Reg. No.

ARPIL 2022 U/611/15-20/05309/

09-14/05309

CORPORATE ACCOUNTING – I

Time : Three hours Maximum : 100

marks SECTION A — (10  2 = 20 marks)

Answer ALL the questions.

1. List out the journal entry for reissue of forfeited shares.

2. Explain the term pro-rata allotment of shares.
3. Distinguish between ex-interest and cum-interest methods in
redemption of debentures.
4. Titan Ltd. issued 1,000 8% debentures of 100 each. Illustrate
with appropriate journal entry if it is issued at a discount of 5%
and repayable at par.
5. List out any two items that appear under finance costs.
6. Give an Outline of the term ‘Interim Dividend’.
7. Relate the term ‘Capital Reduction’ in Internal reconstruction.
8. Goodwill is to be calculated at one year’s purchase of the last
3 years average profits. The profit of the first year was 6,000,
second year twice the profit of the first year and third year one
and half times the profit of the second year. Show the amount of
Goodwill.
9. List out the computational methods of Purchase consideration.
10. L Ltd. agreed to absorb the business of M Ltd. The purchase
consideration was as under :
(a) For every 4, 10% Preference shares of 10 each in M Ltd.
7 Equity shares of 10 each in L Ltd. as 8 paid up. There
were 60,000 10% Preference shares in M Ltd.
(b) For every 3 Equity shares of 10 each in M Ltd. 8 Equity
shares in L Ltd. as 10 paid up. There were 90,000 Equity
shares in M Ltd. Compute and outline the Purchase
consideration.
 SECTION B — (5  7 = 35 marks)
Answer ALL the questions (Internal Choice).

11. (a) Varun Ltd. Issued 1,00,000 shares of 100 each. The
whole of the issue was underwritten as follows :
A – 40%; B – 30% and C – 30%
Applications for 80,000 shares were received in all, out of
which applications for 20,000 shares had the stamp of A,
10,000 had the stamp of B and 20,000 for C. The remaining
applications did not bear stamp. Identify the net liability of
the underwriters.
Or
(b) A company issued 5,000 Equity shares of 10 each at a
discount of 1 per share payable as follows :
2 on Application; 3 on Allotment (Excluding Discount)
and 3 on First call and the balance on final call.
All the amounts were duly received. Apply the above
information and pass necessary journal entries and
Balance Sheet.

12. (a) A company was incorporated on 1st May, 2020 to take over
a business from the preceding 1st January. The accounts
were made upto 31st December, 2020 as usual and the
trading and profit and loss account gave the following
result.
Particulars Particulars

To Opening stock 1,40,000 By Sales 12,00,000

To Purchases 9,10,000 By Closing Stock 1,50,000

To Gross Profit c/d 3,00,000

13,50,000 13,50,000

To Rent taxes and Insurance 18,000 By Gross Profit b/d 3,00,000

To Salaries 51,000

To Director’s Fees 20,000

To Office Expenses 48,000

To Travellers’ Commission 12,000

To Discount 15,000

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 Particulars Particulars

To Depreciation 6,000

To Debenture interest 4,500

To Auditors’ Fees 8,500

To Bad Debts 3,000

To Net Profit 1,14,000

3,00,000 3,00,000

It is ascertained that the sales for November and December are

one and half times the average of those for the year, while those
for February and April are only half the average, all the
remaining months having average sales. Apply the above
information and find the profit prior to incorporation.
Or
(b) Timex Ltd. issued 1,000 8% Debentures of 100 each. If
the debenture were issued as follows :
(i) Issued at Par; redeemable at par
(ii) Issued at a discount of 5% repayable at par
(iii) Issued at a premium of 10% repayable at par
(iv) Issued at par, redeemable at a premium of 10%
(v) Issued at a discount of 5% repayable at a premium of
10%
Construct journal entries to record the above transactions.

13. (a) From the following balances, Categorise the following

items and prepare Balance Sheet as per revised
schedule VI of the Companies Act.

Share Capital 5,00,000 Securities Premium 15,000 11% Debentures 2,50,000

Stock 80,000 Other Fixed Assets 4,70,000 Preliminary 10,000

Expenses

Debtors 60,000 Cash 30,000 Reserves 1,10,000

Profit and Loss 25,000 Goodwill 1,50,000 Investments 2,00,000

A/C (Cr.)

Unsecured Loans 65,000 Sundry Creditors 35,000

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 (b) From the following information, examine the maximum
remuneration payable to the Full-time director of a
manufacturing company. The Profit and Loss account of
the company showed a net profit of 20,00,000 after
taking into account the following items :

Depreciation (including special depreciation of 20,000) 50,000

Provision for Income Tax 1,00,000

Donation to political parties 25,000

Ex-gratia payment to worker 5,000

Capital profit on sale of assets 7,500

14. (a) The following is the Balance Sheet of NSC Ltd. as on

31st December 2018
Liabilities Assets

4,000 10% Preference Sundry Assets at

shares of 100 each 4,00,000 book value 12,00,000

60,000 Equity shares

of Rs.10 each 6,00,000

Bills Payable 50,000

Creditors 1,50,000

12,00,000 12,00,000

The market value of 60% of the assets is estimated to be

15% more than the book value and that of the remaining
40% at 10% less than the book value. There is an
unrecorded liability of Rs. 10,000.

Determine the value of each equity share assuming that

preference shares have no prior claim as to payment of
dividend or to repayment of capital.

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 (b) ABC Company Ltd. passed resolution and got court
permission for the reduction of its share capital by
5,00,000 for the purposes mentioned as under:

(i) To write off the debit balances of P and L A/c of

2,10,000

(ii) To reduce the value of Plant and Machinery by

90,000 and goodwill by 40,000

(iii) To reduce the value of investments by 80,000

The reduction was made by converting 50,000 preference

shares of 20 each fully paid to the same number of
preference shares of 15 each fully paid and by converting
50,000 Equity shares of 20 each on which 15 is paid up
into 50,000 Equity shares of 10 each filly paid up.

Deduce the above transactions with appropriate journal

entries to record the share capital reduction.

15. (a) The Balance Sheets of J Co. Ltd. and H Co. Ltd. as on
31.3.2021 were as follows :
Liabilities J Ltd. H Ltd. Assets J Ltd. H Ltd.

Share capital: Goodwill 40,000 –

100 each 5,00,000 – Fixed Assets 4,00,000 8,00,000

10 each – 4,00,000 Bank – 1,00,000

Capital Reserve 1,00,000 – Other current

Creditors 1,55,000 1,80,000 assets 4,50,000

3,30,000

General Reserve 35,000 4,00,000

Unsecured Loan 1,00,000 –

Secured Loan – 2,50,000

8,90,000 12,30,000 8,90,000 12,30,000

It was proposed that the J Co. Ltd. should be taken over by

H Ltd. The following arrangements were accepted by both
the companies.

(i) Goodwill of J Ltd. is considered worthless

(ii) Arrears of depreciation in J Co. Ltd. amounted to

20,000

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 (iii) The holder of every 2 shares in J Ltd. was to receive :
(1) As fully paid, at par, 10 shares in H Ltd. and
(2) So much cash as is necessary to adjust the
rights of shareholders of both the companies in
accordance with the intrinsic values of the
shares as their Balance Sheet after the
adjustments mentioned above.
Assess the Purchase consideration and show the Balance
Sheet of H Co. Ltd. after the absorption, if the
amalgamation is in the nature of purchase.
Or
(b) The following are the abridged balance sheets of P Ltd. and
S Ltd. as on 31st March 2019.
Liabilities P Ltd. S Ltd. Assets P Ltd. S Ltd.

(In (In (In (In

‘000s) ‘000s) ‘000s) ‘000s)

Equity Share capital of 8,000 3,000 Fixed Assets 11,000 4,730

Rs. 10 each

10% Preference Share Capital – 1000 Current assets 4,000 1,970

of Rs. 100 each

Statutory Reserve 390 125

Creditors 1,437 990

General Reserve 4,610 980

Profit and Loss A/c 563 355

12% Debentures – 250

15,000 6,700 15,000 6,700

On 1st April 2019, P Ltd. takes over S Ltd. on the following

terms :
(i) P Ltd. will issue 3,50,000 Equity shares of l0 each
at par to the equity shareholders of S Ltd.
(ii) P Ltd. will issue 11,000 10% Preference shares of
100 each at par to the preference shareholders of
S Ltd.
(iii) The debentures of S Ltd. will be converted into an
equal number of 12.5% debentures of the same
denomination.

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 It is informed that the statutory reserves of S Ltd. are to be
maintained for two more years. Appraise the above
information and prepare Balance Sheet of P Ltd.
immediately after the above-mentioned scheme of
amalgamation has been implemented that the
amalgamation is in the nature of merger.
SECTION C — (3  15 = 45 marks)
Answer ALL the questions
(Q. No.16 is compulsory)

16. A Co. Ltd. Has an authorised capital of 50,00,000 divided into

1,00,000 equity shares of 50 each. The company issued for
subscription 50,000 shares at a premium of 10 each. The entire
issue was underwritten as follows:

X – 30,000 shares (Firm underwriting – 5,000 shares)

Y – 15,000 shares (Firm underwriting – 2,000 shares)

Z – 5,000 shares (Firm underwriting – 1,000 shares)

Out of the total issue 45,000 shares including firm underwriting

were subscribed. The followings were the marked forms :

X – 16,000 shares Y – 10,000 shares and Z – 4,000 shares

Elaborate the allocation of liabilities of each underwriter under

the following ways :

(a) If the benefit of ‘Firm’ underwriting applications is given to

individual underwriters by treating them like ‘Marked
Forms’.

(b) If the benefit of ‘Firm’ underwriting applications is not

given to individual underwriters by treating them like
‘Unmarked Forms’.

17. (a) S & R Co. Ltd. was incorporated on 1 st July, 2020 to

purchase the business of Nimal Bros. as on 1st April 2020.
Certificate of Commencement of business was received on
1st September 2020. The accounts for the year ended
31st March 2021 disclosed net profits of 80,000 after
charging the following :

(i) Director’s salary – 10,000

(ii) Salaries – 20,000 (4 employees) in pre incorporation

period and six employees in post incorporation period

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 (iii) Wages – 10,200 (5 workers at 80 per month in pre
incorporation period and 10 workers at 100 per
month in post incorporation period)
The sales were 3,00,000 of which 75,000 were in pre-
incorporation period. Discover and compute the profit
earned in pre incorporation and post incorporation periods.
Or
(b) Rajesh Ltd. is a company with an authorized capital of
10,00,000 divided into 10,000 equity shares of 100
each. On 31st December 2018, 5,000 shares were fully
called up. The following balances were extracted from the
ledger of the company as on 31st December 2018.
Particulars Particulars
Calls-in-arrears 10,000 Bad Debts 6,400
Bonus 21,000 Loan from Managing 31,400
Reserves 50,000 Director
Plant and Machinery 1,61,000 Sales 8,50,000
Furniture 34,200 Sundry creditors 70,400
Productive Wages 1,40,000 Rent 12,000
Printing and 4,800 Purchases 6,00,000
Stationery
Profit and Loss A/c 12,440 Insurance (upto 13,440
31.3.2019)
Salaries 37,000 General expenses 17,900
Sundry Debtors 77,400 Stock (on 01.01.2013) 1,00,000
Discount allowed 8,400 Cash and bank balances 2,69,400
Advertisement 7,600 Discount received 6,300
Additional information :
(i) Closing Stock Rs. 1,83,000
(ii) Provide 15% for Depreciation on P and M, 10% on
furniture
(iii) Outstanding liabilities : Wages 10,400; salary
2,440 and Rent 1,200
(iv) provide 5% for Dividend of Paid-up share capital.
Analyse the above data and prepare the Profit and Loss
Account and Balance Sheet as per the Revised Schedule VI
of Companies Act.

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18. (a) The following are the Balance Sheets of Honey Ltd. and
Stark Ltd. as on 31.12.2021.
Liabilities Honey Stark Assets Honey Stark
Ltd. Ltd. Ltd. Ltd.
Share capital of 2,00,000 4,00,000 Fixed 2,40,000 5,00,000
10 each Assets
General Reserve 80,000 1,20,000 Debtors 40,000 20,000
Profit and Loss 20,000 – Stock 60,000 80,000
A/c
Creditors 60,000 1,00,000 Cash 20,000 20,000
3,60,000 6,20,000 3,60,000 6,20,000
Stark Ltd. agreed to absorb Honey Ltd. on the following
terms :
(i) Stark Ltd. to give one share of 10 each, at an
agreed value of 30 per share for every three shares
in Honey Ltd. The shares of Stark Ltd. are quoted in
the market at 45 per share.
(ii) The trade liability is to be taken over.
Assess the journal entries and prepare Balance Sheet in
the books of Stark Ltd., after absorption is completed if the
amalgamation is in the nature of purchase.
Or
(b) Following a series of tosses, XYZ Co. Ltd. resolved to
reduce its capital to 50,000 fully paid 5 shares and to
eliminate securities premium account. The Company’s
Balance Sheet prior to implementation of the scheme was :
Liabilities Assets

50,000 fully paid shares of 10 each 5,00,000 Goodwill 1,00,000

Securities Premium 50,000 Land and Building 1,62,000

Bank Overdraft 73,000 Plant and Machinery 2,07,000

Creditors 62,000 Stock 92,000

Debtors 74,000

Profit and Loss A/c 50,000

6,85,000 6,85,000

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It was resolved to apply the sum available under the
scheme :
(i) To write off the goodwill account
(ii) To write off the debit balance of Profit and Loss
Account
(iii) To reduce the book values of the assets by the
following amounts :
Land and Buildings 42,000
Plant and Machinery 67,000
Stock 33,600
(iv) To provide a bad debts reserve of 10% of the book
value of debtors.
Appraise the situation by preparing journal entries to give
effect to the scheme and prepare the revised Balance Sheet
after its implementation.

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