LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
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M.Com. DEGREE EXAMINATION – COMMERCE
FIRST SEMESTER – APRIL 2007
CO 1806/CO 1803 – ADVANCED CORPORATE ACCOUNTS
Date & Time: 28/04/2007 / 1:00 – 4:00 Dept. No. Max. : 100 Marks
PART – A
10 x 2 = 20
Answer ALL questions:
- What do you mean by Holding Company?
- Differentiate Double Insurance from Reinsurance.
- Discuss the objective of accounting the Human Resource in a company.
- When do you prepare valuation Balance sheet?
- Explain the term “Non-performing Assets”.
- State the different levels of remuneration due to various managerial personnel.
- Distinguish between commission on Reinsurance ceded and commission on insurance accepted.
- Show the disposal of surplus mentioned below profit Rs. 28,00,000 and Reasonable
Return 24,00,000.
- The Revenue a/c a Life Insurance company showed a balance of Rs. 4,75,000 at the end of 2005 before considering the following items (a) Bonus in reduction of premiums Rs. 40,000, (b) outstanding premiums Rs. 1,00,000, (c) Interest accured on investments Rs. 20,000, (d) claims intimated but not admitted 35,000, (e) claims recovered under Reinsurance Rs. 3,000.
- What are the limitations of ‘Historical Accounting’ in a period of Inflation?
PART – B
Answer any FIVE questions: 5 x 8 = 40
- (a) Explain the term ‘B List Contributories’
(b) Bad and Luck Limited went into voluntary Liquidation and proceedings commenced on 2/7/06 certain creditors could not receive the payment out of the realization of assets and out of contributions from the contributories of the ‘A’ list. The following details of share transfers are made available to you.
| Name of share holders | No. of shares transferred | Date of the transferor ceasing to be a member | Creditors remaining unpaid and outstanding on the date
Rs. |
| (i) A
(ii) B (iii) C (iv) D (v) E |
1,000
1,250 500 2,000 250 |
01.03.2005
15.08.2005 01.10.2005 01.12.2005 01.04.2006
|
6,000
8,000 10,750 13,000 15,000 |
All the shares were of Rs.10 each, on which Rs.5 per share had been paid up. Ignoring other details like liquidator’s expenses etc. You are required to workout the liability of the individual contributories listed above.
- Explain the following items.
- Rebate on Bill discounted
- On 31/3/06 the books of NBA bank showed the following items.
Rs.
Rebate on Bill discounted 1/4/05 3,000
Bill discounted and purchased 6,00,000
Interest and discount received 1,60,000
The following bills are discounted.
| Bill Amount | Date of Discounting | Period of Bill | Discount Rate |
| 50,000
60,000 70,000 80,000 |
1/1/06
25/1/06 18/2/06 10/3/06 |
2 months
90 days 60 days 1 months |
14%
12% 16% 10% |
Calculate the closing rebate on bill discounted, Pass journal entries.
- (a) Discuss the features of Double Accounts.
(b) An Electric Supply Co. rebuilds its Mains at the cost of Rs. 19,90,000. This includes value of Rs. 13,800 material of old Main used for new one. The original mains were constructed at a cost of Rs. 9,90,000. The ratio of material and labour therein was 7 : 3. The increase in material prices is 12½ % and
wages rates 15%. Materials worth Rs. 25,200 from old works was sold. Show Journal entries under Double Account System for the above and determine the net cost of replacement.
- The following balances rates to an electricity company and pertain to its accounts for the year ended
31st December, 1989:
| Rs. | Rs. | ||
| Share Capital
Reserve Fund (invested in 5% Government Securities at par) Contingencies Reserve invested in 6% State Government loans Loan from State Electricity Board 11% Debentures
Development Reserve |
1,00,00,000
60,00,000
20,00,000 30,00,000 8,00,000
Rs. 10,00,000
|
Fixed Assets
Depreciation, Reserve on fixed assets Consumer’s Deposits Amounts contributed by consumers towards fixed assets Intangible assets
Tariffs and Dividend Control Reserve Current assets – Monthly average
|
2,00,00,000
80,00,000 75,00,000
2,00,000 5,00,000
Rs.
6,00,000
20,00,000 |
The company earned a post tax profit of Rs. 9 lakhs. Show how the profits of the company will be dealt with under the provision of the Electricity Act, assuming that the Bank rate during the year was 8%.
- Zaldi Pay Insurance Co. Ltd., has furnished the following information for preparation of revenue account for the insurance business for the year ended 31st March, 1989:-
Rs.
Claims admitted but not paid 42,376
Commission paid 50,000
Commission on reinsurance ceded 12,000
Share transfer fees 5,000
Expenses of Management 78,000
Bad Debts 2,500
Claims paid 15,000
Profit and Loss Appropriation Account 10,000
Premiums received (less reinsurance) 5,52,000
Reserve for unexpired risks as on 1.4.88 2,30,000
Additional reserve as on 1.4.1988 40,000
Claims outstanding as on 1.4.1988 27,000
Dividend on share capital 18,500
The following further information has also to be considered:-
- Premiums outstanding at the end of the year: Rs. 40,000
- It is the policy of the company to maintain 50% of premium towards reserve for unexpired risks.
- Additional reserve at 10% of net premium to be maintained.
- Mohan Company Ltd., was incorporated on 30th June 1985 to take over the business of Mr. K.Mohan as from 1st Januray 1985. The financial accounts of the business for the year ended 31st December 1985 disclosed the following information:
| Particulars | Rs. | Rs. |
| Sales:
January to June July to December Less: Purchases: January to June July to December Gross profit Less: Salaries Selling expenses Depreciation Directors remuneration Debenture interest Administration expenses (Rent, Rates etc.) Profit for the year |
1,20,000 1,80,000
75,000 1,20,000
15,000 3,000 1,500 750 90 4,500 |
3,00,000
1,95,000 1,05,000
24,840 80,160 |
You are requested to prepare a statement apportioning the balance of profit between the periods prior to and after incorporation and show the profit and loss appropriation account for the year ended 31st December 1985.
- The summarised Balance Sheet of H Ltd. and S Ltd. as on 31st March 2006 are given below.
| Liabilities | H Ltd. | S Ltd. | Assets | H Ltd. | S Ltd. |
| Share Capital: Share of
Rs. 10 each General reserves Profit & Loss Account |
5,00,000 80,000 1,20,000 7,00,000 |
1,20,000 20,000 80,000 2,20,000 |
Sundry assets
9000 shares in S Ltd. |
5,40,000
1,60,000 _______ 7,00,000 |
2,20,000
_______ 2,20,000 |
At the time of purchase of shares by H Ltd. and S Ltd. had balance of Rs. 10,000 and Rs. 20,000 in General reserve and P&L a/c respectively. S Ltd decided to issue bonus shares out of post acquisition profit in the ratio of 3 shares for every 6 shares held. Calculate only the cost of control before the issue of bonus shares and after the issue of bonus shares.
- From the following Profit & Loss Account of Soundarya Ltd. for the year ended 31.12.92 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 for the year ended 31.12.92
| Rs. | Rs. | ||
| To Opening stock
To Bonus (including Rs.500 for 1991) To Director’s fees To Managing director: Salary Commission To Development rebate reserve To Provision for tax To Establishment expenses To Loss on sale of investments To Net profit c/d |
11,000
5,000 3,000
2,000 1,000 800 3,000 40,000 200 1,22,000 1,88,000 |
By Sales
By Closing stock By Other incomes: Discount Profit on sale of fixed Assets |
1,70,000
15,000
2,000
1,000
_______ 1,88,000 |
The book value of the fixed assets sold was Rs, 2,000 and their original cost was Rs.2,600.
PART – C
2 x 20 = 40
Answer any TWO questions:
- Balance Sheet Alpha Ltd and Beta Ltd as on 31st March 2005 as follows:
| Liability | Alpha Ltd | Beta Ltd., | Assets | Alpha Ltd | Beta Ltd., |
| Equity Share capital (Rs. 100 each)
General Reserve Creditors Bills payable |
10,00,000 2,00,000 4,00,000 2,00,000
________ 18,00,000 |
6,00,000 1,00,000 2,00,000 1,00,000
________ 10,00,000 |
Land and Building
Plant & Machinery Debtors Stock Bank 2000 shares in Alpha Ltd
|
5,00,000
3,50,000 4,00,000 2,50,000 3,00,000 – ________ 18,00,000 |
1,00,000
3,00,000 1,20,000 2,00,000 1,00,000 1,80,000 ________ 10,00,000
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Alpha Ltd was to absorb Beta Ltd on the basis of intrinsic value of the shares. The Land and Building, Plant & Machinery were valued at Rs. 3,50,000 and Rs. 1,60,000 respectively. The purchase consideration is payable in intrinsic value of Alpha Ltd. A sum of Rs. 20,000 is payable by Beta Ltd for Alpha Ltd. Stock of Beta Ltd includes Rs.30,000 goods supplied by alpha Ltd at cost plus 20% prepare necessary ledger accounts and Balance sheets.
- The following are the Balance Sheets of H Ltd. and S Ltd. as on 31st March 1989.
| Liabilities | H Ltd. | S Ltd. | Assets | H Ltd. | S Ltd. |
| Share capital: Shares
of Rs. 100 each General reserve Profit & Loss A/c Current liabilities
|
5,00,000 1,00,000 2,00,000 1,00,000 9,00,000 |
4,00,000 1,00,000 1,50,000 1,00,000 7,50,000 |
Fixed assets
Investment in S Ltd. Current assets |
2,50,000
2,50,000 4,00,000
_______ 9,00,000
|
2,00,000
— 5,50,000
_______ 7,50,000 |
The following further information is furnished:
- H Ltd. acquired 2,000 shares in S Ltd. on 1.4.88 when the latter’s general reserve and Profit & Loss account were Rs. 2,50,000 and Rs. 1,00,000 respectively.
- On 30.6.88, S Ltd. declared 20% dividend out of pre-acquisition profits and H Ltd. credited the amount received to it’s Profit & Loss Account.
- On 31.10.88 S Ltd. issued bonus shares in the ratio of 3 shares for 5 shares held out of the general reserve. H Ltd. made no entry in its books for the bonus shares received.
- S Ltd. owed H Ltd. Rs. 50,000 on 31.3.89 on account of goods supplied on credit. However all of those goods were already disposed off by S Ltd.
Prepare a consolidated Balance Sheet as at 31st March 1989.
- The following is the Trial Balance of Shri Nidhi Bank Ltd., as on 31.12.1986
| Debit
Rs. |
Credit
Rs. |
|
| Issued Share Capital
Reserve fund Investment fluctuation fund Bank over draft, loans and cash credits Bank premises Government bonds Other government securities Current accounts Profit and Loss Account on 1.1.1986 Money at call and short notice Bills discounted Shares Cash in hand Cash at bank Income tax paid Salaries and other expenses Interest discounts etc., Interim dividend paid Deposits and savings bank accounts
|
– – 4,00,000 60,000 3,00,000 2,00,000 – – 70,000 73,000 17,000 1,10,000 3,00,000 9,000 73,500 – 7,500 – ________ 16,20,000 |
1,50,000
3,00,000 20,000 – – – – 6,00,000 25,000 – – – – – – – 1,70,000 – 3,55,000 ________ 16,20,000 |
Additional information:
(i) The bills discounted mature at an average date of February
19, 1987
(including days of grace). All bills are discounted at 10% per annum.
(ii) The market value of investments in government securities was
Rs.4,75,000. Increase investment fluctuation fund with the necessary
amount.
(iii) Bank added premises during the year for Rs.10,000. Provide 5%
depreciation on the opening balance.
(iv) Interest accrued on investment was Rs.750.
(v) Provision for taxation 1.1.1986 was Rs.10,000. It is to be increased to
Rs.30,000.
Prepare final account in the statutory form.