LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

M.Com. DEGREE EXAMINATION – COMMERCE

FOURTH SEMESTER – April 2009

CO 4958 – CORPORATE ACCOUNTS & ACCOUNTING STANDARDS

Date & Time: 28/04/2009 / 9:00 – 12:00  Dept. No.                                                  Max. : 100 Marks

SECTION: A

Answer All Questions:                                                                                       10 x 2 = 20

• Under what headings will you classify the following items while preparing Balance Sheet of a Company?
  1. Preliminary Expenses. ii) Unclaimed Dividend, iii) Loose Tools., iv) Securities Premium.
• Fill in the Blanks:
  12. If the proposed dividend lies between 12.5% and 15 % the percentage of profits to be

transferred to general reserve is ————.

1. ii) A reserve which is represented by investments outside the business is known as ———-.

• What are accounting standards?
• What are Notes to Accounts?
• Give an example of Loss Contingency.
• Whether the following items are a) Prior period items, b) Extraordinary items, c) Change in accounting estimate. D) None of these.
• Expenses of Rs. 1, 00,000 of the previous year, which were omitted, form the books of account of the previous year due to oversight.
• Write off a huge debt of a major customer due for more than a year.
• On 1-1-2001 A Ltd has 1800 equity shares outstanding. On 31-05-2001, it issued 600 equity shares for cash (without bonus claim). On 1-11-2001 it bought back 300 shares. Calculate weighted average number of shares as on 31-12-2001.
• Define Holding Company.
• What is purchase Consideration according to AS14?
• S Ltd was taken over by R Ltd the following position was mutually agreed upon

S Ltd.              R Ltd

Number of Shares                               60,000             90,000

Face Value of Share                            100                  10

Net Assets                                           3, 60, 00,000   72, 00,000

Ascertain intrinsic values of the shares, ratio of exchange of shares and Number

of shares to be issued.

SECTION – B

Answer any five only:                                                                                          5 x 8 = 40

• Distinguish between Merger method and Purchase method of Accounting for amalgamation.

• Define “Value added.” Explain the importance of Value Added concept in the present industrial environment?

• Define “Impairment Loss”. How would an impaired Asset be identified? What are the disclosure provisions relating to impairment of assets?

• X Ltd, having three whole time directors on its Board, the others being part time directors, earned profits during the year ended 31^st March, 2007 to the tune of Rs.2,50,000 after taking into consideration the following:

Depreciation on fixed assets – Rs.47, 800

Depreciation admissible as per Income Tax rules – Rs. 32, 800

Provision of Income Tax – Rs.1, 22,500

Capital expenditure included in general expenses charged to     P&L A/C – Rs.12, 500

Calculate the maximum remuneration payable to the whole time directors assuming that the remuneration payable to the whole time directors to be calculated on net profits remaining after payment of commission to part time directors and the commission to part time directors is to be calculated on net profits remaining after payment of remuneration to whole time directors.

• X Ltd., is having a plant (Asset) carrying amount of which is Rs.250 lakhs on 31.03,2002. Its useful life is 5 years and residual value at the end of 5 years is Rs.5 lakhs. Estimated future cash flow from using the plant in next 5 ears are:

For the year ended on                                   Estimated cash flow ( Rs.in lakhs)

• 50
• 30
• 30
• 20
• 20

Calculate “Value in use” for plant if the discount rate is 25% and also calculate the recoverable amount and impairment loss. Give necessary journal entries.

• A) P Ltd had 12, 00,000 equity shares of Rs.10 each fully paid up outstanding prior to rights issue. The details of rights issue are as follows:
  1. One new share for every two shares outstanding.
  2. Rights issue price. Rs.18
  3. Last date to exercise rights is 31^st December, 2003
  4. Fair value of each equity share earned by the company as follows:

Year ended 31-3-03 Rs.40, 00,000

Year ended 31-3-04 Rs.54, 00,000

Calculate EPS to be reported under AS-20.

1. B) Calculate from the following information basic earning per share:

Profit Rs.50,00,000., 10% Preference Shares of Rs.100 lakhs., Number of Equity shares in the beginning of the year 10 lakhs. Bonus issued in the middle of the year 5,00,000.

17)  Balance sheet of H.Ltd, and S.Ltd  as on 31.12.2000 given below:

Liabilities         HLtd.         S.Ltd.              Assets              H.Ltd.       S.Ltd.

Share Capital    10,000           5,000             sundry assets   17,000      10,000

(Rs.1 each)

General Reserve 5,000        ———             4000 shares in

S.Ltd                 5000

Creditors            3,000            3,200

P&L A/C           4,000            1,800

22,000          10,000                                     22,000     10,000

Shares were purchased by H.Ltd. in S.Ltd. on 30^th june,2000. On 1^st  January, 2000 the balance sheet of S.LTd. showed loss of Rs.3,000 which was written off out of the profits earned during 2000.Profits are assumed to accrue evenly throughout the year. Prepare consolidated Balance sheet.

• a) What is Contingent Liability as per AS 29?

2004. b) Board of directors approved the financial account of year 2003 – 04 on 31^st July, 2004. The following events occurred before the approval of financial accounts by Board of Directors. State how you would deal with this situation:

“The wages of the employees are revised retrospectively from 01.01.04. The agreement is signed on 01.07.04. The negotiations have been going on since 1.2.04. The due to this revision extra wages payable from 01.01.04 to 31.03.04 was Rs.5, 00,000.”

1. c) Write the areas where AS29 is not applicable.

SECTION – C

Answer any two only:                                                                                        2 x 20 = 40

• The authorized capital of X Ltd is Rs.5, 00,000 consisting of 2,000, 6% preference shares of Rs.100 each and 30,000 equity shares of Rs.100 each. The following was the Trial Balance of X Ltd as on 31-03-2006

Particulars                                                                  Debits (Rs.)     Credits (Rs.)

Investment in shares in cost                                           50, 000

Purchases                                                                   4, 90, 500

Selling Expenses                                                            79, 100

Stock on 01-04-2005                                                 1, 45, 200

Salaries and Wages                                                        52, 000

Cash in hand                                                                  12, 000

Interim preference dividend for half year                       6, 000

Discount on issue of Debentures                                     2, 000

Preliminary Expenses                                                       1, 000

Bills Receivable                                                             41, 500

Interest on Bank Overdraft                                             7, 800

Interest on Debentures up to 30-09-05                            3, 750

Debtors and Creditors                                                   50, 100            87, 850

Freehold property at cost                                           3, 50, 000

Furniture at cost                                                             35, 000

6% preference share capital                                                               2, 00, 000

Equity share capital fully paid up                                                      2, 00, 000

5% Mortgage Debenture secured on –

-Freehold properties                                                                           1, 50, 000

Income tax paid in advance for 2005 -06                                  10, 000

Dividends                                                                                                4, 250

Profit and Loss A/C (1-4-2005)                                                            28, 500

Sales (Net)                                                                                         6, 70, 350

Bank Overdraft secured by Hypothecation of stocks                       1, 50, 000

Technical know – how fees at cost paid –

– during the year                                                        1, 50, 000

Audit fees                                                                        5, 000

14, 90,950        14, 90,950

You are require dot prepare the profit and loss account for the year ended         31-03-06 and the balance sheet as on that date after taking into the following:

• Closing stock was valued at Rs.1,42,500
• Purchase includes Rs. 5000 worth of goods and articles distributed among valued customers.
• Salaries and wages include Rs.2000 being wages incurred for installation of electrical fittings which were recorded under furniture.
• Bills receivable of Rs.2000 maturing after 31-3-06 were discounted.
• Depreciation on furniture to be charged at 10% on written down value.
• 1000 of discount on issue of debentures to be written off.
• Provide provision for taxation Rs.4000
• Technical know how is to be written off over a period of 10 years and preliminary expenses to be written off Rs.500.
• Salaries and wages include Rs.10000 being the directors remuneration
• Debtors include Rs.6000 debts due for more than six months.

Keeping in mind the requirements of schedule VI part I and Part II of the companies Act 1956, draw up the final accounts of X Ltd.

• Following are the balance sheet of two companies W Ltd and Z Ltd as at 31^st March 2005

Liabilities                    W Ltd.         Z Ltd.     Assets                      W Ltd        Z Ltd

Equity shares of                                              Sundry assets         750000     350000

Rs.100 each                 500000        300000    1000 shares in

Reserves                      100000          60000    W Ltd at Cost                         100000

Creditors                     150000          90000

750000        450000                                   750000     450000

W Ltd was to absorb Z Ltd agreeing that the shares of both the companies are worth Rs.120 each. The purchase consideration was to be discharged in the form of fully paid shares.

A Sum of Rs.20000 is owed by W Ltd to Z Ltd. Also included in the stock of W Ltd is Rs.30000 goods supplied by Z Ltd at cost plus 20%

Give entries in the books of both the companies and Balance sheet in the books of W Ltd.

• The Balance sheets of H Ltd and S Ltd as at 31^st March, 2007 were as under:

Liabilities.             H Ltd.      SLTd.       Assets.                          HLtd.          SLTd

Equity Capital      9,00,000   3,00,000    Fixed Assets              9,00,000   4,00,000

(Rs.10 each)

General Reserve   5,00,000     30,000     Investments              6,00,000    ———-

P&L A/C             6,00,000  2,00,000      Debtors                     1,60,000      90,000

Creditors              1,00,000  1,70,000      Inventory                 2,10,000    1,20,000

Bank                         2,30,000       90,000

21,00,000   7,00,000                                    21,00,000     7,00,000

H Ltd has acquired 75% of S Ltd shares at Rs.600000 on 1^st July, 2006. S LTd had an opening balance of Rs.1,00,000 in profit and loss account form which it paid dividend for 2005 -06 at 20 % on 30^th September,2006. The dividend received by H Ltd is included in its profit and loss account.

Inventory of H Ltd includes Rs.20, 000 out of purchases of Rs.50, 000 made from small Ltd in January 2007. Credit period is 90 days. S Ltd had sold these items at a margin of 25% on cost. There has been no change in the General Reserve Account for S Ltd during 2006 -07.

Prepare a consolidated Balance Sheet as at 31.03.2007.

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