Advanced Corporate Accounting

1. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

End Semester Examinations – SEPT / OCT 2014

m.com – i semester

 ADVANCED CORPORATE ACCOUNTING

Duration: 3 Hrs                                                                                                       Max. Marks: 100

 

Section – A

1. Answer any SEVEN Each carries 5 marks.                          (7 x 5  = 35)

 

• Mention the five specific conditions, on fulfillment of which the event of two entities coming together is to be treated as “amalgamation in the nature of merger”.
• What is Human Resource Accounting? Mention any two objectives and assumptions of Human Resource Accounting.
• Write Short note on the Role of Public Accounts Committee.
• What is the need for Segmental Reporting? How are the reportable segments classified?
• Mention any 5 differences between Government Accounting and Commercial Accounting.
• Mention the main objectives of Indian Accounting Standards. Who issues the Accounting Standards in India?
• What is Cost of Control? How do you compute it?
• Write the disclosure requirements of Operating Segments as per AS 17. (IFRS – 8).
• Explain the need for corporate social reporting.
• Briefly explain the concept of Environmental Accounting.

 

Section – B

1. II) Answer any THREE Each carries 15 marks.                     (3 x 15   = 45)

• The National Company Ltd. was incorporated on 1^st July 2014 for the purpose of acquiring M Ltd. and N Ltd. and O Ltd.

The Balance Sheets of these companies as on 30^th June 2014 are as follows:

Particulars	M Ltd.	N Ltd.	O Ltd.
Asses
Tangible Fixed Assets at cost less depreciation	5,00,000	4,00,000	3,00,000
Goodwill	0	60,000	0
Other Assets	2,00,000	2,80,000	85,000
Total	7,00,000	7,40,000	3,85,000
Liabilities:
Issued Equity Share Capital (shares of Rs. 10 each)	4,00,000	5,00,000	2,50,000
Profit and Loss Account	1,50,000	1,10,000	60,000
10% Debentures	70,000	0	40,000
Sundry Creditors	80,000	1,30,000	35,000
Total	7,00,000	7,40,000	3,85,000

 

Average annual profits before debenture interest (July 2013 to June 2014 inclusive)	90,000	1,20,000	50,000
Professional valuation of tangible assets on 30th June 2014	6,20,000	4,80,000	3,60,000

 

1. The directors in their negotiations agreed that:
2. The recorded goodwill of N Ltd. is valueless;
3. The “other assets” of M Ltd. are worth Rs. 30,000;

• The valuation on 30^th June 2014 in respect of tangible assets should be accepted.

1. These adjustments are to be made by the individual company before the completion of the acquisition.

 

1. The acquisition agreement provides for the issue of 12% unsecured debentures to the value of the net assets of companies M Ltd., N Ltd., and O Ltd. and for the issuance of Rs. 10 nominal value of equity shares for the capitalized average profit of each acquired company in excess of net assets contributed. The capitalization rate is established at 10%.

You are required to:

1. Compute Purchase Consideration
2. Show the discharge of Purchase Consideration.

 

• The following is an extract of the Profit and Loss Account of Better and Best Ltd., for the year ended 31^st March, 2014.

Particulars	Rs. In thousands
Sales ( including excise duty recoveries)	727
Other Income	13
Total	740
Material	530
Excise Duty	62
Salaries, wages and employee benefits	19
Other Expenses	47
Interest and finance charges	7
Depreciation	5
Provision for taxation	31
Preliminary Expenses written off	5
Transfer to debenture redemption reserve	5
Proposed Dividend	5
Transfer to General Reserve	24
Total	740

Notes:

1. Other expenses include fees and commissions to whole-time directors of Rs. 9,000 and loss on sale of fixed assets of Rs. 3,000.
2. Interest and finance charges include interest on long-term loans of Rs. 4,000, balance being on short-term borrowings.

 

You are required to prepare a Value Added Statement for the year ended 31^st March, 2014 and Reconcile total value added with Profit before taxation.

 

• From the following date, determine in each case:

 

1. Minority Interest at the date of acquisition and at the date of consolidation.
2. Goodwill or Capital Reserve
3. Amount of holding company’s profit in the consolidated Balance Sheet assuming holding company’s own profit and loss account to be Rs. 2,00,000 in each case.

 

Case No.	Company Owned	Share Holding	Cost (Rs.)	Subsidiary Company
				Date of Acquisition 1.1.2013		Consolidation Date 31.12.2013
				Share Capital (Rs.)	Profit and Loss (Rs.)	Share Capital (Rs.)	Profit and Loss (Rs.)
1	A	90%	1,40,000	1,00,000	50,000	1,00,000	70,000
2	B	85%	1,04,000	1,00,000	30,000	1,00,000	20,000
3	C	80%	56,000	50,000	20,000	50,000	20,000
4	D	100%	1,00,000	50,000	40,000	50,000	55,000

 

• What do you mean by segmental reporting? Mention the types of segment & also elucidate on the Quantitative threshold applicable to segmental reporting

 

• Write Short notes on:

1. Forms of Accounts in Government Accounting.
2. Power of the Comptroller and Auditor General of India.
3. Consolidated Fund as per AS-21.

 

 

 

 

Section – C

1. Compulsory Case study.                                                                        (1 x 20 = 20)

 

• Pradeep was appointed as a Senior Accountant of A Ltd. on 1^st March 2014. The Management of A Ltd., wants to know the Minority Interest and the Value of Goodwill of A Ltd. to be reported in the Consolidated Balance Sheet of A Ltd.  Mr.  Pradeep was provided with the following:

A Ltd. acquired 8,000 shares of Rs. 100 each in B Ltd., on 30^th September, 2013.  Liabilities and Assets of the two companies as on 31^st March 2014

Liabilities	A Ltd.	B Ltd.	Assets	A Ltd.	B Ltd.
Share Capital:			Fixed Assets	15,00,000	14,47,000
30,000 Shares of Rs. 100 each	30,00,000	0	Investment in B Ltd. at cost	17,00,000	0
10,000 Shares of Rs. 100 each	0	10,00,000	Stock in hand	4,00,000	2,00,000
Capital Reserve	0	5,50,000	Loan to A Ltd.	0	20,000
General Reserve	3,00,000	50,000	Bills Receivable (including Rs. 5,000 from B Ltd.)	12,000	0
Surplus Account	3,82,000	1,80,000	Debtors	2,50,000	1,80,000
Loan from B Ltd.	21,000	0	Cash and Bank	20,000	20,000
Bills Payable (including Rs. 5,000 to A Ltd)	0	17,000
Creditors	1,79,000	70,000
Note: On the Balance Sheet of A Ltd.:  There is a contingent liability for bills discounted of Rs. 6,000.
TOTAL	38,82,000	18,67,000	TOTAL	38,82,000	18,67,000

 

He was also provided with the following additional information:

1. B Ltd., made a bonus issue on 31^st March, 2014 of one share for every two shares held, reducing the Capital Reserve equivalently but the accounting effect to this has not been given in the above Balance Sheet.
2. Interest receivable for the year (Rs. 1,000) in respect of the loan due by A Ltd to B Ltd. has not been credited in the books of B Ltd.
3. The credit balance in Surplus Account of B Ltd., as on 1.4.2013 was 21,000.
4. The directors decided on the date of the acquisition that the fixed assets of B Ltd. were overvalued and should be written down by Rs. 50,000. Consequential adjustments on depreciation are to be ignored.

Mr. Pradeep, after considering the above details, arrived at the following figures:

1. Goodwill 2,46,500/-
2. Minority Interest Rs. 2,97,800/-

The Management of the company is not satisfied with the above figures, hence wants you to calculate the same and give your opinion on the accuracy of the above figures.  It also wants you to prepare Consolidated Balance Sheet as at 31^st March, 2014 showing your workings.