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ST. JOSEPH’S COLLEGE OF COMMERCE(AUTONOMOUS)
END SEMESTER EXAMINATIONS – OCTOBER 2013
M.COM – I SEMESTER
ADVANCED CORPORATE ACCOUNTING
Duration: 3 hrs Max. Marks: 100
Section – A
I) Answer any SEVEN questions. Each question carries 5 marks (7 x 5 =35)
1) What is Reverse merger? What is demerger?
2) What is Human Resource Accounting? What are the benefits of Environmental
Accounting?
3) Who are dissenting shareholders? Mention the accounting treatment.
4) It has been said that a company’s productivity is best measured in terms of ‘Value
Added Statement’. Comment.
5) Explain the general principles of government accounting. Also explain the role of
Comptroller and Auditor‐General of India.
6) Explain the following with suitable examples:
(a) Minority interest
(b) Chain‐holdings
7) “Accounting standards aim to protect users of financial reports by providing reliable
and comparable financial statement”. Do you agree with this statement? Give
reasons.
8) What is the need for preparation of consolidated financial statements? What are the
rules for the preparation of consolidated Balance Sheet?
9) What are the objectives of Share Buy Back? Briefly explain the conditions of Buy Back
10) On the eve of the absorption of A Ltd. by B Ltd. following summarized details are
given
A Ltd B Ltd.
Net Assets 33,30,000 41,25,000
Number of equity shares of Rs. 200 each 9,000 15,000
Reserves 15,30,000 11,25,000
Terms of absorption proposed as follows:
The holders of every three shares in A Ltd. were to receive four shares in B Ltd. plus as
much cash as is necessary to adjust the rights of shareholders of both the companies in
accordance with intrinsic value of their respective shares. You are required to compute
the purchase consideration.
SECTION – B
II) Answer any THREE questions. Each question carries 15 marks (3 x 15 = 45)
11) Enumerate the distinguishing features of ‘pooling of interest method’ and ‘purchase
method’ of accounting for amalgamation.
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12) What do you understand by segment reporting? What are the problems associated
with segment reporting?
13) The following information is available of a concern; calculate EVA
Equity capital : Rs. 500 crores
Debt capital (12%) Rs. 2000 crores
Reserves and surplus: Rs. 7,500 crores
Capital employed : Rs. 10,000 crores
Risk‐free rate: 9%
Beta factor : 1.05
Market rate of return: 19%
Equity (Market) risk premium : 10%
Operating profit after tax : Rs. 2,100 crores
Tax rate : 30%
14) Blue Ltd. and Star Ltd. were amalgamated on and from 1st April, 2012. A new
company called Yellow Star Ltd was formed to take over the business of the above
said companies. The balance sheets of Blue Ltd. and Star Ltd. as on 31st March, 2012
are given hereunder: (Rs. in Lakhs)
Blue Ltd Star Ltd
Liabilities:
Equity shares of RS. 100 each
2,000
1,600
15% Preference shares of Rs. 100 each 800 600
Revaluation Reserve 200 160
General Reserve 400 300
P&L A/c 160 120
12% Debentures of Rs. 100 each 192 160
Current liabilities 408 190
Total 4,160 3,130
Assets:
Fixed assets
2,400
2,000
Current assets loans and advances 1,760 1,130
Total 4,160 3,130
Additional information:
(i) Preference shareholders of Blue Ltd. and Star Ltd. have received same number of
15% preference shares of Rs. 100 each in the new company.
(ii) 12% debentures of Blue Ltd. and Star Ltd. are discharged by the new company by
issuing adequate number of 16% debentures of Rs. 100 each to ensure that they
continue to receive the same amount of interest.
(iii) Yellow Star Ltd. has issued 1.5 equity shares for each equity share of Blue Ltd.
and 1 equity share for each equity share of Star Ltd.
(iv) The face value of shares issued by Yellow Star Ltd. is Rs. 100 each
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You are required to prepare the Balance Sheet of Yellow Star Ltd. as on 1st April 2012 after the
amalgamation has been carried out using the ‘Pooling of interest method’.
15) The Balance Sheet of H Ltd. and V Ltd., as on 31.3.2012 are as follows:
Liabilities H Ltd. Rs. V Ltd. Rs. Assets H Ltd. Rs. V Ltd. Rs.
Equity share of Rs. 10 each 10,00,000 3,00,000 Goodwill 50,000 25,000
9% Preference shares of
Rs.100 each
1,00,000 __ Building 3,00,000 1,00,000
10% Preference shares of Rs.
100 each
_____ 1,00,000 Machinery 5,00,000 1,50,000
General Reserve 1,00,000 80,000 Stock 2,50,000 1,75,000
Retirement Gratuity fund 50,000 20,000 Debtors 2,00,000 1,00,000
Sundry Creditors 1,30,000 80,000 Cash at Bank 50,000 20,000
Preliminary
expenses
30,000 10,000
Total 13,80,000 5,80,000 Total 13,80,000 5,80,000
H Ltd. absorbs V Ltd. on the following terms:
(i) 10% Preference shareholders are to be paid at 10% premium by issue of 9%
Preference Share of H Ltd.
(ii) Goodwill of V Ltd. is valued at Rs. 50,000, Buildings are valued at Rs. 1,50,000 and
the Machinery at Rs. 1,60,000.
(iii) Stock to be taken over at 10% less value and Reserve for Bad and Doubtful Debts to
be created @7.5%
(iv) Equity shareholders of V Ltd. will be issued equity shares @5% Premium
Prepare necessary ledger accounts to close the books of V Ltd. and prepare the Balance
Sheet after absorption as at 31.03.2012
SECTION – C
III) Compulsory question (20 marks)
16.
The following is the Balance Sheet of H Ltd. and its subsidiary S Ltd. as on 31/03/2013
Liabilities H Ltd S Ltd Assets H Ltd S Ltd
Share capital:
Equity shares of Rs. 10
each
6% Preference shares
of Rs. 10 each
6,00,000
______
2,00,000
1,60,000
Fixed Assets 5,00,000 4,40,000
General Reserve 1,00,000 80,000 15,000 Equity shares
in S Ltd
3,30,000
P&L A/C 2,00,000 90,000 1,200 Preference
shares in S Ltd
1,20,000
6% Debentures of Rs.
10 each
____ 40,000 1,000, 6% Debentures
in S Ltd.
10,000
Proposed dividend: Current Assets 2,94,000 2,87,000
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On Equity shares
On Preference shares
60,000
____
20,000
9,600
Debenture interest
accrued
____ 2,400
Sundry Creditors 2,94,000 1,25,000
Total 12,54,000 7,27,000 Total 12,54,000 7,27,000
Other information is as under:
(i) The general reserve of S ltd as on 31.03.2012 was Rs. 80,000.
(ii) H Ltd. acquired the shares in S Ltd. on 31.03.2012
(iii) The balance of P&L A/c of S Ltd. is made up as follows:
Balance as on 31.03.2012 ‐ Rs. 56,000
Net profit for the year ended 31.03.2013 – Rs. 63,600
Rs. 1,19,600
Less: Provision for proposed dividend Rs. 29,600
Rs. 90,000
(iv) The balance of P&L A/c of S Ltd. as on 31.03.2012 is after providing for preference
dividend of Rs. 9,600 and proposed equity dividend of Rs. 10,000 both of which were
subsequently paid and credited to P&L A/c H Ltd.
(v) No entries have been made in the books of H Ltd. for debenture interest due from or
proposed dividend of S ltd. for the year ended on 31.03.2013
(vi) S Ltd. has issued fully paid bonus shares of Rs. 40,000 on 31.03.2013 among the
existing shareholders by drawing upon the general reserve. The transaction has not
been given effect to in the books of S Ltd.
You are required to prepare the consolidated Balance Sheet of H Ltd. with its subsidiary S
Ltd. as on 31.03.2013
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