Corporate Accounting — Summer 2018

Calculate net cash flows from operating activities from the following:

Profits made during the year Rs. 4,37,500 after considering the following items:

Depreciation on fixed assets Rs. 17,500

Goodwill written off Rs. 8,750

Transfer to General Reserve Rs. 12,250

Profit on sale of land Rs. 5,250 (ii) The following is the position of current assets and current liabilities: Particulars 2017 (Rs.) 2016(Rs.) Debtors 26,250 21,000 Creditors 17,500 26,250 Bills receivable 14,000 17,500 Prepaid expenses 7,000 10,500

Classify the following income and expenses into Capital Expenses, Revenue Expenses, Deferred Revenue Expenses, Capital Income and Revenue Income. (1) Interest on Investment, (2) Purchase of Investments, (3) Research Expenses, (4) Entrance Fees, (5) Rent for Hall, (6) Books for Library, (7) Donation for Building Construction, (8) Sports Ground, (9) Rent received for Ground, (10)Subscription for Newspaper, (11) Ground Maintenance Expenses, (12) Salary of Staff, (13) Purchase of Computer, (14) Charity, (15) Sports Instruments, (16) X-ray Machine, (17) Large Scale advertisement expenses for Golden Jubilee celebration of club, (18) Computer installation charges and wages, (19) Locker rent, (20) Scrap sales, (21) Life Membership fees.

Explain Buyback of shares with its effects of buying back of the shares and also explain objectives of Buyback of shares.

EXCEL Ltd. makes a public issue of 3,00,000 equity share of Rs. 10 each at a discount of Rs.1 per share, payable as follows: On Application & Allotment Rs. On First Call Rs. On Second call Rs. Anil holding 3,000 shares does not pay the second call. His shares are forfeited. Out of this forfeited shares, 1,500 shares are re-issued as a paid up @ Rs. 5 per share. Give the journal entries and show the necessary working notes.

KK Ltd. issued 10% Debentures of Rs. 30,00,000 at 6% Discount on 1-1-2013. The company received full amount. The company will redeem debentures of Rs.6,00,000 every year. Prepare Debenture Discount A/c till the year of final payment.

What is Goodwill? Explain the factors affecting the value of Goodwill.

The capital employed in a business is of Rs. 7,00,000. Last five years’ profit before tax is as under. Rs. 1,47,000; Rs. 1,40,000; Rs. 1,61,000; Rs. 1,57,500 and Rs. 1,64,500. Assume 50% tax rate and 10% expected rate of return. Also assume that company can retain, expected profit for next five years.1

If annuity rate is of Rs. 3.78 according to annuity table find the value of goodwill on the basis of annuity of super profit method.

Also find the value of goodwill on the basis of five years purchase of super profit method.

And also find the value of goodw2ill as per capitalization of super profit method.

Acompany provides the following data. The intrinsic value of equity share is Rs. 125. the face value of this equity share is Rs. 100. find out the market value of Eq. Share from the following particulars:  Net assets Rs. 4,37,000  Average profit before deducting 50% taxes Rs. 2,45,000 (Including interest on investment Rs. 17,500)  Expected Rate of Return 15%  Eq. share capital is double than the 10% pref. Share capital.

Following is the statement of Receipts and Payments of Arohi Charitable Institution for the year 2016-2017. Receipts Rs. Payments Rs. To Balance b/d: By Charities 29,000 Cash on deposits 10,000 By Salaries 5,200 Cash on current A/c 4,800 By Rent & taxes 2,400 Cash in hand 600 15,400 By Printing 600 To Donation 16,000 By Postage 200 To Subscription 14,000 By Advertising exps. 500 To Furniture sold 30,000 By Furniture 1,500 To Legacies 6,000 By Insurance 1,500 To interest on investments 19,000 By Investments 28,000 To Interest on deposit 300 By Advance- Building 10,000 To sale of old newspaper 150 By Balance c/f: Cash on deposits 16,000 Cash on current A/c 4,500 Cash in hand 1,450 1,00,850 1,00,850 Prepare the Income and Expenses Account for the year ended 31st March, 2017 after considering the following: (1) It was decided to treat one-half of the amount received on Account of Donations is Revenue and Legacies is total Capital Income. (2) On 1-4-2016 On 31-3-2017 Rs. Rs. Rent Due 500 600 Prepaid rent 700 400 Salaries due 300 900 Advertisement due 200 300 Subscription due 400 800 Subscription paid in advance 800 1000 (3) Interest on investment Rs. 800 though accrued was not actually received.

Distinguish between Receipts – Payments A/c and Income – Expenditure A/c. OR2

Following is the Trial Balance of Mahi Ltd., as on 31st December 2017. Particulars Debit Rs. Credit Rs. Opening Stock 1,25,000 Sales 4,00,000 Purchases 3,45,000 Wages 50,000 Discount 7,000 5,000 Salaries 7,500 Rent 4,950 General expenses including insurance 17,050 Profit and loss account 15,030 Dividend paid 9,000 Capital (10,000 shares of Rs. 10 each) 1,00,000 Debtors and creditors 37,500 17,500 Machinery 29,000 Cash in hand 16,200 Reserve fund 1,15,500 Bad debts 4,830 Total 6,53,030 6,53,030 Adjustments: 1. Closing stock is valued at Rs. 3,00,000. 2. Purchases include Rs. 5,000 for machinery purchase on 1-7-2017. 3. On 31-12-2017, goods worth Rs. 30,000 were sold to a customer. He has taken away the goods but the transaction was not entered in the sales book. 4. Directors want to provide i) 10% final dividend; ii) income-tax Rs. 30,000; iii) Reserve fund Rs. 20,000. You are required to prepare company’s final accounts and also show the required working notes.

The summerised balance sheets of The Nirali Ltd. As at 31st march, 2016 and 2017 is given below: Liabilities 31-3- 31-3- Assets 31-3- 31-3- Equity shares of 2,01,250 1,72,375 Goodwill 7,000 10,105 Rs. 100 each Reserves and 2,73,000 1,29,500 Plant & machinery less 5,25,000 3,15,000 surplus dep. 8% debentures - 76,125 Investment 8,750 9,845 Creditors 2,62,500 2,18,750 Debtors 1,71,500 80,500 Bills payable 7,000 10,500 Stock 1,22,500 1,13,750 Provident fund 1,48,750 57,750 Cash 40,250 1,22,500 Expenses paid in advance 17,500 13,300 8,92,500 6,65,000 8,92,500 6,65,000 The following information is obtained from the books of accounts: (1) Dividend of Rs. 30,190 has been paid during the year. (2) During the year 2017, investments of Rs. 4,375 were sold out for Rs. 4,200 and shares of the face value of Rs.3,500 were purchased for Rs. 3,280. (3) Depreciation on Plant & Machinery during the current year was Rs. 26,250. Prepare: (a) statement showing change in working capital

Prepare Plant & Machinery A/c, Investment A/c and Share Capital A/c.

Explain the meaning of Cash Flow Statement and Classification of Cash Flow. OR3

Distinguish between Fund Flow Statement and Cash Flow Statement.

(i) From the following information calculate the amount of net cash flows from investing activities: Particulars 2016 (Rs.) 2017 (Rs.) Plant and Machinery 8,50,000 10,00,000 Investments (long –term) 40,000 1,00,000 Land (at cost) 2,00,000 1,00,000 Additional information (1) Depreciation charged on Plant & Machinery Rs. 50,000. (2) Plant and Machinery with a book value of Rs. 60,000 was sold for Rs. 40,000. (3) Land was sold at profit of Rs. 60,000. (4) No investment was sold during the year. (ii) X Ltd. Provides the following information, calculate net cash flow from financing activities: Particulars 2016 (Rs.) 2017 (Rs.) Equity share capital 5,00,000 6,00,000 14% Debentures 1,00,000 - 12% Debentures - 2,00,000 Additional information: (1) Interest paid on debentures Rs. 19,000. (2) Dividends paid Rs. 50,000. (3) During the year 2017, X Ltd. issued bonus share in the ratio of 5:1 by capitalizing reserve.