Term-End Examination: June, 2013
ECO-14: ACCOUNTANCY-II
Note: Attempt any four questions including question no. 1 which is compulsory.
1. Attempt any two of the following questions: 7, 7
(a) Distinguish between fixed and fluctuating methods of maintaining partners 'capital accounts, and list the items that usually appear in partner's current account.
(b) Explain the bases of allocation of common expenses among various departments.
(c) Can a company forfeit shares for nonpayment of calls? If so, explain the procedure of share forfeiture.
(d) Describe the accounting treatment of debentures issued as a collateral security by the company.
2. (a) What is cash flow statement? How does it differ from fund flow statement? 8, 4
(b) "Return on Investment is considered to be the master ratio which reflects the overall performance of the firm". Elucidate.
3. X, Y, and Z are partners in a firm sharing profits in the ratio of 5: 3: 2 respectively. Y retires from business on March 31, 2010, on that date the Balance Sheet of the firm was as follows: 12
Liabilities
|
Amount(Rs.)
|
Assets
|
Amount(Rs.)
|
Sundry Creditors
Bills Payable
Bank Loan
Reserve Fund
X’s Capital
Y’s Capital
Z’s Capital
|
14,400
8,000
25,000
18,000
57,000
30,000
15,000
|
Cash in hand
Bills Receivable
Sundry Debtors
Stock
Machinery
Furniture
Buildings
|
4,400
10,000
18,000
27,000
39,000
9,000
60,000
|
1,67,400
|
1,67,400
|
On the date of retirement Buildings are estimated to be worth Rs. 1,25,000; Machinery worth Rs. 25,000; Furniture 20% less than book value; Stock worth Rs. 22,500; a provision of 5% on debtors should be created for doubtful debts. The goodwill of the firm is estimated to be worth Rs. 90,000 based on past profits. The amount due to the retiring partner shall remain in the firm as loan carrying interest @ 15 p.a. The new profit sharing ratio of the remaining partners X and Z has been agreed to be 3: 2 respectively. Prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet of the firm after the retirement of Y.
Ans:
Revaluation A/c
Particulars
|
Amount
|
Particulars
|
Amount
|
To Machinery
To Furniture (9,000 x 20%)
To Stock
To Provision for bad debts
To Profit on revaluation :
X = 43,800 x 5/10
Y = 43,800 x 3/10
Z = 43,800 x 2/10
|
14,000
1,800
4,500
900
21,900
13,140
8,760
|
By Building A/c
|
65,000
|
65,000
|
65,000
|
Partners Capital A/c
Particulars
|
X
|
Y
|
Z
|
Particulars
|
X
|
Y
|
Z
|
To Y’s Capital A/c
To Y’s Loan A/c
To Balance c/d
|
9,000
------
78,900
|
--------
75,540
--------
|
18,000
-------
9,360
|
By balance b/d
By Reserve Fund A/c
By X’s Capital
By Z’s Capital
By Revaluation A./c
|
57,000
9,000
21,900
|
30,000
5,400
9,000
18,000
13,140
|
15,000
3,600
8,760
|
87,900
|
75,540
|
27,360
|
87,900
|
75,540
|
27,360
|
Balance Sheet of the New firm
Liabilities
|
Amount
|
Assets
|
Amount
|
Sundry Creditors
Bills Payable
Y’s Loan @ 15%
Capitals
X
Z
Bank Loan
|
14,400
8,000
75,540
78,900
9,360
25,000
|
Cash in hand
Bills Receivable
Debtors 18,000
Less : Provision For doubtful debt 900
Stock
Machinery
Furniture (9000 – 20%)
Buildings
|
4,400
10,000
17,100
22,500
25,000
7,200
1,25,000
|
2,11,200
|
2,11,200
|
Working Note: X: Y: Z = 5: 3: 2 (old ratio)
X: Z = 3: 2 (New ratio)
Now, X’s gain 
Z’s gain 
Gaining ratio (X: Z) = 1: 2
Again,
Y’s share of goodwill = 9000 x 3/10 = 27,000
X’s contribution = 27,000 x 1/3 = 9,000
Z’s contribution = 27,000 x 2/3 = 18,000
4. X. Ltd. offered for public subscription 20,000 equity shares each at a premium of 10% payable Rs. 2 on application; Rs.4 on allotment including premium, Rs. 3 on first call, and Rs.3 on second and final call. Applications for 26,000 shares were received. Applications for 4,000 shares were rejected. Pro-rata allotment was made to the remaining applicants. Both the calls were made and all the moneys were received except the final call on 500 shares which were forfeited. The forfeited shares were later reissued as fully paid at Rs. 8.50 per share. Give the necessary journal entries and prepare Balance Sheet. 12
Ans:
Journal entries
In the books of X Ltd.
Particulars
|
L.F.
|
Amount
|
Amount
|
Bank A/c Dr.
To Equity share application A/c
(Being the application money received on 26,000 shares @ Rs.2 each)
|
52,000
|
52,000
| |
Equity Share application A/c Dr.
To Equity share Capital A/c
To Equity share allotment A/c
To Bank A/c
(Being the application money on 20,000 shares transferred to equity share capital and excess application of 4000 shares were rejected and balance transferred to allotment)
|
52,000
|
40,000
4,000
8,000
| |
Equity Share allotment A/c (20,000 x 4) Dr.
To Equity share capital A/c
To Securities premium A/c
(Being the allotment money due on 20,000 shares @ Rs.4 each including premium of Re.1 per share)
|
80,000
|
60,000
20,000
| |
Bank A/c (80,000 – 4,000) Dr.
To Equity share allotment A/c
(Being the allotment money received after adjusting excess application money)
|
76,000
|
76,000
| |
Equity share 1st Call A/c (20,000 x 3) Dr.
To Equity Share Capital A/c
(Being the 1st call money due on 20,000 shares @ Rs.3 each)
|
60,000
|
60,000
| |
Bank A/c Dr.
To Equity Share 1st Fall A/c
(Being the 1st call money received on 20,000 shares @ Rs.3 each)
|
60,000
|
60,000
| |
Equity Share 2nd & Final call A/c Dr.
To Equity Share Capital A/c
(Being the 2nd and final call money due on 20,000 shares @ Rs.2 each)
|
40,000
|
40,000
| |
Bank A/c Dr.
Calls in arrear A/c Dr.
To Equity Share 2nd and final Call A/c
(Being the 2nd and final call money received on 19,500 shares @ Rs.2 each)
|
39,000
1,000
|
40,000
| |
Equity Share Capital A/c Dr.
To Share forfeiture A/c (500 x 8)
To Call in arrears A/c. (500 x 2 )
(Being the 500 shares forfeited due to non-payment of 2nd and final call of Rs.2 each)
|
5,000
|
4,000
1,000
| |
Bank A/c Dr.
Share forfeiture A/c (1.50 x 500) Dr.
To Equity Share Capital A/c
(Being the 500 forfeited shares reissued @ Rs.8.50 each)
|
4,250
750
|
5,000
| |
Equity Share Capital A/c Dr.
To Capital reserve A/c
(Being the profit on reissue of forfeited shares transferred to capital reserve)
|
3,250
|
3,250
|
Balance Sheet of A Ltd.
Particulars
|
Amount
|
Equity & Liabilities :
I. Shareholders Fund
(a) Equity share Capital
20,000 shares @ Rs. 10 each.
(b) Reserve & Surplus
Capital reserve
Securities Premium
Total
|
2,00,000
3,250
20,000
2,23,250
|
Assets :
I. Current Assets
Cash & Cash equivalent
|
2,23,250
|
5. (a) Ishaan Ltd. purchased a truck on hire purchase on July 1, 2007. The cash price of the truck was Rs. 2, 00,000. He was to pay 25% of the cash price as down payment with the delivery and the balance in three yearly instalments of Rs. 50,000 each together with the interest @ 5% per annum. Ishaan fails to pay the second instalment due on June 30, 2009. It was agreed that the truck would be returned to the vendor. The repossessed truck was overhauled at a cost of Rs. 4,000 and sold for Rs. 90,000. Show the accounts of Ishaan Ltd. And Goods Repossessed account in the books of the vendors. 6, 6
Ans:
Ishaan Ltd.
Date
|
Particulars
|
Amount
|
Date
|
Particulars
|
Amount
|
1.7.07
30.06.08
|
To HP Sales A/c
To Interest A/c (1, 50,000 x 5%)
|
2,00,000
7,500
|
1.7.07
30.06.08
30.06.08
|
By Bank A/c (Down Payment)
By Bank A/c (50,000 + 7,500)
By Balance c/d
|
50,000
57,500
1,00,000
|
2,07,500
|
2,07,500
| ||||
1.07.08
30.06.09
|
To Balance b/d
To Interest A/c (1, 00,000 x 5%)
|
1,00,000
5,000
|
30.06.09
|
By Goods repossessed A/c
|
1,05,000
|
1,05,000
|
1,05,000
|
Goods Repossessed A/c
To Ishaan Ltd. A/c
To Bank A/c (Expenses on overhauling)
|
1,05,000
4,000
|
By Bank A/c (Sale of Repossessed goods)
By P/L A/c (Loss on Sale of Repossessed goods)
|
90,000
19,000
|
1,09,000
|
1,09,000
|
(b) How does hire-purchase system differ from instalment payment system?
6. (a) Z Ltd., of Mumbai has a branch in Delhi. The head office sends goods to the branch at cost plus 50%. From the following data, prepare the branch stock account, branch adjustment account, and branch profit and loss account in the books of the head office under stock and debtors system. 8, 4
Goods from Head Office (at Rs. Invoice price)
Returns from branch to Head Office (at I.P.)
Cash sales
Credit Sales
Opening stock at branch (at. I.P.)
Closing stock at branch (at I.P.)
|
50,000
1,000
35,500
8,000
10,000
11,000
|
Ans:
Branch Stock A/c
To Balance b/d
To Goods sent to Branch A/c
|
10,000
50,000
|
By Goods sent to Branch A/c (Return)
By Branch Cash A/c (Cash Sales)
By Branch Debtors A/c (Credit Sales)
By Shortage of Goods A/c
By Balance c/d
|
1,000
35,500
8,000
4,500
11,000
|
60,000
|
60,000
|
Branch Adjustment A/c
To Stock Reserve A/c ( 11,000 x 50/150 )
To Shortage of goods A/c ( 4,500 x 50/150 )
To Gross Profit
|
3,667
1,500
14,500
|
By Goods sent to Branch A/c
(49,000 x 50/150)
By Stock reserve A/c( 10,000 x 50/150 )
|
16,333
3,334
|
19,667
|
19,667
|
Branch P/L Account
To Shortage of goods (Cost) ( 4,500 – 1,500)
To Net Profit
|
3,000
11,500
|
By Gross Profit
|
14,500
|
14,500
|
14,500
|
(b) State the objectives of keeping branch accounts.