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Board Paper of Class 12-Commerce 2013 Accountancy (SET 1) - Solutions

General Instructions
1) This question paper contains two sections: A and B.
2) Section A is compulsory.

Section A
i. This section consists of 2 compulsory questions.
ii. Question No. 1 carries 20 marks.
iii. Question No. 2 carries 10 marks.
iv. This whole section is of 30 marks in total.

Section B
i. This section consists of 8 questions.
ii. Attempt any 5 questions from question nos. 3 to 10 carrying 14 marks each.
iv. This whole section is of 70 marks in total.

  • Question 1
    Answer briefly each of the following questions: [10 × 2 = 20 Marks]
    (i) What is the accounting treatment of forfeiture of shares which were originally issued at a premium but subsequently forfeited
    for nonpayment of calls when:
    (a) The allotment money including premium has been paid by the shareholder
    (b) The allotment money including premium has not been paid by the shareholder.
    (ii) How will you deal with current year’s ‘Proposed Dividend’ and previous year’s ‘Unclaimed Dividend’ at the time of preparation of final accounts of a joint stock company?
    (iii) How will you deal with ‘Purchased Goodwill’ at the time of preparation of cash flow statement from two consecutive years’ balance sheet without any adjustments?
    (iv) Give two differences between debtors turnover ratio and creditors turnover ratio.
    (v) How would you adjust the capital accounts of the partners, when the share of profit of a partner is guaranteed by:
    (a) the firm
    (b) another partner.
    (vi) Define an intangible asset as per AS-26, issued by The Institute of Chartered Accountants of India.
    (vii) A firm maintains three ledgers:
    (a) General Ledger
    (b) Debtors Ledger
    (c) Creditors Ledger
    At the end of the year, a trial balance is extracted from the three ledgers taken together. Explain how you will extract a trial balance if the sectional balancing system is incorporated.
    (viii) What is the meaning of underwriting of shares in the context of a joint venture business?
    (ix) When a company purchases the business of another company, what are the two possibilities that may arise in the books of the purchasing company, if the value of net assets is not equal to the purchase price?
    (x) How would you value the goodwill of a partnership firm on the basis of:
    (a) capitalization of average profit method?
    (b) capitalization of super profit method?
  • Question 2
    Burton and Sons, a partnership firm is about to admit a partner and so decides to value goodwill in the books. The partners are considering three different methods of valuation as follows:  [10 Marks]
    (a)  On the basis of two years’ purchase of the average profits of the last five consecutive years. These were: 2006 – Rs 56,000; 2007 – Rs 48,000; 2008 – Rs 46,000; 2009 – Rs 58,000 and 2010 – Rs 66,000.
    (b) On the basis of three years’ purchase of total super profits of the last five years.  For this purpose, the normal profit is to be taken as Rs 40,000 per annum.
    (c) On the basis of capitalizing the average super profit. For this purpose, the following information is provided:
      (i) Adjusted forecast maintainable profits Rs 60,000.
    (ii) Normal rate of return 20%.
    (iii) Capital employed Rs 2,00,000
    (iv) Capitalization rate 25%.
      You are required to calculate the value of goodwill on the basis of each of the three methods (a) to (c) above.
  • Question 3
    The following information is available from the books of Robinson and Company Limited:         [14 Marks]
    Debit balance as on 1.7.97, Rs 87, 200 in Debtors account and Credit balance as on 1.7.97, Rs 600 in Debtors account.
    Transactions during the six months ended 31.12.97
    Total sales were Rs 94,000 including cash sales of Rs 4,000.
    Debtors whose balance was in credit were paid off Rs 600.
    Payments received by cheque from debtors Rs 60,000.
    Payments received by cash from debtors Rs 48,000.
    Payment received by bills receivable Rs 26,000.
    Bills receivable received from debtors were dishonoured for Rs 6,000 and noting charges of Rs 60 were paid.
    Bills amounting to Rs 10,000 were discounted with the bank for Rs 9,900.
    Cheques received from customers were dishonoured for Rs 800.
    Out of bills receivable received and included in Rs 26,000 above, bills of Rs 5,000 were endorsed to suppliers.
    Bad debts written off during the period were Rs 1,000.
    Discount allowed for prompt payment were Rs 700 and bad debts written off in 1995 and now recovered from debtors amounted to Rs 900.
    Interest debited for delay in payments was Rs 1,250.
    On 31.12.97, provision for doubtful debts was created for Rs 2,100 and provision for discount on debtors for Rs 500.
    Hugo and Company Limited appeared in Debtors Ledger and also in Creditors Ledger.
    The balance in Creditors Ledger was Rs 900 and the same was transferred to Debtors Ledger.
    Goods of Rs 2,760 were rejected by customers.
    From the given information, prepare a Total Debtors Account in the General Ledger. VIEW SOLUTION
  • Question 4
    Andrew and Bill entered into a joint venture for underwriting the subscription at par of the entire share capital of Jacob and Company Limited consisting of 1,00,000 equity shares of Rs 10 each and to pay all expenses up to allotment. The profits were to be shared by them in the ratio of 3:2 respectively.          [14 Marks]
    The consideration in return for this agreement was the allotment of 12,000 other shares of Rs 10 each to be issued to them as fully paid.
    Andrew provided the funds amounting to Rs 32,500 for various expenses and Bill contributed Rs 27,500 on account of office expenses.
    The prospectus was issued and application fell short of the issue by 15,000 shares.
    Andrew took these over on joint account and paid for the same in full. The ventures received 12,000 fully paid shares as underwriting commission.
    They sold their entire share holding at Rs 12.50 less 50 paise brokerage per share. The net proceeds were received by Andrew for 15,000 shares and Bill for 12,000 shares.
    You are required to show in the books of Andrew and Bill, the joint venture accounts as well as their personal accounts in their respective books.

  • Question 5
    Bird and Company Limited issued 10,000 shares of Rs 10 each payable as follows:    [14 Marks]
    Application – Rs 4 per share on 1.1.09
    Allotment – Rs 3 per share payable on 1.4.09
    First call – Rs 2 per share payable on 1.7.09 and Second and final call – Rs 1 per share payable on 1.10.09

    All the shares were subscribed for and the money received subject to certain exceptions:

    (a) Mr. Harry holding 500 shares paid the entire amount of his holding at the time of allotment.

    (b) Mr. Joe holding 200 shares failed to pay the allotment and first call money on the due dates but paid the entire amount due at the time of paying the second and final call.

    Directors have decided to charge and allow interest, as the case may be, on calls in arrear and calls in advance respectively, as per the provisions of Table-A of the Companies Act, 1956.
    The defaulting shareholders duly paid their interest on calls in arrear to the company while some shareholders were also paid interest on calls in advance by the company before the finalization of accounts on 31.12.09.

    You are required to pass the consolidated adjustment and other relevant entries relating to interest on calls in arrear and interest on calls in advance only in all the appropriate books of account of Bird and Company Limited at the time of closing of annual accounts. VIEW SOLUTION
  • Question 6
    The following is the Balance Sheet of Alice, Barry and Charles as on 1st January, 2010:    [14 Marks]
    Liabilities Amount Rs Assets Amount Rs
    Alice’s capital 40,000 Goodwill 10,000
    Barry’s capital 20,000 Building 50,000
    Charles’ capital 20,000 Machinery 40,000
    General reserve 20,000 Furniture 10,000
    Creditors 15,000 Stock 5,000
    Bills payable 15,000 Debtors 5,000
        Bank 10,000
      1,30,000   1,30,000

    The partners share profits and losses in the ratio of 2:2:1, but on the above date, they decided to change that to 2:1:1. The following adjustments are required;

    (a) The value of the goodwill is Rs 15,000.

    (b) The value of machinery and furniture is to be increased by Rs 15,000 and Rs 5,000, respectively.

    (c) The value of stock and debtors is to be decreased by Rs 3,000 and Rs 2,000, respectively.

    (d) The capitals of the partners are to be adjusted according to the new profit and loss sharing ratio and for that, necessary capital is to be brought in or excess capital is to be withdrawn.

    (e) No reserve will be shown in the new Balance Sheet.

    Prepare revaluation account, partners’ capital accounts and re-draft the balance sheet. VIEW SOLUTION
  • Question 7
    The following are the ledger balances extracted from the books of Coopers and Company Limited:    [14 Marks]
    Particulars Amount (Rs)
    Authorized share capital – 1,00,000 equity shares of Rs 10 each. 10,00,000
    Issued and subscribed share capital – 1,00,000 equity shares of Rs 10 each 10,00,000
    Calls in arrear 1,000
    Profit and loss account (Cr) 1,00,000
    10% Debentures 1,42,500
    Debenture interest accrued but not due 7,500
    Fixed deposits accepted 1,21,000
    Provision for taxation 68,000
    General reserve 2,10,000
    Proposed dividend 60,000
    Creditors 2,00,000
    Plant and Machinery 5,25,000
    Stock 2,50,000
    Debtors 2,00,000
    Land 2,00,000
    Preliminary expenses 13,300
    Advances to directors 42,700
    Furniture 50,000
    Cash 30,000
    Bank 2,47,000
    Building 3,50,000
    Prepare the Balance Sheet of the company as per Schedule VI, Part I of the Companies Act, 1956. VIEW SOLUTION
  • Question 8
    [14 Marks]
    Balance Sheet as on 31st March 2010
    Liabilities Amount Rs Assets Amount Rs
    Creditors 20,000 Goodwill 10,000
    Bills payable 20,000 Building 25,000
    Bank overdraft 8,000 Plant 25,000
    Outstanding expenses 2,000 Investments 15,300
    James’ brother’s loan 20,000 Stock 8,700
    Henry’s loan 10,000
    Investment fluctuation fund 2,800
    Less provision for bad Debts
    2,000 15,000
    Employees provident fund 1,200 Bills receivable 10,000
    General reserve 2,000 Cash and bank 17,000
    James’ capital
    Henry’s capital
      1,26,000   1,26,000

    The firm was dissolved on the above balance sheet date and the following arrangements were decided upon:
    (a) James agreed to pay off his brother’s loan.
    (b) Debtors realized Rs 12,000.
    (c) Henry took over all the investment at Rs 12,000.
    (d) Other assets realized are as follows:
    (i) Plant Rs 20,000.
    (ii) Building Rs 50,000.
    (iii) Goodwill Rs 6,000.
    (e) Creditors and bills payable were settled at 5% discount.
    (f) Henry accepted stock at Rs 8,000 and James took over bills receivable at 20% discount.
    (g) Realization expenses amounted to Rs 2,000.
    You are required to prepare the necessary ledger accounts in order to close the books of the firm. VIEW SOLUTION
  • Question 9
    The Balance sheets of Cowper and Company as on 31st December, 2009, and 31st December 2010, are given below:    [14 Marks]
    Balance Sheet as on 31st March 2010
    Liabilities 31.12.09 Amount
    31.12.10 Amount
    Assets 31.12.09 Amount
    31.12.10 Amount
    Equity share capital of Rs 100each 10,00,000 20,00,000 Plant 15,00,000 20,00,000
    General Reserve 10,00,000 11,00,000 Stock 6,00,000 6,00,000
    Profit and Loss account 3,00,000 4,00,000 Debtors 10,00,000 9,00,000
    Current liabilities 7,00,000 2,00,000 Cash 1,00,000 4,00,000
    Provision for taxation 3,00,000 4,00,000 Miscellaneous expenditure          1,00,000 2,00,000
      33,00,000 41,00,000   33,00,000 41,00,000

    Additional information:

    (a)  During the current year, the company paid Rs 2,00,000 as equity dividend.

    (b) During the current year, one plant whose book value was Rs 1,00,000 was sold at a loss of Rs 25,000 and the company purchased another plant for Rs 8,00,000.

    (c) A sum of Rs 3,50,000 has been provided for taxation for the year.

    (d) Miscellaneous expenditure included Rs 1,10,000 as share issue expenses.

    Prepare a Cash Flow Statement as per AS-3 for the year ended 31st December, 2010.
  • Question 10
    (a) The following data is available from Allen and Company Limited: [14 Marks]
      Debtors turnover ratio – 4 times.
    Cost of goods sold – Rs 6,40,000
    Gross profit ratio – 20%.
    Closing debtors were Rs 20,000 more than at the beginning.
    Cash sales being 3313 of credit sales.
    From the above, calculate the amount of opening debtors and closing debtors.
    (b) The following figures have been extracted from Regal and Company Limited:  
      Stock at the beginning of the year – Rs 60,000
    Stock at the end of the year – Rs 1,00,000
    Stock turnover ratio – 8 units.
    Selling price 25% above cost.
    Compute the amount of gross profit and sales.
    (c) The following information is provided to you pertaining to Parker and Company Limited:
      The above company has a current ratio 3:1
    Its current liabilities are Rs 25,000.
    Calculate its current assets and working capital.
    (d) The following information is available from Scott and Company Limited:  
    Opening stock Rs 30,000
    Closing stock Rs 40,000
    Carriage inwards Rs 10,000
    Purchases Rs 1,00,000
    Current assets Rs 50,000
    Current liabilities Rs 20,000
    Fixed assets Rs 80,000
    Indirect expenses Rs 15,000
    Sales Rs 2,00,000
      Calculate the Stock turnover ratio and Working Capital turnover ratio.
    (e) The following information is available from Walter and Company Limited:  
      Stock turnover ratio – 5 times
    Stock at the end of the year is Rs 15,000 more than the stock in the beginning of the year.
    Sales – Rs 2,00,000
    Gross profit ratio – 25%
    Current liabilities – Rs 50,000
    Quick ratio – 0.75
    Calculate the current assets of the company.
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