Q.1
A,B and C are partners decided that no interest on
drawings is to be charged to any partner. But after one year,
’C’ wants that interest on drawings should be charged to every partner. State
how ‘C’ can do this.
Solution
Interest
on capital is allowed only when there is a specific clause to this effect in
partnership deed.
C will have to get this clause deleted from the
partnership deed with the consent of the other partners.
Q.2
Calculate
the amount of profit payable to deceased partner's executor on the death of the
partner which is to be calculated on the basis of average profit of last three
years. Profits of last four years are 2013-14 Rs. 1,00,000; 2012-13Rs. 1,40,000; 2011-12 Rs. 1,20,000; 2010-11 Rs. 80,000. There were
three partners A, Band C and C died on 12thJune, 2014.
Solution
C's
share in profit =Rs.
120,000
x 1/3 x 73/365 =Rs.
8,000.
Q.3
What is meant by Minimum Subscription?
Solution
Minimum
subscription means the minimum amount that must be subscribed by the public.
According to SEBI guidelines, minimum subscription has been fixed at 90% of the
entire issue.
Q.4
A
Ltd.
forfeited 200 equity shares of Rs. 10 each issued at a premium of 30% for the nonpayment of
final call of Rs.
5
including premium. State the maximum amount of discount at which these shares
can be re-issued.
Solution
Final
call per share including premium = Rs. 5.
Premium
(20% of Rs.
10) = Rs. 2.
Final
call excluding premium Rs.
5 - Rs. 3 =Rs. 2.
Money
received on forfeited shares per share =Rs. 10 - Rs. 2 =Rs. 8.
Money
received on 100 forfeited shares =200 x 8 =Rs. 1600.
Maximum amount of discount Rs.
1600
.
Q.5
Give
the meaning of a debentures.
Solution
According
to Section 2(30) of the Companies Act, 2013, "Debenture includes debenture
stock, bonds or any other instrument of a company evidencing a debt, whether
constituting a charge on assets of the company or not".
Q.6
Give the meaning of issue of debentures as a collateral
security.
Solution
When a company takes a loan, the company have to issue
debenture as a subsidiary secondary security in addition to the principal
security, it is called as issue of debenture of collateral security. .
Q.7
20,000
Shares of Rs. 10 each were issued for public subscription at a premium of 10%.
Fullamount was payable on application. Applications were received for 30,000
shares and theBoard decided to allot the shares on a pro-rata basis. Pass
journal entries.
Solution
Q.8
Show
the following information in the Balance Sheet of the ABCD Club as on 31st
March, 2010:
Additional
Information :-
Interest
Accrued on Tournament Fund Investment Rs. 6,000.
Solution
Q.9
X
and Yare partners in a firm. They agree on the following:.
X
is entitled to a salary of Rs. 500 per month together with a commission of 10% of the
net profit after charging salary, but before charging any commission. Y is
entitled to a salary of Rs.
3,000
p.a. together with a commission of 8% of Net Profit after charging salary and
all commissions. Net Profit before charging any commission but after charging
salary is Rs.
60,000.
Prepare
Profit and Loss Appropriation Account.
Solution
Q.10
A,
Band C
are partners sharing profits equally. They decided that in future, C will get
l/5th share in profits. On the day of change, firm's goodwill
iscalculated at 12,00,000. Complete the journal entry.
Solution
Working
note
Sacrifice
or Gain of partners:
A =
1/3 – 2/5 =1/15(Gain)
B =
1/5 -2/5 = 1/15 (Gain)
C =
1/3 – 1/5 = 2/15 (Sacrifice)
Q.11
Kishan
and Gopal were partners in a firm sharing profits in the ratio of 7 : 5. Their
respective Fixed capitals were KishanRs. 10,00,000 and GopalRs. 7,00,000. The
partnership deed provided for the following:.
- Interest
on capital @ 12% p,a,
- Kishan's
salary Rs.
6,000
per month and Gopal's salary Rs. 60,000 per year.
The
profit for the year ended 31st March 2014 was Rs. 5,04,000 which was distributed
equally, without providing for the above. Pass an adjustment entry.
Solution
Table
Showing Adjustments
Q.12
Distinguish between Reserve Capital and Capital Reserve.
Solution
Distinction between Reserve Capital and Capital Reserve
:
Q.13
Gopal
and Sharma were partners in a firm with capitals of Rs. 1,20,000 and Rs. 1,60,000,.
respectively.
On 1.4.2013 they admitted Yadav as a partner for one-fourth share in profits on
his payment of Rs.
2,00,000
as his capital and Rs.
90,000
for his one-fourth share of goodwill.
On
that date the creditors of Gopal and Sharma were Rs. 60,000 and Bank overdraft was Rs. 15,000. Their assets
apart from cash included Stock Rs. 10,000; Debtors Rs. 40,000; Plant and Machinery Rs. 80,000; Land and
Building Rs.
2,00,000.
It was agreed that stock should be depreciated by Rs. 2,000; Plant and
Machinery by 20%, Rs.
5,000
should be written off as bad debts and Land and Building should be appreciated
by 25%. .
Prepare
Revaluation Account, Capital Accounts of Gopal, Sharma and Yadav and the
Balance Sheet of the new firm.
Solution
Working
Notes :
(i)
In the absence of any information regarding profit and loss sharing ratio, Gopal
and Sharmawill besharing profits equally.
(ii)
Since
firm has sufficient cash balance, it will be prudent to payoff its bank
overdraft.
(iii) Closing balance of cash has been
calculated as under :
Q.14
The
Balance Sheet of A, B and C who were sharing profits and losses in the ratio of
112, 113 and 116 respectively, was as follows on 1.4.2015 :.
Retired
from the business on 1.4.2015 and his share in the firm was to be ascertained
on the revaluation of the assets as follows: .
Stock
Rs. 20,000; Furniture Rs. 3,000; Plant and
Machinery Rs.
9,000;
Building Rs.
20,000;
Rs. 850 was to be
provided for doubtful debts. The goodwill of the firm was valued at Rs. 6,000. A was to be
paid Rs.
11,500
in cash on retirement and the balance in three equal yearly installments with
interest at 9% per annum.
Prepare
Revaluation Account, Partners' Capital Accounts and A's Loan Account on the
date of his retirement.
Solution
Working
Note:
Goodwill
of the firm = Rs.
6,000.
A's
share
of the goodwill =Rs.
6,000 X
1/2.
=Rs.
3,000.
Gaining
ratio of B and C = 2 : 1
B's
contribution
towards A's goodwill = 2/3 X 3,000
=
Rs. 2,000.
C's
contribution towards A's goodwill = 1/3 X 3,000
=
Rs. 1,000.
Q.15
'Chennai
Fibers Limited' was registered with an authorized capital of Rs. 40,00,000 divided
into 4,00,000 equity shares of Rs. 10 each. The company had issued 1,00,000 shares and the
dividend paid per share was Rs. 3 for the year 2007·08. The management of the company
decided to export its readymade apparels to European countries. To meet the
requirement of additional funds, the finance put up before the Board of
Directors the following three alternative proposals:.
- Issue
of 1,54,000 equity shares at par.
- Obtain
a loan of Rs.
15,40,000
from a financial institution for a period of 5 years. The loan was available @
12% per annum.
- Issue
16,000,9% debentures of Rs.
100
each at a discount of 10% redeemable in installments at the end of third,
fourth, fifth and sixth year as per details given below:.
After
comparing the alternatives, the company decided in favour of the third
alternative and issued debentures on 1.4.2008. Prepare 9% debentures account
for the years 2008-09 to 2013·14.
Solution
Q.16
X,
Y and Z
were partners in a firm sharing profits and losses in the ratio 5 : 3 : 2. On
31.3.2014 Their
balance Sheet
was as follows:.
Z
died on 31.7.2014. It was agreed that:.
(a)
Goodwill
be valued at 2% year's purchase of the average profits of the last four years,
which were as follows :
(b)
Machinery
be valued at Rs.
70,000;
Patents at Rs.
20,000
and Building at Rs.
62,500.
(c)
For the
purpose of calculating Z's share of profits in the year of his death the
profits in
2014-2015
should be taken to have been accrued on the same scale as in 2013-2014.
(d)
A sum oH17,500was paid immediately to the executors of Z and the balance was
paid in four half-yearly installment together with interest at 12% p.a.
starting from 31.1.2015.
Give
necessary journal entries to record the above transactions and Z's executors'
account till the payment of installment due on 31.1.2015.
Solution
(i)Working Note
Average
Profit = 1,40,000/4
Rs.
35,000.
Goodwill
of the firm =Average Profit X No. of year of purchase .
=
35,000 X 1/2 = 17,500
Goodwill
payable to Z = 17,500 X 2/10 = 3,500
(ii)
Old
ratio of x, y and Z = 5: 3 : 2
New
ratio of X and Y = 5 : 3
(iii)
Profit
for one year Profit for 4 months =Rs. 37,500.
(Prom
31st March to 31st July) = Rs.37,500 X 4/12.
=
Rs. 12,500.
Z's
share in profit = 12,500 X 2/10
=
2,500
(iv)
(v)
Total
Amount payable to Z's Executors Account on 31st July, 2014 = 60,000
Less:
Amount
paid on 31st July, 2014 = 17,500
Balance
in Z's Executors Account = 42,500
No.
of Installments = 4.
Amount
payable in one installment = 42,500/4 = 10,625
Interest
payable together with first installment payable on 31st January, 2015
=
42,500 X 6/12 X 12/100 = 2,250
Total
Amount payable on 31st January, 2015
=
Rs.10,625 + Rs.2,550 = Rs.13,175.
Q.17
Dinesh
Ltd. invited applications for issuing 10,000 Eqnity Shares of Rs. 10 each. The amount.
was
payable as follows:
On
Application Rs.
1.
On
Allotment Rs.
2.
On
First call Rs.
3.
On
Second and Final Call - Balance
The
issue was fully subscribed. Ram to whom 100 shares were allotted, failed to pay
the allotment money and his shares were forfeited immediately after allotment.
Shyam to whom 150 shares were allotted, failed to pay the first call. His
shares were also forfeited after the first call. Afterwards the second and
final call was made. Gopal to whom 50 shares were allotted failed to pay the
second and final call. His shares were also forfeited. All the forfeited shares
were re-issued at Rs.
9 per
share fully paid-up. Pass necessary Journal Entries in the books of Dinesh Ltd.
Solution
Q.18
How the "Earning capacity of a business" is
assessed by Financial Statements Analysis?
Solution
Earning
capacity of a business is assessed by relationship between profit earned and
capital employed.
Q.19
You
are a shareholder of Sana Ltd. Mention any two ratios that you will compute to
examine whether your decision was justified.
Solution
(i)
Net profit ratio
(ii) Return on investment.
Q.20
Under
what heads and sub-heads the following items will appear in the Balance Sheet
of a Company as per Schedule ill of the Companies Act, 2013 :
(i)
Mining Rights
(ii)
Encashment
of employees earned leave payable on retirement
(iii)
Vehicles.
Solution
Q.21
Calculate Cash Flows from Operating Activities from the
following details:
Solution
Calculation of Cash Flows from Operating Activities
Q.22
- Under
which type of activity will you classify "Proceeds from Sale of
Machinery" while preparing Cash Flow Statement?
- Classify
the following into operating, investing and financing activities :Revenue from
operations and Purchase of machinery.
Solution
1.
Investingactivity.
2.
(i) Operating activity.
(ii) Investingactivity
Q.23
1.
What are common-size statements? State any two uses of common-size statements.
2.
From the following Statement of Profit and Loss of Star Ltd. for the year ended
31st March,2014 ‘prepare a Common-size Statement of Profit & Loss:.
Solution
Common-size
statements are the statements in which figures reported are converted into
percentages to some common base. According to Kohler, "Common-sized
statements are accounting statements expressed in percentages of some base
rather than rupees". In Statement of Profit and Loss, sales may be assumed
to be equal to 100 and all other figures are expressed as a percentage of the
sales. Similarly, capital or total assets of the Balance Sheet may be taken as
100 and all other items are expressed as a percentage of capital or total
assets. Since the bases selected represent 100 per cent in the Financial
statements, common-sized statements are also known as "100 per cent
statements". Following are the uses of common-size statements:.
- Common-size
statements ascertain the relative importance of different components of the
financial statement.
- Common-size
statements identify the reasons for change in the profitability and financial
position of the firm.
Common-size Statement of Profit & Loss for the year ended 31st March,
2014 :
