ADVANCED CORPORATE ACCOUNTING

PRACTICE QUESTION PAPER

MARKS : 100 TIME: 3HRS

CODE: 2FV34 B.COM (GEN)

SECTION – A ( 10 X 3 = 30 )

ANSWER ANY TEN QUESTIONS

1. Expand and Define A.S. 3

2. What are the Kinds of Alteration of Share Capital ? 3

3. S Ltd., was taken over by R Ltd., The following position was mutually 3
agreed upon with the following particulars. Ascertain Intrinsic values of the shares,
ratio of exchange of shares and No. of shares to be issued.

S Ltd., R Ltd.,

No. of Shares 60,000 90,000

Face Value of Shares 100 10
Net Assets 3,60,00,000 72,00,000

4. From the following Particulars, Calculate the remuneration payable to 3

liquidator: (For 2% Remuneration amount paid to unsecured creditors)
Particulars Rs.

Amount available for distribution to unsecured

Creditors before paying remuneration
2,80,800

Liquidator’s Remuneration 2%

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5. Who are Insurer and Insured ? 3

6. List out the Scope of Financial Reporting Practice. 3

7. What do you mean by ‘Amalgamation’ and list out its Types. 3

8. Paradise Ltd., has 50,000 equity shares of Rs.100 each, Rs.80 per share called up. 3
The company decides to pay off Rs.30 per share of the paid up capital and to
reduce to Rs.100 shares t0o Rs.50 sharesfully paid by canceling the unpaid amount.
Journalise the Entries.

9. The Life Assurance Fund of a Company stood at Rs.68,00,000 on 3

31.3.06 and the valuation of its net liability in respect of policies inforce on that date
revealed a figure of Rs.57,60,000. How much dothe Policy Holders stand to get by
away by way of Bonus?

10. What is the Meaning of Financial Reporting Practices ? 3

11. Explain the Word ‘Liquidation’. 3

12. The following balances are extracted from the books of ABI LifeInsurance Corporation: 3

Rs.

Life Insurance Funds as on 31.3.06 1,600 Lakhs

Net Liabilities as per valuation 1,200 Lakhs
Interim Dividend Paid 150 Lakhs

You are required to show the valuation Balance Sheet as on31-3-2006

and distribution Statement.

SECTION – B ( 5 X 6 = 30 )

ANSWER ANY FIVE QUESTIONS

13. Discuss the Significance of Accounting Standards. 6

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14. Sun Ltd., and Moon Ltd., are two companies carrying on business in 6
the same line of activity. Their Balances as on 31.12.1994 are:

Liabilities Sun Ltd., Moon Assets Sun Moon

Rs. Ltd., Ltd., Ltd.,
(Rs.) (Rs.) (Rs.)

Land &
Fully Equity Shares Building 1,00,000 -
of Rs.10 Plant &
each. 6,00,000 2,00,000 Machine 7,00,000 3,00,000
General Reserve 4,00,000 2,00,000 Investments 1,00,000 -
Secured Loan 6,00,000 1,00,000 Stock 9,00,000 4,00,000
Current Liabilities 6,00,000 4,00,000 Debtors 3,00,000 1,00,000
Cash at Bank 1,00,000 1,00,000

22,00,000 9,00,000 22,00,000 9,00,000

The two companies decided to amalgamate into Mars Ltd., Thefollowing further
information is given:

(a) All Assets and Liabilities of the companies are taken over.

(b) Each share in Moon Ltd., is valued at Rs.25 for the purpose of
amalgamation.

(c) Shareholders of Moon Ltd., and Sun Ltd., are paid off by issue of sufficient number
of equity shares of Rs.10 each in Mars Ltd., as fully paid at par.

(d) Each share in Sun Ltd., is valued at Rs.15 for the purpose of
amalgamation.

Show the Journal Entries to close the books of both the companies.

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15. Prepare, in the proper statutory form, the revenue account for the Jai 6
Hind Life Assurance Co. Ltd., for the year ended 31st March 2006
from the following figures.

Paid up Capital of the above life assurance company is Rs.5,00,000 Thousands and
net liability as per actuary’s valuation is Rs.11,05,000 Thousands as on 31st March
2006.

Rs. (‘000) Rs. (‘000)

Claims by death 76,140 Exp.of Management 31,290
Claims by maturity 30,110 Commission 9,574
Premiums 7,05,690 Interest, Dividend & Rent 97,840
Transfer Fees 129
Income Tax thereon 35,710
Consideration for Surrenders 13,140
Annuities granted 82,127 Bonus in reduction of
premium 980
Annuities Paid 53,461 Dividend paid to
Bonus paid in Cash 2,416 shareholders 5,500
Life Assurance Fund
(1.4.2005) 15,21LK

Prepare a Valuation Balance Sheet of the Company as on that date.

16. ABC Company Ltd., passed resolution and got court permission for 6
the reduction of its share capital by Rs.5,00,000 for the purposes
mentioned as under:

(a) To write off the debit balances of P & L A/c of Rs.2,10,000

(b) To reduce the value of Plant and Machinery BY Rs.90,000 andgoodwill by

Rs.40,000.

(c) To reduce the value of Investments by Rs.80,000.

(d) The reduction was made by converting 50,000 preference sharesof Rs.20 each fully paid
to the same number of preference sharesof Rs.15 each fully paid.

(e) The reduction was made by converting 50,000 equity shares of Rs.20 each on which Rs.15
is paid up into 50,000 equity shares ofRs.10 each fully paid up.

Journalise the Entries.

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17. The Ultra Optimist Ltd., went into liquidation. Its assets realized 6
Rs.3,50,000 excluding amount realized by sale of securities held bythe secured
creditors. The following was the position:

Rs.
Share Capital:1,000 Shares of Rs.100 each.
Secured Creditors (Securities realized Rs.40,000) 35,000
Preferential Creditors 6,000
Unsecured Creditors 1,40,000
Debentures having a floating charge on the assets of
the company 2,50,000
Liquidation Expenses 5,000
Liquidator’s Remuneration 7,500

Prepare the Liquidator’s Final Statement of Account.

18. Explain the Objectives of Financial Reporting Practices. 6

19. Given below is the Balance Sheet of a Company as on 31-3-2020. 6

Liabilities Rs. Assets Rs.

Share Capital: Goodwill 1,00,000

2000 Preference Fixed Assets 2,50,000
Shares of Rs.100 2,00,000 Current Assets 1,80,000
3000 Ordinary Preliminary Expenses 15,000
Shares of Rs.100 3,00,000 P&L A/c 1,35,000

Securities Premium 50,000

Other Liabilities 1,50,000

7,00,000 7,00,000

(a) To reduce the Face Value of the preference and Equity shares toRs.50 each

(b) To Write off other assets (except real assets) by ultilizing Securities
premium to the extent.

Prepare Balance Sheet after Reconstruction and also the Journal Entries thereon

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 SECTION – C (2 X 20 = 40)
ANSWER ANY TWO QUESTIONS

20. The following Trial Balance was extracted from the books of the New 20
Bharat Life Insurance Company Ltd., as on 31st March 2006.

Rs. (‘000) Rs.(‘000)

Paid up Share Capital (1,00,00,000 @ 10)Life --- 1,00,000
Assurance Fund on 1.4.2005 Dividend paid --- 29,73,000
Bonus to policy holders 15,000 ---
Premium received Claims 31,500 ---
paid Commission paid --- 1,01,500
Management expenses 1,97,000 ---
Mortgages in India 9,300 ---
Interest and Dividends receivedAgent’s 32,300 ---
Balances 4,92,200 ---
Freehold premises --- 1,72,700
Investments 9,300 ---
Loan on Company’s policiesCash 40,000 ---
on Deposit 23,05,000 ---
Cash in handSurrenders 1,73,6000 ---
27,000 ---
7,300 ---
7,000 ---
33,46,500 33,46,500

You are required to prepare the Company’s Revenue A/c for the yearended 31-3-06
and its Balance Sheet as on that date after considering the following matters:

Rs. (‘000)
Claims admitted but not paid 9,300
Management expenses due 200
Interest accrued 19,300
Premiums outstanding 12,000

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21. Balance Sheet of Silver Ltd., as on 31st December 1993. 20

Liabilities Rs. Assets Rs.

Share Capital: Fixed Assets:

1000, 6% Preference Land & Buildings 2,00,000
Shares of Rs.100 1,00,000 Plant & Machinery 2,20,000
2000 Equity Shares
of Rs.100 fully paid 2,00,000 Current Assets:
3000 Equity Shares Stock 1,00,000
of Rs.50 paid up 1,50,000 Debtors 1,00,000
Cash at Bank 30,000
Secured Loans:
6 % Debentures 1,00,000 Miscellaneous Expendit.:
(Floating Charge on Profit and Loss A/c 1,00,000
all assets)

Others 1,00,000
(Mortgage on Land)

Sundry Creditors 90,000

Income Tax 10,000

7,50,000 7,50,000

• The Company went into liquidation on 01-01-1994. The Preferencedividend were

in arrear for 3 years. The arrears are payable on liquidation.

• These Assets are realized: Land & Buildings – Rs.2,40,000 ,Plant &
Machinery – Rs.1,80,000 , Stock – Rs.70,000 , Debtors –
Rs.60,000

• The expenses of liquidation amounted to Rs.8,000

• The Liquidator is entitled to a commission at 2% on All Assets realized and 3%

on amount distributed to unsecured Creditors.

• All Payments were made on June 30th June 1994.

Prepare Liquidator’s Final Statement of Account and Working Notes.

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22. Kala Ltd., Balance Sheet showed the following position on 31st March 20
1995.

Liabilities Rs. Assets Rs.

Share Capital: Fixed Assets 8,00,000

10,000 Equity Current Assets 4,00,000
Shares of Rs.100 Cash at Bank 2,00,000
Each. 10,00,000 Profit and Loss A/c 3,00,000

Capital Reserve 2,00,000

Bank Loan 2,00,000
Trade Creditors 3,00,000

17,00,000 17,00,000

• Mala Ltd., was incorporated to take the followig:

(a) The fixed assets and 60% of the current assets at an agreedvalue of
Rs.9,00,000.

(b) With the (a) to be paid as to Rs.7,40,000 in Equity Shares ofRs.10 each
and the balance in 9% Debentures.

(c) These Debentures were accepted by Bank settlement of Loan.

• Remaining Current Assets realised Rs.90,000.

• After meeting Rs.20,000 expenses of liquidation, all the remainingcash was paid
to the creditors in full settlement.

Give Journal Entries in the books of Kala Ltd., and Mala Ltd.,companies.

Prepare the initial Balance Sheet of Mala Ltd., if the Amalgamation isin the Nature
of Purchase.

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23. Given below is the Balance Sheet of Slow Success Ltd., as on 20
31-12-86

Liabilities Rs. Assets Rs.

Share Capital: Land & Buildings 1,00,000

Plant & Machinery 4,00,000
4000 Equity Shares Motor Van 40,000
of Rs.100 fully paid 4,00,000 Furniture 10,000
1000 Equity Shares Investments 50,000
of Rs.50 paid up 50,000 (Market Value –
Rs.40k) 1,00,000
Development Rebate Stock 1,90,000
Reserve 1,50,000 Debtors 10,000
Loan (Unsecured) 6,40,000 Bank Balance 6,00,000
Creditors 2,60,000 Profit and Loss A/c
(Including Rs.10,000
holding lien on some
assets) 15,00,000 15,00,000

The Company having turned corner, a scheme of reconstruction wasprepared and approved
under:

(a) To revalue Land & Buildings to its present market value ofRs.1,50,000.

(b) Equity Shares to be reduced to Rs.10 per share but the FaceValue to
remain at Rs.100

(c) A call of Rs.50 o be made on equity shareholders to provide fundsfor working

Capital.

(d) Unsecured Loans to be paid immediately to the extent ofRs.1,00,000

(e) Unsecured Creditors to be paid immediately to the extent of 10%of their claims
and they accept a remission of 20% of their claims

(f) Development Rebate Reserve being no longer required, to betransferred

to Profit and Loss account.

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(g) Investments to be brought to their market value.

(h) The amount available as a result of the scheme to be used to writeoff the Debit
Balance on Profit and Loss Account.

Pass the necessary Journal Entries to give effect to the above Schemeand

Prepare the Balance Sheet after Reconstruction.

***************

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