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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI 600 034 B.B.A.DEGREE EXAMINATION BUSINESS ADMINISTRATION FOURTHSEMESTER APRIL 2017
BU 4502/ BU 4504 COMPANY ACCOUNTS
Date: 25-04-2017 Dept. No. Max. 100 Marks
Time: 09:00-12:00 PART A Answer all Questions: (10 x 2 20 Marks)
1. What is Rights Issue
2. What are the reasons for buyback of shares
3. Write the journal entry for Bonus issue of shares.
4. List out 4 items that are not deducted from profit while calculating managerial remuneration.
5. What is weighted sale ratio
6. What do you mean by acquisition of business
7. List out the three methods for calculating Goodwill under Super Profit method.
8. A firm earns a profit of Rs.40,000, and has invested capital amounting to Rs3,00,000. In the same class of business, normal rate of earning is 10%. Calculate goodwill according to capitalization method.
9. Pradeep ltd has taken over the business of Mr. Sandeep and agreed to pay the purchase price as given below:
2,800 shares of Rs.50 each fully paid at Rs.60 per share.
Rs.25,000 in preference shares of Rs.100 each issued at premium of 25% and
Rs.20,000 in cash.
10. Rajan, a small scale industrialist decided to convert his firm into a limited company with effect from 1st April 1996. But he obtained thecertificate of incorporation on 1st August 1996 and the certificate to commence business on 1st October 1996. His accounts were closed on 31st December 1996.
Part B Answer any Four Questions :(4x10=40 Marks)
11. Briefly explain the different types of underwriting.
12. List out the Differences between stock and share.
13. What are the need for valuation of Goodwill
14. Co Ltd., was incorporated on May 2008 to take over the business of Co as going concern from January 2008. The profit and loss account for the year ending December 31, 2008 was as follows:
Profit and Loss Account of Co., Ltd., for the year ended 31-12-2008 Debit Credit Particulars Rs. Particulars Rs. To Rent and Taxes 12,000 By Trading account To insurance 3,000 (Gross profit) 1,55,000 To electricity charges 2,400 To Salaries 36,000 To directors fees 3,000 To auditors fees 1,600 To commission 6,000
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To advertisement 4,000 To discount 3,500 To office expenses 7,500 To carriage 3,000 To bank charges 1,500 To preliminary expenses 6,500 To bad debts 2,000 To interest on loan 3,000 To Net profit 60,000 1,55,000 1,55,000 The total turnover for the year ending December 31, 2008 was Rs.5,00,000 divided into Rs.1,50,000 for the period upto may 2008 and Rs.3,50,000 for the remaining period. Apportion the year's profit between the pre and post incorporation periods.
15. Following details are available about the business of sugar Ltd.,
Profit 1994 Rs.80,000; IN 1995 Rs.1,00,000; In 1996 Rs.1,20,000;
Non-recurring income of Rs.8,000 is included in the profit of 1995
Profit of 1994 have been reduced by Rs.12,000 because goods were destroyed by fire:
Goods have not been incurred but it is thought prudent to insure them in future. The insurance
premium is estimated at Rs.800 per year.
Reasonable remuneration of the proprietor of the business is Rs.12,000 per year but it has not been taken into account for calculation of above mentioned profits.
Profit of 1996 include Rs.1,000 income on investment. Calculate goodwill on the basis of three years purchase of the average profit of last three years.
16. The Balance sheet of Exchange ltd., as on 31-3-2009 was as follows:
Liabilities Rs. Assets Rs. Share capital Sundry assets 9,20,000 50,000 equity shares of Rs. 10 Bank balance 6,00,000 Each fully paid 5,00,000 4,000, redeemable preference Shares of Rs.100 fully paid 4,00000 Profit and loss A/c 5,20,000 Creditors 1,00,000 15,20,000 15,20,000 On the above date, the preference shares were redeemed at a premium of 10%. You are required to pass journal entries and give the amended balance sheet.
17. ABC Company Ltd., passed resolution and got court permission for the reduction of its share capital by Rs.5,00,000 for the purpose mentioned as under
To write off the debit balances of P&L A/c of Rs.2,10,000
To reduce the value of plant and machinery by Rs.90,000 and goodwill by Rs.40,000.
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To reduce the value of investments by Rs.80,000.
The reduction was made by converting 50,000 preference share of Rs.20 each fully paid to the same number of preference shares of Rs.15 each fully paid and by converting 50,000 equity shares of Rs.20 each on which Rs.15 is paid up into 50,000 equity shares of Rs.10 each fully paid Pass journal entries to record the share capital reduction. Part C Answer any Two Questions (2x20=40 Marks) 18. What is a cash flow statement How it is prepare under AS 3 using Indirect Method give the format 19. A Ltd., was registered with aauthorised capital of Rs.6,00,000 in equity shares of Rs.10 each. The following is its trail balance on 31st march 2016 Trial Balances of 'A'.Ltd.
Particulars
Debit
Particulars
Credit
Goodwill Cash Bank Purchases Preliminary expenses Calls in- arrears Premises Plant and machinery Interim dividend Stock Furniture fixtures Sundry debtors Wages General expenses Freight and carriage Salaries Directors fee Bad debts Debenture interest paid
25,000 750 39,900 1,85,000 5,000 7,500 3,00,000 3,30,000 39,250 75,000 7,200 87,000 84,865 6,835 13,115 14,500 5,725 2,110 18,000 12,46,750
Share capital 12% debentures Profit and loss A/c Sales Bills payable Sundry creditors General reserve Provision for bad debts
4,00,000 3,00,000 26,250 4,15,000 37,000 40,000 25,000 3,500 12,46,750
Prepare Statement of Profit Loss and Balance sheet in proper form after making the following adjustments.
Depreciate plant and machinery by 15%
Write off preliminary expenses
Provide for 6 months interest on debentures
Leave bad and doubtful debts provision at on sundry debtors.
Provide for income tax at 50%
Stock on 31-3-2016 was Rs.95,000
Provide for corporate dividend tax at 17%
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20.A Limited company issued a prospectus inviting applications for 2,000 shares of Rs.10 each at a premium of Rs.2 per share payable as follows: On application Rs.2 per share On allotment Rs.5 per share including premium) On first call Rs.3 per share On final call Rs.2 per share Applications were received for 3,000 shares and pro-rate allotment was made on applications for 2,400 shares. Money overpaid on applications was employed towards the sum due on allotment . Ramesh who took 40 shares failed to pay the allotment money and his shares were forfeited on his failure to pay the first call also. Mohan the holder of 60 shares failed to pay the two calls and his shares w ere forfeited after the second call Of the shares forfeited, 80 shares were sold to Krishna credited as fully paid for Rs.9 per share, the whole of ramesh's share being included. Show the journal entries.
21.the following is the balance sheet of Robert Lee Ltd., as on 31 Dec. 1998. Liabilities Assets Share capital Land Buildings 1,10,000 20,000 share of Rs. 10 each 2,00,000 Plant Machinery at General reserve 40,000 (cost Less Depreciation) 1,30,000 Taxation reserve 60,000 Trade Marks 20,000 Workmen saving account 30,000 Stock 48,000 Profit and loss a/c 32,000 Debtors 88,000 Sundry creditors 98,000 cash 52,000 Preliminary expenses 12,000 4,60,000 4,60,000 The plant and machinery is worth Rs.1,20,000 and Land and building have been valued at Rs.2,40,000 by an independent valuer. Rs.8,000 of the Debts are bad. The profits of the company have been as follows: 1996 Rs.80,000; 1997 Rs.90,000; and 1998 Rs. 1,06,000. It is the company's practice to transfer 25 of the profits to reserve. Ignoring taxation, Find out the value of the share using net asset method and yield method. Similar companies give an yield of 10% on the market value of their shares. Goodwill may be taken to be worth Rs.1,60,000.