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Financial Accounting
Time: 3 hours APRIL 1998 Marks: 100
 
Q.1. Sam Ltd. furnishes you with the following trial balance as on 31st march, 1998
20
 
Particulars
Dr. (Rs.)
Cr. (Rs.)
Equity share capital: Shares of Rs. 10 each fully paid as per last balance sheet, received in cash .
50,00,000    
12% redeemable preference share capital: Shares of Rs. 100 each fully paid as per last balance sheet, received in cash (redeemed on 31-12-1997 at premium of 10%)  
20,00,000    
Payment to preference shareholders at the time of redemption - including dividend for the period 1-4-1997 to
31-12-1997
23,80,000   
 
General reserve - as per last balance sheet  
48,70,000    
Cash
20,000  
 
Bank of India - Current Account
1,00,000   
 
Customers' dues - within 6 months
40,00,000   
 
Customers' dues - over six months
2,00,000   
 
Provision for bad debts  
2,00,000    
Advances (considered good)
11,50,000   
 
Prepaid expenses
50,000   
 
Advance payments received  
60,000    
Sundry creditors  
10,00,000    
Fixed assets    
Cost
78,00,000  
 
Provision for depreciation40  
15,40,000   
Inventory at cost
10,00,000   
 
Tax payments pending assessment
6,00,000   
 
Tax provision pending assessment  
5,50,000   
Tax liability  
80,000    
Surplus brought forward from last year  
1,00,000    
Surplus for the year (after taxation)  
19,00,000    
Total
1,73,00,000   
1,73,00,000    
 
  The directors have proposed final equity dividend at 20% and appropriation of Rs. 7,00,000 to general reserve.You are asked to prepare the balance sheet of Sam Ltd. as on 31st March, 1998, giving the information required by the Companies Act, 1956 in the manner so required to the extent it is available from the above data.
 
     
 
Q.2. Kiran Enterprises Limited has the following items appearing in its Balance Sheet as on 31st March, 1998.
16
 
Liabilities
Rs.
Assets
Rs.
Share CapitalEquity Shares Rs. 10/-
10,00,000  
Goodwill
3,50,000   
10 % PreferenceShares Rs. 10
5,00,000  
Freehold property
4,50,000  
Profit & Loss A/c.
5,00,000  
Plant & Machinery
12,50,000   
Bank Loan
10,00,000  
Investment
1,00,000   
Current Liabilities
1,50,000  
Stocks
5,00,000   
    Debtors
3,50,000   
    Bank & Cash
1,50,000   
Total
31,50,000  
Total
31,50,000    
 
  i) The profit for the past three years are year ended 31st
March 1996   Rs. 1,40,000/-
March 1997   Rs. 3,25,000/-
March 1998   Rs. 5,50,000/-
 
  ii) The profits shown above are after debiting -
a) Goodwill @ Rs. 50,000/- p.a.
b) Dividend on Preference Shares as applicable
c) Dividend on Equity Capital - @ Rs. 10% in 1996-97, and @ Rs. 12% in 1997-98.
 
  iii) The recent valuation of Fixed Assets revealed. Property is worth Rs. 5,00,000/- and Machinery worth Rs. 25,00,000/-
 
  iv) The investment are trade investment is worth Rs. 2,50,000/-
 
  v) Obsolete and worthless stock included above is Rs. 4,00,000/-
 
   
 
  You are required to calculate -
 
  i) Future Maintainable profit applying weights - 1996 - 1; 1997 - 2; 1998 - 3.
 
  ii) Value equity shares on basis of - Capitalised value of Future maintainable Profit @ 8 1/3%.
 
  iii) Intrinsic value of Equity shares.
 
   
 
Q.3. Bharat Ltd. issued 50,000 15% debenture of Rs. 1,000 each at Rs. 952 per debenture.The debentures are redeemable in five annual installments of Rs. 200 each. It is decided to write off discount in proportion to the amount of debenture finance usage over the various years. You are asked to
16
  i) Prepare statement for write off of discount over the five year period.
 
  ii) Pass appropriate journal entries in year 1 and year 2.
 
  iii) Show the disclosure in final accounts of year 1 and year 2.
 
   
 
Q.4. M/s. Vivek Agencies Limited have Head Office at Parle and Branch Office at Virar.Both offices maintain independent Books of Accounts. Their Trial Balance on 31st March, 1998.
 
 
 
Parle   Rs.
Virar    Rs.
Dr.
Cr.
Dr.
Cr.
Share Capital
-
1,20,000
-
-
Fixed Assets
64,000
-
32,000
-
Profit and Loss A/c
-
16,000
-
-
Stocks
56,000
-
7,600
-
Purchases/Sales
4,80,000
5,60,000
27,000
90,000
Goods from H.O.
-
48,000
-
-
Goods from Branch
-
-
46,000
-
Administration Expenses
60,000
-
9,000
-
Branch A/c
44,000
-
-
-
H. O. A/c
-
-
-
33,400
Debtors/Creditors
68,000
40,000
6,000
8,200
Cash on hand
12,000
-
4,000
-
Total
7,84,000
7,84,000
1,31,600
1,31,600
 
  Additional information:
 
  i) Stock on 31-3-1998 at Parle Rs. 40,000/-, Virar Rs. 8,400/-
 
  ii) Depreciate Fixed Assets @ 10%
 
  iii) Difference in H. O. and Branch A/c. to be treated cash in transit.
 
   
 
  You are required to prepare in Books of Head Office.
 
  i) Branch A/c.
 
  ii) Columnar Profit & Loss A/c.
 
  iii) Balance sheet.
 
   
 
Q.5. The following is the balance Sheet of Bad-day Ltd. as on 31st December 1997.
16
 
Liabilities
Rs.
   Assets     Rs.
Issued subscribed Capital30,000 Equity shared of Rs. 10 each fully paid
3,00,000    
  Goodwill
   75,000    
2000 12% Pref. Shares of Rs. 100 each fully paid up
2,00,000    
  Land/Building
 2,50,000    
11% Debentures
1,25,000    
  Plant/Machinery
 1,37,500    
Sundry Creditors
22,750    
  Furniture
    16,250   
Bank Overdraft
68,375   
  Stock
 1,31,500    
      Debtors
    23,000   
      Cash in hand
        375   
      Profit and Loss   Account
    82,500   
Total
7,16,125    
   Total
 7,16,125    
 
  The preference dividend was in arrears for 5 years.
 
  The Capital Reduction Scheme was submitted as under -
 
  i) Equity shares to be reduced to Rs.5 each.
 
  ii) All arrears of Preference dividend to be cancelled.
 
  iii) Each Preference share to be reduced to Rs. 75 and then exchanged for one new 12% Preference share of Rs. 50 each and five equity shares of Rs. 5 each.
 
  iv) The debit balance of Profit and Loss Account to be written off Plant/Machinery to be written-down by Rs. 47,500 and Goodwill is to be reduced as much as possible.
 
  v) The Debentures are to be redeemed at 5% premium. Holders being given the option to subscribe at par for new 12% Debentures.
 
  Approval of the court is obtained 1,00,000 new Equity Shares are issued as par (sufficient new Equity Shares are increased by increasing Authorised Shares Capital) payable in full on application. The whole issue is underwritten for 2% commission and the issue was fully taken up. Holders of old debentures of Rs. 50,000 exercised their option and subscribed for the new Debentures. Expenses in connection with the scheme amounted to Rs. 3,375 and were written off Journalise the transaction to record Reduction of scheme and set out new Balance Sheet of the country.
 
   
 
Q.6. The following are the Balance Sheets of Maths Ltd. and Sales Ltd. as on 31st March 1998.
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Rupees in Lakhs
Maths Ltd.
       Stats Ltd.
 
Rs.
Rs.
       Rs.
Rs.
Share Capital:        
12% Preference shares of Rs. 100 each fully paid
10
        -  
Equity shares of Rs. 10 each fully paid
25
       10  
Reserves and Surplus
-
35
      -
10
Shareholder's Funds
-
15
      -
40
   
50
 
50
Loan Funds:        
Secured Loans
30
   
-
Unsecured Loans
20
50
 
-
   
100
 
50
Represented by:        
Fixed Assets (W.D.V.)
-
50
     -
  4
Current Assets
400
       60  
Less: Current liabilities
350
50
     14
46
   
100
 
50
 
  On that day the following scheme was agreed upon
 
  a) Stats Ltd. took over the assets of Maths Ltd. for Rs. 5 crores.
 
  b) Stats Ltd. allotted 10 lakhs Equity Shares of Rs. 10 each at a premium of Rs. 40 per share in discharge of this takeover.
 
  c) The Directors of Stats Ltd. revalued the fixed assets of Maths Ltd. at Rs. 1.10 crores. The other assets were recorded at the values appearing in the Balance sheet of Maths Ltd.
 
  d) Maths Ltd. dealt with the shares received from Stats Ltd. as under -
 
  i) Allotment in full settlement To Secured lenders 60,000 shares To Unsecured lenders 40,000 shares To Preference Shareholders 20,000 shares
 
  ii) Allotment in partial settlement To Equity shareholders 80,000 shares
 
  iii) sale in Mumbai stock Exchange at Rs. 60 per share 8,00,000 shares.
 
  The sale proceeds were partially used to settle all the current liabilities.
 
   
 
  You are asked to
 
  i) Prepare the necessary leader accounts in the books of Maths Ltd.
 
  ii) Prepare the Balance sheet of Stats Ltd. on completion of the above scheme as at 31st March 1998.
 
   
 
Q.7. A, B, C are partners sharing profits and losses as 2:1:1. Their Balance Sheet as on 31st March, 1997 is as follows:
16
 
Liabilities
Rs
Assets
Rs
Creditors
50,000  
Cash
5,000  
Bills Payable
30,000  
Debtors
80,000  
A's capital
90,000  
Stock
60,000  
B's capital
60,000  
Investments
5,000  
C's capital
10,000  
Goodwill
15,000  
 
 
Other fixed Assets
75,000  
Total:  
2,40,000  
Total:  
2,40,000  


Stocks are over-valued by Rs. 10,000. Repairs of Rs. 10,000 three years early treated as capital expenditure. Depreciation @ 10% p.a. on diminishing balance was charged on the assets. Rs. 10,000 collected from debtors was not recorded in books, but taken away by 'C'.
The accounts are rectified and then AB Ltd. is formed to take over the business, 'B' is to take over the investments at Rs. 3,000. 'A' will discharge the creditors. Any dues to 'C' shall be paid off. 'C' is insolvent. Bill payable are paid by A and B in their profit sharing ratio.
Goodwill and stocks are valued at Rs. 10,000 and Rs. 44,580 respectively. Debtors are taken at 5% below book value.
Whereas other assets are taken at book values. AB Ltd. is to pay the firm by equity shares of Rs. 100 each. B takes 550 shares.Show Ledger accounts in the books of firm (use principle of Garner Vs. Murray).

 
   
 
Q.8. Free Fire Ltd. suffered loss of stock due to fire on 31st march, 1998. From the following particulars calculate claim to be made by the trader.
16
 
Particulars
1995
(Rs.)
1996
(Rs.)
1997
(Rs.)
Upto 31-3-1998
(Rs.)
Opening Stock
18,000   
27,000   
27,540   
28,872   
Purchases
1,00,850   
1,05,100   
1,21,620   
28,920   
Returns Outward
2,000   
4,300   
3,600   
2,10   
Opening Debtors
15,000   
18,000   
20,000   
16,000   
Carriage Inward
420   
264   
273   
682   
Cash and Cheques received during the year from Debtors
1,10,000   
1,26,800   
1,33,900   
62,900   
Returns Inward
2,000  
1,200   
2,100   
3,100   
 
   
 
  Accounts are closed every year on 31st December. Debtors as on 31st March 1998 were Rs. 10,000. It is usual practice of the company to value stock at 90% of its cost. The goods were insured by the company for Rs. 10,000 and undamaged goods by fire Rs. 3,800. Goods are sold only on credit basis. Average Gross Profit of the preceding three completed accounting years was maintained by the company during 1998. There is an average clause in the policy.
 
   
 
Q.9. Explain any four of the following:
16
  a) Importance of Accounting Standards
 
  b) Events occurring after Balance Sheet Date
 
  c) Disclosure of Accounting Policies
 
  d) Capital Redemption Reserve
 
  e) Accounting of Independent Branch
 
  f) Future Maintainable Profit.

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