1.

You are required to prepare the profit & Loss Account for 2009-10 and the Balance Sheet as on 31st March 2010 from the following trail balance of XYZ Ltd. (14) Trail Balance of XYZ Ltd as on 31st March 2010. Particulars Cash in Hand Cash in Bank Accounts Receivable Free hold Land Building Machinery Office Equipment Patents Accounts Payable Capital Drawings Opening Stock- Raw Material - Work in Progress - Finished Goods Purchases- Raw Material - Consumables Sales Return Inward Return Outward Wages Fuel and Power Carriage on -Sales - Purchases Salaries- Office - Factory General Expenses Insurance -Factory -Office Rent (office) Debit(Rs.) 5,400 26,300 1,45,000 1,00,000 3,20,000 1,63,000 37,000 75,000 63,000 6,20,000 52,450 20,100 10,400 27,100 3,81,500 25,250 9,87,800 6,800 5,000 84,800 47,300 20,400 32,000 65,000 85,000 30,000 4,000 2,000 90,000 17,65,800 The following adjustments are also to be taken in to account. 1. Inventory of raw material in hand on 31st March 2010 is Rs. 21,300 work in progress is Rs. 14,300 and finished goods Rs 32,400. 2. Machinery is to be depreciated @ 10% and Office equipment @ 15%. Patents are to be amortized @ 20%. 17,65,800 Credit(Rs.)

3. Salaries are outstanding Rs. 10,000 for Factory and Rs. 5,000 for office. 4. Insurance includes a premium of Rs. 1,700 on a policy expiring on 30th Sept. 2010, relating to office. 5. Wages wrongly include Rs. 10,000 paid to the technician on 01/10/2009 for installation of a machine. 6. Bad debts to be written off are Rs. 7,250. 7. Purchases of raw-materials include Rs. 50,000 spent for procuring packing materials. 8. Rent received in advance Rs. 10,000. 9. Charge provision for bad debts at 5% and provision for discount on debtors @ 2%.

2. Success India Ltd, with an authorized capital of Rs. 2,00,000 divided into 20,000 Equity
Shares of Rs. 10 each, issues the entire amount of the shares payable as follows: Rs. 3 on application Rs. 6 on allotment (including premium Rs. 2) Rs. 3 on call. All share money is received in full with the exception of the allotment money on 200 shares and the call money on 500 shares (including the 200 shares on which the allotment money has not been paid). The above 500 shares are duly forfeited and 400 of these (including the 200 shares on which allotment money has not been paid) are re-issued at Rs. 7 per share payable by the purchaser. Pass Journal entries and show the Balance Sheet.

3. Superpower Ltd. invited applications for 10,000 of its Equity Shares of Rs. 10 each payable
Rs. 5 on application, Rs. 3 on allotment, and Rs. 2 on call. Applications were received for 15,000 shares and it was decided to deal with the same as follows: a) To refuse allotment to applicants for 1,000 shares. b) To give full allotment to applicants for 2,000 shares. c) To allot the remaining shares pro-rata among other applicants. d) To utilize the surplus received on application in part payment of amount due on allotment. A holder of 100 shares (to whom full allotment was made) and another holder of 150 shares (to whom pro-rata allotment was made) failed to pay the allotment money due. On call there was a further default on 200 shares. All these shares were forfeited. Subsequently the first lot of 250 (100 + 150) shares were reissued as fully paid at Rs. 8 per share. Give journal entries and prepare Balance Sheet.

4.

Handsome and Beautiful. Co. Ltd. issued 10,000 shares of Rs. 100 each at premium of Rs. 20 per share. The entire issue was underwritten as follows: A B C 5,000 shares 3,000 shares 2,000 shares (Firm underwriting 1,000 shares) (Firm underwriting 500 shares) (Firm underwriting 500 shares)

Shares applied for were 9,000 shares, the following being the marked forms (including firm underwriting):

A B C

3,500 shares 1,400 shares 1,600 shares

Calculate the liability of the each underwriter and also calculate the commission paid to each of them (assuming maximum commission allowed by the law is paid).

5. Following is the Balance Sheet of Important India Ltd as at 31/03/2010:

Liabilities Share Capital 10,000 Eq. Sh. of Rs. 100 each 5,000 Eq. Sh. of Rs. 40 each 2,000 10% Pref. Sh. of Rs. 10 each Reserve and Surplus Securities Premium Account Capital Redemption Reserve Account Capital Reserve Account General Reserve Account Profit and Loss Account Rs. Assets 10,00,000 Sundry Assets 2,00,000 20,000 Rs. 24,10,000

3,00,000 1,80,000 3,80,000 1,50,000 1,80,000 24,10,000

24,10,000

The following resolutions were duly passed: i) ii) A resolution converting the preference shares into preference shares of Re. 1 each. A resolution declaring issue of 3 bonus shares for every 5 shares held.

Showjournal entries and prepare the Balance Sheet.

6.

The is the summarized is the summarized Balance Sheet of Be Brave India Ltd. as on 31/03/2010
Liabilities Share Capital 5,000 Eq. Sh. of Rs. 100 each 3,000 8% Pref. Sh. of Rs. 100 each, Rs. 80 per share called up and paid up 4,000 9% Pref. Sh. of Rs. 100 each, fully paid up Reserve and Surplus Securities Premium Account Capital Reserve Account General Reserve Account Profit and Loss Account Rs. Assets Fixed Assets 5,00,000 Investments 2,40,000 Current Assets 4,00,000 Stock Sundry Debtors 60,000 Cash at Bank 1,00,000 1,00,000 2,00,000 Rs. 9,00,000 2,00,000

1,00,000 2,00,000 3,00,000

Current Liabilities Sundry Creditors

1,00,000 17,00,000

17,00,000

On 01/04/2010, the company redeemed the Pref. Sh. at a premium of 10%. In order to pay off the Pref. Share-holders, the company sold the investments realizing Rs. 2,10,000 and also issued 2,000 7% Pref. Sh. of Rs. 100 each which were fully subscribed in cash. On the same date the company issued fully paid bonus shares in the ratio of 1 for every 2 shares held. Show journal entries and prepare the Balance Sheet.

7. Following are the Balance Sheets of Dedication Wanted Ltd for the year 2007 and 2008.
Liabilities Equity Share Capital 8% Redeemable Preference Shares General Reserve Capital Redemption Reserve Profit & Loss Account 10% Debentures Sundry Creditors Bills Payable Proposed Dividend Provision for Tax 200 7 200 150 40 30 100 55 20 42 40 677 200 8 Assets 320 Goodwill 90 70 48 90 83 16 Land & Building Plant & Machinery (Rs. in '000) 200 200 7 8 100 80 200 80 150 87 20 25 15 677 170 200 250 59 30 18 10 817

Sundry Debtors Inventories Bills Receivable Cash & Bank Preliminary 50 Expenses 50 817

Additional Information:
i) ii)

iii)

iv)

An interim dividend of Rs. 20,000 has been paid in 2008 Debentures and Preference Shares were redeemed at the end of the year 2008. Redeemable Preference Shares were redeemed at a premium of 5%. Premium was paid of P/L account. Before redemption interest was paid on debentures. CRR was created out of General Reserve and Profit and Loss account During the year assets of another company were purchased for a consideration of Rs. 40,000 payable in shares. The assets purchased were: Stock Rs. 20,000, Machinery Rs. 20,000. A part of the plant was sold for Rs. 20,000 (W.D.V. Rs. 25,000). Depreciation for the year 2008 on Plant & Machinery Rs. 20,000 was provided.

v) vi)

Depreciate Land and Building by Rs. 10,000. Land costing Rs. 20,000 was sold for Rs. 50,000. Bonus Shares of Rs. 10,000 were issued to the existing shareholders during the year.

Prepare a Cash Flow Statement for the year 2008.

8. The summarized Balance Sheet two companies as 31

Liabilities Share Capital: Equity Shares of Rs. 10 each Profit & Loss Account Creditors P. Ltd. 100000

st

March 2009 as follows: Amount in Rs. P. Ltd. Q Ltd. 100000 32000 20,000

Q Ltd. Assets Fixed Assets 60000 Investments (2,000 Eq. Sh. of P Ltd) 6,000 Inventories Sundry Debtors 28,000 Cash & Bank Preliminary Expenses

25,000 30,000

25000 15000 10000 5000

20000 10000 8000 4000

155000 94000 155000 94000 st Q Ltd. was absorbed by P Ltd. on 1 April, 2008 on the basis of intrinsic value of shares. The purchase consideration was discharged in the form of fully paid shares at par. A sum of Rs. 5000 was owed by P Ld. to Q Ltd. The inventories of P Ltd includes goods to the value of Rs. 15,000 which were supplied by Q Ltd. at a profit of 25% on cost. Show the journal entries in the books of P Ltd and show the relevant ledgers in the books of Q Ltd.

9. The following information is available from Modi Ltd and Mehta Ltd as on 31.12.2007. They
agree to amalgamate and to form a new company Modi-Mehta Ltd. The authorized capital of the new company will consist of Rs 10 equity shares.
Modi Ltd (Rs.)
Fixed Depn. Assets less 1,11,040

Mehta (Ltd.)
59,560

Investment 10% Govt. Bond 12% Govt. Bond 10,000 8,000

Inventories Accounts Receivables Cash & Bank Advertisement Suspense

62,440 49,560 7,360 2,000 2,42,400

42,840 34,080 3,920

148,400 80,000 28,000 40,400 1,48,400

Paid-up Capital of Rs. 10 shares Reserve & Surplus Accounts Payable

1,60,000 52,000 30,400 2,42,400

The net profits (after tax) of the two companies revealed as below:
YEAR 2005 2006 2007 Modi Ltd (Rs.) 30,000 28,000 26,000 Mehta (Ltd.) 16,000 18,000 20,000

Further Information: Assume 11% return (after tax) on capital Goodwill to be valued at 4 years and 2 years purchase of super profits of Modi Ltd. and Mehta Ltd. respectively. The prices of 10% and 12% Govt. Bond as at 31.12.2007 are 95 each and 101 each (F.V. Rs. 100). Business control is maintained same as before. The cash components of the purchase as required for payment to the vendors has to be met out of Bank O/D. Tax rate is 50%. Required: a) Value of Goodwill and Purchase Consideration b) Opening Balance of Modi-Mehta Ltd.

10.

Far Point Spread is a top-selling electronic spreadsheet product. Far point Technologies India is about to release Version 5.0. It divides its customers into two groups: new customers and upgrade customers (those who previously purchased Far Point Spread 4.0 earlier versions). Although the same physical product is provided to each customer group, sizable differences exist in selling prices and variable marketing costs:
Particulars S.P. V.C.: Manufacturing Marketing Contribution New Customers Rs. 10500 Rs. 1250 Rs. 3250 Upgrade Customers Rs. 6000 Rs. 1250 Rs. 750

Rs. 4500 Rs. 6000

Rs. 2000 Rs. 4000

The fixed costs of Far point Spread 5.0 are Rs. 140000. The planned sales mix in units is 60% new customers and 40% upgrade customers. Required: 1. What is the Far point Spread BEP in units, assuming the planned sales mix is attained. (1077 units sold to upgrade customers and 1615 units sold to new customers) 2. If the sales mix is attained, what the operating income when 200000 units are sold? (Rs. 102.60 crores) 3. Show the BEP in units changes with the following customer mixes: a) New 50% and upgrade 50% (2800 units) b) New 90% and upgrade 10% (2410 units) c) Comment on the results.

11.

Ranbaxy Ltd manufactures pharmaceutical products that are sold through a network of sales agents. The agents are paid a commission of 18% of revenues. The income statement for the current year ending on March, 31 is as follows:
Ranbaxy Ltd Income Statement For the Current Year Ended on March, 31 Rs. Revenues COGS: Variable Fixed Gross Margin Marketing Costs: Commissions Fixed Costs Operating Income Rs. 26000000

11700000 2870000

14570000 11430000

4680000 3420000

8100000 3330000

Ranbaxy is considering hiring its own sales staff to replace the network of sales agents. Ranbaxy would pay it sales people a commission of 10% of revenues and incur fixed costs of Rs. 2080000. Required: 1. Calculate Ranbaxy Ltds BEP in revenues for the current year.

2. Calculate Ranbaxy Ltds BEP in revenues for the current year if the company had hired its own sales force in the current year to replace the network of sales agents. 3. If Ranbaxy had hired its own staff and increased the commission paid to them to 15%, keeping all other cost behavior pattern the same, how much revenue would Ranbaxy have to generate to earn the same operating income as in the current year?

12. A company has margin of safety at 20% and earns a profit of Rs. 4 lakhs. If its contribution
to sales ratio is 0.4, calculate its current sales and fixed costs.

13. The following figures relate to a company manufacturing a varied range of products:
Particulars Year ended 31/03/10 Year ended 31/03/11 Total Sales 22,23,000 24,51,000 Total Cost 19,83,600 21,43,200

Assuming stability in price, with variable costs carefully controlled to reflect predetermined relationships, and an unvarying fixed costs, calculate: a) The profit/volume ratio, b) Fixed Costs c) BEP, d) MOS for the year 2009-10 and year 2010-11.

14. Two manufacturing companies which have the following operating details decide to merge:
Rs. in lakhs
Capacity utilisation Total Sales Less: Break-even Sales MOS Company X 90% 540 396 80 Company Y 60% 300 225 50

Assuming that the proposal is implemented, calculate: i) BES of the merged plant and the capacity utilization at that stage., ii) Profitability of the merged plant at 80% capacity utilization iii) Sales turnover of the merged plant to earn a profit of Rs. 75 lakhs iv) When the merged plant is working a capacity to earn a profit of Rs. 75 lakhs what percentage in increase in selling price is required to sustain an increase of 5% in fixed overheads. (Ans.: Rs. 501.76 L, 45.61%, 11.14%, 791.23 L, 0.82%)

15.

Annual sales of Product M are normally distributed with a mean of 2,000 units and a standard deviation of 400 units. M has a selling price of Rs. 80 with a variable cost of Rs. 50. Budgeted fixed costs are Rs. 30,000. a) Determine the BEQ and probability of loss. (.0062) b) What is the expected profit? (30000) c) Determine the probability of loss greater than Rs. 5,000. (.0019) d) Calculate a 95% confidence level for the expected profit and comment on the viability of this product for the company. (6480 to 53520)

16.

Two firms ABC Ltd. And XYZ ltd. Sell the same type of products in the same market. Their budgeted PL A/C for the year ending 31st March, 2010 are as follows:
Rs. ABC Ltd. Rs. XYZ Ltd.

Sales VC Fixed Costs Net Profit

5,00,000 4,00,000 30,000 4,30,000 70,000 4,00,000 70,000

6,00,000 4,70,000 1,30,000

Required: 1) Calculate at which sales volume both the firms will earn equal profit. 2) State which firm is likely to earn greater profits in condition of i) heavy demand for the product ii) low demand for the product. Give reasons. (Ans.:Rs. 3,00,000)