Sunday, May 21, 2017

Dibrugarh University Solved Question Paper: Corporate Accounting (2010 - Old Course)

Corporate Accounting – 2010 (Old course)
1. (a) (i) Give a brief description of ‘Statutory Books’ and ‘Statistical Books’ which are required to be maintained by a company as per provisions of Indian Companies Act, 1956.
Ans: Statutory and Statistical Books Maintained by Company:
Statutory book: Such books are those which a limited company is under statutory obligation to maintain at its registered office with a view to safeguard the interests of shareholders and creditors. Main statutory books are:
  1. Register of investments held and their names
  2. Register of charges
  3. Register of members
  4. Register of debenture holders
  5. Annual returns
  6. Minute books
  7. Register of contracts
  8. Register of directors
  9. Register of director’s shareholdings
  10. Register of loans to companies under the same management
  11. Register of investment in the shares and debentures of other companies
  12. Register of fixed deposits
  13. Index of members where the number is more than fifty unless register of members itself affords an index
  14. Index of debenture holders where the number is more than fifty, unless the register of debenture holders itself affords an index
  15. Foreign register of members and debenture holders, if any
  16. Register of renewed and duplicate certificates.


Statistical Books:
In order to keep a complete record of numerous details of certain transactions and activities of the company the following statistical books are usually maintained by joint stock companies in addition to statutory books. The keeping of such books are optional. The main books are:
  1. Share application and allotment book
  2. Share calls book
  3. Share certificate book
  4. Debenture application and allotment book
  5. Debenture calls book
  6. Register of share transfers
  7. Dividend book
  8. Debenture interest book
  9. Register of documents sealed
  10. Register of share warrants
  11. Dividend mandates register
  12. Register of debenture transfers
  13. Register of powers of attorney
  14. Agenda book
  15. Register of lost share certificates
  16. Register of director’s Attendance


(ii) What is ‘Statutory Report’? What items are generally included in this report?
Ans:
Or
(b) ABC Co. Ltd. issued prospectus inviting applications for 20000 shares of Rs 10 each at a premium of Rs 2 per share as follows:
On Application – Rs 3
On Allotment – Rs 5 (including premium)
On First Call – Rs 2
On Second Call – Rs 2
Applications were received for 30000 shares and allotment made pro-rata to the applicants of 24000 shares. Money overpaid on application was employed on account of sums due on allotment. Mr. Rajat, to whom 400 shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were forfeited. Mr. Kamal, the holder of 600 shares failed to pay both the calls and his shares were forfeited after second call. Of the shares forfeited, 800 shares were issued to Mr. Anand, credited as fully paid for Rs 9 per share, the whole of Mr. Rajat’s shares being included. Pass the necessary Journal Entries to give effect to the above and prepare Bank A/c, Forfeited Shares A/c and Balance Sheet of the company.
2. (a) The XYZ Co. Ltd. was registered with an authorized capital of Rs 10,00,000 divided into shares of Rs 10 each, of which 40000 shares have already been issued and fully paid up. The following is the Trial Balance extracted on 31st March, 2009:

Dr. Rs
Cr. Rs
Stock on 1.4.2008
1,86,420

Returns
12,680
9,850
Sundry Manufacturing Expenses
19,240

18% Bank Loan (secured)

50,000
Office Salaries and Expenses
17,870

Directors Remuneration
26,250

Freehold premises
1,64,210

Furniture
5,000

Debtors and Creditors
1,05,400
62,220
Cash at Bank
96,860

Profit & Loss A/c on 1.4.2008

38,640
Share Capital

4,00,000
Purchases and Sales
7,18,210
11,69,900
Manufacturing Wages
1,09,740

Carriage Inwards
4,910

Interest on Bank Loan
4,500

Auditor’s Fees
8,600

Preliminary Expenses
6,000

Plant and Machinery
1,28,400

Loose Tools
12,500

Cash in Hand
19,530

Advance Payment of Tax
84,290


17,30,610
17,30,610
You are required to prepare Profit & Loss A/c for the year ended 31st March, 2009 and a Balance Sheet as at that date after taking into consideration the following adjustments:
  1. On 31st March, 2009, outstanding manufacturing wages and outstanding office salaries stood at Rs 1,890 and Rs 1,200 respectively. On the same date stock was valued at Rs 1,24,840 and loose tools at Rs 10,000
  2. Provide for interest on Bank loan for 6 months
  3. Depreciation on plant and Machinery is to be provided @ 15% while on office furniture is to be @10%
  4. Write off one-third of balance of preliminary expenses
  5. Make a provision for income tax @50%
  6. The directors recommended a maiden (first) dividend @15% for the year ending 31st March, 2009 after the minimum transfer to General Reserve as required by law
  7. Ignore corporate dividend tax


STATEMENT OF PROFIT AND LOSS
For the year ending 31st March, 2009
Particulars
Note
No.
Amount
  1. Incomes:
Revenue from Operations (net Sales)             11,69,900
Less: Return                                                                12,680
Other Income



11,57,220
NIL
Total Income

11,57,220
  1. Expenses:
Purchases Stock in trade                                        7,18,210
Less: Return                                                                   9,850

Changes in Inventories:
Operating Stock                                                         1,86,420
Less: Closing Stock                                                    1,24,840
                          
Employee Benefits Expenses
Finance Cost
Depreciation and Amortization Expenses
Other Expenses  








A
B
C
D


7,08,360



61,580

1,30,700
9,000
22,260
61,000
Total Expenses

9,92,900
  1. Net Surplus before Tax (I – II)
Less: Provision for tax @ 50%

1,64,320
82,160
Net Surplus after tax

82,160
A. Employee Benefits Expenses

Amount
Office Salaries and expenses
Add: Outstanding
17,870
1,200

19,070
Manufacturing Wages                                           1,09,740
Add: Outstanding                                                         1,890

1,11,630

1,30,700
B. Finance Cost

Amount
Interest on bank loan                                                                                  4,500
Add: Provide Interest on bank loan for 6 months                                  4,500

9,000

9,000
C. Depreciation and Amortization

Amount
Plant & Machinery (1,28,400 x 15%)
Furniture (5,000 x 10%)
Loss tools (12,500 – 10,000)
19,260
500
2,500

22,260
D. Other Expenses

Amount
Sundry Manufacturing Expenses
Director’s Remuneration
Carriage Inward
Auditors Fees
Preliminary Expenses (6,000 x 1/3)
19,240
26,250
4,910
8,600
2,000

61,000


BALANCE SHEET



Note
No.
Amount
  1. Equity and Liabilities:
  1. Shareholders’ fund
  1. Share Capital
  2. Reserves and Surplus



A


4,00,000
60,800


4,60,800
  1. Non-Current Liabilities
  2. Current Liabilities:
  1. Short-term borrowing
18% bank loan
  1. Trade Payable (Creditors)
  2. Other Current liabilities
  3. Short term provision





B
C
NIL


50,000
62,220
7,590
57,870
                              Total

1,77,680
Total of Equity and Liabilities (I + II)

6,38,480
  1. Assets:
Non-Current Assets
  1. Fixed Assets
  1. Tangible Fixed Assets
  2. Intangible Fixed Asset
  1. Other Non-current Assets



D



2,87,850
NIL
4,000
                             Total Fixed Assets

2,91,850
Current Assets
  1. Inventories
  2. Trade Receivables (Debtors)
  3. Cash & Cash Equivalents (Cash at Bank)


1,24,840
1,05,400
1,16,390


3,46,630
                           Total of All Assets

6,38,480
A. Reserve & Surplus

Amount
General Reserve
Surplus                                                                                           38,640
Add: Net Surplus after Tax                                                          82,160
                                                                                                     1,10,800
Less: (1) Dividend (4,00,000 x 15%)                                           60,000
                                                                                                60,800
(2) C.D.T                                                                                    NIL
                                                                                                60,800
(3) Transfer to Reserve (82,160 x 5%)                                 4,108
4,108







56,692

60,800
B. Other Current Liabilities

Amount
Outstanding Wages
Outstanding Salaries & expenses
Interest on bank loan
1,890
1,200
4,500

7,590
C. Short Term Provisions

Amount
Provision for Tax                                                           82,160
Less: Advance Payment of Tax                                   84,290

Dividend Tax

(2,130)

60,000

57,870
D. Tangible Fixed Assets

Amount
Freehold Premises
Furniture (5,000 – 500)
Plant & Machinery (1,28,400 – 19,260)
Loss tools (12,500 – 2,500)
1,64,210
4,500
1,09,140
10,000

2,87,850


0R
(b)Explain how the provisions laid under following standards affect the preparation of final accounts of the companies:
    1. (AS)-5
    2. (AS)-12
    3. (AS)-15
    4. (AS)-29


5. (a) X Ltd. and Y Ltd. decided to amalgamate and a new company XY Ltd. is formed to take over both the companies as on 31st March, 2016. The following are the Balance Sheets of the companies as on that date:
Liabilities
X Ltd.
Rs.
Y Ltd.
Rs.
Assets
X Ltd.
Rs.
Y Ltd.
Rs.
Share Capita:
Shares of Rs. 10 each fully paid
Reserve fund
Profit & Loss A/c
Dividend Equalization Fund
Workmen Compensation fund
Bank Overdraft
Sundry Creditors
Bills Payable

5,00,000
2,00,000
30,000
-
20,000
-
1,00,000
50,000

3,00,000
1,50,000
50,000
1,00,000
-
50,000
1,20,000
30,000
Goodwill
Land and Buildings
Plant and Machinery
Patents and Trade Mark
Stock
Sundry Debtors
Bills Receivable
Cash at Bank
1,00,000
2,50,000
2,00,000
-
2,00,000
1,00,000
-
50,000
80,000
1,90,000
2,55,000
52,500
1,50,000
50,000
20,000
2,500

9,00,000
8,00,000

9,00,000
8,00,000
Show how the amount payable to each company is arrived at the prepare the amalgamated Balance Sheet of XY Ltd. assuming amalgamation is done in the nature of purchase. 5+6=11
Journal Entries
Particulars
L/F
Amount
Amount
Business Purchase A/c                                                                                      Dr.
To Liquidator of X Ltd.
To Liquidator of Y Ltd.

13,50,000

7,50,000
6,00,000
Goodwill A/c                                                                                                      Dr.
Land & Building A/c                                                                                          Dr.
Plant & Machinery A/c                                                                                     Dr.
Stock A/c                                                                                                             Dr.
Sundry Debtors A/c                                                                                           Dr.
Bills Receivable A/c                                                                                           Dr.
Cash at Bank A/c                                                                                                Dr.
To Sundry Creditors A/c
To Bills Payable A/c
To Business Purchase A/c

1,00,000
2,50,000
2,00,000
2,00,000
90,000
-
50,000







90,000
50,000
7,50,000
Goodwill A/c                                                                                                     Dr.
Land & Building A/c                                                                                         Dr.
Plant & Machinery A/c                                                                                    Dr.
Patent & Trade Marks A/c                                                                              Dr.
Stock A/c                                                                                                            Dr.
Sundry Debtors A/c                                                                                          Dr.
Bills Receivable A/c                                                                                          Dr.
Cash at Bank A/c                                                                                               Dr.
To Bank Overdraft A/c
To Sundry Creditors A/c
To Bills Payable A/c
To Purchase Consideration A/c

80,000
1,90,000
2,55,000
52,500
1,50,000
40,000
20,000
2,500








50,000
1,10,000
30,000
6,00,000
Liquidator of X Ltd. A/c                                                                             Dr.
Liquidator of Y Ltd. A/c                                                                        Dr.
To Equity Share Capital A/c

7,50,000
6,00,000


13,50,000
Balance Sheet
Particulars
Amount
  1. Equity & Liabilities:
  1. Shareholders fund:
  1. Share Capital
  2. Reserve & Surplus:


13,50,000
-

  1. Non Current Liabilities:
  2. Current Liabilities
  1. Short term borrowing
  2. Trade Payable
-
------

50,000
2,80,000
Total (1 + 2 + 3)
16,80,000
  1. Assets:
  1. Non Current Assets:
  1. Fixed Assets
Tangible Fixed Assets:
Land & Building                        4,40,000
Plant & Machinery                   4,55,000

Intangible Fixed Assets:
Patent & trademarks                           52,500
Goodwill (1,00,000 + 80,000)         1,80,000

  1. Current Assets
  1. Inventories
  2. Trade receivable:
Bills Receivable                          20,000
Debtors                                    1,30,000
  1. Cash & cash equivalent





8,95,000



2,32,500


3,50,000


1,50,000
52,500
Total (1 + 2)
16,80,000
Calculation of Purchase Consideration Net Assets Method
Assets – Liabilities
X Ltd.
Y Ltd.
Assets:
Goodwill
Land & Building
Plant & Machinery
Patent & Trademarks
Stock
Sundry Debtors
Bills Receivable
Cash at Bank

1,00,000
2,50,000
2,00,000
-
2,00,000
90,000
-
50,000

80,000
1,90,000
2,55,000
52,500
1,50,000
40,000
20,000
2,500

Less: Liabilities:
Bank Overdraft
Sundry Creditors
Bills Payable
8,90,000

-
90,000
50,000
7,90,000

50,000
1,10,000
30,000
Purchase Consideration
7,50,000
6,00,000


Or
(b) (i) Describe in detail the different types of amalgamation.
Ans: Amalgamation: Introduction
Amalgamation means the merging of two or more than two companies for eliminating competition among them or for growing in size to achieve the economies of scale. Amalgamation is a broad term which includes mergers (uniting of two existing companies) and acquisition (one company buying out another company).
There are two types of amalgamation: According to AS-14 amalgamation is divided into the following two categories for accounting purposes: 
(A) Amalgamation in the nature of merger; and 
(B) Amalgamation in the nature of purchase.
Amalgamation in the nature of Merger
According to AS-14 on Accounting for Amalgamation, the following conditions must be satisfied for an amalgamation in the nature of merger:
a. After amalgamation, all the assets and liabilities of the transferor company becomes the assets and liabilities of the transferee company.
b. Shareholders holding not less than 90% of the face value of the equity shares of the transferor company become the equity shareholders of the transferee company by virtue of amalgamation.
c. The business of the transferor company is intended to be carried on after the amalgamation by the transferee company.
d. Purchase consideration should be discharged only by issue of equity shares in the transferee company except that cash may be paid in respect of any fractional shares.
e. No adjustments are required to be made in the book values of the assets and liabilities of the transferor company, when they are incorporated in the financial statements of the transferee company. If any one of the condition is not satisfied in a process of amalgamation, it will not be considered as amalgamation in the nature of merger.
Amalgamation in the nature of Purchase: An amalgamation will be treated as “Amalgamation in the nature of purchase” if any of the above mentioned conditions is not satisfied.


(ii) Discuss in detail the various methods of calculating purchase consideration.
Purchase Consideration – Methods for calculation
Purchase Consideration refers to the consideration payable by the purchasing company to the vendor company for taking over the assets and liabilities of Vendor Company.
Accounting Standard – 14 defines the term purchase consideration as the “aggregate of the shares and other securities issued and the payment made in the form of ach or other assets by the transferee company to the shareholders of the transferor company”. Although, purchase consideration refers to total payment made by purchasing company to the shareholders of Vendor Company, its calculation could be in different methods, as explained below:
a. Lump sum method
b. Net Assets method
c. Net Payment Method
a. Lump sum Method: Under this method purchase consideration will be paid in lump sum as per the valuation of purchasing companies valuation. E.g., if it is stated that A Ltd. takes over the business of B Ltd. for Rs.15, 00,000 here the sum of the Rs.15, 00,000 is the Purchase Consideration.
b. Net Assets Method: Under this method P.C. shall be computed as follows:
Particulars
Rs.
Agreed value of assets taken over
Less: Agreed value of Liabilities taken over
XXX
XXX
Purchase Consideration
XXX
Note: i. The term “agreed value” means the amount at which the transferor company has agreed to sell and the transferee company has agreed to take over a particular assets or a liability Otherwise book value will be the agreed value.
ii. Fictitious assets (i.e., preliminary expenses, underwriting commission, discount on issue of shares, discount on issue of debentures and debit balance in P & L A/c) are not taken over.
c. Net Payment Method: Under this method P.C. should be calculated by aggregating total payments made by the purchasing company. E.g.: A Ltd. had taken over B Ltd. and for that it agreed to pay Rs.5, 00,000 in cash 4, 00,000 Equity Shares of Rs.10 each fully paid at an agreed value of Rs.15 per share then the P.C. will be ascertained as follows:
Particulars
Rs.
Cash
4,00,000 E. Shares of Rs.10 each fully paid, at Rs.15 per share
5,00,000
60,00,000
Purchase Consideration
65,00,000


4. (a) From the Balance Sheet and information given below, prepare Consolidated Balance Sheet of H Ltd. and its subsidiary S Ltd.:
Balance Sheet as on 31st march, 2009
Liabilities
H Ltd. (Rs)
S Ltd. (Rs)
Assets
H Ltd. (Rs)
S Ltd. (Rs)
Share Capital :
Share of Rs 10 each fully paid

5,00,000

1,00,000
Fixed Assets
4,00,000
60,000
Profit & Loss A/c
2,00,000
60,000
Stock
3,00,000
1,20,000
Reserves
60,000
30,000
Debtors
75,000
85,000
Bills Payable

15,000
Bill Receivable
20,000

Creditors
1,10,000
60,000
7500 shares in S Ltd. at cost
75,000


8,70,000
2,65,000

8,70,000
2,65,000
Additional Information:
  1. The bills accepted by S Ltd. are all in favour of H Ltd.
  2. The stock of H Ltd. includes Rs 25,000 bought from S Ltd. at a profit to latter of 20% on sales.
  3. All the profit of S Ltd. has been earned since the shares were acquired by H Ltd. but there was already the reserve of Rs 30,000 at that date
Illustration 4: [2010 Old Course]
  1. Degree of Control:
H. Ltd.
S. Ltd  
  1. Control Chart A:
Particulars
Total
H. Ltd
S. Ltd
  1. Pre-acquisition Profit:
Reserve                                                                    40,000
Less: Discount on issue of shares                        10,000

  1. Post-acquisition Profit
Surplus

  1. Share Capital


30,000


60,000

1,00,000


22,500


45,000

75,000


7,500


15,000

25,000
Minority Interest


47,500


  1. Control Chart B:
Particulars
Amount (Rs.)
Cost of Investment
Less: (i) H Ltd. shares in Pre-acquisition Profit
(ii) H Ltd. shares in Share Capital
75,000
22,500
75,000
Capital Reserve
22,500


  1. Control Chart C:
Particulars
Fixed Assets
Stock
Debtors
B/R
B/P
Creditors
H Ltd.
S Ltd.
4,00,000
60,000
3,00,000
1,20,000
75,000
85,000
20,000
-
-
15,000
1,10,000
60,000

Less: Stock Reserve

Less: Mutual owing
4,60,000
4,20,000
5,000
1,60,000
20,000


15,000
15,000


15,000
1,70,000

4,60,000
4,15,000
1,60,000
5,000
NIL
1,70,000
Consolidated Balance Sheet of H Ltd. & S Ltd
Particulars
Amount (Rs.)
  1. Equity & Liabilities:
  1. Shareholder’s Fund
  1. Share Capital
  2. Reserve & Surplus
General Reserve                                                                 60,000
Capital Reserve                                                                   22,500                                             
Surplus                                            2,00,000           
Add: Revenue Profit                         45,000
                                                         2,45,000
Less: Stock Reserve                            5,000                   2,40,000

  1. Minority Interest
  2. Non-Current Liabilities
  3. Current Liabilities:
Bills Payable
Bills Payable
Trade Payable


5,00,000






3,22,500


47,500
NIL

NIL
1,70,000
Total (a + b + c + d)
10,40,000
  1. Assets:
  1. Non-Current Assets
  1. Fixed Assets
Tangible

  1. Current Assets:
  1. Inventories                                   
  2. Trade Receivable
  3. Bills Receivable  
  4. Cash & Cash Equivalent



4,60,000


4,15,000
1,60,000
5,000
NIL
Total (a + b)
10,40,000


Or
(b) (i) Define a holding company. How does it come into existence? Explain briefly.
Ans: Meaning of Holding and its existence
An important development of recent times in the business world is the combining of independent business units into a group or an economic unit. A company may acquire either the whole or majority of shares of another company so as to have a controlling interest in such a company or companies. The controlling company is known as Holding or Parent Company and the company controlled is known as Subsidiary Company.
Holding Company: As per Section 2(46) “holding company”, in relation to one or more other companies, means a company of which such companies are subsidiary companies. According to this section, one company can become the holding company of another in any of the following three ways:
1. By holding more than 50% of nominal value of the equity shares of the other company i.e. the holding company holds the majority of voting power in the subsidiary company.
2. By controlling the composition of the Board of Directors of the other company so that the holding company is able to appoint or remove the directors of the subsidiary company.
3. By controlling a holding company which controls another subsidiary or subsidiaries. For example, if B Ltd is a Subsidiary of C Ltd & C Ltd is a subsidiary of A Ltd then B Ltd is also deemed to be a subsidiary of A Ltd.
(ii) How would you ascertain the amount of goodwill or capital reserve while preparing a Consolidated Balance Sheet?
Ans: In practice the holding company may pay more or less than the net worth of the subsidiary company. If the holding company feels that a company the shares of which it wants to acquire enjoys considerable reputation or exceptionary favourable factor it may pay more than the paid up value of shares or net assets. The excess of acquisition price over net assets represents goodwill or cost of control. If on the other hand the acquisition price is less than the paid up value of shares the difference is again to the holding company & is known as capital reserve.

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