Corporate Accounting 1

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Assignment A

 

Question 1):A company issued 50000 equity shares of Rs. 10 each to the public, on the following terms: – Rs. 2 on application, Rs. 3 allotment, and the balance in two equal calls. The public applied for 8000 shares for which allotment took place on 1st April, 2008. All money due to allotment and calls was duly received except for one shareholder holding 500 shares who failed to pay both the calls and one holder who was the holder of 450 shares did not pay only final call. Pass journal entries and ledger into balance sheet.

 

Question 2: A company has decided to increase its existing share capital by bringing out a rights issue for the existing shareholders in the proportion of two new shares for every ten shares held. Calculate the price of right, if the market value of the shares at the time of the announcement of the right issue is Rs. 500. The company has decided to give shares of Rs. 200 each at a premium of Rs. 110 each.

 

Question 3: ABC Co. Ltd. Issued 500,000 Equity shares of Rs.10 each and 30000, 10% Preference shares of Rs.100 each, all shares being fully paid. On 31.3.08, Profit and Loss Account showed an undistributed profit of Rs. 50,000 and General Reserve Account stood at Rs.120,000 On 2.4.08, the directors decided to issue 15000, 6% Preference shares of Rs.100 each for cash and to redeem the existing preference shares at Rs.105 utilizing as much as would be required for the purpose. Show the journal entries to record the transactions.

Question 4): Journalize   transactions   when   debentures   are   issued   as follows:-1) At par of 15%, 2500 debentures of Rs. 100 each, redeemable at par.

2)   At   10%   discount   12%,   1000   debentures   of   Rs.   100   each, redeemable at par.

3)   At   10%   premium   11%,   3500   debentures   of   Rs.   100   each, redeemable at par.

4)   At par 12%, 2000 debentures of Rs. 100 each, redeemable at a premium of 5%.

5)   At 5% premium 12%, 1900 debentures of Rs. 100 each, redeemable at 10% premium.

6)   At 5% discount of 12%, 3600 debentures of Rs. 100 each, and redeemable at 15% premium.

 

Question 5): H Ltd. acquires 3/4 shares of the share capital of S ltd. As on 31st March 2006, when the balance sheets of both the companies were as under:-

Balance Sheet As on 31st March, 2008

7)

Liabilities H ltd. S ltd. Assets H ltd. S ltd.
Share   capital   (in Rs. 10 shares) 200000 100000 Fixed assets 200000 100000
General reserve 50000 30000 Current assets 130000 120000
Profit & loss A/c 30000 20000 Shares in S ltd. 100000
10% debentures 100000 50000
Sundry creditors 50000 20000
430000 220000 430000 220000

Prepare the consolidated balance sheet as on 31st March, 2008.

 

Assignment B

Question 1: A company issue 20000 debentures of Rs. 100 each, payable Rs. 10 on application, Rs. 30 on allotment, and the balance on first and final call. Application were received for 24000 debentures, A the applicant of 1000 debentures was refused allotment and B the applicant of 8000 debentures were allotted 5000 debentures. Excess application money was adjusted towards allotment. A debenture holder holding to whom 600 debentures were allotted did not pay his money due on first and final call. Pass the necessary journal entries.

 

Question 2: The following are the two balance sheets of H ltd. and S ltd. as on 31st March 2005:-

Liabilities        H ltd.               S ltd.       Assets                 H ltd.           S ltd.

Share capital Fixed assets 550000 100000
Equity shares 800000 200000 75% shares in S ltd.(at cost) 280000
General reserve 150000 70000 Stock 105000 177000
Profit & loss A/c 90000 55000 Other current assets 225000 128000
Creditors 120000 80000
1160000 405000 1160000 405000

Draw a consolidated balance sheet as on 31st March, 2005 after taking

into consideration the following information:-
i)          H ltd. acquired the shares on 31st July, 2004.
ii)         S Ltd. earned a profit of Rs. 45000 for the year ended 31st
March, 2005.

 

Question 3): Rakesh ltd. issued 10000 shares of Rs. 10 each at Rs. 11 per share. Share money was payable as follows:-On application Rs. 2, on allotment Rs. 5, and on call Rs. 4. The offer was over subscribed by 5000 shares and the applicants were allotted shares on pro rata basis. Surplus application money was adjusted for future share dues. All shares were fully called up and money was received except on 300 shares of Raja who did not pay allotment and call money. The company later on forfeited his shares, and reissued at a discount of Rs. 2 per share.

Give Cash book and journal entries in the books of a company.

 

Case Study

The balance sheet of Chandan Limited as on 31 December 1998 was as follows:-

 

Liabilities Amount Assets Amount
Share capital Fixed assets
10000,       6%       redeemable preference shares of Rs. 10 each fully paid 100000 Land & building 150000
50000 equity shares of Rs. 10 each fully paid 500000 Plant & machinery 200000
General reserve 90000 Current assets
Profit & loss A/c 230000 Stock 250000
8% debentures 50000 Debtors 180000
Sundry creditors 70000 Cash and bank 260000
1040000 1040000

The directors of the company decided to:-

a)         Redeem preference shares at a premium of 5%

b)      Redeem debentures at a premium of 10%;

c)          Bring out a bonus issue for the equity shareholders of one Rs. 10 equity share held in order to capitalize a part of the undistributed profit.

Show:-

  • The appropriate journal entries to record the transactions in the books of the company;
  • The balance sheet as it would appear after the completion of the transactions.

 

Assignment – C

Q:1). The rate of discount on shares cannot exceed:-

a) 5%

b) 10%

c) 20%

d) 6%

 

Q:2). The share premium amount will be shown under the heading:-

a) Share capital

b) Current liabilities

c) Reserves & surplus

d) Current assets

 

Q:3). Which of the following should be deducted from the share capital to determine the paid up capital:-

a) Calls in advance

b) Calls in arrears

c) Securities premium

d) Discount on issue of shares

 

Q:4). The profit on reissue of forfeited share is transferred to—-

a) Capital A/c

b) Capital reserve A/c

c) Capital redemption A/c

d) Redemption of share A/c

 

Q:5). Share allotment is a A/c.

a) Real A/c

b) Personal A/c

c) Impersonal A/c

d) None of the above

 

Q:6). Now, a company can buy back more than per cent of its shares.

a) 20%

b) 30%

c) 25%

d) 15%

 

Q:7). Any premium payable on the redemption of preference account or from the divisible shares must be from the profits of the company.

a) Security premium

b) Discount on issue of shares

c) Dividend

d) Capital redemption

 

Q:8). Fresh issue of shares for redemption can be made at par, premium or

a) Face increase

b) Discount

c) Premium

d) None of the above

 

Q:9). After realizing all the investments in the sinking fund investment account is transferred to

a) Profit & loss A/c

b) Debentures A/c

c) Capital reserve

d) Sinking fund A/c

 

Q:10). Premium on redemption of debenture a/c is in the nature

Personal A/c

Real A/ c

Nominal A/c

Impersonal A/c

 

Q:11). The following journal entry is passed in the books of Arun limited:-

 

7% debenture A/c Dr. 160000

Premium on redemption of debenture A/c Dr. 6000

To bank A/c 147200

To profit on cancellation of debenture A/c 18800

a) Par

b) Rs. 92

c) d)

 

Rs. 90 Rs. 95

 

Q:12). The books of ABC Limited showed the following journal entry:-

Dr. 96000

Dr. 10000 100000 6000

Bank A/c

Loss on issue of debenture A/c

To 10% debenture

To premium on redemption

Debentures have been issued at a discount:-

a) 10 %

b) 5%

c) 6%

d) 4 %

side of the at fixed rate.

 

Q:13). Own debenture amount will appear on the balance sheet.

a) Liability

b) Asset

c) Under the balance sheet

d) Profit & loss A/c

 

Q:14). Debenture holders are entitled to receive

a) Interest

b) Dividend

c) Bonus

d) All of the above

 

Q:15). The company can

its own debentures.

Purchase Sell

Resell

Mortgage

Loss on the issue of debenture account is

Current

(?)

Fictitious

Fixed Tangible asset.

 

Q:17). Provision of funds must be made, if debentures are to be redeemed by —- method.

a) Debenture redemption fund

b) Sinking fund

c) Sinking fund investment

d) All of the above

 

Q:18). Own debentures purchased by the company will be shown on the —- side of the balance sheet.

a) Liabilities

b) Profit & loss A/c

c) Assets

d) Purchase book

 

Q:19). While redeeming the debenture the debenture account should be debited at its —- value.

a) Annual value

b) Market value

c) Net value

d) Face value

 

Q:20). The balance of debenture redemption reserve account is transferred to —- after all the debentures are redeemed.

a) General reserve

b) Secured loan

c) Unsecured loan

d) Capital reserve

 

Q:21). From the cum-interest price the debenture can be calculated by the interest of the expired period.

a) Adding

b) Multiplying

c) Subtracting

d) Dividing

 

Q:22). Loss on sale of sinking fund investment is to be debited to —- account.

a) Sinking fund account

b) Sinking fund investment account

c) Capital reserve account

d) Capital redemption fund account

 

Q:23). Public Limited Companies cannot issue:-

a) Equity shares

b) Preference shares

c) Deferred shares

d) Bonus shares

 

Q:24). The minimum share application money is:-

a) Rs. 2 per share

b) 5% of the nominal value of shares

c) 50% of the nominal value of shares

d) 20% of the nominal value of shares

 

Q:25). Right shares mean the shares which are:-

a) Issue to the directors of the company

b) First offered to the debenture holder

c) First offered to the existing share holders

d) Issued by a newly formed company

 

Q:26). Equity share holders are:-

a) Creditors

b) Owners

c) Customers

d) Suppliers

 

Q:27). Subject to the permission allowed, the maximum allowable discount on equity shares is:-a) 10%

b) 5%

c) 15%

d) 20%

 

Q:28). Premium on issue of shares can be used for:-

a) Distribution of profits

b) Issue of bonus shares

c) Paying the remuneration to the directors

d) Issue of debentures

 

Q:29). The balance of the share forfeited account after the reissue of forfeited shares is transferred to:-

a) General reserve

b) Capital redemption reserve

c) Capital reserve

d) Sinking fund

 

Q:30). Balance of share forfeiture account is shown in the balance sheet under the item:-a) Current liabilities and provisions

b) Reserves and surplus

c) Share capital account

d) Unsecured loans

 

Q:31). If a share of Rs. 10 on which Rs. 6 has been paid, is forfeited it can be re issued at a maximum price of:-

a) Rs. 6 per share

b) Rs. 4 per share

c) Rs. 10 per share

d) Rs. 3 per share

 

Q:32). Debentures represents:-

a) The investment of equity share holders

b) Director’s share in business

c) Long term liability of a business

d) Asset of a company

 

Q:33). Debentures issued as collateral security for Rs. 100000 should be debited to:-a) Debenture suspense A/c

b) Bank account

c) Debenture account

d) Capital account

 

Q:34). The balance of sinking fund account after redemption of debentures is transferred to:-

a) Profit & loss account

b) General reserve account

c) Debenture account

d) Sinking fund investment account

 

Q:35). The balance of sinking fund investment account after realization of investments is transferred to:-

a) Profit & loss account

b) Debenture account

c) Sinking fund account

d) Sinking fund investment account

 

Q:36). Profit on cancellation of own debentures is transferred

to:-

a) Capital reserve

b) Dividend equalization fund

c) Profit & loss account

d) None of the above

 

Q:37). If debentures of the face value of Rs. 50000 are issued at a discount of 10% for net assets worth Rs. 40000 the balance of Rs. 5000 will be debited to:-a) Goodwill account

b) Capital reserve account

c) Profit & loss account

d) None of the above

 

Q:38). A floating charge generally cover all the :-

a) Fixed assets of the company including future one

b) Current assets of the company including future one

c) All the assets of the company including future one

d) Fictitious assets of the company including future one

 

Q:39). Pricing of public issue is determined by:-

a) The SEBI

b) The company in consultation with stock exchange and SEBI

c) The company in consultation with lead manager

d) All of the above

 

Q:40). Book building is a method of:-a) Price estimation for issue of shares to the public

b) Allotment of shares

c) Redemption of shares

d) Redemption of debentures