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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI 600 034
B.Com.DEGREE EXAMINATION -COMMERCE
THIRD SEMESTER APRIL 2018
CO 3502- COMPANY ACCOUNTS
Date: 05-05-2018 Dept. No. Max. 100 Marks
Time: 01:00-04:00
SECTION A(10*2=20 MARKS)
ANSWER ALL QUESTIONS
1. Mention the two types of shares.
2. What do you mean by firm underwriting?
3. What is a preference share?
4. What do you mean by capital redemption reserve?
5. What is Joint Stock Company?
6. Mention the different forms of balance sheet.
7. What do you mean by acquisition of business?
8. What is a debenture?
9. Define goodwill.
10. Mention the different kinds of alteration of share capital.
SECTION B MARKS)
ANSWER ANY FOUR QUESTIONS
11. Explain the methods of valuation of goodwill
12. Explain the objectives of financial statements.
13. Bharat Ltd., issued 1,50,000 equity shares. The whole of the issue was underwritten as follows:
Z-25%.
Applications for 1,20,000 shares were received in all, out of which applications for 30,000 shares had the stamp of those for 15,000 shares that of Y and those for 30,000 shares that of Z. The remaining applications for 45, 000 shares did not bear any stamp. Determine the liability of the underwriters.
14. Sterling Ltd have part of their share capital in 2,500 6 Redeemable Preference shares of Rs.100 each. The company decided to redeem the Preference shares at premium of 10%. The general reserve of the company shows a credit balance of Rs. 3,00,000. The directors decide to utilize 60% of the reserve in redeeming the preference shares and the balance is to be met from the proceeds of fresh issue of sufficient number of shares of Rs. 10 each. The premium is to be met from the year's profit and loss appropriation account. Give journal entries to record the above transactions.
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15. From the following particulars, determine the maximum remuneration available to a full time director of a manufacturing company. The profit and loss account of the company showed a net profit of Rs. 40,00,000 after taking into account the following items:
a. Depreciation (including special depreciation of Rs. 40,000) Rs. 1,00,000
b. Provision for income tax Rs. 2,00,000
c. Donation to political parties Rs. 50,000
d. Ex gratia payment to a worker Rs. 10,000
e. Capital profit on sale of assets Rs. 15,000
16. Ganesh Ltd., was registered on 1.7.97 to acquire the running business of Suneel Co., with effect from 1.1.97. The following was the profit and loss account of the company on 31.12.97.
Particulars
Rs.
Particulars
Rs.
To office expenses
54,000
By gross profit b/d
2,25,000
To formation expenses (written off)
10,000
To stationery postage
5,000
To selling expenses
60,000
To director's fees
20,000
To net profit
76,000
2,25,000
2,25,000
You are required to prepare a statement showing profit earned by the company in the pre and post
incorporation periods. The total sales for the year took place in the ratio of 1:2 before and after
incorporation respectively.
17. The following information is presented for five years ending 31st Dec.1998:
Year
Profits(after tax) Rs.
Taxation Rs.
Transfer to reserve Rs.
Director's remuneration Rs.
1994
25,000
9,000
5,000
2,000
1995
27,500
10,000
6,000
2,250
1996
24,000
7,500
4,000
2,250
1997
32,500
12,500
7,500
2,500
1998
36,000
17,500
7,500
3,000
Fixed assets have been revalued and the same showed an appreciation of Rs. 2,50,000 (depreciation to be provided for The current rate of taxation may be taken 50%. Calculate the value of goodwill on the basis of four years' purchase of the last five years' average profits.
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SECTION C MARKS)
ANSWER ANY TWO QUESTIONS
18. Ambitions 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, the remaining applications being refused. Money received in excess on the application was adjusted towards the amount due on allotment.
David, 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. Madan, 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 Robert, credited as fully paid for Rs.8 per share.
Pass journal entries to record the above issue of shares by the company.
19. Moon and Star Co. Ltd., is a company with an authorized capital of 5,00,000 dividend into 5,000 equity shares of Rs. 100 each on 31.12.1985 of which 2,500 shares were fully called up. The following are the balances extracted from the ledger as on 31.12.1985
Trial balance of moon star co., 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 (upto 31.3.86)
6,720
Reserves
25,000
Salaries
18,500
Loan from managing director
15,700
Rent
6,000
Share capital
2,50,000
General expenses
8,950
Printing
2,400
Advertisements
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
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You are required to prepare Profit Loss Account for the year ended 31.12.1985 and a balance sheet as on that date. The following further information is given:
a. Closing stock was valued at Rs. 1,91,500
b. Depreciation on plant at 15% and on furniture at 10% should be provided.
c. A tax provision of Rs. 8,000 is considered necessary.
d. The directors declared an interim dividend on 15.8.85 for 6 months ending June 30, 1985@ 6%.
20. Ganguly Ltdwas formed with an authorized capital of Rs. 10,00,000 divided into equity shares of Rs. 10 each, to acquire the business of and whose balance sheet on the date of acquisition was as follows:
Liabilities
Rs.
Assets
Rs.
Capital
6,00,000
Freehold premises
7,00,000
General reserve
4,00,000
Stock
2,00,000
Sundry creditors
2,00,000
Sundry debtors 1,60,000
Less: provision for bad debts 10,000
1,50,000
Cash at bank
1,50,000
12,00,000
12,00,000
The purchase consideration was agreed upon at Rs. 14,00,000 to be paid in Rs. 12,00,000 fully paid equity shares at Rs. 11 and the balance in cash.
Give journal entries to record the above and prepare the balance sheet of Ganguly Ltd. Assuming the vendor's account is finally settled.
21. The paid up capital of science traders Ltd., amounted to Rs. 5,00,000 consisting of 2,000 cumulative preference shares of Rs. 100 each and 30,000 equity shares of Rs. 10 each. The preference dividends were in arrears for Rs. 30,000. After a succession of losses incurred by the company, the directors recommended to the shareholders the proposal to reduce the capital to provide a sum sufficient for the following purposes.
a. To write down the book value of patents by Rs. 70,000; plant machinery by Rs. 17,000; and tools and implements by Rs. 2,000
b. To write off debit balance on profit loss account of Rs. 1,98,000.
c. Any balance made available by the reduction of capital to be used to write off "experiment and research expenses".
The scheme, duly approved and authorized, provided as follows:
a. For every five preference shares, three cumulative preference shares, of Rs. 100 each and twenty equity shares of Rs. 2 each.
b. For every Rs. 10 of accumulated arrears of preference dividend, one equity share of Rs. 2 each and
c. For every five old equity shares, one new equity share of Rs. 2 each.
You are required to show the necessary journal entries and prepare capital reduction A/c to record the above in the books of the company.