LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – COMMERCE

FOURTH SEMESTER – April 2009

CO 4502 – COMPANY ACCOUNTS

Date & Time: 24/04/2009 / 9:00 – 12:00  Dept. No.                                                   Max. : 100 Marks

SECTION – A

Answer any TEN questions.                                                                                       (10  x 2 = 20)

1. What conditions must a company satisfy for issuing shares at discount?
2. Distinguish between marked and unmarked applications.
3. How do you value goodwill under capitalization of super profit?
4. Write short notes on (i) rights issue of shares, (ii) bonus shares.
5. What is the need for valuation of shares?
6. A company purchased assets for Rs. 5,00,000. The vendors were paid Rs. 1,40,000 in cash and the balance in 10% debentures of 100 each is issued at 90%. Journalise.
7. From the following particulars determine maximum remuneration available to full- time director of a manufacturing company.

The P&L A/c of the company showed net profit of Rs. 40,00,000 after taking into   account the following

items:

1. i) depreciation Rs. 1,00,000(including special depreciation Rs. 40,000
2. ii) provision for income tax Rs. 2,00,000

    iii) donation to political party Rs. 50,000,iv) capital profit on sale of assets Rs. 15,000

8. A company forfeited 10 shares of Rs. 10 each. Rs. 6 called up, issued at a discount of 10% on which Rs. 2 per share was paid.  These shares were reissued at Rs. 8 called up  for Rs. 5 per share. Pass forfeiture and reissue entries.
9. Company has following shares as a part of its share capital. 20,000 equity shares of Rs. 10 each, Rs. 8 called up and paid up and 10,000, 10% preference shares of Rs. 10 each. The company decided to alter the share capital as follows: i)To convert the partly paid-up equity shares  into fully paid-up shares of Rs. 8 each, ii) To consolidate the preference share into shares of Rs. 50 each. Journalise the alterations.
10. X Ltd. decides to redeem Rs. 2,00,000, 10% preference shares at a premium of 10% out of profits. The company has general reserve balance of Rs. 3,00,000. Write entries for redemption.

SECTION-B

Answer ANY 5 questions                                                                                                        (5 x 8 = 40)

11. How do you ascertain underwriter’s liability in the following cases:

(a) Complete underwriting

(b) Partial underwriting

(c) Firm underwriting

12. Write short notes on: (i) Capital Redemption Reserve, and (ii) Ex-Interest and Cum- Interest Quotations

13. A company earned the following net profits during the last four years after taxes:

1996-Rs. 60,000, 1997-Rs. 65,000,1998-Rs. 75,000, and 1999-Rs. 70,000.  The capital employed in the business was Rs. 60,000.  Reasonable rate of return, normal  in the industry was 10%.  Super profits of the company can be maintained for l5 years.

Find out goodwill of the company:

• If the present value of annuity of Re. 1 for five years at 10% is 3.78 and the goodwill  should be valued

on Annuity basis.

2) If the super profit should be capitalized at normal rate of return.

3) If goodwill is 5 years purchase of the super profits.

14. The Quick Ltd., went into voluntary liquidation on 31-3-05 at which date its capital  consisted of 2,000

shares of Rs. 100 each fully paid and particulars of the   assets and liabilities  were as under:

Cash in hand                                                                                       1,000

Machinery which realized                                                                 35,000

Stock which realized                                                                         20,000

Debtors which realized                                                                     10,000

Unsecured creditors (including Rs. 5,000 preferential creditors)     55,000

Secured creditors(securities realized Rs. 30,000 by themselves)     22,000

8% Debentures(having floating charge)                                           40,000

The liquidator’s remuneration was fixed at 4% commission on the assets realized  by him including surplus from secured creditors and 2% on the distribution made  to unsecured creditors.   The liquidation expenses came to Rs. 2,380 and the   interest on debentures was due for one year to the date of winding up.

Prepare the liquidator’s final statement of account showing the rate and amount  distributed as final dividend

to the unsecured creditors.

15. Ashok Ltd. was incorporated on 1^st April to take over as from 1^st January in the same year an existing

business of Desai Bros.  Under the agreement all  the profits made from 1^st January are to belong to the

company.  The following balances appeared in the company’ ledger as at 31^st December:

Stock on 31^st December amounted to Rs. 4,80,000. Bad debts amounting to Rs. 1,000  of which Rs. 500

related to book debts taken over by the company and a provision  of  Rs. 5,000 to be made for doubtful debts.

Depreciation has to be written off at 5% on buildings, 10% on furniture and 20%  on Vehicles.

Prepare(a) Trading Account (b) Profit and Loss Account showing profit post and  prior to incorporation of the company (assuming that the sales are evenly spread over throughout the year)

16. A company has 10,000 9% redeemable preference shares of Rs. 100 each fully paid.  The company

decides to redeem the shares on 31^st Dec. 2007 at a premium  of 10%.  The company makes the following

issues:

• 6,000 equity shares of Rs. 100 each at a premium of 10%
• 4,000 8% Debentures of Rs. 100 each.

The issue was fully subscribed and allotments were made.  The redemption

was duly carried out.  The company has sufficient profits.

You are required to give the necessary entries.

17. On 31^st Dec. 1998, the balance sheet of a limited company disclosed the following position.

On Dec. 31, 1998, the fixed assets were independently valued at Rs. 7,00,000  and the goodwill at

Rs. 1,00,000.  The net profits for the three years were:

1996-Rs. 1,03,000;1997-Rs. 1,04,000;and 1998-Rs. 1,03,300 of which 20% was  placed to reserve, this proportion being considered reasonable in the industry in  which the company is engaged and where a fair return on investment may be taken   at 10%.  Compute the value of the company’s share by (a) the net assets method and (b) the yield method.

18. Ltd. was promoted as a Joint Stock Company in 2000. The working of company was not successful.  On 31-12-2001 company’s balance sheet stood as under:

It is resolved to reconstruct the company on the basis of the following scheme:

(1) The 12,000 shares of Rs. 100 each are to be reduced to an equal number of fully  Paid shares of Rs. 50 each.

(2) Debenture holders are to be discharged by the issue of 8,000 unissued shares as fully paid up shares of

Rs. 50 each in full settlement of their claim

(3) The claims of creditors be reduced by 50% as agreed by them.

(4) The amount available be used to write off Profit and Loss Account, Preliminary Expenses, Discount on issue of shares, 50% off Goodwill; Rs. 20,000 off Stock; and Rs. 30,000 off Machinery; and also provision for doubtful debts to be made  to the extent of Rs. 10,000.

Give the necessary Journal entries:                                                    

SECTION—C

Answer ANY 2 Questions:                                                                                         (2 x 20 = 40)   

19. The balance sheets of Gargi Ltd., as at December 31, 2006 and 2007 are given below:

       Assets                                                                2007                        2006

Cash Balances                                                Rs     60,000                        50,000

Trade Debtors                                                      1,00,000                        75,000

Inventory                                                              1,20,000                     1,40,000

Land                                                                        80,000                     1,00,000

Plant & Machinery                                               2,50,000                     2,00,000

Accumulated depreciation on plant                      (80,000)                     (60,000)

Total  of assets                                                     5,30,000                      5,05,000

       Liabilities and Capital

Trade creditors                                                        40,000                        30,000

Debentures                                                              90,000                      1,50,000

Equity share capital                                              2,40,000                      2,00,000

Retained Earnings                                                1,60,000                      1,25,000

Total of liabilities and capital                              5,30,000                      5,05,000

Cash dividends of Rs. 25,000 have been paid during the year.

You are required to prepare a cash flow statement.

20. On 1^st April 1999, ABC Ltd. issued 1,00,000 equity shares of Rs. 10 each at Rs. 12 per share, payable as to Rs. 5 on application, Rs. 4 on allotment, and the balance on 1^st July 1999.

The lists closed on 12^th April 1999 by which date applications for 1,40,000 shares had been received.  Of the cash received, Rs. 80,000 was returned and Rs. 1,20,000 was applied to the amount due on allotment, the balance of which was paid on 19^th April 1999.  All share holders paid the call due on 1^st July 1999, with the exception of one allottee for 1,000 shares.  These shares were forfeited on 30^th November 1999 and reissued  as fully paid at Rs. 8 per share on 2^nd January 2000.

Pass Journal entries in the books of ABC Ltd.

21. From the following trial balance of Vishal Trading Co. Ltd. as at 31.3.2000 and the adjustments given

below prepare the trading and profit and loss account,  profit and loss appropriation account and the

balance sheet:

Adjustments:

• Closing stock was valued at Rs. 25,000
• Provide for ½ year’s outstanding interest on debentures
• Write off ¼ of discount on issue of shares
• Provide for Rs. 10,000 for income tax and 10% tax on proposed dividend
• The directors have proposed dividend at 15%
• Transfer Rs. 3,000 to dividend equalization reserve
• Depreciate buildings at 2.5% and furniture at 10%.

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – COMMERCE

FOURTH SEMESTER – APRIL 2011

CO 4502/CO 4500 – COMPANY ACCOUNTS

Date : 07-04-2011              Dept. No.                                        Max. : 100 Marks

Time : 1:00 – 4:00

Part – A

Answer ALL Questions:                                                                     10 X 2 = 20 marks

1. State any two legal provisions as to the utilization of securities premium.
2. Enumerate the various ways of redemption of debentures.
3. Give an imaginary Profit & Loss appropriation account of a limited company.
4. Write a note on “Intrinsic Value of Shares”.
5. What do you understand by “Consolidation of shares”?
6. Ltd. forfeited 1,000 equity shares of Rs.10 each, issued at a discount of 10% for non-payment of the first call of Rs.2 and the final call of Rs. 3 per share. Show the necessary journal entry.
7. Ltd. redeemed Rs.10,000, 12% debentures out of capital by drawing a lot and it has also redeemed Rs.20,000 10% debentures out of profit by drawing a lot. Journalize.
8. Dharran Ltd. earned a profit after tax of Rs.10,00,000 in 2008-09 and it wanted to pay a dividend of 18% on its Capital of Rs.30,00,000. What will be the balance left in the Profit & Loss A/c.
9. Give journal entries for the following transactions in connection with internal reconstructions:-
   • 30,000 equity shares of Rs.10 each fully paid reduced to shares of Rs.5 each fully paid.

• 300 9% debentures Rs.1000 each converted into 1500

12% debentures of Rs.100 each.

10. Total assets of the firm is Rs.8,40,000. The liabilities of the firm is Rs.4,40,000. Normal rate of return in this class of business is 12.5%. The firm earned a profit of Rs.64,000. Calculate goodwill, if it is to be valued at          2 years’ purchase of super profit.

PART – B

5 X 8 – 40 MARKS

Answer any FIVE Questions:

11. Explain the law relating to calculation of ‘Managerial Remuneration’.
12. What are preference shares? What are the conditions for the redemption of preference shares?
13. Define goodwill. What are the different methods of calculation of goodwill?
14. A company issued 10,000 equity shares of Rs.10 each at a premium of Rs.3 per share payable. Rs.5 on application, Rs.5 (including Premium) on allotment and the balance on call. All the shares offered were applied for and allotted.  All the moneys due on allotment were received except on 200 shares. Call was made.  All the amount due thereon was received except on 300 shares. Directors forfeited 200 shares on which both allotment and call money was not received.

Pass the necessary journal entries to record the above and also show how this will appear in the Balance Sheet of the Company.

15. On 1^st January ‘X’ Ltd. has Rs.1,00,000 6% debentures. In accordance with the power under the deed the directors acquire the debentures as follows in the open market for immediate cancellation:

March 1             –        Rs.20,000 at Rs.98

August 1            –        Rs.40,000 at Rs.100.25

December 15     –        Rs.10,000 at Rs.98.5

You are required to give journal entries for purchase and cancellation of debentures.

• If the above purchase rates are ‘Ex-Interest’
• If the above purchase rates are ‘Cum-Interest’.

Assume that interest is payable every year on 30^th June and 31^st December.

16. From the following Balance Sheet as on 31.12.2005 and 31.12.2006. You are required to prepare a cash flow statement:

Liabilities                2005           2006          Assets          2005        2006

Share Capital          1,00,000      1,50,000      Fixed Assets  1,00,000     1,50,000

Profit & Loss A/c        50,000         80,000      Goodwill           50,000        40,000

General Reserve         30,000         40,000      Inventories       50,000        80,000

12% Bonds                50,000       60,000      Debtors            50,000        80,000

Sundry Creditors         30,000        40,000      Bills receivable   10,000        20,000

Outstanding Expen.     10,000        15,000      Bank                 10,000       15,000

2,70,000    3,85,000                            2,70,000   3,85,000

17. P Mills Ltd., was incorporated on 31^st July 2007 to purchase the business of H. & Co., as on 1.4.2007. The books of account disclosed the following on    31^st March 2008.
    • Sales for the year Rs.32,10,400 (1^st April to 31^st July 2007 Rs.8,02,600; 1^st July 2007 to 31^st March 2008 Rs.24,07,800)
    • Gross Profit for the year Rs.4,12,800; Managing Directors’ Salary Rs.12,000; Preliminary expenses written off Rs.18,000; Company Secretary’s salary Rs.58,000.
    • Bad debts written off Rs.14,890 (prior to 31^st July Rs.4,020, after 31^st July Rs.10,870)
    • Depreciation on Machinery Rs.25,200; General expenses Rs.51,000; Advertising Rs.7,400; Interest on debentures Rs.20,000.

You are required to prepare a statement apportioning properly the net profit of the company as between pre-Incorporation and post-incorporation.

18. The issued Share Capital of a company was Rs.10,00,000 consisting 10,000 equity shares of Rs.100 each. The net profits for the last 5 years were Rs.1,00,000; Rs.80,000 ; Rs.1,20,000; Rs.1,60,000 and Rs.1,40,000 of which 20% was placed to reserve, this proportion being considered reasonable in the industry in which the company is engaged and where a fair investment return may be taken at 12%.  Compute the value of Company’s share by the yield value method.

PART – C

Answer any two questions: –                                                       Marks: 2 X 20 – 40

19. The following is the Trial Balance of Bee Ltd. as on 31^st March 2008

       Rs.                                                       Rs.

Stock on 1.4.2007               75,000                Purchase returns             10,000

Purchases                         2,45,000                Sales                           3,40,000

Wages                                30,000                Discount                          3,000

Carriage                                   950               Profit & Loss A/c.            15,000

Furniture                             17,000                Share Capital               1,00,000

Salaries                                 7,500                Creditors                        17,500

Rent                                     4,000                General Reserve              15,500

Sundry Trade Exp.                 7,050                Bills Payable                     7,000

Dividend Paid                                  9,000

Debtors                              27,500

Plant & Machinery                29,000

Cash at Bank                       46,200

Patents                                 4,800

Bills receivable                       5,000

5,08,000                                                   5,08,000

Prepare the Profit and Loss account for the year ended 31.03.2008 and a balance sheet as on that date after considering the following adjustments:

• Stock on 31.3.2008 Rs.88,000
• Provide for Income tax at 50%
• Depreciate Plant & Machinery at 15%, furniture at 10%, and patents at 5%
• On 31.3.2008 outstanding rent amounted to Rs.800 and Salaries Rs.900.
• The Board recommends payment of a dividend of 15% p.a. Transfer the minimum required amount to General reserve.
• Provide Rs.510 for doubtful debts.
• Provide for managerial remuneration at 10% on profit before tax.

20. The following was the Balance Sheet of ABC Limited as on 31.12.2006.

Liabilities                               Rs.                 Assets                   Rs.

Share Capital                                                Goodwill                10,000

12000 shares of                                            Land & Building       20,500

Rs.10 each             1,20,000                          Machinery               50,850

Less Calls in arrear                                         Preliminary Exp.        1,500

Rs.3 per share                                               Stock                     10,275

300 shares                  9,000      1,11,000       Debtors                  15,000

Creditors                                   15,425         Bank                        1,500

Provision for tax                           4,000         P & L A/c   22,000

(-) net

profit of      1,200   20,800

this year

1,30,425                                   1,30,425

Machinery value was Rs.10,000 in excess. It is proposed to write down this asset and to extinguish the profit & Loss A/c debit. balance and to write off goodwill and preliminary expenses by the adoption of the following scheme:-

• forfeit the shares on which the calls are outstanding.
• Reduce the paid up Capital by Rs.3 per share.
• Re-issue the forfeited shares at Rs.5 per share.
• Utilize the provision for tax if necessary

You are required to draft the journal entries necessary and the balance sheet after carrying out the scheme.

20. On 31.3.2008 the date of liquidation of a company, its balance sheet was as under:

Liabilities                   Rs.                    Assets                          Rs.

Share Capital:

7% preference shares          3,00,000              Land & Buildings           4,00,000

6000 Eq. Shares of Rs.10       48,000              Plant & Machinery         1,60,000

Each Rs.8 Paid up

Stock                           4,00,000

3000 Eq. Shares of Rs.10       21,000              Debtors                        6,40,000

Each Rs.7 paid up

Cash at Bank                   51,000

6% Debentures of Rs.100  12,00,000

each

Outstanding interest on           72,000

debentures

Creditors                                 8,000

Bills Payable                             2,000

16,51,000                                             16,51,000

The assets were realized as under:

Land & Buildings Rs.3,50,000 ; Plant & Machinery Rs.2,00,000 ; Debtors Rs.6,00,000 ; Stock Rs.4,61,000 ; Liquidation expenses Rs.2000. Remuneration of liquidator 0.5% on assets realized including cash and 1% on the amount paid to unsecured creditors.

Creditors shown in the balance sheet included Rs.2000 preferential.  Interest on debentures is to be paid up to 31.5.2008. Dividend on preference.  Shares is in arrears for 1 ½ years. Legal charges Rs.1,000/-. Prepare liquidator’s final statement of Account as on 31-3-2008.

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – COMMERCE

FOURTH SEMESTER – APRIL 2012

CO 4502/CO 4500 – COMPANY ACCOUNTS

Date : 21-04-2012              Dept. No.                                        Max. : 100 Marks

Time : 1:00 – 4:00

PART –  A

Answer ALL Questions:                                                                                           (10 x 2 =20 marks)

1. State the need for underwriting of shares.
2. Distinguish between ‘Ex-interest’ and ‘cum-interest’ price.
3. Under what headings will you classify the following items while preparing the Balance sheet of a company :
4. Preliminary expenses
5. Bills payable
6. Provision for tax
7. Outstanding debenture interest
8. Explain the term capital reduction.
9. What is Normal Rate of Return?
10. 50,000 shares of Rs.10 each are issued at a premium of 10%, the full amount of shares will be paid in one lump sum.
11. Sadan Ltd. issued 20,000 equity shares of Rs.10 each at par.  The issue was underwritten for maximum remuneration permissible by law.  The public applied for and received 16,000 shares.  Calculate the commission payable to the underwriter.
12. Forex Ltd. issued 2000,12% debentures of Rs. 100 each at a discount of 5% , repayable at a premium of 10% . Give the appropriate journal entry.
13. Calculate managerial remuneration, assuming there are two whole time directors, a part time director and manager from the details given below :

Net profit before provision for income tax and managerial remuneration but after depreciation Rs.8,70,410.

Depreciation provided in the books Rs.3,10,000 and allowable depreciation is Rs.2,60,000.

10. 5,000 equity shares of Rs.10 each are reduced to fully paid shares of Rs.6 each. Show the effect of the above in the books of the company.

PART-B

    Answer any FIVE Questions:                                                                                (5 x 8 =40 marks)

11. Explain the different kinds of ‘Alteration of share capital’ which do not require approval of court of law.
12. What is ‘Statement of affairs’? How is it prepared?
13. Describe the method of dealing with ‘unmarked applications’ in relation to an underwriting contract.
14. Axe Ltd. issued 40,000 shares of Rs.10 each at a premium of Rs.2 per share.  The shares were payable as follows : Rs.2 on application, Rs.5 on allotment (including premium)and Rs.5 on first and final call.  All the shares were applied for and allotted.  All moneys were received with the exception of the first and final call on 1,000 shares which were forfeited.  400 of these were reissued as fully paid at Rs.8 per share.  Give the necessary journal entries.
15. Irone Ltd was incorporated on July 31, 2010 to purchase the business of Rode Ltd. as on April1,2010. The books of accounts disclosed the following on March31,2011.
16. Sales for the year Rs.32,10,400 (1^st April1 –31^st July ,2010 Rs.8,02,600, 1^st August to 31^st March  24,07,800)
17. Gross profit for the year Rs.4,12,800, managing director’s salary Rs.12,000, preliminary expenses written off Rs.18,000, company secretary’s salary 58,000.
18. Bab debts written off Rs.14,890. (prior to 31^st July Rs.4,020 and after Rs.10,870)
19. Depreciation on machinery Rs.25,200, general expenses Rs.51,000, Advertising Rs.7,400, Interest on debentures Rs.20,000.

You are required to prepare a statement showing the Pre-incorporation and Post-incorporation profits.

16. The Balance sheet of Skey Ltd.as on 31^st2010 is as follows :

Liabilities                    Rs.                               Assets                          Rs.

Share Capital:

15,000 equity shares of

Rs.100 each fully paid                        15,00,000                    Land& Buildings          6,60,000

Profit and loss account              3,09,000                   Plant & Machinery        2,85,000

Sundry creditors                        2,31,000                   Stock                           10,50,000

Bank overdraft                              60,000                   Sundry Debtors             4,65,000

Provision for taxation                1,35,000

Dividend equalization fund       2,25,000

___________                                                    ___________

24,60,000                                                          24,60,000

___________                                                     __________

The net profit of the company after deducting all working charges and providing for depreciation and taxation were as under :

2006 – Rs.2,25,000 ;   2007 – Rs.2,88,000;    2008 – Rs.2,70,000;  2009 – Rs.3,00,000;  2010 – Rs.2,85,000

On 31^st December 2010, land and buildings were valued at Rs.7,50,000 and Plant and machinery at Rs.4,50,000.

10% is considered as the reasonable return on capital.

Calculate the value of the company’s shares after taking into account the revised values on fixed assets and goodwill  based on four years purchase of the annual super profits.

17. The financial position of Axe Ltd. on 1^st April 2010 and 31^st March 2011 was as follows :

Liabilities                                                        1.4.2010(Rs.)              31.3.2011(Rs.)

Current liabilities                                             72,000                                     82,000

Loan from associate company                        –                                               40,000

Loan from bank                                              60,000                                     50,000

Capital and Reserves                                   2,96,000                                  2,98,000

 Assets                                                         1.4.2010                              31.3.2011

Cash                                                                8,000                                         7,200

Debtors                                                         70,000                                       76,800

Stock                                                             50,000                                       44,000

Land                                                              40,000                                       60,000

Building                                                     1,00,000                                    1,10,000

Machinery                                                  2,14,000                                    2,44,000

Provision for depreciation                           (54,000)                                    (72,000)

During the year Rs.52,000 was paid as dividends .  Prepare Cash Flow Statement as per

AS-3 .

18. The Balance sheet of Yee Ltd. as on 31^st2010 disclosed the following information :

15% Debentures                                  Rs.8,00,000

Debenture Sinking Fund                          3,40,000

Debenture Sinking fund investment represented by Rs.80,000 own Debentures purchased at 98 and the remaining amount by Rs.2,80,000 4% stock.

On the above date , directors redeemed all the debentures . For this purpose, they realized 4% stock at par.  They utilized Rs.1,20,000 for redemption out of current year’s profits.  You are required to give journal entries.

PART – C

    Answer any TWO Questions:                                                                              (2 x 20 =40 marks)

19. Bigge Ltd. has a nominal capital of Rs.6,00,000 divided into shares of Rs.10 each. The following Trial Balance is extracted from the books of the company as on 31^st December 2010.

Calls in arrear                                  7,500       6% Debentures                        3,00,000

Premises (Rs.60,000 added                            Profit and loss account              14,500

On 1.7.2010)                              3,60,000       Creditors                                    50,000

Machinery                                  3,00,000       General reserve                          25,000

Interim dividend paid                    7,500       Share capital (called up)          4,60,000

Purchases                                   1,85,000       Bills payable                               38,000

Preliminary expenses                       5,000       Sales                                        4,15,000

Freight                                           13,100       Provision for bad debts                3,500

Director’s fees                                 5,740

Bad debts                                        2,110

4% government securities             60,000

Stock (1.1.2010)                           75,000

Furniture                                         7,200

Sundry Debtors                             87,000

Goodwill                                       25,000

Cash                                                   750

Bank                                               39,900

Wages                                            84,800

General expenses                           16,900

Salaries                                           14,500

Debenture interest                            9,000

_________                                                    _________

13,06,000                                                      13,06,000

__________                                                   __________

Prepare final accounts for the year ending 31^st  December 2010 in the prescribed form, after taking into account the following adjustments :

1. Depreciate machinery by 10% and furniture by 5%
2. Write off half of the preliminary expenses
3. Wages include Rs.10,000 paid for the construction of a compound wall to the premises and no adjustment was made.
4. Provide 5% for bad debt on sundry debtors
5. Transfer Rs.10,000 to general reserve.
6. Provide for income tax Rs.25,000
7. Stock on 31^st December was Rs.1,01,000.

20. Neo Company  was formed on 1^st January 2010 with an authorized capital of Rs.7,00,000 divided into 50,000 equity shares of Rs.10 each and 2,000 preference shares of Rs.100 each to acquire the business of Wilson as a going concern. The Balance sheet of Wilson at 31^st December 2010 is given below :

Liabilities                        Rs.               Assets                                                   Rs.

Sundry creditors           7,500             Cash at bank                                         3,800

A’s Loan account        15,500             Sundry debtors                                     9,700

Wilson’s capital       1,57,000              Stock                                                   36,000

Furniture                                               3,500

Plant and machinery                           70,000

Land and Buildings                            57,000

_________                                                                   _________

1,80,000                                                                       1,80,000

__________                                                                 __________

The purchase consideration was to be discharged by the issue of 15,000 equity shares of

Rs.10 each, 500 preference shares of Rs.100 each and Rs.20,000 in cash.  Neo Co. also

agreed to discharge the sundry creditors but declined to accept A’s loan.  All the assets of

the old company  were taken over at their balance sheet values except stock which was

valued at Rs.40,000. A provision of 5% was also created against sundry debtors.

To provide necessary working capital and to pay the purchase consideration the

remaining equity shares were issued at a premium of 10% and all cash was duly received.

The preliminary expenses amounting to Rs.15,000 were paid by the company

immediately after the issue.

Show the opening entries in the books of the  Neo Company Ltd. and also the opening

Balance sheet.

21. King Ltd. went into voluntary liquidation on 31^st December 2010 when their Balance sheet read as follows :

Liabilities                    Rs.                   Assets                          Rs.

Issued and subscribed capital :                                   Land and Buildings      7,50,000

15,000 10% cumulative preference                             Plant and machinery   18,75,000

Shares of Rs.100 each fully paid        15,00,000        Patents                                      3,00,000

7,500 equity shares of Rs.100                                     Stock                             4,02,500

Each,, Rs.75 paid                                  5,62,500       Sundry Debtors             8,25,000

22,500 equity shares of Rs.100                                   Cash at bank                 2,25,000

Each, Rs.60 paid                                 13,50,000        Profit and loss account 8,53,750

15% debenture secured by a

Floating charge                                     7,50,000

Interest outstanding on debentures      1,12,500

Creditors                                               9,56,250

________                                         _________

52,31,250                                         52,31,250

________                                         _________

Preference dividends were in arrears for 2 years and the creditors included preferential

creditors of Rs.38,000.

The assets were realized as follows :

Land and buildings     Rs.9,00,000, Plant and machinery      Rs.15,00,000, Patents

Rs.2,25,000, Stock   Rs.4,50,000, Sundry debtors     Rs.6,00,000.

The expenses of liquidation amounted to Rs.27,250.

The liquidator is entitled to a commission of 3% on assets realized except cash.

Assuming the final payments including those on debentures were made on 30^th June

2010,  Show the liquidator’s final statement of accounts.

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – COMMERCE

FOURTH SEMESTER – NOVEMBER 2012

CO 4502/4500 – COMPANY ACCOUNTS

Date : 03/11/2012             Dept. No.                                        Max. : 100 Marks

Time : 1:00 – 4:00

PART – A

Answer All Questions:                                                                                              (10 X 2 = 20 marks)

1. Explain the term ‘Firm Underwriting’.
2. What is call money? What is the maximum amount of a call according to table A.?
3. What do you understand by redemption of debenture out of profits.?
4. What are ‘divisible profit’?
5. Write a note on ‘pre – incorporation profit’.
6. How do you calculate ‘Average capital employed’?
7. 5,000 Equity shares of Rs 100 each reduced to Rs 75 each and 1000 preference shares of Rs 50 each is reduced by Rs 25 Pass Journal entries.
8. Amount needed after 5 years for debenture redemption is Rs 60,00,000. Rate of interest on investment expected is 5% Annual investment needed to get Rs 15 after 5 years, Rs 2.71462. Ascertain the annual transfer to sinking fund.
9. Padma co.Ltd was formed for taking over the business of Mr. Ganapathi. The purchase consideration was Rs 1,92,000 which will be settled by issue 960 shares of Rs 100 each at a discount of 5% and balance in cash. Assets taken over were Rs 2,08,000 and liabilities taken over were Rs 28,000. Give journal entries in the books of padma co.Ltd.
10. Calculate Net profit before tax and Extra ordinary items. P&L a/c balance on 31/03/10:

Rs. 10,00,000 and on 31/03/11 Rs 11,00,000 Transfer to General Reserve Rs.10,000,

Proposed Dividend Rs. 25,000,  Provision for taxation Rs. 40,000.

PART – B

Answer any FIVE questions:                                                                                     (5 x 8 = 40 marks)

11. What is ‘acquisition of Business’? Explain the methods of computing purchase consideration on acquisition of business.
12. Explain the Provisions Under sec 78 of the companies Act for the use of share premium.
13. Explain the circumstances under which valuation of shares is essential and discuss the various methods of valuation.
14. WYE Co.Ltd. issued 20,000 shares of Rs.10 each. These shares were underwritten as follows:

X: 10,000 shares,     Y: 6,000 shares.  The public applied for 16,000 shares which included market application as follows:-     X: 2,400 shares;     Y: 600 shares.

Determine the obligating of the underwriters.

15. Ltd issued 2,000 12% Debentures of Rs.100 each on 1.1.2008 at a discount of 10%, redeemable at premium of 15% in equal annual drawings in two years out of profits. Give journal entries both at the time of issue and redemption of debentures.   (ignore the treatment of loss on issue of debentures and interest).
16. From the following Profit & Loss Account of Soundarya Ltd. For the year ended 31.12.2010 and additional data given, calculate commission due to managing director at 5% of net profit.  Salary of managing director is to be treated as part payment of the commission.

Profit & Loss A/c  of the year ended 31.12.2010.

The book value of the fixed assets sold was Rs.2,000 and their original cost was Rs.2,600.

17. A company was incorporated on 1^st May 2010 acquiring the business of a sole trader with effect from 1^st January 2010. The accounts of the company were closed for the first time on 30^th September 2010, disclosing a gross profit of Rs.1,68,000.  The establishment expenses were Rs.42,660. Directors’ fees Rs.3,000 per month, preliminary expenses written off Rs.4,000, rent upto  June, 2010 was Rs.300 per month which was there after increased to Rs.750 per month.  Salary to the manager was at Rs.1500 per month who was appointed a director at the time of incorporation of the company.

Prepare a statement showing profits prior and subsequent to incorporation assuming that the net sales were Rs.24,60,000.  The monthly average of which for the first four months of 2010 was half of that of the remaining period.

18. From the following information, calculate the value of good will on the basis of 3 years purchase of super profit.

• Average capital employed in the business is Rs.20,00,000.
• Rate of interest expected from capital having regard to the risk involved is 10%.
• Net trading profits of the firm for the past three years were Rs.3,50,400; Rs.2,80,300; and Rs.3,10,100.
• Fair remuneration to the partners for their services is Rs,48,000 p.a.
• Sundry assets of the firm are Rs.23,50,400 and current Liabilities are Rs.95,110.

PART – C

Answer any TWO questions:                                                                                   (2 x 20 = 40 marks)

19. Swan ltd., issued 8,000 9% Redeemable preference shares of Rs.100 each at par 1.7.2004, redeemable at the option of the company on or after 30^th June 2010, partly or fully.

Redemption were made out of profit as follows:

• 1,200 shares on 30^th June 2010 at par.
• 1,600 shares on 31^st December 2010 at 10% premium.
• Remaining shares 30^th June 2011 at a premium of 5% by making a fresh issue of 40,000 equity shares of Rs.10 each at premium of Re.1 each,

On 30^th June 2011, the company also decided to capitalize 50% of its Capital redemption reserve by issuing bonus shares of Rs.10 each fully paid at a premium of Rs.2.50 per share.   Pass necessary entries to record the above transactions.

20. The Silver Ore co.ltd. was formed on 1.4.2007 with an authorized capital of Rs.6,00,000 in shares of Rs.10 each of these 52,000 shares had been issued and subscribed but there was calls in arrear on 100 shares.  From the following trial balance as on March 31, 2008, Prepare the Trading and Profit & Loss Account and the Balance sheet:

Adjustments:

• Depreciate plant and Railways by 10% . Furniture & building by 5%
• Write off a third of the promotion expenses.
• Value of silver ore of march 31, 2008 Rs.15,000.
• The directors forfeited on Dec. 20, 2007, 100 shares on which only Rs.7.50 had been paid.

21. Knight co.ltd went into voluntary liquidation on 31.12.2010 when their balance sheet read as follows:

Preference dividends were in arrears for 2 years and the creditors included Preferential creditors of Rs.38,000.

The assets were realized as follows:  land & Buildings Rs.9,00,000; Plant & machinery Rs.15,00,000; patents Rs.2,25,000; Stock Rs.4,50,000; Sundry debtors Rs.6,00,000.

The expenses of liquidation amounted to Rs.27,250.  The liquidator is entitled to a commission of 3% on assets realized except cash.  Assuming the final payments including those on debentures were made on 30.6.2011, show the liquidator’s final statement of account.

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