CS Inter :: Company accounts and Cost & Mangaement accounts : June 2004

On 31s1 December, 2002, Brightlight Industries Ltd. showed in their accounts debenture redemption fund of Rs. 1,50,000 which was represented by Rs. 1,51,000, 5% municipal bonds purchased for Rs. 1,50,000.

On 28th February, 2003, the company had a balance of Rs.28,000 at their bank and they paid into the bank account, the proceeds of sale of foregoing investments for Rs. 1,50,500. On 1st March, 2003, the debentures of the value of Rs. 1,50,000 were paid.

You are required to prepare debenture redemption fund account and debenture redemption fund investments account in the books of the company. Calculations are to be made to the nearest rupee.

Expected normal yield for equity shares is 7% of capital employed. Goodwill is to be taken at 5 years' purchase of super profits, if any.

What is the difference between 'accounting audit trail' and 'operations audit trail' ?

What are the restrictions imposed by the Banking Regulation Act, 1949 on loans and advances in case of banking companies ?

Precision Ltd. proposed to purchase the business carried on by Fastners Pvt. Ltd. The goodwill for this purpose is agreed to be valued at five years' purchase of the weighted average profit for the past four years (Use appropriate weights). Profits for the past four years are as follows:

Sukriti Ltd. forfeited 100 shares of Rs. 10 each for non-payment of final call of Rs.2. Of these, 60 shares were re-issued @ Rs.9 per share as fully paid. Pass journal entries in the books of Sukriti Ltd. clearly showing how much amount was credited to shares forfeited account and what amount was transferred to capital reserve account.

On 1st April, 2002, Broad Ltd. acquired 20 lakh fully paid equity shares of Rs.10 each in Ways Ltd. for Rs.3.75 crore. The balance sheets of two companies as on 31s1 March, 2003 are given below :

Liabilities	(Rupees in Lakhs)
	Broad Ltd.	Ways Ltd.
Equity share capital of Rs.10 each,   fully paid Securities premium General reserve Profit and loss account Creditors Proposed dividends	500 50 60 230 95 75	250 — 140 75 85
	1,010	550
Assets
Land and buildings Plant and machinery Furniture and fixtures Shares in ways Ltd. Stock Debtors Cash at bank Preliminary expenses	90 210 100 375 110 75 50 —	80 135 25 — 145 85 70 10
	1,010	550

As on 31SI March, 2003, the following is the balance sheet of Agile Industries Ltd. : (Rs. In 000’s)

Liabilities Share capital:   14% Preference share   capital of Rs. 100   each Equity shares of Rs. 10   each General reserve 15% Debentures Current liabilities	22.50 45.00 27.00 21.00 15.00	Assets Fixed assets Investments Current Assets	97.50 18.00 15.00
	130.50		130.50

Ankit Industries Ltd. agreed to takeover the assets and liabilities of Agile Industries Ltd. on the following terms and conditions :

(i)	—	Discharge of 15% debentures at a premium of 10% by issuing 15% debentures in Ankit Industries Ltd.
	—	Fixed assets 10% above the book value.
	—	Investments at par value.
	—	Current assets at a discount of 10%.
	—	Current liabilities at book value.
(ii)	—	Discharge the debentureholders of Agile Industries Ltd. at 10% premium by issuing 15% debentures of Ankit Industries Ltd.
	—	Preference shareholders are discharged at a premium of 10% by issuing 15% preference shares of Rs.100.
	—	Issue 3 equity shares of Rs.10 each for every 2 equity shares in Ankit Industries Ltd. and pay cash @ Rs. 3 per equity shares.

The following information is extracted from the books of Reliable Electricity Co. Ltd. for the year ended 31sl March, 2003 :

	Rs.
Net profit before charging debenture interest 10% Debentures interest paid during the year Capital base arrived at by the company Reasonable return calculated by the company	22,50,050 3,75,000 1,03,63,000 13,56,150

A factory is currently working at 50% of its working capacity and produces 10,000 units. At 60% working capacity, the raw materials cost increases by 2% and selling price falls by 2%.
At 80% working capacity, raw material cost increases by 5% and selling price falls by 5%. At 50% working capacity, the product costs Rs.180 per unit and sold at Rs.200 per unit. The cost of Rs.180 is made up as follows :

	Rs.
Materials Labour Factory overhead (40% fixed) Administration overhead (50% fixed)	100 30 30 20 180

You are required to estimate the profits of the factory when it works at 60% and 80% of its working capacity.

A transport service company is running four buses between two towns that are 50 kms. apart. The seating capacity of each bus is 48 passengers. The following particulars were obtained from its records for the month of June, 2003 :

	Rs.
Wages of drivers, conductors and cleaners Salaries of office and supervisory staff Diesel oil and other oils Repairs and maintenance Tax, insurance, etc. Depreciation Interest and other charges	4,800 2,000 8,000 1,600 3,200 5,200 4,000

Actual passengers carried were 75% of the seating capacity. All the four buses ran on all the days of the month. Each bus made one round trip per day. Ascertain the cost per passenger per kilometer.

Swastik Oils Ltd. has furnished the following information for the year ended 31s1 March, 2003 :

	(Rs. in Lakhs)
Net profit	37,500.00
Dividend (including interim dividend paid)	12,000.00
Provision for income-tax	7,500.00
Income-tax paid dur ing the year	6,372.00
Loss on sale of assets (net)	60.00
Book value of assets sold	277.50
Depreciation charged to P&L account.	30,000.00
Profit on sale of investments	150.00
Value of investments sold	41,647.50
Interest income on investments	3,759.00
Interest expenses	15,000.00
Interest paid during the year	15,780.00
Increase in working capital (excluding cash and bank balance)	84,112.50
Purchase of fixed assets	21,840.00
Investments in joint venture	5,775.00
Expenditure on construction work-in-progress	69,480.00
Proceeds from long-term borrow ings	3 8,97 0.00
Proceeds from short-term borrowings	30,862.50
Opening cash and bank balances	11,032.50
Closing cash and bank balances	2,569.50

Design Pens Ltd., manufactures only pens where the marginal cost of each pen is Rs.3. It has fixed costs of Rs.25,000 per annum. Present production and sales of pens is 50,000 units and selling price per pen is Rs.5. Any sale beyond 50,000 pens is possible only if the company reduces 20% of its current selling price.

However, the reduced price applies only to the additional units. The company wants a target profit of Rs.1,00,000. How many pens the company must produce and sell if the target profit is to be achieved '?