2007 ICFAI University M.B.A Business Administration Financial Accounting – I (MB 131) : April 2007 Question paper
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Question Paper
Financial Accounting – I (MB 131) : April 2007
· Answer all questions.
· Marks are indicated against each question.
1. Which of the following is not a use of fund?
(a) Acquiring assets
(b) Incurring expenses
(c) Incurring losses
(d) Incurring liabilities
(e) Paying dividends.
(1 mark)
2. Accounting does not record non-financial transactions due to
(a) Business entity concept
(b) Going concern concept
(c) Accounting period concept
(d) Money measurement concept
(e) Cost concept.
(1 mark)
3. Which of the following is generally not used as a valuation base in accounting?
(a) Historical cost
(b) Standard cost
(c) Current cost
(d) Realizable value
(e) Present value.
(1 mark)
4. Which of the following branches of accounting primarily deals with processing and presenting data for internal users?
(a) Financial Accounting
(b) Cash System of Accounting
(c) Management Accounting
(d) Inflation Accounting
(e) Cost Accounting.
(1 mark)
5. The system of recording transactions based on dual concept is called
(a) Double account system
(b) Dual control system
(c) Double entry system
(d) Single entry system
(e) Multiple entry system.
(1 mark)
6. Which of the following is a liability of a firm?
(a) Debit balance of discount column of cash book
(b) Credit balance of bank pass book
(c) Debit balance of bank column of cash book
(d) Debit balance of cash column of cash book
(e) Credit balance of bank column of cash book.
(1 mark)
7. The periodical total of discount column on receipts side of a triple column cash book is posted to the
(a) Credit side of discount account
(b) Credit side of provision for discount account
(c) Debit side of discount account
(d) Credit side of debtor’s account
(e) Credit side of creditor’s account.
(1 mark)
8. A purchase day book is to record
(a) All credit purchases of fixed assets
(b) All cash purchases only
(c) All credit and cash purchases
(d) All credit purchases of goods only
(e) All credit purchases and cash discount.
(1 mark)
9. The pass book of XYZ Ltd., shows a debit balance of Rs.2,50,000 as on 31.03.07. If a cheque for Rs.10,000 issued by them on the date is not presented for payment and Rs.500 is debited to the A/c as bank charges, the cash book balance on the above date will be a
(a) Debit balance of Rs.2,59,500
(b) Debit balance of Rs.2,60,500
(c) Credit balance of Rs.2,59,500
(d) Credit balance of Rs.2,60,000
(e) Credit balance of Rs.2,60,500.
(1 mark)
10. Which accounting entry is to be passed to make a full and final settlement for a purchase of Rs.10,000 from Mr. Abuja at a discount of 2% (payment is made through a cheque)?
Rs. Rs.
(a) Abuja’s account Dr. 10,000
To Bank account 9,800
To Discount account 200
(b) Abuja’s account Dr. 9,800
To Bank account 9,800
(c) Purchases account Dr. 10,000
To Bank account 10,000
(d) Abuja’s account Dr. 10,000
To Bank account 10,000
(e) Abuja’s account Dr. 10,000
To Trade discount 200
To Bank account 9,800.
(1 mark)
11. Navneeth, a sole proprietor, maintains a three column cash book to record his business transactions. Consider the following data pertaining to his business for the month of March, 2007.
Particulars Rs.
Opening cash on hand 25,000
Balance at bank 3,50,000
Cheque received from a customer (after allowing a discount of Rs.2,500) 50,000
Paid the supplier by cheque (discount allowed by the supplier: Rs.10,000) 1,00,000
Salaries paid to staff in cash 20,000
Received a cheque from Daulat Ram, a customer (who owed Rs.16,500 and was allowed a discount of 10%)
14,850
Paid M/s. Bharani and Co. in full settlement of their dues of Rs. 28,500 26,250
Received from Rama & Bros. (against an amount of Rs.38,900) in full and final settlement
36,200
The total amount of discount recorded on the debit side of the three columnar cash book for the month of March, 2007 is
(a) Rs. 5,200
(b) Rs. 4,150
(c) Rs. 6,850
(d) Rs.12,250
(e) Rs.13,900.
(2 marks)
12. Consider the following data pertaining to M/s.ABC Ltd., for the year 2006-2007:
Opening balance of creditors Rs. 40,000
Closing balance of creditors Rs. 45,000
Total purchases during the year Rs.1,25,000
If the creditors were paid Rs.90,000 and discount received was Rs.4,000, the credit purchases during the year 2006-2007 were
(a) Rs.1,25,000
(b) Rs. 99,000
(c) Rs. 94,000
(d) Rs. 85,000
(e) Rs. 81,000.
(1 mark)
13. The three columns on each side of the three columnar cash book represent
(a) Real account and capital account
(b) Personal account and nominal account
(c) Real and nominal accounts
(d) Real and personal accounts
(e) Real, personal and nominal accounts.
(1 mark)
14. Which of the following errors is not disclosed by the Trial Balance?
(a) Error in casting of subsidiary books
(b) Error in balancing the account
(c) Posting to wrong account with correct amount on correct side
(d) Error in carry forward of total from one page to another
(e) Error in preparation of debtor’s schedule.
(1 mark)
15. The statement which helps an accountant to assess the arithmetical accuracy of the accounting process is the
(a) Balance sheet
(b) Profit and loss account
(c) Cash book
(d) Trial balance
(e) Bank reconciliation statement.
(1 mark)
16. Cash profit represents
(a) Gross profit minus net profit
(b) Net profit minus non trading profit minus depreciation and provision
(c) Gross profit minus non trading profit plus depreciation and provision
(d) Net profit plus depreciation and provision
(e) Gross profit minus operating expenses.
(1 mark)
17. It was discovered that purchase of a typewriter for Rs.450 on credit was recorded by debit of Rs.450 to office equipment account and a debit of Rs.450 to creditors account. The total of credit column of the trial balance is Rs.48,100. What should be the total of the credit column after rectification of the error?
(a) Rs.41,100
(b) Rs.48,500
(c) Rs.47,650
(d) Rs.49,000
(e) Rs.47,500.
(1 mark)
18. Which of the following is an example of capital expenditure?
(a) Insurance premium
(b) Taxes and legal expenses
(c) Depreciation on machinery
(d) Discount allowed
(e) Installation charges.
(1 mark)
19. Rent paid Rs.400 was credited to Rent account. The rectifying entry is
Rs. Rs.
(a) Cash account Dr. 400
To Rent account 400
(b) Rent account Dr. 800
To Suspense account 800
(c) Rent account Dr. 400
To Suspense account 400
(d) Suspense account Dr. 800
To Rent account 800
(e) Rent account Dr. 400
To Cash account 400.
(1 mark)
20. Consider the following data pertaining to Basso Ltd., for the year ended March 31, 2007:
Particulars Rs.
Opening stock 20,000
Closing stock 30,000
Sales 1,45,000
Purchases 80,000
Returns inward 5,000
Returns outward 15,000
Salaries 30,000
Discount allowed by suppliers 4,000
Administrative expenses 7,500
Selling and distribution expenses 6,500
Income from investments 12,000
The net profit of the company for the year ended March 31, 2007 is
(a) Rs.49,000
(b) Rs.37,000
(c) Rs.45,000
(d) Rs.57,000
(e) Rs.63,500.
(2 marks)
21. The total purchases of Linda Ltd., during the year 2006-2007 was Rs.1,90,000. If the gross profit of Linda Ltd., is 20% on sales and closing stock is more than the opening stock by Rs.30,000, the gross profit earned by Linda Ltd., during the year 2006-2007 was
(a) Rs.70,000
(b) Rs.10,000
(c) Rs.40,000
(d) Rs.32,000
(e) Rs.62,000.
(2 marks)
22. When Purchase Consideration is greater than Net Asset Value, it is to be adjusted to
(a) Capital reserve
(b) Goodwill
(c) Profit and loss account
(d) Preliminary expenses
(e) Promoters’ funds.
(1 mark)
23. Current liabilities are such obligations which are to be satisfied
(a) Within three months
(b) Within six months
(c) Within one year
(d) Within two years
(e) Within three years.
(1 mark)
24. The balances of prepaid expenses of a company as on March 31, 2006 and March 31, 2007 were Rs.40,320 and Rs.32,720 respectively. If the expenditure paid by the company during the year 2006-2007 was Rs.1,20,000, then the total expenditure during the year was
(a) Rs.1,60,320
(b) Rs.1,52,720
(c) Rs.1,27,600
(d) Rs.1,20,000
(e) Rs.1,13,400.
(1 mark)
25. A building standing in the books at Rs.60,000, was sold for Rs.90,000. The gain on the sale of building was transferred to the profit and loss account, resulting in a net profit of Rs.3,40,000. The net operating profit will be
(a) Rs.4,30,000
(b) Rs.3,40,000
(c) Rs.3,10,000
(d) Rs.4,00,000
(e) Rs.2,80,000.
(1 mark)
26. The accountant of M/s.Abhay Enterprises reported net profit of Rs.5,90,000 for the year 2006–2007. Subsequently, the following omissions were noticed:
• The company has invested Rs.1,00,000 in 13% debentures and the interest for the year 2006-2007 is not accounted for.
• Salary to manager is still outstanding for the month of March, 2007 and is not taken while preparing profit and loss account. The manager draws an annual salary of Rs.18,000.
• Ms. Suman returned goods worth Rs.29,000 which is not recorded in the books of account. However, the physical closing stock includes the returned goods.
The above omissions were duly considered. The profit of M/s Abhay Enterprises, after giving effect to the above is
(a) Rs.5,72,500
(b) Rs.5,56,000
(c) Rs.6,30,000
(d) Rs.5,75,500
(e) Rs.5,92,000.
(2 marks)
27. Which of the following is an Intangible Asset?
(a) Expenditure incurred on erection of machinery
(b) Preliminary expenses
(c) Pre-operative expenses
(d) Patents
(e) Income accrued but not received.
(1 mark)
28. Loss on issue of debentures is a/an
(a) Fictitious asset
(b) Intangible asset
(c) Fixed asset
(d) Current asset
(e) Current liability.
(1 mark)
29. The amount earmarked for distribution to the shareholders is known as
(a) Profit after tax
(b) Retained earnings
(c) Dividends
(d) Operating profit
(e) Profit before tax.
(1 mark)
30. The balance sheet gives information regarding the
(a) Results of operations for a particular period
(b) Financial position during a particular period
(c) Profit earning capacity for a particular period
(d) Financial position on a particular date
(e) Operating efficiency of the firm on a particular date.
(1 mark)
31. Consider the following data pertaining to Jagriti Ltd., as on March 31, 2007:
Particulars Rs. Rs.
Opening stock 45,000
Sales 3,17,500
Purchases 2,28,000
Salaries 43,000
Other expenses 36,500
Fixed assets 2,50,000
Sundry debtors 22,500
Sundry creditors 16,000
Cash and bank 26,500
Share capital 3,00,000
Short term loan 18,000
Total 6,51,500 6,51,500
The value of stock as on March 31, 2007 was Rs.37,500. The company has the practice of charging depreciation on the fixed assets at the rate of 15% under written down value method. The total of the liabilities side of the balance sheet as on March 31, 2007 was
(a) Rs.3,69,000
(b) Rs.3,34,000
(c) Rs.3,36,500
(d) Rs.2,96,500
(e) Rs.3,71,500.
(2 marks)
32. During a period of steadily falling prices, which of the following methods of measuring the cost of goods sold is likely to result in reporting the highest gross profit?
(a) Simple average cost
(b) Weighted average cost
(c) First-in-first out
(d) Last-in-first out
(e) Next-in-first out.
(1 mark)
33. Which of the following is not classified as inventory in the financial statements?
(a) Finished goods
(b) Work-in-progress
(c) Stores and spares
(d) Raw materials and components
(e) Advance payments made to suppliers for raw materials.
(1 mark)
34. If the opening inventory of a business is undercast, it will
(a) Increase gross profit and decrease net profit
(b) Decrease gross profit as well as net profit
(c) Increase value of assets
(d) Increase gross profit as well as net profit
(e) Decrease value of assets.
(1 mark)
35. ______________is the process of allocating the cost of a natural resource.
(a) Amortization
(b) Absorption
(c) Allocation
(d) Depletion
(e) Set-off.
(1 mark)
36. Which of the following is not a method of calculating depreciation?
(a) Sum-of-the years’ digits method
(b) Units of production method
(c) Realizable value method
(d) Straight line method
(e) Diminishing balance method.
(1 mark)
37. Which of the following is not an example of fixed assets?
(a) Plant and machinery
(b) Land and buildings
(c) Royalty
(d) Patent
(e) Office furniture.
(1 mark)
38. Net book value of a fixed asset is its
(a) Historical cost
(b) Historical cost less accumulated depreciation
(c) Historical cost less written down value
(d) Fair market value
(e) Historical cost less fair market value.
(1 mark)
39. Cost of purchase of raw-material is equal to
(a) Purchase price
(b) Purchase price plus duties and taxes
(c) Purchase price plus duties and taxes plus freight inward
(d) Purchase price plus duties and taxes plus freight inward minus discount
(e) Purchase price plus duties and taxes plus freight inward minus discount and duty draw back.
(1 mark)
40. When goods are sold subject to approval by buyer, revenue should be recognized when
(a) Goods have been formally accepted by the buyer
(b) Payment has been received from the buyer
(c) Buyer has seen the sample and approved the same
(d) Goods have been sent to the buyer
(e) Three days after the buyer has received the goods.
(1 mark)
41. Radhika Ltd., has the practice of creating provision for doubtful debts @ 8% on debtors. The balance of provision for doubtful debts on April 01, 2006 and March 31, 2007 was Rs.16,000 and Rs.22,000, respectively. During the year 2006-2007, the amount collected from debtors was Rs.30,25,000. Credit sales during the year were
(a) Rs.30,25,000
(b) Rs.33,00,000
(c) Rs.31,00,000
(d) Rs.32,25,000
(e) Rs.30,31,000.
(2 marks)
42. The balance in machinery account of Leo Ltd., as on 1st April, 2006 was Rs.85,000. The following transactions took place during the year 2006-07:
Date Particulars Rs.
01.07.2006 Machinery purchased 90,000
01.10.2006 Machinery sold (book value as on 01.04.06 is Rs.40,000) 50,000
01.01.2007 New machinery purchased 80,000
If the company charges depreciation @10% per annum on book value, the balance in Machinery account as on 31st March, 2007 was
(a) Rs.1,84,500
(b) Rs.1,93,500
(c) Rs.2,05,000
(d) Rs.1,99,000
(e) Rs.2,01,750.
(2 marks)
43. Consider the following Balance Sheet of Radial Ltd., as on March 31, 2007:
Liabilities Rs. Assets Rs.
Share capital 3,50,000 Land and building 2,30,000
Capital reserve 1,45,000 Plant and machinery 1,60,000
Profit and loss account 90,000 Non-trading investments 1,40,000
Sundry creditors 40,000 Sundry debtors 40,000
Inventory 45,000
Cash and bank 5,000
Preliminary expenses 5,000
Total 6,25,000 Total 6,25,000
The market values of assets are as under:
Land and building – Rs.2,75,000
Plant and machinery – Rs.2,00,000
Non-trading investments – Rs.1,25,000
Sundry debtors includes Rs.5,000 due from Sarika who has become insolvent.
The capital employed of the company is
(a) Rs.6,45,000
(b) Rs.5,20,000
(c) Rs.6,50,000
(d) Rs.5,60,000
(e) Rs.6,85,000.
(2 marks)
44. Pivotal Limited bought machinery costing Rs.1,75,000 on 01.04.2003. It was providing depreciation @10% using the written down value method. On 1st April 2007 the company decided to change the method of depreciation to the straight line method with retrospective effect. The company credited excess depreciation on account of the change in the depreciation policy to the extent of Rs.5,425 to the profit and loss account. The depreciation percentage as per the straight line method would be
(a) 10.5%
(b) 10.0%
(c) 12.0%
(d) 8.0%
(e) 6.0%.
(2 marks)
45. Shyam purchased 1,000 shares in Manoharan Laboratories Ltd., at Rs.300 per share in the year 2003. There was a rights issue in the year 2007 at the rate of one share for every two shares held, at a price of Rs.75 per share. The market value per share was Rs.350. If Shyam subscribed to the rights, the carrying cost of total shares in his books will be
(a) Rs.3,00,000
(b) Rs.1,75,000
(c) Rs.3,37,500
(d) Rs.4,75,000
(e) Rs.5,25,000.
(2 marks)
46. Mr. ‘X’, a customer who owed Rs.5,000, has become insolvent. Now, only 20 paisa in a rupee is recovered. The entry to record the transaction is
Rs. Rs.
(a) Bank account Dr. 1,000
Bad debt account Dr. 4,000
To ‘X’ account 5,000
(b) Bad debts account Dr. 4,000
To ‘X’ account 4,000
(c) Profit & Loss account Dr. 4,000
To ‘X’ account 4,000
(d) Bad debt account Dr. 4,000
To Profit & Loss account 4,000
(e) Provision for Bad debt account Dr. 1,000
To ‘X’ account 1,000.
(1 mark)
47. A company is following LIFO method for valuing its inventory. The details of its purchase and issues of inventory during a week are as follows.
01.03.2007 purchased 200 units @Rs.45 each
03.03.2007 purchased 100 units @Rs.48 each
04.03.2007 issued 50 units
06.03.2007 issued 150 units
The inventory value at the end of the week is
(a) Rs.4,800
(b) Rs.4,500
(c) Rs.4,600
(d) Rs.4,650
(e) Rs.4,400.
(2 marks)
48. RSV Ltd., acquires the assets of BC Ltd., paying a sum of Rs.11,25,000 against the acquisition of the following assets of BC Ltd.:
Particulars Rs.
Cash at bank 11,875
Cash on hand 6,125
Accounts receivable 43,100
Other identifiable assets 8,00,000
If Accounts Receivables are believed to have a realizable value of Rs.40,000 and other identifiable assets that are estimated to have market value of Rs.9,25,000, the amount of goodwill to be recorded in the books of RSV Ltd., is
(a) Rs.2,67,000
(b) Rs.1,45,100
(c) Rs.1,42,000
(d) Rs.2,70,100
(e) Rs.1,60,000.
(2 marks)
49. Consider the following:
I. Rate of depreciation under the written down method = 20%
II. Original cost of the asset = Rs.50,000
III. Residual value of the asset at the end of useful life = Rs.20,480
The estimated useful life of the asset, in years, is
(a) 4
(b) 5
(c) 6
(d) 7
(e) 8.
(2 marks)
50. The present book value of an asset of a company is Rs.2,04,120. The company has charged depreciation at the rate of 10% under straight line method for the last 3 years. The original cost of the asset was
(a) Rs.2,91,600
(b) Rs.2,80,000
(c) Rs.2,55,150
(d) Rs.2,52,000
(e) Rs.2,26,800.
(2 marks)
51. Which of the following item does not appear in a Profit & Loss Appropriation A/c?
(a) Dividend
(b) Transfer to General Reserve
(c) Last year’s Income Tax provision
(d) Managing director’s salary
(e) Transfer to sinking fund.
(1 mark)
52. When shares are issued to promoters for the services offered by them, the account that will be debited with the nominal value of shares is
(a) Preliminary expenses
(b) Goodwill
(c) Tangible assets
(d) Share capital
(e) Loss on issue of shares.
(1 mark)
53. The amount of capital to describe the shares offered to public for subscription is
(a) Authorized Capital
(b) Issued capital
(c) Paid-up capital
(d) Subscribed capital
(e) Called up capital.
(1 mark)
54. Which of the following signifies the difference between the par value and an issue price below par?
(a) Securities premium
(b) Discount on issue of shares
(c) Calls in arrears
(d) Call in advance
(e) Loss on issue of shares.
(1 mark)
55. The issue of shares at a discount should be sanctioned by
(a) Securities Exchange Board of India
(b) National Company Law Tribunal
(c) High Court
(d) Registrar of Companies
(e) Board of Directors.
(1 mark)
56. Which of the following statements is true?
(a) A debenture holder is an owner of the company
(b) A debenture holder can get his money back only on the liquidation of the company
(c) A debenture can be issued at discount and redeemed at a premium
(d) A debenture holder gets his interest only in the events of profits
(e) A debenture holder can get a share from profits.
(1 mark)
57. On issue of shares, the application money received should not be less than
(a) 2.5% of the nominal value of shares
(b) 2.5% of the issue price of shares
(c) 5.0% of the nominal value of shares
(d) 5.0% of the issue price of shares
(e) 10.0% of the issue price of shares.
(1 mark)
58. If the forfeited shares are issued at a discount, the amount of discount shall be debited to
(a) Profit and loss account
(b) Capital reserve account
(c) Share forfeiture account
(d) Securities premium account
(e) Share capital account.
(1 mark)
59. The profit or loss on cancellation of own debentures is calculated at the time of
(a) Issue of Debentures
(b) Creation of sinking fund for redemption of debentures
(c) Purchase of own debentures
(d) Cancellation of own debentures
(e) Redemption of debentures.
(1 mark)
60. Which of the following should be deducted from the share capital to find out paid-up capital?
(a) Calls in advance
(b) Calls in arrears
(c) Share forfeiture
(d) Discount on issue of shares
(e) Securities premium.
(1 mark)
61. The balance in the shares forfeited account after re-issue of forfeited shares will be transferred to
(a) Current liability in the Balance Sheet
(b) General reserve in the Balance Sheet
(c) The paid up share capital in the Balance Sheet
(d) Profit and loss account
(e) Capital reserve.
(1 mark)
62. When interest on own debenture becomes due, it will be credited to
(a) Profit and loss account
(b) Own debenture account
(c) Debenture interest account
(d) Interest on own debenture account
(e) Profit and loss appropriation account.
(1 mark)
63. If the company issues Rs. 40,000 amount of equity shares at a discount of 10% for redemption of preference shares of Rs.1,50,000 at a premium of 5%, then the amount to be transferred to capital redemption reserve account is
(a) Rs.1,21,500
(b) Rs.1,10,000
(c) Rs.1,17,500
(d) Rs.1,23,000
(e) Rs.1,14,000.
(2 marks)
64. The following information is pertaining to the books of Joyati Enterprise Ltd.
Number of issued and fully called-up shares is 4,50,000 of Rs.10 each
Number of shares on which calls are due is 7,500
The balance of general reserve is Rs.18,00,000
The Board of directors of the company decided to issue one fully paid bonus share for every three shares held.
The balance in general reserve after issue of bonus share would be
(a) Rs.3,25,000
(b) Rs.4,50,000
(c) Rs.7,50,000
(d) Rs.4,42,500
(e) Rs.4,75,000.
(2 marks)
65. Green Ltd., issued 5,000, 8% preference shares of Rs.100 each at a discount of 10%, which are redeemable at par. The amount of reserves available for redemption is Rs.2,00,000. For the purpose of redemption, it was decided to issue equity shares of Rs.10 each at a premium of 10%. The number of equity shares to be issued for redemption of preference shares is
(a) 30,000 shares
(b) 27,273 shares
(c) 50,000 shares
(d) 45,455 shares
(e) 20,000 shares.
(2 marks)
66. Electronics Ltd., issued 1,00,000 equity shares of Rs.10 each at par. The amount payable on the shares :
On Application Rs.2
On Allotment Rs.3
On First and Final Call Rs.5
Application monies were received on 1,20,000 shares. Excess application monies were refunded immediately. All other amounts were received except final call money on 1,000 shares.
The amount standing to the credit of share capital account is
(a) Rs.12,00,000
(b) Rs.10,00,000
(c) Rs. 9,95,000
(d) Rs.10,35,000
(e) Rs.10,40,000.
(2 marks)
67. The face value of the equity shares of a company is Rs.10 and the current market price is Rs.17. The company issues right shares at the rate of 3 equity shares for every 5 existing equity shares held, the right shares being priced at Rs.13.
The value of rights is
(a) Rs.7.00
(b) Rs.2.50
(c) Rs.1.50
(d) Rs.4.00
(e) Nil.
(2 marks)
68. The share capital of Thomas Ltd., consists of 5,000 shares of Rs.100 each. The net profit for the year 2006-07 amounted to Rs.1,00,000, of which, the directors proposed to distribute Rs.75,000 to the share holders as dividend. The minimum amount of profit to be transferred to reserves is
(a) Nil
(b) Rs.3,750
(c) Rs.5,000
(d) Rs.7,500
(e) Rs.2,500.
(2 marks)
69. Kristin Ltd., issued 1,50,000 shares of Rs.100 each at a discount of 10%. Ramie, to whom 300 shares were allotted, failed to pay the final call of Rs.30 per share and hence, all her shares were forfeited. At the time of forfeiture, the amount transferred to forfeited shares account was
(a) Rs. 9,000
(b) Rs.18,000
(c) Rs.21,000
(d) Rs.27,000
(e) Rs.30,000.
(2 marks)
70. Marks Ltd., issued 10,000, 18% debentures of Rs.100 each at a premium of 20%.
Mr. Solomon entered into an underwriting agreement for 80% of the issue with a firm liability of 1,000 debentures under a clause of maximum commission. Marked applications were for 6,000 debentures. The underwriting commission payable to Mr. Solomon is
(a) Rs.30,000
(b) Rs.24,000
(c) Rs.48,000
(d) Rs.20,000
(e) Rs.18,000.
(2 marks)
71. A company offered 60,000 shares of Rs.10 each at a premium of 50%. 48,000 shares were underwritten by Mr. Ram. The number of shares subscribed by the public was 54,000 out of which the marked applications were for 36,000 shares. The liability of Mr. Ram is for
(a) 6,000 shares
(b) 12,000 shares
(c) 4,800 shares
(d) 4,000 shares
(e) Nil shares.
(2 marks)
72. The directors of Yamuna Ltd., made the final call of Rs.30 per share on 15th May, 2006, indicating the last date of payment of call money to be 31st May, 2006. Mr. Rohit, holding 5000 shares paid the call money on 15th July, 2006. If the company adopts Table A, the amount of interest on calls-in-arrear to be paid by Mr. Rohit is (Assume 360 days in year)
(a) Rs. 625.00
(b) Rs. 937.50
(c) Rs. 750.00
(d) Rs.1,125.00
(e) Rs.1,250.00.
(2 marks)
73. Sure Ltd., acquired assets worth Rs.7,50,000 from Shine Ltd., by issue of shares of Rs.100 each at a premium of 25%. The number of shares to be issued by Sure Ltd., to settle the purchase consideration is
(a) 6,000 shares
(b) 7,500 shares
(c) 9,375 shares
(d) 5,625 shares
(e) 10,000 shares.
(2 marks)
74. ESS Ltd., issued 1,000, 10% debentures at the rate of Rs.100 each during the year 2002-2003. Interest on debentures is payable half yearly on September 30 and March 31 every year. The company has power to purchase its own 10% debentures in the open market for cancellation. The following purchases were made during the year 2006-2007:
On July 01, 2006 – 400 of its own 10% debentures at the rate of Rs.96 ex-interest.
On December 01, 2006 – 300 of its own 10% debentures at the rate of Rs.102 cum- interest.
The total amount debited to own debenture investment account was
(a) Rs.70,000
(b) Rs.68,500
(c) Rs.70,600
(d) Rs.69,000
(e) Rs.71,600.
(2 marks)
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