Corporate Accounting Solved Question Papers Dibrugarh UniversityCorporate Accounting Solved Paper May 2010 (Old Course)COMMERCE (General/Speciality)Course: 203 (Corporate Accounting )The figures in the margin indicate full marks for the questionsFull Marks: 80Pass Marks: 32Time: 3 hours
1. (a) (i) Give a brief description of ‘Statutory Books’ and ‘Statistical Books’ which are required to be maintained by a company as per provisions of Indian Companies Act, 1956.
Ans: Statutory and Statistical Books Maintained by Company:
Statutory book: Such books are those which a limited company is under statutory obligation to maintain at its registered office with a view to safeguard the interests of shareholders and creditors. Main statutory books are:
a. Register of investments held and their names
b. Register of charges
c. Register of members
d. Register of debenture holders
e. Annual returns
f. Minute books
g. Register of contracts
h. Register of directors
i. Register of director’s shareholdings
j. Register of loans to companies under the same management
k. Register of investment in the shares and debentures of other companies
l. Register of fixed deposits
m. Index of members where the number is more than fifty unless register of members itself affords an index
n. Index of debenture holders where the number is more than fifty, unless the register of debenture holders itself affords an index
o. Foreign register of members and debenture holders, if any
p. Register of renewed and duplicate certificates.
Statistical Books:
In order to keep a complete record of numerous details of certain transactions and activities of the company the following statistical books are usually maintained by joint stock companies in addition to statutory books. The keeping of such books are optional. The main books are:
a. Share application and allotment book
b. Share calls book
c. Share certificate book
d. Debenture application and allotment book
e. Debenture calls book
f. Register of share transfers
g. Dividend book
h. Debenture interest book
i. Register of documents sealed
j. Register of share warrants
k. Dividend mandates register
l. Register of debenture transfers
m. Register of powers of attorney
n. Agenda book
o. Register of lost share certificates
p. Register of director’s Attendance
(ii) What is ‘Statutory Report’? What items are generally included in this report?
Ans: Out of syllabus
Or
(b) ABC Co. Ltd. issued prospectus inviting applications for 20000 shares of Rs 10 each at a premium of Rs 2 per share as follows:
On Application – Rs 3
On Allotment – Rs 5 (including premium)
On First Call – Rs 2
On Second Call – Rs 2
Applications were received for 30000 shares and allotment made pro-rata to the applicants of 24000 shares. Money overpaid on application was employed on account of sums due on allotment. Mr. Rajat, to whom 400 shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were forfeited. Mr. Kamal, the holder of 600 shares failed to pay both the calls and his shares were forfeited after second call. Of the shares forfeited, 800 shares were issued to Mr. Anand, credited as fully paid for Rs 9 per share, the whole of Mr. Rajat’s shares being included. Pass the necessary Journal Entries to give effect to the above and prepare Bank A/c, Forfeited Shares A/c and Balance Sheet of the company.
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CORPORATE ACCOUNTING SOLVED QUESTION PAPERS (2010 Till Date)
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2. (a) The XYZ Co. Ltd. was registered with an authorized capital of Rs 10,00,000 divided into shares of Rs 10 each, of which 40000 shares have already been issued and fully paid up. The following is the Trial Balance extracted on 31st March, 2009:
Dr. Rs
|
Cr. Rs
| |
Stock on 1.4.2008
|
1,86,420
| |
Returns
|
12,680
|
9,850
|
Sundry Manufacturing Expenses
|
19,240
| |
18% Bank Loan (secured)
|
50,000
| |
Office Salaries and Expenses
|
17,870
| |
Directors Remuneration
|
26,250
| |
Freehold premises
|
1,64,210
| |
Furniture
|
5,000
| |
Debtors and Creditors
|
1,05,400
|
62,220
|
Cash at Bank
|
96,860
| |
Profit & Loss A/c on 1.4.2008
|
38,640
| |
Share Capital
|
4,00,000
| |
Purchases and Sales
|
7,18,210
|
11,69,900
|
Manufacturing Wages
|
1,09,740
| |
Carriage Inwards
|
4,910
| |
Interest on Bank Loan
|
4,500
| |
Auditor’s Fees
|
8,600
| |
Preliminary Expenses
|
6,000
| |
Plant and Machinery
|
1,28,400
| |
Loose Tools
|
12,500
| |
Cash in Hand
|
19,530
| |
Advance Payment of Tax
|
84,290
| |
17,30,610
|
17,30,610
|
You are required to prepare Profit & Loss A/c for the year ended 31st March, 2009 and a Balance Sheet as at that date after taking into consideration the following adjustments:
a) On 31st March, 2009, outstanding manufacturing wages and outstanding office salaries stood at Rs 1,890 and Rs 1,200 respectively. On the same date stock was valued at Rs 1,24,840 and loose tools at Rs 10,000
b) Provide for interest on Bank loan for 6 months
c) Depreciation on plant and Machinery is to be provided @ 15% while on office furniture is to be @10%
d) Write off one-third of balance of preliminary expenses
e) Make a provision for income tax @50%
f) The directors recommended a maiden (first) dividend @15% for the year ending 31st March, 2009 after the minimum transfer to General Reserve as required by law
g) Ignore corporate dividend tax
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0R
(b)Explain how the provisions laid under following standards affect the preparation of final accounts of the companies:
(i) (AS)-5
(ii) (AS)-12
(iii) (AS)-15
(iv) (AS)-29
5. (a) X Ltd. and Y Ltd. decided to amalgamate and a new company XY Ltd. is formed to take over both the companies as on 31st March, 2016. The following are the Balance Sheets of the companies as on that date:
Liabilities
|
X Ltd. Rs.
|
Y Ltd. Rs.
|
Assets
|
X Ltd. Rs.
|
Y Ltd. Rs.
|
Share Capita:
Shares of Rs. 10 each fully paid
Reserve fund
Profit & Loss A/c
Dividend Equalization Fund
Workmen Compensation fund
Bank Overdraft
Sundry Creditors
Bills Payable
|
5,00,000
2,00,000
30,000
-
20,000
-
1,00,000
50,000
|
3,00,000
1,50,000
50,000
1,00,000
-
50,000
1,20,000
30,000
|
Goodwill
Land and Buildings
Plant and Machinery
Patents and Trade Mark
Stock
Sundry Debtors
Bills Receivable
Cash at Bank
|
1,00,000
2,50,000
2,00,000
-
2,00,000
1,00,000
-
50,000
|
80,000
1,90,000
2,55,000
52,500
1,50,000
50,000
20,000
2,500
|
9,00,000
|
8,00,000
|
9,00,000
|
8,00,000
|
Show how the amount payable to each company is arrived at the prepare the amalgamated Balance Sheet of XY Ltd. assuming amalgamation is done in the nature of purchase. 5+6=11
Solution: Refer Question No. 4 of 2014 Semester Exam
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Or
(b) (i) Describe in detail the different types of amalgamation.
Ans: Amalgamation: Introduction
Amalgamation means the merging of two or more than two companies for eliminating competition among them or for growing in size to achieve the economies of scale. Amalgamation is a broad term which includes mergers (uniting of two existing companies) and acquisition (one company buying out another company).
There are two types of amalgamation: According to AS-14 amalgamation is divided into the following two categories for accounting purposes:
(A) Amalgamation in the nature of merger; and
(B) Amalgamation in the nature of purchase.
Amalgamation in the nature of Merger
According to AS-14 on Accounting for Amalgamation, the following conditions must be satisfied for an amalgamation in the nature of merger:
a. After amalgamation, all the assets and liabilities of the transferor company becomes the assets and liabilities of the transferee company.
b. Shareholders holding not less than 90% of the face value of the equity shares of the transferor company become the equity shareholders of the transferee company by virtue of amalgamation.
c. The business of the transferor company is intended to be carried on after the amalgamation by the transferee company.
d. Purchase consideration should be discharged only by issue of equity shares in the transferee company except that cash may be paid in respect of any fractional shares.
e. No adjustments are required to be made in the book values of the assets and liabilities of the transferor company, when they are incorporated in the financial statements of the transferee company. If any one of the condition is not satisfied in a process of amalgamation, it will not be considered as amalgamation in the nature of merger.
Amalgamation in the nature of Purchase: An amalgamation will be treated as “Amalgamation in the nature of purchase” if any of the above mentioned conditions is not satisfied.
(ii) Discuss in detail the various methods of calculating purchase consideration.
Ans: Purchase Consideration – Methods for calculation
Purchase Consideration refers to the consideration payable by the purchasing company to the vendor company for taking over the assets and liabilities of Vendor Company.
Accounting Standard – 14 defines the term purchase consideration as the “aggregate of the shares and other securities issued and the payment made in the form of ach or other assets by the transferee company to the shareholders of the transferor company”. Although, purchase consideration refers to total payment made by purchasing company to the shareholders of Vendor Company, its calculation could be in different methods, as explained below:
a. Lump sum method
b. Net Assets method
c. Net Payment Method
a. Lump sum Method: Under this method purchase consideration will be paid in lump sum as per the valuation of purchasing companies valuation. E.g., if it is stated that A Ltd. takes over the business of B Ltd. for Rs.15, 00,000 here the sum of the Rs.15, 00,000 is the Purchase Consideration.
b. Net Assets Method: Under this method P.C. shall be computed as follows:
Particulars
|
Rs.
|
Agreed value of assets taken over
Less: Agreed value of Liabilities taken over
|
XXX
XXX
|
Purchase Consideration
|
XXX
|
Note: i. The term “agreed value” means the amount at which the transferor company has agreed to sell and the transferee company has agreed to take over a particular assets or a liability Otherwise book value will be the agreed value.
ii. Fictitious assets (i.e., preliminary expenses, underwriting commission, discount on issue of shares, discount on issue of debentures and debit balance in P & L A/c) are not taken over.
c. Net Payment Method: Under this method P.C. should be calculated by aggregating total payments made by the purchasing company. E.g.: A Ltd. had taken over B Ltd. and for that it agreed to pay Rs.5, 00,000 in cash 4, 00,000 Equity Shares of Rs.10 each fully paid at an agreed value of Rs.15 per share then the P.C. will be ascertained as follows:
Particulars
|
Rs.
|
Cash
4,00,000 E. Shares of Rs.10 each fully paid, at Rs.15 per share
|
5,00,000
60,00,000
|
Purchase Consideration
|
65,00,000
|
6. (a) From the Balance Sheet and information given below, prepare Consolidated Balance Sheet of H Ltd. and its subsidiary S Ltd.:
Balance Sheet as on 31st march, 2009
Liabilities
|
H Ltd. (Rs)
|
S Ltd. (Rs)
|
Assets
|
H Ltd. (Rs)
|
S Ltd. (Rs)
|
Share Capital :
Share of Rs 10 each fully paid
|
5,00,000
|
1,00,000
|
Fixed Assets
|
4,00,000
|
60,000
|
Profit & Loss A/c
|
2,00,000
|
60,000
|
Stock
|
3,00,000
|
1,20,000
|
Reserves
|
60,000
|
30,000
|
Debtors
|
75,000
|
85,000
|
Bills Payable
|
15,000
|
Bill Receivable
|
20,000
| ||
Creditors
|
1,10,000
|
60,000
|
7500 shares in S Ltd. at cost
|
75,000
| |
8,70,000
|
2,65,000
|
8,70,000
|
2,65,000
|
Additional Information:
a) The bills accepted by S Ltd. are all in favour of H Ltd.
b) The stock of H Ltd. includes Rs 25,000 bought from S Ltd. at a profit to latter of 20% on sales.
c) All the profit of S Ltd. has been earned since the shares were acquired by H Ltd. but there was already the reserve of Rs 30,000 at that date
Or
(b) (i) Define a holding company. How does it come into existence? Explain briefly.
Ans: Meaning of Holding and its existence
An important development of recent times in the business world is the combining of independent business units into a group or an economic unit. A company may acquire either the whole or majority of shares of another company so as to have a controlling interest in such a company or companies. The controlling company is known as Holding or Parent Company and the company controlled is known as Subsidiary Company.
Holding Company: As per Section 2(46) “holding company”, in relation to one or more other companies, means a company of which such companies are subsidiary companies. According to this section, one company can become the holding company of another in any of the following three ways:
1. By holding more than 50% of nominal value of the equity shares of the other company i.e. the holding company holds the majority of voting power in the subsidiary company.
2. By controlling the composition of the Board of Directors of the other company so that the holding company is able to appoint or remove the directors of the subsidiary company.
3. By controlling a holding company which controls another subsidiary or subsidiaries. For example, if B Ltd is a Subsidiary of C Ltd & C Ltd is a subsidiary of A Ltd then B Ltd is also deemed to be a subsidiary of A Ltd.
(ii) How would you ascertain the amount of goodwill or capital reserve while preparing a Consolidated Balance Sheet?
Ans: In practice the holding company may pay more or less than the net worth of the subsidiary company. If the holding company feels that a company the shares of which it wants to acquire enjoys considerable reputation or exceptionary favourable factor it may pay more than the paid up value of shares or net assets.
The excess of acquisition price over net assets represents goodwill or cost of control. If on the other hand the acquisition price is less than the paid up value of shares the difference is again to the holding company & is known as capital reserve.