Term-End Examination: June, 2014
ECO-14: ACCOUNTANCY-II
Note: Attempt any four questions including question no. 1 which is compulsory.
1. Attempt any two of the following questions: 7, 7
(a) Describe the rights of a hire vender in case of default by hire purchaser in making payment of instalments under the hire purchase agreement.
(b) What do you mean by goodwill? State the factors that affect its valuation.
(c) Explain briefly the sinking fund method of redemption of debentures by a company.
(d) How do you deal with purchase and depreciation of branch fixed assets whose accounts are maintained at the head office level?
2. Asia Ltd. of Mumbai has a branch at Delhi. The branch sells goods on cash as well as on credit. From the following branch transactions that took place during the year 2011 - 12, prepare 'Delhi Branch Account', 'Memorandum Branch Debtors Account' and 'Goods Sent to Branches Account' in the books of the head office.
Particulars
|
Rs.
|
Opening Stock
Closing Stock
Opening debtors
Opening balance of petty cash
Goods sent to branch
Cash sales
Credit Sales
Cash received from debtors
Cash sent to branch for expenses
Goods returned by branch
Goods returned by customers
Discount allowed to customers
Bad debts
Petty cash in hand at the end of the year
|
2,00,000
1,20,000
1,00,000
600
6,80,000
6,00,000
4,00,000
2,00,000
40,000
10,000
60,000
10,000
30,000
4,600
|
Ans:
Delhi Branch Account
Particulars
|
Amount
|
Particulars
|
Amount
|
To Opening Balance :
Stock
Debtors
Petty Cash
To Goods sent to Branch A/c
To Bank (Expenses)
To Branch Profit for the year
|
2,00,000
1,00,000
600
6,80,000
40,000
1,14,000
|
By Cash (Remittance)
- Cash Sales
- Collection from Debtors
By Goods sent to Branch A/c (Return)
By Closing Balance :
Stock
Petty Cash
Debtors
|
6,00,000
2,00,000
10,000
1,20,000
4,600
2,00,000
|
11,34,600
|
11,34,600
|
Goods sent to Branches A/c
To Delhi Branch A/c ( Return )
To Purchases A/c
|
10,000
6,70,000
|
By Delhi Branch A/c
|
6,80,000
|
6,80,000
|
6,80,000
|
Memorandum Branch Debtors A/c
To Balance b/d
To Credit Sales
|
1,00,000
4,00,000
|
By Cash
By Return Inward
By Discount
By Bad debts
By Balance c/d
|
2,00,000
60,000
10,000
30,000
2,00,000
|
5,00,000
|
5,00,000
|
3. X, Y and Z are partners sharing profits and losses in the ratio of 2: 2: 1. Their balance sheet as on March 31, 2012 was as follows: 12
Liabilities
|
Rs.
|
Assets
|
Rs.
|
Bills Payable
Sundry Creditors
Loan from X
Reserve Fund
Capital :
X
Y
Z
|
80,000
2,10,000
5,00,000
1,00,000
3,00,000
2,50,000
1,35,000
|
Cash at Bank
Bills Receivable
Sundry Debtors
Stock
Furniture
Machinery
Buildings
Goodwill
|
3,40,000
50,000
1,50,000
2,25,000
50,000
3,00,000
4,00,000
60,000
|
15,75,000
|
15,75,000
|
Z retires from business on April 1, 2012. For the purpose of retirement of Z, the assets and liabilities of the firm are revalued as follows:
- Stock at Rs. 1,80,000; Furniture at Rs. 30,000; Machinery at 75% of book value; and Buildings at Rs. 8,00,000.
- A provision of 10% of debtors is to be made for doubtful debts.
- The goodwill of the firm is estimated to be worth Rs. 3, 00,000.
- A bill for repairs of building Rs. 40,000 was unpaid and had not been recorded in the books of the firm.
Ascertain the claim of Z against the firm by preparing Revaluation Account and his Capital Account and show your workings.
Revaluation A/c
To Stock
To Furniture
To Machinery
To Provision for bad debts
To Bill of repairs
To Profit on revaluation :
X = 2,05,000 x 2/5
Y = 2,05,000 x 2/5
Z = 2,05,000 x 1/5
|
45,000
20,000
75,000
15,000
40,000
82,000
82,000
41,000
|
By Buildings
|
4,00,000
|
4,00,000
|
4,00,000
|
Partner’s Capital A/c
Particulars
|
A
|
B
|
C
|
Particulars
|
A
|
B
|
C
|
To Goodwill A/c
To Z’s Capital A/c
To Z’s Loan A/c
To Balance c/d
|
24,000
30,000
---------
3,68,000
|
24,000
30,000
---------
3,18,000
|
12,000
---------
2,44,000
|
By balance b/d
By Revaluation a/c
By Reserve Fund a/c
By X’s Capital
By Y’s Capital
|
3,00,000
82,000
40,000
|
2,50,000
82,000
40,000
|
1,35,000
41,000
20,000
30,000
30,000
|
4,22,000
|
3,72,000
|
2,56,000
|
4,22,000
|
3,72,000
|
2,56,000
|
Balance Sheet of New Firm
Liabilities
|
Amount
|
Assets
|
Amount
|
Bills Payable
Sundry Creditors
Loan From X
Bill for Repairs of Building
Loan From Z
Capitals
X
Y
|
80,000
2,10,000
5,00,000
40,000
2,44,000
3,68,000
3,18,000
|
Cash at Bank
Bills Receivable
Debtors 1,50,000
Less : Provision For doubtful debt 15,000
Stock
Machinery
Furniture
Buildings
|
3,40,000
50,000
1,35,000
1,80,000
2,25,000
30,000
8,00,000
|
17,60,000
|
17,60,000
|
Working Note: (1) X: Y: Z (old ratio) = 2: 2: 1.
X: Y (New ratio) = 2: 2 = 1: 1
New Gaining ratio = 1: 1.
(2) Z’s share of goodwill = 3, 00,000 x 1/5 = 60,000
Contributed by X = 60,000 x ½ = 30,000.
Contributed by Y = 60,000 x ½ = 30,000.
4. (a) On January 1, 2009 Mahendra Bros. Sold Machinery to Harish on hire-purchase system for Rs. 4, 62,000 including interest @ 10% per annum. The payment received on delivery was Rs. 80,000; at the end of first year it was Rs. 1, 52,000; at the end of second year it was Rs. 1, 20,000; and at the end of third year it was Rs. 1, 10,000. Their accounting year ends on December 31. Compute the cash price of the machinery, and prepare Hire Vendor's Account in the books of Harish.
(b) How would you deal with calls in arrears, calls in advance and the amount received on forfeited shares while preparing the final accounts of a company?
5. (a) What is a statement of changes in financial position? 4, 8
(b) Ascertain the amount of funds from operations from the following Profit and Loss A/c of a company:
Rs.
|
Rs.
| ||
Sundry Expenses
Salaries
Goodwill W/O
Preliminary Expenses
Loss on sale of furniture
Depreciation
Net Profit
|
25,000
40,000
22,000
8,500
4,000
9,000
56,500
|
Gross Profit
Profit on Sale of Machinery
|
1,25,000
40,000
|
1,65,000
|
1,65,000
|
Ans: Calculation of Funds from Operation
Net Profit = 56,500
Add : Non –fund and non operating Expenses and Loss :
Depreciation
Loss on Sale of Furniture
Preliminary Expenses
Goodwill G/D
Less : Non Fund and Non-Operating incomes :
Profit on Sale of machine
Funds From operation
|
9,000
4,000
8,500
22,000
|
56,500
43,500
1,00,000
40,000
60,000
|
6. Compute Gross Profit Ratio, Operating Ratio, Net Profit Ratio and Operating Profit Ratio from the following data: 3x4=12
Particulars
|
Amount
|
Sales
Sales Returns
Gross Profit
Office Expenses
Selling Expenses
Interest on Debentures
Loss by fire
Income from Investment
|
41,00,000
1,00,000
15,00,000
1,50,000
2,60,000
1,00,000
2,40,000
50,000
|
Ans:
Income Statement
Gross Sales
Less : Return
Net Sales
Less : Cost of goods sold
Gross Profit
Less : Operating Expenses
Selling Expenses = 2,60,000
Office Expenses = 1,50,000
Operating Profit
Less : Interest and Other Expenses
Less : Loss by fire
Add : Other Income - Income from Investment
Net Profit before tax
|
41,00,000
1,00,000
40,00,000
25,00,000
15,00,000
4,10,000
10,90,000
1,00,000
9,90,000
2,40,000
7,50,000
50,000
8,00,000
|
(i) Gross Profit Ratio = 
= 
=
(ii) Operating ratio = 
x100
x100
(iii) Net Profit Ratio = 
= 
(iv) Operating Profit Ratio = 1 – Operating ratio = 1 – 72.75% = 27.25%