LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
B.B.A. DEGREE EXAMINATION –BUSINESS ADMINISTRATION
SUPPLEMENTARY EXAMINATION – JUNE 2007
BU 4500 - CORPORATE ACCOUNTING
Date & Time: 27/06/2007 / 9:00 - 12:00
Dept. No.
Max. : 100 Marks
PART A
Answer ALL questions
Explain the following:
10 x 2 = 20 marks
1.
2.
3.
4.
5.
6.
7.
Calls in advance and calls in arrears
Two purposes for which securities premium can be used
Average Capital employed
Amalgamation adjustment reserve
Intrinsic value of a share
Preferential creditor with two examples
P Ltd redeems 2,000 8% preference shares of Rs.100 each at a premium of 10% out of
divisible profits. Journalize.
8. A Ltd issued 1,000 8% debentures of Rs.100 each at par, redeemable at 5% premium. Pass
entries at the time of issue and redemption of the debenture.
9. R Ltd was formed on 1st May 2006 to purchase the business of X with effect from 1st
January 2006. While preparing final accounts on 31.12.2006, it was found that the total sales
for the year was Rs.10,00,000 and the sales from 1st July 2006 was double that of those up to
that date on a monthly average basis.
Calculate sales ratio.
10. A Ltd., issued 6% debentures of Rs.100 each. The issue was underwritten to the extent of
50% by X and 30% by Y. applications were received for 900 debentures. Calculate the
liability of the underwriters.
PART B
Answer ANY FIVE questions
5 x 8 = 40 marks
11. Ellora Ltd., issued 1,50,000 equity shares of Rs.10 each at par. The issue was underwritten
by Anand, Vijay and Ashok equally. Applications totaled 1,29,700 shares. This included
marked forms as follows:
Anand - 40,000 shares
Vijay - 52,500 shares
Ashok – 30,000 shares
The underwriting commission was fixed at 5%.
Calculate the liability of each underwriter and pass journal entries in the books of the
company.
12. State the conditions to be followed while
(a)
Redeeming Preference shares
(b)
Issuing share @ a discount
13. Aruna Ltd., had Rs.9,00,000 10% debentures outstanding on 1.1.1993. On that date, the
sinking fund stood in the company’s books at Rs.7,50,000. The fund was invested in
Rs.7,95,000 6% Govt. bonds. The annual appropriation to the sinking fund was Rs.1,23,450.
On 31.12.1993, the interest on the investments was received. The bank balance before
receiving interest was Rs.2,40,000. On that date, the investments were realized at 90% of
their face value and the debentures were redeemed.
Show the important ledger accounts for the year 1993.
14. On 1st July 1989 ABC Co. Ltd., purchased the business of Mr. Ram Keshav, a sole trader,
taking over all the assets with the exception of book debts amounting to Rs.1,25,000 and
creditors amounting to Rs.75,000. The company undertook to collect all the book debts and
pay off the creditors and for this service, it has to be paid a commission of 3% on the
amounts collected and 1% on amounts paid. The debtors realized Rs.1,12,000 out of which
Rs.68,000 was paid to creditors in full settlement. The company was able to collect Rs.5,000
debt which was previously written off as bad by the sole trader. The company was also
forced to meet a contingent liability of Rs.3,000 on account of a claim against the vendor for
damages. The vendor received Rs.30,000, 10% debentures of Rs.100 each at 95 and the
balance in cash in settlement of his account with the company.
Journalize the above transactions in the book of the company.
15. Prabhu Private Ltd., was incorporated on 1st July 1994 to take over the running concern of
Mr. Rowther with effect from 1st April 1994. The following profit and loss account for the
year ended 31st March 1995 was drawn up.
Rs.
Rs.
To Commission
2,625
By Gross profit
98,000
To Advertisement
5,250
By Bad debts realized
500
To Managing Director’s
Remuneration
9,000
To Depreciation
2,800
To Salaries
18,000
To Insurance
600
To Preliminary expenses
700
To Rent and taxes
3,000
To Discount
350
To Bad debts
1,250
To Net Profit
54,925
---------------98,500
98,500
The following details are available:
(a)
The average monthly turnover from July 1994 onwards was double than that of
previous months.
(b)
The rent for the first 3 months was paid @ Rs.200 p.m. and thereafter at a rate
increased by Rs.50 p.m.
(c)
Bad debts Rs.350 related to sales effected after the 1st September 1994 and the
realisation of bad debts was in respect of debts written off during 1992.
You are required to find out profit prior to incorporation and to state the treatment thereof in
the books of the company.
16. Determine the maximum remuneration available to the part time Directors and Manager of
Blueprint Co. Ltd. (a manufacturing company) under section 309 and 387 of the Companies
Ac, 1956, from the following particulars:
Before charging any such remuneration the Profit and Loss A/c showed a credit balance of
Rs.6,60,000 for the year ended March 31, 1983 after taking into account the following
matters:
Rs.
Capital expenditure
1,50,000
Subsidy received from Govt.
1,20,000
Special depreciation
20,000
Multiple shift allowance
30,000
Bonus to foreign technicians
90,000
Provision for taxation
8,00,000
Compensation paid to injured workman
20,000
2
Ex-gratia to an employee
Loss on sale of fixed asset
Profit on sale of investment
10,000
20,000
60,000
17. Bright Ltd., invited applications for 10,000 shares of Rs.100 each at a discount of 6%
payable as follows:
On application Rs.30
On allotment Rs.24
On first and final call Rs.40
Applications were received for 9,500 shares and all these were accepted. All moneys due
were received except the final call on 250 shares which were forfeited. 150 of the forfeited
shares were reissued at Rs.80 per share as fully paid.
Pass journal entries in the books of the company.
18. The following are the Balance Sheets of Sindhu Ltd., and Bindhu Ltd., as on 31.3.2000
Liabilities
Sindhu Ltd Bindhu Ltd Assets
Sindhu Ltd Bindhu Ltd
(Rs.)
(Rs.)
(Rs.)
(Rs.)
Eq. Sh.Capital
5,00,000 3,00,000 Fixed Assets 8,00,000 3,50,000
(Rs.10 each)
8% Pref. sh. Capital
(Rs.100 each)
2,00,000 1,00,000
Current Assets
4,00,000 2,50,000
General Reserve
1,00,000
50,000
P&L a/c
50,000
30,000
Creditors
3,50,000 1,20,000
------------ ----------------------- -----------12,00,000 6,00,000
12,00,000 6,00,000
Sindhu Ltd., agreed to acquire Bindhu Ltd., on the following terms:
(a)
8% preference shares will be issued to discharge the preference shares in
Bindhu Ltd., at 5% premium.
(b)
One equity share in Sindhu Ltd., will be issued at agreed value of Rs.12 per
share for every equity share in Bindhu Ltd.
Give journal entries in the books of Sindhu Ltd., and prepare its Balance sheet, if
amalgamation is in the nature of merger.
PART C
Answer ANY TWO questions
marks
2 x 20 = 40
19. The following is the balance sheet of R Ltd., on 31.3.2006
Liabilities
Rs.
Assets
Rs.
Share capital
Fixed assets
20,00,000
20,000 equity shares of Rs.100
Current assets
6,50,000
each
20,00,000
P &L balance
9,70,000
6% debentures of Rs.100 each 10,00,000
Debenture interest due
1,20,000
Creditors
5,00,000
36,20,000
36,20,000
Fixed assets are re-valued at Rs.9,60,000 and current assets at Rs.4,80,000.
A capital reduction scheme was approved by the court as follows:
i) Shares were sub divided into shares of Rs.5 each and 90% of the shares were surrendered.
ii) Claims of debenture holders were reduced to Rs.4,90,000 for which 2,50,000 equity
shares were allotted from out of the shares surrendered.
iii) Creditors agreed to reduce their claims to Rs.3,00,000, 1/3rd of this amount was to be
satisfied by the issue of equity shares out of the shares surrendered.
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Pass necessary journal entries and prepare the Balance sheet of the company after the
reconstruction.
20. Balance sheet of M Ltd., on 31.3.2006 stood as follows:
Liabilities
Rs.
Assets
Share capital:
Land and building
5,000 equity shares of Rs.100
Machinery
each Rs.60 paid up.
3,00,000
Stock
5,000 equity shares of Rs.100
Debtors
each Rs.50 paid up.
2,50,000
P&L
12% preference shares of
Rs.100 each fully paid.
10,00,000
15% debentures
4,00,000
Preferential creditors
1,05,000
Unsecured creditors
10,45,000
31,00,000
Rs.
3,86,000
8,21,000
1,84,000
13,37,000
3,72,000
31,00,000
Preference dividend is in arrears for 2 years and are payable on liquidation.
Assets realized as follows
Land and building Rs.9,84,000; Stock Rs.1,63,000
Machinery Rs.7,12,000 and Debtors Rs.11,91,000
Liquidation expenses was Rs.65,500
Liquidator is entitled to a commission of 3% on assets realized and 2% on payments to
unsecured creditors. All payments are made on 30.9.2006.
Prepare Liquidator’s final statement of account.
21. a) Explain the various methods used to value the goodwill of a firm.
b) The balance sheet of A Ltd., is as follows:
Liabilities
Rs.
Assets
Rs.
Share capital:
Land & building
1,10,000
20,000 equity shares of Rs.10
Machinery
1,30,000
each.
2,00,000
Stock
68,000
General reserve
40,000
Debtors
88,000
P & L account
32,000
Cash
52,000
Tax liability
60,000
Preliminary expenses
12,000
Workman’s saving A/c
30,000
Creditors
98,000
4,60,000
4,60,000
Land and building has been valued at Rs.2,40,000 and Machinery at Rs.1,20,000. Goodwill
should be valued at two years’ purchase of the average profit of the past three years, which
were Rs.80,000, Rs.90,000 and Rs.1,06,000 respectively. It is the company’s practice to
transfer 25% of the profits to reserve. The normal rate of return is 10%. Calculate the value
of the share under (1) intrinsic value method (2) yield method
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