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ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)
END SEMESTER EXAMINATION – OCTOBER 2013
B.COM – III SEM (TRAVEL & TOURISM)
CORPORATEACCOUNTING
TIME: 3 HOURS MAX. MARKS: 100
SECTION – A
I. Answer ALL the following questions. (10×2=20)
1. What is Pooling of Interest Method and when is this method applied?
2. Under which heading and sub-heading do the following items appear in the Balance
sheet as per Revised Schedule VI Part II:
a) Long term investments b. Preliminary expenses
3. State any two factors affecting valuation of shares.
4. Which sections of the Companies Act deals with Alteration of Share Capital and
Reduction of Share Capital?
5. “Goodwill has been said to be the attractive force which brings in customers” – in this
context what is Non-purchased Goodwill?
6. How is the balancing figure treated in case of Amalgamation in the nature of Purchase
when the assets and liabilities are taken over by the Purchasing Company?
7. Mention the three methods of Valuation of Shares.
8. What are the two situations when managerial remuneration is paid to managerial
personnel?
9. Closing capital employed is Rs.6,00,000; Net profit for the current year is Rs. 1,20,000.
What is the Average Capital Employed?
10. What is Capital Reduction A/c and when is it prepared?
SECTION – B
II. Answer ANY FOUR of the following questions. (4×5= 20)
11. Super Smart Ltd. absorbed Smart Ltd. by taking over the following assets and liabilities:
Assets taken over:
Land & Building Rs. 2,00,000; Plant & Machinery Rs. 5,00,000; Furniture & fittings Rs.
50,000; Stock Rs. 40,000; Debtors Rs. 10,000.
Liabilities taken over:
10% Debentures Rs. 1,00,000 (issued at a premium of 10%)
Creditors Rs. 35000
Bills payable Rs. 15,000.
Determine the purchase consideration as per AS-14 and discharge purchase
consideration into 50,000 Equity Shares of Rs.10 each and balance of the P.C in the form
of cash.
12. Alpha Ltd. proposed to purchase the business carried on by Beta Ltd. Goodwill for this
purpose is agreed to be valued at 3 years purchase of the Average Profits (using Simple
average) of the last 4 years.
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Year Amount of Profits(Rs)
2009 1,01,000
2010 1,24,000
2011 1,00,000
2012 1,50,000
The business was looked after by the management. Remuneration from alternative
employment if not engaged in the business, comes to Rs. 6000 p.a. Find out the amount of
goodwill.
13. Under what headings and sub-headings will you show the following items in the
Balance Sheet of the Company as per Revised Schedule VI?
a) Goodwill f) Investments
b) Closing stockg) Reserve fund
c) Securities Premiumh) Live Stock
d) Proposed dividendi) Patents
e) Interest accrued and due on unsecured loans j) Land & Building
14. The following is the Balance Sheet of Million Dollar Co. Ltd. as on 31.12.2012
LIABILITIES AMOUNT ASSETS AMOUNT
2,000 6% preference shares
of Rs.100 each
2,00,000 Fixed Assets 3,00,000
30,000 equity shares of Rs.
10 each
3,00,000 Current Assets 3,00,000
Liabilities 1,00,000
6,00,000 6,00,000
The market value of fixed assets is 10% more than book value. The market value of current
assets is 5% less than book value. There is an unrecorded liability of Rs. 5,000. Assume
preference shares have no priority either as to repayment of capital or dividend. You are
required to calculate the intrinsic value per Equity and Preference share.
15. (a) Purchasing Co. agrees to issue 3 shares of Rs10 each, Rs. 8 paid up for every 5 shares
in the Vendor Co. Find the number and the amount of shares to be issued by the
purchasing company if the vendor company has Rs.5,00,000 paid up capital of shares of
Rs10 each, Rs. 5 paid up.
(b)Purchasing Co. agrees to issue 3 shares at Rs10 each, Rs9 paid up at the market value of
Rs15 per share for every 5 shares in the Vendor Company. Find the number and amount of
shares to be issued by the purchasing company, if the vendor company has 1,00,000 shares
of Rs10 each, Rs5 paid up (market value Rs8).
16. Explain in detail the legal procedure involved in Internal Reconstruction in case of
Reduction of Share Capital.
SECTION – C
III. Answer ANY THREE of the following questions. (3×15=45)
17. The following are the Balance Sheets of X Ltd. and Y Ltd. as on 31.12.2012
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Liabilities X Ltd. Y Ltd. Assets X Ltd. Y Ltd.
Equity Share Capital (Rs.
100 per share)
1,00,000 60,000 Land & building 30,000 —
6% Debentures (Rs. 10
each )
20,000 — Plant & Machinery 1,10,000 50,000
Reserve Fund 34,000 — Stock 16,000 8,000
Revenue Reserve 4,000 — Debtors 14,000 9,000
Bills Payable 3,000 — Cash 3,000 1,000
Trade creditors 10,000 8,000
Profit & Loss A/c 2,000 —
1,73,000 68,000 1,73,000 68,000
The two companies agree to amalgamate and form a new company called Z Ltd. which
takes over the assets and liabilities of both companies. The Authorized Capital of Z Ltd. is
Rs. 10,00,000 consisting 1,00,000 equity shares of Rs. 10 each. The assets of X ltd. are taken
over at a reduced valuation of 10% with exception of land & building which are accepted
at book value.
Both the companies are to receive 5% of the valuation of their respective business as
Goodwill. The entire purchase consideration is to be paid by Z Ltd. in fully paid shares of
Rs. 10 each. In return for Debentures in X ltd. Debentures of the same amount at
denomination are to be issued by Z Ltd.
Prepare the necessary ledger accounts in the books of X Ltd and also prepare the New
Balance Sheet after Amalgamation assuming in the nature of purchase. Show necessary
workings.
18. The Balance Sheet of Karnavathi Ltd. as on 31.12.2012 is as follows:
Liabilities Rs. Assets Rs.
Sharecapital: Issued, subscribed
and paid up:2,000 shares of Rs.
100 each
2,00,000 Land & building 1,10,000
General Reserve 40,000 Plant & Machinery 1,30,000
Profit & Loss A/c 32,000 Patents 20,000
Sundry Creditors 1,28,000 Stock 48,000
Provision for tax 60,000 Debtors 88,000
Bank 52,000
Preliminary expenses 12,000
4,60,000 4,60,000
The expert valued the Land & building at Rs. 2,40,000, Goodwill at Rs. 1,60,000 and Plant
& Machinery at Rs. 1,20,000. Out of the total debtors, it is found that debtors of Rs. 8,000
are bad. The profits of the company have been as follows:
2010= Rs. 90,000; 2011= Rs. 80,000 and 2012= Rs. 1,06,000
The company follows the practice of transferring 25% of profits to General Reserve.
Normal Rate of Return is 10%. Ascertain the value of shares of the company under:
a. Intrinsic Value Method
b. Yield Value Method (on the basis of Rate of Dividend)
c. Fair Value Method
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19. The following balances are left on the books of Seven Star Fashions Ltd. after its Profit &
Loss Statement has been prepared for the year ended 31.3.2013.
Particulars Amount Particulars Amount
Public deposits 1,50,000 Sundry debtors 5,20,000
Interest accrued but not due 2,500 Security deposit 80,000
Bank over draft 2,36,600 Interest accrued on Investments 6,000
Sundry creditors 1,75,000 Plant & machinery 15,40,000
General Reserve 2,00,000 Prepaid insurance 1,000
1,60,000 equity shares of Rs. 10 each 16,00,000 Vehicles 3,10,000
5,000 10% preference shares of Rs. 10
each
5,00,000 10% Government Bonds 60,000
Securities premium 2,00,000 Loan to staff 25,000
10% Secured Loan 1,80,000 Stock in Trade 4,10,700
Interest accrued and due on Secured
loan
4,800 Preliminary expenses 5,000
Net profit for the year ended
31.3.2013
3,20,000 Bills Receivable 22,000
Expenses owing 12,200 Cash and bank balance 15,400
Employee Benefit Fund 20,000 Land & building 6,44,000
Sinking Fund 38,000
36,39,100 36,39,100
Note: Bills Receivable discounted but not matured Rs.15,000.
It was resolved that:
(a) The General Reserve is increased by 50,000
(b) A dividend of 8% on Equity Share Capital and 10% on Preference Share Capital is
declared. Prepare the Company’s Balance Sheet as on 31st March, 2013 as per Revised
Schedule VI Part II.
20. The Balance Sheet of Mercy Ltd. is as follows as on 31.12.2012:
Liabilities Amount Assets Amount
Equity shares of Rs. 10 each 5,00,000 Fixed Assets less depreciation 4,00,000
General Reserve 2,00,000 Investments in 6% Government
Bonds
1,00,000
Profit & loss A/c 1,00,000 Current assets 4,00,000
Current Liabilities 1,00,000
9,00,000 9,00,000
Net profit after taxation: 2010= Rs. 1,30,000; 2011= Rs. 1,25,000 and 2012=Rs. 1,50,000
Goodwill may be taken at 4 year’s purchase of average super profits trading on the basis of
15% normal profit on average capital employed. The current assets are to be taken at Rs. 4,
20,000. 6% Interest on Government Bonds is treated as non-recurring item after taking
average profits. Ascertain the value of Goodwill.
21. Following is the Balance sheet of Unsuccessful Ltd. as on 31.12.2012:
Liabilities Amount Assets Amount
13% cumulative preference
shares of Rs. 100 each
1,00,000 Fixed Assets 15,00,000
Equity shares of Rs. 10 each 7,00,000 Current Assets 32,00,000
8% Debentures 3,00,000 Profit & Loss A/c 3,00,000
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Current liabilities(included
Creditors)
39,00,000
50,00,000 50,00,000
The following scheme of reconstruction was adopted:
1. Fixed assets are to written down by 33.33%
2. Current assets are to be revalued at Rs. 24,00,000
3. One of the creditors of the company to whom the company owes Rs. 25,00,000
decides to forego 50% of his claim. He is allotted 1,00,000 equity shares of Rs. 5 each
in part satisfaction of the balance of his claim.
4. The rate of interest on debentures is increased to 11%. The debenture holders
surrender their existing debentures of Rs. 100 each and exchange the same for fresh
debentures of Rs. 75 each.
5. All existing equity shares are reduced to Rs. 5 each.
6. All preference shares are reduced to Rs. 75 each.
Pass Journal entries and show the Balance Sheet of the company after giving effect to the
above. Also prepare Capital Reduction A/c.
SECTION – D
IV. Answer the following question (COMPULSORY) (1×15=15)
22. St. Joseph’s College of Commerce started B.Com Travel & Tourism in the year 2012. The
first batch of the students were now in their second year of the course. The students were
well equipped with the New Revised Schedule VI after studying Corporate Accounting
subject.The following information is extracted from the Trial Balance of a company as on
31.3.2013. Assume you are one among the student of that batch and prepare the Profit &
Loss Statement and Balance Sheet as per Revised Schedule VI Part I and Part II as on
31.3.2013
Particulars (Dr) (Cr.)
Furniture 1,60,000
Land & building 6,74,000
Depreciation on furniture 16,000
Purchases (adjusted) 4,00,000
Salaries 80,000
Sales 10,00,000
10% Debentures (issued on 1st April, 2012) 1,00,000
Wages 1,20,000
Closing stock 1,50,000
Bank overdraft 2,00,000
Equity share capital – 2,000 shares of Rs. 100 each fully paid 2,00,000
Preference share capital – 1,000 6% shares of Rs. 100 each fully
paid.
1,00,000
TOTAL 16,00,000 16,00,000
Additional Information:
1. To declare an equity dividend at 10% on the paid-up capital.
2. To pay dividend on the Preference Share Capital in full.
3. To transfer Rs. 2, 00,000 to General Reserve.
Note: Marks carries for the format.
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