II Semester B.B.M. Examination, June 2009 (Semester Scheme) BUSINESS MANAGEMENT (Paper - 2.4) : Financial Accounting - II

c) How do you determine purchase consideration under Net Payment Method?

h) Mention two advantages of Conversion of partnership into a Joint Stock Company.

j) What is Average clause?

Answer any 5 questions. Each "question carries 5matis: 2. On 1st January 2009 Mr. Abhinav Bhindra bought a pulsar bike from Bajaj Auto Ltd; on Hire Purchase System. The down payment being Rs. 15,000 and the balance t' be paid in four equal half yearly installments of Rs. 20,000 each, the first installme1l', falling due on 30th June 2009. Rate of interest is 6% per annum. Determine the cash . pnce. '

3. Mr. Dhoni and Yuvaraj are equal partners with capital of Rs. 6,00,000 and Rs. 9,00,000 respectivply. Yuvaraj withdrew Rs. 20,000 at the end of each mont!) from 1st January 2008 to 31st December 2008. The deed provided for interest on, drawings at 6% P.a. Accounts are closed on 31 st December. Calculate interest on Drawings. 4. On 1st April 2009 a Fire broke out in the premises of CA DVER Y Handicrafts Lt4., M.G.Road, Bangalore and destroyed all the stocks except some partly damag~ goods which were sold for Rs. 1,10,000. From the following details a$certain the claim to be lodged if the stock is fully insured:

30,00,000 20,00,000 4,00,000 2,00,000 5,00,000 Stock on 1-4-2009 Gross profit ratio is 25%

.111 . Mahavishnu Ltd. took delivery of a Dezire Car from Maruthi Suzuki Ltd., on 1st April2009 on hire purchase system. The down payment being Rs. 1,50,000 and the balanceto be paid in five installments ofRs. 3,00,000 each payable annually on 31 st March. The cash price of the car being Rs. 15,00,000. Calculate interest for each year. Govinda Ltd. took a lease of land at Bangalore from Kubera on 1st January 2009. . The Minimum Rent being Rs. 1,00,000 with a right to recoup the short workings during the next two years. Royalty during the frrst five years was as follows:

Year

Royalty

2009

60,000

2010

90,000

2011

97,500

2012

1,20,000

2013

1,42,500

PrepareAnalytical Table . . Sachin and Sehwag are partners sharing profits and losses in the ratio of 3:2. On 1st April 2008 their capitals were Rs. 2,50,000 and Rs. 2,00,000 respectively. From the following details prepare Profit and Loss Appropriation Account as on 31st March 2009. Net profit as on 31-3-2009 Rs.8,75,000. Drawings Sachin Rs. 75,000 and Sehwag Rs. 50,000 for the whole year. Interest on Capital 5% P.a .

.Transfer 10% of distributable profits before distribution to Reserve Fund. Interest on Sehwag's Loan of Rs. 2,00,000 at 6% P.a. for the whole year.

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8. Mahesh and Leander were equal partners. Their financial position as on 31 8t March 2009 was as under : Liabilities Mahesh's capital Leander's capital General Reserve Sundry Creditors

Amount Rs. 1,20,000 1,40,000 60,000 1,00,000

Outstanding Wages

40,000

Bills payable

50,000

Assests

Amount Rs.

Machinery FUrniture

2,25,000

Stock

1,40,000

75,000

Debtors

60,000

Cash

10,000

5,10,000

5,10,000

Sai Ltd. took over the above firm. All the assets and liabilities were taken over at book values. Determine the purchase consideration.

10. Tata Auto Ltd. obtained patent rights from Mr. Ratan Tata to manufacture and sell NAND Cars for a period of 20 years starting from 18t January 2006 on the following terms: i) Mr. Ratan Tata to get Royalty of Rs. 1,000 per car. li) Minimum Rent Rs. 1,20,000 P.a. ill) Shortworkings to be recouped during the subsequent two years. iv) In the event of strike Minimum Rent to be reduced to 70%. Production during four years from 2006 to 2009 was as follows : Year

No. of Cars Manufactured

2006

70

2007

90

2008

150

2009 (strike for 3 months)

110

MS -A60 '1>,' Prepare the following Ledger Accounts in the books of Tat;.iAuto Ltd. a) Royalty Account b) Minimum Rent Account

1. Srinivas and Rani were equal partners. On 31 st March 2009 their financial position , was as follows : Balance Sheet as on 31 st March 2009

Liabilities

Amt.

Assets

Rs.

Amt.

Rs.

Srinivas's capital

2,00,000

Land

5,00,000

Rani's capital

2,00,000

Plant and Machinery

2,10,000

Sundry creditors

2,40,000

Debtors

70,000

40an

2,00,000

Bills Receivable

20,000

Cash

30,000

Patents

40,000

Bank overdraft Reserve fund

30,000 1,00,000

Stock 9,7&,900

1,00,000 9,70,000

On 1st April 2009 they decide to sell their business to SRM Ltd., which had an authorised share capit~l ofRs. 15,00,000' consisting of 12,000 Equity shares of Rs. 100 each and 3,000; 9% Cumulative preference shares of Rs. 100 each.

The company agreed to take over the firm on the following terms : i) That land to be valued at Rs. 7,50,000 and Plant and Machinery at Rs. I,S All the other assets (except cash) to be taken over at their book values. ii) Goodwill was valued at 2 years purchase of the average profits of the pre' three years. Profits for 2007,2008 and 2009 were Rs. 2,10,000, Rs. 1,70,( Rs. 1,80,000 respectively after setting aside Rs. 10,000 to Reserve Fund e year. ill) Creditors and overdraft were not taken over by the company. iv) Loan was taken over by offering 9% cumulative preference shares. v) 40% of the purchase consideration to be paid in cash and the balance to bl by allotment of Equity shares. Prepare Ledger Accounts in the books of the Firm. 12. On 1st January 2009 Coca-cola Ltd. bought a cooler from Ezone Ltd., Bangal< The cash price of the cooler being Rs.4,47,000. The cover was purchased un installment system. Rs. 1,20,000 was paid on signing of the agreement and balance in three installments of Rs. 1,20,000 each at the end of each year. : interest is charged by Ezone Ltd. Per annum. Coca-cola Ltd. depreciates coole) 10% P.a. on diminishing balance method. Prepare necessary Ledger Accounts the books of Coca-cola Ltd. 13. Fire occured in the premises of Rolex Ltd. on 28th April 2009. The company h taken out a Fire Insurance Policy ofRs. 2,00,000 covering its stock in trade and t Policy was subject to average clause. From the following particulars ascertain t claim to be lodged. Stock on pt January ?008

1,80,000

Purchases from 1-1-2009 to the date of fire 1,68,000

Purcgase during 2008

7,30,000

Sales from 1-1-2009 to the date of frre

2,06,000

Sales Returns from 1-1-2009 to date offrre

8,000

Purchase Returns during 2008 Stock on 31-12-2008 • Sales for the year 2008 Salvage

10,000 2,52,000 20,.000 39,600

Stock is always valued 10% below the cost.

14.0n 1stJanuary 2008 Ram, Lakshman and Janaki entered into partnership contributing Rs. 5,00,000, Rs. 2,60,000 and Rs. 2,40,000 respectively and sharing profits in the ratio of 5:3:2. Lakshman and Janaki are entitled to annual salary ofRs. 32,000 and Rs. 29,000 respectively. Interest on capital to be allowed at 5% P.a. Interest on drawings to be charged at 5%. During the year Ram withdraw Rs. 80,000; Lakshman Rs. 50,000 and Janaki Rs. 30,000. Interest being Ram Rs. 4,500, Lakshman Rs. 2,250 and Janaki Rs. 1,450. Profit for the year ended 31 st December 2008 was Rs.l,42,8oo. Show how the profits is distributed and also prepare capital accounts (a) if they are fluctuating and (b) if they are fixed.