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Reg. No. : .................................... Name : .........................................

(Pages : 7)

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Second Year B.Com. Degree Examination, March 2009 (Old Scheme Prior to 2006 Admn.) Part III : Paper VIII : ADVANCED ACCOUNTING
Time : 3 Hours Max. Marks : 100

Instruction: Answers may be written either in English or in Malayalam. SECTION A Answer any ten questions. Each question carries two marks. 1. Explain prorata allotment. 2. Explain the term Firm Underwriting. 3. What are participating preference shares ? 4. What do you mean by forfeiture of shares ? 5. Define Debentures. 6. What is Capital Reserve ? 7. What is interim dividend ? 8. Define minimum subscription. 9. What do you mean by Revaluation Account ? 10. What do you mean by Gaining Ratio ? 11. What do you mean by Sweat Equity ? 12. What is Realisation A/c ? (102=20 Marks)

P.T.O.

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SECTION B Answer any eight questions. Each question carries 5 marks. 13. State the provisions regarding redemption of preference shares. 14. What are the advantages of underwriting of shares ? 15. Explain the various methods of calculating purchase consideration. 16. Explain the advantages of right issue. 17. What are the purposes for which share premium can be used ? 18. Distinguish between Amalgamation and External reconstruction. 19. A company has 10,000, 11% redeemable preference shares of Rs. 100 each fully paid. The company decides to redeem the shares at par. For the purpose, it issued 50,000 equity shares of Rs. 10 each and the balance as made available from the accumulated profit. The issue was fully subscribed and all the amount were received. The redemption was duly carried out. Give journal entries. 20. A company forfeits 100 shares of Rs. 10 each, originally issued at a premium of Rs. 2 per share. The shareholder paid Rs. 4 per share on application; did not pay the allotment money of Rs. 4 per share (including premium) and call money of Rs. 4 per share. The company takes credit for the premium as soon as it becomes due. The shares are forfeited and subsequently reissued at Rs. 11 per share, fully paid up. Pass journal entries for forfeiture and reissue of shares. 21. A and B are sharing profits in a business in the ratio of 3 : 2. They admit C as a partner. The new ratio being 2 : 2 : 1 for A, B and C respectively. The value of the firms goodwill is estimated at Rs. 15,000. C is not in a position to bring any cash for his share of goodwill. Pass a suitable journal entry for adjustment of goodwill in partners capital accounts.

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22. Rajendra Ltd. was incorporated on 1-7-2005 to take over the business of G.K. Enterprises as a going concern with effect from 1-4-2005. Their Profit and Loss Account for the year ended 31-3-2006 is as follows : Profit and Loss Account Rs. To Opening Stock To Purchases To Administration Expenses To Directors Fee To Selling Expenses To Audit Fees To Preliminary Expenses To Net Profit 60,000 87,500 9,000 1,500 18,000 500 1,500 7,000 1,85,000 1,85,000 By Sales (upto 30-6-2005 Rs. 50,000) By Closing Stock 35,000 Rs. 1,50,000

Prepare a statement showing the profit earned prior to and after incorporation. 23. The following is the Balance Sheet of A Co. Ltd. : Liabilities Share capital 6,000 equity shares of Rs. 10 each 5% Debentures Sundry Creditors General Reserve Profit and Loss Account 60,000 10,000 6,000 4,000 20,000 1,00,000 Rs. Assets Goodwill Land and Buildings Plant and Machinery Stock Debtors Cash Preliminary Expenses Rs. 28,000 16,000 28,000 16,000 8,000 2,000 2,000 1,00,000

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B company takes over the business of A company. The value agreed for various assets is : Goodwill Rs. 22,000; Land and Buildings Rs. 25,000; Plant and Machinery Rs. 24,000; Stock Rs. 13,000; and Debtors Rs. 8,000. B company does not take over cash but agreed to assume the liability of sundry creditors at Rs. 5,000. Calculate purchase consideration. 24. Sunlight Ltd. has Rs. 11,20,000 in equity share capital consisting of 80,000 shares of Rs. 10 each fully paid and 40,000 shares of Rs. 10 each, of which Rs. 8 paid per share. It has Rs. 40,000 in Capital Reserve, Rs. 40,000 in securities premium account, Rs. 1,40,000 in Capital Redemption Reserve Account and Rs. 3,00,000 in General Reserve. By way of bonus dividend the partly paid up shares be converted into fully paid up shares and the holders of fully paid up shares are also allotted fully paid up bonus shares in the same ratio. Pass journal entries showing separately the two types of bonus issues as mentioned above with the minimum reduction in free reserves. (85=40 Marks) SECTION C Answer any two questions. Each question carries 20 marks. 25. Lean, Thin and Strong are partners in a firm sharing profits and losses in the ratio of 5 : 4 : 1. Balance Sheet of Lean, Thin, Strong as at Dec. 31, 2007 Liabilities Sundry Creditors Capital Accounts Lean Thin Strong 20,000 15,000 10,000 45,000 57,500 57,500 Rs. 12,500 Assets Cash at Bank Sundry Debtors Stock Plant Rs. 1,000 20,000 10,000 26,500

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Lean dies on March 31, 2008 and the partnership deed provides, among other things, that in the event of death of a partner his executor will be entitled to : 1) A share in the profits up to the date of death. 2) Interest on capital at 6% per annum. 3) A share of goodwill calculated on the basis of 2 years purchase of the Net Profits of the past four years. The net profits of the firm for the years 2004, 2005, 2006 and 2007 were Rs. 15,000, Rs. 12,500, Rs. 25,000 and Rs. 30,000 respectively. The drawings of Lean up to the date of his death amounted to Rs. 1,200. Profit of the firm upto the date of death amounted to Rs. 15,000. The total sum payable to the Leans executors is to be transferred to a Loan Account bearing interest at 6% per annum and 1/4 of the principal amount and the accrued interest is to be paid to the executor of the deceased partner every year on June 30. Prepare Leans Capital A/c and show the Loan Account as it would appear in the books of the firm on December 31, 2008 and 2009. 26. Satyam, Sivam and Sundaram were equal partners. Balance Sheet of Satyam, Sivam, Sundaram as on Dec. 31, 2007 Liabilities Sundry Creditors General Reserve Satyams Capital A/c Sivams Capital A/c Rs. 9,000 3,000 9,000 4,000 25,000 Assets Cash in hand Debtors Stock Furniture Rs. 500 6,250 9,250 5,200 25,000

Sundarams Capital A/c 3,800 On December 31, 2007 the firm was dissolved due to Sundarams insolvency. Only Rs. 5,850 could be realised from debtors while stock and furniture fetched Rs. 5,840 and Rs. 4,000 respectively. Expenses came to Rs. 90. Sundarams estate could pay only 50% of what was due from Sundaram. Show journal entries in the books of the firm. Apply Garner Vs Murray rule.

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27. Ajanta Limited agreed to acquire the business of Ellora Limited as on 31st March 2005. The Balance Sheet of Ellora Limited as on that date was as under : Liabilities Paid up Capital : 10,000 6% Preference Shares of Rs. 10 each 20,000 Equity Shares of Rs. 10 each Reserve Profit and Loss Account 7% Debentures Sundry Creditors 2,00,000 20,000 30,000 1,00,000 1,50,000 6,00,000 The consideration payable by Ajanta Limited was agreed as under : 1) The Preference Shareholders of Ellora Limited were to be allotted 8% Preference Shares of Rs. 1,10,000. 2) Equity Shareholders to be allotted six Equity Shares of Rs. 10 each issued at a premium of 10% and Rs. 3 cash against every five shares held. 3) 7% debentureholders of Ellora Limited to be taken over by the transferee company. While arriving at the agreed consideration the directors of Ajanta Limited valued land and building at Rs. 2,50,000; stock at Rs. 2,20,000 and debtors at their book value subject to an allowance of 4% to cover doubtful debts. The machineries were valued at book value. Debtors of Ellora Limited included Rs. 10,000 due from Ajanta Limited. It was agreed that before acquisition Ellora Limited will pay dividend at 10% on Equity Shares and will also retain Rs. 5,000 for liquidation expenses. Draft journal entries necessary to close the books of Ellora Limited and to record the acquisition in the books of Ajanta Limited. 1,00,000 Rs. Assets Fixed Assets : Land and Building Machineries Current Assets : Stock Debtors Cash and Bank Balances Miscellaneous Expenditure : Preliminary Expenses Debenture Discount 10,000 5,000 6,00,000 2,00,000 50,000 35,000 2,00,000 1,00,000 Rs.

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28. The following is the Balance Sheet of Good Luck Limited as on 31-3-2005 Liabilities Rs. Assets Rs. Share Capital : Goodwill 20,000 Authorised Capital : Leasehold Premises 1,07,000 50,000 Preference Plant and Machinery 60,000 Shares of Rs. 10 each 5,00,000 Patents 1,73,900 50,000 Equity Shares Stock 34,000 of Rs. 10 each 5,00000 Debtors 56,000 10,00,000 Cash 100 Issued and paid up : Preliminary Expenses 2,000 25,000 Preference Shares Profit and Loss A/c 1,23,000 of Rs. 10 each 2,50,000 25,000 Equity Shares of Rs. 10 each 2,50,000 Current Liabilities : Sundry Creditors 40,000 Bank Overdraft 36,000 5,76,000 5,76,000 The company proved unsuccessful and resolutions were passed to carry out the following scheme of reconstruction by reduction of capital : i) That the Preference Shares be reduced to an equal number of fully paid shares of Rs. 5 each. ii) That the Equity Shares be reduced to an equal number of fully paid shares of Rs. 2.50 each. iii) That the amount so available be utilised towards wiping out losses and reduction of assets as follows : Preliminary Expenses, Goodwill and Profit and Loss Account to be written off entirely, Rs. 27,000 to be written off Leasehold Premises, Rs. 14,000 to be written off stock, Rs. 6,000 to be provided for doubtful debts, 20% should be written off Plant and Machinery and the balance be written off patents. Make journal entries in the books of the company and prepare the Balance Sheet giving effect to the above scheme. (220=40 Marks)