2007 Bangalore University B.Com Corporate Accounting - I Question paper
III Semester B.Com. Examination, Nov./Dec. 2005
COMMERCE
3.3 : Corporate Accounting - I
Time : 3 Hours Max. Marks : 90
Instruction : Answers should be written completely either in English or in Kannada.
SECTION - A
(Answer any ten sub-questions. Each sub-question carries 2 marks.) (10x2=20)
1. a) What is meant by Underwriting ?
b) What is partial underwriting ?
c) What is redemption of preference shares ?
d) Give the journal entry for transfer of divisible profits to Capital Redemption Reserve Account.
e) Mention the factors determining the value of goodwill.
f) What is average capital employed ?
g) What is meant by normal rate of return ?
h) What are the circumstances under which shares are valued ?
i) How do you calculate intrinsic value of shares ?
j) Give two examples of contingent liabilities.
k) What is the permissible monthly remuneration to a managerial person, in case of inadequate profits, when the effective capital is between 5 crores and 25 crores ?
l) State under what headings the following items will appear in the Balance Sheet of a company :
i) Calls unpaid ii) Loose Tools
SECTION - B
(Answer any five of the following. Each question carries 5 marks.) (5x5=25)
2. A company issued 1,00,000 shares of Rs. 10 each. The whole issue was fully underwritten by A, B, C and D as follows :
A : 40,000 B : 30,000 C : 10,000 D : 20,000
The company received applications for 90,000 shares of which marked applications were as follows :
A - 44,000 B - 22,000 C - 2,000 D - 18,000
Determine the liability of each underwriter.
3. A company had 5,000, 6% redeemable preference shares of Rs. 100 each fully paid. These shares were due for redemption on 31st March 2005 at a premium paid. To carry out the redemption the company issued 1,250 equity shares of Rs. 100 each at a premium of 7.5%. The company had a balance of Rs. 25,000 in securities account and Rs. 4,87,500 in profit and loss account. Pass journal entries.
4. From the following information, calculate the value of goodwill under,
a) Three years purchase of super profits method.
b) Capitalisation of super profits method.
i) Average Capital employed : Rs. 8,70,000
ii) Net profits of the firm for the past 3 years were : Rs. 1,22,000 ;Rs. 98,500 and Rs. 1,75,000.
iii) Managerial remuneration if employed elsewhere Rs. 18,000 per annum.
iv) Normal rate of return 8%.
5. From the following particulars calculate the value of an equity share under yield method :
a) 5,000, 9% Preference shares of Rs. 100 each Rs. 5,00,000, 1, 25, 000 equity shares of Rs. 10 each, Rs. 8 per share paid up Rs. 10,00,000.
b) Expected profits before tax Rs. 5,45,000. Rate of taxation is 40%.
c) Transfer to general reserve, every year 20% of profit.
d) Normal rate of earnings from this type of business is 15%.
6. From the following particulars, prepare Profit and Loss Appropriation Account :
a) Profit and Loss account balance from last year Rs. 62,500.
b) Net profit for the year before tax Rs. 5,40,000 (provision for tax 40%)
c) Transfer to General Reserve Rs. 52,500. Dividend Equalisation Fund Rs. 40,000 and Development Reserve Rs. 37,500.
d) Dividend on 7.5% preference shares Rs. 3,00,000
e) Dividend ar 12.5% on 50,000 equity shares of Rs. 10 each, Rs. 7.50 called up (Calls in arrears Rs. 13,000)
f) Corporate dividend tax 10%.
7. Following particulars have been obtained from the accounts of a company :
Rs.
a) Remuneration of Managing Director 20,000
b) Provision for Bad debts 10,000
c) Provision for taxation 1,50,000
d) Depreciation written off 80,000
e) Loss on sale of investment 70,000
f) Depreciation allowable according to 70,000
Income Tax provisions
g) Net profit after considering the above items 4,50,000
Calculate remuneration pf Managing Director at 5% of net profit. The net profit should be as per provisions of Companies Act.
8. State the conditions laid down Under Section 80 of the Companies Act for redemption of preference shares.
9. Mention the guidelines given by the Government for transfer of profits to Reserve based on dividends.
SECTION - C
(Answer any three of the following. Each question carries 15 marks.) (3x15=45)
10. X Ltd. invited applications from public for 2,50,000 shares of Rs. 10 each at a premium of Rs. 5 per share. The entire issue was underwritten by underwriters P, Q, R and S to the extent of 30%, 20%, 30% and 20% respectively with the provision of firm underwriting of 7,500; 2,500; 5,000 and 2,500 shares respectively. The underwriters were entitled to the maximum commission as per law in force and practice laid down by SEBI.
The company received applications for 1,75,000 shares, excluding firm underwriting. Out of which marked applications were 47,500, 52,500, 25,000 and 20,000 were marked in favour of P, Q, R and S respectively.
Calculate the liability of each one of the underwriters treating,
a) Firm underwriting as marked applications and
b) Firm underwriting as unmarked applications.
Also ascertain the underwriters commission payable to different underwriters.
11. The following is the Balance Sheet of Green Land Ltd. on 31-12-2004.
Liabilities Rs. Assets Rs.
50,000 Equity shares of Rs. 10 each 5,00,000 Fixed assets 6,00,000
1,000, 10% preference 1,00,000 Bank 1,00,000
shares of Rs. 100 each
fully called up Other current assets 2,00,000
Less Calls in arrears (on 1,000 99,000
50 shares at rs. 20 each) ----------
General reserve 1,00,000
Development Rebate Reserve 50,000
Current liabilities 1,51,000
9,00,000 9,00,000
The preference shares were redeemed on the following bases :
1) Issue of 4,500 equity shares of Rs. 10 each at a premium of 10%.
2) Expenses on fresh issue of shares Rs. 5,000
3) Of the preference shares, holders for 40 shares paid the call money before the date of redemption. The balance 10 shares were forfeited for non payment of calls before redemption. The forfeited shares were re-issued as fully paid on receipt of Rs. 500 before redemption.
Preference shares were redeemed at a premium of 10% and securities premium amount was utilized in full for the purpose.
Journalise the transactions and prepare Balance Sheet after redemption.
12. The following is the Balance Sheet of ‘X’ Ltd. on 31st Dec. 2001.
Liabilities Rs. Assets Rs.
Equity share capital of Rs. 10 each 5,00,000 Buildings 1,65,000
General reserve 2,00,000 Machinery 85,000
Profit and Loss A/c 1,00,000 Furniture 50,000
Sundry creditors 60,000 Motor vans 1,00,000
Bills payable 20,000 Investments 1,00,000
Provision for tax 20,000 (Market price 1,20,000)
Stock 1,50,000
Debtors 80,000
Bank 1,70,000
9,00,000 9,00,000
Net profit before tax :
1999 - Rs. 2,10,000 ; 2000 - 2,20,000 ; 2001 - Rs. 2,50,000. Rate of taxation 40%. Income from Investments may be taken at 6%. Normal rate of return on average capital employed is 15%. Buildings is valued at Rs. 1,80,000 and Machinery at Rs. 90,000. Taking weighted average of proits after tax as basis, calculate the value of goodwill based on
a) 5 years purchase of super profits.
b) Capitalization of super profits.
c) Annuity of super profits taking annuity rate at 2.97 (Ignore additional depreciation on Buildings and Machinery).
13. The following figures were extracted from the books of Elegant Ltd :
Share Capital : Rs.
9% preference shares of Rs. 100 each 3,00,000
a) 1,000 Equity shares of Rs. 100 each Rs. 50 called up 50,000
b) 1,000 Equity shares of Rs. 100 each Rs. 25 called up 25,000
c) 1,000 Equity shares of Rs. 100 each fully called up 1,00,000
Reserves and surplus :
General Reserve 2,00,000
Profit and Loss A/c 50,000 2,50,000
--------------- ---------------
7,25,000
On a fair valuation of all the assets of the company, it is found that they have an appreciation of Rs. 75,000.
The Articles of Association provided that in case of liquidation, the preference share holders will have a further claim to the extent of 10% of the surplus assets.
Ascertain the value of each preference and equity share assuming a liquidation. Ignore expenses of winding up.
14. The following Trial Balance has been extracted from the books of Amar Ltd. as on 31-3-2001. You are required to prepare :
a) Profit and Loss Account for the year ended 31-3-2001 and
b) Balance sheet as on that date.
Debit Balances Rs. Credit Balances Rs.
Land and Building 1,40,000 Share capital 2,00,000
(Original cost Rs. 3,00,000) General Reserve 30,000
Furniture 8,000 8% debentures 1,00,000
(Original Cost Rs. 15,000) Bank overdraft 1,500
Plant and Machinery 1,00,000 Sundry creditors 10,000
(Original Cost Rs. 2,00,000) Securities Premium 6,000
Investments 6,000 Gross profit 1,14,000
Preliminary expenses 4,000 Sinking fund 40,000
Advance Income tax 8,000 Profit and Loss A/c
Printing and Stationery 1,200 (1-4-2000) 8,500
Stock on 31-3-2001 1,28,000
Salaries 8,000
Debtors 70,000
Cash on hand 2,000
Cash at bank 24,000
Interest 2,000
Debenture interest 4,000
Director’s fees 2,000
Rent, rates and insurance 2,800
5,10,000 5,10,000
Adjustments :
1) Provide depreciation on :
a) Land and Buildings at 5% on straight line basis.
b) Furniture and Plant and Machinery at 20% on reducing balance basis.
2) Provide Rs. 5,000 for bad debts.
3) Provide for audit fees Rs. 2,500, Provision for Income Tax Rs. 14,000 and debenture interest for 6 months.
4) Insurance prepaid Rs. 800
5) Write off half of preliminary expenses.
6) Directors have recommended :
a) Transfer of Rs. 10,000 to Sinking Fund
b) Transfer of Rs. 4,000 to General reserve
c) Equity dividend at 8% on paid up capital.
7) Provide for Corporate Dividend Tax 10%.
---------------------------
Return to question paper search
|