P Ltd. acquires the business of V Ltd. whose Balance …premieracademy.in/download/29_Crash...
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IPC-CRASH COURSEGROUP-I ACCOUNTING
FINANCIAL STATEMENTS OF A COMPANY
PREPARATION OF STATEMENT OF P&L
1. The following items appear in the Trail Balance of BHARAT Ltd. as at 31st March 2012:
Rs.
1. Revenue from Operations 24,00,000
2. Other Income 1,00,000
3. Expenses other than Interest 3,80,000
4. General Reserve (as on 1st April 2011) 1,30,000
5. Profit and Loss Account (as on 1.4.2011) RS. 3,28,000. The recommendation of the company’s Board of Directors include equity dividend of 15% (Including Interim Dividend of Rs. 80,000). Transfer Debenture Redemption Reserve @ 50% of Debentures. Transfer to general reserve at 15%.
(assume corporate tax 30% & corporate dividend tax at 20%)
6. 12%, 10,000 Debentures of Rs. 100 each fully paid up
7. 14%, 5,000 Preference Shares of Rs. 100 each fully paid up
8. 6,000 Equity Shares of Rs. 100 each
9. 8,000 Equity Shares Rs. 100 each, Rs 25 paid up
Required: Show the above items in Profit and Loss Statement and Balance Sheet
Required: Show the above items in Profit and Loss Statement and Balance Sheet
2. Provisional balance sheet of P Ltd as at 31st March 2014 was as under:
Liabilities Rs. Assets Rs.
Share Capital Fixed assets (at
cost less
depreciation)
7,00,000
50,000 equity
shares of Rs.10
each, Rs.7 per
share called up
3,50,000 Cash and bank
balances
2,00,000
Less: Calls in
arrear on 10,000
shares at Rs.2 per
share
(20,000) Other current
assets
6,00,000
3,30,000
Add:Calls in
advance on 40,000
1,20,000 4,50,000
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shares at Rs.3 per
share
20,000, 10%
redeemable
preference shares
of Rs.10 each, fully
paid
2,00,000
Reserves and
Surplus
General Reserve 3,00,000
Profit and Loss
account
2,70,000
Trade payables 2,80,000
15,00,000 15,00,000
Calls in arrear are outstanding for 6 months. Calls in advance were also received 6 months back. Interest at 10% p.a on calls in advance and 12% p.a on calls in arrears are allowed/charged.
The Board Of Directors have recommended that:
i. Dividend for the year 2013-2014 be allowed at 20% on equity shares.
ii. Money on calls in advance be refunded. Calls in arrears with interest received.
iii. The preference shares which are redeemable at a premium of 10% any time after 31st
March, 2014 may be redeemed by issue of 10% debentures of Rs.100 in cash.
Show Journal entries to give effect to the above proposals including payment and receipt of cash and redraft the statement of Profit and Loss and Balance Sheet of P Ltd.
3. On 31st March, 2015 Bose and Sen Ltd provides to you the following ledger balances after preparing its Profit and Loss account for the year ended 31-03-2015
Credit balances
Particulars RsEquity share capital, fully paid shares of Rs.10 each
70,00,000
General Reserve 15,49,100Loan from State Finance Corporation 10,50,000(Secured by hypothecation of Plant and Machinery repayable within one year Rs.2,00,000)Loans Unsecured (Long term) 8,47,000Sundry creditors for goods and expenses(Payable within 6 months)
14,00,000
Profit and Loss account 7,00,000Provision for tax 3,25,500Proposed dividend 4,20,000Provision for dividend distribution tax 71400
133,63,000
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Debit balancesCalls in arrear 7000Land 14,00,000Buildings 20,50,000Plant and Machinery 36,75,000Furniture and Fixture 3,50,000Inventories:Finished goods 14,00,000 Raw material 3,50,000Trade receivables 14,00,000Advances:Short term 2,98,900Cash in hand 2,10,000Balances with bank 17,29,000Preliminary expenses 93,100Patents and trademarks 4,00,000
133,63,000 The following additional information is also provided in respect of the above transactions:
i. 4,20,000 fully paid up equity shares were allotted as consideration for land and buildingii. Cost of building –Rs.28,00,000
iii. Cost of Plant and Machinery-Rs.49,00,000
Cost of Furniture and Fixtures-Rs.4,37,500
iv. Trade receivables for Rs.3,80,000 are due for more than 6 monthsv. The amount of balances with bank includes Rs.18,000 with a bank which is not a scheduled
bank and the deposits of Rs.5,00,000 are for a period of 9 monthsvi. Unsecured loan includes Rs.2,00,000 from a bank and Rs.1,00,000 from related parties
You are required to give previous year figures and prepare the Balance Sheet as per Schedule III.
4. Sumedha Ltd took a loan from bank for Rs.10,00,000 to be settled within 5 years in 10 half yearly instalments with interest.First instalment is due on 30.09.2013 of Rs.1,00,000.Determine how the loan will be classified in the preparation of Financial Statements of Sumedha Ltd. for the year ended 31st March 2013 according to Schedule III of the Companies Act, 2013.
BONUS ISSUE
1. Following is the balance sheet of Happy Ltd as on Mar 31,2011Balance sheet as on 31-3-2011
Liabilities Rs Assets RsAuthorised Share Capital:2,00,000 Equity shares of Rs 10
eachIssued and subscribed share
capital2,00,000 Equity shares of Rs 10
each, Rs 7 paid up Reserves and Surplus:Capital reserve (profit on sale of
Assets)Securities Premium (includes Rs 20000 received
otherwise than in cash)General reserveP/L A/c
20,00,000
14,00,000
1,30,000
90,000
2,40,0005,20,000
Fixed AssetsInvestmentsCurrent Assets
20,00,000 4,40,0005,60,000
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Secured Loans:12% Fully convertible debentures
@ Rs 100 eachCurrent liabilities
4,00,000
2,20,00030,00,000 30,00,000
On Apr 01,2011 company has made final call @Rs 3 on 2,00,000 equity shares and received complete call money by Apr 30,2011.The company wants to issue bonus shares to its shareholders @ 1 share for every 4 shares held.
12 percent debentures are convertible in to equity shares of Rs 10 each fully paid on June 01,2011 .Necessary resolutions were passed and requisite legal requirements were complied with. For issue of bonus shares it was decided that reserves and surplus, other than P&L a/c should be first capitalised.
Required: Prepare Balance Sheet as on May 15,2011 , date on which all the formalities related to the issue of bonus shares completed. For the purpose of preparation of Balance Sheet assume that, Balance Sheet items as on Mar 31,2011 which are not affected by issue of bonus shares as above, remains unchanged as on May 15,2011. Also pass necessary journal entries in the books of the company related issue of bonus shares, for the period from Apr 01,2011 to May 15,2011.
2. The paid up capital of Sunshine Ltd. is Rs. 10,00,000 consisting of 60,000 equity shares of Rs.10 each fully paid up and 50,000 equity shares of Rs.10 each , Rs. 8 paid up .It has Rs.40,000 in Securities Premium account ,Rs. 2,00,000 in Profit and Loss account (Cr.) Rs. 3,00,000 in General Reserve and Rs. 60,000 in Capital Redemption Reserve account.
By way of bonus dividend the partly paid shares are converted into fully paid up shares and the holders of fully paid shares are also allotted fully paid –up bonus shares in the same ratio.
Pass journal entries showing separately the two types of bonus issues stated above. It is desired that there would be minimum reduction in free reserves.
DIVIDEND
1. Due to inadequacy of profits during the year ended 31st March,2015, XYZ Limited proposes to declare 10% dividend out of general reserves. From the following particulars, ascertain the amount that can be utilized from general reserves, according to the Companies(Declaration of dividend out of Reserves) Rules, 2014:
Particulars Rs.17,500 9% Preference shares of Rs.100 each, fully paid
17,50,000
8,00,000 equity shares of Rs.10 each, fully paid
80,00,000
General Reserves as on 1.4.2014 25,00,000Capital Reserves as on 1.04.2014 3,00,000Revaluation Reserves as on 1.04.2014 3,50,000Net profit for the year ended 31st March 2015
3,00,000
Average rate of dividend during last 3 years has been 12%
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MANAGERIAL REMUNERATION
1. The following extract of Balance Sheet of X Ltd was obtained:Balance Sheet (Extract) as on 31st March, 2015
Liabilities Rs.Authorised Capital:20,000, 14% preference shares of Rs.100 20,00,0002,00,000 equity shares of Rs.100 each 200,00,000
2,20,00,000Issued and Subscribed Capital:15,000, 14% preference shares of Rs.100 each fully paid
15,00,000
1,20,000 equity shares of Rs.100 each, Rs.80 paid up
96,00,000
Share Suspense a/c 20,00,000Reserves and SurplusCapital Reserves (Rs.1,50,000 is revaluation reserve)
1,95,000
Securities Premium 50,000Secured Loans15% Debentures 65,00,000Unsecured Loans:Public Deposits 3,70,000Cash credit loan from SBI (Short term) 4,65,000Current LiabilitiesTrade Payables 3,45,000Assets:Investment in shares, debentures etc. 75,00,000Profit and Loss account 15,25,000
Share suspense account represents application money received on shares, the allotment of which is not yet made.You are required to compute effective capital as per provisions of Schedule V. Would your answer differ if X Ltd is an investment company?
2. The following is the Profit and Loss a/c of Mudra Ltd:
Particulars Rs. Particulars Rs.To Salaries and wages 1,92,000 By Gross profit 10,15,200To Bonus for 2013-2014
5000 By premium on issue of shares and debentures
50,000
To interest on debentures
12,000 By profit on sale of forfeited shares
5000
To interest on unsecured loan
6000 By Profit on sale of building (Cost-Rs.2
90,000
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lakhs, W.D.V Rs.1.3 lakhs)
To repairs to -Movable property-immovable property
10002000
By bounties and subsidies received from Govt.
60,000
To contributions 25000To Depreciation 82,000To Compensation for breach of contract
1000
To insurance premium against the risk or meeting liability on a/c of compensation for breach of contract
5000
To loss on sale of investments
5000
To loss on sale of machinery (Cost Rs.2,00,000 Sale proceeds Rs.1,10,000 W.D.V Rs.1,30,000)
20,000
To Expenditure on Scientific Research
20,000
To Provision for income tax
1,60,000
To Provision for doubtful debt
7,500
To Directors’ fees 5000To Ex-gratia payments to employees
2,200
To Balance c/d 6,69,50012,20,200 12,20,200
To proposed dividend 1,60,000 By profit for the year 2014-2015
6,69,500
To Corporate dividend tax
16,000
To bal c/d 4,93,500
Estimated liability on account of bonus in respect of 2014-2015 in accordance with the payment of Bonus Act is Rs.10,000
Depreciation on fixed assets as per Schedule II of the Companies Act, 2013 was 67,000.You are required to calculate the maximum limits of the managerial remuneration as per Companies Act, 2013.
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CASH FLOW STATEMENTS
1. The Balance Sheets of Z Ltd. as on 31st March, 2012 and 2013 are given below:
Liabilities 31.03.2012
Rs.
31.03.2013
Rs.
Assets 31.03.2012
Rs.
31.03.2013
Rs.
Share Capital
Capital Reserve
General Reserve
Profit and Loss A/c
10% Debentures
Current Liabilities
Provision for Income Tax
Proposed Dividend
Unpaid Dividend
3,00,000
__
1,70,000
60,000
2,00,000
1,20,000
90,000
30,000
__
4,00,000
10,000
2,00,000
75,000
1,40,000
1,30,000
85,000
36,000
4,000
Fixed Assets:
Less: Depreciation
Trade Investment
(in shares)
Cash & Bank Bal.
Other Current Assets
Preliminary Exp.
8,00,000
(2,30,000)
1,00,000
80,000
2,00,000
20,000
9,50,000
(2,90,000)
80,000
30,000
3,00,000
10,000
9,70,000 10,80,000 9,70,000 10,80,000
During the year 2012 – 2013, the Company
(i) Sold one machine for Rs.25,000 the cost of which was Rs.50,000 and the depreciation provided on it was Rs.21,000.
(ii) Provided Rs.95,000 as depreciation.
(iii) Redeemed 30% of the Debentures at Rs 103 as at 31.3.2013.
(iv) Sold some Trade Investments at a profit which was credited to Capital Reserve.
(v) Decided to value stock at cost where as previously the practice was to value stock at cost less 10%. The stock according to books on 31.3.2012 was Rs.54,000. The stock on 31.3.2013 was correctly valued at Cost Rs.75,000.
(vi) Decided to write off Fixed Assets costing Rs. 14,000 (depreciated).
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2. From the following balance sheet and information, prepare Cash Flow Statement of Ryan Ltd. for the year ended 31st March,2013
Balance Sheets
Liabilities 31.03.2013 31.03.2012 Assets 31.03.2013 31.03.2012Equity Share Capital
6,00,000 5,00,000 Land and building
1,50,000 2,00,000
10% Redeemable Preference
- 2,00,000 Plant and machinery
7,65,000 5,00,000
Capital Redemption Reserve
1,00,000 - Investments 50,000 80,000
Capital Reserve
1,00,000 - Inventory 95,000 90,000
General Reserve
1,00,000 2,50,000 Bills receivable
65,000 70,000
Profit and loss a/c
70,000 50,000 Sundry debtors
1,75,000 1,30,000
9% Debentures
2,00,000 ---- Cash and bank 65,000 90,000
Sundry creditors
95,000 80,000 Preliminary expenses
10,000 25,000
Bills payable 20,000 30,000 Voluntary separation payments
1,25,000 65,000
Liabilities for expenses
30,000 20,000
Provision for taxation
95,000 60,000
Proposed dividend
90,000 60,000
15,00,000 12,50,000 15,00,000 12,50,000
a. A piece of land has been sold out for Rs.1,50,000 (Cost :Rs.1,20,000) and the balance land was revalued. Capital Reserve consisted of profit on sale and profit on revaluation
b. On 1st April 2012 a plant was sold for Rs.90,000 (Original Cost Rs.70,000 and W.D.V Rs.50,000) and debentures worth Rs.1,00,000 was issued at par as part consideration for plant of Rs. 4.5 lakhs acquired.
c. Part of the investments (Cost Rs.50,000) was sold for Rs.70,000
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d. Pre-acquisition dividend received Rs.5000 was adjusted against cost of investment.
e. Directors have proposed 15% dividend for the current year
f. Voluntary separation cost of Rs.50,000 was adjusted against general reserve.
g. Income tax liability for the current year was estimated at Rs.1,35,000
h. Depreciation at 15% has been written off from Plant account but no depreciation has been charged on Land and Building a/c
3. Given below is the Statement of Profit and Loss of ABC Ltd. and the relevant Balance Sheet information:
Statement Of Profit and Loss of ABC Ltd for the year ended 31st December, 2013
Particulars Rs.in lakhsRevenueSales 4150Interest and dividend 100Stock adjustment 20Total (A) 4270Expenditure:Purchases 2400Wages and salaries 800Other expenses 200Interest 60Depreciation 100Total (B) 3560Profit before tax(A-B) 710Tax Provision 200Profit after tax 510Balance of Profit and Loss account brought forward
50
Profit available for distribution 560Appropriations:Transfer to general reserve 200Proposed dividend 300Dividend Distribution Tax 30Total 530Balance 30
Relevant Balance Sheet Information:
Particulars 31.12.2013 31.12.2012 Trade receivables 400 250Inventories 200 180Trade payables 250 230Outstanding Wages 50 40Outstanding expenses 20 10Advance Tax 195 180
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Tax Provision-Assessed tax liability
200 180
Compute cash flow from operating activities using direct method and indirect method
4. The Summarised Balance Sheets of XYZ Ltd. As at 31.3.2010 and 31.3.2011 are given below
Liabilities 31.03.2010
Rs
31.03.2011
Rs.
Assets 31.03.2010
Rs.
31.03.2011
Rs.
Preference share capital
Equity Share Capital
Securities Premium
Capital Redemption Reserve
General Reserve
P&L account
Current Liabilities
Proposed dividend
Provision for tax
4,00,000
4,00,000
40,000
NIL
2,00,000
1,30,000
6,40,000
1,60,000
1,50,000
2,00,000
6,60,000
30,000
1,00,000
1,20,000
1,75,000
9,00,000
2,10,000
1,80,000
Plant and machinery
Long term investment
Goodwill
Current Assets
Short term investments
( less than 2 months)
Cash at bank
Preliminary expenses
7,00,000
3,20,000
-
9,10,000
50,000
1,00,000
40,000
8,20,000
4,00,000
30,000
11,41,000
84,000
80,000
20,000
21,20,000 23,75,000 21,20,000 23,75,000
Additional information:
During the year 2011 the company:
i. Preference share capital was redeemed at a premium of 10% partly out of proceeds issue of 10,000 equity shares of Rs.10, each issued at 10% premium and partly out of profits otherwise available for dividends.
ii. The company purchased plant and machinery for Rs. 95,000.It also acquired another company stock Rs. 25,000 and plant and machinery Rs. 1,05,000 and paid Rs. 1,60,000 in equity share capital for the acquisition.
iii. Foreign exchange loss of Rs. 1600 represents loss in value of short term investment.
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iv. The company paid tax of Rs.1,40,000Prepare Cash flow statement.
AMALGAMATION OF COMPANIES
1. Let us consider the draft balance sheet of X Ltd as on 31st March,2011
Liabilities Rs(‘000) Assets Rs(‘000)Share CapitalEquity shares of Rs.10 each
7500 Land and Buildings 5000
14% Preference shares of Rs.100 each
2500 Plant and machinery 4500
General reserve 1250 Furniture 105012% Debentures 4000 Investments 500Trade payables and other current liabilities
2000 Inventory 2300
Trade receivables 2400Cash and bank balance
1500
17,250 17,250
Other information:i. Y Ltd takes over X Ltd on 10th April, 2011
ii. Debentureholders of X Ltd are discharged by Y Ltd at 10% premium by issuing 15% own debentures of Y Ltd.
iii. 14% Preference shareholders of X Ltd are discharged at a premium of 20% by issuing necessary number of 15% preference shares of Y Ltd.(Face value Rs. 100 each)
iv. Intrinsic Value per share of X Ltd is Rs.20 and that of Y Ltd Rs.30.Y Ltd will issue equity shares to satisfy the equity shareholders of X Ltd. on the basis of intrinsic value.
Compute the purchase consideration
2. P Ltd. acquires the business of V Ltd. whose Balance Sheet as at 31st March 2012 was as under:
Liabilities Rs Assets Rs
6% Preference Share Capital (Rs 100)Equity Share Capital (Rs 100)Statutory ReservesProfit & Loss A/c6% DebenturesInterest outstanding on aboveWorkmen’s compensation Reserve
4,00,0008,00,000
78,40071,600
2,00,00012,000
8,000
GoodwillTangible Fixed AssetsStockBook DebtsBills ReceivableCash at BankUnderwriting Commission
2,00,00010,50,0001,50,0001,55,000
25,00070,00040,000
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(Expected liability Rs 5,000)Trade CreditorsBills Payable
1,00,00020,000
16,90,000 16,90,000
Prior to acquisition, V Ltd decided to declare and pay an equity dividend of 4% and preferences dividend.
P Ltd. was to take over all assets (except cash) and liabilities (except for interest due on debentures) and to pay the following amounts.
(i) Rs 2,00,000 7% Debentures (Rs 100 each) in P Ltd. for the existing debentures in V Ltd.; for the purpose, each debenture of P Ltd. is to be treated as worth Rs 105.
(ii) For each preference share in V Ltd. Rs 10 in cash and one 9% preference share of Rs 100 each in P Ltd.
(iii) For Each equity share in V Ltd. Rs 20 in cash and one equity share in P Ltd. of Rs 100 each at Rs 140.
(iv) Expenses of liquidation of V Ltd. are to be reimbursed by P Ltd. to the extent of Rs 10,000. Actual expenses amounted to Rs 12,500.
P Ltd. valued Tangible Fixed Assets at Rs 12,20,000.
V Ltd. owed P Ltd. Rs 60,000 for the purchases of stock from P Ltd. which made a profit of 20% on cost. Four fifth of such stock were sold till 31.3.2011. All Bills Receivables of V Ltd. were drawn upon P Ltd. the bills amounting to Rs 10,000 have already been discounted with the Bank.
Required: Prepare Journal of V Ltd. and P Ltd. Also show Realization Account, Cash at Bank Account and Equity shareholders’ Account (Assume Corporate Dividend Tax @ 10%)
3. Consider the following summarized balance sheets of X Ltd and Y Ltd.
Balance sheet as on 31st March, 2012
(Rs. In 000’s)
Liabilities X Ltd Y Ltd Assets X Ltd Y LtdEquity share capital (Rs.10 each)
5000 3000 Land and building
2500 1550
14% Preference share capital(Rs.100 each)
2200 1700 Plant and Machinery
3250 1700
General Reserve
500 250 Furniture and Fittings
575 350
Export profit reserve
300 200 Investments 700 500
Investment allowance reserve
100 Inventory 1250 950
Profit and Loss
750 500 Trade receivables
900 1030
13% 500 350 Cash and 725 520
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Debentures(Rs.100 each)
bank
Trade creditors
450 350
Other current liabilities
200 150
9900 6600 9900 6600
X Ltd takes over Y Ltd. on 1st April 2012.X Ltd discharges the purchase consideration as below:
i. Issued 3,50,000 equity shares of Rs.10 each at par to the equity shareholders of Y Ltd.
ii. Issued 15% preference shares of Rs.100 each to discharge the preference shareholders of Y Ltd at 10% premium
The debentures of Y Ltd will be converted into equivalent number of debentures of X Ltd.
The statutory reserves are required to be maintained for 2 more years.
Show the balance sheet of X Ltd after amalgamation on the assumption that:
a. The amalgamation is in the nature of purchase b. The amalgamation is in the nature of merger.
4. The following is the summarised Balance Sheets of A Ltd and B Ltd as on 31.3.2012(Rs. In thousands)
Particulars A Ltd B LtdLiabilitiesShare CapitalEquity shares of Rs.100 each fully paid
2000 1000
Reserves 800 ----10% Debentures 500 ----Loan from banks 250 450Bank Overdraft ---- 50Trade payables 300 300Proposed dividend 200 ----Total 4050 1800AssetsTangible assets/fixed assets 2700 850 Investments 700 ----Trade receivables 400 150Cash at bank 250 ---Accumulated losses --- 800Total 4050 1800
B Ltd has acquired the business of A Ltd.The following scheme of merger was approved.
1. Banks agreed to waive off the loan of Rs.60,000 of B Ltd.2. B Ltd will reduce its shares to Rs.10 per share and then consolidate 10 such shares into
one share of Rs.100 each(new share)
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3. Shareholders of A Ltd .will be given one share (new) of B Ltd.in exchange of every share in A Ltd.
4. Proposed dividend of A Ltd will be paid after merger to shareholders of A Ltd.5. Trade payables of B Ltd includes Rs.100 thousands payable to A Ltd.
Pass necessary entries in the books of B Ltd. and prepare balance sheet after merger.
5. The following is the summarised Balance Sheet of A Ltd as at 31st March 2012:
Liabilities Rs. Assets Rs.8000 equity shares of Rs.100 each
8,00,000 Building 3,40,000
10% debentures 4,00,000 Machinery 6,40,000Loan from A Ltd 1,60,000 Inventory 2,20,000Trade payables 3,20,000 Trade receivables 2,60,000General Reserve 80,000 Bank 1,36,000
Goodwill 1,30,000Share issue expenses 34,000
17,60,000 17,60,000
B Ltd agreed to absorb A Ltd on the following terms and conditions:a. B Ltd would take over all assets, except bank balance at their book values less 10%.
Goodwill is to be valued at 4 year’s purchase of super profits, assuming that the normal rate of return be 8% on combined amount of share capital and general reserve.
b. B Ltd is to take over trade payables at book value.c. The purchase consideration is to be paid in cash to the extent of Rs.6,00,000 and the
balance in fully paid equity shares of Rs.100 each at Rs.125 per share.The average profits is Rs.124,400.The liquidation expenses amounted to Rs.16,000.B Ltd sold prior to 31st March, 2012 goods costing Rs.1,20,000 to A Ltd for Rs.1,60,000.Rs.1,00,000 worth of goods are still in inventory of A Ltd on 31st March 2012.Trade payables of A Ltd include Rs.40,000 still due to B Ltd.Show the necessary ledger accounts to close the books of A Ltd. and prepare the balance sheet of B Ltd as at 1st April 2012 after the takeover.
6. Given below is the balance sheet of X ltd. as at 31st March 2012 at which date the Company was taken over by T Ltd.
Liabilities Rs Assets Rs
12% Pref. Shares of Rs 100 each 1,00,000 Land & Building 2,00,000
Equity SHARES OF Rs 10 each 2,00,000 Plant & Machinery 1,00,000
Reserves & Surplus 50,000 Stock 2,00,000
12% Debentures 1,00,000 Debtors 50,000
Current Liabilities 1,50,000 Cash & Bank Balance 43,600
Preliminary Expenses 6,400
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6,00,000 6,00,000
Terms of Absorption:
a) X Ltd. is to declare and pay dividend @ 12% on shares prior to absorption.
b) The value of Land & Building to be increase by Rs 50,000, Stock to be increased to Rs 2,20,000 and Debtors at their book value subject to an allowance of 5% to cover doubtful debts, Goodwill to be valued at Rs 7,500.
c) Expenses of liquidation of X Ltd. are to be reimbursed by T Ltd. to the extent of Rs 4,000. The actual expenses amounted to Rs 5,000.
d) Tulsian Ltd. is to issue such an amount of fully paid 15% Debentures at 96 per cent as is sufficient discharge 12% debentures in X Ltd. at a premium of 8%.
e) 12% Preference Shareholders of X Ltd. to be discharged at 10% premium by issuing 15% preference shares (Rs 100 each) of the transferee company at 12% discount to be extent of 80% and balance in cash.
[Assume Corporate Dividend Tax @ 10%]
Required: Calculate the Purchase consideration if:
Equity Shareholders to be allotted 4 Equity Shares of Rs 10 each., Rs 8 paid up at a premium of Rs 3 per share for every 5 shares held in X Ltd. In addition necessary cash to be paid to be Equity Shareholders as is required to adjust the rights of equity shareholders of X Ltd. in accordance with the intrinsic value of the shares of X Ltd.
INTERNAL RECONSTRUCTION
1. The Shareholders of Sunrise Ltd decided on a corporate restricting exercise necessitated due to economic recession and a slump in business. From the audited prepare:
(i) Balance Sheet after the completion of the restricting exercise.
(ii) The Capital Reduction Amount,
(iii) The Cash Account of the entity.
Balance Sheet of Sunrise Ltd as on 31-03-2010
Liabilities Rs Assets RsShare Capital
30,000 Equity Shares (Rs 10 each)
40,000 8% Cumulative Preference Shares (Rs 10 each)
Reserves and Surplus
Securities Premium Account
Profit & Loss Account
Secured Borrowings:
9% Debentures (Rs 100) 1,20,000
Accrued Interest
3,00,000
4,00,000
10,000
(1,38,400)
Fixed Assets
Trade Marks and Patents
Goodwill at cost
Freehold Land
Freehold Premises
Plant and Equipment
Investment (Market to Market)
Current Assets
Inventories:
Raw materials and packing
Materials 60,000
1,10,000
36,100
1,20,000
2,44,000
3,20,000
64,000
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5,400
Current Liabilities
Creditors
Deferred Vat Payable
Temporary Bank Overdraft
1,25,400
1,20,000
50,000
2,23,100
Finish goods 16,000
Trade receivable76,000
1,20,000
10,90,100 10,90,100
Note: Preference Dividends are in arrears for 4 years.
The scheme of reconstruction that received the permission of the Court was on the following lines:
(1) The Authorized capital of the Company to be re-fixed at Rs 10 Lakhs (preference Capital Rs 3 Lakhs and Equity Capital Rs 7 Lakhs both Rs 10/- per share each).
(2) The Preference shares are to be reduced to Rs 5 each and equity share reduced by Rs 3 per share. Post reduction, both classes of shares to be consolidated into Rs 10 shares.
(3) Trade Investments are to be liquidated in the open market
(4) One fresh equity share of Rs 10 to be issued for every Rs 40 of preference dividends in arrears (ignore taxation).
(5) The Securities premium is to be fully utilized to meet the reconstruction programme.
(6) The debenture holder took over freehold land at Rs 2,10,000 and settled the balance after adjusting their dues.
(7) Unprovided contingent Liabilities were settled at Rs 54,000 and a pending insurance claim receivable settled at Rs 12,500 on conditions that claim will be immediately settled.
(8) The Intangible assets were all the written off along with Rs 10,000 worth obsolete packing material and 10% of the Receivables.
(9) Remaining cash available as a result of the above transactions is to be utilized to pay off the bank overdraft to that extent.
(10) The equity shareholder agree that they who bring in cash to liquidate the balance outstanding on the overdraft account and also agree the sufficient funds will be brought in to bring up the net working capital, after completing the re-structuring exercise, to Rs 2 lakhs. The Equity Shares will be issued at par for this purpose.
2. Green Limited had decided to reconstruct the Balance Sheet since it has accumulated huge losses. The following is the Balance Sheet of the Company on 31.3.2012 before reconstruction:
Balance Sheet of Green Limited as at 31.3.2012
Liabilities Rs Assets Rs
Share Capital:Authorized:1,50,000 Equity Shares of Rs. 50 75,00,000
Fixed Assets:
Goodwill
Building
20,00,000
10,00,000
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eachSubscribed 50,000 Equity Shares
of Rs. 50 each1,00,000 Equity Shares of Rs. 50
each, Rs. 40 per share paid upSecured Loans:12% First Debentures12% Second DebenturesCurrent Liabilities:Sundry Creditors
Plant
Computers
Investments
Current Assets
Profit and Loss A/c (Loss)
10,00,000
25,00,000
Nil
Nil
20,00,000
25,00,000
40,00,000
5,00,00010,00,000
5,00,000
85,00,000 85,00,000
The Following is the interest of Mr. X and Mr. Y in Green Limited:
Mr. XRs
Mr. YRs
12% First Debentures
12% Second Debentures
Sundry Creditors
Fully paid up Rs. 50 shares
Parly paid shares (Rs. 40 paid up)
3,00,000
7,00,000
2,00,000
2,00,000
3,00,000
1,00,000
12,00,000 6,00,000
3,00,000
5,00,000
2,00,000
5,00,000
The following Scheme of Reconstruction is approved by all parties interested and also by the Court:
(a) Uncalled capital is to be called up in full and such shares and the other fully paid up shares be converted into equity shares of Rs. 20 each.
(b) Mr. X is to cancel Rs. 7,00,000 of his total debt (other than share amount) and to pay Rs. 2 lakhs to the company and to receive new 14% First Debentures for the balance amount.
(c) Mr. Y is to cancel Rs. 3,00,000 of his total debt (other than equity shares) and to accept new 14% First Debentures for the balance.
(d) The amount thus rendered available by the scheme shall be utilized in writing off of Goodwill, Profit and Loss A/c Loss and the balance to write off the value of computers.
Required: Pass the Journal Entries and prepare the Balance Sheet of the reconstructed company.
3. The following is the balance sheet of CSJHB Ltd. as at 31st March, 2012:
Liabilities Rs Assets RsShare Capital:
Authorized:
30,000 Equity Shares of Rs 10 each
3,00,000
Fixed Assets:
Pune Property
Bombay Property
Plant and Machinery
1,60,000
1,20,000
1,50,000
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30,000 13% Pref. Shares of Rs 10 each
Subscribed, Issued and Paid-up:
20,000 Equity Shares of Rs 10 each fully paid
18,000 13% Pref. Shares of Rs 10 fully paid
Reserves & Surplus:
Workmen’s compensation fund:
Pune 20,000
Bombay 10,000
Secured loans:
12% ‘A’ Debentures secured
On Pune Property 30,000
12% ‘B’ Debentures secured on Bombay Property 35,000
Current Liabilities & Provisions:
(A) Current Liabilities:
Sundry Creditors
(B) Provisions:
3,00,000Investments:
10% Government loan earmarked against Workmen’s compensation Fund
Miscellaneous expenditure and losses:
Profit and Loss Account
30,000
40,000
6,00,000
2,00,000
1,80,000
30,000
65,000
25,000
5,00,000 5,00,000The following scheme of reconstruction was duly approved:
(a) Equity shares were to be reduced to Re. 1 each.
(b) Preference shares were to be reduced by Rs 2 per share.
(c) Debenture holders were to forgo their unpaid interest Rs 5,200 which is included in sundry creditors.
(d) ‘B’ Debenture holders agreed to take over the Bombay property at Rs 50,000 and paid the balance amount due from them in cash.
(e) Workmen’s compensation fund (Bombay) disclosed the fact that actually there was a liability of Rs 2,000 only. As a result the relevant fund amount balance was to be brought down to the required amount. Investments were realized at 10% above the book value.
(f) The Plant and Machinery were to be written down by Rs 90,000.
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(g) Any balance remaining was to be applied as to 75% in writing down Pune property and 25% transferred to capital reserve.
Required: Pass the necessary journal entries and prepare the Balance Sheet after reconstruction.
NOT FOR PROFIT ORGANISATION
1. Following is the Receipts and Payments accounts for the year ended 31st March 2011
Receipts Rs Payments RsTo Balance as per pass book
8230 By honorarium of secretary
4800
To Cash overspent 20 By printing and stationery
470
By balance as per pass book
3480
Unpresentedcheques being payment on printing on 01.04.2010 Rs. 90 and on 31.03.2011 Rs.30
Cash overspent represents amount of honorarium to the treasurer not drawn due to shortage of fund. But the total salary payable to him for the year was already included in Rs.4800.
Required:
How will you show the above items in final accounts of a club for the year ended 31st March,2011
2. How will you deal with the following items in the final accounts of a club for the year ended 31st March 2011
a) Entrance donation received during 2010-2011 Rs.1,00,000
b) Entrance donation received pending membership Rs.1,00,000 as on 1.04.2010
c) A sum of Rs.20,000 received in October 2010 as entrance donation from an applicant was to be refunded as he had not fulfilled the requisite membership qualifications.The refund was made on 03.06.2011
d) 50% of entrance donation was to be capitalized.There was no pending membership as on 31.03.2011
3. Prizes awarded Rs.2,00,000.Prize fund as at 31.03.2010 Rs.12,00,000.Donations for prizes received during the year 2010-2011 Rs.2,80,000, 10% Prize fund investments as at 31.03.2010 Rs. 12,00,000.Interest received on prize fund investments Rs.60,000.Capital fund as at 31.03.2010 Rs.90,00,000.How will you disclose these items in balance sheet as at 31.03.2011
4. Expenditure on building Rs.2,00,000, building fund as at 31.03.2010 Rs.12,00,000.Donations for building received during the year 2010-2011 Rs.2,80,000, 10% building fund investments as at 31.03.2010 Rs.12,00,000.Interest received on building fund investments Rs.60,000.Capital fund as at 31.03.2010 Rs.90,00,000.How will you disclose these items in the balance sheet as at 31.03.2011.
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5. How will you deal with the following items while preparing the Income and Expenditure a/c for the year ending on 31st March, 2011 and balance sheet as on that date
Particulars As at 1.04.2010 As at 31.03.2011Amount due to Suppliers of Sports material
15000 9750
Advances to suppliers of sports material
5000 3750
Stock of sports material 15,000 2000
During 2010-2011 the payment made to suppliers of sports materials was Rs.44,000.Cash purchases amounted to 20% of total purchases.
6. How will you treat the following items in the final accounts of a club?
a. Payment for new car(less sale proceeds of old car Rs.6000 as on 1.4.2010) Rs.25,200b. Car (as on 1.4.2010) Rs.24,380c. Depreciation on car(as on 1.04.2010) Rs.20,580d. Rate of depreciation on car at 15% p.a for whole year
7. The following particulars relate to Hanuman Sports Club:
Income & Expenditure Account for the year ending on 31st Dec., 20X2
Expenditure Rs Income Rs
To Secretary’s Salary
To Printing & Stationery
To Advertising
To Audit Fees
To Fire Insurance
To Depreciation:
-Sports Equipments
-Furniture
To Surplus
1,500
2,200
1,600
500
1,000
9,000
500
13,800
By Entrance Fees
By Subscriptions
By rent
By Interest on Investments
10,500
15,600
2,800
1,200
30,100 30,100
Receipts & Payments AccountDr. for the year ending on 31st Dec., 20X2
Receipts Rs Payments Rs
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To Balance b/d
To Entrance Fee 20X1
To Entrance Fee 20X2
To subscriptions 20X1
To Subscription 20X2
To Subscription 20X3
To Rent received
To Interest received
4,200
1,000
10,000
600
15,000
400
2,400
600
By Secretary’s Salary
By Printing & Stationery
By Advertising
By Fire Insurance
By 12% Investments
(purchased on 1.7.20X2)
By Furniture
By Balance c/d
1,000
2,600
1,600
1,200
20,000
2,000
5,800
34,200 34,200
The assets on 1 January, 20X2 included Club Grounds & Pavilion Rs 44,000, Sports Equipments Rs 25,000 and Furniture and Fixtures Rs 4,000. Subscriptions in arrear on that date were Rs 800. Subscriptions received in advance on that date were Rs 200. Creditors for Printing & Stationery on that date were Rs 500.Requirements: Prepare the Balance sheet as at 1.1.20X2 and 31.12.20X2.
8. The Lok Kalyan Dispensary had the following:
Income and Expenditure Accountfor the year ending on 31st March, 20X2
Expenditure Rs Income Rs
Salaries
Surgery & Dispensary
Rent and Taxes
Insurance
Office expenses
Depreciation:
Building -3750
Furniture -120
Instruments-100
Surplus
23,500
3,000
500
200
800
3,970
6,330
Subscriptions
Interest
Donations
Miscellaneous Receipts
25,000
9,000
4,000
300
38,300 38,300
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Information: 31.3.20X1 31.3.20X2Rs Rs
Cash in hand and at bank ? 18,7004.5% Tax free Government securities (Face value Rs 2,00,000) 1,80,000 1,80,000Subscription outstanding 7,000 10,000Subscription received in advance 200 600Salaries unpaid 1,000 1,500Furniture 2,000 1,980Land & Buildings 1,00,000 96,250Instruments 3,500 3,900Creditors for medicines 200 300Stock of medicines 300 100Prepare Receipts and Payments Account for 20X1-20X2 and also the Balance Sheet.
9. Prepare Income and Expenditure Account and Balance Sheet of Tulsian Sports Club, Delhi from the following Information:
Receipts and Payments Account of Tulsian Sports Club, Delhi for the year ending on 31st March, 2012
Receipts Rs ‘000 Payments Rs ‘000
To Balance b/d: Cash To SubscriptionsTo Entrance FeesTo Life Membership SubscriptionTo General DonationsTo Cricket FeesTo Refreshment Room ReceiptsTo Sale of Old periodicalsTo Interest on Govt. Securities
(T.D.S. @ 20%)To Donation for Club Pavilion
(on 1.1.2012)
2007,000
200500
2,000250
3,10072,
144
10,000
By Balance b/d (Bank Overdraft)By Insurance (paid up to 30.6.2012)By Miscellaneous ExpensesBy Postage ExpensesBy Refreshment Room
ExpenditureBy Furniture (Purchased on 1.10.2011)By Honorarium to Cricket coachBy Sports Equipments (on
1.10.2011)By 10% RBI Tax Free Bonds
(on 1.1.2012) (Pavilion)By Balance c/d:Cash in hand 52Cash at bank 539
3,000
3003,875
200
2,100
600600
2,200
10,000
591
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Receipts Rs ‘000 Payments Rs ‘000
23,466 23,466
Information:
Particulars 1.4.2011Rs ‘000
31.3.2012Rs ‘000
Club Pavilion Fund
Sports Equipments
Furniture
Stock of Foodstuff
6% Government Securities (Face Value Rs 30,00,000)
Subscription Outstanding
Subscription in Advance
Outstanding Miscellaneous Expenses
5,000
4,500
3,200
120
2,580
600
-
200
?
?
?
80
?
250
300
250
Accounting policies followed by Tulsian Sports Club, Delhi are, provide as under:(a) The sports equipments and furniture are to be depreciated @ 25% and 19% p.a. respectively.(b) One half of the entrance fees and life membership fee are to be treated as income.
SINGLE ENTRY
1. Opening Bills receivable –nil, Closing Bills receivable-Rs.5000
During the year, of the bills drawn(Rs.1,00,000)
a. Some bills were endorsed in favour of creditors .Out of these endorsed bills, bills for Rs.25,000 were dishonoured.b. Bills amounting to Rs.25,000 were discounted at a discount of 2% of which a bill for Rs. 12,500 was dishonouredc. Out of these dishonoured bills, drawees of bills of Rs.18750 became insolvent and paid 50% only by means of a bank draft.d. Bills amounting to Rs.10,000 were discharged by drawees before maturity at a rebate of 2% by means of bank drafte. Bills amounting to Rs.10,000 were collected at maturity by means of bank draft.Prepare bills receivable account
2. Calculate cash sales, gross credit sales, cash purchases and gross credit purchases from the following information:
Stock as on 1st April 2006 was Rs.20,000 Rate of GP-No change Terms of credit:Debtors-2 months, Creditors-1 monthCash sales 331/3 % of Net Credit Sales, Sales Returns -1/7th of Gross credit sales
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Cash purchases-20% of net credit purchases,Purchases returns 1/7th of gross credit purchasesThe sales for the year ended 31st March,2008 were 20% higher than the previous year’sOn 1st April, 2007 the stock level was raised by Rs.48,000 and stock was maintained at his new level throughout the year.Trade debtors as on 31.03.2007: Rs.50,000Trade creditors as on 31.03.2007: Rs.25,000Stock as at 31.03.2007:Rs. 60,000
3. From the following information in respect of BHARAT a trader, prepare a Trading, Profit and Loss Account for the year ended 31st March, 2012 and a Balance Sheet as on that date.
(a) Liabilities and Assets:
Particulars 31.3.2011
Rs
31.3.2012
Rs
Stock-in-trade
Debtors for Sales
Bills Receivable
Creditors for purchases
Fixed Assets (at written down value)
Expenses outstanding
Prepaid expenses
Cash in hand
Bank balance
80,000
1,60,000
-
1,10,000
60,000
20,000
6,000
2,000
10,000
70,000
1,49,500
17,500
1,50,000
63,500
18,000
7,000
1,500
4,750
b. Receipts and Payments during the year Rs
Collections from Debtors (after allowing 2.5% discount) ? Payments to Creditors (after receiving 2% discount) 3,92,000 Proceeds of Bills Receivable, discounted at 2% 61,250 Proprietor’s drawings 70,000
Purchases of Fixed Assets midway through the year 10,000
4% Government Securities purchased (at 96% on 1.10.20X1) 96,000
Expenses 1,75,000
Miscellaneous income 5000
(c) Sales are affected so as to realize a gross profit of 33-1/3% on the sale proceeds.
(d) Goods costing Rs 9,000, were issued as advertisement articles.
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(e) During the year, Bills Receivable were drawn on debtors. Of these, Bills amounting to Rs 20,000 were endorsed in favour of creditors. Of this later amount, a bill for Rs 4,000 was dishonored by the debtor.
(f) Capital introduced during the year by the proprietor by cheques was omitted to be recorded in Cash Book, though the Bank balance of Rs 4,750 on 31st March, 2012 (as shown above), takes the same
into account.
4. Indian Travel Agency sells tickets for Inland Transport ltd. Bharat Air Lines and GOVERNMENT Railways. The rate of commission due to the agency on account of sales of tickets are 10 per cent, 7.5 per cent, and 5 per cent respectively on the sale price of tickets. The firm closes its books on 31st December every year. The balances as on 31st Dec., 20X1 were as follows:
Particulars Dr. (Rs) Cr. (Rs)
Capital
Deposits from customers of Inland Transport Ltd.
Deposits from general public
Interest due for half year on above
Auditors
Advertising
Rates and taxes
Fixtures and fittings
Motor car
Debtors for Rail Tickets
Debtors for Air Tickets
Rent paid in Advance
Bank Balance
20,000
18,000
5,000
2,000
1,250
27,250
50,000
10,000
10,000
500
1,500
1,000
500
73,500 73,500
Other available particulars are:(a) From the Bank statements, returned cheques and the paying- in slips for the year ended 31 st
Dec., 2012
Particulars Rs
Particulars Rs
Payment for tickets – Inland Transport ltd. 6,20,000 Bharat Air Lines 1,69,000 Government Railways 84,000Rent paid for 4 quarters 5,000
Electricity 5,000Rates and Taxes 3,000Interest paid to public on their deposits 1,000Amount paid to Auditors 1,500
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Advertising 6,250Bank Balance as on 31.12.2012 55,500
(b) Weekly expenditure defrayed from cash receipts before banking: Staff Wages Rs 1,100, Petty Expenses Rs 50In addition to the above, the owner has drawn Rs 650 per month to meet personal expenses and spent Rs 350 per month for maintenance of a car in the interest of the agency, out of the cash receipts before banking:
(c) Liabilities of the firm as on 31st Dec., 2012 include:
Auditors’ Fee 1,500Advertising charges 1,250Rates and taxes 1,000
Inland Transport Ltd. 5,500Bharat Air lines 16,000Governments Railways 11,000
(d) Customers deposits on 31st Dec., 2012 were for Inland Transport Ltd. Rs 8,000(e) Debtors for air and rail tickets on 31st Dec., 2012 were Rs 2,500 and 800 respectively.(f) Depreciation on car and fixtures is allowed at the rate of 20% and 10% of the last year’s
balance respectively.(g) Owner agrees to treat the cash differences, if any as his drawings.
Required: Draw a Profit and Loss Account showing commission earned for each class of tickets sold for the year ending 31st Dec., 2012 and a Balance Sheet as at the date.
5. The following is the Balance Sheet of Sri CAMHG as on 31st March, 2011:
Liabilities Rs Assets Rs
Capital AccountLoanCreditors
96,00030,00062,000
BuildingFurnitureMotor CarStockDebtorsCash in handCash at bank
65,00010,00018,00040,00034,0004,000
17,000
1,88,000 1,88,000
A riot occurred on the night of 31st March, 2012 in which all books and records were lost. The cashier had absconded with the available cash. He gives you the following information.
(a) His sales for the year ended 31st March, 2012 were 20% higher than the previous year’s. He always sells his goods at cost plus 25%; 20% of the total sales for the year ended 31st March, 2012 were for cash. There were no cash purchases.
(b) On 1st April, 2011, the stock level was raised to Rs 60,000 and stock was maintained at this new level all throughout the year.
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(c) Collection from debtors amounted to Rs 2,80,000 of which Rs 70,000 was received in cash. Business expenses amounted to Rs 40,000 of which Rs 10,000 was outstanding on 31st March, 2012 and Rs 12,000 was paid by cheques.
(d) Analysis of the Pass Book revealed the Payment to Creditors Rs 2,75,000, Personal Drawings Rs 15,000, Cash deposited in Bank Rs 1,43,000, Cash withdrawn from Bank Rs 24,000.
(e) Gross profit as per last year’s audited accounts was Rs 60,000.(f) Provide depreciation on Building and Furniture at 5% and Motor Car at 20%.(g) The amount defalcated by the cashier may be treated as recoverable from him.
Required: Prepare the Trading and Profit and Loss Account for the year ended 31st March, 2012 and the Balance Sheet as on that date. ACCOUNTING FOR INVESTMENTS
1. On 1st May, 2012 Sumedha purchased 5000, 13.5% convertible debentures in X Ltd of face value of Rs.100 each at 105 ex-interest. Interest on debentures is payable each year on 31st March and 30th September. The accounting year is the calendar year. The following other transactions were entered into during 2012:
Date ParticularsAugust 1st Purchased Rs.2,50,000 debentures at Rs.107
cum interestOctober 1st Sale of Rs.2,00,000 debentures at Rs.103Dec.31st Receipt of 10,000 equity shares in X Ltd. of
Rs.10 each on conversion of 20% of the debentures held.Further it also received interest on debentures converted in cash at the time of conversion.
The market price of a debenture and an equity share in X Ltd as on 31st Dec, 2012 was Rs.106 and Rs.15.
Sumedha held the debentures as current assets.You are required to prepare debenture investment account in the books of Sumedha on Average Cost Basis.
2. On 1st Apr 2009 XY Ltd has 15000 equity shares of ABC Ltd at a value of 15 per share(face value Rs 10 per share) . On 1st June2009, XY ltd acquired 5000 equity shares of ABC Ltd .Rs 1,00,000 on cum right basis. ABC Ltd announced a bonus and right issue.a) Bonus was declared , at the rate of 1 equity share for every 5 shares held, on 1stjuly 2009b) Right shares are to be issued to the existing shareholders on 1stsep 2009. The company
will issue one right share for every 6 shares at 20% premium. No dividend was payable on these shares.
c) Dividend for the year ended 31.3.2009 were declared by ABC LTD @ 20% which was received by XY LTD on 31.10 2009XY LtdTook up half the right issueSold the remaining rights for Rs 8 per shareSold half of its share holdings on 1st Jan 2010 at rs 16.5 per share .Brokerage being 1%
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You are required to prepare investment account of XY ltd. For the year ended 31st mar 2010 assuming the shares are being valued at average cost .
3. Mr.M purchased on 1st March, 20X1 Rs 24,000 5% Bharat Debenture Stock @ 90 cum-interest, interest being payable on 31st March and 30th September each year. Stamp and expenses on purchase amounted to Rs 20 and brokerage @ 2% was charged on cost; interest for the half-year was received on the due date. On 1st September Rs 10,000 of the stock was sold @ 92 ex-interest less brokerage @ 2%. On 30th September Rs 8,000 stock was purchased @ 91 ex-interest plus brokerage @ 2% and charges Rs 10. On 1st December, Rs 6,000 stock was sold @ 94 cum interest less brokerage @ 2%. The market price of stock on 31st December was 88.5%. Show the Investment Account for the year ending on 31st December, 2011 assuming FIFO Method. Calculation should be made in the multiple of rupee. Mr.M holds the Bharat Debenture Stock as a current asset.
INSURANCE CLAIMS
1. From the following information, compute the amount of claim under loss of Stock Policy:
Sum Insured Rs 6,000
Accounting Year Calendar Year
Reason for Damage on 30-6-2012 Due to fire accident
Value of Salvaged Stock Rs 5,000
G.P. Ratio Uniform from year to year
Stock as on 1.1.2011 Rs 90,000
Sock as on 31.12.2011 Rs 70,000
Purchases during 2011 Rs 4,00,000
Sales during 2011 Rs 6,00,000
Purchases from 1.1.2012 to 30.6.2012 Rs 6,00,000
Sales from on 1.1.2012 to 30.6.2012 Rs 8,80,000
You are informed that in 2012, the cost of purchases and selling prices have increased by 20% and 10% respectively above the levels prevailing in 2011.
2. Calculate the net claim for the increased cost of working from the following information:
Agreed G.P ratio 20%, net profit for the last accounting year Rs.2,40,000, Standing charges (out of which Rs.80,000 have not been insured) Rs.5,60,000, actual turnover during claim period Rs.8,00,000.During the claim period, 50% of the total turnover of this period was maintained by incurring the additional expenses amounting to Rs.1,50,000 and there was a saving in insured standing charges of 6.25% and in uninsured standing charges of Rs.10,000.Turnover during 12 months preceding the date of fire Rs.30,00,000.Agreed increase 20%.
3. A fire occurred in the premises of M/s Fireprone Co. on 30th May 2012. From the following particulars, relating to the period from 1.1.2012, you are required to ascertain the amount of claim to be filed with the insurance company for the loss of stock.
Particulars Amount (Rs.)
The average rate of GP has been 20% in the past. The selling price has been increased by 20% with effect from 1.1.2012.
For valuing the stocks for the balance sheet as at 31st Dec.2011, Rs.1000 had been written off in respect to a slow moving item, the cost of which was Rs.5000.A portion of these goods was sold at a
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loss of Rs.500 on the original cost of Rs.2500.The reminder of the stock was now estimated to be worth the original cost.
Subject to the above exceptions, the gross profit had remained at the uniform rate throughout. The value of goods salvaged was estimated at Rs.25,000.
The concern had taken an insurance policy for Rs.60,000 which was subject to average clause.
4. Sony Ltd’s Trading and profit and loss account for the year ended 31st December 2011 were as follows:
Trading and Profit and Loss account for the year ended 31.12.2011
Particulars Rs Particulars Rs.To opening stock 20,000 By sales 10,00,000To purchases 6,50,000 By closing stock 90,000To manufacturing expenses
1,70,000
To gross profit 2,50,00010,90,000 10,90,000
To administrative expenses
80,000 By gross profit 2,50,000
To selling expenses 20,000To finance charges 1,00,000To NP 50,000
2,50,000 2,50,000
The company had taken out a fire policy for Rs.3,00,000 and a loss of profit policy for Rs.1,00,000 having an indemnity period of 6 months.A fire occurred on 1.04.2012 at the premises and the entire stock was gutted with nil salvage value. The net quarter sales i.e 1.04.2012 to 30.06.2012 was seriously affected. The following are the other information
Sales during the period 1.1.2012 to 31.03.2012 2,50,000Purchases during the period 1.1.2012 to 31.03.2012 3,00,000Manufacturing expenses 1.1.2012 to 31.03.2012 70,000Sales during the period 1.04.2012 to 30.06.2012 87,500Standing charges insured 50,000Actual expenses incurred after fire
60,000
The general trend of the industry shows an increase of sales by 15% and decrease in GP by 5% due to increased cost.Ascertain the claim for loss of stock and loss of profit
HIRE PURCHASE
5. A Ltd purchases a plant on hire purchase basis for Rs.1,00,000(cash price Rs.86,000) and makes the payment in the following order:
Down Payment Rs.20,000
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1st instalment after one year Rs.40,0002nd instalment after two years Rs.20,000Last instalment after 3 years.You are required to calculate
i. Total interest andii. Interest included in each instalment
6. On 1.1.2011 Shaan Ltd purchased a machine on hire purchase basis.The terms of agreement provided for 40% as cash down payment and the balance in three instalments of Rs. 1,63,000 on 31.12.2012, Rs.1,20,000 on 31.12.2013 and Rs.1,10,000 on 31.12.2014.The rate of interest charged by vendor is 10% p.a compounded annually.You are required to calculate the cash price and periodic interest charged hire vendor.
7. On 1.1.2011 Beeta Ltd. purchased a machine from Yama Ltd on hire purchase basis.The terms of agreement provided for 40% cash down payment and the balance in three instalment of Rs.1,30,000 on 31.12.2011, Rs.1,42,000 on 31.12.2013, and Rs.1,10,000 on 31.12.2014.The rate of interest charged by the vendor is 10% p.a compounded annually.You are required to calculate the cash price when 2nd instalment is payable after two years.
8. Shyam purchased from Rang Ltd a colour T.V set on 1st October, 2011 on hire purchase system.The cash price of the T.V set was Rs.15,000.Term of payment were Rs.1150 down payment and half yearly instalments of Rs.4000 each, over two years.The first instalment was to be paid on 31st March, 2012.Rate of interest was 12% p.a.Shyam could not pay the second instalment due on 30th September, 2012 as a consequence, Rang Ltd repossessed the T.V set after fulfilling legal formalities. Prepare Shyam‘s a/c. and Goods repossessed a/c in Rang’s books.Assume that the estimated value of T.V set at the time of repossession was Rs.12,000 and after an expenditure of Rs.850 on repairs and re-packing, the company re-sold it on 6th December, 2012 for cash to one of its employees at a special discount of 10% of cash price i.e for Rs.13,500.Rang closes its books of accounts every year on 31st March.
9. Computer point sells computers on HP basis at cost plus 25%.Terms of sales are Rs.10,000 down payment and eight monthly instalments of Rs.5000 for each computer.Two computers were repossessed for non-payment of instalments and to be valued at 50% of cost price. Compute the value of repossessed computers.
AVERAGE DUE DATE AND ACCOUNT CURRENT
1. Ketan had accepted a bills payable to Mitesh, falling due on different dates. The details of bills are as follows:
Date of bill Amount Usance of Bill10th April 2012 Rs. 4000 For 4 months18th April 2012 Rs.5000 For 3 months25th May 2012 Rs.3000 For 6 months5th June 2012 Rs.6000 For 3 monthsOn 1st July, it was agreed that these bills should be withdrawn and that Ketan should accept on that day two bills, on for Rs.10,000 due in 4 months and the other for the balance with interest, due in 6 months. Calculate the amount of the second bill taking interest at 10% p.a.Take 365 days in the year 2012-2013 for calculation purposes.
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2. A had the following bills receivable and bills payable against B. Calculate average due date when the payment can be made or received without any loss or gain of interest to either party.
BILLS RECEIVABLE BILLS PAYABLE
Date of bill Amount Tenure in months Date of bill Amount Tenure in months
1.06.2013 18,000 3 29.05.2013 12,000 2
5.06.2013 15,000 3 03.06.2013 18,000 3
9.06.2013 20,000 1 10.06.2013 20,000 2
12.06.2013 16,000 2 13.06.2013 14,000 2
20.06.2013 24,000 3 27.06.2013 22,000 1
Gazetted holiday intervening in the period are 15th August 2013, 16th August 2013, and 6thSeptember 2013.
3. The following are the transactions that took place between Geet and Hari during the period from 1st October 2013 to 31st March 2014:
Date Particulars AmountOct 1, 2013 Balance due to Geet by Hari 6000Oct 18,2013 Goods sold by Geet to Hari 5000Nov 16,2013 Goods sold by Hari to
Geet(due date November 26)8000
Dec 7th 2013 Goods sold by Hari to Geet(due date December 17th )
7000
Jan 3, 2014 Promissory note given by Geet to Hari, at 3 months
10,000
Feb 4, 2014 Cash paid by Geet to Hari 2000March 21, 2014 Goods sold by Geet to Hari 8600March 28, 2014 Goods sold by Hari to
Geet(due date April 8)5400
Draw up an account current upto 31st March 2014 to be rendered by Geet to Hari charging interest at 10% per annum.
SELF BALANCING AND SECTIONAL BALANCING
1. From the following information available from the books of a trader from 1-1-2011 to 31-03-2011, you are required to draw up the debtors ledger adjustment account in the general ledger.
a. Total sales amounted to Rs.1,80,000 including the sale of old Xerox Machine for Rs.4,800(Book value Rs.8000).The total cash sales were 80% less than the total credit sales.
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b. Collections from debtors amounted to 70% of the aggregate of the opening debtors and credit sales for the period. Debtors were allowed a cash discount of Rs.20,000
c. Bills receivable drawn during the three months totalled Rs.30, 000 of which bills amounting to Rs.10,000 were endorsed in favour of suppliers. Out of the endorsed bills, one bill for Rs.6000 was dishonoured for non-payment as the party became insolvent, his estate realized nothing.
d. Cheques received from customers Rs.8000 were dishonoured, a sum of Rs.2000 was irrecoverable, bad debt written off in the earlier years realised Rs.11,000
e. Sundry debtors as on 1.1.2011 stood at Rs.50,000
2. Prepare the General Ledger Adjustment accounts as will appear in the debtor’s and creditor’s ledger, from the information given below:Balance as on 1.04.2011
Particulars Dr. Cr.Debtor’s Ledger 47,200 240Creditor’s Ledger 280 26,300Transactions for the year ended 31.03.2012
Particulars Rs. Particulars Rs.Total Sales 1,20,100 Bills accepted by
customers20,100
Cash Sales 8,100 Bills receivable dishonoured
1,500
Total Purchases 89,500 Bills receivable discounted
5000
Credit purchases 67,000 Bills receivable endorsed to creditors
4000
Creditors paid off(in full settlement of Rs.40,000)
39,500 Endorsed bills dishonoured
1000
Received from debtors (in full settlement of Rs.59,000)
58,200 Bad-debts written off(after deducting bad debts recovered Rs.300)
2,200
Return from debtors 2600 Provision for doubtful debts
550
Return to creditors 1800 Transfer from debtor’s ledger to creditor’s ledger
1100
Bills accepted for creditors
5500 Transfer from creditor’s ledger to debtor’s ledger
1900
Bills payable matured
8000
Balance on 31.03.2012Debtor’s Ledger (Cr.) Rs.380Creditor’s Ledger (Dr.) Rs.420
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3. Pass journal entries in the books of Exe Ltd both under self balancing and sectional balancing system:
a) The sales book was found undercast by Rs.1000b) Discount allowed to Rao Rs.50 correctly entered in the cash book but not posted to
his account.c) Credit balance of Rs.310 in Murthy’s account in the Purchase Ledger was transferred
to his account in the Sales Ledger.
4. M/s Big Systematic Limited maintains self-balancing ledgers preparing control accounts at the of each month.On 3rd January 2013 the accountant of the company located the following errors in the books of account:
i. An amount of Rs.8700 received from customer Mehra was credited to customer Mehta another customer.
ii. Goods invoiced at Rs.15,600 were returned to supplier M/s Mega Ltd. but no entry was made in the books for his return made on 28th December, 2012
Pass the necessary journal entries to rectify this error.
PARTNERSHIP ACCOUNTS
1. i) Anil and Mukeshan partners sharing profit and losses in the ratio of 3:2 .Govind is admitted for 1/4th share of firm. Thereafter Madan enters for 20 paise in a rupee. Compute new profit sharing ratios under both admission of partnersii) The following goodwill a/c was opened by the partners R &S , on the admission of H as a new partner into firm Om and sons .Calculate the share of profit agreed to be given to “H”
Goodwill A/c
Dr Cr
1-4-10 to R’s Capital1-4-10 to S’s Capital
24,80018,600
43,400
1-4-10 by R’s Capital1-4-10 by S’s Capital1-4-10 to H’s Capital
12,40012,40018,60043,400
2. P , Q, and R share profit & losses in the ratio of 4:3:2 respectively .Q retires and P and R decide to share future profits and losses in the ratio of 5:3 .Then immediately H is admitted for 3/10 share of profits half of which was gifted by p and the remaining was taken by H equally from P and R. Calculate the new profit sharing ratio after H’s admission and gaining ratio of P & R after Q’s retirement.
3. A & B are in partnership sharing profit and losses in the ratio of 3;2 .The capitals of A & B are Rs 80000 and Rs 60000 respectively. They admit C as a partner who contributes Rs 35000 as capital for 1/5th share of profits to be acquired equally from both A &B.The capital accounts of old partners are to be adjusted on the basis of the proportion of C’s capital to his share in the business. Calculate the amount of actual cash to be paid off or brought in by the old partners for the purpose and pass the necessary Journals.
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4. X, Y & Z are partners sharing profits and losses in the ratio of 4:3:2 respectively. On Mar 2011 Y retires and X & Z decide to share profits and losses in the ratio of 5:3 .Then immediately , W is admitted for 3/10th in profits , 2/3rd of which was given by X and rest was taken by W from Z . Goodwill of the firm is valued at Rs 216000 W brings required amount of goodwill.Give necessary Journal entries to adjust goodwill on retirement of Y and admission of W if they do not want to raise goodwill in the books of accounts.
5. X, Y and Z are in partnership with capital of Rs 1,20,000 (credit), Rs 1,00,000 (credit) and Rs 8,000 (debit) respectively on 1st April, 2011. Their partnership deed provided for the following:
(a) 7.5% of profit to be transferred to General Reserves
(b) Partners are to be only allowed interest on capital @ 5% p.a. and are to be charged interest on drawings @ 6% p.a.
(c) Z is entitled to a salary of Rs 7,000
(d) X is entitled to a remuneration of 10% of the net profit before making any appropriation
(e) Y is also entitled to a commission of 8% of the net profit after making all appropriations
During the year, X withdrew Rs 1,000 at the beginning of every month, Y Rs 1,000 during the month and Z Rs 1,000 at the end of every month. On 1st Oct. 2011, Z granted a loan of Rs 6,00,000.
The manager is entitled to a salary of Rs 1,000 p.m. and a commission of 10% of net profits after charging his salary & commission.
The net profit of the firm for the year ended on 31st March, 2012 before providing for any of the above adjustments was Rs 1,62,000.
Required: Prepare profit and Loss Appropriation Account for the year ended on 31st March, 2012.
6. X, Y and Z were in partnership sharing profits and losses as one-half, one fourth and one-fourth respectively. It was agreed that interest should be allowed at the rate of 10% per annum on partners’ capital accounts and charged at the rate of 8 per cent annum on their drawings. No interest was to allowed or charged on current accounts.
The following are the particulars of their capital accounts, current accounts and drawings (as shown by the draft accounts):
Capital Account Balance on
1.1.20X1Rs (Cr.)
Current Account Balance on
1.1.20X1Rs (Cr.)
Drawings for the Year Ending 31st
Dec 20X1Rs
Interest on Drawings
Rs
X 1,50,000 20,000 30,000 2,000
Y 80,000 10,000 20,000 760
Z 60,000 10,000 20,000 1,400
The draft accounts for the year up to 31st December, 20X1 showed a net profit of Rs 1,20,000 before taking into account interest on partners’ capital account balances and drawings. The audit of the draft accounts revealed the following errors:
(a) The rent of X’s private house, amounting to Rs 1,500 and paid on 31 st Dec 20X1 had been included in rents charged in profit and loss Account.
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(b) Repairs amounting to Rs 20,000 had been treated as addition to machinery, depreciation on which had been charged at the rate of 20 per cent.
(c) The premium, amounting to Rs 6,000, on Y’s Life Insurance Policy, and paid on 30 th June 20X1 had been included as insurance charges in the Profit and Loss Account.
Z retired from the partnership on 31st December 20X1 and agreed to leave the amount due to him from the firm as a loan repayable by agreed installments. X and Y agreed to continue in partnership, sharing profits and losses as two-third and one-third. In ascertaining the amount due to Z from the firm and for the purposes of the new partnership, it was agreed to make the following adjustments:
(1) Goodwill to be valued at Rs 1,44,000, but no account for goodwill to be raised n the books.
(2) The value of freehold premises to be increased by Rs 40,000.
(3) The provision for doubtful debts to be increased by Rs 12,000
You are required to prepare (a). The Profit and Loss Appropriation account for the year ended 31st December 20X1, making all the necessary adjustments for the errors revealed, and (b) Partners’ Capital and Current Accounts (in columnar form) for the year ended 31st December, 20X1 incorporating the adjustment on Z’s retirement;
7. Jeet, Meet, and Reet were partners sharing profits and losses in the ratio of 2/5, 2/5 and 1/5. On 1st Jan. 20X1 their Balance Sheet stood as follows:
Liabilities Rs Assets Rs
CreditorsReserveCapital Accounts:JeetMeetReet
40,00010,000
50,00040,00030,000
Fixed AssetsStockDebtorsCash
1,00,00025,00035,00010,000
1,70,000 1,70,000
The firm had taken out a Joint Life Policy for Rs 1,00,000 the premiums on which were charged to the Profit and Loss Accounts. On 1st July, 20X2 Reet died. His representatives agree that:
(a) Goodwill of the firm be valued at Rs 50,000; (b) Fixed assets be written down by Rs 10,000; and (c) In lieu of profits, upto his death, Reet should be paid interest at the rate of 25% p.a. on his capital as on 1st Jan. 20X1
The Policy money was received on December 31, 20X1 and Reet’s heirs were paid the total amount due to them. The accounts reveal that the firm had made a profit of Rs 40,500 during the year after writing off Rs 9,500 as depreciation on fixed assets (of which Rs 5,000 was up to 1st July. 20X1). At the end of the year. The creditors had been reduced by Rs 5,000 and debtors by Rs 6,000 and stock had increased by Rs 8,000 (as compared to the figures on 1st Jan, 20X1. The drawings of the partners were;
Up to 1st July 20X1
Rs
After 1st July 20X1
Rs
Jeet 4,125 5,000
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Meet
Reet
4,125
1,750
5,000
-
Required: Prepare the Balance Sheet of the firm as on 31st Dec, 20X1 assuming that remaining partners did not retain goodwill in their books.
8. E,F and G were partners sharing profits and losses in the ratio of 5:3:2 respectively.On 31st March , 2009 Balance Sheet of the firm is as follows:
Liabilities Rs. Assets Rs.Capital a/cs Buildings 55,000E 50,000 Furniture 25,000F 40,000 Stock 42,000G 28,000 Debtors 20,000Creditors 33,500 Cash at bank 11,200Outstanding expenses 1700
1,53,200 1,53,200
On 31st March, 2009 E decided to retire and F and G decided to continue as equal partnes.Other terms of retirement were as follows:
i. Building be appreciated by 20%ii. Furniture be depreciated by 10%
iii. A provision of 5% be created for bad debts on debtorsiv. Goodwill be valued at two year’s purchase of profit for the latest accounting year.The
firm’s profit for the year ended 31st March 2009 was Rs.25,000.No goodwill account is to be raised,
v. Fresh capital be introduced by F and G to the extent of Rs.10,000 and Rs.35,000 respectively.
vi. Out of sum payable to retiring partner E, a sum of Rs.45,000 be paid immediately and the balance be transferred to his loan account bearing interest at 12% p.a.The loan is to be paid off on 31st March, 2011One month after E’s retirement , F and G agreed to admit E’s son H as a partner with ¼ th share in profits/losses. E has agreed that the balance in his loan account be converted into H’s capital. E also agreed to forgo one month’s interest on his loan.It was agreed that H will bring in, his share of goodwill through book adjustment, valued at the price on the date of E’s retirement.No goodwill is to be raised.You are requested to pass necessary journal entries to give effect to the above transactions and prepare Partner’s capital account.
AS
1. Unsold units with Agent - 1000Cost per unit - Rs 10Estimated selling price per unit as at balance sheet date - Rs 8Agents commission on sales - 5%What should be the value of closing stock?
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2. T Ltd which manufactures three products namely “ O”, “N” and “S” using raw materials M1, M2 and M3 respectively provides you the following information about the Closing stock at 31st ,March 2013
Items Historical cost (Rs L) NRV (Rs L) Replacement value( Rs L)O 10 11 12N 20 18 19S 30 27 28M1 5 3M2 6 5M3 7 8
Calculate the value of closing stock
3. Cost of production of Product A is given below:
Raw material per unit Rs 150Wages per unit Rs. 50Overheads per unit Rs50
Rs 250As on the balance sheet date the replacement cost of raw material is Rs.110 per unit.There are 100 units of raw material on 31.3.2012.
Calculate the value of closing stock of raw materials in the following conditions:i. If finished product is sold at Rs.275 per unit what will be the value of closing stock of raw
materialii. If finished product is sold at Rs.230 per unit what will be the value of closing stock of raw
material
4.Particulars Kg RsOpening Stock - Finished goodsRaw materialsPurchasesLabourOverhead (Fixed)SalesClosing Stock - Raw materialsFinished Goods
10001100
10,000
10,000900
1200
25,00011,000
100,00076,50075,000
280,000
The expected production for the year was 15000 kg.of the finished good products. Due to fall in the market demand the sales price for the finished goods was Rs 20 per Kg and the replacement cost for the raw material was Rs 9.5 kg on the closing day.
Calculate the value of the closing stock of finished goods.
5. A company had 5000 units of stock “A”, costing at Rs.50 each on 31.03.2014.Out of this stock, 3000 units are to be supplied under a firm contract at Rs.45 each. Show how the valuation will be done of such stock when-The selling price is Rs.49 each-the selling price is Rs.52 each
AS-6
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1. X Ltd set up a factory inthe backward area and purchased plant for Rs. 500 lakhs for the purpose. Purchases were entitled to Cenvat Credit of 2% and along with this Government agreed to extend 30% subsidy for backward area development. Estimated residual value at the end of the useful life Rs.43 lakhs. Compute depreciable amount of the asset.
2. In the Trial Balance of M/s Sun Ltd .as on 31-3-2010. Balance of machinery appears at Rs. 5,60,000. The company follows rate of depreciation on machinery @10% p.a. on WDV basis. On scrutiny it was found that a machine appearing in the books on 1-4-2010 at Rs. 1,60,000 was disposed of on 30-9-2010 at Rs. 1,35,000 in Part exchange of a new machine costing Rs. 1,50,000.
You are required to calculate:(1)Total depreciation to be charged in the Profit and Loss Account.(2)Loss on exchange of machine.(3) Book value of machinery in the Balance Sheet as on 31-3-2011.
3. Machinery purchased on 1/4/2011 Rs.1,00,000Estimated residual value at the end of the 10th year Rs 10,000Method of providing depreciation in use –SLMFrom 5thyear company decided to change the method of depreciation from SLM method to WDV method at 20%
4. Machinery purchased on 1/4/2011 Rs. 1,00,000Estimated residual value at the end of the 10th year Rs 10,000Method of providing depreciation in use SLMAt the end of the 4th year due to change in technology the total useful life of an asset is reduced to 8 years and residual value at the end of 8thyear is Rs.3000
5. A machinery was purchased on 1.04.2011 for Rs 1,50,000 and useful life of the machine is estimated to be 10 years.The net book value of the machinery on 1/04/2004 was Rs.1,05,000.The liability for acquiring this machine was increased by Rs.14,000 due to price adjustments on 31/03/2005.What will be the depreciation for the year 2004-05 onwards.Assume depreciation has been provided on SLM.
6. Cost of machine Rs.1,30,000Residual value NILUseful life 10 years Method of depreciation in use SLMAfter 8 years the machine was revalued to Rs.80,000
7. Machinery purchased on 1/04/2010 Rs. 1,00,000Estimated residual value at the end of the 5th year Rs. 5000Method of depreciation WDVRate of depreciation 55%Addition to machinery on 1/04/2011 Rs. 50,000Estimated residual value at the end of the 4th year Rs.2000This addition becomes an integral part of the existing asset.
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AS-7
1. Gammon Ltd has undertaken bridge construction contract as per detail given below, bridge will be constructed in 3 years
a. Initial contract revenue Rs.900 croresb. Initial contract cost Rs.800 crores
(Rs. In crores)
Particulars I year II year III yearEstimated contract cost 805Increase in contract revenue 20Estimated additional increase cost
15
Contract cost incurred upto 161 584 820At the end of II year cost incurred includes Rs.10 crores, for material stored at the sites to be used in III year to complete the project.
2. Calculate the contract revenue from the following details
(Rs. In crores)
Particulars I II IIIInitial contract revenue 1000 1000 1000Revenue increase due to escalation in II year - 200 -Claim - - 100Incentive payments - - 150Penalties - 50 -
Calculate contract revenue
3. Induga Ltd undertook construction of subway for Rs100 crores on 1-01-2009.It estimated construction cost initially at 70 crores. Contract was estimated to be completed in 3 years.However, when starting the work it was found that there were rocks underground at construction site and cost shall increase by Rs.36 crores and the contract shall be completed in three years. The company wants to provide for expected loss of Rs 2 crores per year.
a. Is the treatment correct?b. If work has not yet started but by technical survey it was known on 25/12/2009 that there
was rock underneath at construction site.Company did not want to provide for any losses of Rs. 6 crores for the year ended 31-03-2010.Considering that when project work would start, the losses shall be provided for.
AS -9
1. Y Ltd used certain resources of X Ltd. In return X Ltd receives Rs.10 lakhs and Rs.15 lakhs as interest and royalties respectively, from Y Ltd. during the year 2007-2008.State on what basis X Ltd. should recognize their revenue as per AS-9
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2. On 25th September 2009, Planet Advertising Limited obtained advertisement rights to World Cup Hockey Tournament to be held in Nov;/Dec 2009 for Rs 520 lakhsThey furnish the following information:
The company obtained the advertisements for 70% of available time for Rs. 700 lakhs by 30thSeptember , 2009
For the balance time they got bookings in October 2009 for Rs. 240 lakhs
All the advertisers paid the full amount at the time of booking the advertisements.40% of the advertisements appeared before public in Nov 2009 and balance 60% appeared in Dec 2009.You are required to calculate the profit/loss to be recognized for the month of Nov 2009 and December 2009 as per Accounting Standard-9.
3. M/s SEA Ltd recognized Rs 5 lakhs on accrual basis income from dividend during the year 2010-2011., on shares of the face value of Rs. 25 lakhs held by it in Rock Ltd as at 31 st March 2011.Rock Ltd proposed dividend at 20%. On 10th April 2011. However dividend was declared on 30 th June 2011.Please state with reference to the relevant AS , whether the treatment is in order.
4. Victory Ltd. purchased goods on credit from Lucky Ltd.for Rs.250 Crores for export.The export order was cancelled.Victory Ltd decided to sell the goods in the local market with a price discount.Lucky Ltd.was requested to offer a price discount of 15%.The chief accountant of Lucky Ltd wants to adjust the sales figure to the extent of the discount requested by Victory Ltd.Discuss whether the treatment is justified.
AS-10
A company is in the process of setting up a production line for manufacturing a new product.Based on trial runs conducted by the company, it was noticed that the production lines output was not of the desired quality.However, company has taken a decision to manufacture and sell sub-standard product over the next one year due to huge investment involved.
In the background of the relevant accounting standard, advise the company on the cut off date for capitalisation.
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