Reg. No. { pe AMalt [4] [16BBA3C04] HIRD SEMESTER UNIVERSITY EXAMINATION, OCTOBER 2018 CORPORATE ACCOUNTING Time: 03 HOURS Maximum Marks:70 SECTION ~ A 1. Answer any SEVEN of the following. 7x2=14 a. What do you mean by amalgamation in the nature of merger? b. Mention any two objectives of amalgamation of companies. Purchase consideration includes amount paid to creditors of the transferor Company. Is this statement correct? Why? ¢. Mention two features of absorption of companies, How is purchase consideration calculated under Net Payments method? f. Give the accounting treatment of dissolution expenses met by the purchasing company. G. Give the meaning of intrinsic value of shares. hh. Distinguish between External Reconstruction and Internal Reconstruction. i, What is a capital reduction account? 4. What is meant by business valuation? SECTION - B Answer any FOUR of the following. 4xaz16 ‘a. Differentiate between the merger and purchase of companies, b. The Balance Sheet of Dharma Ltd. on 31st March, 2018 was as under: Liabilities Rs. Assets Rs. share Capital 7,500 equity shares of Rs. 10 each fully paid 75,000 | Land and Bx 19S 2,00,000 10% Debentures 2,00,000 | Plant and Machinery 128,000 Standing Interest on debentures 20,000 | Sundry Debtors 80,000 60,000 | Investments 40,000 40,000 | Cash 2,000 benture Redemption Fund (Sinking fund) ‘40,000 | Preliminary Expenses 10,000 it and Loss Account 25,000 4,60,000 4,60,000 Karma Lid. absorbs Dharma Ltd. on the following terms: Karma Ltd. to take over sundry creditors. Karma Ltd, to take over Land and Buildings, Plant and Machinery and Investments at 120% of book values, Sundry debtors to be taken over at 90% book value and Goodwill at Rs. 35,400. Liability to debenture holders inciuding interest to be met by Issue of Rs. 2,00,000, 15% Debentures by Karma Ltd, Galculate Purchase Consideration. Page 1 of 5c. The following is the Balance sheet of Acme Ltd. as on 31-03-2018, Liabilities Rs. Assets Rs. Shares of Rs. 10 each 10,00,000 | Goodwill 2,00,000 Pdi Preference shares of] > 99,090) Machinery dooce Sundry Liabilities 10,00,000 | Stock 2,50,000 Debtors 2,00,000 | Bank 50,000 P&L Account 5,00,000 22,00,000 22,00,000 Preference Dividends are in arrears for the last 4 years. The following scheme is approved by the court. Equity shares to be reduced to Re. 1 each. 50% of the preference dividend In arrears to be paid in cash immediately and the balance of arrears is agreed to be foregone. Machinery to be depreciated by 5% and 10% reserve for doubtful debts to be provided. iv. All intangible assets to be written off. Joi Balance of reconstruction account if any to be capitalised. urnalise the above showing effect in the books of Acme Ltd. d. The purchasing company agrees to issue four shares of Rs. 10 each for every three shares of Rs. 10 each of the vendor company. The total numbers of shares of the ver cor ndor company are 10,000. The market price of each share of the purchasing mpany is RS. 15. Find out purchase price. . The following Is the Balance Sheet of Amrita Ltd. Liabilities Rs. Assets Rs. Share Capital 60,000 | Goodwill 28,000 Debentures 10,000] Land and Building 16,000 Sundry Creditors 6,000 | Plant and Machinery 28,000 General Reserve 4,000 | Stock 16,000 Profit and Loss Account 20,000 | Debtors 8,000 Cash 2,000 Preliminary expenses 2,000 2,00,000 1,00,000 Bangalore Ltd takes over the business of Amrita Ltd. the value agreed for various assets are: Goodwill Rs.22,000, Land & Building Rs.25,000, Plant and Machinery Rs.24,000, Stock Rs.13,000 and Debtors Rs.8,000. Bangalore Ltd does not take over cash but agrees to assume the liability of sundry creditors at Rs.5,000. Calculate the purchase consideration. fo ow rite short notes on Discounted Cash flow method of corporate valuation. Page 2 of §SECTION ~ ¢ 3. Answer any THREE of the following. 3x10=30 a. Following are the Balance sheet of A Ltd. and 8 Ltd. as on 31.3.2018: Liabilities A(Rs.) B(Rs.) | Assets | A (Rs.) B(Rs.) Share Capital: Equity shares of Rs. 10] $0,00,000) 20,00,000]4274, "41 —23,90,000] 12,00,000 each fully paid fasted 14% Preference share Plant and capital (Rs, 100 each 20,00,000} _10,00,000 | wachinery 45,009,000} 18,00,000 General Reserve 8,00,000] _2,00,000| Furniture 5,00,000| _2,00,000 Investment allowance 7,00,000] _3,00,000| Stock 15,00,000] __5,00,000 Profit and Loss Account | 10,00,000] _5,00,000| Debtors 10,00,000] _7,00,000 12% Debentures (Rs. Cash at too sn 5,00,000) 2,00,000| Sash 3,00,000] — 3,00,000 Creditors 5,00,000| _3,00,000 Other Current Liabilities} 4,00,000| _2,00,000 1,09,00,000| 47,00,000 1,09,00,000| 47,00,000 A Ltd. takes over B Ltd, as on 31.3.2018 on the following terms: i, To issue 2,00,000 Equity Shares of Rs. 10 each at Rs. 12.50 to the Equity Shareholders of B Ltd, To issue 15% preference shares of Rs. 100 each to discharge preference shares of B Ltd. at par. To convert debentures of B Ltd. into equivalent number of debentures of A Ltd. of Rs, 100 each, iv. To maintain investment allowance reserve for two years. Ww. The fair value of Plant and Machinery is Rs. 15,00,000. Pass Journal Entries or ledger accounts in the books of the transferee company. b, Following is the Balance sheet of A company as on 31.03.2018. Liabilities Rs.| Assets Rs. 1,20,000 shares of Rs. 10 each | 12,00,000 | Buildings 7,50,000 Reserve Fund 6,00,000 | Machinery 3,64,500 Development Reserve Fund 12,500 | Stock 4,55,750 Creditors 2,00,000 | Debtors 3,82,500 Profit and Loss Account 65,280 | Bank 1,25,030 20,77,780 | 20,77,780 ‘The concern is acquired by B Company. The purchase consideration being the payment Of Rs. 10,00,000 in cash and allotment of two fully paid shares of Rs. 10 each at an agreed price of Rs. 12.50 in exchenge for every 3 shares of A company. The liquidation expenses of the Vendor Company is Rs. 15,000. Page 3 of SShow the necessary journal entries to record the above in the books of B company using Purchase method, Assume that development rebate reserve will continue for 3 more years in the transferee company. The following is the summarised Balance Sheet of A Ltd. as at 31st March, 2018 Liabilities Rs. Assets Rs. 8,000 equity shares of Rs. 100 each 8,00,000 | Building 3,40,000 10% debentures 4,00,000 | Machinery Eee 6,40,000 Loan from A 1,60,000 | Stock 2,20,000 | creditors 3,20,000 | Debtors 2,60,000 General Reserve 80,000 | Bank i 1,36,000 Goodwill 1,30,000 Share issue Expenses 34,000 17,60,000 17,60,000 B Ltd. agreed to absorb A Ltd, on the following terms and conditions: 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 the combined amount of share capital and general reserve. B Ltd. is to take over creditors at book value. ‘The purchase consideration is to be paid in cash to the extent of Rs. 600,000 and the balance in fully paid equity shares of Rs. 100 each at Rs. 125 per share. The average profit is Rs. 1,24,400. The liquidation expenses amounted to Rs. 16,000. B Ltd. sold prior to 31st March, 2018 goods costing Rs. 1,20,000 to A Ltd. for Rs. 1,60,000. Rs. 1,00,000 worth of goods are still in stock of A Ltd. on 31st March, 2018. Creditors of A Ltd. include Rs. 40,000 still due to B Ltd. Show the necessary Ledger Accounts to close the books of A Ltd. d. The Balance sheet of Ram Dev Ltd. on 31-03-2038 is as follows: Liabilities Rs. Assets Rs. ee ee 6,00,000 | Goodwill 70,000 Buildings 80,000 2000 shores af Re, 100 each fully paid up | 200,000] Plant eevee 200, 5% Debentures of RS. 1,000 each 2,00,000 | Stock 50,000 Sundry Creditors 50,000 | Debtors 43,000 Bilis payable 5,000 | Cash 2,500 Bank Overdraft 45,000 | Preliminary expenses 4,500 Profit and Loss Account | _1,00,000 5,00,000 5,00,000 Page 4 ofS‘The following scheme of reconstruction was adopted: I. The paid up value of each share to be reduced to Rs. 50. ii. 5% Debentures to be converted into 100, 7,5% Debentures of Rs. 1,000 each. ili, Assets were revalued as under: Buildings - Rs. 72,000, Plant - Rs. 1,40,000, Stock - Rs, 45,000, Debtors subject to Reserve for bad debts - Rs. 2,500 iv. Creditors agree to forego 1/4th of the amount due to them in return for shares for the balance, v. Goodwill and other fictitious assets to be written off entirely. vi. Give necessary journal entries in the books of Ram Dev Ltd. Discuss the successive steps to be taken for making out a scheme of external e. reconstruction, SECTION - D 4. Answer any following compulsory question. 1x10=10 The following is the Balance sheet of Mysore Sandal Ltd, as on 31st March, 2018. Liabilities Rs, Assets Rs. 13% cumulative preference shares eee iboeach 1,00,000 | Fixed Assets 15,00,000 Equity shares of Rs. 10 each 7,00,000 | Current Assets 35,00,000 8% Debentures 3,00,000 | Profit and Loss Account 3,00,000 Current Liabilities 39,00,000 Provision for Taxation 3,00,000 53,00,000 53,00,000 vi. vii, vill, ‘The following scheme of reconstruction was adopted: Fixed assets are to be written down by 33.33%, Current assets are to be revalued at Rs. 27,00,000. Preference shareholders decide to forego their right to arrears of dividend which are in arrears for three years. The tax liability is settled at Rs. 4,00,000. One of the creditors of the company to whom the company owes Rs. 25,00,000 decides |. He is allotted 1,00,000 equity shares of Rs. 5 each In part to forego 50% of his clait satisfaction of the balance of his claim. The rate of interest of debentures is increased to 11%. The debenture holders surrender their existing debentures of Rs. 100 each and exchange the same for fresh debentures of Rs. 75 each, All existing equity shares are reduced to Rs. 5 each. All preference shares are reduced to Rs. 75 each. Pass necessary Journal entries. Page 5 of 5[16BBA3C04) THIRD SEMESTER UNIVERSITY EXAMINATION, SEPTEMBER/OCTOBER 2017 CORPORATE ACCOUNTING Time: 03 HOURS Maximum Marks:70 ‘SECTION - A 1. Answer any SEVEN of the following. Each question carries TWO marks. 7x2=14 a. What is meant by Intrinsic Value of Shares? b. What is purchase consideration as per AS-14? © State the different forms of Internal Reconstruction. d. How do you treat workmen's compensation Fund under Amalgation? @. How are balances in Capital Reduction Account treated? f. State the Journal Entry for recording of Statutory Reserve of Selling Company. g. Give the meaning of Internal Reconstruction. hh, What are Current assets? i. State the different methods of accounting for Amalgamation. j. State the reasons for Corporate Valuation. SECTION - B Answer any FOUR of the following. Each question carries FOUR marks. 4x4=16 a. State the difference between internal reconstruction and external reconstruction. b. The following is the Balance Sheet of C Ltd. as on 31/3/2010. Liabilities T Rs. Assets Rs. ‘Share capital: 7 500.000 Goodwill 20,000 | Authorised Capital: 50,000 Preference Shares of Rs. 10 | each | 50,000 Equity Shares of Rs. 10 each —_| 5,00,000 | Leasehold Premises 2,07,000 {Issued & Paid up: a 250,000 | Plant & Machinery 60,000 | 25,000 Preference Shares of Rs. 10 | : each | 25,000 Equity Shares of Rs. 10 each 2,50,000 | Patents | 4,73,000 Current Liabilities: at ‘Stock 34,000 | Sundry Creditors 40,000 Bank overdraft 36,000 | Debtors 56,000 ot Cash 100 aaa Preliminary Expenses 3,000 CL Profit and Loss A/C 23900 l 5,76,000 5,76,000 | The Company proved unsuccessful and resolution were passed to Carry out the following scheme of reconstruction by reduction of capital Page 1 ofe ‘That the Preference Shares to reduce to an equal number of fully paid shares of Rs. 5 each. That the amount so available be utilized towards wiping out losses and reduction of assets as follows: Preliminary Expenses, Goodwill and Profit & Loss Account to be written off entirely, RS. 27,000 to be written off on Leasehold Premises, Rs. 14,000 to be written off on stock, Rs. 6,000 to be provided for doubtful debts, 20% should be written off on Plant and Machinery and the balance be written off against Patents Pass journal entries in the books of the Company. Briefly explain the methods of calculating Purchase Consideration? A purchasing company agrees to issue 3 shares of Rs 10 each, Rs 8 paid up for every 5 shares in the vender company. Find the number and amount of shares to be issued by the purchasing company if the vendor company has Rs 5,00,000 paid up capital of shares of Rs 10 each. A purchasing company agrees to issue 3 shares of Rs 10, Rs 7 paid up (quoted in the market price at Rs 15) for every 6 shares in the vendor company, find the number of shares to be issued by the purchasing company if the vendor company has 6,00,000 paid up of Rs 10 each. Write a brief note on Comparable Transaction. Liabilities and Assets of Dreamers Ltd. as on 31° March, 2015 stood as under: Rs, In Lakhs Liabilities ‘Amount [Assets ‘Amount 10% Preference Shares of Rs. 100 each | 30 | Fixed Assets 130 | Equity Shares of Rs. 10 each 60 | Investments 24 General Reserve 36 | Current Assets 20 12% Debentures 28 | Current Liabiniti a) eee eee) Total ce 174 | Total 74 Performers Ltd. signified their agreement to take over the assets and liabilities of Dreamers Ltd. as per the following terms and conditions: i. ii. ii. Fixed assets at 90% of the book value. Investments at 10% above the par value. Current assets and liabilities at book value except that stock in trade at cost amounting to Rs. 10 lakh was agreed to be taken over at a discount of 20%. 12% Debentures are to be discharged at a premium of 15% by issuing 12% debentures of Performers Ltd. Preference shareholders are to be discharged at a premium of 15% by issuing 10% preference shares of Rs. 100 each. Equity shareholders in Dreamers Ltd. are to be issued 5 equity shares of Rs. 10 each in Performers Ltd. for every 3 shares held by them. Work out the consideration for the takeover under: Net Assets Method. Page 2 of 5SECTION ~ c Answer any THREE of the following. Each question carries TEN marks. 3x10=30 X Co. Ltd., and Y Co. Ltd., have agreed to amalgamate and to form a new company called Z Co. Ltd., which has taken over business of both the companies as per their balance sheets given below: Balance sheet of X Co. Ltd., as on 31/3/2010 Page 3 of 5 Liabitities ‘Amount | Assets ‘Amount ‘Share Capital Fixed assets: Subscribed and paid up Land & building 50,000 shares of Rs. 10/- 5,00,000 | 2,00,000 Plant & Machinery 4,00,000 1,50,000 Furniture t 50,000 Reserves and Surplus: Investment in Govt Securities | 2,00,000 General reserve 1,50,000 Surplus 50,000 2,00,000 ‘Secured loans ~ | Current assets, loans and advances: Stock 90,000 Debtors 2,00,000 80,000 Bank 30,000 | Unsecured loans = [Miscl. expenses = Current liabilities and | Profit and loss a/c = provision: Creditors 80,000 | i Bills payable 20,000 {___1,00,000 | | | 8,00,000 8,00,000 Balance sheet of ¥ Co. Ltd., as on 31/03/2010 Amount, Assets ‘Amount | | Fixed assets: Subscribed and paid up Land & building 80,000 shares of Rs. 10/- | 8,00,000 | 3,00,000 Plant & Machinery 2,50,000 7,50,000 Patents 1,50,000 | Furniture 50,000 j Reserves and Surplus: Investment in Govt Securities | 4,50,000 General reserve 3,00,000 ‘Surplus 1,00,000 | 4,00,000 _ ‘Secured loans against 1,50,000 | Current assets, loans and buildings advances: Stock 1,20,000 Debtors 3,00,000 90,0007 a Bank T | 90,000 [Unsecured loans - Deposits_[ 50,000 Miscl. expenses 5 [Current liabilities and Profit and loss a/c > | provision: | Creditors 60,000 | Bills payable 40,000 1,00,000 Cc 15,00,000 15,00,000 ce You are required to give necessary journal entries to close the books of X Co. Find out the purchase consideration of each company and give Balance sheet of Z Co. Which has authorised capital of Rs. 25,00,000 of Rs. 10 each ‘Assume amalgamation is in the nature of purchase. Write a brief note on internal reconstruction, it needs, procedure and forms of reduction. Briefly bring out the difference between amalgamation in the nature of purchase and amalgamation in the nature of merger. The following is the Balance Sheet as on 31* March 2010, f Liabilities Rs. Assets Rs. 20,000 Equity Shares @ Rs. 10 fully paid 2,00,000 | Buildings 2,00,000 10% Cumulative Preference @ Rs. 100 fully paid 50,000 | Machinery 1,30,000 ‘8% Debentures 1,00,000 | Patents 40,000 Trade Creditors 3,30,000 | Inventories 80,000 Creditors for expenses 20,000 | Debtors 55,000 Preliminary expenses | 10,000 Pee Profit & Loss A/c 1,85,000 7,00,000 7,00,000 ‘Scheme of reconstruction: i. Reduce Equity Shares by Rs. 9 each. 10% Preference Shares by Rs. 40 each. 8% Debentures to Be reduced by 10%, trade creditors ciaims by 1/3". Machinery rate to Rs. 70,000 and Inventories by Rs. 10,000. fi. To provide Rs. 15,000 for bad debts. ili, Written off all intangible assets. iv. Raise the rate of preference dividend to 13%. v. Raise the rate of interest on debentures to 13.5%. Following is the Balance sheet of B Co Ltd., as on 31% March, 2015 Balance Sheet of B co. Ltd Lial ies Amount Rs. Assets Amount Rs. Equity Share Capital Goodwill 15,000 (2500 shares of Rs.100 each) 2,50,000 | Building 1,50,000 Reserve fund 50,000 | Machinery 1,35,000 Profit & Loss A/c 25,000 | Investments 75,000 10% Debentures 1,00,000 | Stock 1,00,000 Creditors 50,000 | Debtors 30,000 Dividend equalization fund 25,000 | Cash 20,000 ‘Tax provision 25,000 5,25,000 fe 5,25,000 Page 4 of 5© Co. itd. purchasea the business of B Co. Ltd., on the following terms. All the assets except cash and goodwill are taken over. ii. 400 shares of Rs. 100 each of C Co. are issued at an agreed valu Per share in full settlement of accounts of creditors. iil. 5 equity shares of Rs. 100 each in CCo, are issued to equity shay an agreed value of Rs. 125 per share for every 4 shares held in B le of Rs, 125 reholders at Co. Iv. Cash Rs. 40 per share held in B Ltd. is paid to equity shareholders, Ys 10% debentures are discharges at 20% premium by issue of necessary amount of 12% debentures in C Ltd. Calculate purchase consideration and Pass opening Journal entries, SECTION-D 4. Answer the following Compulsory question. Which carries TEN marks. 1x10=10 AUG. and 8 Ltd, agreed to amalgamate by transferring their undertakings to an company AB Ltd. formed for that purpose. the companies were as under: ew On the date of amalgamation, balance sheet of ‘A Ltd Ltd ‘A’ Ltd [BL td abilities Assets AmtRs | Amt.Rs AMERS | Amt.Rs Share capital(10 each) | 5,060,000 | 3,00,000 | Sundary Assets 4,80,000 | 3,22,000 Reserve ~| 50,000 | Freehold Property 2,00,000 | 1,00,000 j P&L Account 30,000 | 20,000 | Debtors 2,50,000 | 1,50,000 ‘5% Debentures 2,00,000 | 1,00,000 T investment “50,000 | 20,000 Creditors aa 2,20,000 } 1,30,000 | Preliminary Expenses 20,000 ‘8,000 Mortgage Loan 50,000 1 His Ee fa 10,00,000 | 6,00,000 ——— f8;50;000 6,00,000 ‘The purchase consideration consisted off i, The discharge of debentures in A Ltd. and B Ltd. by the issue of equivalent amount of 6% debentures in AB Ltd. il, The assumption of liabilities of both the companies. ‘ii, each in AB Ltd. for the purpose of amalgamation, the assets are to. revalued as under: Particulars Altd. Rs. |B Ltd. Rs [Goodwill 7,00,000 75,000 ‘Sundry Assets See 410,000 | 2,80,000 [Freehold Property # 2,60,000 | 1,409,000 | [Investments 1——~si,000! 20,000 Debtors 2,25,000 | 1,35,000 | ae [eae td. —Journalise the above transaction in the books of A Ltd. and AB L ‘The issues of shares at a premium of Rs.2 per share of equity shares of Rs.10 be Page 5 of 5Reg. No. [38Ba3] THIRD SEMESTER UNIVERSITY EXAMINATION, OCTOBER 2016 CORPORATE ACCOUNTING Time: 03 HOURS: Maximum Marks: 80 SECTION -A 1. Answer any FIVE of the following. Each question carries TWO marks. 5x2=10 a. What is meant by Purchase Consideration? b. State the accounting procedure far amalgamation. €. State any two items of statutory reserves. 4. What is Absorption? ©. What is purchase method? f. Give the meaning of external reconstruction. 9. When can a company reduce its share capital? fh. What is surrender of shares? SECTION -B 2. Answer any TWO of the following. Each question carries FIVE marks. a. Explain the types of amalgamation in brief. b. ABC Limited was purchased by XYZ Limited on following agreed terms: 1. Apayment in cash at 2.40 for equity share In ABC Limited. ii, A further payment in cash of Rs.110 for every debenture in ABC Ltd. I. An exchange of 4 shares in XYZ Limited of Rs.50 each at the market value of Rs.50 for every share in ABC Ltd. ABC Ltd has 1,00,000 equity shares and 50,000 debentures. Calculate the amount of purchase consideration. © Godrej Co., Ltd., was purchased by the Super Co., Ltd., The Purchase Consideration payable was as follows: 1. Payment in cash of Rs. 20 for every share in Going Co... Ltd H, A further payment of cash Rs. 55 for every debenture (No of Debentures. 1,000) Ml. An exchange of 3 shares in super company Ltd of Rs 30 each at the market value of Rs.50 for every share in Godrej Co, Ltd. The share capital of the going company is 1,000 shares of Rs.100 each. Calculate Purchase Consideration 4. Calculate Liquidator’s remuneration: Balance of cash after paying preferential creditors Rs. 4,10,000 ‘Other unsecured creditors Rs. 4,78,000 fil. Liquidator's remuneration 3% on the amounts paid to other unsecured creditors: iv. Also state the amount paid to unsecured creditors. Page 1 of 6Answer ALL the following questions. Each question carries TEN m: ili, The amount so made available be used to write off Rs.30,800 of the leasehold premises : Rs.15,000 off , stock :20% of plant and machinery and sundry debtors and balance available of patents Journalize the transactions and prepare the balance sheet after the reconstruction has been carried out. ‘The following was the Balance Sheet of the Sound Ltd., as at 31" March 2015 when it was wound up voluntarily. Liabilities ‘Amt (Rs.) | Assets ‘Amt (Re.) '50,000 Equity shares of Rs Plant & Machinery | 4,00,000 10 each 5,00,000 | Furniture 7,000 2,000, 6% Cumulative Tnvestments 50,000 Preference shares of Rs. | Stock ‘50,000 100 each 2,00,000 | Debtors 2,00,000 7% Debentures 7,00,000 | Cash 7,200 1 ‘Sundry creditors Profit @ Less B/E [447,800 Tree 3,00,000 ‘Cash 48,000 Outstanding 2,000 ines 11,50,000 13,50,000 Preference dividends are In arrears for one year. Debenture interest Is also due for ‘one year. All the outstanding creditors are preferential. The assets realized a follows: Plant & Machinery Rs. 2, 80,000 Furniture Rs. 400 Debtors Rs. 1, 50,000 ‘The stock and investments realize nothing. The expenses of liquidation amounted to Rs, 2,000. The liquidator is entities to a commission of 4% on the ausuls realized ‘and 2% on the amount paid to unsecured creditors. Prepare the Liquidator’s statement of account showing the compensation paid to the unsecured creditors. SECTION -D 3x10=30 [Attd and B itd have decided to amalgamate. A new company AB Lid. is formed to take over the two companies on 31% March 2001. The balance sheets of the two ‘companies were as under: aia abies ae | ee ame ne. | Amt Re. SRaReorRS Te] 480,000) 69.000 Land & 705,000} — 66,000 ‘i Bulnos a = 1 15, Prank & 35,005) 351 TRasee | 80,000 ee Machinery ot Pae 4 of 6[Profit & Loss A/e 20,000 | 20,000 | Motor Vehicle 10,000 5% Debentures: 60,000 | Stock 60,000 78,000 Creditors 75,000 | 32,000 | Cash 43,000 | 18,000 | Debtors 82,000! 21,000 | | 3,25;000 1,92,000 3,25,000 | 1,92,000 ‘The assets & liabilities are to be taken over at book value with the following exceptions: Good will of A company & B company are to be valued at Rs. 80,000 & Rs. 30,000 respectively. Motor Vehicle of A company are to be valued at Rs. 30,000. Debentures of 8 Company are to be discharged by the issue of 5% debentures of AB company at a premium of 4%. Debtors & Cash of B Ltd are to be retained by the liquidator and creditors are to be paid out of the proceeds thereof. Pass opening journal entries in the books of AB Ltd. ‘The Balance Sheet of N Company as on 31-12-2015 was as follows: “Liabilities Amount Assets amount Re. Re. {000 shares of Rs.100 each) | 1,00,000 | Goodwill 17,500 Raserve fund 10,000 | Building 42,500 50% Debentures, 50,000 | Machinery 80,000 Loan from X (A Director) 20,000 | Stock on hand 27,500 Creaitors “| 40,000 | Debtors 32,500 Cash at Bank 17,000 Discount on Debentures 3,000 2,20,000 2,20,000 This company was agreed to be purchased by M Company on the following terms. 1. M Company to acquire all assets at book value fers 10% except cash, which ig retained in the N Company. The goodwill is to be valued on the following lines: 3 i. The Goodwill Is to be valued at 4 years purchase of the excess average profit of 5 years over 8% of the combined Share Capital and Reserve Fund. ill. M Company to takeover creditors at 5% Discount iv. The purchase consideration to be paid as to Rs. 75,000 in cash and the palance in shares of Rs. 10 each, valued at RS. 12.50 each 7 srha, Admmepeliprortts tor |eellest Bi yenrel te Rs, 15,050, the /@xprrire® of realisation are Rs. 2,000. prepare the necessary Ledger accounts in the books of N Company: Page 5 of 6Reg. No. [TJ | I OQ [3BBA3) THIRD SEMESTER UNIVERSITY EXAMINATION, SEPTEMBER/OCTOBER-2017 CORPORATE ACCOUNTING (FOR 2015 BATCH) Time: 03 HOURS Maximum Marks: 80 SECTION - A 1. Answer any FIVE of the following. Each question carries TWO marks. 5x2=10 a. State any two items of statutory reserves. b. Explain the net asset method of purchase consideration. . & State the different types of amalgamation. d. What is Realisation account? €. What do you mean by Transferee Company? f. What are miscellaneous expenses? 9- What is reduction of share capital? h. What is liquidation of a company? SECTION - B 2. Answer any TWO of the following. Each question carries FIVE marks. 2x5=10 ‘@, _ State the conditions for amalgamation in the nature of a merger as per AS-14. b, —_Explain pooling of interest method and purchase method. 2 Company Ltd., has an Authorised Capital of Rs. 14, 00,000/-. In the form of 50,000 preference shares of Rs. 10/- each and 90,000 ordinary shares of Rs. 10/- each. A Co., Ltd., purchased Z Co., Ltd., on the following terms: i, Two shares of Rs.5 each fully paid in A Co., Ltd., to be issued for every three shares In Z Co., Ltd., li, Six shares of Rs. 5/- each fully paid in A Co., Ltd., to be issued for every five preference shares imZ Co., Ltd., Calculate Purchase Consideration. ; Calculate the amount of preferential creditors from the following information: Income tax payable Rs. 25,000 Salaries and wages payable to 10 workers at Rs. 10,000 per month for the last 3 months. ili. Remuneration to office staff Rs. 2,00,000 Compensation under the Workmen's Compensation Act 1923, in respect of iv. death of an employee Rs. 40,000 is due from a provident fund for the welfare of the v. Amount due to an employee, employee, maintained by teem Rs, 20,000 SECTION - C Each question carries FIFTEEN marks. 2x15=30 any TWO of the following. : pannel pany Ltd. and B company Ltd. a. The following are the Balance Sheets of A com Balance Sheet of A company Ltd. | acesLiabilities Ltd Amt Rs. | Assets | ‘A’ Ltd Amt Rs. i 15,000 4 50,000 | Buildings | 5,000 Eauity Share Rs. 10 each) 50,000 | Balding sou Reserve Fun Machine : Dividend Equalisation Fund 208 Dente + Lae 100, 6% Debentures of Rs.100 each. 0,000 | Steck 2.000 Employees Provident Fund 1508 Pa Account a | Trade Creditors 5 e500 Balance Sheet of B Company Ltd. ae “Br Ltd 7 Liabilities Re Asset auras 1,500 Equity shares of R5.20 each_| 39 990 | Machinery 25,000 z 7 000 é 4,000 | Stock 4 it x Trade Creditors Sia = 7H Less: Reserve 500 a 4,500 Cash 500 34,000 34,000 The two companies agree to amalgamate and form a new company called C Company Ltd., which takes over the assets and liabilities of both the companies. The assets of A Company Ltd. are taken over at a reduced valuation of 10% with the exception of building which is accepted at book value. Both companies are to receive 5% of the net valuation of their respective businesses as goodwill, The entire purchase price is to be paid by C Company Ltd., in fully paid shares of Rs. 10 each. In return for debentures in A Company Ltd., debentures of the same amount and denomination are to be issued by C Company Ltd., Give Journal entries to close the books A Company Ltd., and show the opening Balance Sheet of C Company Ltd., under business Purchase method, whose authorized capital is Rs.1,00,000 in Rs:10. b. Bharath Ltd. was absorbed by India Ltd. On 31/12/01, and the Balance Sheet was as follows: liabilities Amount(Rs.) | Assets Amount(Rs.) | Equity share capital 6,00,000 | Buildings 4,00,000 5% pref. share capital 4,00,000 | Plant 2,00,000 Sundry creditors 1,10,000 | Current assets 2,00,000 Development rebate reserve 40,000 | P/L Account 3,50,000 11,50,000 11,50,000 India Ltd took over buildings at Rs. 3,00,000 plant at Rs. 1/40,000 and stock at Rs.60,000. The purchase consideration is to be satisfied by the issue of 8% Preference shares of Rs. The preference share holder preference shares. 100 each and equity shares of Rs 10 each in ratio of 3:2, "8 are to be settled in full by the allotment of new Sundry debtors realized Rs150000 and Rs100000 was aid to sundry creditors in full settlement (there were No other current assets). Cost Page 2 of 5of liquidation Rs.10000. Development rebate reserve is a statutory reserve to be continued for 2 more years. Prepare necessary ledger accounts in the books of Bharath Ltd. Opening journal entries of India Itd. and its balance sheet. M Itd presents you with the following balance sheet as on 30/6/2012: Liabilities ‘Amount(Rs.) | Assets Amount(Rs.) Share capital: Goodwill 30,000 Equity shares of Rs.100 each 2,00,000 | Land and building 75,000 fully paid Plant and Machinery 150,000 7% preference share 1,50,000 | Patents 15,000 Profit prior to incorporation 5,000 | Stock 1,10,000 6% debentures 1,50,000 | Sundry debtors 75,000 Sundry creditors 1,00,000 | Cash 2,500 Preliminary expenses 12,500 P/L ale 1,35,000 6,05,000 6,05,000 The following scheme of reconstruction was duly approved: 1.7%, preference shares are converted into 9% preference shares, the.amount being reduced by 30%. Equity shares are reduced to fully paid shares of Rs50 each. Land and buildings be appreciated by 20%. Debentures are reduced by 20%. v. All intangible assets and fictitious amounts including patents are written off. Utilise profit prior to incorporation, if necessary. Assuming the whole scheme to have been put through, give journal entries in the books of M company. Fortune Ltd., went into voluntary liquidation on 1-4-2015 on which date its position was as under: Liabilities ‘Amount (Rs.) ‘Share capital: 2,500 shares of Rs. 100 each, 2,00,000 Rs. 80 per share paid up \ Secured loan (Land, Building, Machinery) 50,000 Unsecured loan ‘95,000 Preferential creditors 5,000 Ee '+__3,50,000 Assets: _[Land, Building, Machinery 40,000 Other fixed assets 1,30,000 ‘Stock See 52,500 Debtors 50,000 Loans 20,000 Cash 2,500 Profit and Loss a/¢ 55,000 eee 3,50,000 land, Building and Machinery were realized by secured creditors for Rs. 60,000. Other fixed assets realized Rs. 20,000. Debtors Rs. 10,000; Stock Rs. 5,000. Loans were completely bad. Liquidator is to be paid a fixed commission of Rs. 500 plus 1% Page 3 of 5of the amount paid to unsecured creditors excluding preferential creditors, Liquidator’s out of pocket expenses amounted to Rs, 500. Company decides to make calls on shares and received I nfl Prepare Liquidator's final statement of account. SECTION - D Answer ALL the following questions. Each question carries TEN marks. 3x10=30 a. X Ltd. and Y Ltd. have decided to amalgamate. A New Company XY Ltd. is formed to take over the two companies on 31 March 2008. The Balance Sheets of the two companies were as under: iabilities | |x Ltd. [YLtd. | Assets x Ltd. | ¥ Ltd. | (Rs.) (Rs.) (RS.) (Rs.) Share of Rs. 10each | 75,000] 40,000) Land & Building | 52,500 30,000 General Reserve 40,000 Plant & Machinery | 12,500 7,500 Profit & Loss A/c 10,000] 10,000 | Motor Vehictes 5,000 - 5% Debentures | -| 30,000 | Stock 30,000 39,000 Creditors 37,500} 16,000 | Debtors 41,000 10,500 Cash 21,500 9,000 L | 3,62,500 | 96,000 1,62,500 | 96,000 ‘The assets and liabilities are to be taken over at book values with the following exceptions: i. Goodwill of X Company and Y Company is to be valued at Rs.40000 and Rs.15000 respectively. ii, Motor vehicles of X Company are to be valued at Rs. 15,000. Debentures of XY Company at a premium of 4%, iv. Debtors and Cash of Y Ltd. are to be retained by the liquidator and creditors are to be paid out of the proceeds thereof. Debentures of Y Company are to be discharged by the issue of 5% Compute the basis on which shares in XY Company will be issued to shareholders in the existing companies. Pass Journal Entries in the books of XY Ltd. b. The A Co. Ltd sells its business to B Co. Ltd. as on 31* Dec 2009, on which date its B/S was as under: Liabilities Rs. ‘Assets Rs. Paid up capital(2000 shares ‘Goodwill 50,000 of Rs.100 each) 2,00,000 | Freehold property | 150,000 Debentures 1,00,000 | Plant & Tools 83,000 Creditors 30,000 | Stock 35,000 General reserve 50,000 | Bills Receivable 4500 P&La/c 20,000 | Debtors 27,500 Cash at back 50,000 4,00,000 4,00,000 Page 4 of SB Co, Ltd. agreed to take over all the assets (exclusive of cash and goodwill) at 10% less than the book Value to pay Rs.75, 000 for goodwill and to take over the debentures The purchase consideration was to be discharged by the allotment to the A Co. Ltd of 1500 shares of Rs.100 each at premium of Rs.10 per share and balance in cash The cost of liquidation amounted to Rs.3000 paid by liquidator. Show Realisation a/c, Shareholders’ a/c, B. Co. Ltd a/c, and Bank a/c in the books of Vendor ‘Company. Balance sheet of XY Itd as at 31/12/2001 was as follows: ‘Liabilities Rs. Assets Rs. ‘Share capital: | Goodwill 15,000 2000 preference share of Freehold premises | 2,00,000 Rs.100 each 2,00,000 | Plant 3,00,000 4000 equity share of Rs.100 Stock 50,000 each 4,00,000 | Debtors 40,000 5% mortgage debenture 1,00,000 | P/L a/c 2,45,000 Bank overdraft 50,000 creditors 1,00,000 : 8,50,000 8,50,000 The following scheme was approved by the court for the company: i. Preference shares to be reduced to Rs.75 per share and the equity share to Rs.37.50 per share. q Hl, Debenture holders to take over stock and book debts in full satisfaction of the amount due to them. lil. Goodwill to be eliminated iv. Freehold premises to be depreciated by 50% v. Plant to be appreciated by Rs.50,000. Journalise and prepare the revised Balance Sheet. Page Sof 5