Corporate Accounting Solved Question Papers Dibrugarh UniversityCorporate Accounting Solved Paper May 2017 (Old Course)COMMERCE (General/Speciality)Course: 203 (Corporate Accounting )The figures in the margin indicate full marks for the questionsFull Marks: 80Pass Marks: 24Time: 3 hours
a) Shareholders get interest.
b) A debenture holder is the creditor of a company. True
c) Internal reconstruction means reduction of share capital of a company which is to be reconstructed. True
d) Insolvency is not a necessary condition for liquidation of a company. True
(b) Write the correct answer: 1x4=4
i. Preference shareholders are
1) Owner of the company.
2) Creditors of the company.
3) Customers of the company.
ii. A contributory is a
1) Debenture holder.
2) Shareholder.
3) Creditor.
iii. The Companies Act, 2013 defines a subsidiary company under Section
1) 3
2) 2(87)
3) 5
iv. Accounting for amalgamation relates to Accounting Standard
1) 12
2) 13
3) 14
2. Write short notes on (any four): 4x4=16
a) Forfeiture of Share.
b) Buyback of Share. – out of syllabus
c) Reduction of Share Capital.
d) Voluntary Winding-up. – out of syllabus
e) Minority Interest.
f) Redeemable Preference Share.
Ans: a) Forfeiture of shares: A company has no inherent power to forfeit shares. The power to forfeit shares must be contained in the articles. Where a share holder fail to pay the amount due on any call, the directors may, if so authorized by the articles, forfeit his shares. Shares can only be forfeited for non-payment of calls. An attempt to forfeit shares for other reasons is illegal. Thus where the shares are declared forfeited for the purpose of reliving a friend from liability, the forfeiture may be set aside. Before the shares are forfeited the shareholder:
i) Must be served with a notice requiring him to pay the money due on the call together with interest;
ii) The notice shall specify a date, not being earlier than the expiry of 14 days from the date of service of notice, on or before which the payment is to be made and must also state that in the event of non-payment within that date will make the shares liable for forfeiture;
iii) There must be a proper resolution of the board;
iv) The power of forfeiture must be exercised bonafide and for the benefit of the company.
A person, whose shares have been forfeited, ceases to be a member of the company. But he shall remain liable to pay to the company all moneys which at the date of forfeiture were payable by him to the company in respect of the shares. The liability of such a person shall cease as and when the company receives payment in full in respect of the shares.
c) Reduction of Share Capital: Reduction of share capital is regarded as one of the process of decreasing company’s share capital. The Reduction of Share Capital means reduction of issued, subscribed and paid up share capital of the company. In simple words it can be regarded as ‘Cancellation of Uncalled Capital’ i.e. part of subscribed share capital.
The need of reducing share capital may arise in various situations, few are listed below:
a) Returning of surplus to shareholders;
b) Eliminating losses, which may be preventing the payment of dividends;
c) May be as part of scheme of compromise or arrangements;
d) To simply capital structure;
This power is, given by Section 66 of the Companies Act, 2013, subject to the compliance of conditions. According to this, a company may,
(1) Extinguish or reduce the liability on any of its shares in respect of share capital not paid up
(2) cancel any paid-up share capital which is lost or is unrepresented by any available assets;
(3) pay off any paid-up share capital which is in excess of what is required by the company.
e) Minority interest: When some of the shares in the subsidiary are held by outside shareholders they will be entitled to a proportionate share in the assets and liabilities of that company. The share of the outsider in the subsidiary is called minority interest.
Amount of minority interest is calculated by adding subsidiary company’s share in pre-acquisition profit, post-acquisition profit and in share capital of the company. Preference share capital to the extent of not purchased by holding company is also added with minority interest. In the consolidated balance sheet all the assets and liabilities of the subsidiary are consolidated with assets and liabilities of the holding company and the minority interest representing the interest of the outsider in the subsidiary is shown as a liability.
f) Redeemable preference shares: Preference shares: Sec. 43 (b) of the Companies Act, 2013 defines preference shares as those shares which carry preferential rights as the payment of dividend at a fixed rate and as to repayment of capital in case of winding up of the company. Thus, both the preferential rights viz.
(a) Preference in payment of dividend and
(b) Preference in repayment of capital in case of winding up of the company, must attach to preference shares.
Redeemable preference shares are those which are redeemed after the expiry of fixed period of time. But before redeeming the preference shares, the following conditions must be satisfied under section 55 of the Companies Act, 2013:
1. No authorization is required in the articles to redeem the preference shares of a company.
2. The redeemable preference shares must be fully paid up. If there is any partly paid share, it should be converted in to fully paid shares before redemption.
3. The redeemable preference shareholders should be paid out of undistributed profit/ distributable profit or out of fresh issue of shares for the purpose of redemption.
4. If the shares are redeemed at a premium, it should be should be provided out of securities premium or out of profits of the company.
5. The proceeds from fresh issue of debentures cannot be utilized for redemption.
6. The amount of capital reserve cannot be used for redemption of preference shares.
7. If the shares are redeemed out of undistributed profit, the nominal value of share capital, so redeemed should be transferred to Capital Redemption Reserve Account. This is also known as capitalization profit.
8. CRR may be utilised only for the purpose of issuing fully paid bonus shares to the members.
3. (a) Luit Co. Ltd. issued 10000 shares of Rs. 100 each at a premium of 10% payable as under:
On Application – Rs. 30
On Allotment – Rs. 60 (including premium)
On Call – Rs. 20
Bikash holding 700 shares failed to pay the call money. The company forfeited his shares and reissued them to Jatin as fully paid up at Rs. 90 per share. Give Journal entries to record the above transactions and show the Balance Sheet of the company. 8+4=12
CORPORATE ACCOUNTING SOLVED QUESTION PAPERS (2010 Till Date)
Also Read:
Also Read:
Journal Entries
In the books of XYZ Co. Ltd
Particulars
|
L/F
|
Amount (Dr.)
|
Amount (Cr.)
|
Bank A/c (10,000 x 30) Dr.
To Share Application A/c
(Being the application money received on 10,000 shares @ Rs. 30 each)
|
3,00,000
|
3,00,000
| |
Share Application A/c Dr.
To Share Capital A/c
(Being the application money of 10,000 shares of Rs. 30 each transferred to share capital account)
|
3,00,000
|
3,00,000
| |
Share Allotment a/c Dr.
To Share Capital A/c (10,000 x 50)
To Securities Premium Reserve A/c (10,000 x 10)
(Being the allotment money due on 10,000 shares @ Rs.60 each including premium of Rs. 10 per share)
|
6,00,000
|
5,00,000
1,00,000
| |
Bank A/c Dr.
To Share Allotment a/c
(Being the allotment money received on 10,000 shares @ Rs. 60 each)
|
6,00,000
|
6,00,000
| |
Share 1st & Final Call A/c Dr.
To Share Capital A/c (10,000 x 20)
(Being the first and final call money due on 10,000 shares @ Rs.20 each)
|
2,00,000
|
2,00,000
| |
Bank A/c Dr.
Calls in arrear A/c (700 x 20) Dr.
To share 1st & Final Call A/c
(Being the first and final call money received on 9,300 shares)
|
1,86,000
14,000
|
2,00,000
| |
Share Capital A/c Dr.
To forfeited Share A/c (700x 80)
To Calls in arrear A/c (700 x 20)
(Being the 700 shares forfeited due to nonpayment of first and final call)
|
70,000
|
56,000
14,000
| |
Bank A/c Dr.
Forfeited shares A/c Dr.
To Share Capital A/c
(Being the 700 forfeited shares reissued @ Rs. 90 each)
|
63,000
7,000
|
70,000
| |
Forfeited Share A/c Dr.
To Capital Reserve A/c
(Being the profit on reissue of forfeited shares transferred to capital reserve)
|
49,000
|
49,000
|
Balance Sheet of Luit Co. Ltd
Particulars
|
Amount
|
I. Equity & Liabilities:
1) Share Holders Fund:
a) Share Capital:
10,000 shares @ Rs. 100 each
2) Reserves & Surplus:
S.P.R.
Capital Reserve
|
10,00,000
1,00,000
49,000
|
11,49,000
| |
II. Assets:
1) Cash & Cash Equivalents
|
11,49,000
|
11,49,000
|
Or
(b) Discuss the provisions of the law with regard to redemption of redeemable preference shares as laid down in Section 55 of the Companies Act, 2013. 12
Ans: Preference Shares: Sec. 43 (b) of the Companies Act, 2013 defines preference shares as those shares which carry preferential rights as the payment of dividend at a fixed rate and as to repayment of capital in case of winding up of the company. Thus, both the preferential rights viz.
(a) Preference in payment of dividend and
(b) Preference in repayment of capital in case of winding up of the company, must attach to preference shares.
The rate of dividend on these shares is fixed and the dividend on these shares must be paid before any dividend is paid to ordinary shares. Directors, however, may decide not to pay any dividend to any class of shareholders even if there are sufficient profits. But, if any how, they decide to pay the dividend, preference shareholders will get the priority to pay the ordinary shareholders.
Following are the basic features of preference share:
a) Fixed rate of dividend
b) Preferential payment of dividend
c) Preferential right in redemption of capital in case of winding up of a company.
d) Absence of voting rights
Conditions for redemption of Preference Shares:
Under section 55 of the Companies Act, 2013, a company should have to follow the conditions:
1. No authorization is required in the articles to redeem the preference shares of a company.
2. The redeemable preference shares must be fully paid up. If there is any partly paid share, it should be converted in to fully paid shares before redemption.
3. The redeemable preference shareholders should be paid out of undistributed profit/ distributable profit or out of fresh issue of shares for the purpose of redemption.
4. If the shares are redeemed at a premium, it should be should be provided out of securities premium or out of profits of the company.
5. The proceeds from fresh issue of debentures cannot be utilized for redemption.
6. The amount of capital reserve cannot be used for redemption of preference shares.
7. If the shares are redeemed out of undistributed profit, the nominal value of share capital, so redeemed should be transferred to Capital Redemption Reserve Account. This is also known as capitalization profit.
8. CRR may be utilised only for the purpose of issuing fully paid bonus shares to the members.
4. (a) Liabilities and Assets of X Ltd. as on 31st March, 2016 are given below: OUT OF SYLLABUS
Liabilities
|
Rs.
|
Assets
|
Rs.
|
Paid-up Share Capital:
2000000 Equity Shares of Rs. 10
Security Premium Reserve
General Reserve
14% Redeemable Debentures
Current Liabilities
|
2,00,00,000
20,00,000
1,80,00,000
1,00,00,000
1,00,00,000
|
Freehold Property
Stock-in-Trade
Sundry Debtors
Bank Balance
|
2,00,00,000
1,20,00,000
1,00,00,000
1,80,00,000
|
6,00,00,000
|
6,00,00,000
|
It was resolved in the meeting of shareholders:
i. To buyback 20% of Equity Shares @ Rs. 12 per share.
ii. To utilize General Reserve for buyback of shares.
iii. To utilize securities premium for premium on buyback of shares.
iv. To immediately cancel the shares bought back.
Pass Journal Entries and draw up the Balance Sheet after the above transactions have been given effect to. 6+5=11
Or
(b) Journalize the following transactions at the time of issue of redemption of debentures in the books of the Company: 3+4+4=11
a) Issued Rs. 90,000, 13% debentures at 10% discount, redeemable at par.
b) Issued Rs. 90,000, 13% debentures at par, redeemable at 10% premium.
c) Issued Rs. 90,000, 13% debentures at 5% premium, redeemable at 10% premium.
JOURNAL ENTRIES
IN THE BOOKS OF THE COMPANY
Date
|
Particulars
|
L/F
|
(Dr.) Amount
|
(Cr.) Amount
|
(I)
|
At the time of Issue
Bank A/c Dr.
Discount on Issue of Debenture A/c Dr.
To Debenture A/c
(For issue of Rs. 90,000 Debenture of Rs. 100 at a discount of 5%)
|
81,000
9,000
|
90,000
| |
(II)
|
Bank A/c Dr.
Loss on Issue of Debenture A/c Dr.
To Debenture A/c
To Premium on Redemption of Debenture A/c
(For issue of Debenture of Rs. 100 at a discount of 5% and repayable at a premium of 5%)
|
90,000
9,000
|
90,000
9,000
| |
(III)
|
Bank A/c Dr.
Loss on Issue of Debenture A/c Dr.
To Debenture A/c
To Securities Premium Reserve A/c
To Premium on Redemption of Debenture A/c
(For issue of Debenture of Rs. 100 at face value but repayable at a premium of 5%)
|
94,500
9,000
|
90,000
4,500
9,000
|
5. (a) Distinguish between the following: 6+5=11
a) Amalgamation in the nature of merger and Amalgamation in the nature of purchase.
b) Pooling of interest method of amalgamation and Purchase method of amalgamation.
Ans: (i) Difference between Amalgamation in the nature of purchase and Amalgamation in the nature of merger
Basis of Distinction
|
Amalgamation in the Nature of Merger
|
Amalgamation in the Nature of Purchase
|
a) Transfer of Assets and Liabilities
|
There is transfer of all assets & liabilities.
|
There need not be transfer for all assets & liabilities.
|
b) Equity Shareholder’s holding 90%
|
Equity shareholders holding 90% equity shares in transferor company become shareholders of transferee company.
|
Equity shareholders need not become shareholders of transferee company.
|
c) Purchase Consideration
|
Purchase consideration is discharged wholly by issue of equity shares (except cash for fractional shares)
|
Purchase consideration need not be discharged wholly by issue of equity shares.
|
d) Same Business
|
The same business of the transferor company is intended to be carried on by the transferee company.
|
The business of the transferor company need not be intended to be carried on by the transferee company.
|
e) Recording of Assets & Liabilities
|
The assets & liabilities taken over are recorded at their existing carrying amounts except where adjustment is required to ensure uniformity of accounting policies.
|
The assets & liabilities taken over are recorded at their existing carrying amounts or the basis of their fair values.
|
f) Recording of Reserves of Transferor Co.
|
All reserves are recorded at their existing carrying amounts and in the same form.
|
Only statutory reserves are recorded at their existing carrying amounts.
|
g) Recording of Balance of Profit & Loss A/c of Transferor
|
The balance of P&L A/c should be aggregated with the corresponding balance of the transferee co. or transferred to the General.
|
The balance of P&L A/c losses its identity and is not recorded at all.
|
Ans: (ii) Difference between Pooling of interest and purchase method of recording transactions relating to amalgamation.
Basis
|
Pooling of Interest Method
|
Purchase Method
|
a) Applicability
|
The pooling of interest method is applied in case of an amalgamation in the nature of merger.
|
Purchase method is applied in the case of an amalgamation in the nature of purchase.
|
b) Recording
|
In the pooling of interest method all the reserves of the transferor Co. are also recorded by the transferee Co. in its books of account.
|
In the purchase method the transferee Co. records in its books of accounts only the assets and liabilities taken over the reserves, except the statutory reserves of the transferor company are not aggregated with those of the transferee Co.
|
c) Adjustment of the differences
|
Under the pooling of interest method, the difference between the consideration paid and the share capital of the transferor company is adjusted in the general reserve or other reserves of the transferee company.
|
Under the purchase method, the difference between the consideration and net assets taken over is treated by the transferee company as goodwill or capital reserve.
|
d) Statutory reserves
|
In this method, the statutory reserves are recorded by the transferee co. like all other reserves without opening Amalgamation and Adjustment A/c.
|
In the purchase method, while incorporating the statutory reserves, the transferee Co. has to open amalgamation adjustment account debiting it with the amt. of the statutory reserves being incorporated.
|
Or
(b) P Ltd. had the following Balance Sheet as on 31st March, 2015:
Liabilities
|
Rs.
|
Assets
|
Rs.
|
Share Capital:
8000 Equity Shares of Rs. 100 each fully paid
7½% Debentures
Profit prior to incorporation
Sundry Creditors
|
8,00,000
3,00,000
10,000
2,00,000
|
Land & Building
Plant & Machinery
Goodwill
Patents
Cash in Hand
Stock
Debtors
Profit & Loss A/c
Preliminary Expenses
|
4,00,000
3,50,000
1,00,000
20,000
10,000
90,000
1,00,000
1,90,000
50,000
|
13,10,000
|
13,10,000
|
The following scheme of reconstruction was adopted:
a) Each share was to be reduced to a share of Rs. 50 each.
b) Each shareholder was to subscribe for half the number of shares already held by him and pay immediately in cash for the new shares acquired.
c) All fictitious assets including goodwill and patents were to be eliminated.
d) A provision of 5% on debtors in respect of doubtful debts to be created.
e) Machinery was to be written down by Rs. 40,000.
Give Journal Entries to record the above and show the Balance Sheet after the scheme is carried through. 6+5=11
Journal Entries
In the books of Jeevan Jyoti Company Ltd
Particulars
|
L/F
|
Amount
|
Amount
|
Share Capital A/c (100) Dr.
To Share Capital A/c (50)
To Capital Reduction A/c (50)
(Being the equity share reduced to Rs. 50 per share)
|
8,00,000
|
4,00,000
4,00,000
| |
Bank A/c Dr.
To Share Capital A/c
(Being the 4,000 equity shares of Rs. 50 each issued to the existing shareholders)
|
2,00,000
|
2,00,000
| |
Capital Reduction A/c Dr.
Profit Prior to incorporation A/c Dr.
To Patents A/c
To Goodwill A/c
To Preliminary Expenses A/c
To Profit & Loss A/c
To Machinery A/c
To Provision for bad debts A/c
(Being the various assets written down and losses written off)
|
4,00,000
5,000
|
20,000
1,00,000
50,000
1,90,000
40,000
5,000
|
Balance Sheet of P ltd (After reconstruction)
As on 31-03-2015
Particulars
|
Note No.
|
Amount
|
I. Equity & Liabilities:
1) Shareholders fund
a) Share Capital
b) Reserve & Surplus
Profit Prior to incorporation
|
6,00,000
5,000
| |
2) Non Current Liabilities
a) Long term borrowing
7.5% Debenture
3) Current Liabilities
a) Trade Payable
|
6,05,000
3,00,000
2,00,000
| |
Total (1 + 2 + 3)
|
11,05,000
| |
I. Assets:
1) Non Current Assets
a) Fixed Assets
Tangible Fixed Assets:
Land & Building 4,00,000
Plant & Machinery 3,10,000
(3,50,000 – 40,000)
2) Current Assets
a) Inventory (Stock)
b) Trade Receivable
Debtors (1,00,000 – 5,000)
c) Cash & Cash Equivalent
|
7,10,000
90,000
95,000
2,10,000
| |
Total (1 + 2)
|
11,05,000
|
6. (a) What do you understand by the Liquidator’s Final Statement of A/c? Give a proforma of such an account with imaginary figures. 4+7=11
Or
(b) The following particulars related to a limited company which has gone into voluntary liquidation. You are required to prepare the Liquidator’s Final Statement of Account allowing for his remuneration @ 2% on the amount realized and 2% on the amount distributed to unsecured creditors other than preferential creditors: 11
Rs.
| |
Preferential Creditors
Unsecured Creditors
Debentures
|
10,000
32,000
10,000
|
The assets realized the following sums:
Rs.
| |
Land & Building
Plant & Machinery
Fixtures and Fittings
|
20,000
18,650
1,000
|
The liquidator expenses came to Rs. 1,000
7. (a) A Ltd. (holding company) acquired 4000 shares of B Ltd. (subsidiary company) as on 1st April, 2015. Their Balance Sheet as on 31st March, 2016 stood as follows:
Balance Sheets
As on 31st March, 2016
Liabilities
|
A Ltd.
|
B Ltd.
|
Assets
|
A Ltd.
|
B Ltd.
|
Share Capital:
1000 Equity Shares of Rs. 10 each fully paid
5000 Equity Shares of Rs. 10 each fully paid
Profit & Loss A/c
Creditors
|
1,00,000
-
40,000
40,000
|
-
50,000
10,000
20,000
|
Fixed Assets
Investment: 4000 Equity shares
of B Ltd. at Rs. 12.50 each.
Current Assets
|
1,00,000
50,000
30,000
|
60,000
-
20,000
|
1,80,000
|
80,000
|
1,80,000
|
80,000
|
Ans: Refer 2018 Old Course Paper
Or
(b) Discuss the provisions relating to holding company laid down in Section 212 of the Companies Act, 1956. 11
Ans: Particulars of Balance Sheet of a Holding Company in regard of its Subsidiaries
Section 212 of the Companies Act stipulates the conditions regarding the manner in which the Balance Sheet of the holding Company should be prepared. The provisions of the Section are given below:
(1) There shall be attached to the Balance Sheet of a holding company having a subsidiary or subsidiaries at the end of the financial year as at which the holding company’s Balance Sheet is made out, the following documents in respect of such subsidiary or of each such subsidiary, as the case may be:
(a) A copy of the Balance Sheet of the subsidiary;
(b) A copy of its Profit and Loss Account;
(c) A copy of the Report of its Board of Directors;
(d) A copy of the Report of its Auditors;
(e) A statement of holding company’s interest in the subsidiary;
(f) The statement referred to in sub-section (5) if any; and
(g) The report referred to in sub-section (6), if any.
(2) The Balance Sheet, profit and loss accounts and the reports of the board of directors and the auditors shall be made out in accordance with the requirements of this Act.
(i) As the end of the financial year of the subsidiary, where such financial year coincides with the financial year of the holding company;
(ii) As at the end of the financial year of the subsidiary last before that of the holding where the financial year of the subsidiary does not coincide with that of the holding company.
Where the financial year of a subsidiary is shorter in duration than that of its holding company, then financials statements of subsidiary company shall be construed for two more financial years of the subsidiary company the duration of which, in the aggregate, in not less than the duration of holding company’s financial year.
(3) The statement holding company’s interest in subsidiary company shall specify.
(a) The extent of the holding company’s interest in the subsidiary at the end of the financial year or of the last of the financial year of the subsidiary;
(b) the net aggregate amount, so far as it concerns members of the holding company and is not dealt with in the company’s accounts, of the subsidiary’s profit after deducting its losses or vice versa.
(i) For the financial year or years of the subsidiary aforesaid; and
(ii) For the previous financial years of the subsidiary since it became the holding company’s subsidiary;
(c) The net aggregate amount of the profits of the subsidiary after deducting its losses or vice versa.
(i) For the financial year of years of the subsidiary aforesaid; and
(ii) For the previous financial years of the subsidiary since it became the holding company’s subsidiary;
(4) Clauses (b) and (c) of sub-section (3) shall apply only to profits and Losses of the subsidiary which may properly be treated in the holding company’s accounts as revenue profits or losses, and the profits or losses attributable to any shares in a subsidiary for the time being held by the holding company or any other of its subsidiaries shall not (for that on any other propose) be treated as aforesaid so far as they are profits or losses for the period before the date on or as from which the shares were acquired by the company or any of its subsidiaries.
(5) Whether the financial year or years of a subsidiary do not coincide with the financial year of the holding company, a statement containing information on the following matters shall also be attached to the Balance Sheet of the holding Company:
(a) Whether there has been any, and if so, what change in the holding company’s interest in the subsidiary between the end of the financial year or of the last of the financial years of the subsidiary and the end of the holding company’s financial year;
(b) Details on any material changes which have occurred between the end of the financial year or of the last of the financial years of the subsidiary and the end of the holding company’s financial year in respect of
(i) The subsidiary’s fixed assets ;
(ii) Its investments ;
(iii) The money lent by it ;
(iv) The money borrowed by it for any purpose other than that of meeting current liabilities.
(6) If, for any reason, the Board of Directors of the holding company is unable to obtain information on any of the matter required to be specified by sub-section (4), a report in writing to that effect shall be attached to the Balance Sheet of the holding company.
(7) The documents referred to in clauses (c), (f) and (g) of sub-section (1) shall be signed by the persons by whom the Balance Sheet of the holding company is required to be signed.
(8) The Central Government may, on the application or with the consent of the Board of Directors of the company, direct that in relation to any subsidiary, the provisions of this section shall not apply or shall apply only to such extent as may be specified in the direction.
(9) If the board of directors of the holding company fails to take all reasonable steps to comply with the provisions of this Section, he shall, in respect of each offence, be punishable with imprisonment for a term which may extent to six months, or with a fine which may extend to one thousand rupees, or with both : Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed willfully.
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