Professor Vipin 2014
Financial Accounting 1
Section A
1.
a) What is Royalty?
b) How do you treat the effect of strike in Royalty accounts?
c) What is short working? How do you treat it in the B/S of lessee, if the recoupment period is not
over?
d) Who is a hirer?
e) What are hire purchase charges?
f) Mention any two rights of the Hire Vendor?
g) What is revaluation account?
h) How do you treat the fictitious assets appearing in the B/S of the amalgamating firm?
i) Pass the entry for creating provision for doubtful debts in the books of the amalgamating firm at
the time of amalgamation.
j) How do you calculate purchase consideration under net worth method?
k) What do you mean by sale of a firm to a company?
l) Can a seller seize the asset under instalment system? Why?
Section B (5x5=25)
2. Distinguish hire purchase and sale
3. Mention the features of instalment system.
4. Calculate the amount of purchase consideration from the following:
Purchaseing company agreed to issue 100,000 equity shares of Rs. 10 each valued at Rs. 12
each, 50000 8% debentures of Rs. 10 each at a discount of 5%, pay cash equal to 10% of face
value of the debentures and shares issued. The company also agreed to meet the dissolution
expenses of Rs. 5000.
5. Prepare the analaysis table of royalties from the following:
a) Minimum rent of Rs. 60000 pa
b) Royalty Rs. 4 per ton of ore raised
c) Shortworkings recoverable during the first 3 years of lease.
d) The outpur of the first four years was as follows:
2006-4000 tons, 2007-8000 tons, 2008-16000 tons, 2009-4000 tons.
www.VipinMKS.com
Page 1
Professor Vipin 2014
6. From the following information, prepare interest suspense account in the books of the buyer
under instalment system:
a)
b)
c)
d)
Cash price of the asset: Rs. 300000
Instalment price: Rs. 372000
Interest to be apportioned: 3:2:1
Date of purchase: 01/4/06
The books are closed on 31st march every year. The first payment is made at the end of the first
year
7. The following are the terms of an hire purchase agreement:
a) Cash Price: Rs. 24000
b) Hire Purchase: Rs. 30000
c) No of installments: 30
The hire purchaser has already paid 12 installments. He wants to settle the remaining balance
and terminate the agreement.
Calculate:
a) Rebate amount he can claim
b) The balance amount to be paid on settlement .
Some Questions Missing for this Year Paper. Apologies for the same.
Section C (3x15=45)
1. Nishal Mines Company took a lease from a landlord for a period of 10 years from 1st January
2005 on a Royalty of Rs. 10 per ton of coal raised with a dead rent of Rs. 40000 and power to
recoup short workings during the first four years of lease. The annual output is as follows:
Year
2005
2006
2007
2008
2009
Output (tons)
2000
3000
4000
4500
5000
www.VipinMKS.com
Page 2
Professor Vipin 2014
Prepare
a)
b)
c)
d)
Dead Rent a/c
Royalties a/c
Short workings a/c
Landlord a/c in the books of Nishal Mines Company.
2. On 1st January 2007, Anju Oil Company purchased an oil machine on the installment system. The
cash price of the machine was Rs. 223500 and payment was made as follows: Rs. 60000 was to
be made on the singning of the agreement and the balance in 3 installments of Rs. 60000 each
at the end of each year. 5% pa interest is charged by the vendor company. Anju Oil Company
has decided to write off 10% per annum as depreciation on the diminishing balance of the cash
price.
Prepare the necessary ledger accounts in the books of Anju Oil Company. Calculations are to be
made to the nearest rupee.
3. On 1st Jan 2006, Miss Manasa purchased a washing machine from Niharika Enterprises on hire
purchase basis. The cash price of the machine was Rs. 50000 payable Rs. 10000 on signing the
agreement and the balance in 4 annual installments of Rs. 10000 each plus at 5% pa interest
payable on 31st December each year. Miss Manasa writes off depreciation at 10% pa on
diminishing value of the machine. Show the necessary ledger accounts in the books of Miss
Manasa.
4. Vinay, Vishwas and Vicky were in partnership shareing profits and losses in the ratio of 4:3:1
respectively. On 31st March 2009 they agreed to sell their business to a limited company. Their
position was as follows:
Liabilities
Capital Accounts:
Vinay
Vishwas
Vicky
Loan From bank
Sundry Creditors
Amount
40000
30000
26000
8000
16000
120000
Assets
Freehold Property
Machinery
Book Debts
Stock
Cash
Amount
36000
24000
30000
26000
4000
120000
The company took the following assets at the valuation shown:
www.VipinMKS.com
Page 3
Professor Vipin 2014
Freehold Property: Rs. 44000, Machinery: Rs. 22000, Book Debts: Rs. 28000, Stock: Rs. 24000
and Goodwill: Rs. 8000. The company also agreed to oay the creditors which is agreed at Rs.
15400. The company also paid 3300 shares of Rs. 10 each fully paid and balance in cash. The
expenses amounted to Rs. 1000.
Prepare the necessary accounts in the books of the firm and also pass the necessary entries in
the books of the purchasing company.
5. Following were the balance sheets of M/S A & B and M/s C & D as on 31st December 2009:
Liabilities
Creditors
Bills Payable
Bank OD
Capital:
A
B
C
D
A&B
C&D
6000
50000
12000 20600
100000
100000
2180000
105000
105000
280600
Assets
Stock
Debtors
Premises
A&B
C&D
100000 150000
60000
90000
40000
Plant and Machinery
Bank
Furniture
Defence Bonds
10000
3000
1000
4000
2180000
40000
600
280600
The two firms decided to amalgamate their business from 1st Jan 2010. For this purpose, it was
agreed that premises and plant and machinery belonging to A&B should be taken over at Rs.
50000, Rs. 20000 respectively. C&D were to be credited with Rs. 10000 as the value of the
certain patent rights which they possessed which became the property of the partnership and
which were not included in the balance sheet. All other assets were taken over at book values
except the Defence Bonds belonging to a&B which was not taken over. Both firms undertook to
discharge their own liabilities and it was agreed that A&B should introduce cash, to make their
capital equal to C&D.
Prepare the necessary ledger accounts in the books of M/S A&B, M/S C&D. Also pass the
incorporation entries in the books of the new firm.
www.VipinMKS.com
Page 4