M.B.A. DEGREE EXAMINATION, NOVEMBER 2017
Third Semester
Corporate Secretaryship
COMPANY ACCOUNTS AND AUDITING PRACTICES
(CBCS 2013 onwards)
Time 3 Hours Maximum 75 Marks
Part A x 3 15)
Answer all questions.
All questions carry equal marks.
1. What is the goal of IFRS?
2. What are International Accounting Standards?
3. Distinguish between capital profits and revenue profits.
4. Write a note on Purchase Consideration as per AS-14.
5. Why audit markings are used? List out any three marks
used in audit.
Part B 10 50)
Answer all questions, by choosing either or
All questions carry equal marks.
6. Write short notes on the advantages and
disadvantages of setting of Accounting Standards.
Or
State and explain the requirements of GAAP.
Sub. Code
622304
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7. Mohan Ltd. issued 1,00,000 shares of Rs. 10 each at
a premium of Rs. 2 per share, payable as to Rs. 2 on
application, Rs. 5 on allotment (including premium)
and the balance on call. Applications were received
for 1,50,000 shares. 30,000 applications were
rejected. For the remaining applications the shares
were issued pro-rata.
Mr. a shareholder to whom 2000 shares were
alloted, failed to pay the allotment money and call.
His shares were forfeited and they were re-issued to
Mr. as fully paid at Rs. 8 per share.
Give necessary journal entries to record the
transactions in the books of the company.
Or
H Ltd. issued 60,000 shares which were
underwritten as follows
X —30,000 shares, Y —18,000 shares and
Z — 12,000 shares.
In addition there was a firm underwriting as
follows
X — 3000shares, V — 1500 shares and Z — 4500
shares. Total subscriptions received, including firm
underwriting were for 45,600 shares. The
applications included the followed marked forms
X — 9,000 shares, Y — 13,500 shares and Z — 5,100
shares.
Show the liability of each underwriter.
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8. From the Balance Sheets and information given
below, prepare a consolidated Balance Sheet of H
and S.
Balance Sheet as on 31.3.2016
Liabilities H Ltd.
Rs.
S Ltd.
Rs.
Assets H Ltd.
Rs.
S Ltd.
Rs.
Share capital (of Sundry assets 8,00,000 1,20,000
Rs. 10 each) 10,00,000 2,00,000 Stock 6,10,000 2,40,000
P/L A/c 4,00,000 1,20,000 Debtors 1,30,000 1,70,000
Reserves 1,00,000 60,000 Bills
Creditors 2,00,000 1,20,000 receivable 10,000
Bills payable 30,000 Investments
15000 shares
in S Ltd. at cost 1,50,000
17,00,000 5,30,000 17,00,000 5,30,000
Other informations
All profits of S Ltd have been earned since the
shares were acquired by H Ltd; but there was
already a reserve of Rs. 60,000 on that date.
All the bills accepted by S Ltd are infavour of
H Ltd; and H Ltd; had discounted Rs. 20,000
of them
Sundry assets of S Ltd., are undervalued by
Rs. 20,000
The stock of H Ltd., includes Rs. 50,000
purchased from S Ltd at a profit to latter at
25% on cost
Or
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The net profit of a company alter providing for
taxation for the past five years is
Year Profit
2009 40,000
2010 50,000
2011 30,000
2012 70,000
2013 80,000
The net tangible assets in the business are Rs. 4,00,000
on which the normal rate of return is expected to be 10%.
It is also expected that the company will be able to
maintain its super profits for next five years. Calculate
the value of goodwill of the business on the basis of an
annuity of super profits, taking present value of an
annuity of Rs. 1 for five years at 10% interest is Rs. 3.78.
9. The following is the Balance Sheet of Nirmal Ltd.,
as on 30th September 2015.
Liabilities Rs. Assets Rs.
Share capital Goodwill 1,80,000
12% 4,000 pref. shares of Plant and
Rs. 100 each 4,00,000 Machinery 5,00,000
50,000 equity shares of Stock 3,00,000
Rs. 10 each 5,00,000 Debtors 70,000
10% Debentures 1,00,000 Cash 20,000
Creditors 2,00,000 Profit and
Loss a/c 1,30,000
12,00,000 12,00,000
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The court has approved the following scheme of
reconstruction.
To issue 15% pref. Shares of Rs. 60 each for
every 12% Rs. 100 preference shares.
To reduce the equity shares by Rs. 4 each.
To redeem 10% debentures of Rs. 1,00,000 by
the issue of 14% debentures of Rs. 80,000 in
full satisfaction.
To write off Goodwill and Accumulated losses,
write down Plant and Machinery by Rs. 60,000
and any balance left from capital reduction
scheme be provided for doubtful debts.
Give journal entries to effect the scheme and
also prepare the new balance sheet.
Or
White Ltd., agreed to acquire the business of Green
Ltd., as on December 31, 2016. The summarized
Balance Sheet of Green Ltd., on that date was as
follows
Rs. Rs.
Share capital in Goodwill 1,00,000
fully paid shares Land, building
of Rs. 10 each 6,00,000 and plant 6,40,000
General reserve 1,70,000 Stock-in-trade 1,68,000
P and L a/c 1,10,000 Debtors 36,000
debentures 1,00,000 Cash 56,000
Creditors 20,000
10,00,000 10,00,000
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The consideration payable by White Ltd. was agreed
as follows
A cash payment equivalent to Rs. 2.50 for
every Rs. 10 shares in Green Ltd.
The issue of 90,000 shares of Rs. 10 fully paid
in White Ltd. having an agreed value of Rs. 15
per share.
The issue of such an amount of fully paid
debentures of White Ltd, at 96% as is
sufficient to discharge the debentures of
the Green Ltd., at a premium of 20%.
When computing the agreed consideration the
directors of White Ltd., valued the land, buildings
and plant at Rs. 12,00,000; the stock in trade at
Rs. 1,42,000 and the debtors at their face value
subject to an allowance of to cover doubtful
debts. The cost of liquidation of Green Ltd. came to
Rs. 5,000.
Draft Journal entries in the books of White Ltd.,
and show entries and Ledger accounts in the books
of Green Ltd.
10. Draw a chart showing the list of frauds aimed to be
detected through auditing.
Or
Design an audit program for a manufacturing
organization.
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Part C 10 10)
Compulsory Questions.
11. Advise P Co. Ltd. about the treatment of the
following in the Final Statement of Accounts for the
year ended 31st March, 2014. A claim lodged with
the Railways in March, 2011 for loss of goods of
Rs. 2,00,000 had been passed for payment in March,
2014 for Rs. 1,50,000. No entry was passed in the
books of the Company, when the claim was lodged.
The notes to accounts of X Ltd. for the year 2015-16
include the following
''Interest on bridge loan from banks and Financial
Institutions and on Debentures specifically obtained
for the Company's Fertiliser Project amounting to
Rs. 1,80,80,000 has been capitalized during the
year, which includes approximately Rs. 1,70,33,465
capitalised in respect of the utilization of loan and
debenture money for the said purpose." Is the
treatment correct? Briefly comment.
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