5th Account Gobind Kumar Jha 9874411552

Commerce Eed - Vision
By,
Gobind Kumar Jha

CA (F), L.L.B(H), M.COM,
B.COM(H)
Gobind Kumar Jha 9874411552
Chapter -1
Issue of Shares
Practical Questions:
1. Z Ltd. issued 5000 shares of Rs 10 each payable ₹ 3 on application, ₹ 2 on allotment & Balance on final
Call. All money due had been received except one shareholder holding 500 shares failed to pay final call
money. His shares had bee forfeited & reissued @ Rs 9 each as fully paid up.
Pass journal entries in the books of Z Ltd.
2. X Ltd. Issued 15000 shares of Rs 10 each payable ₹ 2 on application, ₹ 4 on allotment & Balance on a
call. All money due had been received except one shareholder holding 1,200 shares failed to pay call
money. His shares had bee forfeited & reissued @ Rs 9 each as fully paid up.
Pass journal entries in the books of X Ltd.
3. A Ltd. issued 10,000 shares of ₹ 10 each payable as ₹3 on application, ₹ 3 on allotment and balance on
two equal calls. All money due on shares had been received except Mr. Ram holding 800 shares only
paid application money. His shares had been forfeited by the company & reissued @ ₹ 8 each as fully
paid up. Pass necessary journal entries.
4. Ram Ltd. Issued 20,000 shares of ₹ 10 each payable as ₹ 3 on application, ₹5 on allotment and balance
on a call. The company received application for 22,000 shares. Excess money being refunded. All money
due had been received except one shareholder holding 2,500 shares failed to pay call money. His shares
had been forfeited & reissued @ ₹ 8 each as fully paid up.
Pass necessary journal entries.
5. Gopi Ltd. Issued 8,000 shares of ₹ 15 per share payable as ₹ 4 on application, ₹ 5 on allotment and
balance on two equal calls. All money due had been received except one shareholder holding 1,000
shares failed to pay call money. His shares had been forfeited and reissued @ ₹ 7 per share as fully paid
up. Pass necessary journal entries.
6. K Ltd. Issued 12,000 shares of ₹ 10 each payable as ₹ 3 on application, ₹ 2 on allotment and balance on
two equal calls. All money due had been received except one shareholder holding 1,500 shares paid
application and allotment money. His shares had been forfeited by company & reissued @ ₹ 9 per share
as fully paid up. Pass necessary journal entries.
7. X Ltd. Issued 20,000 shares of ₹ 10 each payable as ₹3 on application, ₹ 4 on allotment and balance on a
call. All money due on shares had been received except Mr. A holding 500 shares failed to pay call
money and Mr. B holding 800 shares only paid application money. His shares had been forfeited and
reissued @ ₹ 8 each as fully paid up.
1
8. A Ltd. invited application for 10,000 shares of ₹100 each at a premium of ₹10 per share. The amount is
payable as follows: On application ₹25; On allotment ₹ 35 (including premium) ; On 1st call ₹25 and On
final call ₹25. The application were received for 9,000 shares and these were accepted in full. All money
due on shares were received except 1st and final call money on 200 shares, which were forfeited. Out of
these shares, 100 shares subsequently reissued @ ₹90 per share. Pass necessary Journal Entries.
9. XYZ Ltd. invited application for 10,000 equity shares of ₹ 100 each at a premium of 20% payable as:
₹50 on
application, ₹50 on allotment (including premium) and balance on a call.
Application for received for 15,000 shares and excess application money being refunded. Allotment was
made in full on all other applications.
All money due were received except call money on 500 shares which were forfeited. Out of these
forfeited shares, 400 shares were reissued at ₹100 each as fully paid up.
Pass necessary journal entries in the books of XYZ Ltd.
10. X Ltd. issued 10,000 equity shares of ₹ 15 per share payable as follows:
₹4 on application,
₹7 on allotment (including premium of ₹2 per share) &
₹6 on first and final call.
Mr. A holding 50 shares failed to pay allotment and call monies. B holding 80 shares failed to pay call
money. All these shares were forfeited and subsequently reissued as fully paid up @ ₹12 per share.
11. Raju Ltd. Issued 20,000 shares of ₹10 per shares at a premium of 10% payable as:
₹3 on application;
₹5 on allotment (including premium) & Balance on a call.
The company received application for 18,000 shares. All money due on shares were received except Mr.
Raju holding 500 shares only paid application money and Mr. Gopal holder of 1,500 shares failed to pay
call money. All these shares were forfeited and reissued @ ₹8 as fully paid up.
12. D & Co. Ltd. made a public issue of 30,000 shares of ₹ 10 each payable as follows:-
On application ₹ 5 per share (including premium of ₹2), On allotment ₹ 4 per share, On call ₹ 3 per
share, No allotment was made for 2,000 shares applied for and the amount received therein was
refunded along with letter of regret.
30,000 shares were allotted pro-rata amongst the applicants for 4,000 shares, the excess application
money being adjusted with the amount due on next call . Mr. Patra holding 75 shares failed to pay the
allotment money. His shares were forfeited after the subsequent call.
The forfeited shares were reissued as fully paid on payment of ₹ 9 per share by Mr. Sen.
Show the Necessary Journal Entries.
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13. X Ltd. offered 10,000 equity shares of ₹ 10 each for subscription at a premium of ₹ 2 per share
payable as follows:
On application ₹2
On allotment ₹ 5 (including premium)
On first call ₹ 2
On final call ₹ 3
The company received applications for 15,000 shares and allotment was made pro rata to the
applicants of 12,000 shares, the remaining applications being refusal. The excess application money
was adjusted on account of sums due on allotment. Kapil to whom 500 shares were allotted failed to
pay the allotment money and on his subsequent failure to pay the first call money his shares were
forfeited. Srinath who originally applied for 240 shares failed to pay the two calls and his shares were
forfeited after the final call. Subsequently, out of these forfeited shares 600 shares (including all
shares of Kapil) were re-issued to Sharma as fully paid up at ₹ 9 per share. Show the Journal entries
to record the above transactions.
14. Sunshine Ltd. issued 50,000 Equity shares of ₹ 10 each at a premium of 20% payable as ₹ 3 on
application, ₹ 6 on allotment (including premium) and the balance in one call after 3 months from
allotment. Applications were received for 80,000 equity shares. Allotment was made pro-rata to the
applicants for 75,000 equity shares, the remaining applications being rejected. Excess money on
application (eligible for allotment) was adjusted with allotment. Sourav, to whom 400 equity were
allotted, failed to pay the allotment and call money. Rahul, who applied for 750 equity shares, failed to
pay call money. These shares were subsequently forfeited and all the shares of Sourav and 50% shares
of Rahul were reissued at a discount of 10% to Sachin as fully paid up. Show the necessary journal
entries (narrations required) in the books of the company.
15. A Ltd. issued 1,000 Equity Shares of ₹ 15 each. The share money was payable as follows:
(i) ₹ 5 per share on Application;
(ii) ₹ 7 per share (including ₹ 2 per share as premium) on Allotment;
(iii) ₹ 5 per share on First and Final Call.
Mr. Das who held 40 shares failed to pay the allotment and call money. Mr. Dey who held 100 shares
failed to pay the call money. The Directors forfeited all these shares. Thereafter, these shares were
reissued as fully paid up @ ₹ 13 each. Pass the necessary Journal entries
[Amount of Capital Reserve ₹ 920 (without crediting Securities Premium A/c on re-issue)]
3
Chapter-2
Issue of Bonus Shares & Right
Shares
1. Issue of Bonus Shares

Ex Ltd. had ₹ 12,00,000 in Capital Redemption Reserve, ₹ 10,00,000 in Securities Premium and ₹
15,00,000 credit balance in its Statement of Profit & Loss. It issued 20,000 bonus shares of ₹ 100
each as fully paid at par and 5,000 right shares of ₹ 100 each fully paid at ₹ 125 to its shareholders.
A. Ltd. received 1,200 such bonus shares and entitled to 300 right shares, which it accepted.
Show necessary journal entries (without narrations) in the books of Ex Ltd. and in the books of A
Ltd. for the above.

Petro Ltd. provides the following information as on 31.03.2021 :
Particulars ₹
1,20,000 equity shares of ₹ 10 each fully paid 12,00,000
Capital Redemption Reserve 3,00,000
Plant Revaluation Reserve 40,000
Securities Premium 3,00,000
Development Rebate Reserve 4,60,000
Investment Allowance Reserve 5,00,000
General Reserve 6,00,000
On 01.04.2021, the company decided to issue Bonus shares at par to its shareholders at the rate of 1
share for every 2 shares held and right shares at the rate of 1 share for every 4 shares held at ₹ 14 per
shares. Show necessary Journal entries in the books of Petro Ltd. to give effect to above transactions.Z
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The authorised capital of X Ltd. is 15,000 Equity Shares of ₹ 10 each. Out of which 8,000 Equity
Shares of ₹ 10 each are fully paid – up and 2,000 Equity Shares of ₹ 10 each have been called and
paid – up ₹ 7 per shares. The company has the following Balances:
Particulars ₹
Securities Premium 5,000
General Reserve 18,000
Profit & Loss (Cr.) 47,500
The company has decided in a general meeting to capitalise Securities Premium and General Reserve
in full and part of the Profit & Loss Account is necessary for this purpose by issuing:
(i) Bonus on the partly paid – up shares in order to make them fully paid – up; and
One bonus share at a premium of ₹ 2 for every two fully paid Equity Shares held. Show the Journal
entries to record the transactions

The following is the abstracts of Balance Sheet of T Ltd. as on 31.3.2021:
Issued and paid up capital: ₹
20,000 Equity shares of ₹ 10 each
fully paid up 2,00,000
Reserves and Surplus:
Capital Redemption Reserve 40,000
Securities premium 30,000
General Reserve 1, 00,000
Profit & Loss Account 80,000
Revaulation Reserve 20,000
Development Rebate Resere 10,000
At the annual general meeting of the company the following resolutions were passed:
(i) To issue 2 bonus shares for every five shares hold as on date; and
(ii) To give existing shareholders the option to purchase three ₹ 10 Right shares at ₹ 14 per share
for every five shares held before the issue of bonus shares.
All the shareholders took up the option of right shares and bonus shares were dully allotted. Show
appropriate journal entries to record the above transactions in the books of T Ltd.
5
Chapter-3
Employee Stock option Plan
1. Employee Stock option Plan

ABC Ltd. grants 1,000 employees stock options on 1.4.2018 at ₹ 40, when the market price is ₹ 160.
The vesting period is 2½ years and the maximum exercise period is one year. 300 unvested options
lapse on 1.5.2020. 600 options are exercised on 30.6.2021. 100 vested options lapse at the end of the
exercise period. Pass Journal Entries giving suitable narrations.

S Ltd. grants 1,000 options to its employees on 1.4.2018 at ₹ 60. The vesting period is two and a half
years. The maximum exercise period is one year. Market price on that date is ₹ 90. All the options were
exercised on 31.7.2021. Journalize, if the face value of equity share is ₹ 10 per share.

BETA Ltd. granted 15,000 options at ₹ 40 to its employees under Employee's stock Option Scheme
(ESOS). The face value of each option was ₹ 10 and its market price at that time was ₹ 120. Two years
were the vesting period. All the employees exercised their options fully. Show Journal Entries.
[Ans. Value of option : ₹ 12,00,000; Amount of annual amortisation ₹ 6,00,000]
6
Chapter-4
Underwriting
1. Underwriting [Without firm underwriting]

On 1st January, 2022 MOON Ltd. issued a prospectus inviting applications for subscription in
10,00,000 Equity Shares of ₹ 10 each. The whole issue was fully underwritten by A,B,C and D. as: A—
30%; B—25%; C—35% and D—10%. The applications were received for 8,00,000 shares of which
marked applications were as follows:
A—1,80,000; B—2,00,000; C—2,03,000 and D—1,67,000.
Find out liability of individual Underwriters.
2. Underwriting [With firm underwriting]

Sam Ltd. invited applications from public for 1,00,000 Equity Shares of ₹ 10 each at a premium of ₹ 5
per shares. The entire issue was underwritten by the underwriters A,B,C and D to the extent of 30 %,
30 %, 20 % and 20% respectively with the provision of firm underwriting of 3,000, 2,000, 1,000 and
1,000 shares respectively. The underwriters were entitled to the maximum commission permitted by
law.
The Company received applications for 70,000 shares from the public out of which applications for
19,000, 10,000, 21,000 and 8,000 shares were marked in favour of A, B, C and D respectively.
Calculate the Liability to each underwriter assuming the firm underwriting as (i) marked application,
(ii) unmarked application. Also ascertain the underwriting commission payable to each underwriter.
[Net Liability (i) A - 2,750 Shares, B - 12,750 Shares, C - Nil and D - 7,500 Shares . (ii) A - 3,500
Shares, B - 12,500 Shares, C - Nil, D - 7,000 Shares. Commission : A - ₹ 11,250, B - ₹ 11,250, C
- ₹ 7,500 and D - ₹ 7,500]
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3. Underwriting [With firm underwriting]

Outset Ltd. invited applications from public for 1,00,000 equity shares of ₹ 10 each at a premium of ₹ 5
per share. The entire issue was underwritten by the underwriters P, Q, R and S to the extent of 30%,
30%, 20% and 20% respectively with the provision of firm underwriting of 3,000, 2,000, 1,000 and
1,000 shares respectively. The underwriters were entitled to the maximum commission permitted by
law.
The company received applications for 70,000 shares (excluding firm underwriting) from public out of
which applications for 19,000, 10, 000, 21,000 and 8,000 shares were marked in favour of P, Q, R and
S respectively.
Calculate the liability of each underwriter (A) if benefit of firm underwriting is given to all (i.e.treated
as unmarked). Also ascertain the underwriting commission payable to different Underwriters.
(B) if Individual benefit of firm underwriting is given (i.e.treated as marked).
4. Underwriting
The following underwriting took place for Pioneer Ltd., which invited applications for 10,000 shares of
₹ 10 each : X : 6,000 shares, Y : 2,500 shares, Z : 1,500 shares
In addition, there were firm underwriting as follows : X : 800 shares, Y : 300 shares, Z : 1,000 shares
Total subscription including firm underwriting was 7,100 shares, and the forms included the following
marked forms : X : 1,000 shares, Y : 2,000 shares, Z : 500 shares
You are required to compute the underwriter’s liability in number of shares when the specific benefit of
firm underwriting is to be given to the underwriters (i.e. Marked Application)
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Chapter-5
Redemption of Preference
Shares
1. Redemption of preference shares
The capital structure of a company consists of 20,000 Equity Shares of ₹ 10 each fully paid up
and 1,000 8% Redeemable Preference Shares of ₹ 100 each fully paid up.
Undistributed reserve and surplus stood as:
General Reserve ₹ 80,000
Profit and Loss Account ₹ 20,000
Investment Allowance Reserve ₹ 10,000
(out of which ₹ 5,000 not free for distribution as dividend)
Securities Premium ₹ 2,000,
Cash at bank amounted to ₹ 98,000.
Preference shares are to be redeemed at a Premium of 10% and for the purpose of redemption, the
directors are empowered to make fresh issue of Equity Shares at par after utilising the
undistributed reserve and surplus, subject to the conditions that a sum of ₹ 20,000 shall be
retained in general reserve and which should not be utilised.
Pass Journal Entries to give effect to the above arrangements and also show how the relevant
items will appear in the Balance Sheet of the company after the redemption carried out.
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Following is the Balance Sheet of XYZ Ltd. as an 31.12.2021:
Liabilities ₹ Assets ₹
20,000 Eq. Share @ 10 each fully paid 2,00,000 Fixed Assets 1,50,000
1,000 5% redeemable Pref. Shares @ 100 1,00,000 Investments 1,00,000
each fully paid up
Securities Premium 22,000 Stock 75,000
P&L A/c 30,000 Debtors 45,000
General Reserve 48,000 Bank 30,000
4,00,000 4,00,000
In January 2022, Preference Shares are to be redeemed at 5% premium. For this purpose Investments were
sold at a Profit of 10% and 5,000 equity Shares of ₹ 10 each were issued at ₹ 10.50 per Shares. The
Preference Shares were duly redeemed. Show Journal entries.

The capital structure of a company as on 31.03.2021 consisted of 20000 equity shares of ₹ 10 each
fully paid up and 1000, 8% Redeemable preference shares of ₹ 100 each fully paid up. Undistributed
reserves and surplus were as under :
Balance in Statement of Profit & Loss ₹ 32,000
Cash at Bank amounted to ₹ 98,000. Preference shares are to be redeemed at a premium of 10% and
for the purpose of redemption, the directors are empowered to make fresh issue of equity shares at
par after utilizing the reserves and surplus subject to the condition that a sum of ₹ 25,000 shall be
retained in General Reserve.
Pass necessary journal entries to give effect to the above arrangements (narration required) and also
all relevant workings.

The capital structure of a company consists of 30,000 Equity Shares of ₹ 10 each fully paid up and 1,000, 6%
Preference Shares of ₹ 100 each fully paid up. The company has ₹ 70,000 in General Reserve, ₹ 10,000 in
Profit & Loss Account, ₹ 20,000 in Investment Allowance Reserve (not available for distribution as dividend)
and ₹ 11,000 in Securities Premium.
The Preference Shares are due for redemption at a premium of 10%. The company decides to make a fresh
issue of Equity Shares at par and to use Profits and Reserves in a manner so that a minimum balance of ₹
10,000 is maintained in General Reserve.
Show the Journal Entries to give effect to the above arrangements.
10

The following balances are extracted from the books of Sun Ltd.:
10,000, 10% Preference Shares of ₹ 10 each, fully paid up;
6,000, 9% Preference Shares of ₹ 10 each, ₹ 9 paid up;
20,000 Equity Shares of ₹ 10 each, fully paid up;
General Reserve ₹ 2,20,000;
Profit & Loss account ₹ 80,000;
Capital Reserve ₹ 20,000;
Securities Premium ₹ 20,000 (both the categories of Preference shares were issued prior to 2012.)
Preference Shares are to be redeemed at 10% premium. For this purpose 5,000 Equity Shares of ₹ 10
each are issued at 10% premium. Holders of 500, 10% Preference Shares are not traceable. Minimum
use of free reserve is to be made for the purpose of redemption of Preference Shares. Pass necessary
Journal Entries.
11
Chapter-6
Buyback of Equity Shares
1. Buyback of Equity Shares
XYZ Ltd. has the following capital structure on of 31st March 2021.

Particulars ₹ in Lakhs
a. Equity Share capital (Shares of ₹ 10 each) 300
b. Reserves :
General reserve 270
Security Premium 100
Profit and Loss A/c 50
Export Reserve (Statutory reserve) 80
c. Loan Funds 800
Advice the company on maximum number of shares that can be bought back if the buyback price is ₹
30 each and record journal entries.
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2. Buy-Back of equity Shares
The Balance Sheet of BLACK Ltd. as on 31st March, 2021 is as follows:

Share Capital of ₹ 10 each Land & Building 30,00,000
fully paid up 80,00,000 Machinery 45,00,000
Securities Premium 25,00,000 Furniture 10,00,000
General Reserve 7,00,000 Investments 10,80,000
Profit & Loss A/c 4,80,000 Sundry Debtors 5,40,000
6.5% Debentures 3,00,000 Cash & Bank Balance 21,13,000
Sundry Creditors 2,53,000
1,22,33,000 1,22,33,000
On 1st April, 2021 the company announced the buy back of its 25% Equity Shares at ₹ 20 per shares.
For that purpose the Company sold its entire investments at ₹ 12,00,000 and issued 8,000, 10%
Preference Shares of ₹ 100 each. The Company utilised 50% of the General Reserve, 100% of the
Profit and Loss A/c and the rest was taken from the Securities Premium A/c. Show necessary Journal
Entries.
3. Buy-Back of equity
The following balances are included Balance Sheet of E. Ltd. as on 31st Mrach, 2021 :
(Amount) (₹)
6,00,000 Equity Shares of ₹ 10 each fully paid 60,00,000
12% Debentures of ₹ 100 each 28,00,000
Trade Payables 9,20,000
On 1st April 2021, the shareholders of the company have approved the scheme of buyback of equity
shares as under :
(a) 20 % of the equity shares would be bought back at ₹ 16 per shares.
(b) Premium payable on buyback of shares should be met from the Securities Premium Account.
(c) Investments would be sold for ₹ 7,80,000 (Book value being ₹ 7,40,000).
Pass journal entries to record the above transactions.
13
.
4. Buy-Back of equity Shares

The following information is available from the Balance Sheet of Everest Co. Ltd. as on 31.03.2021.
(a) Share Capital: ₹
Subscribed and fully paid up:
1,20,000 Equity Shares of ₹ 10 each. 12,00,000
12,00,000
(b) Reserves and Surplus: ₹
(i) General Reserve 18,00,000
(ii) Securities Premium 6,00,000
24,00,000
(c) Total of secured and unsecured loan – ₹ 36,00,000
On the above date equity shares are bought back by the company to the extent possible as per section 68(2) of
the Companies Act, 2013, at premium of ₹ 40 per shares. You are required to give journal entries to give the
effect to buy-back and also show all workings.
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Chapter-7
Redemption of Debentures
1. Redemption of Debentures [Sinking Fund]
On 1st April 2014. H Ltd. issued 442, 10% Debentures of ₹ 1000 each at a discount of 10%
redeemable at a premium of 5% after 4 years. It was decided to create a Sinking Fund for the
purposes of accumulating sufficient funds to redeem the Debentures and to invest in some radily
convertible securities yielding 10% interest p.a. Reference to the table shows that ₹ 1.00 p.a. at 10%
compound interest amounts to ₹ 4.641 in 4 years. Investments are to be made in the Bonds of ₹
1000 each available at par. On 31st March 2018, the investments realised ₹ 3,40,000 and debentures
were redeemed. The bank balance as on that date was ₹ 50,000.
Required: Prepare Debenture Redemption Fund Account and Debenture Redemption Fund
Investments Account for 4 years.
2. Redemption of Debentures
Silicon Ltd. issued 8% Debentures of ₹ 4,00,000 in earlier year on which interest is payable half-early on 31st
March and 30th September. The Company has power to purchase its own debentures in the open market for
cancellation thereof subsequently. The following purchases were made during the financial year 2020-21 and
cancellation was done as 31.03.2021:
a) On 01.04.2020 ₹ 60,000 Nominal value, Purchased for ₹ 59,340 (ex-interest)
b) On 01.09.2020 ₹ 40,000 Nominal value, Purchased for ₹ 40,333 (cum-interest)
Show the journal entries for the transaction that took place during 2020-21.
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Chapter-8
Valuation of Goodwill
1. Valuation of Goodwill
Calculate goodwill as per (a) annuity method ; (b) five years purchase of super-profits method and (c)
capitalisation of super profits method from the following information :
(i) Capital employed ₹ 6,30,000
(ii) Normal rate of profit 10 %
(iii) Present value of an annuity of ₹ 1 for 5 years at 10% 3.77545
(iv) Net profits before taxation (tax rate 50 %):
1st year ₹ 1,05,000 ;
2nd year ₹ 1,45,000 ;
3rd year ₹ 1,75,000 ;
4th year ₹ 2,00,000;
5th year ₹ 1,50,000.
(v) Non-trading income ₹ 5,000 and debenture interest ₹ 10,000 on an average included in P/L A/c.
(vi) Fixed assets revalued by ₹ 20,000 more than existing book value of the assets.
From the following information calculate the value of goodwill as on 31.03.21:
a) Equity share capital (₹ 10) ₹ 4,00,000
b) 10% Pref. Share capital ₹ 1,00,000.
c) Reserve & Surplus ₹ 90,000
d) 9% Debenture ₹ 1,00,000
e) Depreciation fund ₹ 60,000
f) Creditors ₹ 70,000.
g) Market value of Assets is ₹ 90,000 more than the book value and non-trade investment included in
assets ₹ 1,30,000.
h) Profits for last three years after 40% tax were:
2018-19: ₹ 84,000, 2019-20: 1,08,000 and 2020-21: ₹ 1,05,000 respectively.
i) Non-trade income of ₹ 14,400 (before tax) is included in the amount of profit for 2019-20 only.
j) Fair return on capital employed in this type of business is estimated at 12%.
k) Goodwill is to be valued on the basis of 4 years purchase of Super Profit.(Take simple average profit)
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From the information given below calculate the value of Goodwill by Capitalisation of Average Operating
Profit:
Capital and liabilities of the company (as per its Balance Sheet as on 31-3-2021) includes the following:
Shareholders’ fund ₹ 12,50,000
7% Debentures ₹ 4,50,000
Profits after charging 40% income tax for the last three years were:
2018-19: ₹ 1,56,000, 2019-20: ₹ 1,84,000 and 2020-21: ₹ 1,76,000
It was found that, in 2018-19 the company purchased a machine at ₹ 50,000 and charged the same against its
profit. The company charges depreciation @ 20% on WDV of such machinery. Debentures were issued prior
to 2018-19.
Similar companies earn after tax operating profit @ 8%. [Consider simple average profit]
The following particulars of A.Ltd are given below:
(a) Equity share capital: 20,000 equity shares of ₹ 10 each fully paid
(b) Preference share capital: 2,000, 8% preference shares of ₹ 100 each fully paid
(c) Reserves and Surplus: ₹ 1,00,000
(d) Trade Payables: ₹ 40,000
(e) Average normal profit after tax earned in each year by the company ₹ 60,000
(f) Transfer to General Reserve – Nil.
(g) Profit on revaluation of tangible assets – ₹ 40,000
(h) Fictitious items included in the assets of the company – ₹ 10,000
(i) Normal rate of return earned in respect of the equity shares of the same type of
company is ascertained at 10%.
(j) Ignore Goodwill.
Compute the value of the company’s share by
(i) Asset-backing Method and
(ii) Earnings Yield Method.
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Chapter-9
Valuation of Shares
1. Valuation of Shares
The following is the condensed balance sheet of P Ltd on 31.3.04:
Equity and Liability ₹
40,000 equity shares of ₹ 10 each 4,00,000
Reserves 90,000
Surplus in profit and loss statement 20,000
10% debentures 1,00,000
current liabilities 1,30,000
7,40,000
Assets
Tangible fixed Assets 5,00,000
Goodwill 40,000
Current assets 2,00,000
7,40,000
On 31st December 2004, the fixed assets were independently valued at ₹ 3, 50,000 and the goodwill at ₹
50,000. The net profits for the three years were: 2002 ₹ 51,600; 2003 ₹ 52,000 and 2004 ₹ 51,650 of which
20% was placed to Reserve Account and this proportion being considered reasonable in the industry in which
the Company is engaged and where a fair investment return may be taken at 10%. Compute the value of the
Company’s share by (a) the Assets Method and (b) the Yield Method.
The following particulars are available in relation to Hari Pvt Ltd. Co.
(a) Capital: 6,000, 6% Preference Shares of ₹ 100 each fully paid and 5,000 Equity Shares of ₹ 100 each
fully paid.
(b) External Liabilities - ₹ 75,000;
(c) Reserved & Surplus - ₹ 50,000;
(d) The average expected profit (after tax) -₹ 90,000;
(e) The normal Profit earned on the market value of Equity Shares of the same Company -10 %.
(f) Transfer to Reserve - 10% of the Net Profit.
Calculate the intrinsic value per Equity Share and the value per Equity Share according to Dividend Yield
Basis. Assume that total assets include ₹ 30,000 fictitious assets..
18
The following particulars of Jupiter Co. Ltd. Are available:
Fixed Assets – ₹ 5, 80,000; Goodwill – ₹ 50,000; Current Assets – ₹ 1, 80,000; Discount on Issue of
Debentures – ₹ 10,000; 5% Debentures – ₹ 1, 00,000; Current Liabilities – ₹ 1, 30,000. The net profit after
tax for three years were: 2019 – ₹ 51,600; 2020 – ₹ 52,000; 2021 – ₹ 51,650 of which 20% was placed to
reserve and fair rate of return on investments is 10%. Issued Capital was 40,000 Equity Shares of ₹ 10 each
fully paid up. Compute the value of the company’s shares by
(a) The Assets Backing Method,
(b) The Dividend Yield Method.
Balance Sheet of Diamond Ltd. As on 31.03.2021 is given below:
15,000 Equity Shares ₹ 10 fully Sundry Fixed Assets 2,20,000
paid up 1,50,000 Investments 40,000
20,000 Equity Shares ₹ 10; ₹ 6 Stock 80,000
paid up 1,20,000 Debtors 40,000
9% cumulative Preference Shares Cash at Bank 40,000
Long Term Loan 60,000 Profit & Loss Account 1,30,000
80,000
5,50,000 5,50,000
Further Information:
(a) Current Cost of Sundry Fixed Assets is ₹ 3, 70,000 and that of Stock is ₹ 1, 00,000.
(b) Investment could fetch only ₹ 10, 000.
(c) 50% of Debtors are doubtful.
(d) Preference dividend is in arrear for the last five years.
Find out the intrinsic value of each Equity Share of the company.
19
Chapter-10
Final Account of companies
1. Final Account
The following balances are extracted from the books of K Ltd.
Particulars (₹) ( ₹)
Land and building 51,12,000
Furniture and fittings 2,66,000
Capital work in progress 98,000
Calls in arrear 50,000
Cash in hand 10,000
5% tax free govt loan (FV ₹ 2,00,000) 19,7,600
Bills receivable 2,72,000
Goodwill 3,20,000
Trade debtors 4,16,000
Trade creditors 6,12,000
General reserve 3,00,000
Profit and loss account (1.4.2020) 1,76,000
Bank overdraft 2,23,600
Purchase and returns 48,00,000 1,00,000
Sales and returns 1,40,000 61,56,000
Advertisement 1,78,800
Legal charges 20,000
Carriage on goods purchased 74,000
Wages and salaries including PF 4,64,000
Repairs and trade expenses 71,200
Opening stock 9,52,000
Income tax (advance) 56,000
Interim dividend paid 70,000
Share capital (@ ₹ 10 each) 40,00,000
6 % debentures of ₹ 100 each 20,00,000
1,35,67,600 1,35,67,600
20
Additional information:
1. Closing stock was valued at ₹ 10,82,000 at cost, but market value of which was ₹ 12,10,000
2. Provision for doubtful debts to be created @ 5%.
3. Depreciation on all assets was calculated for the amount of ₹ 2,86,400 for the year 2020-21.
4. Trade expenses include ₹ 10,000 for audit fees and ₹ 2,000 paid to the auditor for attending taxation mattersof the company.
5. Calls on arrear includes ₹ 4,000 due from directors.
6. Directors declared an interim dividend @ 2.5% and recommended dividend for the amount of ₹ 1,46,260.
7. Assume dividend tax rate is 17%.
8. Provide for income tax of ₹ 70,000 for the year 2020-21.
Prepare the company’s balance sheet as on 31.03.2021 and its statement of profit and loss for the year ended
31.03.2021.
2. Final Account
Following is the Trial Balance of Zoom Ltd., a trading concern, as at 31.02.2021:
Debit Balance ₹ Credit Balance ₹
Stock on 01.04.2020 1,86,000 Sales 11,90,000

Purchases 7,20,000 Return outward 10,000
Return Inward 12,000 10% Bank Loan 60,000
Wages 1,10,000 Sundry Creditors 50,000
Carriage Inward 5,000 Bills Payable 12,000
Sundry manufacturing expenses 18,000 Profit & Loss Balance (Cr.) 26,000
Interest on Bank loan 5,000 (01.04.2020)
Office salaries 18,000 General Reserve 12,000
Auditor’s fees 9,000 Securities Premium 24,000
Directors’ remuneration 32,000 Share Capital 4,00,000
Freehold Premises 1,64,000
Plant and Machinery 1,30,000
Furniture and Fittings 42,000
Patents 20,000
Sundry Debtors 96,000
Bills Receivable 29,000
Cash and Bank 85,000
Advance Tax for 2020-21 83,000
17,84,000 17,84,000
21
You are required to prepare the Statement of Profit & Loss for the year ended 31.03.2021 and theBalance
Sheet as at that date after taking into account the following :
(a) Stock on 31.03.2021 was valued at ₹ 1,25,000
(b) Bank loan was taken on 01.04.2020.
(c) Depreciation is to be provided on Plant and Machinery @ 20 % and on Furniture and Fittings
@10%.
(d) 1/4th of Patents is to be amortised.
(e) Provision for tax is to be maintained @ 30%
(f) 10% of profit for the year is to be transferred to General Reserve.
(g) Ignore tax on dividend.
3. Final Account
The following is the trial Balance of Sigma Ltd. as at 31st March,2021:
Dr. Cr.
₹ ₹
Stock on 1st April, 2020 80,000
Purchase and Sales 2,50,000 4,00,000
Purchase return 5,000
Carriage-in-ward 1,050
Wages 25,000
Salaries 10,000
Discount Received 4,000
Rent 5,000
Sundry expenses 8,250
Balance of Profit and Loss (1-4-2020) 25,000
Share capital (Subscribed and paid up) ₹ 10 each 1,00,000
Interim Dividend 8,000
Debtors and Creditors 26,200 15,500
Patent 4,000
Bills Receivable and Bill payable 3,000 4,000
5,63,500 5,63,500
22
Prepare Statement of Profit & Loss for the year ended 31st March, 2021 and a Balance Sheet as on that date
as per Schedule II of the Companies Act, 2013, taking into consideration the following adjustments:
a) Stock on 31st March, 2021 was valued at ₹ 98,000
b) Depreciate: Plant & Machinery @ 15%, Furniture & Fittings @ 10%
c) On 31st March, 2021 outstanding rent amounted to ₹ 800 while outstanding salaries totaled ₹
1,200
d) Make a provision for doubtful debts @ 5%
e) Provision for tax is to be made @ 30%.
f) The directors proposed a dividend @ 10% for the year ended 31st March, 2021 excluding interim
dividend and decided to transfer ₹ 10,000 to General Reserve.
g) Patents have a life of 4 year.
h) Ignore tax on dividend.
You are also required to prepare rated to account in relation to Reserve and Surplus.
23
4. Final Account
Gloria Ltd. was registered with an authorised capital of ₹ 10, 00,000 divided into equity shares of ₹ 10 each, of
which 40,000 shares had been issued and fully paid.
The following is the trial balance extracted on 31st March, 2021:
Debit Credit
₹ ₹
st
Stock on 1 April, 2020 1, 86,420 -
Purchases and sales 7, 18,210 11, 69,900
Returns 12,680 9,850
Manufacturing wages 1, 09,740 -
Sundry manufacturing expenses 19,240 -
Carriage inwards 4,910 -
18% Bank Loan (Secured) - 50,000
Interest on bank loan 4,500 -
Office salaries and expenses 17,870 -
Auditor’s fees 8,600 -
Director’s Remuneration 32,250 -
Freehold premises 1, 64,210 -
Plant & Machinery 1, 28,400 -
Furniture 5,000 -
Patents 20,000 -
Debtors & Creditors 1, 05,400 62,220
Cash in hand 19,530 -
Cash in bank 89,360 -
Advance tax 84,290 -
st
P & L A/c on 1 April, 2020 - 38,640
Share capital - 4, 00,000
17, 30,610 17, 30,610
You are required to prepare the Statement of Profit and loss for the year ended 31.03.2021 and a Balance Sheet
as on that date as per revised schedule VI after taking into consideration the following adjustments :-
(a) On 31st March, 2021, outstanding manufacturing wages and outstanding office salaries stood at ₹ 1,890
and ₹ 1,200 respectively. On the same date stock was valued at ₹ 1, 24,840.
(b) Provide for interest on bank loan for 6 months.
(c) Depreciation is to be provided on plant and machinery @ 15% p.a. and on office furniture @ 10% p.a.
(d) Make a provision for taxation @ 33%.
(e) The directors recommended a dividend @ 15% for the current year after transfer of 5% of net profit to
General Reserve.
(f) Dividend Tax is 15 %.
24
Chapter-11
Internal Reconstruction
Practical Questions
1. Internal Reconstruction
The Balance Sheet of Vaibhav Ltd. as on 31st March 2021 is as follows:
Equity Shares of ₹ 100 each 2,00,00,000 Fixed Assets 2,50,00,000
Investments
6%, Cumulative Preference
1,00,00,000 (Market Value 20,00,000
Shares of ₹ 100 each
₹ 19,00,000)
5% Debentures of ₹ 100 each 80,00,000 Current Assets 2,00,00,000
Sundry Creditors 1,00,00,000 P & L A/c 12,00,000
Provision for taxation 2,00,000
TOTAL 4,82,00,000 TOTAL 4,82,00,000
The following scheme of Internal Reconstruction is sanctioned:

(a) All the existing equity shares are reduced to ₹ 40 each.
(ii) All preference shares are reduced to ₹ 60 each.
(iii) The rate of Interest on Debentures increased to 6%. The Debenture holders surrender
their existing debentures of ₹ 100 each and exchange the same for fresh debentures of
₹ 70 each for every debenture held by them.
(iv) Fixed assets are to be written down by 20%.
(v) Current assets are to be revalued at ₹ 90,00,000.
(vi) Investments are to be brought to their market value.
(vii) One of the creditors of the company to whom the company owes ₹
40,00,000 decides to forgo 40% of his claim. The creditor is allotted with 60000 equity
shares of ₹ 40 each in full and final settlement of his claim.
(viii) The taxation liability is to be settled at ₹ 3,00,000.
(ix) It is decided to write off the debit balance of Profit & Loss A/c.
Pass journal entries and show the Balance Sheet of the company after giving effect to the
above.
25
The Summarised Balance Sheet of Revise Limited as at 31st March, 2021 was as follows :
Authorised and subscribed Fixed Assets :
10,000 Equity shares of ₹ 100 10,00,000 Machineries 1,00,000
each fully paid
Long term borrowings: Current Assets:

12% Debentures 2,00,000 Inventory 3,20,000
Current Liabilities: Trade receivables 2,70,000
Accrued interest 24,000 Bank 30,000
Trade payables- 72,000 Profit and loss account 6,00,000
Provision for income tax 24,000
13,20,000 13,20,000
It was decided to reconstruct the company for which necessary resolution was passed and
sanctions were obtained from appropriate authorities. Accordingly, it was decided that:
(a) Each share is sub-divided into ten fully paid up equity shares of ₹ 10 each.
(b) After sub-division, each shareholder shall surrender to the company 50% of his holding,
for the purpose of re-issue to debenture holders and trade payables as necessary.
(c) Out of shares surrendered, 10,000 shares of ₹ 10 each shall be converted into 12%
preference shares of ₹ 10 each, fully paid up.
(d) The claims of the debenture-holders shall be reduced by 75%. In consideration of the
reduction, the debenture holders shall receive preference shares of ₹ 1,00,000 which are
converted out of shares surrendered.
(e) Trade payables claim shall be reduced to 50%, it is to be settled by the issue of equity
shares of ₹ 10 each out of shares surrendered.
(f) Balance of profit and loss account to be written off.
(g) The shares surrendered and not re-issued shall be cancelled.
You are required to show the journal entries giving effect to the above and the resultant Balance
Sheet.
26
Following is the balance sheet of X Ltd. As at 31.03.2021:
Share Capital Fixed Assets 3,70,000
60,000 shares of ₹ 10 each 6,00,000 Stock 1,20,000
Sundry Creditors 1,70,000 Debtors 1,70,000
Provision for tax 10,000 Cash 20,000
P/L Account 1,00,000
7,80,000 7,80,000
The directors have decided
 To reduce the nominal value of shares by ₹ 4 per shares.
 To write off the loss.
 To revalue the fixed assets at ₹ 2, 30,000.
Journalise the above transactions and prepare the balance sheet.
[Balance of Capital Reduction ₹ Nil, Balance Sheet ₹ 5,40,000]
27
The Balance Sheet of B. Ltd. as on 31.03.2021 is as below :
Particulars Amount
₹
I. Equity and Liabilities :
1. Shareholders’ Funds :
(a) Share Capital :
(i) Equity share capital (₹ 10 each) 5,00,000
(ii) 7% Cumulative Preference share capital (₹ 100) 1,00,000
(b) Reserves and Surplus :
(i) Balance in statement of Profit and Loss (5,00,000)
2. Non-current Liabilities :
(a) Long-term Borrowings (8% Debentures) 1,00,000
3. Current Liabilities :
(a) Trade Payables (Trade Creditors) 5,00,000
Total 7,00,000
II. Assets :
1. Non-current Assets :
(a) Fixed Assets :
(i) Tangible Assets :
Buildings 1,00,000
Machinery 4,00,000
(ii) Intangibles (Goodwill) 40,000
2. Current Assets :
(a) Inventories (Stock) 60,000
(b) Trade Receivables (Sundry Debtors) 90,000
(c) Cash and Cash equivalents (Bank) 10,000
7,00,000
Note : Contingent liability for Arrear Preference Dividend for 3 years.

A scheme of internal reconstruction is approved by the court in the following lines :
(a) Paid up value of equity share capital is to be reduced to 10%;
(b) Preference shareholders are to be issued 8%, 7 Preference shares of ₹ 10 each in exchange of each
existing preference shares.
(c) Preference shareholders are to be issued similar preference share for one-third of arrear
dividend. The balance of arrear dividend are to be cancelled.
(d) 8% Debenture holders agreed to sacrifice 20% of their claim for increase of interest to 10%.
(e) Building is valued at ₹ 1,50,000.
(f) Losses and intangible assets are to be written off.
Pass necessary journal entries (without narration) giving effect to the above scheme and prepare a revised
Balance Sheet of the company.
28
Following balance were available from the Balance Sheet of Timtim Ltd. as at 31.03.2021:
(Amount) ₹
3,000 6% Preference shares of ₹ 100 each, fully paid up 3,00,000
45,000 Equity shares of ₹ 10 each, fully paid up 4,50,000
Profit and Loss Account Debit Balance (1,50,000)
Bills Payable 50,000
Bank Overdraft 1,00,000
Land and Building 2,70,000
Goodwill 42,300
Patent 18,000
Inventory 88,800
Debtors 1,50,900
Dividends on Preference Shares are in arrear for three years. The company passes a special resolution
to reduce its capital in accordance with the following scheme and the same is duly sanctioned by the
Court :
(a) Each 6% preference share is converted to 8%, Preference shares of ₹ 75 each, fully paid. The
value of equity shares is brought down to ₹ 8 per share fully paid.
(b) The arrears of dividend on preference shares are sacrificed by the preference shareholders.
(c) Goodwill to be written off fully.
(d) Land & Building and Plant & Machinery are revalued at 135% and 80% of their respective book
values.
(e) Book debts worth ₹ 7,200 are to be treated as bad and hence to be written off.
(f) The balance of total capital reduction is to be utilised in writing down patents.
Give necessary Journal entries to give effect to the above.
29
The following figures are available from the Balance Sheet of Jagaddhatri Ltd. as on 31.03.2021:
Liabilities ₹
70,000 Equity Shares of ₹ 10 each 7,00,000
5,000 10% Preference Shares of ₹ 100 each 5,00,000
9% Debenture 4,00,000
Accrued interest 36,000
Creditors 3,34,000
22,20,000
Assets:
Land 4,00,000
Plant 2,00,000
Patent 40,000
Goodwill 1,20,000
Investment 60,000
Debtors 4,00,000
Stock 4,50,000
Profit & Loss Account 5,50,000
22,20,000
A scheme of re-organisation as approved by the Court was to take effect on 01.04.2021 by adopting the
following course:
(a) Preference Shares are to be written down to ₹ 75 each and Equity Shares to ₹ 1 each.
(b) Preference dividend were in arrear for 4 years. 1/4th of the total arrear dividend is to be satisfied by
issue of Equity Shares of ₹ 1 each and 3/4th of the claim is to be waived.
(c) Accrued interest on Debentures are to be paid in cash.
(d) Investments are to be sold for ₹ 1,00,000.
(e) Provision for bad debts is to be considered ₹ 9,000.
(f) Plant is valued at ₹ 1,78,000.
(g) All the intangible assets are to be written off to maximum extent.
Show the Journal Entries including narration to give effect of the above transactions in the books of the
Company.
30
The Balance Sheet of Mass Ltd. as on 31.03.2021 is as under:

Amount (₹)
I. Equity and Liability
1. Shareholders’ Funds:
(a) Share Capital – 40000 Equity Shares of ₹ 100 each. 40,00,000
(b) Reserves and Surplus:
Statement of Profit & Loss (5,00,000)
2. Non-current Liabilities:
10% Debentures 12,00,000
3. Current Liabilities:
Interest Due on Debentures 2,40,000
Term Loan 6,00,000
50,40,000
II. Assets
1. Non-current Assets:
(a) Property, Plant and Equipment
(i) Tangible Assets 33,00,000
(ii) Intangible Assets (Goodwill) 6,00,000
2. Current Assets:
(a) Inventories 5,00,000
(b) Trade Receivables 6,00,000
(c) Cash and Cash Equivalents 40,000
50,40,000
The following scheme of reconstruction has been passed and approved by the Court:
(i) The Equity Shares are to be subdivided into shares of ₹ 10 each and each shareholder shall
surrender 80% of his/her holdings.
(ii) The company issues 100000 Equity Shares of ₹ 10 each at a premium of ₹ 5 each.
(iii) 50% of 10% Debentures are redeemed.
(iv) The claims of Trade Payables are to be reduced by 40%.
(a) Outstanding Interest on Debenture is paid off.
(b) The surrendered shares are cancelled.
(v) The Capital Reduction A/c should be utilised to write off Tangible Assets as maximum as
possible after writing off intangible assets and accumulated losses.
(vi) Expenses of reconstruction are ₹ 50,000.
You are required to prepare journal entries and a Balance Sheet after effecting the scheme in the
booksof Mass Ltd. (Narration not required).
31
Chapter-12
Amalgamation & Absorption of
companies
1. Amalgamation
A Ltd. is absorbed by B Ltd., B. Ltd. agrees to make the following payments :
(a) Cash @ ₹ 5 per share for 10,000 shares of ₹ 10 each issued by A Ltd.
(b) Issue two shares of ₹ 20 each for every five shares held in A Ltd.
(c) Discharge ₹ 1,00,000 12% debenture of A Ltd. at 10% premium by issuing 13% debenture in
B Ltd. at par, and
(d) ₹ 20,000 cash to creditors of A Ltd. in final settlement of their account.
Determine the amount of purchase consideration as per AS-14 and pass the journal entry in the books
of B Ltd. (without narration)
2. Amalgamation
Som Ltd. agreed to takeover Dove Ltd. on Apri. 1, 2021. The terms and conditions of takeover were as
follows :
(i) Som Ltd. issued 56,000 equity shares of ₹ 100 each at a premium of ₹ 15 per share to the
equity shareholders of Dove Ltd.
(ii) Cash payment of ₹ 39,000 was made to equity shareholders of Dove Ltd.
(iii) 24,000 fully paid preference shares of ₹ 50 each issued at per to discharge the preference
shareholders of Dove Ltd.
(iv) The 8% Debentures of Dove Ltd. (₹ 78,000) converted into equivalent value of 9%
Debentures in Som Ltd.
(v) The actual cost of liquidation of Dove Ltd. was ₹ 23,000. Liquidation cost is to be reimbursed
by Som Ltd. to the extent of ₹ 15,000.
You are required to :

1. Calculate the amount of Purchase Consideration as per the provisions of AS-14; and
2. Show necessary Journal entries in the books of Som Ltd. for discharge of Purchase
Consideration.
32
4. Amalgamation
The Balance Sheets of Root Ltd. and Fruit Ltd. as on 31.03.2021 are given below:
Particulars Root Ltd. Fruit Ltd.
Amount Amount
I. Equity and Liability:
1. Shareholders’ Funds:
Equity Shares of 10 each 20,00,000 12,00,000
Reserves and Surplus 5,00,000 3,00,000
2. Non-Current Liabilities:
10% Debentures 6,00,000 4,00,000
3. Current Liabilities:
Short term Loan — 3,00,000
Trade Payable 2,50,000 1,50,000
TOTAL 33,50,000 23,50,000
II. Assets
1. Non-Current Assets:
Property, Plant and Equipment 10,00,000 9,00,000
Intangible Assets 12,00,000 8,00,000
2. Current Assets:
Inventory 5,15,000 4,00,000
Trade Receivables 4,00,000 2,20,000
Cash and Cash Equivalents 2,35,000 30,000
33,50,000 23,50,000
The companies decide to amalgamate on 01.04.2021 and form Flower Ltd. on the following terms:
(a) All Assets and Current Liabilities of the old companies are taken over by the Flower Ltd. The
net worths of Root Ltd. and Fruit Ltd. have been determined at ₹ 36 lakhs and ₹ 18 lakhs
respectively.
(b) The purchase considerations have been discharged by issuing sufficient numbers of Equity
Shares of ₹ 10 each at a premium of ₹ 50 each.
Show the Journal Entries in the books of Flower Ltd. and the Opening Balance Sheet of Flower Ltd.
33
5. Amalgamation
X Ltd. is absorbed by Y Ltd. on 31.03.2021 on which date the Balance Sheet of X.Ltd. was
summarized as follows:
Particulars Notes X.Ltd

No ₹
I. Equity and Liabilities
1. Shareholders’ Fund
(a) Equity Share Capital (₹ 10 each fully paid) 1,60,000
(b) Reserves and Surplus 1,44,000
2. Non-Current Liabilities
Long-term borrowings: 10% Debenture of ₹ 100 each 1,00,000
3. Current Liabilities
(a) Trade Payable 36,000
TOTAL 4,40,000
II. Assets
1. Non-Current Assets
(a) Property, Plant and Equipment 3,12,000
(b) Non-Current Investment —
2. Current Assets
(a) Inventory 81,000
(b) Trade Receivables 34,200
(c) Cash and Cash Equivalent 12,800
TOTAL 4,40,000
Notes to Balance Sheet (includes)
Particulars Amount(₹ )
1. Reserves and Surplus:
General Reserves 64,000
Profit & Loss Balance 80,000
1,44,000
2. Property, Plant & Equipment:
Plant and Machinery 72,000
3,12,000
The consideration payable to X.Ltd.:

(a) A cash payment of ₹ 110 for every Debenture in X.Ltd.
(b) An exchange of 3 equity shares of ₹ 5 each (quoted in the market at ₹ 6 each) in Y.Ltd. for
every share in X.Ltd.
(c) A further cash payment of ₹ 3 for each equiry share in X.Ltd.
You are required to prepare necessary ledger accounts in the books of X.Ltd. to close the books of
accounts and journal entries in the books of Y.Ltd. Expenses on liquidation were ₹ 6,000.
34
2019
CORPORATE ACCOUNTING – HONOURS
Paper : DSE 5.2A
Full Marks: 80
Group – A
Group A (5 Questions of 10 Marks each)
(3 Questions with Alternative):
Question 1 (Issue of shares):

Sunshine Ltd. issued 50,000 Equity shares of ₹ 10 each at a premium of 20% payable as ₹ 3 on application, ₹
6 on allotment (including premium) and the balance in one call after 3 months from allotment. Applications
were received for 80,000 equity shares. Allotment was made pro-rata to the applicants for 75,000 equity
shares, the remaining applications being rejected. Excess money on application (eligible for allotment) was
adjusted with allotment. Sourav, to whom 400 equity were allotted, failed to pay the allotment and call money.
Rahul, who applied for 750 equity shares, failed to pay call money. These shares were subsequently forfeited
and all the shares of Sourav and 50% shares of Rahul were reissued at a discount of 10% to Sachin as fully
paid up. Show the necessary journal entries (narrations required) in the books of the company.
Question 2 (ESOP or Underwriting):

Akash Ltd. granted on 1st April, 2016 options for 2000 shares of ₹ 10, to its employee at ₹ 60 each. The
market price on that date was ₹ 150 per shares.
The vesting period was 3 years and the maximum exercise period was 6 months. Options for 200 shares were
lapsed on 14.01.18. All the options were exercised on 30.09.2019 except for 100 shares. Show the journal
entries in the books of Akash Ltd. (Narration not required.)
Or
Remo Ltd. issued a prospectus inviting applications for subscription in 10,00,000 equity shares of ₹ 10 each.
The whole issue was fully underwritten by A, B, C and D as:
A – 30%; B – 25%; C – 35% and D – 10% (including firm underwriting of A and B)
Applications were received for 8,00,000 shares of which marked applications (excluding firm) were as
follows:
A – 1,80,000; B – 2,00,000; C – 2,03,000 and D – 1,67,000.
Firm applications were : A – 60,000 and B – 40,000 shares.
Determine the liability of each underwriter.
35
Question 3 (Buyback or Preference Shares):
The following information is available from the Balance Sheet of Everest Co. Ltd. as on 31.03.2019.
(a) Share Capital: ₹
Subscribed and fully paid up:
1,20,000 Equity Shares of ₹ 10 each. 12,00,000
12,00,000
(b) Reserves and Surplus: ₹
(iii) General Reserve 18,00,000
(iv) Securities Premium 6,00,000
24,00,000
(c) Total of secured and unsecured loan – ₹ 36,00,000
On the above date equity shares are bought back by the company to the extent possible as per section 68(2) of
the Companies Act, 2013, at premium of ₹ 40 per shares. You are required to give journal entries to give the
effect to buy-back and also show all workings.
Or
The following balances are extracted from the books of Sun Ltd.:
10,000, 10% Preference Shares of ₹ 10 each, fully paid up; 6,000, 9% Preference Shares of ₹ 10 each, ₹ 9
paid up; 20,000 Equity Shares of ₹ 10 each, fully paid up; General Reserve ₹ 2,20,000; Profit & Loss account
₹ 80,000; Capital Reserve ₹ 20,000; Securities Premium ₹ 20,000 (both the categories of Preference shares
were issued prior to 2012.)
Preference Shares are to be redeemed at 10% premium. For this purpose 5,000 Equity Shares of ₹ 10 each are
issued at 10% premium. Holders of 500, 10% Preference Shares are not traceable. Minimum use of free
reserve is to be made for the purpose of redemption of Preference Shares. Pass necessary Journal Entries.
Question 4 (Redemption of Debenture):

The following balances as on 31.03.2018 were extracted from the books of P Ltd.:
₹
(i) 12% Debentures Account 4,00,000
(ii) Debenture Sinking Fund Account 3,00,000
(iii) Debenture Sinking Fund Investment Account 3,00,000
(represented by 10% ₹ 3,60,000 Secured Bonds)
Annual contribution to the Sinking Fund was made on 31st March each year of ₹ 64,000. On 31st March,
2019 balance at bank was ₹ 1,60,000. On the same date interest on investment was received. Investments
were sold at 105% and the debentures were redeemed at par. You are required to prepare 12% Debenture
Account, Debenture Sinking Fund Account and Debenture Sinking Fund Investment Account for the year
ended 31.03.2019.
36
Question 5 (valuation of shares Or Valuation of Goodwill):
From the following particulars, calculate the value of an equity share under Earning Method and Dividend
Yield Method.
₹
5,000 Equity Shares of ₹ 100 each fully paid up 5,00,000
1,000, 8% Pref. Shares of ₹ 100 each fully paid up 1,00,000
EBDIT 3,00,000
Depreciation 50,000
Income Tax Rate 30%
Standard Price Earning ratio is 8 and dividend yield is 15%. During the last three years the company paid
equity dividend at 20%, 17% and 20% respectively.
OR
From the following information, calculate the value of goodwill as on 31.12.2018:
Equity Share Capital ( ₹ 10) ₹ 6,00,000
Preference Share Capital ₹ 1,00,000
Reserve and Surplus ₹ 90,000
10% Debentures ₹ 90,000
Depreciation Fund ₹ 50,000
Creditors ₹ 50,000
Total assets include preliminary expenses ₹ 20,000
Market value of assets is 70,000 higher than the book value.
Profits for last three years after 40% tax were ₹ 95,000, ₹ 90,000 and ₹ 1,10,000 respectively for the year 1,
2 and 3.
Fair return on capital employed is estimated at 10%.
Calculate the value of goodwill by capitalization of Average Profit on the basis of weighted Average Profit
(Weights are to be considered as 1, 2 and 3 for last 3 years respectively).
37
Group B (1 Question of 15 marks)
(1 Question with alternative):
Question 6 (Amalgamation or Internal Reconstruction):
Star Ltd. and Lite Ltd. agreed to amalgamate on and from 1st April, 2018. A new company Starlite Ltd. was
formed to take over the business of the amalgamating companies. The Balance Sheet of Star Ltd. and Lite Ltd.
as on 31st March, 2018 are given below:
Particulars Note No. Star Ltd. Lite Ltd.

( ₹ in Lakhs) ( ₹ in Lakhs)
1. Equity and Liabilities:

Share Capital 1 1,100 950
Reserves and Surplus 2 420 330
Long-term borrowings
(10% Debentures of ₹ 100 each) 60 30
Trade Payables 420 190
Total
2,000 1,500
2. Assets:
Fixed Assets:
900 650
Tangible Assets
150 50
Non-current Investments (Investments)
350 250
Inventories (Stock)
300 350
Trade Receivables
300 200
Cash and Cash equivalents (Cash and Bank)
Total 2,000 1,500
Notes to Accounts:
Particulars Star Ltd. Lite Ltd.

( ₹ in lakhs) ( ₹ in lakhs)
1. Share Capital:
(a) Equity Share of ₹ 100 each fully paid up 800 750
(b) 12% Preference Shares of ₹ 100 each 300 200
1,100 950
2. Reserves and Surplus
150 100
(a) Revaluation Reserve
170 150
(b) General Reserve
50 50
(c) Investment Allowance Reserve 50 30
(d) Balance in statement of Profit and Loss
420 330
38
Additional Information:
(a) 10% Debentures holders of both companies are discharged by Starlite Ltd. issuing such number of its
15% Debentures of ₹ 100 each so as to maintain the same amount of interest earned before
amalgamation.
(b) Preference shareholder of old companies are issued equivalent number of 15% Preference Share of
Starlite Ltd. at a price of ₹ 150 per share (Face value ₹ 100)
(c) New company will issue 5 equity shares for each equity share of Star Ltd. and 4 Equity Shares for
each equity share of Lite Ltd. The shares are to be issued at ₹ 30 per share, having a face value of ₹
10 per shares.
(d) Investment Allowance Reserve is to be maintained for 4 more years.
(e) Fixed assets of Star Ltd. and Lite Ltd. are to be taken at 930 Lakhs and ₹ 620 lakhs respectively.
Calculate the amount of purchase consideration to be paid to each of the companies and prepare the balance
sheet of Starlite Ltd. after amalgamation.
OR
The following figures are available from the Balance Sheet of Jagaddhatri Ltd. as on 31.03.2019:
Liabilities ₹
70,000 Equity Shares of ₹ 10 each 7,00,000
5,000 10% Preference Shares of ₹ 100 each 5,00,000
9% Debenture 4,00,000
Accrued interest 36,000
Creditors 3,34,000
22,20,000
Assets:
Land 4,00,000
Plant 2,00,000
Patent 40,000
Goodwill 1,20,000
Investment 60,000
Debtors 4,00,000
Stock 4,50,000
Profit & Loss Account 5,50,000
22,20,000
A scheme of re-organisation as approved by the Court was to take effect on 01.04.2019 by adopting the
following course:
(a) Preference Shares are to be written down to ₹ 75 each and Equity Shares to ₹ 1 each.
(b) Preference dividend were in arrear for 4 years. ¼th of the total arrear dividend is to be satisfied by
issue of Equity Shares of ₹ 1 each and 3/4th of the claim is to be waived.
(c) Accrued interest on Debentures are to be paid in cash.
(d) Investments are to be sold for ₹ 1,00,000.
(e) Provision for bad debts is to be considered ₹ 9,000.
(f) Plant is valued at ₹ 1,78,000.
(g) All the intangible assets are to be written off to maximum extent.
Show the Journal Entries including narration to give effect of the above transactions in the books of the
Company.
39
Question 7 (Company Final Accounts):
The Trial Balance of Khadim Ltd. as on 31.03.2019 is given below:
Debit ₹ Credit ₹
Land and Building 80,000 Equity Shares Capital (₹ 10 each) 2,40,000

Plant and Machinery 80,000 6% Pref. Share capital (₹ 100 each)
Furniture 6,400 Profit & Loss A/c as on 01.04.2018 40,000
Trade Debtors 72,000 Sales 6,000
Salaries and Wages 1,80,000 Trade Creditors 9,26,900
Investment (40% current) 40,000 provision for Income Tax 35,200
Patents 90,000 for the year 2017-2018
Repairs and Maintenance 2,000 General Reserve 9,400
Interest on Debenture 2,400 12% Debenture 10,700
Vehicles 12,000 Interest on Investment 40,000
Sundry Expenses 4,000 3,200
Purchases 6,50,000
Dividend paid 12,000
Dividend Distribution Tax 2,400
Advance Tax for current year 20,000
Carriage Inward 2,800
Cash in Hand 3,600
Cash at bank 6,000
Advance tax paid for the year –
2017 – 2018 9,200
Opening Stock 36,600
13,11,400 13,11,400
Additional Information:
(a) Stock at the end of the year 2018-19 valued at ₹ 46,000.
(b) Depreciation is to be provided on the diminishing values of assets as vehicles @ 20%; Building @ 5%;
Machinery @ 15% and furniture @ 10%. Land and Buildings include ₹ 16,000 as cost of land.
(c) 1/10th of value of patent is to be written off.
(d) The final assessment for 2017-18 has been complete and Income Tax Authority has made a gross
demand of ₹ 9,600.
(e) Income Tax Rate for the current year is to be taken 30%.
(f) The company resolves to transfer ₹ 5,000 to the General Reserve.
(g) Debentures were issued three years ago.
Prepare (i) Statement of Profit and Loss for the year ended 31.03.2019 and (ii) a Balance Sheet on that date.
[Note no 1. Property, Plant & Equipment; 2. Reserve & Surpluses are to be shown.]
40
CORPORATE ACCOUNTING – 2020 HONOURS
Group A (Answer any 4 Questions) (4 x 10 = 40 Marks)
Question 1:
Ex Ltd. had ₹ 12,00,000 in Capital Redemption Reserve, ₹ 10,00,000 in Securities Premium and ₹
15,00,000 credit balance in its Statement of Profit & Loss. It issued 20000 bonus shares of ₹ 100 each
as fully paid at par and 5000 right shares of ₹ 100 each fully paid at ₹ 125 to its shareholders. A. Ltd.
received 1200 such bonus shares and entitled to 300 right shares, which it accepted.
Show necessary journal entries (without narrations) in the books of Ex Ltd. and in the books of A
Ltd. for the above.
Question 2:
X Ltd. issued 20,000 shares of ₹ 100 each at a premium of ₹ 10 per shares. The entire issue was
underwritten as follows :
A – 10000 shares, B – 6000 shares, C – 4000 shares.
The firm underwriting was to be : A – 2000 shares, B – 1000 shares and C – 1000 shares. Shares
applied for were 18000 (including firm underwriting). Marked applications being, A – 7000 shares, B
– 2800 shares and C – 3200 shares.
Calculate the liability of the underwriters (in number of shares).
Question 3:
Following figures are available from the Balance Sheet of King Ltd. as on 31.03.2019 (in ₹.) :
₹
Equity shares of ₹ 100 each, fully paid up 30,00,000
Balance in the statement of Profit & Loss (cr.) 10,00,000
Capital Reserve 2,00,000
Cash and Bank 5,00,000
The company decided to buy-back 6000 equity shares at ₹ 125 per shares. For this purpose it
decided to issue 2,000 10% Preference Shares of ₹ 100 each at 10% premium. It also sold 3/4 th of
the investments @ 75% of the face value. 4
Pass necessary journal entries in the books of King Ltd to give effect to the above (Narrations not
required).
Question 4:
From the following particulars of K. Ltd., calculate the value of equity share under (a) intrinsic value
method and (b) earnings-yield method.
Tangible assets ₹ 11,60,000; Goodwill ₹ 1,00,000; Current Assets ₹ 3,60,000; Discount on issue of
debentures ₹ 20,000; 5% Debentures ₹ 2,00,000; Current Liabilities ₹ 2,60,000.
The net profits after tax for three years were : 2017-18 ₹ 1,03,200; 2018-19 ₹ 1,04,000; 2019-20 ₹
1,03,300. It is the practice of the company to transfer 20% of the profit to Reserves. Normal rate of
return is 10%. Issued and paid up Equity Capital - 80000 Equity shares of ₹ 10 each fully paid-up.
41
Question 5:
The following balances appear in the books of A Ltd. as on 31.03.2019 :
₹
13% Debentures Account 14,00,000
Debenture Redemption Fund Account 10,00,000
13% Debenture Redemption Fund Investment Account 10,00,000
The annual contribution to the Debenture Redemption Fund was ₹ 1,40,000. The company sold its
investments for ₹ 14,00,000 and redeemed the debentures on 31.03.2020.
Prepare 13% Debentures Account, Debenture Redemption Fund Account and 13% Debenture
Redemption Fund Investment Account up to 31.03.2020.
Question 6:
Sunshine Ltd. granted options on 1st April, 2015 for 1500 shares of ₹ 10 each at ₹ 80 each, when the
market price was ₹ 160 each. The vesting period was 3 years. The maximum exercise period was 1
year. All the 1500 options were exercised by the employees on 31st October, 2018.
Show necessary journal entries to record the above transactions in the books of the company
(Narrations required).
Question 7:
The capital structure of a company as on 31.03.2020 consisted of 20000 equity shares of ₹ 10 each
fully paid up and 1000, 8% Redeemable preference shares of ₹ 100 each fully paid up. Undistributed
reserves and surplus were as under :
Balance in Statement of Profit & Loss ₹ 32,000
Cash at Bank amounted to ₹ 98,000. Preference shares are to be redeemed at a premium of 10% and
for the purpose of redemption, the directors are empowered to make fresh issue of equity shares at
par after utilizing the reserves and surplus subject to the condition that a sum of ₹ 25,000 shall be
retained in General Reserve.
Pass necessary journal entries to give effect to the above arrangements (narration required) and also
all relevant workings.
Question 8:
Calculate the value of goodwill under
(a) 5 years’ purchase of Super Profit method and (b) Capitalization of Average Profit method from
the following information :
(i) Capital employed as per last balance sheet ₹ 6,30,000
(ii) Normal rate of profit 10%
(iii) Net profit before tax (tax rate 35%)
1st year ₹ 1,05,000 4th year ₹ 2,00,000
2nd year ₹ 1,45,000 5th year ₹ 1,50,000
3rd year ₹ 1,75,000
(iv) Non-trading income ₹ 5,000 and Interest on long-term borrowings ₹ 10,000 on an
averageincluded in the statement of Profit & Loss.
(v) Fixed assets revalued by ₹ 20,000 more than the balance sheet value.
Use simple average method for determining average profit and ignore depreciation on increased
value of fixed assets.
42
Question 9:
Care Ltd. invited applications for 10000 shares of ₹ 10 each at 10% premium payable as – on
application ₹ 4; on allotment ₹ 3 (including premium) and balance on one call. Applications were
received for 17000 shares and after rejecting applications for 1000 shares the company issued all the
shares on proportionate basis. All amount due was received except the following :
iii. Mr. A holding 500 shares failed to pay allotment and call money.
iv. Mr. B holding 400 shares failed to pay call money.
All these shares were forfeited after call. All forfeited shares were re-issued to Mr. C as fully paid @
₹ 8 per shares.
Show necessary journal entries (including cash transactions) in the books of Care Ltd. (Narrations not
required)
Question 10:
(h) State the conditions to be satisfied as per AS 14 in case of amalgamation in the nature of
merger.
(i) Distinguish between pooling of interest method and purchase method of accounting for
amalgamation in the books of transferee company.
43
Question 11:
The Balance Sheet of B. Ltd. as on 31.03.2019 is as below :
Particulars Amount
₹.
I. Equity and Liabilities :
1. Shareholders’ Funds :
(a) Share Capital :
(i) Equity share capital (₹ 10 each) 5,00,000
(ii) 7% Cumulative Preference share capital (₹ 100) 1,00,000
(i) Balance in statement of Profit and Loss (5,00,000)
2. Non-current Liabilities :
(a) Long-term Borrowings (8% Debentures) 1,00,000
3. Current Liabilities :
(a) Trade Payables (Trade Creditors) 5,00,000
Total 7,00,000
II. Assets :
1. Non-current Assets :
(a) Fixed Assets :
(i) Tangible Assets :
Buildings 1,00,000
Machinery 4,00,000
(ii) Intangibles (Goodwill) 40,000
2. Current Assets :
(a) Inventories (Stock) 60,000
(b) Trade Receivables (Sundry Debtors) 90,000
(c) Cash and Cash equivalents (Bank) 10,000
7,00,000
Note : Contingent liability for Arrear Preference Dividend for 3 years.
A scheme of internal reconstruction is approved by the court in the following lines :
(g) Paid up value of equity share capital is to be reduced to 10%;
(h) Preference shareholders are to be issued 8%, 7 Preference shares of ₹ 10 each in
exchange of each existing preference shares.
(i) Preference shareholders are to be issued similar preference share for one-third of
arrear dividend. The balance of arrear dividend are to be cancelled.
(j) 8% Debentureholders agreed to sacrifice 20% of their claim for increase of interest to
10%.
(k) Building is valued at ₹ 1,50,000.
(l) Losses and intangible assets are to be written off.
Pass necessary journal entries (without narration) giving effect to the above scheme and prepare a revised
Balance Sheet of the company.
44
Question 12:
Following is the Trial Balance of Zoom Ltd., a trading concern, as at 31.02.2020 :
Debit Balance ₹ Credit Balance ₹
Stock on 01.04.2019 1,86,000 Sales 11,90,000

Purchases 7,20,000 Return outward 10,000
Return Inward 12,000 10% Bank Loan 60,000
Wages 1,10,000 Sundry Creditors 50,000
Carriage Inward 5,000 Bills Payable 12,000
Sundry manufacturing expenses 18,000 Profit & Loss Balance (Cr.) 26,000
Interest on Bank loan 5,000 (01.04.2019)
Office salaries 18,000 General Reserve 12,000
Auditor’s fees 9,000 Securities Premium 24,000
Directors’ remuneration 32,000 Share Capital 4,00,000
Freehold Premises 1,64,000
Patents 20,000
Bills Receivable 29,000
Cash and Bank 85,000
Advance Tax for 2019-20 83,000
17,84,000 17,84,000
You are required to prepare the Statement of Profit & Loss for the year ended 31.03.2020 and theBalance
Sheet as at that date after taking into account the following :
(h) Stock on 31.03.2020 was valued at ₹ 1,25,000
(i) Bank loan was taken on 01.04.2019.
(j) Depreciation is to be provided on Plant and Machinery @ 20 % and on Furniture and Fittings
@10%.
(k) 1/4th of Patents is to be amortised.
(l) Provision for tax is to be maintained @ 30%
(m) 10% of profit for the year is to be transferred to General Reserve.
(n) Ignore tax on dividend.
45
CORPORATE ACCOUNTING – 2021 HONOURS
(Out of 8)
Question 1:
The Balance Sheet of X Ltd. reflected the following balances :
Equity shares of ₹ 10 each, ₹ 8 per share ₹ 8,00,000
(called up and paid up)
Capital Redemption Reserve ₹ 1,50,000
Securities Premium (fully realized) ₹ 50,000
Surplus in statement of Profit and Loss ₹ 1,60,000
Capital Reserve (fully realized in cash) ₹ 80,000
General Reserve ₹ 4,80,000
The Board of Directors resolved the following :
(i) To make a call of ₹ 2 per share to the equity shareholders.
(ii) To issue three Bonus shares for every five equity shares held.
(iii) To utilise General Reserve as minimum as possible.
(iv) To issue 40000 Right shares of ₹ 10 each fully paid up at ₹ 13 per share to its equity
shareholders.
Assuming that all call moneys were collected in due time and the right shares were duly taken up by the
shareholders, pass necessary journal entries in the books of the company. [Narration not required]
Question 2:
P Ltd. granted option for 8000 equity shares on October 1, 2016 at ₹ 80 (Face value ₹ 10 each), when the
market price was ₹ 70. The vesting period was 2½ years. The maximum exercise period was 1 year.
All the options were exercised by the employees on 30.06.2019.
Show necessary journal entries to record the above transactions in the books of the company [Narrations
required].
Question 3:
A Ltd. has authorized capital of ₹ 50,00,000 divided into 100000 equity shares of ₹ 50 each. The company
issued for subscription 50000 shares at a premium of ₹ 10 each. The entire issue was underwritten as follows :
X — 30000 shares (firm underwriting – 5000 shares)
Y — 15000 shares (firm underwriting – 2000 shares)
Z — 5000 shares (firm underwriting – 1000 shares)
Out of total issue, 45000 shares including firm underwriting, were subscribed. The following were the marked
forms including firm : X – 15600 shares; Y – 10400 shares and Z – 4000 shares.
Calculate the total liability (in number of shares) of each underwriter considering firm applications as
marked.
46
Question 4:
The following figures are available from the Balance Sheet of Blue Chip Ltd. as on 31.03.2020 :
₹
240000 equity shares of ₹ 10 each fully paid up 24,00,000
Non-Current Assets (Tangible) 72,00,000
Current Assets 72,00,000
The company intends to buy back 40000 equity shares at a premium of ₹ 30 per share.
State whether the company can do so and if yes, pass journal entries in the books of the company.
[Narration not required]
Question 5:
The following balances appeared in the books of Syska Ltd. As on 01.04.2020 :
₹
13% Debentures Account 7,00,000
Debenture Redemption Fund Account 6,35,000
Debenture Redemption Fund Investment
(Nominal Value = Cost) 6,35,000
The company sold its investments for ₹ 7,50,000 and redeemed the debentures at par on 01.04.2020. Prepare
13% Debentures Account, Debenture Redemption Fund Account and Debenture Redemption Fund Investment
Account in the books of the company.
Question 6:
The Capital structure of White Ltd. is given below:
₹
Equity share capital (₹ 100 each) 18,00,000
12% Pref. Share Capital (₹ 10 each) 9,00,000
13% Term Loan 24,00,000
Reserves and Surplus 6,00,000
The average profit of the company before payment of interest and income tax is ₹ 14,00,000. The income tax rate
is 25%. Calculate the value of equity shares of the company assuming Price-Earning Ratio is 10.
47
Question 7:
The Capital and Reserves & Surpluses of ABC Ltd. as on 31.03.2021 was as follows (in ₹ ) :
10000 Equity Shares of ₹ 10 each 1,00,000
1000 10% Preference Shares of ₹ 100 each 1,00,000
Less Calls in arrear (on 100 shares @ ₹ 20) 2,000
98,000
400, 8% Preference Shares of ₹ 100 each. ₹ 60 called 24,000
Securities Premium 12,000
Reserve Fund 45,000
Surplus in Statement of Profit & Loss 12,000 1,11,000
On 31.03.2021, investments standing in the books at ₹ 20,000 were sold for ₹ 18,000. On the same date it
was resolved to redeem the eligible preference shares at 10% premium by issuing sufficient equity shares at
20% premium, subject to leaving a balance of ₹ 10,000 in Reserve Fund.
Give necessary journal entries assuming that all transactions were immediately given effect and payments were
made to the Preference Shareholders. (Narration not required)
Question 8:
Balance Sheet of G. Ltd. as on 31.03.2021 included the following :
₹ ₹
Share Capital :
Equity Share Capital (₹ 10 each fully paid) 3,00,000
10% Pref. Shares Capital 1,00,000
Reserves and Surpluses : 4,00,000
Statement of Profit & Loss 26,000
80,000
Trade Payables 30,000
Following information are also available :

Assets include a non-trade investment at ₹ 15,000
Market Value of other assets is ₹ 40,000 more than the book value.
Profits before tax for last three years were : 2018-2019 : ₹ 58,000, 2019-2020 : ₹ 64,000 and
2020-2021 : ₹ 75,000
Fair Return on Capital Employed in this type of business is estimated at 10%. In
year 2018-2019, there was an accidental loss of ₹ 6,600.
Profits of 2019-2020 and 2020-2021 include ₹ 2,000 and ₹ 1,600 as income from non-trade investments.
You are required to calculate the value of Goodwill of G. Ltd. based on above using 4 years purchase of
super profit (assume applicable rate of income tax to be 20%)
48
(Out of 4):
Question 9:
Televista Ltd. invited applications for 20000 Equity Shares of ₹ 10 each at a premium of ₹ 2 per share,
payable ₹ 3 per share on application, ₹ 5 per share on allotment (including premium) and the balance on
first and final call. Applications for 27000 shares were received. It was decided :
(a) to refuse allotment to the applicants for 3000 shares;
(b) to allot in full to the applicants for 4000 shares;
(c) to allot the balance of the available shares pro-rata among the other applicants; and
(d) to utilise excess application money in part payment of allotment money.
Mr. X holding 250 shares, to whom shares were allotted on pro-rata basis, failed to pay the amount due on
allotment and call. Mr. Y holding 150 shares to whom full allotment was made, also failed to pay allotment
and call money. These shares were forfeited after call. 150 forfeited shares of Mr. X and 100 forfeited shares
of Mr. Y were reissued at ₹ 9 per share as fully paid up to Mr. Z.
Show the necessary journal entries including cash transactions in the books of Televista Ltd. [Narrations not
required]
Question 10:
Following are the items appearing in the Balance Sheet of X Ltd. as on 31.03.2020 :
₹
Share Capital :
6000, 10% Preference shares of ₹ 100 each 6,00,000
120000, Equity shares of ₹ 10 each 12,00,000
Reserve & Surplus :
Balance in Statement of Profit & Loss (8,50,000)
Non-current Liabilities
2000, 6% Debentures of ₹ 100 each 2,00,000
Current Liabilities
23,00,000
A scheme of reconstruction was adopted with a reduction of capital which was approved by the tribunal on
the following terms :
(a) Equity shares to be converted into same number of equity shares of such face value as to
reduce the paid up equity share capital by 30%.
49
(b) Preference shares to be converted into same number of preference shares of ₹ 60 each, fully
paid up.
(c) Balance of General Reserve to be utilised in full.
(d) Debentures to be converted into such number of 8% Debentures of ₹ 50 each as to
generate the same amount of interest as before.
(e) Property, Plant and equipment and inventories are to be reduced by ₹ 5,52,000 and ₹
38,000 respectively.
(f) Arrears of preference dividend to be waived in full. The deficit balance in the statements of
profit and loss to be written off in full.
(g) The following are to be given effect :
(i) Unrecorded debtors ₹ 3,34,000
(ii) Unrecorded creditors ₹ 80,000 to be paid in full
(iii) Reconstruction expenses ₹ 11,500 to be paid.
Pass necessary journal entries (without narration) and the resultant Balance sheet after the capital
reduction.
Question 11:
BT Ltd. is absorbed by the CT Ltd. on 01.04.2021, on which date the assets and liabilities of BT Ltd. were as
follows :
Amount (₹ )
I. Equity and Liability :
1. Shareholder’s Fund :
(a) Equity Share Capital (₹ 10 each fully paid) 80,000
Surplus Balance in Statement of Profit and Loss 32,000
72,000
2. Non-current Liabilities : 10% Debentures (100 each) 50,000
3. Current Liabilities : Trade Payable 13,000
Total 2,15,000
The consideration payable by CT Ltd. was :
(a) A cash payment of ₹ 105 for every debenture in BT Ltd.
(b) Exchange of 3 shares in CT Ltd. of ₹ 5 each (to be issued at ₹ 6 each) for every share in BT Ltd.
(c) A further payment in cash at ₹ 4 for each share in BT Ltd.
(d) The expenses of liquidation ₹ 3,000 were paid by the BT Ltd.
Calculate the purchase consideration, and show Realisation A/c, CT Ltd. A/c, Equity Share Holders A/c and
Bank A/c in the books of BT Ltd to close its books.
50
Question 12:
The following is the Trial Balance of Y. Ltd. as on 31.03.2020 :
Dr. ( ₹ ) Cr. (₹ )
Stock (01.04.2019) 1,60,000 —
Purchase and Sales 5,00,000 8,00,000
Purchase returns — 10,000
Carriage Inward 2,100 —
Wages 50,000 —
Salaries 20,000 —
Discount Received — 8,000
Furniture and Fittings 40,000 —
Rent 10,000 —
Sundry Expenses 16,500 —
Balance in Profit & Loss Statement (01.04.2019) — 50,000
Paid up Capital — 2,00,000
Interim dividend 16,000 —
Dividend distribution tax on interim dividend 3,290 —
Debtors and Creditors 52,400 31,000
Plant and Machinery 2,46,000 —
General Reserve — 20,000
Patents 8,000 —
Bills Receivable and Payables 2,710 8,000
11,27,000 11,27,000
Prepare a statement of Profit and Loss for the year ended on 31.03.2020 and a Balance Sheet as at
that date as per schedule III of Companies Act. 2013 taking into consideration the following adjustments :
(a) Stock at on 31.03.2020 was ₹ 1,96,000
(b) Depreciate Plant and Machinery @ 15%, Furniture and Fittings @ 10%
(c) Make a provision for doubtful debts @ 10%
(d) Provision for tax is to be made @ 40% and the rate of Dividend distribution tax is 20.56%
(e) Patents have a life of 5 years
(f) The directors proposed a dividend @ 10% for the year ended 31.03.2020 excluding Interim
dividend and decided to transfer ₹ 15,000 to General Reserve.
51
CORPORATE ACCOUNTING – 2019 GENERAL
Group A (5 Questions of 10 Marks each) (3 Questions with Alternative):
Question 1 (Issue of Shares):
The directors of KPL Industries Ltd. have invited application for 72,000 Equity Shares of ₹ 10 each to be issued
at 20% premium. The money payable on shares is as follows:
01.05.18: On application ₹ 2
01.06.18: On allotment ₹ 5 (including premium of ₹ 2)
01.01.19: First and Final Call ₹ 5
Applications were received for 90,000 shares and allotment was made pro-rata to the applicants. All shareholders
are paid their dues within the due time except Mr. Ranjit, to whom 3,600 shares were allotted, failed to pay the
allotment and call money. His shares are forfeited fulfilling the statutory provisions.
Subsequently these shares are re-issued to Animesh as fully paid shares at ₹ 8 per share on 01.03.19.
Show the necessary journal entries (including cash transaction)
Question 2 (Underwriting or Bonus Shares):
Zenith Ltd., issued 3,00,000 shares of ₹ 10 each at a premium of ₹ 2. The entire issue was underwriting by X, Y
and Z in the ratio of 3:2:1. Their firm underwriting was as follows:
X : 35,000, Shares Y : 20,000 shares, Z : 22,500 shares.
The total subscription excluding firm underwriting & including marked application were for 1,60,000 shares.
Marked application received were as follows:
X : 45,000, Shares Y : 22,500 shares, Z : 17,500 shares.
The underwriting contract provided that credit for unmarked applications to be given to the underwriters in
proportion to the shares underwritten and benefit of firm underwriting is to be given to all Underwriters.
You are required to compute the underwriter’s liability in number of shares.
Or
(a) Following is the extracts of Balance sheet of BPA Limited as on 31.03.19:
Share capital:
12,000, 12% preference shares of ₹ 10 each fully paid ₹ 1,20,000
80,000 Equity Shares of ₹ 10 each fully paid ₹ 8,00,000
Reserve and Surplus
Securities Premium ₹ 1,00,000
Revaluation Reserve ₹ 1,50,000
Profit and loss balance (Cr.) ₹ 3,00,000
Company has decided in its General Meeting to capitalize its reserve by issue of 1 fully paid bonus share
for every 2 equity shares held after fulfilling the legal formalities. Pass the journal entries to give the effect
of the above decision.
(b) On 01.04.17 Zed Pharmaceuticals Ltd. had granted 2,000 shares to the employees under stock option
scheme at ₹ 80 (Face value ₹ 10; Market value ₹ 120). The company allowed 2 years for vesting the
option and 1 year maximum exercise period. Employees exercised all the option on 31.12.19. Show
necessary journal entries for the above transactions.
52
Question 3 (Preference shares or Buyback):
The Balance Sheet of Gyan Ltd. as on 31.03.2019 is an follows:
Equity and Liabilities Amount ( ₹ )
Shareholder’s fund
(c) Shareholders’ fund
Equity Share Capital of ₹ 10 each fully paid 2,00,000
10% Preference Share Capital of ₹ 100 each fully paid 3,00,000
(d) Reserve and Surplus
Profit and Loss balance 4,00,000
Current Liabilities
Trade Payable 80,000
11,00,000
Assets Amount ( ₹ )
Non-current investment
(c) Property Plant and equipment – tangible 5,00,000
(d) Non-current investment 3,00,000
Current Assets
Cash and cash equivalent 3,00,000
11,00,000
In the board meeting it was decided
(i) To Sell investment at a profit of ₹ 10,000.
(ii) To redeem the Preference Shares at 10% premium.
(iii) Utilize the reserve and profit and loss balance after maintaining balance in Profit and Loss
Account ₹ 3,00,000 for redemption.
(iv) To issue minimum number of equity shares of ₹ 10 each for the purpose of redemption.
You are requirement to pass necessary journal entries to record the above transactions.
Or
The Balance Sheet of Progyan Ltd. as on 31.03.19 is as follows
Equity and Liabilities Amount ( ₹ )
Shareholders’ fund
(a) Share Capital
2,50,000 equity share of ₹ 10 each fully paid 25,00,000
2,000 10% Preference Share of ₹ 100 each fully paid 2,00,000
(b) Reserve and Surplus
Capital Reserve 10,00,000
Profit and Loss balance 4,00,000
Current Liabilities
Trade Payable 15,00,000
92,00,000
53
Assets Amount ( ₹ )
Non-Current Assets
(a) Property Plant and Equipment - tangible 47,00,000
(b) Non – current Investment 30,00,000
Current Assets
Cash and Cash equivalent 15,00,000
92,00,000
The Company passed a resolution
(a) To buy back 20% of its equity capital @ ₹ 50 per shares.
(b) To sell all of its investment for ₹ 29,00,000.
You are required to pass the necessary journal entries and prepare the Balance Sheet.
Question 4 (Redemption of Debenture):
The following balances appeared in the books of Birla Ltd. as on 31.03.2018:
13% Debenture account ₹ 7,00,000
Debenture Redemption Fund Account ₹ 5,00,000
13% Debenture redemption Fund Investment Account (Nominal Cost) ₹ 5,00,000
The annual contribution to the Debenture Redemption Fund was ₹ 7,00,000 and redeemed the debentures on
31.03.2019.
Prepare 13% Debenture Account, Debenture Redemption Fund Account and Debenture Redemption Fund
Investment Account up to 31.03.2019.
Question 5 (Valuation of Goodwill or Valuation of Shares):
Following information is extracted from the records of XYZ Ltd. Calculate the value of Goodwill as on
31.03.2019:
 Equity Share Capital (₹ 10) ₹ 8,00,000
 11% Pref. Shares Capital ₹ 2,00,000
 Reserve and Surplus ₹ 90,000
 12% Debentures ₹ 1,00,000
 Creditors ₹ 70,000
 Non-trade investment ₹ 80,000
 Profits for last three years before tax were: 2016-17: ₹ 1,60,000; 2017-18: ₹ 2,20,000 and 2018-19:
₹ 2,40,000 respectively.
 Non-trade income of ₹ 6,400 (before tax) was included on an average for each of these years.
 Tax rate 40%
 Fair return on Capital Employed in this type of business is estimated at 12%
 Goodwill is to be valued on the basis of 4 years purchase of Super Profit. (Take simple average profit.)
Or
The following particulars are available in relation to Chamling Ltd:
 Equity Share Capital: 5,000 Equity Shares of ₹ 20 each.
 Preference Share Capital: 1,000. 8% Preference Shares of ₹ 100 each
 Total assets (Market value ₹ 3,00,000) ₹ 2,50,000.
 Current Liabilities ₹ 18,000
 Average trading Profit after tax ₹ 40,000
 Amount transfer to General Reserve 15%
 Normal rate of return on equity shareholders in market 10%.
54
Calculate:
(a) Intrinsic value per equity share
(b) Yield value of equity share
(c) Fair value of share

(1Question with alternative):
Question 6 (Company Final Account):
Following is the Trial Balance of JK Limited as on 31.03.2019.
Particulars Dr. ( ₹ ) Particulars Cr. ( ₹ )
Machinery 2,00,000 Equity Share Capital (₹ 10 each)
2,00,000
Furniture 1,00,000 Creditors 50,000
Land 3,00,000 Sales 8,70,000
12% Investment (non- 1,30,000 Bills Payable 25,000
current)
(Purchased 01.04.18 Nominal Interest Received 10,400
Value ₹ 1,20,000)
Bills Receivable 10,000 General Reserve 75,000
Debtors 30,000 Surplus balance (01.04.18) 87,600
Purchases 5,00,000 10% Debentures 1,00,000
Stock (01.04.18) 40,000 Bank Overdraft 15,000
Salaries 35,000 Provision for Depreciation
Rent 15,000 - On Machinery : 40,000
General administration 1,00,000 - On Furniture : 20,000 60,000
expenses
Cash 2,000 Bad debt recovery 1,500
Bank 20,000
Debenture Interest 10,000
Bad debts 2,500
14,94,500 14,94,500
You are required to prepare the Statement of Profit and Loss for the year ended 31.03.19 and the Balance
Sheet as on that date after considering the following in the books of JK Ltd.
(a) Unsold stock on 31.03.19 at cost ₹ 20,000.
(b) Depreciation to be charged on Machinery @ 10% and on Furniture @ 5% p.a. on diminishing Balance
Method.
(c) Rate of Income Tax is 30% (ignore surcharge and cess).
(d) 10% profit transferred to General Reserve.
(e) Salaries outstanding ₹ 1,500.
Ignore corporate dividend tax.
55
Question 7 (Amalgamation or Internal Reconstruction):
(a) What do you understand by Purchase Consideration as per AS-14?
(b) Sun Ltd. agreed to take over Moon Ltd. on Apr. 1, 2019. The terms and conditions of take over were as
follows:
 Sun Ltd. issued 56,000 equity shares of ₹ 100 each at a premium of ₹ 15 per share to the equity
shareholder of Moon Ltd.
 Cash payment of ₹ 39,000 was made to equity shareholders of Moon Ltd.
 24,000 fully paid preference share of ₹ 50 each issued at par to discharge the preference
shareholders of Moon Ltd;
 The 8% Debentures of Moon Ltd. (₹ 78,000) converted into equivalent value of 9% Debentures in
Sun Ltd.;
 The actual cost of liquidation of Moon Ltd. was ₹ 23,000. Liquidation cost is to be reimbursed by
sun Ltd to the extent of ₹ 15,000.
You are required to:
(i) Calculate the amount purchase consideration as per the provisions of AS-14; and
(ii) Pass Journal Entry relating to discharge of purchase consideration in books of Sun Ltd.
Or
Following is the Balance Sheet of B Ltd. as on 31.03.2019 (Notes of Balance Sheet includes)
Particulars Note ₹ Particulars ₹
No.
I. EQUITY AND LIABILITIES 1. Share Capital
1. Shareholders’ funds 3,000, 5% Pref. share of
₹ 100 each 3,00,000
(a) Share capital 1 11,00,000 8,000 Equity shares of ₹ 100
each 8,00,000
(b) Reserve and surplus
P/L balance (2,30,000) 11,00,000
2. Non-current liabilities
Long-term borrowing: 2. Tangible Assets
Secured Loan 50,000 Land and Building 4,50,000
3. Current Liabilities Plant and Machinery 2,50,000
Trade payable (Creditors) 1,25,000
Total 10,45,000 7,00,000
II. Assets 3. Intangible Assets
1. Non-Current Assets Goodwill 1,50,000
Property, Plant & Equipment Patents 45,000
(a) Tangible Assets 2 7,00,000 1,95,000
(b) Intangible Assets 3 1,95,000
2. Current Assets 4. Cash and Cash Equivalent
(a) Inventories 1,35,000 Bank Overdraft 75,000
(b) Trade Receivables: Debtors 90,000
(c) Cash and Cash equivalent 4 (75,000)
Total 10,45,000
56
The Company undertook the following scheme of reconstruction:
(a) Equity Shares were to be reduced to shares of ₹ 50 each fully paid up.
(b) Preference share were to be converted into 7% Preference Shares of ₹ 70 each fully paid up.
(c) Sundry Creditors agreed to give up 1/5th of their claims provided they were paid off immediately.
(d) 50,000 equity share of ₹ 50 each were to be issued for cash.
(e) Expenses of Reconstruction were to be ₹ 7,500.
(f) The company decided:
 To write off Goodwill, deficit balance of statement of Profit and Loss and Patents.
 To write down Plant and Machinery by ₹ 45,000 and Inventories by ₹ 20,000.
 To create a Provision for Doubtful Debts @ 5%.
Show journal entries giving effects of the scheme of reconstruction.
57

Group A
(Answer any 4 Questions) (4 x 10 = 40 Marks)
Question 1:
Sky Ltd. granted 20,000 options at ₹ 50 each to its employees under Employees’ Stock Option Scheme.
The face value of each option was ₹ 10 and its market price at that time was ₹ 110. The vesting period
was two years. All the employees exercised their options fully. Show the journal entries in the books of
Sky Ltd.
Question 2:
The following underwriting took place for Pioneer Ltd., which invited applications for 10,000 shares of
₹ 10 each :
X : 6,000 shares, Y : 2,500 shares, Z : 1,500 shares
In addition, there were firm underwriting as follows :
X : 800 shares Y : 300 shares Z : 1,000 shares
Total subscription including firm underwriting was 7,100 shares, and the forms included the following
marked forms :
X : 1,000 shares, Y : 2,000 shares, Z : 500 shares
You are required to compute the underwriter’s liability in number of shares when the specific benefit of
firm underwriting is to be given to the Underwriters.
Question 3:
Petro Ltd. provides the following information as on 31.03.2020 :
Particulars ₹
1,20,000 equity shares of ₹ 10 each fully paid 12,00,000

Capital Redemption Reserve 3,00,000
Plant Revaluation Reserve 40,000

Development Rebate Reserve 4,60,000
Investment Allowance Reserve 5,00,000
58
On 01.04.2020, the company decided to issue Bonus shares at par to its shareholders at the rate of 1
share for every 2 shares held and right shares at the rate of 1 share for every 4 shares held at ₹ 14 per
shares.
Show necessary Journal entries in the books of Petro Ltd. to give effect to above transactions.
Question 4:
The Summarised Balance Sheet of Green Private Ltd. as at 31.03.2020 is given below :
Particulars ₹
Share Capital : Equity shares of ₹ 10 each 40,000

Reserves and surplus 24,000
Long-term borrowings : 5% Debentures 10,000
Creditors 10,450
Tangible assets 33,900
4% Investment (Face value ₹ 8,000) 7,200
Inventories 16,000
Debtors 19,350
Cash and bank 8,000
The net earnings for the last three years were as follows :
Year ended 31.03.2018: ₹10,100; Year ended 31.03.2019: ₹ 10,850; Year ended 31.03.2020: ₹ 12,200.
You are required to ascertain the value of goodwill at 3 years’ purchase of super profit (take simple
average profit) assuming normal rate of return on capital employed at 10%. Ignore income tax.
Question 5:
The following information is related to Sylvan Ltd. as on 31.03.2020 : [Fig. in ₹]
Building (Market value ₹ 9,13,000) 5,50,000 Trade payables 14,000

Inventories 60,000 Share Capital :
Trade receivables 1,24,000 15,000 Equity share of ₹ 10 1,50,000
each, fully paid
Cash at bank 1,42,000 10,000 Equity share of ₹ 10 70,000
each, ₹ 7 paid
8% Debenture 25,000
Calculate the value of each fully paid-up and partly paid up Equity shares.
59
Question 6:
The following balances appeared in the books of Kolkata Tubes Ltd. on 31.03.2020
8% Debentures ₹ 1,20,000
Sinking Fund (for redemption of debentures) ₹ 1,00,000
Sinking Fund Investment in 6% Govt. Bond (Nominal Value ₹ 1,10,000) ₹ 1,00,000
On 01.04.2020 all the investments were sold at 90% of nominal value and the debentures were
redeemed at par. Prepare 8% Debentures Account, Sinking Fund Account and Sinking Fund Investment
Account in the books of the company.
Question 7:
State the relevant provisions of the Companies Act, 2013 relating to redemption of Preference Shares.
Question 8:
The following balances are included Balance Sheet of E. Ltd. as on 31st Mrach, 2020 :
(Amount) (₹)
6,00,000 Equity Shares of ₹ 10 each fully paid 60,00,000
12% Debentures of ₹ 100 each 28,00,000
On 1st April 2020, the shareholders of the company have approved the scheme of buyback of equity
shares as under :
(d) 20 % of the equity shares would be bought back at ₹ 16 per shares.
(e) Premium payable on buyback of shares should be met from the Securities Premium Account.
(f) Investments would be sold for ₹ 7,80,000 (Book value being ₹ 7,40,000).
Pass journal entries to record the above transactions.
60
Question 9:
The directors of Finolex Ltd. have invited an application for 30,000 equity shares of ₹ 10 each to be
issued at 20% premium. The money payable on the shares are as follows :
On application : ₹ 6 per share (including premium of ₹ 2);
On allotment : ₹ 4 per share;
On call: Balance amount.
Applications were received for 40,000 shares and allotment was made pro-rata amongst the applicants.
All the shareholders paid their dues within the due time except Miss Ritika, applied for 400 shares,
failed to pay the allotment money. Her shares were forfeited after the subsequent call.
200 forfeited shares were reissued as fully paid on payment of ₹ 8 per share to Miss Ankita.
Show the necessary journal entries (including cash transaction) in the books of Finolex Ltd.
Question 10:
The Trial Balance of Zee Ltd. as on 31.03.2020 is as below :
Debit ₹ Credt ₹
Stock on 01.04.2019 75,000 Share capital 1,00,000
(Equity shares of ₹ 10 each)
Purchases 2,40,000 General Reserve 20,500
Wages 35,000 Sales 3,40,000
Carriage 900 Discount 3,000
Furniture 17,000 Profit and Loss Balance 15,000
Salaries 7,500 Creditors 25,000
Rent 10,000 Bills Payable 10,000
Administration expenses 12,000 10% Debentures 37,000
Plant and Machinery 70,000
Debtors 35,000
Bills receivable 5,000
Cash 8,000
Bank 15,000
Long-term investments 20,100
5,50,500 5,50,500
61
Prepare Statement of Profit and Loss for the year ended March 31, 2020 and Balance Sheet as at that
date considering, the following information :
(a) The authorised capital of the company is ₹ 2,00,000
(b) Stock as on 31 03.2020 ₹ 88,000
(c) Depreciate Plant & Machinery and Furniture at 10%
(d) The directors recommended :
(i) An equity dividend of 25%
(ii) Transfer 10% of net profit of the period of General Reserve
Ignore Corporate Divident Tax.
Question 11:
(b) Mention the conditions that are to be satisfied (as per AS-14) to consider amalgamation in the
nature of merger.
(c) Som Ltd. agreed to takeover Dove Ltd. on Apri. 1, 2020. The terms and conditions of takeover
were as follows :
(vi) Som Ltd. issued 56,000 equity shares of ₹ 100 each at a premium of ₹ 15 per share to the
equity shareholders of Dove Ltd.

(vii) Cash payment of ₹ 39,000 was made to equity shareholders of Dove Ltd.
(viii) 24,000 fully paid preference shares of ₹ 50 each issued at per to discharge the
preference shareholders of Dove Ltd.

(ix) The 8% Debentures of Dove Ltd. (₹ 78,000) converted into equivalent value of 9%
Debentures in Som Ltd.

(x) The actual cost of liquidation of Dove Ltd. was ₹ 23,000. Liquidation cost is to be
reimbursed by Som Ltd. to the extent of ₹ 15,000.
You are required to :

3. Calculate the amount of Purchase Consideration as per the provisions of AS-14; and
4. Show necessary Journal entries in the books of Som Ltd. for discharge of Purchase
Consideration.
62
Question 12:
Following balance were available from the Balance Sheet of Timtim Ltd. as at 31.03.2020 :
Amount
3,000 6% Preference shares of ₹ 100 each, fully paid up 3,00,000
45,000 Equity shares of ₹ 10 each, fully paid up 4,50,000
Profit and Loss Account Debit Balance (1,50,000)
Bills Payable 50,000
Goodwill 42,300
Patent 18,000
Inventory 88,800
Debtors 1,50,900
Dividends on Preference Shares are in arrear for three years. The company passes a special resolution
to reduce its capital in accordance with the following scheme and the same is duly sanctioned by the
Court :
(g) Each 6% preference share is converted to 8%, Preference shares of ₹ 75 each, fully paid. The
value of equity shares is brought down to ₹ 8 per share fully paid.
(h) The arrears of dividend on preference shares are sacrificed by the preference shareholders.
(i) Goodwill to be written off fully.
(j) Land & Building and Plant & Machinery are revalued at 135% and 80% of their respective book
values.
(k) Book debts worth ₹ 7,200 are to be treated as bad and hence to be written off.
(l) The balance of total capital reduction is to be utilised in writing down patents.
Give necessary Journal entries to give effect to the above.
63
Question 1:
Facebook Ltd. granted 2,000 options at ₹ 60 each to its employees under Employees’ Stock Option
Scheme. The face value of each option was ₹ 10 and its market price at that time was ₹ 140. The vesting
period was 2½ years. All the employees exercised their options fully. Show the journal entries in the
books of Facebook Ltd.
Question 2:
On January 1, 2021, Moon Ltd. issued a prospectus inviting applications for subscription in 10,00,000
equity shares of ₹ 10 each. The whole issue was underwritten by A, B, C and D as under.
A : 30% B : 25% C : 35% D : 10%
The applications were received for 8,00,000 shares of which marked applications were as follows :
A : 1,80,000 B : 2,00,000 C : 2,03,000 D : 1,67,000
Find out the liability of the individual underwriter.
Question 3:
Following is the Balance Sheet of M.N. Ltd. as on March 31, 2021 :
NOTES TO BALANCE SHEET
Particulars Note ` Particulars `

No.
I. EQUITY AND 1. Share capital :

LIABILITIES Subscribed capital :
(1) Shareholders’ funds 5,000 Equity shares of ` 100 each 5,00,000
(a) Share capital 1 6,00,000 1,000 8% Redeemable Pref.
(b) Reserves & surplus 2 1,40,000 shares of ` 100 each 1,00,000
(2) Current liabilities 6,00,000
(a) Trade payable :
Creditors 40,000 2. Reserves and surplus :
Total 7,80,000 Capital Reserve (Realised in cash) 30,000
II. ASSETS Securities premium 10,000
(1) Non-current assets General reserve 50,000
Property, Plant and Balance in Statement of Profit
Equipment : and Loss 50,000
Tangible assets 3 5,30,000 1,40,000
(2) Current assets 3. Tangible assets :
(a) Inventories 30,000 Land & building 2,00,000
(b) Trade receivables : Plant & machinery 2,30,000
Debtors 80,000 Furniture & fixtures 1,00,000
(c) Cash and cash
equivalents : Bank 1,40,000
Total 7,80,000 5,30,000
64
The Directors decided to redeem the preference shares at a premium of 10% out of profits. Assuming the
preference shares were duly redeemed, pass the journal entries. (narrations not required)
Question 4:
Balance Sheet of Black Ltd. as on 31.03.2021 is as follows :
NOTES TO BALANCE SHEET (includes)

No.
I. EQUITY AND 1. Share capital :

LIABILITIES Subscribed :
(1) Shareholders’ funds Subscribed and Fully paid up
(a) Share capital 1 80,00,000 8,00,000 Equity shares of ` 10 each 80,00,000
(b) Reserves and surplus 2 36,80,000
(2) Non-current liabilities 2. Reserves and surplus :
Long-term borrowings : Securities premium 25,00,000
6.5% Debentures 3,00,000 General reserve 7,00,000
(3) Current Liabilities Balance in SPL 4,80,000
Trade Payable :
Sundry creditors 2,53,000 36,80,000
Total 1,22,33,000
II. ASSETS 3. Tangible assets :
(1) Non-current assets Land & building 30,00,000
(a) Property, Plant and Machinery 45,00,000
Equipment : Furniture 10,00,000
Tangible assets 85,00,000
(b) Non-current 85,00,000
investment 10,80,000
(2) Current assets
(a) Trade receivables : 5,40,000
Sundry Debtors
(b) Cash and cash
equivalents : Cash
and Bank 21,13,000
Total 1,22,33,000
On April 1, 2021 the company announced the buy-back of its 25% Equity shares at ₹ 20 per share. For that
purpose the Company sold its entire investments at ₹ 12,00,000 and issued 8,000, 10% Preference shares of ₹
100 each. The Company utilised 50% of the General Reserve, 100% of the surplus balance of Statement of
Profit and Loss and the rest was taken from the Securities Premium.
Show necessary journal entries (narrations not required).
65
Question 5:
From the following information, compute the value of Goodwill as per ‘Capitalisation of Average Profits method:
(a) Capital employed: ₹ 15,00,000
(b) Normal rate of profit: 10%
(c) Net profit before tax (Tax rate @ 30%)
Year ended 2020-21 2019-20 2018-19 2017-18 2016-17

Profit (₹ ) 2,75,000 3,00,000 2,60,000 2,80,000 2,20,000
(d) Non-trading income ₹ 10,000 and Debenture interest ₹ 20,000 on an average included in the Statement
of Profit and Loss.
Question 6:
The following particulars are available in relation to HOTELS Ltd.
(a) Capital:
450, 6% Preference shares of ₹ 100 each, fully paid.
4,500 Equity shares of ₹ 10 each, fully paid.
(b) External Liabilities ₹ 7,500.
(c) Reserves and Surplus ₹ 3,500.
(d) The average normal profit (after taxation) earned every year by the company ₹ 8,505.
(e) The normal profit earned on the market value of fully paid equity shares by the same
type of companies is 9%
(f) Out of the total assets, assets worth ₹ 350 are fictitious.
Ascertain the intrinsic value and earning capacity value of an equity share.
Question 7:
The share capital of M Ltd consists of 4,00,000 equity shares of ₹ 10 each fully paid.
The Ledger balances were as follows :
Securities Premium ₹ 2,00,000
Surplus in Statement of Profit & Loss ₹ 10,00,000
The company has decided to issue bonus shares in the ratio of 4 : 1 to the existing shareholders utilising
Capital Redemption Reserve in full and balance from other eligible sources.
Show journal entries in the books of the company (narrations not required) .
Question 8:
State the conditions that are required to be fulfilled for an amalgamation to be considered as an
amalgamation in the nature of merger.
66
Question 9:
The directors of INOX Ltd. invited applications for issuing 60,000 equity shares at ₹ 10 each at a
premium of ₹ 6 per share. The amount was payable as follows :
On Application : ₹ 4 per share
On Allotment : ₹ 9 per share (including premium)
On First and Final Call : Balance Amount
Applications were received for 80,000 shares and the allotment was made on pro-rata basis. Ivy, a shareholder
holding 2,400 shares did not pay the allotment and call money and her shares were forfeited. All the forfeited
shares of Ivy were reissued at ₹ 9 per share fully paid up. Pass necessary journal entries for recording the
above transactions in the books of the company. (narrations not required)
Question 10
The following balance appeared in the books of X Ltd. as on 31.03.2020 :
13% Debentures Account ₹ 7,00,000
Debenture Redemption Fund Account ₹ 5,00,000
13% Debenture Redemption Fund Investment Account (Nominal = Cost) ₹ 5,00,000
The annual contribution to the Debenture Redemption Fund was ₹ 70,000. The company sold its investments for
₹ 7,00,000 and redeemed the debentures on 31.03.2021. Prepare 13% Debentures Account, Debenture
Redemption Fund Account and Debenture Redemption Fund Investment Account upto 31.03.2021.
Question 12:
The trial balance of P Ltd. as on 31.03.2020 is as follows :
Debit Balances ₹ Credit Balances ₹
Stock (01.04.2019) 1,50,000 Share Capital 2,00,000
Purchases 4,80,000 (Equity shares of ₹ 10 each)
Wages 70,000 Sales 6.80,000
Carriage 1,800 Discount 6,000
Furniture 34,000 Balance of Statement of
Profit & Loss
Salaries 15,000 30,000
Creditors
Rent 20,000 Bills Payable 50,000
Administration expenses 24,000 10% Debentures 20,000
Plant & Machinery 1,40,000 General Reserve 74,000
Debtors 70,000 41,000
Bill Receivables 10,000
Cash 16,000
Bank 30,000
Long-term investments 40,200
11,01,000 11,01,000
Prepare statement of Profit and Loss for the year ended on 31.03.2020 and Balance Sheet on that date
considering the following information :
(a) Stock as on 31.03.2020: ₹ 1,76,000
(b) Provide for Income tax @ 30%
67
(c) Depreciate Plant & Machinery and Furniture at 10%.
(d) On 31.03.2020, Outstanding rent amounted to ₹ 1,600 and salaries ₹ 1,800.
(e) 10% of the net profit is transferred to Reserves.
Question 11:
Following is the Balance Sheet of Honey Ltd. as on 31.03.2021 :
Balance Sheet of Honey Ltd. as at Mar. 31, 2021 Notes to Balance Sheet (includes)

No.
I. EQUITYAND 1. Share capital :
LIABILITIES Equity shares of ` 10 each
(1) Shareholders’ funds Fully paid 5,00,000
(a) Share capital 1 5,00,000
(b) Reserves and surplus: (1,00,000)
P/L Balance
(2) Current liabilities
(a) Trade Payable :
Creditors 1,70,000
(b) Short-term provisions:
Provision for tax 10,000
Total 5,80,000
II. ASSETS
(1) Non-current assets
(a) Property, Plant &
Equipment :
Trangible assets 2,70,000
(2) Current assets
(a) Inventories 1,20,000
(b) Trade receivables :
Debtors 1,70,000
(c) Cash and cash
equivalents 20,000
Total 5,80,000
A scheme of internal reconstruction was approved and the directors decided :

(a) to reduce the nominal value of shares by ₹ 6 per share.
(b) to write off the loss;
(c) to revalue the Fixed Assets at ₹ 1,90,000 and inventories at ₹ 91,000.
(d) to provide 30% on Debtors for doubtful debts.
Pass the journal entries (narrations not required) to record the above transactions and prepare the
revised Balance Sheet after implementation of the scheme.
68

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Commerce Eed - Vision

Gobind Kumar Jha

1. Issue of Bonus Shares

2. Issue of Bonus Shares

4. Issue of Bonus Shares

1. Employee Stock option Plan

2. Employee Stock option Plan

3. Employee Stock option Plan

1. Underwriting [Without firm underwriting]

2. Underwriting [With firm underwriting]

3. Underwriting [With firm underwriting]

3. Redemption of preference shares

4. Redemption of preference shares

5. Redemption of preference shares

1. Buyback of Equity Shares

2. Buy-Back of equity Shares

The Balance Sheet of BLACK Ltd. as on 31st March, 2021 is as follows:

4. Buy-Back of equity Shares

Debit Balance ₹ Credit Balance ₹

Stock on 01.04.2020 1,86,000 Sales 11,90,000

The following scheme of Internal Reconstruction is sanctioned:

Long term borrowings: Current Assets:

Note : Contingent liability for Arrear Preference Dividend for 3 years.

Give necessary Journal entries to give effect to the above.

The Balance Sheet of Mass Ltd. as on 31.03.2021 is as under:

You are required to :

Shares of ₹ 10 each at a premium of ₹ 50 each.

Particulars Notes X.Ltd

The consideration payable to X.Ltd.:

Question 1 (Issue of shares):

Question 2 (ESOP or Underwriting):

Question 4 (Redemption of Debenture):

Particulars Note No. Star Ltd. Lite Ltd.

1. Equity and Liabilities:

Particulars Star Ltd. Lite Ltd.

Land and Building 80,000 Equity Shares Capital (₹ 10 each) 2,40,000

Debit Balance ₹ Credit Balance ₹

Stock on 01.04.2019 1,86,000 Sales 11,90,000

Following information are also available :

(a) to refuse allotment to the applicants for 3000 shares;

(b) to allot in full to the applicants for 4000 shares;

(d) to utilise excess application money in part payment of allotment money.

Group B (1 Question of 15 marks)

Ignore corporate dividend tax.

CORPORATE ACCOUNTING – 2020 GENERAL

1,20,000 equity shares of ₹ 10 each fully paid 12,00,000

Plant Revaluation Reserve 40,000

Share Capital : Equity shares of ₹ 10 each 40,000

Building (Market value ₹ 9,13,000) 5,50,000 Trade payables 14,000

Ignore Corporate Divident Tax.

equity shareholders of Dove Ltd.

preference shareholders of Dove Ltd.

Debentures in Som Ltd.

reimbursed by Som Ltd. to the extent of ₹ 15,000.

You are required to :

Give necessary Journal entries to give effect to the above.

Particulars Note ` Particulars `