CA PCC/PCE :: Advanced Accounting : May 2007

It was also discovered that in ascertaining the results in the earlier years certain adjustments, details of which are given below, had not been noted.

The partners decided to admit Chaplin as a partner with effect from 1.4.2007. It was decided that Chaplin would be allotted 20% share in the firm and he must bring 20% of the combined capital of Laurel and Hardy.

Following is the Balance sheet of the firm as on 31.3.2007 before admission of Chaplin and before adjustment of revised profits between Laurel and Hardy.

Balance Sheet of LH & Co. as at 31.3.2007
Liabilities	Rs.	Assets	Rs.
Capital Accounts Laurel Hardy Sundry Creditors	2,11,500 1,51,500 2,27,000 5,90,000	Plant and Machinery Cash on hand Cash at bank Stock in trade Sundry debtors	60,000 10,000 5,000 3,10,000 2,05,000 5,90,000

You are required to

(i)	Profit and Loss Adjustment account;
(ii)	Capital accounts of the partners; and
(iii)	Balance Sheet of the firm after the admission of Chaplin.

Following is the Balance Sheet of P and Q as at 31.3.2007:

Liabilities	P Rs.	Q Rs.	Assets	P Rs.	Q Rs.
Capital Current liabilities	7,75,000 6,23,500 13,98,500	8,55,000 5,57,600 14,12,600	Plant & Machinery Building Current assets	4,85,000 7,50,000 1,63,500 13,98,500	6,14,000 6,40,000 1,58,600 14,12,600

Following are the additional information:

(i)	The authorised capital of the new company will be Rs.25,00,000 divided into 1,00,000 equity shares of Rs.25 each.
(ii)	Liabilities of P includes Rs.50,000 due to Q for the purchases made. Q made a profit of 20% on sale to P.
(iii)	P has goods purchased from Q, cost to him Rs.10,000. This is included in the Current asset of P as at 31st March, 2007.
(iv)	The assets of P and Q are to be revalued as under: P Rs. Q Rs. Plant and machinery Building 5,25,000 7,75,000 6,75,000 6,48,000
(v)	The purchase consideration is to be discharged as under: (a) Issue 24,000 equity shares of Rs. 25 each fully paid up in the proportion of their profitability in the preceding 2 years. (b) Profits for the preceding 2 years are given below: P Rs. Q Rs. Ist year IInd year Total 2,62,800 2,12,200 4,75,000 2,75,125 2,49,875 5,25,000 (c) Issue 12% preference shares of Rs.10 each fully paid up at par to provide income equivalent to 8% return on capital employed in the business as on 31.3.2007 after revaluation of assets of P and Q respectively.

You are required to:

(i)	Compute the amount of equity and preference shares issued to P and Q.
(ii)	Prepare the Balance Sheet of P & Q Ltd. immediately after amalgamation.

From the following particulars draft Hire-purchase trading account and compute profit or loss for the year ended 31st March, 2007:

	Rs.
Goods with customers on 1.4.2006 (instalments are not due) Instalments due on 1.4.2006 (customers are paying) Goods sold on hire-purchase during the year (i.e., from 1.4.2006 to 31.3.2007) Cash received from customers Goods re-possessed from customers valued at 40% Unpaid instalments in respect of re-possessed goods Goods with customers as on 31.3.2007 (at hire-purchase price)	3,20,000 20,000 16,00,000 11,20,000 16,000 40,000 7,20,000

Sales upto 2.6.2007 includes Rs.75,000 being the goods not dispatched to the customers. The sales invoice price is Rs.75,000.

Purchases upto 2.6.2007 includes a machinery acquired for Rs.15,000.

Purchases upto 2.6.2007 does not include goods worth Rs.30,000 received from suppliers, as invoice not received upto the date of fire. These goods have remained in the godown at the time of fire.

Value of stock salvaged from fire Rs.22,500 and this has been handed over to the insurance company.

The insurance policy is for Rs.1,20,000 and it is subject to average clause. Ascertain the amount of claim for loss of stock.

Prepare Trading, Profit and Loss Account for the year ended 31st March, 2007 and Balance Sheet on that date.

Whether the theft of cash has to be adjusted in the accounts of the company for the year ended 31.3.2007. Decide.