LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
B.A. DEGREE EXAMINATION –CORPORATE
SUPPLEMENTARY EXAMINATION – JUNE 2007
CR 4500 - CORPORATE ACCOUNTING
Date & Time: 26/06/2007 / 9:00 - 12:00
Dept. No.
Max. : 100 Marks
SECTION: A
Answer any ten only:
10 x 2 = 20
1) Write Short Note On: Minimum Subscription.
2) Fill the blanks.
A) A Call money on shares should not exceed ------- of the face value of share.
B) Interest @------- is charged on calls in arrears according to Table A of the
Companies Act.
3) 70% of an issue of 5,00,000 shares of Rs.10 each is underwritten by M/S K and S.
Applications totaled 4,00,000 shares. Is there a liability of the underwriters?
4) What do you mean by “Profit Prior to Incorporation”?
5) Under what headings will you classify the following items while preparing Balance
Sheet of a company?
Preliminary expenses, Unclaimed Dividend, Loose tools, Proposed Dividend
6) Define “Goodwill”
7) Calculate the yield value per share from the information given below:
40,000 Equity shares of Rs.10 each fully paid.
Normal rate of return: 8%
Expected rate of return: 12%
8) What do you understand by “consolidation” and “Sub division” of shares.?
9) Write Note on “Purchase consideration”.
10) From the following particulars, Calculate the remuneration payable to liquidator:
Amount available for distribution to unsecured creditors before paying liquidator’s
remuneration which is not sufficient to pay them fully Rs.2,80,000.
Liquidator’s remuneration: 2% of the amount paid to unsecured Creditors.
SECTION – B
Answer any five only.
5 x 8 = 40
11) Differentiate between Pooling of interests method and Purchase method suggested for
amalgamation accounting.
12) What is Capital reduction? Explain the procedure for reduction of capital.
13) Explain in detail the requirements for the redemption of preference shares as per Section 80
of the Companies act 1956?
14) A company’s share capital consists of 1, 00,000 ordinary shares of Rs.10 each fully paid,
and 50,000 6% redeemable preference shares of Rs.10 each fully paid, redeemable at a
premium of Re.1 per share. The company had a credit of balance of Rs.4, 00,000 on profit
and loss account and Rs.5, 00,000 on general reserve.
The company resolved:
1) To make a bonus issue of one share for every two held by the existing ordinary
shareholders form the general reserve.
2) To redeem the preference shares.
3) To issue 30,000 ordinary shares of Rs.10 each at Rs.11.25 per share in order to
provide part of the funds for the redemption of the preference shares.
The resolutions were carried into effect. You are required to pass necessary journal
entries to record the same.
15) P LTd., was incorporated on 31st July 1997 to purchase the business of Premi &co., as on 1st
April 1997. The books of accounts disclosed the following on 31st March 1998.
a. Sales for the year Rs.32,10,400 (1st April to 31st July 97 Rs.8,02,600; 1st July 97 to
31st March 1998 Rs.24,07,800)
b. Gross profit for the year Rs.4,12,800; Managing Directors’ Salary Rs.12,000;
Preliminary expenses written off Rs.18,000.; company secretary’s salary Rs.58,000.
c. Bad Debts written off Rs.14,890 ( Prior to 31st July Rs.4020, after 31st July
rs.10,870)
d. Depreciation on machinery Rs.25,200; general expenses Rs.51,000; Advertising
Rs.7,400; Interest on debentures Rs.20,000.
You are required to prepare a statement apportioning properly the net profit of
the company as between Profits available for distribution and Profits prior to
incorporation.
16) The Balance Sheet of S Ltd., disclosed the following positions as on 31st December 2000
Liabilities
Rs
Assets
Rs
Share capital:
6,000 equity shares
of Rs.100 each
Profit &Loss A/c
General Reserve
6% Debentures
Creditors
6,00,000
75,000
2,25,000
4,50,000
4,50,000
18,00,000
Goodwill
Investments
Stock
Debtors
Cash
1,65,000
5,25,000
6,60,000
3,90,000
60,000
18,00,000
The profits for the past five years were: 1996-Rs.30,000; 1997-Rs.70,000; 1998Rs.50,000; 1999-Rs.55,000; 2000-Rs.95,000.
The Market value of investments was Rs.3,30,000
Goodwill is to be valued at three years purchase of the average annual profits for the last
five years.
Find out the intrinsic value of each share.
17) The following was the balance sheet of A LTd. As on 31.12.2000
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Liabilities
Issued and Paid up
Capital:
12000 shares of Rs.10
Each
Rs.120000
Less: Calls in
Arrears
9,000
(Rs.3 Per Share)
Creditors
Provision for tax
Rs.
1, 11,000
15,425
4,000
1, 30,425
Assets
Goodwill
Land & Building
Machinery
Stock
Debtors
Bank
Rs.
10,000
20,500
50,850
10,275
15,000
1,500
preliminary Expenses 1,500
P&L A/C
22000
(-) Net Profit
of this year
1200 20,800
1, 30,425
Machinery value was Rs.10, 000 in excess. It is proposed to write down this asset
and to extinguish the P&LA/C debit balance and to write off goodwill and preliminary
expenses by the adoption of the following scheme.
A) Forfeit the shares on which the calls are outstanding.
B) Reduce the paid up capital by Rs.3 per share.
C) Re-issue the forfeited shares at Rs.5 per share.
D) Utilize the provision for tax if necessary.
You are required to draft the journal entries and prepare the revised balance sheet.
18) From the data relating to a company (in voluntary liquidation), you are asked to prepare
liquidator’s final statement of account.
a. Cash with liquidator (after all assets are realized and secured creditors and debenture
holders are paid) Rs.6, 73,800
b. Preferential creditors to be paid Rs.30, 000
c. Other unsecured creditors Rs.2, 15,000
d. 4000 6% preference shares of Rs.100 each fully paid.
e. 2,000 equity shares of Rs.100 each, Rs.75 per share paid up.
f. 6,000 equity shares of Rs.100 each, Rs. 60 per share paid up.
g. Liquidator’s remuneration 2% on preferential and other creditors.
h. Preference dividends were in arrears for 2 years.
SECTION – C
Answer any two only:
2 x 20 = 40
19) A Ltd., issued a prospectus, inviting applications for 2,00,000 shares of Rs.10 each at
a premium of Rs.5 per share, payable as follows:
On application – Rs.2.50 per share
On allotment – Rs.7.50 per share (Including Premium)
On first call – Rs.4.00 per share
On final call – Rs.1.00 per share
Applications were received for 3, 00,000 shares and allotment was made pro rate to the
applicants of 2, 40,000 shares, and the remaining applications being refused. Money
received in excess on the application was adjusted towards the amount due on allotment.
Pradeep, to whom 4,000 shares were allotted, failed to pay allotment money and on his
failure to pay the first call, his shares were forfeited. Joel, the holder of 6,000 shares, failed
to pay the two calls and so his shares were also forfeited. All these shares were sold to Elvis,
credited as fully paid for Rs.8 per share.
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Pass journal entries to record the above issue of shares by the company.
20) The E K Ltd. sells its business to B 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 Receivable
4,500
Debtors
27,500
Cash at bank
50,000
4,00,000
4,00,000
B 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 and Creditors.
The purchase consideration was to be discharged by the allotment to the EK.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 Realization Account, Shareholders’ Account, B Ltd a/c and Bank a/c in the
books of the vendor and entries in the books of B Ltd.
21) Moon Ltd., is a company with an authorized capital of Rs.5, 00,000 dividend into 5000
equity shares of Rs.100 each on 31.12.2005 of which 2,500 shares were fully called up. The
following are the balances extracte3d from the ledgers as on 31.12.2005.
Trial balance of Moon Ltd.
Debit
Rs.
Credit
Rs.
Opening stock
50,000
Sales
3,25,000
Purchases
2,00,000
Discount received
3,150
Wages
70,000
Profit & Loss A/C
6,220
Discount allowed
4,200
Creditors
35,200
Insurance (up to 31.3.05)
6,720
Reserves
25,000
Salaries
18,500
loan from managing
Rent
6,000
director
15,700
General Expenses
8,950
Share Capital
2,50,000
Printing
2,400
Advertisement
3,800
Bonus
10,500
Debtors
38,700
Plant
1,80,500
Furniture
17,100
Bank
34,700
Bad Debts
3,200
Calls in arrears
5,000
6,60,270
6,60,270
You are required to prepare profit and loss account for the year ended 31st December 2005
and the Balance Sheet as on that date. The following information is given:
a) Closing stock was valued at Rs.1, 91,500
a) Depreciation on plant @15% and on Furniture @ 10% should be provided.
b) Tax provision of Rs.8, 000 is considered necessary.
c) The directors declared the interim dividend on 15.08.05 for six months ending 30th
June 2005. @ 6%.
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