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Financial Accounting
Time : 3 Hours
October - 1998
Marks : 100
 
Q.1

Following is the Balance Sheet of Comfortable Ltd. as on 31-3-1998

20

 
SOURCES
Rs. in lakhs
I
OWN FUND
  1   Share Capital:        
    (i) Equity Shares  
1.00
   
    (ii) 11% Redeemable Preference shares of Rs 100 each
Less : Calls in areas
(@ Rs. 20/- per share)
10% Non-Redeemable Preference shares
1.00
0.06
 


0.94 
1.00
   
  2 2. Reserves & Surplus :        
    (i)
(ii)



(iii)
(iv)
Share Premium Account
Capital Reverse Account
(Profit on Sale of Assets, available for
Distribution by way of
Dividend as per A/A of Co.)
General Reserve Account
P & L Account
0.06
0.36


0.40
0.20





1.02






3.96
 
           
Nil  
   3.96
  =====
               
II OWED FUND
       I Fixed Assets
2.60
     
       II Investments
0.30
     
      III Working Capital
1.06
        
    3.96
  =====



1)
2)

3)

4)
5)


1)

2)
3)
4)





1)
2)

Directors Resolved :

To issue reminders to 300 share holders in default.
To issue 2000 Equity Shares of Rs. 10/- each @ Premium of Rs. 5/- per share.
To redeem 11% Redeemable Preferences Shares @ Premium of Rs. 5/- per share.
To sell off all investments to redeem Preference Shares.
To forefeit shares on which calls are not received.

Accordingly :
200 share holders paid off their dues and remaining shares Forefited.
Sold off investments @ 90% of the costs.
Utilised divisible profit for redemption.
Redeemed the 11% Redeemable Preference shates of which share holders holding 20 shares were not traceable.

You are required to :

Pass necessary Journal entries to implement redemption.
Prepare Balance Sheet after redemption as per Schedule VI of the companies Act. 1956.

Q.2.

M/s Alpha Industries Limited incorporated with authorised capital of Rs. 5,00,000/- divide in Ordinary Shares of Rs.10/- each. Of these, 30,000 shares are issued on which Rs. 8/- per share is called up.

Its Trail Balance as on 31st March, 1998 is :

16

 

 
 

 

Dr.

Rs.
Cr. Rs.
Purchases
2,18,000   
Shapre Capital 2,40,000 
Salaries
62,000   
General Reserve 40,000
Furnitures
3,500   
Profit & Loss Account 25,000
Directors Fees
5,000   
Sales 3,28,000
Debtors
1,25,000   
Bank Loan 50,000
Insurance Premium
3,200   
Bills Payable 16,000
Interest on Loan
10,000   
Creditors for Goods 27,000  
Stocks
72,000   
Creditors for Expenses 32,000   
Prepaid Expenses
2,000   
Provision for Bad Debts 2,000 
Professional fees
10,000   
Interest on Investment 1,000   
Rent
2,500  
Unclaimed Dividends 2,000  
Land & Building
1,10,000   
Provision for Taxation (last year) 8,000
Plant & Machinery
75,000   
   
Audit Fees
5,000   
   
Repairs
3,200   
   
Printing & Stationary
1,100   
   
Cash on Hand
6,200   
   
Bills Receivable
7,500   
   
Advances
12,000   
   
Preliminary Exp.
6,000   
   
Bank
 
 31,800   
   

Total Rs   

7,71,000  

Total Rs.    

7,71,000
 

 

Q.3


















 

On Midnight of 16th and 17th April, 1998 a fire ablazed a shop of a wholsale trader destryoing all records and goods except worth Rs. 10,000/- The accountant was asked to compile data for Lodging claims with Insurance Company against Fire Policy of Rs. 50,000/- having Average Clause.

Poor Accountant ran from pillar to the post and could gather information
a) From the suppliers and customers Books and Statement of Accounts :
 

 
Suppliers
Rs.
Customers
Rs.
Opening Balance on 1-4-1998
Bills Payable/Receivable
Goods Returned
Discounts
Remisttances
Dues on the date of fire
 
68,000     
15,000     
9,000     
10,000     
95,000     
50,000     
1,20,000     
70,000     
25,000     
15,000     
1,05,000     
1,22,000     


b) From Bankers :

 i)
Current Account debited for Trading Expenses Rs. 15,000
 ii)
Current Account debited for cash Purchases Rs. 7000
 iii)
Current Account credited for cash Deposits against Counter Sales Rs. 25,000
 iv)
Stock Statement submitted to Bank on 1-4-1998 indicated Stock
(at inflated value of 10% above cost)
 
Rs. 66,000

 


c) From Proprietors Correspondences and Personal Diary :
 

i)
Goods sent on consignment from 1-4-1998 to the date of fire remaining unsold with Consignee (at cost + 10% Rs. 5,500
 ii)
Goods sent on approval from 1-4-1998 having no intimation received till the date of fire (at cost + 10%) Rs.2,200
 iii)
Goods are sold @ Gross Margin of 30%
 
 

Compute the Insurance Claim on the basis of data gathered as above.

16

Q.4

Wimco Limited furnishes the following information and requests you to find out -

Balance Sheet as on 31st March, 1998

Liabilities Rs. Assets Rs.
Share Capital   Goodwill 2,50,000
10,000 share of Rs. 100/- each 10,00,000  Property 2,88,000
General Reserves 3,00,000 Equipments 4,00,000
Profit & Loss Account 3,00,000 Investments 2,00,000
Workmen Fund for Compensation 1,40,000 Receivable 6,60,000
Loans 2,00,000 Cash & Banks 4,00,000
Current Liabilities 4,60,000 Capital Issues Expenses 1,50,000
      52,000 
Total : 24,00,000     Total : 24,00,000

Further Information

1) The Investments are earmarked to provide funds for replacement of equipments as and when required.
2) The provisions already deducted from assets are-
 

Depreciation on property
Depreciation on Equipments
Bad & Doubt Debts

 
  Rs. 72,000/-
  Rs. 80,000/-
  Rs. 60,000/-


3) The property is worth Rs. 6,00,000/- and equipments are worth Rs. 3,60,000/- other assets are valued properly.
4) The Liability for Workmen Compensation is expected at Rs. 1,00,000/-
5) The expected rate of return is @ 12%
6) The profits of past three years (before tax @ 50%) have been-
 

Year ended on 31-3-1998
                on 31-3-1997
                on 31-3-1996             

 
Rs. 5,60,000/-
Rs. 5,46,000/-
Rs. 6,20,000/-


7) The changes expected from ensuring year are :-

       a) Increase Rent for new office @ Rs. 18,000/- p.a.
       b) Increase in Directors fees @ Rs. 24,000/- p.a.
       c) Reduction in publicity expenses @ Rs. 36,000/- p.a.
8) For the purpose of valuation, year and capital employed should be considerd.

16

Q.5

M/s Kiran Traders Private Limited have Head Office at Fort and Branches at different places. The complany deals in a single product.

All goods are purchased at Fort office at price of Rs. 50/- per unit depatched to various braches at proforma invoice price of Rs. 60/- per unit. The branches are to sell goods at proforma invoice price.

The particulars in respect of Dombivili Branch are :-
 

 
On 1-4-1997
Rs.
On 31-3-1998
Rs.
Stock
Debtors
Petty Cash
 
500 Units           
Rs. 6,600/-            
Rs.500/-            
?                         
?                         
Rs.800/-                  

Transaction during year :
 

a) Relating to Goods :  
  Goods sent to Branch
Damaged at Branch due to heavy rain
Sales for Cash
Sales on credit
Goods Returned by Customers
Goods Returned to Fort
     10,000 units
         200 units
       1,800 units
       7,200 units
          700 units
          300 units
b) Receipt from Debtors
    (Net - after discount of Rs. 700/-)
 
      Rs. 4,19,300/-
c) Payment for Expenses at Branch :  
  Salary
Rent
Office expenses
Freight & Carriage
 
    Rs. 1000/-p.m.
    Rs.  250/-p.m.
    Rs.  500/- p.m.
@ Re. 1/- per unit sold.d)
d) Payment for Branch Expenses by Fort office :  
  Insurance Premium
Allocation of Expenses to Dombivili Branch
   i) Administration
   ii) Depreciation

 
   Rs. 300/-


   Rs. 6000/-
   Rs. 3000/-
 
e) Fort office received cheque for claim for damage stock    Rs. 8000/-
  Prepare :i) Branch Debtors Account     ii) Branch Stock Account   iii) Branch Adjustment Account
iv) Branch Expenses Account     v) Branch Cash Account      vi) Branch Profit & Loss Account
vii) Goods sent to Branch Account.
16
Q6

The following are the Balance Sheets of Fat. Ltd. and Thin Ltd. as at 31st December, 1997
 

 
Fat Ltd.
RS. in Lakhs
Thin Ltd.
RS. in Lakhs
Share Capital:
Equity Shares of 10 each fully paid
6% Preference Shares of Rs. 100 each fully paid

Reserves and Surplus :
Share Premium
Capital Reserve
Other Reserves

Secured Loans
Unsecured Loans
Loans from Fat Ltd.

Fixed Assets :
Cost
Less : Depreciation

Investments in Madhyam Ltd.
Loan to Thin Ltd.
Net Current Assets
 

50
--


50





65
20
15
---
150



60
---
5
85
150

20
15


35




30
10
5
5

85
 


25
30
--
30

85



10
15
 40


5
10
15






90
30






40
15

On that day Fat Ltd. absorbed Thin Ltd. on the following terms :
a) All the assets and liabilities of Thin Ltd. Other than Investmen Madhyam Ltd. are taken over for Rs. 40 lakhs.
b) Thin Ltd. to receive from Fat Ltd. 15% Debentures of Rs. 12 lakhs at par and Equity Shares of the par value of Rs. 10 each at a premium of Rs. 4 per share for the balance.
c) The preference Shareholders of Thin Ltd. are to be alloted the debentures received from Fat Ltd. and 10,000 Equity Shares of Fat Ltd. in full discharge of their interest in Thin Ltd.
d)The balance of Equity Shares received from Fat Ltd. and the Investments in Madhyam Ltd. are to be alloted to the Equity Shareholders of Thin Ltd.
e) The Directors of Fat Ltd. revalued the fixed assets taken over from Thin Ltd. at Rs. 41,00,000

You are asked to -
i) Show the relevant ledger accounts in the books of Thin Ltd.
ii) Show the Balance Sheet of Fat Ltd. after giving effect to the above transactions as at 31st Decmeber, 1997.

16
Q7

Following is the Balance Sheet of Hardluck Ltd. as on 3oth June, 1997.
 

Liabilities
Rs.
Assets
Rs.
5,000 7% Cumulative Preference Shares of Rs. 100 each
5,00,000  
Goodwill
75,000    
1,00,000 equity Shares Rs.10 each
10,00,000  
Patents
50,000    
7% Debentures of Rs.100 each (Secured on Land/Buildings)
 
5,00,000  
Land & Buildings
6,00,000    
Interest Payable to Debentures holders
17,500  
Plant & Machinery
5,50,000    
Loan From Directors
1,00,000  
Investments (at cost)
60,000    
Creditors
4,00,000  
Stock
4,30,000    
U.T.I. Bank Overdraft
2,50,000  
Debtors : Considered Good
4,00,000    
    Debtors : Considered Doubtful
30,000    
    Cash
2,500    
    Preliminary Expenses
80,000    
    Profit & Loss account
4,90,000    
Total Rs. :
27,67,500  
Total Rs. :
27,67,500     

Contingent Liabilities :
1) Claims for damages pending in the court totalling Rs. 50,000.
2) Arrears of Preference Dividend Rs. 14,000. The Board of Directors agreed to present the realistic picture of the State of Affairs of the company’s position and the following scheme of reconstruction was duly approved.
  a) The Preference Shares were to be reduced to an equal number of fully paid Preference Shares of Rs. 80 each and equity Shares to an equal number of fully paid Equity Shares of Rs. 2.50  each.
  b) All intangible assets, including patents to be written off.
  c) Stock to be revalued at Rs. 3,80,000 and Debtors considered Doubtful to be written off.
  d) Preference Shareholders agreed to waive half of the arrears of divididends and to receive Equity Shares in lieu of the balance.
  e) Debenture holders agreed to take over part of the security of the book value of Rs. 1,80,000 for  Rs. 2,50,000 in satisfaction of part of their claim and to provide further cash of Rs. 1,50,000  after deducting arrears of interest due to them on floating  charge of the rest of the assets.
  f) The contingent liability for claims for damages pending in the Court of Law materialised to the full extent. However, the company could recover Rs. 40,000 from those who  were responsible for  such damages and settle the rest by issuing Equity Shares.
  g) The Directors agreed to convert the loan into Equity Shares.

You are required to prepare :
    1) Capital Reduction Account
    2) The Balance Sheet After reconstruction.

16
Q8

Meduvada, Batatavada, And Idli were partners sharing Profits and losses in the ration of 5:3:2 respectively. The Trial Balance of the firm as at 31st March, 1998 was as under -
 

 
Dr.
Rs.
Cr.
Rs.
Machinery (at cost)
1,00,000    
------         
Stock
68,700    
------         
Debtors
62,000    
------         
Drawings : Meduvada
25,000   
------        
              Batatavada
  23,000    
------        
              Idli
17,000    
------        
Cash at ICICI Bank
89,300    
------        
Creditors
------           
64,700   
Bills Payable
------          
20,000   
Capitals : Meduvada
 ------         
68,000  
             Batatavada
------          
 45,000   
             Idli
------          
23,000   
Depreciation on Machinery
------          
40,000   
Profit for the year ended 31st March,1998
------          
1,24,300   
 
3,85,000     
3,85,000   


Before preparing the above Trial Balance, Interest on Capital accounts @ 10%p.a. on the balance standing to the credit of partners Capital Account at the beginning of the year was not provided.

On 1st April, 1998 they formed MLD Private Limited Company with an authorised share Capital of Rs. 2,00,000 in shares of Rs. 10 each to be divided classes to take over the business of partnership .

You are informed as under :
1) Machinery is to be transferred at Rs. 70,000
2) Shares in the company are to be issued to the partners, at par, in such numbers and in such classes as will give the partners, by reason of their share of Profit & Loss as they had in the partnership.
3) Before tranferring the business the partners wish to draw from the partnership profits to such an extent that the balance in ICICI Bank is reduced to Rs. 50,000. For this purpose, sufficient profit of the year is to be retained in the profit sharing ratio.
4) All assets and liabilitiesexpect machinery and ICICI Bank balance are to be transferred at their book values as at 31st March 1998.

You are required to prepare :
a) Capital Accounts showing all adjustments required to dissolve the partnership.
b) Realisation Account.
c) A statement showing the workings of the number of shares of each class to be issued by the company to each of the partners and a statement of additional drawings in cash.
d) Balance Sheet of MLD Pvt. Ltd. Company.

16
Q9

Write Short Notes on any Four of the following :

a) Contingent Liabilities b) Conditions for Redemption of Preference Shares c) Accounting of Independent Branches d) Evolution of Accounting Standard e) Features of Accounting Governement Grants f) Capital Reduction Account.

16

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