CS Inter :: Company accounts and Cost & Mangaement accounts : December 2005

The paid-up share capital of Foresight Ltd. includes 5,000, 9% redeemable preference shares of Rs.100 each, repayable at a premium of 6%. As the shares have become ready for redemption, the company has decided to redeem the entire amount out of the proceeds of a fresh issue of 50,000 equity shares of Rs.10 each at Rs.10.60 per share. The company realised the entire amount of equity issue in cash and redeemed the preference shares on date. You are required to show the journal entries in the books of the company.

The following balances appeared in the books of a company on 1st April, 2004:

	Rs.
12% Debentures 12% Debenture sinking fund 12% Debenture sinking fund investments represented by 10% Govt. bonds secured of Rs. 7,20,000)	8,00,000 6,00,000 6,00,000

Annual contributions of Rs. 1,28,000 to sinking fund is to be made on 31st March every year. On 31st March, 2005, balance at bank was Rs. 4,00,000 after receipt of interest. The company sold the investments at 80% and debentures were redeemed. You are required to prepare — (i) 12% debentures account; (ii) debenture sinking fund account; (iii) debenture sinking fund investments account; and (iv) bank account.

Yash Ltd. has only one type of capital, viz., 40,000 equity shares of Rs. 100 each. It also has got reserves totalling Rs. 20,00,000. The company closes its books on 31st March each year. It has paid dividends @ 12½% upto 2001-02 and 15% thereafter. In 2004-05, the company suffered a loss of Rs. 2,50,000; therefore, it wishes to draw required amount out of the reserves to pay dividend at 12%. Advise the company.

Biggie Ltd. made an issue of 10,000, 10% mortgage debentures of Rs.100 each at Rs.96. The whole of the issue was underwritten by Smart Bulls. 8,500 debentures were applied for and allotted to the public. The underwriters discharged their liability and were paid commission at the rate of 2% on the nominal value of the debentures. Show the journal entries.

The summarised balance sheets of P Ltd. and S Ltd. as at 31st March, 2005 were as follows:

Liabilities	P Ltd. Rs.	S Ltd. Rs.
Share capital:
3,000 shares of Rs.100 each	3,00,000	—
10,000 shares of Rs.10 each	—	1,00,000
Capital reserve	—	55,000
General reserve	30,000	1,05,000
Profit and loss account	38,200	18,000
Loan from S Ltd	2,100	—
Bills payable (includingRs.500 to P Ltd.)	—	1,700
Creditors	—	1,700
	3,88,200	2,86,700
Assets
Fixed assets	1,50,000	2,44,700
Investments in S Ltd., at cost	1,70,000	—
Stock	40,000	20,000
Loan to P Ltd.	—	2,000
Bills receivable (including Rs.200 from S Ltd.)	1,200	—
Debtors	20,000	15,000
Cash	7,000	5,000
	3,88,200	2,86,700

There is a contingent liability of Rs.1,000 for bills discounted appearing in the balance sheet of P Ltd. P Ltd. acquired 8,000 shares of Rs. 10 each in S Ltd. on 31st March. 2005.
You are given the following additional information:

(i)	S Ltd. made a bonus issue on 31st March, 2005 of one share for every two shares held, reducing general reserve by an equivalent amount, but the transaction is not shown in the balance sheet.
(ii)	Interest receivable amounting to Rs. 100 in respect of a loan due by P Ltd. has not been credited in the accounts of S Ltd.
(iii)	The directors decided that the fixed assets of S Ltd. were overvalued and should be written down by Rs. 5,000.
Prepare a consolidated balance sheet of the two companies as at 31st March, 2005 giving all the workings.

The balance sheet of Super Sound Ltd. as at 31st March, 2005 is given below:

Liabilities	Rs.	Assets	Rs.
Share capital:		Buildings	2,25,000
9,000 Equity shares of		Machinery	3,30,000
Rs.100 each, fully paid-up	9,00,000	Sundry debtors	2,40,000
Profit and loss account	75,000	Bank	90,000
Bank overdraft	15,000
Creditors	90,000
Provision for taxation	1,65,000
Provision for dividends	90,000
	13,35,000		13,35,000

The net profits of the company after deducting usual working expenses but before providing for taxation were as under:

Year	Rs.
2002-03	3,00,000
2003-04	3,60,000
2004-05	3,30,000

On 31st March, 2005, building was revalued at Rs. 3,00,000; machinery at Rs. 3,75,000 and sundry debtors on the same date include Rs. 10,000 as irrecoverable. Having regard to nature of the business, 10% return on net tangible capital invested is considered reasonable.

You are required to value the company's share ex-dividend. Valuation of goodwill may be based on three years, purchase of annual super profits. Rate of depreciation on buildings is 2% and on machinery is 10%. The income-tax rate is to be assumed at 35%. All workings should form part of your answer.

The following scheme was passed and sanctioned:

(i)	Future Ltd. to be formed to take over the business.
(ii)	One share of Rs. 10 fully paid-up in the new company to be issued for every three equity shares in the old company.
(iii)	Three shares of Rs. 10 each fully paid-up in the new company to be issued for every five preference shares in the old company.
(iv)	Debentureholders to be paid in full by Future Ltd.
(v)	The creditors to receive 80% of the sums due to them in fully paid-up shares of Rs. 10 each in the new company in full settlement
(vi)	Patents and profit and loss to be written off.
(vii)	Arrears of preference dividend to be cleared by issuing one equity share of Rs. 10 fully paid-up in Future Ltd. for every 20 shares held.
(viii)	Any balance available by the scheme to be used in writing down buildings.
You are required to pass the journal entries and prepare a balance sheet of Future Ltd. after giving effect to the scheme.

From the following information, calculate the amount of provision to be made in the profit and loss account of Trusted Bank Ltd. for the year 2004-05:

	(Rs. in '000)
Standard assets	5,96,520
Sub-standard assets	37,120
Doubtful assets:
Upto one year (secured)	10,264
One year to three years (secured)	6,240
More than three years (secured by mortgage of plant worth Rs.1,600 thousand)	2,632
Loss assets	4,136

The net profits of the company after deducting usual working expenses but before providing for taxation were as under:

Attempt any four of the following:

Explain the complementary role of financial accounting and cost accounting.

A manufacturing company has three production departments and two service departments. The summary of departmental expenses are distributed as under:

The service department expenses are charged on the following percentage basis:

	Production Deptt			Service Deptt
Service Deptt	P1	P2	P3	S1	S2
S1	20%	25%	35%	—	20%
S2	25%	25%	40%	10%	—

Prepare a statement showing the apportionment of expenses of two service departments in production departments by simultaneous equation method

Using the following data, compute — (i) closing inventory; and (ii) cost of sales under 'current purchasing power' (CPP) method assuming that the firm is following last-in-first-out (LIFO) method of inventory valuation:

Following are the labour turnover rates computed under different methods for the quarter ended on 31st March, 2005:

Flux method	20%
Replacement method	10%
Separation method	6%

Following additional information has been given to you:
 (i) Total cost incurred:

Input 1,000 units	Rs. 4,600
Direct labour	Rs. 4,100
Overheads	Rs. 6,000

One unit of Product-C requires half the raw material required for one unit of Product-B; one unit of Product-A requires one and half times the raw material required for Product-B.

Product-A requires double the time needed for the production of one unit of Product-B and one unit of Product-C.

You are required to calculate the total and per unit cost of each of the products.

Define 'budget key factor'. List four principal budget factors which may influence the targets.

The following information is available from the records of Always First Ltd. for a particular week with regard to the composition and rates of a gang of workmen:

Standard	Standard
Composition	Hourly Rate (Rs.)
20 Skilled workmen	12.00
15 Semi-skilled workmen	10.00
5 Unskilled workmen	8.00

The standard output for a week is 3,600 units and a week consists of 48 hours.

During a particular week, a gang consisted of 25 skilled workmen, 12 semi-skilled workmen and 3 unskilled workmen and the actual wages paid were as follows:

Skilled workmen -@ Rs. 11.60 per hour; semi-skilled workmen @ Rs. 10.20 per hour; and unskilled workmen @ Rs. 8.00 per hour.

Actual output during the week was 3,750 units despite the fact that 6 hours were lost in that week due to abnormal idle time.

Based on the above information, you are required to work out—

(i)	Labour rate variance;
(ii)	Labour mix variance;
(iii)	Labour idle time variance;
(iv)	Labour yield variance;
(v)	Labour efficiency variance; and
(vi)	Labour cost variance

You are given the following figures worked out from the profit and loss account and balance sheet of Steadfast Ltd. relating to the year 2004-05. Prepare a balance sheet:

Fixed assets (net, after writing off 30%)	Rs. 10,50,000
Fixed assets turnover ratio (cost of sales basis)	2
Finished goods turnover ratio	6
Rate of gross profit to sales	25%
Net profit (before interest) to sales	16%
Fixed charges cover (debenture interest 14%)	8
Debt collection period	1-1/2 months
Materials consumed to sales	30%
Stock of raw materials (in terms of number of months'
consumption)	3
Current ratio	2.4
Quick ratio	1.0
Reserves to capital	0.21