BBA Corporate Accountingn Question Paper 2007

LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.B.A.

MS 13

DEGREE EXAMINATION –BUSINESS ADMINISTRATION

FOURTH SEMESTER – APRIL 2007

BU 4500 – CORPORATE ACCOUNTING

 

 

Date & Time: 21/04/2007 / 9:00 – 12:00          Dept. No.                                                     Max. : 100 Marks

 

 

PART A

 

Answer ALL questions                                                                                  10 x 2 = 20 marks

 

Explain the following:

1. Forfeiture of shares
2. Capital redemption reserve
3. Redemption of debentures cum interest and ex-interest
4. Vendors suspense account
5. Liquidators remuneration
6. Contingent liability
7. A Ltd., had share capital of 10,000 equity shares of Rs.10 each, Rs.40,000 in P & L and Rs.30,000 in general reserve. It is decided to issue bonus shares, in the ratio of one share for every 5 held. Pass entries.
8. The expected profit of a company before tax @ 40% is Rs.50,000, Its capital consists of 10,000 equity shares of Rs.10 each and 10,000 8% preference shares of Rs.10 each. It is the company’s policy to transfer 20% of the profits to general reserve. If the normal rate of return is 10%, calculate the yield value per share.
9. X Ltd., has made the following profits during the past three years: Rs.60,000, Rs.75,000 and Rs.90,000. Its assets are worth Rs.5,00,000 and liabilities Rs.2,00,000. Calculate the value of goodwill of the firm at 2 years purchase of super profits, the normal rate of return being 15%.
10. State under which heading in the Balance sheet of the company the following items will appear:
11. a) Loose tools (b) unclaimed dividends (c) public deposits (d) bills receivable.

 

 

PART  B

 

Answer ANY FIVE questions                                                                       5 x 8 = 40 marks

 

11. (a) State the maximum commission payable to underwriters

 

(b) The following underwriting took place:

A – 5,000 shares;  B – 3,000 shares;  C – 2,000 shares.

In addition there was  firm underwriting:

A – 1,000 shares;  B – 500 shres;  C – 1,500 shares.

The share issue was for 10,000 shares. Total subscription including firm underwriting was 8,500 shares and the forms included the following marked forms:

A – 2,000 shares;  B – 1,000 shares;  C – 1,000 shares.

Show the allocation of liability of the underwriters assuming that shares underwritten firm are treated as unmarked.

 

12. Distinguish between Amalgamation in the nature of purchase and merger.

 

13. X Co. Ltd., had 10,000 equity shares of Rs.10 each fully paid and 5,000 7% redeemable preference shares of Rs.10 each fully paid, redeemable at a premium of 10%. It had a credit balance of Rs.40,000 on profit and loss account and Rs.50,000 on general reserve.

The company resolved:

• To issue 3,000 equity shares of Rs.10 each at Rs.12 per share in order to provide part of the funds for the redemption of the preference shares.
• To redeem the preference shares.
• To make a bonus issue of one share for every two held by the existing equity shareholders from the general reserve. The resolutions were carried into effect.

Journalize.

 

14. Krishna Ltd., which had Rs.5,00,000 12% debentures outstanding on 1/1/1997, made the following purchases in the open market:

1.4.1997 1,000 debentures of Rs.100 each at Rs.99 ex-interest

1.9.1997 500 debentures of Rs.100 each at Rs.97 cum interest

The debentures purchased on 1/4/97 were cancelled on 31/12/97.

Pass entries for the year 1997, assuming that the interest is payable every year on 30^th June and 31^st December.

 

 

15. M Ltd., was incorporated on 1.1.94 with an authorized capital of 50,000 equity shares of Rs.10 each to take over the running business of V Ltd., as from 1.10.93. The following is the summarized profit and loss account for the year ended 30.9.94

Rs.                               Rs.

Sales – 1.10.93 to 31.12.94                         6,000

1.1.94 to 30.9.94                         19,000                         25,000

Cost of sales                                              16,000

Administrative expenses                             1,768

Selling commission                                        875

Goodwill written off                                     200

Interest paid to vendors                                 373

(loan repaid on 1.2.94)

Distribution expenses (60% variable)         1,250

Preliminary expenses written off                   330

Debenture interest                                          320

Depreciation                                                   444

Directors’ fees                                                100                         21,660

Profit                                                                                         3,340

The company deals with one type of product.

The unit cost of sales was reduced by 10% in the post incorporation period as compared to the pre-incorporation period. Apportion the net profit between pre-incorporation and post-incorporation periods showing the basis of apportionment.

 

16. (a) What is the maximum remuneration payable to different classes of managerial personnel as per the Company’s Act?

 

(b) From the following particulars, determine the maximum remuneration available to a full time director of a manufacturing company.

The Profit & Loss Account of the company showed a net profit of Rs.40,00,000 after taking into account the following items:

Rs.

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

(b) Provision for income tax                                                                     2,00,000

(c)   Donation to political parties                                                                 50,000

(d) Ex-gratia payment to a worker                                                               10,000

(e) Capital profit on sale of assets                                                                15,000

 

 

 

 

 

 

17. The share capital of Z Ltd., consisted of the following: 10,000 6% Preference shares of Rs.100 each and 50,000 equity shares of Rs.10 each.

The company had accumulated losses totaling Rs.3,50,000 and preliminary expenses not written off to the extent of Rs.20,000. It is ascertained that Fixed Assets that stood in the books at Rs.14,00,000 was over valued to the extent of Rs.4,00,000.

The following scheme was adopted to write off the losses and reduce the assets:

1. 6% preference shares were to be converted into 7% preference shares of Rs.60 each.
2. Equity shares to be reduced to Rs.2 each

• The Directors to refund Rs.10,000 fees received by them.

1. Preference dividend which is in arrears for 3 years, is to be settled by the issue of 5,000 equity shares of Rs.2 each.

Journalize.

 

18. The following particulars related to ABC Ltd., which went into voluntary liquidation.

Preferential creditors                     Rs.25,000

Unsecured creditors                      Rs.50,000

Secured creditor                            Rs.10,000

(secured on machinery of the book value of Rs.25,000)

Machinery realized                        Rs.15,000

Other assets realized                     Rs.75,000

Expenses of liquidation                Rs.  1,500

Liquidators remuneration was agreed at 21/2% on the amount realized and 2% on the amount paid to unsecured creditors.

Prepare liquidator’s final statement of account.

 

PART C

 

Answer ANY TWO questions                                                                 2 x 20 = 40 marks

 

19. ABC Ltd. issued a prospectus inviting applications for 2,000 shares of Rs.10 each at a premium of Rs.2 per share, payable as follows:

 

On application                   Rs.2

On allotment                     Rs.5 (including premium)

On first call                       Rs.3

On second call                  Rs.2

 

Applications were received for 3,000 shares and allotment was made pro-rata to applicants of 2,500 shares, the remaining applications being refused. Amount overpaid on application was adjusted against amount due on allotment.

 

X to whom 80 shares were allotted failed to pay allotment money and on a subsequent failure to pay the first call, his shares were forfeited.

 

Y the holder of 40 shares failed to pay the two calls and the shares were forfeited. Of the shares forfeited, 100 shares were sold at Rs.9 per share fully paid ( all the shares of X being included).

Journalize.

 

 

 

 

 

 

 

 

 

20. The business of A Ltd., was purchased by B Ltd., on the following terms:
21. i) A payment of cash of Rs.20 for every share in A Ltd.
22. ii) A payment of Rs.55 in cash for every debenture in A Ltd.

iii)        The exchange of 3 shares in B Ltd., of Rs.10 each (market value of Rs.20) for every share in A Ltd.

1. Expenses of realization Rs.5,000 to be paid by B Ltd.
2. B Ltd., valued the buildings of A Ltd., at Rs.40,000 and machinery at Rs.15,000

The balance of sheet A Ltd.on date of purchase stood as follows:

Liabilities                                    Rs.	Assets                                          Rs.
800 equity shares of Rs.50 each                                  40,000 8% debentures of Rs.50 each                                    6,000 Export profit reserve                      4,000 (statutory) P & L                                              1,000 Creditors                                        4,200 ——– 55,200	Building                                       15,000 Machinery                                   21,000 Stock                                           10,000 Debtors                                         9,000 Cash                                                200       ——— 55,200

Prepare realization account, B Ltd., account and equity shareholders’ account in the books of A Ltd. Also pass journal entries in the books of B Ltd., to record the take over.

 

21. B Ltd. had an authorized capital of Rs.6 lakhs divided into equity shares of Rs.10 each. The following is the Trial Balance of the company as on 31.3.2006.

Rs.

Rs.

Calls in arrears                             7,500 Building                                   3,60,000 Machinery                               3,00,000 Interim dividend paid                   7,500 Purchases                               1,85,000 Preliminary expense                    5,000 Freight                                        18,840 Bad debts                                     2,110 8% Govt. bonds                          60,000 Stock (1.4.05)                             75,000 Debtors                                       94,200 Cash                                           25,750 Bank                                           39,900 Advance tax paid                        14,800 Wages                                        70,000 Salaries                                      31,400 Debenture interest (up to 30.9.05)                              9,000 ————- Total                                       13,06,000

6% debentures                   3,00,000 P & L (.1.4.05)                      14,500 Creditors                               50,000 General reserve                     25,000 Share capital                      4,60,000 Bills payable                         38,000 Sales                                  4,15,000 Provision for bad debts          3,500                     ————– 13,06,000

 

Prepare final accounts for the year ending 31.3.06 after considering the following adjustments:

1. 60,000 was added to machinery on 1.10.05. Depreciate machinery by 10% and building by 5%.
2. Write off ½ of preliminary expenses.

• Provide 5% for bad debts.

1. Provide for income tax Rs.25,000
2. Transfer Rs.10,000 to general reserve.
3. Stock on 31.3.06 was Rs.1,01,000

• Directors propose 5% final dividend on equity shares.
• bonds were purchased on 31.3.06.

 

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