LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
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M.Com. DEGREE EXAMINATION – COMMERCE
FOURTH SEMESTER – APRIL 2008
CO 4958 – CORPORATE ACCOUNTS & ACCOUNTING STANDARDS
Date : 25/04/2008 Dept. No. Max. : 100 Marks
Time : 9:00 – 12:00
SECTION: A
Answer all questions: 10 x 2 = 20
- What are fundamental accounting assumptions?
- Write short note on events occurring after the balance sheet date.
- Given an example for prior period item and extraordinary item as per AS5
- B Ltd submits you the following information to calculate the weighted average number of shares outstanding during the year 2002 for the purpose of calculation of earnings per share.
Number of shares outstanding as on 1.1.02 – 9000
Number of shares on 31.05.02 – 3000
Number of shares bought back as on 1.11.2002 – 1500
- Define “Value Added”.
- Write short not on “Minority Interest”
- Distinguish between amalgamation and absorption.
- Calculate the maximum remuneration payable to the whole time director on the profits after charging his remuneration. Net profit for calculating managerial remuneration Rs.400000.
- What are inter-company Owings? How are they treated on consolidation?
- Stock of Rs.1, 60,000 held by H Ltd consists of Rs.60, 000 goods purchased from S Ltd who has charged Profit on Sale of 20%. H Ltd acquired 80% of shares of S Ltd. Calculate the amount of unrealized profit included in stock.
SECTION – B
Answer any five only: 5 x 8 = 40
- Write short note on: a) Cost of Control; b) Unrealized Profit; c) Consolidated Balance sheet.
- Distinguish between Merger method and Purchase method of Accounting for amalgamation.
- Briefly explain the accounting treatment on revaluation of fixed Assets.
- Determine the maximum remuneration payable to the part time directors and Manger of B Ltd., a manufacturing company under section 309 and 387 of the company’s act 1956 from the following particulars.
Before charging any such remuneration, the Profit and Loss account showed a credit balance of Rs.23, 05,000 for the year ended 31st march 2005 after taking into account the following matters:
Rs.
Profit on sale of investments 2,05,000
Subsidy received from government 4,10,000
Loss on sale of fixed assets 65,000
Ex-gratia to an employee 30,000
Compensation paid to injured workman 75,000
Provision for taxation 2,79,000
Bonus to foreign technicians 3,12,000
Multiple shift allowance 1,00,000
Special depreciation 75,000
Capital expenditure 5,10,000
Profit on sale of assets 1,00,000
(Cost price Rs.2, 50,000 and written down value
Rs.1, 80,000)
Company is providing depreciation as per section 350 of the companies’ act 1956.
- From the following items in the trial balance of a company on 31.12.2005 and the adjustments given hereunder, show how the items would appear in the relevant accounts and details in the balance sheet.
Trial Balance DR. CR.
Advance tax paid (2005) Rs.60, 000
Provision for tax (2005) Rs.80, 000
Tax deducted at source Rs.10, 000
Adjustments:
Income tax for 2005 has been assessed at Rs.1, 00,000 against which the
Advance Payment of tax deducted at source is to be adjusted.
Provide Rs.60, 000 for taxation on current profits.
- NDA Company had 20,00,000 equity shares outstanding as on 1.1.2001. On 1.10.2001 it issued 2 equity shares bonus for each share outstanding on 30.09.01. Net profit for 2000 was Rs.18, 00,000; net profit for 2001 was Rs.60, 00,000. Calculate basic EPS 2001 and Adjusted EPS 2000.
- The East Karnataka Ltd. Sells its business to Basu Product Ltd. as on 31-12-2005. On which date its balance sheet was as under:
Liabilities Rs. Assets Rs.
Paid up share capital:
2000 shares of Rs.100 each 2, 00,000 Goodwill 50,000
Debentures 1, 00,000 Freehold property 1, 50,000
Creditors 30,000 Plant and Tools 83,000
General Reserve 50,000 Stock 35,000
Profit & Loss a/c 20,000 Bills Recivable 4,500
Debtors 27,500
Cash at bank 50,000
4,00,000 4,00,000
Basu Products Ltd. agreed to take over the assets (exclusive of goodwill and cash) at 10% less then the book values, to pay Rs.75000 for goodwill and to take over debentures.
The purchase consideration was to be discharged by the allotment to the East Karnataka Co.Ltd.1500 shares of Rs.100 each at a premium of Rs.10 per share and the balance in cash.
The cost of liquidation amounted to Rs.3, 000.
Show the calculation of purchase consideration and opening entries in the books of Basu Product Ltd.
- Balance sheets as at 31.12.2000
Liabilities H S Assets H S
Shar Capital Re.1 10,000 5000 Sundry Assets 19000 15000
Reserves 5000 —— 5000 shares in
S Ltd. 6000
P&L A/C 4000 1800
Creditors 6000 8200
25000 15000 25000 15000
Shares of S Ltd were purchased by H Ltd on 30th June 2000. On 1st Jan2000 the balance sheet of S Ltd showed a loss of Rs.3000.
Prepare the consolidated Balance sheet.
SECTION – C
Answer any two only: 2 x 20 = 20
- The Auto Parts Manufacturing Co.Ltd., was registered with an authoried capital of Rs.7,50,000 divided into 3000, 6% cumulative preference shares of rs.100 each and 4500 equity shares of Rs.100 each. The following are the balance taken as on 31.12.2006
Particulars Rs Particulars Rs
Calls in arrear 18750 Plant and Machinery 900000
Stock 1.4.02 187500 Fixtures 18000
Debtors 217500 Buildings 750000
Purchases 462500 Interim dividend paid 18750
Rent 12000 General Expense 12250
Debenture interest 22250 Bills Payable 95000
General Reserves 62500 P&L Appropriation A/C(cr) 36250
Equity shares (fully called up) 1150000 Preliminary Expense 12500
Goodwill 62500 Freight 32750
Cash in Hand 6125 Wages 212000
Directors fees 14350 Cash at Bank 95750
Commission on sales 18000 Bad Debts 5275
Debentures 750000 Salaries 36250
Government securities 150000 Sales 1037500
Sundry creditors 125000 Provision for bad debts 8750
The stock on 31st March,2003 was estimated at Rs.2,52,500. The following adjustments have also to be made:
- Depreciation of plant and Machinery at 10% and on Fixtures at 5%
- Wages include Rs.25000 paid for the construction of additional rooms to the building
- Final dividend at 5% to be provided
- Preliminary expenses to be written off by 20%
- Provision for bad debts to be maintained at 5% on debtors
- 25000 to be transferred to General Reserve.
- A provision for income tax was the extent of Rs.62500 was to be made.
You are required to prepare the trading and profit and loss account and appropriation account for the year ending 31st March 2003 and the balance sheet as on the same date.
- Following are the Balance Sheets of HLtd. and its subsidiary SLtd. as on31.3.06
Liabilities H. Ltd. S. Ltd. Assets H. Ltd S Ltd
Rs. Rs. Rs. Rs.
Share Capital 20, 00,000 8, 00,000 Fixed Assets 16, 00,000 10,00,000
(Rs.100 each)
General Reserve 6,40,000 2,40,000 Stock 4, 00,000 3,60,000
P&L A/C 5,60,000 3,60,000 Debtors 1,60,000 3,00,000
Creditors 3,20,000 3,60,000 Investments:
6400 shares in
S.Ltd at cost 12, 00,000 ——–
Bank 1,60,000 1,00,000
35,20,000 17,.60,000 35,20,000 17,.60,000
- Ltd. acquired the shares in S.Ltd on 1st Oct.2005.
- The Profit and loss account of S.Ltd. on 1- 4 – 2005 showed a balance of
Rs.2, 80, 000 out of which a dividend of 20% was paid for the year
2004- 2005, in the month of Oct 2005. H.Ltd credited the dividend to its
Profit and Loss account.
3) Sundry creditors of S.Ltd includes Rs.60, 000 for goods supplied by H.Ltd.
The closing stock of S.Ltd includes goods worth Rs.24, 000 which were
supplied by H.Ltd. at a profit of 25% on cost.
Prepare Consolidated Balance Sheet.
- The balance sheet of O LTd. And P Ltd as on 31st March, 2004 are as under:
(Rs. .Lakhs)
Liabilities O P Assets O P
Equity (Rs.10) 25 50 Fixed Assets 110 50
Reserves 131 29.25 Investments 16.25 25
12% Debenture 11 5.50 Current Assets 40.25 3.25
Creditors 8 2.75 Misc. Expenditure 8.50 9.25
175 87.50 175 87.50
Investments of O Ltd represent 125000 shares of P Ltd. Investments of P Ltd are considered worth Rs.30 lakhs. P Ltd is taken over by O Ltd on the basis of the intrinsic value in their respective books of accounts. Prepare a statement showing the number of shares to be allotted by O Ltd to P Ltd and the opening entries in the books of O Ltd and also show the Balance sheet of O Ltd after absorption of P Ltd.