St. Joseph’s College of Commerce (Autonomous)
End Semester Examination –APRIL 2014
B.COM – II SEMESTER
ADVANCED ACCOUNTING – I
Time: 3 hrs Marks: 100
Section – A
- I) Answer ALL the questions. Each carries 2 marks. (2 x 10 =20)
- State 5 methods of valuation of goodwill.
- The intrinsic value of a share is Rs.260/- and its yield value is Rs.290/-. Calculate the fair value of the share.
- Explain Recoupment of short working.
- What is meant by ‘poor selling line’ of goods? Compare the Gross Profit ratio of these goods with that of normal stock.
- The super profits of a company is Rs.25,000/-. The present value of an annuity of Re.1, for 3 years at 10% per annum is 2.478. Calculate the value of goodwill using Annuity method.
- Ascertain Opening Stock when:-
| Purchases | 60,000 |
| Wages | 20,000 |
| Sales | 1,00,000 |
| Closing stock | 15,000 |
Percentage of gross profit on sales is 25%
- As per the Revised Schedule VI of the Co’s Act. Where do the following items appear in the Balance Sheet?
- Preliminary Expenses (b) Bills discounted but not yet matured
- Calls in Advance (d) Workmen’s Accident Compensation Fund
- State the formula for valuation of Right Shares.
- State two differences between Dependent and Independent Branches.
- The Head office charges the Branch at cost plus 25%. Goods sent to Branch is Rs.40,000/- Goods returned to Head office is Rs.600/-. What is the net value of Goods sent to Branch?
Section – B
- II) Answer any four Each carries 5 marks. (4 x 5 =20)
- Under what heads will you show the following items in the Balance Sheet of the Company?
- Securities Premium
- Interest accrued but due on secured loan
- Interest accrued but not due on loan
- Uncalled liability on partly paid shares
- Capital Reserve
- Debit balance in the statement of profit and loss
- Employees earned leave payable on retirement
- Computer soft wares
- Goods in transit
- Provision for Provident Fund Scheme
- The following particulars are available in respect of the business carried on by Wisehead:
| Rs. | ||
| 1 | Capital invested | 50,000 |
| 2 | Trading results: | |
| 2010 Profits Rs.12,200; 2011 Profit Rs.15,000; | ||
| 2012 Loss Rs.2,000; 2013 Profits Rs.21,000 | ||
| 3 | Market rate of interest on investments | 8% |
| 4 | Rate of risk return on capital invested in business | 2% |
| 5 | Remuneration from alternative employment of the proprietor (if not engaged in business) | 3,600 per annum |
You are required to compute the value of goodwill on the basis of 3 years’ purchase of super profits of the business calculated on the average profits of the last four years.
- Prosperous Company is planning to raise funds by making rights issue of equity shares to finance its expansion. The existing ordinary share capital of the company is Rs. 2 Crore. The par value of its shares is Rs. 20 and the Market price is Rs. 80. The alternatives under consideration before the management for making rights issue are given below:
- 4 new shares for 4 old shares @ par.
- 3 new shares for 5 old shares @ Rs. 30.
- 2 new shares for 5 old shares @ Rs. 40
- 1 new share for 5 old shares @ Rs. 50.
Calculate the theoretical market price after the issue.
- From the following particulars, prepare Branch Account showing the Profit or Loss for the branch:
| Opening Stock at the branch | 60,000 |
| Goods sent to branch | 1,80,000 |
| Sales (Cash) | 2,40,000 |
| Expenses: | |
| Salaries | 20,000 |
| Other Expenses | 8,000 |
Closing stock could not be ascertained, but it is known that the Branch generally sells at cost plus 20%. The branch manager is entitled to a commission of 5% on the profit before charging such commission.
- Hubli Coal worked under a lease which provided for the payment of royalties at Rs.5/- per ton with a minimum rent of Rs.25,500 per annum. Each year’s excess of minimum rent over the actual royalties was receivable during the subsequent three years. The lease, stipulated that if in any year the normal rent was not attained due to strike or accident, the minimum rent was to be regarded as having been reduced proportionately having regarded to the length of the stoppage. The output was as follows:
| Year | Output (in tons) |
| 2000 | 600 |
| 2001 | 4,200 |
| 2002 | 4,500 |
| 2003 | 6,900 |
| 2004 | 4,500 (there was a strike) |
| 2005 | 7,500 |
During the year 2004, there was a stoppage of work due to strike lasting three months. Prepare Analytical Table only.
- A fire occurred on the premises of a merchant on 18th September, 2013 and a considerable part of the stock was destroyed. The value of the stock saved was Rs.8,200/-.
The books disclosed that on 1st April 2013 the stock was valued at Rs.66,850/- the purchases to the date of fire amounted to Rs.1,85,000/- and the sales to Rs.2,82,500/-. Goods costing Rs.500/- were taken for personal use and goods sold for Rs.2,500/- were returned to the merchant. On investigation it is found that during the past five years the average gross profit on the cost was 25%.
You are required to prepare statement showing the amount the merchant should claim from the insurance company in respect of stock destroyed by fire.
Section – C
III) Answer any three questions. Each carries 15 marks. (3 x 15 = 45)
- Suman Bros, had a branch at Kanpur, goods are invoiced to the branch at cost plus 25%. Branch is instructed to deposit cash every day in the head office account in the bank. All expenses are paid by the Branch Manager. From the following particulars, prepare Branch account in the books of the head office.
| Rs. | Rs. | ||
| Stock on 1.1.2012 | 2,500 | Furniture purchased By Branch Manager | 1,200 |
| Stock on 31.12.2012 | 3,000 | Goods invoice from Head Office | 18,200 |
| Sundry debtors on 1.1.2012 | 1,400 | Expenses paid by HO | 1,640 |
| Sundry Debtors on 31.12.2012 | 1,800 | Expenses paid by Branch | 120 |
| Cash Sales for the year | 10,800 | Cash sent by HO to purchase locker for Branch | 1,300 |
| Credit Sales for the year | 7,000 | ||
| Cash remitted to HO | 15,000 |
- From the following particulars, calculate the fair value of an equity share assuming that out of the total assets, those amounting to Rs.41,00,000 are fictitious:
- Share capital:
5,50,000 10% Preference shares of Rs.100 each, fully paid up
55,00,000 Equity shares of Rs.10 each, fully paid up
- Liability to outsiders: Rs.75,00,000
- Reserves and surplus: Rs.45,00,000
- The average normal profit after taxation earned every year by the company during the last five year’s Rs.85,05,000
- The normal profit earned on the market value of fully paid equity shares of similar companies is 12%
- On 1st July 2013, the stock of Mahesh was destroyed by fire but sufficient records were saved from which the following particulars were ascertained:
| Rs. | |
| Stock at cost – 1st April 2012 | 73,500 |
| Stock at cost – 31st March 2013 | 79,600 |
| Purchases – Year ended 31st March 2013 | 3,98,000 |
| Sales – Year ended 31st March 2013 | 4,87,000 |
| Purchases – 1st April 2013 to 30th June 2013 | 1,62,000 |
| Sales – 1st April 2013 to 30th June 2013 | 2,31,200 |
In valuing the stock for the Balance Sheet on 31st March 2013, Rs.2,300 has been written off against certain stock which was a poor selling line, the cost of which was Rs.6,900/- . A portion of these goods was sold in June 2013 at a loss of Rs.250 on original cost of Rs. 3450 The remainder of the stock was now estimated to be worth the original cost. Subject to the above exception, gross profit had remained at a uniform rate throughout the year.
The value of stock salvaged was Rs.5,800. The policy was of Rs.50,000 and was subject to average clause. Show amount of claim for the loss by fire.
- From the following details, calculate Consequential Loss Claim
|
- The following balances are found in the books of Five Star Fashions Ltd., after its Profit & Loss Statement has been prepared for the year ended 31st March 2012.
| Rs. | Rs. | ||
| Public Deposits | 1,50,000 | Sundry Debtors | 5,20,000 |
| Interest accrued but not due | 2,500 | Security Deposit | 80,000 |
| Bank Overdraft | 2,36,600 | Interest Accrued on Investments | 6,000 |
| Sundry Creditors | 1,75,000 | Plant and Machinery | 15,40,000 |
| General Reserve | 2,00,000 | Vehicles | 3,10,000 |
| 1,60,000 Equity Shares of Rs.10 each | 16,00,000 | 10% Government Bonds | 60,000 |
| 5,000, 10% Preference Shares of Rs.100 each | 5,00,000 | Loan to Staff | 25,000 |
| Securities Premium | 2,00,000 | Stock in Trade | 4,10,700 |
| 10% Secured Loan | 1,80,000 | Prepaid Insurance | 1,000 |
| Interest Assured and due on Secured Loan | 4,800 | Share issue Expenses | 5,000 |
| Net Profit for the year ended 31st March, 2012 | 3,20,000 | B/R | 22,000 |
| Expenses Owing | 12,200 | Cash and Bank Balance | 15,400 |
| Employees’ Benefit Fund | 20,000 | Land and 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:
- The General Reserve be increased to Rs.2,50,000
- A dividend of 8% on Equity Share Capital and 10% on Preference Share Capital be declared.
Prepare the Company’s Balance Sheet as on 31st March 2012.
- The following is the balance sheet of A. limited 31-12-2013.
| Liabilities | Amount | Assets | Amount |
| Share capital 10,000 shares @ Rs.10/-each | 1,00,000 | Goodwill | 20,000 |
| General reserve | 15,000 | Plant & Machinery | 40,000 |
| 6% Debentures(Rs.100/) | 25,000 | Land & building | 45,000 |
| P & L a/c (as on 1.1.2013) | 5,000 | Investments | 20,000 |
| Profits for the year before tax | 40,000 | Stock | 25,000 |
| Creditors | 10,000 | Debtors | 20,000 |
| Provision for tax | 5,000 | Cash at bank | 25,000 |
| Discount on issue of debentures | 5,000 | ||
| 2,00,000 | 2,00,000 |
Assets revalued:-
Plant & Machinery= Rs. 50,000, Land and building= Rs. 40,000, investment= Rs. 25,000.
Profits include Rs.1,000/- being income on investments. Calculate the value of goodwill on the basis of three years purchase of super profits assuming that debentures are treated as long term capital. N.R.R is 12%, Tax rate is 50%, and depreciation on building is @ 10% and depreciation on plant and machinery @ 5%.
Section – D
- IV) Compulsory question. (15 marks)
23.
- In the terms of the lease, minimum rent was fixed at Rs.24,000/-. Royalty is to be calculated at 50 paise per ton. Due to strike, minimum rent is to be reduced by 25 percent for that year. In a particular year, there was a strike for 3 months and production was 44,000 tones. Calculate the amount paid to the landlord.
(3 marks)
- Write the format of Profit and Loss Account as per revised Schedule VI of the Co’s Act. (6 marks)
- A Company had 1000 equity shares of Rs.100 each, Rs.50 called up, and 1000 equity shares of Rs.100 each, Rs.25 called up and 1000 equity shares of Rs.100 fully called up. Preliminary expenses existed to the extent of Rs.50,000/-. Calculate the value of its Net Assets. (3 marks)
- A company has issued 80,000 shares of Rs.10 each. A fair investment return may be taken at 10%, this being considered reasonable in the industry in which the company is engaged in. The profit available to share holders was Rs.82,800/-. Calculate the capitalized value of its profits. (3 marks)
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