1. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER EXAMINATION – SEPT /OCT 2014

BCOM – III SEMESTER

ADVANCED ACCOUNTING- II

Duration: 3 Hours                                                                                       Max. Marks: 100

SECTION – A

 

1. Answer ALL the questions. Each carries 2 marks.                                       (10 x2 =20)

 

 

1. What is meant by Buy-Back of shares? State the sources of buying back the companies own shares.

1. On 31-12-2009 B Ltd. had 20,000, Rs. 10 Equity Shares as authorised capital and the shares were all issued on which Rs. 8 was paid up. In June, 2010 the company in general meeting decided to sub-divide each share into two shares of Rs. 5 with Rs. 4 paid up. In June, 2011 the company in general meeting resolved to consolidate 20 shares of Rs. 5, Rs. 4 per share paid up into one share of Rs. 100 each, Rs. 80 paid up. Pass Journal Entries.

3. C Ltd., has 10,000 10% redeemable preference shares of Rs. 100 each, fully paid up. The company decided to redeem these preference shares at par, by issue of sufficient number of equity shares of Rs. 10 each at a premium of Rs. 2 per share as fully paid up.  You are required to pass necessary journal entries including cash transactions in the books of the company.
4. What is meant by redemption of debenture and different methods of redemption of debentures?
5. What is meant by surrender of shares?
6. State any 2 difference between external and internal reconstruction?
7. What is meant by Minority Interest?
8. State the procedure for Internal Reconstruction.
9. A ltd., has acquired 80% share in B ltd., for Rs. 1,50,000. The net assets of B ltd., on the day are Rs. 2,20,000.  During the year A ltd., sold the investment for Rs. 3,00,000 and the net assets of B ltd., on the date of disposal was Rs. 3,50,000.  Calculate the profit or loss on disposal of this investment to be recognized in consolidated financial statement?
10. What is meant by Purchase Consideration? What are the different methods of calculating Purchase Consideration?

 

 

 

SECTION – B

 

1. Answer any FOUR Each carries 5 marks.                                  (4×5=20)

 

11. Explain the conditions for buy-back of shares as per companies act Section 77A.
12. Determine the amount of fresh issue of shares from the following information:

Redeemable preference share capital – Rs. 80,00,000

Premium on redemption – 10%

General reserve – 12,00,000

Profit and loss a/c – 4,00,000

Security premium – 6,00,000

1. Fresh issue to be made at a discount of 10% to the extent desirable for redemption of preference shares which could not otherwise be redeemed.
2. Fresh issue to be made at a premium of 10% to the extent desirable for redemption of preference shares which could not otherwise be redeemed.
3. Briefly explain provisions of companies act Sec 80?
4. The following is the summarized balance sheet of A Ltd., as on 31/3/2012:

Liabilities	Amount	Assets	Amount
14,000 equity shares of Rs. 100 each fully paid General reserve 10% Debentures Sundry creditors Bank overdraft Bills payable	14,00,000   10,000 2,00,000 2,00,000 50,000 40,000	Sundry assets Discount on issue of dentures P & L a/c	18,00,000 10,000   90,000
	19,00,000		19,00,000

R Ltd., agreed to take over the business of A ltd.  Calculate Purchase consideration under Net Assets method on the basis of the following:

The market value of 75%of the sundry assets is estimated to be 12% more than the book value and that of the remaining 25% at 8% less than the book value.  The liabilities are taken over at book values.  There is an unrecorded liability of Rs. 25,000.

 

15. A ltd., purchased 40% stake of B ltd., for Rs 12 per share. After 2 years A ltd decided to purchase another 40% share in B ltd.  B ltd, has 1,00,000 equity shares of Rs 10 each as fully paid up shares.  The purchase deal was finalized on the following terms:

• Purchase price per share to be calculated on the basis of average profit of last 3 years capitalized at 7.5%. profits for the last 3 years are Rs. 35,000; Rs. 65,000 and Rs. 89,000.
• Total assets of B ltd., of Rs. 11,50,000. Assets to be appreciated by Rs. 40,000
• Of the external creditors for Rs. 2,50,000 one creditor to whom Rs 10,000 was due has expired and nothing is to be paid to settle this liability.
• B ltd., will declare dividend @ 15%.

Calculate the goodwill or capital reserve for A ltd.  In consolidated financial statement?

16. Distinguish between Amalgamation in the nature of Purchase and Merger?

 

SECTION – C

III)      Answer any THREE questions.    Each carries 15 marks.                    (3×15=45)

 

17. Ram Ltd. and Shyam Ltd. Carry on business of a similar nature and it is agreed that they should amalgamate.  A new company Ramayam Ltd. is to be formed to which the assets and liabilities of the existing companies, with certain exception, are to be transferred.  On 31/12/2011, the balance sheets of the 2 companies were as under:

Liabilities	Ram Ltd.	Shyam Ltd.	Assets	Ram Ltd.	Shyam Ltd.
Equity shares of Rs 10 each	3,00,000	1,60,000	Freehold property at cost	2,10,000	1,20,000
General reserve	1,60,000	—	Plant & m/c at cost less depreciation	50,000	30,000
P & L a/c	40,000	40,000	Motor vehicles at cost less depreciation	20,000	—
Sundry creditors	1,50,000	64,000	Stock	1,20,000	1,56,000
6% Debentures	—	1,20,000	Debtors	1,64,000	42,000
			Cash at bank	86,000	36,000
	6,50,000	3,84,000		6,50,000	3,84,000

 

Assets and liabilities are to be taken at book value, with the following exceptions:

1. Good will of Ram ltd., and Shyam ltd., are to valued at Rs. 1,60,000 and Rs. 60,000 respectively.
2. Motor vehicles of Ram ltd are to be valued at Rs. 60,000.
3. The debentures of Shyam ltd., are to be discharged by the issue of 6% debentures of Ram and Shyam ltd., at a premium of 5%.
4. The debtors of Shyam ltd., realized fully and bank balance of Shyam Ltd., are to be retained by the liquidator and the sundry creditors of Shyam ltd., are to be paid out of the proceeds thereof.

You are required to:

• Compute the basis on which shares in Ram and Shyam ltd., will be issued to the shareholders of the existing companies assuming that the nominal value of each share in Ram and Shyam ltd is Rs. 10.
• Draw up the balance sheet of Ramayam ltd., as of 1^st april 2011, the date of completion of amalgamation.
• Write up journal entries, including bank entries, for closing the books of Shyam ltd.

18. The following is the balance sheet of TOM ltd., as on 31/3/2007:

Liabilities	Amount	Assets	Amount
Authorized capital: Preference shares of Rs. 10 each              50,000 equity shares of Rs. 10 each               4,50,000		Fixed assets: Gross block           1,50,000 Less: depreciation   50,000	1,00,000
Issued, subscribed and paid up capital: 5,000 10 % redeemable preference shares of Rs. 10 each. 5,000 equity shares of Rs. 10 each	50,000   50,000	Investments	50,000
Reserves and surplus: General reserve Share premium P & L a/c	60,000 35,000 9,250	CA, Loans and Advances: Inventory Debtors Cash and Bank Bal	12,500 12,500 25,000
CL & Provisions: Sundry creditors	5,750	Misc. exps to the extent not written off	10,000
	2,10,000		2,10,000

For year ended 31/3/2008, the company made a net profit of Rs. 7,500 after providing Rs. 10,000 depreciation and writing off the miscellaneous expenditure of Rs. 10,000.

The following additional information is available with regard to company’s operation:

1. The preference dividend for the year ended 31/3/2008 was paid before 31/3/2008.
2. The company redeemed the preference shares at a premium of 10%
3. To meet the cash requirements of redemption, the company sold a portion of the investments, so as to leave a minimum balance of Rs. 15,000 after such redemption.
4. Except cash and bank balances other current assets and current liabilities as on 31/3/2008 was the same as on 31/3/2007.
5. The company issued bonus shares in the ratio of one share for every equity share held as on 31/3/2008.
6. Investments were sold at 90% of cost on 31/3/2008.

You are required to:

• Prepare necessary journal entries to record redemption and issue of bonus shares.
• Prepare the cash and bank account.
• Prepare the Balance Sheet as on 31/3/2008 incorporating the above transactions.

19. Given below is the summarized balance sheet of Rebuilt Ltd. as on 31.3.2012:

 

Liabilities	Amount	Assets	Amount
12,000, 7% Preference shares of Rs. 50 each (Note: Preference dividend is in arrear for five years)	6,00,000	Building at cost less depreciation	4,00,000
15000 Equity shares of Rs. 50 each	1,50,000	Plant at cost less depreciation	2,68,000
Loan	5,73,000	Trademarks and goodwill at cost	3,18,000
Sundry creditors	2,07,000	Stock	4,00,000
Other liabilities	35,000	Debtors	3,28,000
		Preliminary expenses	11,000
		Profit and loss account	4,40,000
	21,65,000		21,65,000

The Company is now earning profits short of working capital and a scheme of reconstruction has been approved by both the classes of shareholders. A summary of the scheme is as follows:

(a) The equity shareholders have agreed that their Rs. 50 shares should be reduced to Rs. 2.50 by cancellation of Rs. 47.50 per share. They have also agreed to subscribe for three new equity shares of Rs. 2.50 each for each equity share held.
(b) The preference shareholders have agreed to cancel the arrears of dividends and to accept for each Rs. 50 share, 4 new 5% preference shares of Rs. 10 each, plus 6 new equity shares of Rs. 2.50 each, all credited as fully paid.
(c) Lenders to the company for Rs, 1,50,000 have agreed to convert their loan into share and for this purpose they will be allotted 12,000 new preference shares of Rs. 10 each and 12,000 new equity shares of Rs. 2.50 each.
(d) The directors have agreed to subscribe in cash for 40,000, new equity shares of Rs. 2.50 each in addition to any shares to be subscribed by them under (a) above.
(e) Of the cash received by the issue of new shares, Rs.2,00,000 is to be used to reduce the loan due by the company.
(f) The equity share capital cancelled is to be applied:
i. to write off the preliminary expenses:
ii. to write off the debit balance in the profit and loss A/c: and
iii. to write off Rs. 35,000 from the value of plant.
Any balance remaining is to be used to write down the value of trademarks and goodwill. Show by journal entries how the financial books are affected by the scheme and prepare the balance sheet of the company after reconstruction. The nominal capital as reduced is to be increased to Rs.6,50,000 for preference share capital and Rs.7,50,000 for equity share capital.

20. H ltd. Acquired all the shares in S ltd., on 1/1/2012 and liabilities and assets of the 2 companies on 31/2/2012 were as follows:

Liabilities	H ltd.	S ltd.	Assets	H ltd.	S ltd.
Share capital	50,000	30,000	Sundry assets	65,000	70,000
Reserve on 1/4/2011	20,000	15,000	Shares in S ltd. At cost	50,000	—
Surplus a/c	25,000	10,000
Creditors	20,000	15,000
	1,15,000	70,000		1,15,000	70,000

The surplus account of S ltd., had a credit balance of Rs. 3,000 on 1/4/2011.  Prepare a Consolidated Balance Sheet as on 31/3/2012.

21. The summarized balance sheet of Mars ltd., as on 31/3/2012 was as follows:

Liabilities	Amount	Assets	Amount
1,00,000 equity shares of Rs. 10 each fully paid	10,00,000	Land and building	7,64,000
Capital reserve	42,000	Stock	7,75,000
Contingency reserve	2,70,000	Debtors             1,60,000 Less: provision For DD                8,000___	1,52,000
P & L a/c	2,52,000	Bills receivable	30,000
Bills payable	40,000	Cash at bank	3,29,000
Sundry creditors	2,26,000
Provision for income tax	2,20,000
	20,50,000		20,50,000

On 1/4/2012, Jupiter ltd., agreed to absorb Mars Ltd., on the following terms and conditions:

• Jupiter ltd., will take over the assets at the following values: land and building – Rs. 10, 80,000; stock – Rs. 7,70,000; bills receivables – Rs. 30,000.
• Purchase consideration will be settled by Jupiter ltd., as under: 4,100 fully paid 10% preference shares of Rs. 100 will be issued and the balance will be settled by issuing equity shares of Rs 10 each at Rs. 8 paid up.
• Liquidation expenses are to be reimbursed by Jupiter ltd., to the extent of Rs. 5,000.
• Sundry debtors realized Rs. 1,50,000,bills payable were settled for Rs. 38,000, income tax authorities fixed the taxation liability at Rs. 2,22,000 and the same was paid.
• Creditors were finally settled with cash remaining after meeting liquidation expenses amounting to Rs. 8,000.

You are required to:

1. Calculate the number of equity shares and preference shares to be allotted by Jupiter ltd., in discharge of Purchase Consideration.
2. Prepare Realization a/c; bank account; equity shareholders a/c; and Jupiter ltd., a/c in the books of Mars Ltd.

 

SECTION – D

1. IV) Case study- Compulsory questions. (15 marks)
2. D Ltd. and F Ltd. were amalgamated on and from 1st April, 2009. A new Company P Ltd. was formed to takeover the business of the existing companies. The Balance Sheets of D Ltd. and F Ltd. as on 31st March, 2009 are given below :

Liabilities	D Ltd.	F Ltd.	Assets	D Ltd.	F Ltd.
Share Capital: Equity Share of Rs. 10 each 9% Preference Shares of Rs. 100 each Reserves and surplus: Revaluation reserve General reserve Export profit reserve Secured Loan : 13% Debentures of Rs. 100 each Current liabilities and Provisions: Bills Payable Sundry creditors	85,000   32,000     12,500 24,000 7,500   5,000       2,000 14,500	72500   17,500     8,000 16,000 3,000   2,800       — 7,500	Fixed Assets: Land and Building Investments Current assets: Stock Debtors Bills receivable Cash and bank	79,500 7,500   32,500 30,500 2,500 30,000	43,400 5,000   26,900 27,000 — 25,100
	1,82,500	1,27,000		1,82,500	1,27,300

 

Other information:

1. 13% Debenture holders of D Ltd. and F Ltd. are discharged by P Ltd. by issuing such number of its 15% Debentures of Rs. 100 each so as to maintain the same amount of interest.

 

1. Preference Shareholders of the two companies are issued equivalent number of 12% Preference Shares of P Ltd. at a price of Rs. 12.50 per share (face value Rs.10).

 

1. P Ltd. will issue 2 equity shares for each equity share of D Ltd. and 2 equity shares for each equity share of F Ltd. at Rs. 15 per share having a face value Rs. 10.

 

1.  Export Profit Reserve is to be maintained for two more years.

Prepare Journal Entries and prepare the Balance Sheet of P Ltd. after the amalgamation is carried out using under Merger Method.

 

                                    

 

 

Latest Govt Job & Exam Updates:

View Full List ...