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B.Com. III Semester Degree Examination, March/April - 2023

COMMERCE
Corporate Accounting
(NEP)

Time : 2 Hours Maximum Marks : 60

Note : Answer all the Sections.

SECTION - A

1. Answer the following sub-questions, each sub-question carries one mark. 10x1=10

(a) What is underwriting of shares ?

(b) Mention any two needs of underwriting.

(c) How do you treat profit prior incorporation ?

(d) What is sales Ratio ?

(e) What are the types of valuation of shares ?

(f) Give the meaning of ‘warrant’.

(g) What is purchased goodwill ?

(h) What do you mean by superprofits ?

(i) What is final dividend ?

(j) Mention the statements which are prepared by the companies as per
companies Act.

SECTION - B

Answer any four of the following questions, each question carries five marks.
4x5=20
2. The Oxygen Ltd. issued 80,000 shares of Rs. 10/- each of which 70,000 shares
were underwritten by Mr. X. Applications were received for 74,000 shares, out of
which 52,000 were marked applications. Determine the underwriter’s liability.

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3. Calculate the value of equity shares based on rate of return (yield method)
(a) 4,000, 15% preference shares of Rs. 100/- each, fully paid up __________
4,00,000.
(b) 10,000 equity shares of Rs. 100/- each fully paid up __________ 10,00,000.
(c) Normal rate of return is 15%.
(d) Average profits before tax Rs. 8,00,000.
(e) Rate of tax 32%.
(f) Transfer to reserve fund is Rs. 10,000 per year.

4. Write the basis of allocation for the following expenses :

(a) Rent and rates
(b) Director’s fees
(c) Preliminary expenses
(d) Interest on loan
(e) Advertisement expenses
(f) Bank charges
(g) Bad debts
(h) Carriage outwards
(i) Free samples
(j) Interest on capital

5. Explain the factors which will affect the value of goodwill.

6. Write the format of Note No. 2 Reserves and surplus as per companies Act.

7. From the following particulars prepare Note No. 1 share capital appearing in the
Balance sheet as per companies Act.
Authorised capital Rs.
5,000, 10% preference shares of 100/- each. 5,00,000
2,00,000 equity shares of Rs. 10/- each. 20,00,000
Issued and subscribed and paid up capital
5,000, 10% preference shares of 100/- each. 5,00,000
2,00,000 equity shares of Rs. 10/- each, 16,00,000
Rs. 8 per share called up.
Calls unpaid by directors and officers. 20,000
Forfeited equity shares. 8000

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SECTION - C

Answer any three of the following questions, each question carries ten marks.
3x10=30
8. Write the functions of underwriters and SEBI guidelines on underwriting.

9. Sulphur Ltd. was formed on 01.07.2021, to takeover the business of Nitrogen

traders with effect from 01-04-2021. The following was the position of the statement
of profit and loss prepared for the year ending 31.03.2022.
Particulars Note Amount Total
I. Continuing operations
1. Revenue from operations (sales) 1 33,60,000
2. Other Income 2 -

Total Revenue (a) → 33,60,000

3. Expenses
(a) Cost of sales 3 26,60,000
(b) Employees benefit cost 4
Salaries and allowances 1,60,000
Director’s fee 18,000 1,78,000
(c) Finance cost 5
Interest on Debentures 18,000
Interest to vendors
(up to 30-09-2021) 10,000 28,000
(d) Depreciation and Amortisation 6 64,000
(e) Other expenses
7
Rent and rates 35,000
General expenses 48,000
Commission on sales 56,000
Advertisement 14,000
Audit fees 10,000 1,63,000

Total expenses (b) → 30,93,000

Net profit (a - b) → 2,67,000

The following additional information are given.

(a) The average monthly sales for the first three months were Rs. 1,60,000/-,
where as the monthly average sales for the subsequent period was
Rs. 3,20,000/-.
(b) Rent was paid Rs. 2,000/- per month upto 30-06-2021 and thereafter it was
3000 per month.
Prepare the statement showing profit prior to incorporation of this company.

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10. From the following balances extracted from the books of Gold Ltd. for the year ending
31-03-2022, prepare the statement of assets and liabilities as on 31-03 2022 as
per the schedule III of the companies Act.
Name of the Account Debit Credit
Share capital
(15,000 equity shares of 10/- each) - 1,50,000
(50,000 preference shares of 10/- each) - 5,00,000
Securities premium - 2,50,000
General reserve - 5,62,500
Loss for the current year 1,50,000 -
Bonds and Debenture - 3,00,000
Long term loan from bank
Secured on Building - 2,00,000
Other long term loans - 1,00,000
Short term borrowings from others - 1,50,000
Trade payables (creditors) - 5,22,500
Other current liabilities - 85,000
Provision for Income tax - 3,25,000
Provision for salaries - 25,000
Buildings 11,50,000
Furniture 75,000
Capital work in progress
(Cost of construction) 50,000
Investments - Government
(Non - current) 1,50,000
Investments in preference 62,600
Closing stock 6,00,000
Cash in hand 1,37,500
Loose tools 29,000
Trade Receivables
Debtors 6,02,400
Cash at Bank 1,63,500

31,70,000 31,70,000

Additional Information :
(a) Authorised capital of the company consists of 20,000 equity shares of
Rs. 10/- each and 1,00,000 preference shares of Rs. 10/- each.
(b) Other current liabilities consists of income received in advance.

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11. The following is the balance sheet shakti Ltd. for the year ending 31-03-2022.
Particulars Note Amount Rs.
I. Equity and liabilities :
(A) Share holder’s funds :
(i) Share capital 1 4,00,000
(ii) Reserves and Surplus 2 3,10,000 7,10,000
(B) Non current liabilities
Long term borrowings 3 1,00,000 1,00,000
(C) Current liabilities
Trade payables 4 1,30,000 1,30,000
Total 9,40,000
II. Assets :
(A) Non-current Assets :
(i) Tangible fixed assets 5 5,00,000
(ii) Intangible fixed assets 6 40,000 5,40,000
(B) Current Assets :
Trade receivables 7 4,00,000 4,00,000
Total 9,40,000
Notes to statements of assets and liabilities.
Note 1. Share capital :
40,000 equity shares of Rs. 10/- each fully paid 4,00,000
Share capital 4,00,000
Note 2. Reserves and Surplus
General Reserves 1,90,000
P & L a/c (credit balance) 1,20,000 3,10,000
Reserves and Surplus 3,10,000
Note 3. Long term borrowings
10% Debentures 1,00,000 1,00,000
Long term borrowings 1,00,000
Note 4. Trade Payables
Creditors 1,30,000 1,30,000
Trade payables 1,30,000
Note 5. Tangible fixed assets :
Land and Building 3,00,000
Plant and machinery 2,00,000 5,00,000
Tangible fixed Assets 5,00,000
Note 6. Intangible Assets :
Goodwill 40,000 40,000
Intangible assets 40,000
Note 7. Trade Receivables
Debtors 4,00,000 4,00,000
Trade Receivables 4,00,000

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Additional Information.
1. The machinery and land buildings were independently valued at Rs. 1,00,000
and Rs. 1,60,000/- respectively.
2. Goodwill valued at 50,000.
3. The net profits before tax for the last 3 years are as follows :
2019-20 - 1,60,000
2020-21 - 1,80,000
2021-22 - 1,40,000
4. Tax rate is 30%.
5. Transfer 20% of profits to general reserve.
6. Normal rate of return in similar businesses is 18%. Determine value of
equity under :
(i) Net assets method
(ii) Yield method
(iii) Fair value method

12. The following particulars are available in respect of the business carried on by a
trader.
(a) Profit earned for the following three years.
2020 - 22000
2021 - 29000
2022 - 24000
(b) The normal rate of return is 10%.
(c) Average capital employed in the business 1,50,000/-.
(d) Present value of Annuity of Re 1 to 5 years at 10% is 3.78.
(e) The profit included non-recurring profit on an average basis Rs. 3000.
You are required to calculate the value of the goodwill of the business on the
basis of :
(1) Five years purchase of super profits
(2) Annuity method of valuation
(3) Capitalisation of super profits
(4) Comment on each of the above value of goodwill

-oOo-
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