Q.P. Code : 13321 Third Semester B.Com. Degree Examination, November/December 2019 (B.Com. Regular/Tourism/LS/SP) (CBCS Scheme) Commerce Paper 3.3 - CORPORATE ACCOUNTING - I Time : 3 Hours] [Max. Marks : 70 Instructions to Candidates : Answers should be written in English only. SECTION - A 1 Answer any FIVE sub-questions. Each sub-question carries 2 marks (5 * 2 = 10) 1, (a) _ Differentiate between firm and general underwriting, (b) Mention the ratios required to calculate profit prior to incorporation. (c) How do you treat profit prior to incorporation and. profit after incorporation? (2) Mention any four factors influencing goodwill. (©) What is super profit? (9) Mention any two methods of valuing shares. (2) How is the cost of goods sold calculated? SECTION -B. I. Answer any THREE questions, Each question carries 6 marks: (3 x 6 = 18) 2. ATC Ltd. issued 50,000 equity shares. The issue was underwritten as follows : P-40%, Q- 30%, R- 30%. Applications were received for 40,000 shares, out of which the following were the marked applications : P- 10,000 shares, Q - 5,000 shares, R - 10,000 shares. Unmarked applications had to be distributed in the gross liability ratio. Calculate the liabilities of the underwriters. 1/6Q.P. Code : 13321 3. Calculate sales Ratio from the following : X Company was incorporated on 1.5.2009 and acquired a business with effect from 1.1.2009. Total sales from 1.1.2009 up to 31.12.2009 was Rs. 6,00,000. Sales for January and February 1’ times the average monthly sales. Sales from March to July % of average monthly sales. Sales for August and September ¥% of average monthly sales and sales from October to December double the average monthly sales. A business was available for sale and it had earned the following profits in the past : 2009 - Rs. 7,10,000, 2010 - Rs. 6,90,000, 2011 - Rs. 7,50,000, 2012 - Rs. 7,30,000 The business was managed by the proprietor himself and he could have earned Rs. 1,20,000 each year from an alternate job, if not engaged in the business. Calculate the goodwill of the business based on 2 years purchase of the simple average net profit of the previous 4 years. ‘The following is the Balance Sheet of Sunlight Ltd., as at 31.03.2013 : Liabilities Rs. Assets Rs. 20,000 shares of L/B (Market value Rs. 1,50,000) 75,000 Rs. 10 each 2,00,000 Pand M (Market value Rs. 1,00,000) 80,000 General reserve 50,000 Trade Marks (Market value Rs. 8,000) 10,000 Women savings a/c 50,000 Stock 1,00,000 PandLa/c 50,000 Debtors 54,000 Current liabilities 25,000 Investments 20,000 Cash at Bank 20,000 Preliminary expenses 16,000 373 000 3,75,000 Find out the intrinsic value of each share taking into account the following data : Rs. Interest payable to creditors 1,000 Bad debts amounts to 2,000 Investments worth 16,000 2/6Q.P. Code : 13321 6. Under which heading would you show the following in company final accounts : (a) Furniture (b) Purchases (c) Bonus to employees (4) General reserve (©) Electricity charges () Bank charges. SECTION - C Answer any THREE questions. Each question carries 14 marks: (3 x 14 = 42) S Ltd. issued to public 1,50,000 equity shares of Rs. 100 each at par. The issue was underwritten equally by A, B and C for a 3% commission. Applications were received for 1,40,200 shares in all and the following details are available : Names of the Firm underwriting Marked Total underwriters applications applications applications A 5,000 40,000 45,000 B 5,000 46,000 51,000 o 3,000 34,000 37,000 Unmarked - = 7,200 applications 1,40,200 It was agreed to credit the unmarked applications to A B and C equally and firm applications had to be treated as marked applications. Calculate the total liabilities of the underwriters. A company was incorporated on 1s May 2014 acquiring the business of a sole trader with effect from 1% January 2014. The accounts of the company were closed for the first time on 31.12.14 disclosing a gross profit Rs. 1,68,000. The establishment expenses were Rs. 42,660, Directors fees Rs. 3,000 per month, Preliminary expenses written off Rs. 4,000, rent to June 2004 was Rs. 300 per month which was thereafter increased to Rs. 750 per month. Included in the Directors fees was salary to the Manager at Rs. 1,500 per month who was appointed as a Director at the time of incorporation of the company. Prepare a statement showing profits prior and subsequent to incorporation. Included in the Directors fees was salary to the Manager at Rs. 1,500 per month who was appointed a Director at the time of incorporation of the company. Prepare a statement showing profits prior and subsequent to incorporation assuming that the net sales were Rs. 24,60,000, the monthly average of which for the first four months of 2014 was half of that of the remaining period. 3/6Q.P. Code : 13321 9. 10, Calculate the good will of the business carried on by Mr. Suman from the following information : Profits for the previous years : 2008 - Rs. 5,33,000, 2009 - Rs. 5,91,000, 2010 - Rs. 5,83,000, 2011 - Rs. 5,83,000, 2012 - Rs. 4,83,000 : (a) (bo) (c) (a) ‘The profit of the year 2009 was reduced by Rs. 16,000 on account of goods destroyed in a small accidental fire in the business. The same year’s profit also included casual income of Rs. 14,000 ‘The profit of the year 2010 was increased by Rs. 10,000 on account of interest received on investments It was decided that the business had to be insured in future at an annual premium of Rs, 7,000 Reasonable remuneration had to be provided to the proprietor at Rs. 96,000 p.a. in future. ‘The goodwill has to be calculated on the basis of 3 years purchase of the average profit of the previous 5 years. From the given Balance Sheet and other information, you are required to ascertain the value of equity share under (a) Intrinsic value (b) Yield value and {o)_ Fair value methods. Ignore taxation. Balance Sheet of RKS as at 31.03.2013 Liabilities Amount Assets Amount Rs. Rs. Share capital : Land and Building 1,10,000 2,000 shares of Rs. 100 each 2,00,000 Plant and Machinery 1,30,000 General reserve 40,000 Patents and Trade Marks 20,000 PandLa/c 32,000 Stock 48,000 Creditors 1,28,000 Debtors Bills payable 60,000 Cash and bank Preliminary expensesQ.P. Code : 13321 hj ‘An independent valuation of the Assets of the Company is as under ; Land and Building Rs. 2,40,000, Goodwill Rs. 1,60,000 and Plant and Machinery Rs. 1,20,000. The other assets were worth their book values. ‘The Profits of the company have been as follows : Financial year 2010-11 2011-12 2012-13 Profit (Rs.) 80,000 90,000 1,06,000 The company follows the practice of transferring 25% of Profits to General Reserve. Normal Rate of Return is 12%. On 31.03.2013 the following ledger balances were extracted from the books of Bhavani Manufacturing Company Ltd. : Dr. Rs. cr. Rs. Calls in arrears 37,500 Equity share capital 23,00,000 Plant and Machinery _18,00,000 Bills payable 1,90,000 Stock (1.4.2012) 3,75,000 General reserve 1,25,000 Furniture 36,000. Profit and loss a/c (1.4.2012) 72,500 Sundry debtors 4,35,000 6% debentures 15,00,000 Buildings 15,00,000 Sales 24,80,000 Purchases 925,000 Reserve for doubtful debts 17,500 Interim dividend paid 3,75,000 Sundry creditors 2,30,000 Rent 24,000 General expenses 24,500 Debenture interest 45,000 Preliminary expenses 25,000 Manufacturing expenses 65,500 Goodwill 1,45,000 Wages 4,24,000 Cash in hand 39,500 Cash at bank 1,91,500 Director's fees 28,500 Bad debts 10,500 Commission paid 36,000 Salaries 72,500 4% Government securities 3,00,000 69,15,000 69,15,000 5/6Q.P. Code : 13321 Adjustments : (a) © ©) (a) © @ (8) (hy Depreciate Plant and Machinery by 10% and Furniture by 5% Write off Preliminary expenses by 20% ‘Transfer Rs, 25,000 General reserve Provide for Income tax Rs. 62,500 Half year’s Debenture interest is outstanding Provide for final dividend at 5%. Ignore Corporate Dividend Tax Maintain provision for doubtful debts 5% on Sundry debtors ‘The stock on 31.03.2013 was estimated at Rs. 5,04,000. You are required to prepare the final accounts. 6/6