B.Com-COMMERCE 4th Sem CORPORATE ACCOUNTING(Bangalore University, Bangalore-2008)

IV Semester B.Com. Examination, June 2008
(Semester Scheme)
COMMERCE
Paper - 4.3: Corporate Accounting – II

Time: 3 Hours Max Marks: 90


Instruction: Answers should be written completely in English or Kannada.



SECTION – A

1. Answer any ten of the following. Each question carries two marks.(10x2=20)

a) Define amalgamation.
b) State the objectives of amalgamation.
c) Define purchase consideration.
d) What is net assets method?
e) What is external reconstruction?
f) Give the meaning of internal reconstruction.
g) What is capital reduction account?
h) What is intangible asset? Give two examples.
i) State the types of voluntary winding up.
j) State the functions of liquidator.
k) Who are secured creditors?
l) What is surrender of shares?

SECTION – B

Answer any five of the following. Each question carries five marks. (5x5=25)

2. Write a note on amalgamation in the nature of purchase?
3. What are the grounds for compulsory winding up of a company?
4. What are the differences between amalgamations and external reconstruction?
5. Distinguish between re-organization and reduction of share capital.
6. Following is the Balance Sheet of A Ltd, as at 31-03-2008

Liabilities Rs. Assets Rs.
Equity share capital Fixed Assets 2, 00,000
10,000 shares of Rs.10 each 1, 00,000 Current Assets 50,000
Reserves and surplus 50,000
12% Debentures 75,000
Creditors 25,000
2, 50,000 2, 50,000

B Ltd., absorbs the business A Ltd; as at the above date and agrees to discharge
The purchase consideration as under:
a) Cash payment of Rs.2 per share
b) Issue of sufficient number of equity shares of Rs. 10 each at a premium of 100% for the balance.

Calculate purchase consideration and state the number of equity shares issued . Assuming that fixed assets are valued at Rs.2, 75,000 and current assets at Rs.45, 000.

7. following are the Balance Sheet of C Ltd. and D Ltd. as at 31-03-2008

Liabilities Cltd D Ltd. Assets C Ltd. D.Ltd
Rs. Rs. Rs. Rs.

Equity share 1,50,000 1,50,000 Land and Buildings 1,00,000 1,50,000
(15,000 shares )
Reserves and Surplus 50,000 1,00,000 Plant and Machinery 1,50,000 1,25,000
12% Debentures 1,00,000 1,00,000 Stock 75,000 75,000
Creditors 60,000 60,000 Debtors 25,000 50,000
Cash 10,000 10,000
3, 60,000 4,10,1000 3,60,000 4,10,000

C Ltd. and D Ltd. amalgamate their business and form a new company called DC Ltd. The assets of both the companies are valued as follows:

Fixed Assets 25% more
Stock 15% less and
Debtors 10% less

The purchase consideration is discharged by the issue to both companies, sufficient number of equity shares of Rs.10 each in DC Ltd. at an agreed value of Rs.12.50 per share.

Calculate purchase consideration and state the number of equity shares issued to each company.

8. Following is the Balance Sheet of E ltd., as at 31.03.2008.

Liabilities Rs. Assets Rs.

Equity share Capital Land and Buildings 1,00,000
20,000 shares Plant and Machinery 50,000
Of Rs.10 each 2,00,000 Stock and Debtors 75,000
12% Debentures 1,00,000 Cash 10,000
Creditors 50,000 P & L A/c 1,15,000

3,50,000 3,50,000
Eltd. is liquidated and a new company called F Ltd., is formed. The new company takes over only the fixed assets and 12% debentures of E Ltd,. The Land and Buildings and Plant and Machinery are revalued at Rs.1, 75,000 and Rs.40, 000 respectively.

Eltd, realized stock and debtors at Rs.45, 000 and discharged creditors at 5% discount. Liquidation expenses came to Rs.1, 500.

Assuming that the purchase consideration is discharged by the issue of equity shares in new company prepare
1) Realisation A/c
2) F Ltd., A/c and
3) Equity Shareholders A\c on the books of E Ltd.

9. From the following details prepare Liquidators Final Statement of Account

Assets Rs.
Land and Buildings 6, 00,000
Plant and Machinery 3, 60,000
Furniture 1, 20,000
Stock and Debtors 80,000
Cash 10,000
Liabilities
Debentures 8, 00,000
Creditors 4, 60,000

The assets other than Land and Buildings realized 10% less. Land and Buildings realized
25% more. Liquidation expenses Rs.5.000.
Liquidators’ remuneration is 2% on assets realized (except cash) and 3% on amount
Distributed to unsecured creditors.


SECTION – C

Answer any three of the following. Each question carries fifteen marks. (3x15=45)

10. Given below are the Balance Sheets of H Ltd., and I Ltd., as at 31-03-2008


Liabilities H Ltd. I Ltd Assets H Ltd. L Ltd.
Rs. Rs. Rs. Rs

Share Capital – Goodwill 10,000 5,000
Shares of Buildings 40,000 40,000
Rs.10 each 1, 50,000 1, 00,000 Plant and Machinery 60,000 30,000

Share Premium 4,500 2,000 Stock 18,000 8,000

General Reserve 10,000 5,000 Debtors 25,000 16,000
P & L A/c 1,500 1,000 Cash 47,000 26,000

Development
Rebate Reserve 6,000 3,000

12% Debentures 25,000 10,000

Creditors 3,000 4,000

2, 00,000 1, 25,000 2, 00,000 1, 25,000


The two companies amalgamated and formed a new company called “Hi Ltd.,” on the following terms.

a) Hi. Ltd., to assume liabilities of both the companies and continue to maintain development rebate reserve for 3 more years.
b) Authorized share capital of Hi Ltd., to be 75,000equity shares of Rs. 10 each
c) Hi Ltd., to issue 16,000 equity shares of Rs.10 each
d) Hi Ltd., to issue 14,000 equity shares of Rs.10 each at a premium if 20% and pay cash at Rs.10 per share to the shareholders of I Ltd.
e) Immediately after amalgamation Hi Ltd., to issue Rights shares to the existing shareholders in the ratio of 2:1. These shares are issued at a premium of 60%.

Pass Journal entries and show Balance Sheet in the books of “Hi Ltd”.

11. Following is the Balance Sheet of J Ltd., as at 31-03-2008

Liabilities Rs. Assets Rs.

Equity Share Land and Buildings 2, 00,000
Capital (Rs.10 each) 5, 00,000 Plant and Machinery 1, 75,000
12% Preference Share Furniture 45,000 Capital (Rs. 100 each) 2, 00,000 Investstments 60,000
General Reserve 1, 50,000 Stock 3, 00,000
P and L A\C 5,000 Debtors 50,000
Export Profit Reserve 50,000 Cash 1, 70,000
Workmen Compensation fund 25,000
15% Debentures 25,000
Workmen Saving fund 15,000
Creditors 30,000


10, 00,000 10,00,000

K Ltd. absorbs the business of J Ltd., on the following terms:
a) K Ltd., to take over the assets (except cash) and only 15% debentures of J Ltd.
b) The assets are to be taken over at the following values:

Rs.
Goodwill 50,000
Land and Building 1, 30,000
Plant and Machinery 1, 50,000
Furniture 30,000
Investments 1, 00,000
Debtors 40,000

c) The Purchase consideration to be discharged as under:
i) Issue of 2,400 12% preference shares of Rs. 100 each to the preference shareholders of J Ltd.
ii) Issue of 7 equity shares of Rs. 10 each to the equity shareholders for every 5 equity shares held and
iii) Payment of cash to the equity shareholders for the balance of purchase consideration
J Ltd., discharged the creditors at a discount of Rs. 5,000 and incurred an expenditure of Rs. 7,500 towards liquidation proceedings.

Pass necessary journal entries in the books of J Ltd.

12. Following is the Balance Sheet of L Ltd., as at 31-03-2008
Liabilities Rs. Assets Rs.
Equity Shares of Rs.10 each 3, 00,000 Land and Buildings 2, 00,000
10% Debentures 1, 50,000 Plant and Machinery 60,000
Creditors 50,000 Stock 60,000
Debtors 35,000
Cash 5,000
P & L A\c 1, 40,000

5, 00,000 5, 00,000

The company went into voluntary liquidation and a new company called M Ltd., was formed. The scheme of reconstruction is as under:

a) The new company to have authorized capital of Rs. 10,00,000 consisting of 1,00,000 equity shares of Rs. 10 each
b) The new company to take over the assets at their book values and discharge 10% debentures by the issue of equal number of 8%
c) The creditors to be discharged by the issue of 4,000 equity shares of Rs.10 each in full settlement of their claims
d) The entire purchase consideration is to be discharged by the issue of sufficient number of equity shares of M Ltd.
e) Liquidation expenses of L ltd., Rs.3, 000 to be met by M Ltd.
f) The new company to issue 15,000 new shares to the public at par and purchase new plant and machinery at a cost of Rs. 1,25,000

Prepare Realisation A/c and Equity shareholders A/c in the books of L Ltd., and pass journal entries and prepare Balance Sheet in the books of M Ltd.

13. Following is the Balance Sheet of N Ltd., as at 31-03-2008

Liabilities Rs. Assets Rs.
12,000 7% Preference
Share capital (Rs.50 each) 6, 00,000 Buildings 2, 00,000
15,000 Equity shares of Plant 3, 00,000
Rs.50 each fully paid 7, 50,000 Good will 4, 00,000
12% Loan creditors 5, 75,000 Stock 4, 00,000
Trade creditors 2, 00,000 Debtors 3, 00,000
Other current liabilities 40,000 Preliminary Expenditure 15,000
P & L A/c 5, 50,000

21, 65,000 21,65,000

The company adopted a scheme of internal reconstruction as under:
1) The equity shares to be reduced to Rs. 2.50 each fully paid and the equity shareholders to subscribe to new equity shares of Rs.2.50 each at the rate of three shares for one share held.

2) The preference dividend which is in arrears for three years to be cancelled against the issue of two new equity shares for every Rs. 100 dividend in arrears.

3) The preference shares to be reduced to 10% preference shares of Rs. 10 each fully paid and preference shareholders to subscribe to new equity shares of Rs.2.50 each at the rate of two shares for one share held.

4) 12% Loan creditors to forego Rs.1, 25,000 and accept 10% preference shares of Rs.10 each fully paid for the balance of claim. They also agree to subscribe 12,000 new equity shares of Rs.2.50

5) The Directors of the company to subscribe 40,000 equity shares of Rs.2.50 each.

6) Trade creditors to sacrifice 10% of their claim and be paid immediately 50% of the remaining claim.
7) The intangible and fictitious assets to be written off completely and the balance be
Utilized to write off plant and stock in proportion to their book values.

Pass journal Entries and Prepare Reconstructed Balance Sheet.

14. O Ltd., went into voluntary liquidation on 31-03-2008 on which date its Balance Sheet
Showed the following figures.

Liabilities Rs. Assets Rs.
6,250 6% cumulative Sundry Assets 17, 00,000
Preference shares of Rs.100 Cash 80,000
Each fully paid 6, 25,000 P & L A/c 4, 30,000

4,000 Equity Shares of
Rs.100 each fully paid 2, 40,000

8,000 Equity shares of
Rs.100 each Rs.70 paid 5, 60,000

5% Mortagage debentures 4, 00,000

Creditors 3, 85,000


22, 10,000 22, 10,000

Sundry assets realized 70% of their book value. Liquidator is entitled to a remuneration of 3% on assets realized excluding cash and 4% on amount distributed to unsecured creditors other than preferential creditors. Of the total creditors Rs.2, 25,000 is secured and Rs.30, 000 is preferential. The preference dividends were in arrear for 2 years and are payable on liquidation. Liquidation expenses Rs. 35,000. Prepare Liquidators final Statement of Account.