RO 15

FOURTH SEMESTER – APRIL 2008

CO 4500 – CORPORATE ACCOUNTING

Date : 26/04/2008 Dept. No. Max. : 100 Marks

Time : 9:00 – 12:00

PART A (Answer all the questions) (10 x 2 = 20)

What is under subscription?
What is meant by marked forms in under writing?
How do you apportion the following expenses while ascertaining profits prior to incorporation: salary, gross profit, director’s fee, debenture interest.
Briefly explain calls in arrears.
Give an imaginary profit and loss appropriation account of a limited company.
A company issued 500 8% debentures of Rs 100 each at a discount of 5% redeemable at a premium of 10%. Pass journal entry.
What is interim dividend?
Write a note on capital reduction.
B Ltd. Has 60000 equity shares of Rs.100 each, Rs.80 per share called up. The company decided to pay off Rs.20 per share of the paid up capital and at the same time to reduce the Rs.100 share to Rs 60 share fully paid up by canceling the unpaid amount. Give journal entries.
From the following information calculate the minimum fresh issue of shares. Redeemable Preference shares Rs.4,00,000, premium on redemption 10%. Divisible profits available Rs 80,000. Fresh issue of equity shares of Rs. 10 each is to be made at 25% premium.

PART B (answer any five questions only) 5 x 8 = 40

What is purchase consideration? Explain the various methods of its calculation.
What is Alteration of share capital? Explain the different kinds of Alteration of share capital which do not require court approval?
Explain the provisions relating to redemption of redeemable preference shares.
From the following particulars determine the maximum remuneration available to a full time director of a manufacturing company. The profit and loss of a company showed a net profit of Rs.4000000 after taking into account the following items.

Depreciation (including special depreciation of Rs 40,000) 1,00,000

Provision for income tax 2,00,000

Donation 50,000

Ex-gratia payment to worker 10,000

Capital profit on sale of assets 15,000

B ltd. Issued 10000 shares of Rs.100 each. The entire issue was underwritten as follows. A 50%, B 30%, and

C 20%. In addition there was firm underwriting as follows. A 1000 shares, B 750 shares, and C 500 shares. The total subscription including firm underwriting was 8000 shares and the subscription included the following marked applications. A 1500, B 2000 and C 750. Find the liability of the underwriters.

The following particulars relate to a company which went into voluntary liquidation.

Preferential creditors Rs. 600, secured creditors Rs.20,000(securities realized Rs.25,000) unsecured creditors Rs.30,500. The assets realized Rs. 26,000(excluding securities) the expense of the liquidation were Rs. 252 and the liquidators remuneration was agreed at 3% on the amount realized and 1.5% on the amount paid to unsecured creditors. Show the liquidators final statement of accounts.

Average capital employed in K ltd. Is Rs 35,00,000 net trading profits before tax for the last 3 years were Rs.14,75,000 Rs 14,55,000 Rs 15,25,000. In these 3 years the M.D. was paid a salary of Rs. 10,000 pm. But now he would be paid a salary of Rs 12000 pm. Normal rate of return is 18%, rate of tax is 50%. Calculate goodwill on the basis of 3 years purchase of super profits.

Y ltd was incorporated, on 1.7.05 to acquire a running business of Y, with effect from 1.1.05. The following was the profit and loss account of the co for the year ending 31^st Dec 2005.

Particulars	Rs.	particulars	Rs
To. Office expenses	1,08,000	By gross profit	4,50,000
To. formation exps	20,000
To stationary	10,000
To selling expenses	1,20,000
To directors fees	40,000
To Net profit	1,52,000
	4,50,000		4,50,000

Prepare a statement showing profits earned by the company in the pre and post incorporation periods. The total sales for the year took place in the ratio of 1:2 before and after incorporation respectively.

PART C (answer any two questions only) 2 x 20 = 40

M ltd and N ltd. Agreed to amalgamate on the basis of the following balance sheets as on 31.3.07.

Liabilities	M ltd (Rs)	N ltd (Rs)	Assets	M ltd (Rs)	N ltd (Rs)
Share capital of Rs 25 each	75,000	50,000	Good will	30,000	———
P & L a/c	7,500	2,500	Fixed assets	31,500	38,800
Creditors	3,500	3,500	Stock	15,000	12,000
Depreciation fund	——	2,500	Debtors	8,000	5,200
			Bank	1,500	2,500
	86,000	58,500		86,000	58,500

The assets and liabilities are to be taken over by a new company formed called P ltd at book values. P ltd capital is Rs 2,00,000 divided into 10000 equity shares of Rs 10 each and 10000 9% preference shares of Rs 10 each. P ltd issued the equity shares equally to the vendor companies and preference shares were issued for any balance of purchase price. Pass journal entries in the books of P ltd and prepare its balance sheet if the amalgamation is in the nature of purchase.

Sun ltd issued a prospectus inviting applications for 20000 shares of Rs 10 each at a premium of Rs 2 per share payable on application Rs 2 per share, allotment Rs 5, (including premium) on first call Rs 2, and on final call Re 3 per share. Applications were received for 30000 shares and allotment was made on pro-rata to the applicants of 24000 shares, and the remaining applications being refused. Raja to whom 800 shares were allotted failed to pay the allotment money and calls money and John the holder of 1000 shares failed to pay the two calls and these shares were forfeited. All these shares were sold to Mani at Rs 8 per share fully paid. Pass journal entries in the books of Sun ltd.

The XYZ Co. was registered with a capital of Rs 6,00,000 in equity shares of Rs. 10 each. The following is the list of balances extracted from its books on 31.3.07

Particulars	Amount	Particulars	Amount
Wages	84,865	Freight	13,115
Calls in arrears	7,500	Salary	14,500
Plant and machinery	3,30,000	Directors fee	5,725
Premises	3,00,000	Bad debts	2,110
Interim dividend	37,500	Debentures	9,000
Opening Stock	75,000	capital	4,00,000
Fixtures	7,200	6% debentures	3,00,000
Sundry debtors	87,000	P & l a/c (cr)	14,500
Goodwill	25,000	Bills payable	38,000
Cash in hand	750	Sundry crs.	50,000
Bank	39,900	Sales	4,15,000
Purchases	1,85,000	General reserve	25,000
Preliminary exps	5,000	Bad debts reserve	3,500
General exps	16,835

Prepare trading and profit and loss account and balance sheet in proper form after making the following adjustments.

Depreciate plant and machinery by 10%.
Write off Rs 500 from preliminary expenses.
Provide half years debenture interest due.
Bad and doubtful debts reserve at 5%.
Stock on 31.3.07 was Rs 95,000.

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