2007 Bangalore University B.Com Financial Accounting - I Question paper
I Semester B.Com. Examination, Nov./Dec. 2007
Financial Accounting - I
Time : 3 Hours Max. Marks : 90
SECTION - A
Answer any 10 of the following. Each question carries 2 marks : (10x2=20)
1. a) What is realization account ?
b) State any 2 objectives of sale of firm to limited company.
c) Mention the 2 methods of purchase consideration.
d) Why is the hire purchase price always higher than the cash price ?
e) What remedy does a vender have if any installment is not paid under installment system ?
f) What do you mean by royalty ?
g) How is irrecoverable short workings account id closed ?
h) What is entry for irrecoverable short workings in the books of the lessor ?
i) Why is re-valuation account opened in the books of the amalgamation of firms ?
j) What are the entries for recording unrecorded assets and liabilities at the time of amalgamation ?
k) Bring out two features of installment system of sale.
l) How do you distribute the shares and debentures received from purchasing company as purchase consideration amongst the partners ?
SECTION - B
Answer any 5 questions from the following. Each question carries 5 marks :
2. Prepare an analytical table of royalty’s from the following details :
a) Minimum rent = 30,000 p.a.
b) Royalty Rs. 2 per ton fore raised.
c) Short working are recoverable during first 3 years lease only.
d) The output for the 1st four years was
2001 - 4,000 tons, 2002 - 8,000 tons,
2003 - 16,000 tons, 2004 - 4,000 tons.
3. Pass in corporation entries in the books of the company from the following particulars.
Purchase consideration = 11,25,000, value of sundry assets taken over = 13,50,000, current liabilities taken over Rs. 1,35,000, settlement of purchase consideration = 60% in equity shares of Rs.10 each at face value and the balance is 8% debentures of as 100 each at face value.
4. Mention the features of installment system.
5. Calculate the amount of interest included in cash installment.
Cash price = Rs. 1,50,000, down payment = Rs. 45,000, 3 annual installment of Rs. 60,000, Rs. 45,000, Rs. 30,000 respectively payable at the end of each year.
6. A washing machine set with the cash price of Rs. 16,200 is acquired on hire purchase system, payable in three installments of Rs. 6,000 each. How do you apportion each installment between revenue and capital ?
7. Calculate the amount of purchase consideration from the following >
Purchasing company agreed to issue 60,000 equity shares of Rs. 10 each valued at Rs. 12 each. 24,000 8% debentures of Rs. 10 each at a discount of 5% pay cash value equal to 10% of face value of shares and debentures issued.
The company also agreed to meet the dissolution expenses of Rs. 10,000.
8. Prepare interest suspense account in the books of purchaser under installment system.
Cash price of the assets Rs. 2,40,000
Installment price Rs. 2,82,000
Interest to be apportioned in the ratio of 4 : 2 : 1
Date of purchases 1.4.2002
The book are closed on 31st March every year. The first payment is made at the end of the 1st year.
9. What is the accounting procedure involved in the sale of firm to a limited company ?
SECTION - C
Answer any 3 of the following questions. Each carries 15 marks : (15x3=45)
10. Following is the balance sheet (31.3.05) of P and Q and R and S who share profits P and Q 2 : 1 and R and S 3 : 2. The two firms decided to amalgamate.
Liabilities P and Q R and S Assets P and Q R and S
Capital A/c P 80,000 Land & Buildings ---- 1,00,000
Q 20,000 Plant & Machinery 40,000 60,000
R 1,00,000 Patents 20,000 10,000
S 1,00,000 Stock 50,000 40,000
S/creditors 32,000 46,000 Debtors 20,000 32,000
Reserve 20,000 --- Investments 10,000 ----
Cash 12,000 4,000
1,52,000 2,46,000 1,52,000 2,46,000
a) Investment of P and Q were not to be taken over by the new firm, but were to be distributed between partners.
b) Goodwill P and Q was Rs. 40,000 and R and S Rs. 80,000, however it was agreed that the total amount of goodwill in the new firm to be Rs. 1,00,000 only.
c) Assets and liabilities of P and Q were valued as follows :
Plant and machinery Rs. 30,000, patents Rs. 15,000, stock Rs. 40,000, debtors Rs. 15,000, creditors Rs. 30,000
d) Assets and Liabilities of R and S were valued as follows.
Land and buildings 1,20,000, plant and machinery Rs. 55,000, patents Rs. 10,000, stock Rs. 45,000, debtors Rs. 30,000 and creditors Rs. 40,000.
e) Total capital of the firm to be Rs. 4,00,000. Each partner shall introduce such sum as would make his capital equal to one fourth of the total capital or withdraw excess capital. P, Q, R, S are to be equal partners.
Prepare necessary ledger accounts in the books of old firm and show amalgamated balance sheet in the books of the new firm.
11. On 1.4.2003 Ramyashree Patel purchased a computer under hire purchase system. The cash price was Rs. 34,000 payable as Rs. 4,000 on signing the agreement and the balance in 3 instalments of Rs. 10,000 each together with interest at 8% p.a., on 31st March every year. The asset is depreciated at 10% p.a. on diminishing balance method.
Give necessary ledger accounts in the books of Ramyashree Patel.
12. Jaishree obtained a lease of some granite bearing land on 1st Jan. 2004, the terms being a royalty of Rs. 700 per meter granite raised subject to minimum rent of Rs. 20,00,000 per annum with a right of recoupment of short workings over the 1st three years of the lease. The following are the particulars.
Year Sales in meter Closing stock / meter
2004 2200 300
2005 3300 500
2006 4800 600
2007 6000 700
You are required to prepare royalty account, short workings A/c, landlord A/c to record the above transactions.
13. A and B are partners having profit sharing ratio of 2 : 1 and their balance sheet as on 31.3.2005 was as follows :
Liabilities Amount Assets Amount
Creditors 1,20,000 Cash 900
B.P 30,000 Drs 1,80,000
Less : reserve 9,000 1,71,000
Reserve fund 18,000 Bills receivable 15,000
A’s loan 60,000 Stock 1,31,100
Capital A 90,000 Machinery 60,000
They agreed to sell the business to a limited company and the company to take over the assets and liabilities as follows :
Machinery ar Rs. 48,000, stock at Rs. 1,05,000, debtors ar Rs. 1,52,100, B/R at Rs. 15,000 and goodwill ar Rs. 18,000. The company agreed to take over creditors ar Rs. 1,14,000 and B/P at Rs. 30,000. The firm received Rs. 1,20,000 of the purchase price in Rs. 10 fully paid equity shares and the balance in cash. Distribute the shares as per original capital ratio. Prepare the necessary ledger accounts in the books of the firm.
14. The Bangalore transport company purchased a motor lorry from the Mysore motor company in deferred payment system on 1.1.2001 paying Rs. 60,000 on that day and agreed to pay the remaining amount in three annual installment of Rs. 60,000 each with interest at 5% p.a.
Prepare necessary accounts in the books of the buyer assuming that :
1) Depreciation at 10% p.a. is charged on the diminishing balance.
2) Books are closed on 31 December.
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