Corporate Accounting - IV Question Paper - 2007

IV Semester B.com Examination, April/May 2007
(Semester Scheme)
Corporate Accounting - II


Time: 3 Hours                                                                 Max. Marks : 90

Instruction:  1) Answers Should be written completely only in English. 
                        2) Answer all the Sections.

SECTION - A

Answer any 10 sub-questions. Each sub-question carries 2 marks.           (10x2=20)

1. a) Mention any two objects of Amalgamation of companies.
b) Distinguish netween External Reconstruction and Internal Reconstruction.
c) Mention the methods of calculating purchase consideration.
d) Give the journal entry for purchase consideration due, in the books of vendor company.
e) Mention any four ledger accounts opened in the books of Transferor company under absorption.
f) Mention the two forms of Internal reconstruction.
g) Mention any two circumstances when a company is compulsorily wound up.
h) What is the journal entry for the payment of liquidation expendes in the books of vendor company ?
i) Give any two examples of inter company owing.
j) When should calls in advance be returned to shareholders under liquidation ?
k) How would you treat liabilities not taken over by Transferee company under absorption ?
l) Mention the types of liquidation of companies.

SECTION - B

Answer any 5 of the following questions. Each question carries 5 marks.   (5x5=25)

2. Who are preferential creditors under the Companies Act ?

3. Explain briefly the legal formalities to be followed for the reduction of share capital

4. Mention any five ways of alteration of share capital.

5. Calculate the purchase consideration :
Total assets at book values = Rs. 5,00,000
Assets are taken over at 10% less than book values.
Total liabilities = Rs. 2,00,000
Liabilities not taken over = Rs. 50,000
Liquidation expenses of Rs. 5,000 is to be borne by the purchasing company.

6. Calculate liquidator's remuneration :
Balance of cash after paying preferential creditors = Rs. 2,10,000
Other unsecured creditors are Rs. 2,50,000
Liquidators remuneration is 5% on the amount paid to other unsecured creditors.

7. Wirte the journal entries for the settlement of purchase consideration in the books of purchasing companies from following details :
Purchase consideration + Rs. 5,00,000 which is settled by issue of equity shares os Rs. 100 each at premium of 25%.

8. Calculate the amount of preferential creditors :
Income Tax payable = Rs. 25,000
Salaries and Wages payable to 10 workers @ Rs. 10,000 p.m. for the last 3 months.
Remuneration to officers = Rs. 2,00,000

9. Calculate the amount of purchase consideration.
a) A cash payment of Rs. 50,000
b) Issue of 80,000 equity shares of Rs. 10 each fully paid ar Rs. 15 per share.
c) Issue of 50,000 preference shares of Rs. 10 each, rs. 6 per share paid up.
d) Issue of 30,000 debentures of Rs. 10 each at a discount of 10 %.

SECTION - C

Answer any 3 of the following questions. Each question carries 15 marks.     (3x15=45)

10. Unfortunate Ltd., went into voluntary liquidation with the following liabilities.
a) Secured creditors = Rs. 1,00,000
b) Preferential creditors = Rs. 3,000
c) Other unsecured creditors = Rs. 1,50,000
The expenses of liquidation amounted to rs. 1,250.

The liquidator is entitled to remuneration @ 3% on all assets realized including the securities held by secured creditors and 2% on the amounts distributed to unsecured creditors other than the preferential creditors. The various assets realised Rs. 2,10,000 (including Rs. 1,10,000 realized from securities).

Prepare the liquidator's Final Statement of Account.

11. Following is the Balance Sheet of P Co. Ltd. as on 31-3-06.
Rs. Rs.
Authorised capital : Patents 4,25,000
5000 Pref. shares of 5,00,000 Leasehold premises 65,400
Rs. 100 each
10,00,000 Debtors 38,250
Issued capital : Stock 27,500
3750 Pref. shares 3,75,000 Discount of 9,000
of Rs. 100 each issue of shares
2500 Equity shares 2,50,000 Preliminary Expenses 6,300
of Rs. 100 each
Sundry creditors 15,000 P&L A/c. 57,500
B.O.D 10,000 Cash 250
6,50,000 6,50,000

The company proved unsuccessful and the following scheme of reconstruction was approved :
a) Rs. 100 preference shares be reduced to an equal number of fully paid shares os Rs. 50 each.
b) Rs. 100 equity shares be reduced to an equal number of fully paid shares of Rs. 25 each.
c) The amount thus rendered available for the reduction of the assets to be apportioned as follows : Preliminary expenses, P&L A/c and discount on issue of shares to be written off entirely ; Rs. 15,400 off leasehold premises, Rs. 7,500 off the stock, 20% off plant and machinery and debtors and the balance available to be written off patents. Pass journal entries and prepare the Balance Sheet after reconstruction in the books of P Co. Ltd.

12. A Ltd. and B Ltd. carrying on similar business decided to amalgamation and a new company to be formed to take over the assets and liabilities of both companies and it is agreed that fully paid equity shares of Rs. 100 each shall be issued by the new company to the value of the net assets of each of the old companies :

Balance Sheet as on 31-3-06
Liabilities A Ltd. B Ltd. Assets A Ltd. B Ltd
Rs. Rs. Rs. Rs.
Share capital of 25,000 20,000 Goodwill 2,500 1,000
Rs. 50 each
General Reserve 10,000 --- Land & 8,500 5,000
building
P & L A/c 1,500 --- Plant & 12,000 8,000
Machinery
Sundry creditors 2,000 4,000 Furniture 2,500 3,750
Bills payable 2,000 --- Stock 5,000 3,750
B.O.D. --- 4,000 Debtors 6,000 3,500
Cash 4,000 150
P & L A/c --- 2,850
40,500 28,000 40,500 28,000

All tangible assets are taken over at book values and goodwill of A Ltd. is to be valued at Rs. 6,000, while that of B Ltd. was valueless. You are required to compute the purchase consideration and present the Balance Sheet of the new company.

13. On 31-3-06 the Balance Sheet of C Ltd. was as follows :
Liabilities Rs. Assets Rs.
25000 Equity Shares 2,50,000 Goodwill 12,500
of Rs. 10 each
General Reserve 1,25,000 Other Fixed 87,500
Assets
Current liabilities 75,000 Bank 25,000
Other Current 3,25,000
Assets
4,50,000 4,50,000

C Ltd. is to be absorbed by D Ltd. on following terms :
a) D Ltd. to take over the assets (Excluding Bank) and the liabilities at 10 % less than book values.
b) The consideration is to be discharged by D Ltd. in the form of equity shares os Rs. 10 per share at a premium of Rs. 5 per shares.
Show ledger accounts in the books of C Ltd. and give the journal entries in the books of D Ltd.

14. On 31-3-06 the Balance Sheet of Z Ltd. was as under :

Liabilities Rs. Assets Rs.
Authorised & Issued capital :
1500 6% Pref. shares 37,500 Goodwill 50,000
of Rs. 25 each.
4000 Equity shares 2,00,000 Sundry Assets 1,25,000
of Rs. 50 each
Sundry creditors 37,500 Cash 5,000
P & L A/c 95,000
2,75,000 2,75,000
Preference dividend were in arrears for 2 years.
A scheme of reconstruction agreed upon was as under :

a) A new company was to be formed called 'New Z Ltd.' with an authorised capital of Rs. 2,50,000 all in equity shares of Rs. 100 each.

b) One equity share of Rs. 100 each fully paid in the new company to be issued in exchange for every 3 preference shares in old company.

c) One equity share of Rs. 100 each fully paid in the new company to be issued in exchange for every 4 equity shares in the old company.

d) Arrears of preference dividend to be cancelled.

e) Creditors to be taken over by the new company and immediately paid off.

f) The new company to issue remaining equity shares to public.

g) The new company to take over old company's assets, subject to revaluation of sundry assets at Rs. 1,32,500. Assuming that the public subscription was fully responded, pass journal entries in the books of new company and prepare its Balance Sheet.