pass necessary Journal Entries to record the above transactions and prepare capital
reduction account and new Balance Sheet after reconstruction.
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