2013
CORPORATE ACCOUNTING
Full Marks: 80
Time: 3 hours
(The figures in the margin indicate full marks for the questions)
1. Answer as directed: 1x10=10
a) Expenses incurred at the time of formation of a company are termed as _______ expenses. (Fill in the blank)
b) Write the meaning of right share.
c) The difference between the market price and the exercise price under the Employees Stock Option Plan is termed as _______. (Fill in the blank)
d) Buy back of shares does not affect the authorized share capital of a company. (State whether the statement is true or false)
e) Write the meaning of redemption of debentures out of profits.
f) A debenture is a certificate issued by a company under its seal acknowledging a debt due by it to its holders. (State whether the statement is true or false)
g) After the redemption of all debentures, the balance in the sinking fund is transferred to _______ account. (Fill in the blank by choosing the right option from the following).
[General Reserve/Capital Reserve/Debenture Redeemed]
h) In case of amalgamation in the nature of merger, equity shareholders of the combining entities continue to have proportionate share in the combined entity. (State whether the statement is true or false)
i) State the meaning of amalgamation as per-AS-14.
j) Payment made to the creditors in final settlement of the transferor company is not included in purchase consideration for amalgamation. (State whether the statement is true or false)
2. Answer the following: 2x2=4
1) How would you deal with the following item while preparing the final accounts of a company –
a) Preliminary expenses.
b) Proposed dividend.
2) State the meaning of issue of bonus share. 2
3) State the accounting treatment of loss on issue of debenture. 2
4) State two objectives of amalgamation of companies. 2
3. Answer the following:
(a) The share capital of MKB Ltd. consisted of 30,000 equity shares of Rs. 10 each fully paid and the profit and loss A/c of the company for the year 2012-13 showed a net profit of Rs. 1,25,000 after tax. It was resolved in the Board meeting to transfer Rs. 30,000 to General Reserve and to propose a dividend of 12% and to provide for Required corporate dividend tax.
You are required to show how these various items will appear in the Company’s Balance Sheet. 5
Or
The following is the extract of Trial Balance of Kamrup Ltd. as on 31.3.2013
| | Rs. |
| Sales Purchases Opening inventory Purchase Return Salary and Wages Dividend received Carriage inward Advertisement Staff Welfare Expenses Dividend paid | 3,00,000 2,25,000 70,000 10,000 50,000 6,000 500 7,500 3,000 8,000 |
Prepare a statement of Profit and Loss for the year ended 31st March, 2013 after considering the additional information given below:
1) Closing inventory on 31.3.2013 Rs. 95,000
2) Outstanding salary Rs. 2,500
(b) Mention the conditions that are to be fulfilled for the issue of bonus shares. 5
Or
Triveni Ltd. having a paid up capital of Rs. 6,00,000 divided into 60,000 shares of Rs. 10 each, has a reserve of Rs. 4,25,000. The company has decided to declare bonus out of the reserve and to distribute the same in the form of bonus shares of Rs. 10 each as fully paid up to the existing shareholders in the ratio of one bonus share for every five shares held in the company.
Calculate the amount of bonus to be declared and show the journal entries in the books of the company.
(c) Journalize the following transactions in the books of Prakash Trade Ltd. 5
1) 1000, 12% debenture of Rs. 100 each issued at par and redeemable at par were converted into equity shares of Rs. 10 each issued at par.
2) Rs. 1,00,000, 12% debentures of Rs. 100 each issued at par and redeemable at par were converted into equity shares of Rs. 10 each issued at a premium of 25%.
Or
Explain the different sources of finance of redemption of debentures.
(d) Mention any five points of distinctions between amalgamation in the nature of merger and amalgamation in the nature of purchase. 5
Or
Mention the different methods of ascertaining the consideration for amalgamation.
4. Answer as directed:
(a) From the following balance as on 31st March, 2013 and information available on that date, prepare Balance Sheet of Satyam Ltd. 10
| Balances | Rs. |
| Building Machinery Sundry debtors Share Capital (Equity shares of Rs. 10 each, Rs. 9 lakh called up) 15% Debentures Debenture Redemption Reserve General Reserve Prepaid insurance P/L A/c (CR.) (1-4-2012) Bank Overdraft Patents Investments Calls in arrear Securities Premium Provision for Income Tax Closing Stock Cash in hand Advance Income tax Sundry Creditors Outstanding expenses | 3,25,000 2,90,000 65,000 3,60,000 1,00,000 66,000 1,00,000 4,800 1,43,000 15,000 7,200 70,000 2,000 25,000 24,000 1,33,000 12,000 4,000 15,200 4,800 |
Information:
Profit of the current year after tax is Rs. 60,000.
(b) Anand Ltd. has Rs. 5,00,000 in equity shares of Rs. 10 each. It has Rs. 90,000 in general reserve and Rs. 40,000 in security premium. The company had passed necessary resolutions to buy back 10,000 equity shares at par.
However, for the purpose of giving effect to the resolution, the company issued Rs. 40,000, 10% debentures at 5% discount repayable after 5 years at par.
Give journal entries relating to the resolution. 10
Or
State the meaning of buy back of shares and the accounting entries to be made for the same.
(c) Following balances appeared in the books of LK Ltd. on 31.12.12
| | Rs. |
| 9% Debenture A/c Sinking Fund A/c 12% Sinking Fund (Its Face value is Rs. 1,00,000) | 2,00,000 90,000 90,000 |
On the above date, parts of the above investments having book value of Rs. 50,000 were sold at 90% to redeem Rs. 45,000 debentures at par.
Pass Journal Entries ignoring interest in the books of the company. 10
Or
State the procedure of redemption of debentures by sinking fund method.
(d) The following are the Balance Sheets of S Ltd. and M Ltd. as on 31.3.2013 on which date the two firms amalgamated on the following terms: 10
1) S Ltd. takes over all assets and liabilities of M Ltd. and M Ltd. ceases to exist.
2) Shareholders of M Ltd. to get 8 Equity shares of Rs. 10 each in S Ltd. for every 2 shares in M Ltd.
You are required to prepare the Balance Sheet of S Ltd. after amalgamation.
M Ltd. Balance Sheet as at 31.3.2013
| Particulars | Amount (Rs.) |
| I. Equity & Liabilities: 1. Shareholders Fund: a) Share Capital: Issued & Paid up Capital (10,000 equity shares of Rs. 50 each fully paid) b) Reserve and Surplus: General Reserve 2. Current Liabilities: Trade payable (Sundry Creditor) Other Current Liabilities | 5,00,000 50,000 70,000 10,000 |
| | 6,30,000 |
| II. Assets: 1. Non-Current Assets: Fixed Assets 2. Current Assets Inventory Trade Receivable (Debtors) Cash | 4,20,000 1,00,000 1,00,000 10,000 |
| | 6,30,000 |
S Ltd. Balance Sheet as at 31.3.2013
| Particulars | Amount (Rs.) |
| I. Equity & Liabilities: 1. Shareholders Fund: a) Share Capital: Issued & Paid up Capital (2,00,000 equity shares of Rs. 10 each fully paid) b) Reserve and Surplus: General Reserve 2. Current Liabilities: Trade payable (Sundry Creditor) | 20,00,000 3,00,000 2,00,000 |
| | 25,00,000 |
| II. Assets: 1. Non-Current Assets: Fixed Assets 2. Current Assets Inventory Trade Receivable (Debtors) Cash | 17,00,000 2,00,000 4,00,000 2,00,000 |
| | 25,00,000 |
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