test by ruchi

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Question. A, B are partners sharing profits in the ratio of \( 5:3 \). Their balance sheet as on \( 31^{\text{st}} \) December 2013 was as follows:

Balance Sheet of A and B

On the January, 2014, they decided to admit C giving \( 1/5^{\text{th}} \) share. He brings Rs. 50,000 in cash. The partners decide to revalue the assets as follows:
Goodwill: Rs. 50,000       Debtors: Rs. 31,000
Building: Rs. 40,000       Bills Receivable: Rs. 12,500
Furniture: Rs. 2,000       Stock: Rs. 32,500
Plant: Rs. 25,000

The partners decide not to show goodwill account in the new firm. A and B also decided to adjust their capital accounts on the basis of C’s Capital by opening current accounts. You are required to show journal entries regarding Goodwill, Revaluation account, Capital account and Balance Sheet of the new firm.
Answer:
1. Journal Entries in the Books of the Firm

2. Revaluation Account

3. Partners' Capital Accounts

4. Balance Sheet of the New Firm as on 1st January 2014

Question. P, Q, R were partners sharing profits in the ratio of 3:2:1. Their Balance sheet on 31st December 2011 was as follows;

Balance Sheet 31st December 2011

The firm had joint life policy for Rs.60,000 on which premium were paid in all amounting to Rs.25,000. The surrender value of the policy was Rs.90,000 on 31st December 2011. Q retired on the above date upon the following terms:
a) Goodwill of the firm be valued at Rs.25,000.
b) Machinery be written down by 10%, Patent written up by 25%, a provision of 5% be created on debtors and a provision of 3% on creditors be made.
c) Unclaimed liability of Rs.600 is to be written off
d) Sale of scraps realized Rs. 300.
e) Provision of Rs.982 be made for settling dispute with the former manager.
f) Q be paid Rs.7000 by accepting a draft drawn by him payable after 3 months and Rs. 15,000 immediately, which is to be contributed by the other partners in the ratio of their capital.

P and R agreed to share profits in future in the ratio of 3:2 and decided not to keep any account in books in respect of joint policy. Prepare revaluation account, partners capital account and the Balance sheet of the firm after Q’s retirement.
Answer:
1. Revaluation Account

Notes on Adjustments:

• Gaining Ratio of P & R: \( \text{P's Gain} = \frac{3}{5} - \frac{3}{6} = \frac{3}{30} \), \( \text{R's Gain} = \frac{2}{5} - \frac{1}{6} = \frac{7}{30} \). Therefore, Gaining Ratio = \( 3:7 \).
• Share of retiring partner Q in Goodwill = \( \text{Rs. } 25,000 \times \frac{2}{6} = \text{Rs. } 8,333 \) (contributed by P and R in \( 3:7 \), i.e., P: Rs. 2,500; R: Rs. 5,833).
• Share of Q in JLP Surrender value = \( \text{Rs. } 90,000 \times \frac{2}{6} = \text{Rs. } 30,000 \) (adjusted through capitals of P & R in gaining ratio \( 3:7 \), i.e., P: Rs. 9,000; R: Rs. 21,000).
• Existing Goodwill of Rs. 10,000 is written off among old partners in their old ratio (P: Rs. 5,000; Q: Rs. 3,333; R: Rs. 1,667).
• Retained Earnings of Rs. 9,000 is distributed (P: Rs. 4,500; Q: Rs. 3,000; R: Rs. 1,500).
• P and R bring in cash of Rs. 10,000 and Rs. 5,000 respectively (ratio of old capitals \( 2:1 \)) to pay Q Rs. 15,000 immediately.

2. Partners' Capital Accounts

3. Balance Sheet of the New Firm as on 1st January 2012

Question. A, B and C were partners in sharing profit and loss in the ratio of 3:1:1. Their balance sheet as on 31st March 2009 the date on which they dissolve their firm was as follows:

Balance Sheet 31st March 2009

It was agreed that:
a) A to takeover Bills receivable t Rs. 800, debtors amounting to Rs.20,000 at Rs. 17200 and the creditors of Rs. 6000 were to be paid by him at this figure.
b) B is to takeover all stock for Rs.7,000 and some sundry assets at Rs.7,200 (being 10% less than the book value).
c) C to takeover remaining sundry assets at 90% of the book value and assume the responsibility of discharge of loan together with accrued interest of Rs.300.
d) The expenses of the realization were Rs.270/-
Answer:
1. Realisation Account

2. Partners' Capital Accounts

3. Cash Account

Question. Show necessary accounting solutions for the following:
i) X limited forfeited 200 shares of Rs.10 each, Rs. 6 called up, issued at a discount of 10% to Mahesh on which he paid Rs.4 per share out of these 120 shares were reissued at Rs.6 per share to Suresh, Rs. 8 paid up.
ii) DC Limited purchased assets of Rs.38,0000 from Ram Traders. It issued shares of Rs.100 each fully paid at a discount of 5% in satisfaction of purchase consideration.
iii) ABC Company Limited issued 5000 shares at Rs.10 each at a premium of Rs. 2 per share for public subscription, payable at Rs.5 on application and Rs.7 on allotment (including premium). Rajesh who was allotted 200 shares by the company failed to pay the allotment and his shares were forfeited by the company. 100 out of these forfeited shares were reissued to Brijesh as fully paid up for Rs.8 per share.
Answer:
i) Journal Entries for X Limited (Forfeiture and Reissue):

ii) Journal Entries for DC Limited (Issue of Shares to Vendor):

iii) Journal Entries for ABC Company Limited (Forfeiture and Reissue):

Question. A company invited application for issuing 2,50,000 equity shares of Rs.10 each. The amount was payable as follows:
On Application: Rs.2
On Allotment: Rs.5
On first and final call: Rs.3

Applications for 4,00,000 shares were received and the allotment was made as follows:

All the shares were allotted on pro rata basis and excess application money was adjusted towards some due on allotment. Shakun who belonged to category I and to whom 1000 shares were allotted failed to pay the allotment money. Her shares were forfeited immediately after allotment. Sneha who belonged to Category II and who had applied for 400 shares failed to pay the final call. Her shares were forfeited after the final call. Out of the forfeited shares all the shares were reissued as fully paid up at the rate of Rs.8 per share. Pass the necessary journal entries in the books of the company.
Answer:
Journal Entries in the Books of the Company:

Question. Pass journal entries for the following:
A Shasco Ltd. Issued 5000, 9% debentures of Rs.500 each. Pass journal entries when;
i) Debentures are issued at 10% Premium and redeemable at par.
ii) When debentures are issued at a premium of 25% to the vendors at for machinery purchased for Rs.25,00,000
B i) Redeemed 1200, 10% debentures of Rs.75 each by converting in equity shares of 100 each. The equity shares were issued at a discount of 10%.
ii) Converted 550, 12% debentures at Rs.1000 each in to new 13% debentures of Rs.100 each. The new debentures were issued at a premium of 10%.
Answer:
Journal Entries:

Question. List the items which are shown under the heading current liabilities as per schedule VI part I of the companies act 1956.
Answer:
As per Schedule VI Part I of the Companies Act, 1956, the following items are shown under the heading "Current Liabilities and Provisions":

A. Current Liabilities:

1. Acceptances (Bills Payable)
2. Sundry Creditors
3. Subsidiary Companies' Balances
4. Advance Payments and Unexpired Discounts (Deferred Revenue/Income received in advance)
5. Unclaimed Dividends
6. Other Liabilities (such as Outstanding Expenses, Salaries/Wages outstanding, etc.)
7. Interest Accrued but not due on Loans

Question. Give the major heading under which the following items will be put as per schedule VI part I of the companies act 1956.
a) Long term investment
b) Provision of tax
c) Preliminary expenses
d) Loose tools
e) Bill receivable
f) Patents
g) Discount issue of shares
h) Sundry creditors
i) Unclaimed dividend
j) Motor car
Answer:
Under Schedule VI Part I of the Companies Act, 1956, the items are classified under the following major headings:

Question. From the following information provided prepare comparative income statement for the period 2011 and 2012.

Answer:
Comparative Income Statement for the Years Ended 2011 and 2012:

Question. Debtors turn over ration - 4 Times
Average debtors - Rs.1,80,000
Cash Sales - 25% of total sales
Gross profit ratio - \( 33\frac{1}{3}\% \)
Calculate a) sales b) cost of goods sold
Answer:
a) Calculation of Sales:
Debtors Turnover Ratio is given by:
\[ \text{Debtors Turnover Ratio} = \frac{\text{Net Credit Sales}}{\text{Average Debtors}} \]
Given, Debtors Turnover Ratio = 4 times, and Average Debtors = Rs. 1,80,000.
\[ 4 = \frac{\text{Net Credit Sales}}{\text{Rs. } 1,80,000} \]
\[ \text{Net Credit Sales} = 4 \times \text{Rs. } 1,80,000 = \text{Rs. } 7,20,000 \]

Since Cash Sales = \( 25\% \) of Total Sales, Credit Sales will be:
\[ \text{Credit Sales} = 100\% - 25\% = 75\% \text{ of Total Sales} \]
Therefore,
\[ \text{Total Sales} = \frac{\text{Net Credit Sales}}{0.75} = \frac{\text{Rs. } 7,20,000}{0.75} = \text{Rs. } 9,60,000 \]

b) Calculation of Cost of Goods Sold (COGS):
Gross Profit Ratio = \( 33\frac{1}{3}\% = \frac{1}{3} \text{ of Sales} \)
\[ \text{Gross Profit} = \frac{1}{3} \times \text{Rs. } 9,60,000 = \text{Rs. } 3,20,000 \]
\[ \text{Cost of Goods Sold (COGS)} = \text{Total Sales} - \text{Gross Profit} \]
\[ \text{COGS} = \text{Rs. } 9,60,000 - \text{Rs. } 3,20,000 = \text{Rs. } 6,40,000 \]

Question. Calculate the current ratio from the following information:
Total assets - Rs.4,50,000
Fixed assets - Rs.2,40,000
Non current investment - Rs.1,50,000
Long term liabilities - Rs.1,20,000
Share holders fund - Rs. 3,00,000
Answer:
1. Calculation of Current Assets:
\[ \text{Total Assets} = \text{Fixed Assets} + \text{Non-Current Investments} + \text{Current Assets} \]
\[ \text{Rs. } 4,50,000 = \text{Rs. } 2,40,000 + \text{Rs. } 1,50,000 + \text{Current Assets} \]
\[ \text{Current Assets} = \text{Rs. } 4,50,000 - \text{Rs. } 3,90,000 = \text{Rs. } 60,000 \]

2. Calculation of Current Liabilities:
\[ \text{Total Equity & Liabilities} = \text{Total Assets} = \text{Rs. } 4,50,000 \]
\[ \text{Total Equity & Liabilities} = \text{Shareholders' Fund} + \text{Long-Term Liabilities} + \text{Current Liabilities} \]
\[ \text{Rs. } 4,50,000 = \text{Rs. } 3,00,000 + \text{Rs. } 1,20,000 + \text{Current Liabilities} \]
\[ \text{Current Liabilities} = \text{Rs. } 4,50,000 - \text{Rs. } 4,20,000 = \text{Rs. } 30,000 \]

3. Current Ratio:
\[ \text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}} = \frac{\text{Rs. } 60,000}{\text{Rs. } 30,000} = 2:1 \]

Question. From the following information calculate (i) Opening Stock (ii) Liquid Ratio (iii) Operating profit ratio.
Current assets - Rs.1,00,000
Current Liabilities - Rs.70,000
Total sales - Rs.2,00,000
Cost of Goods sold - Rs.1,50,000
Operating Expenses - Rs. 20,000
Stock Turnover Ratio - 5 times
Closing stock is more by Rs.4,000 than opening stock.
Answer:
(i) Calculation of Opening Stock:
\[ \text{Stock Turnover Ratio} = \frac{\text{Cost of Goods Sold}}{\text{Average Stock}} \]
\[ 5 = \frac{\text{Rs. } 1,50,000}{\text{Average Stock}} \]
\[ \text{Average Stock} = \frac{\text{Rs. } 1,50,000}{5} = \text{Rs. } 30,000 \]
Let Opening Stock = \( x \). Then Closing Stock = \( x + 4,000 \).
\[ \text{Average Stock} = \frac{\text{Opening Stock} + \text{Closing Stock}}{2} \]
\[ \text{Rs. } 30,000 = \frac{x + (x + 4,000)}{2} \]
\[ \text{Rs. } 60,000 = 2x + 4,000 \implies 2x = 56,000 \implies x = \text{Rs. } 28,000 \]
Therefore,

• Opening Stock = Rs. 28,000
• Closing Stock = Rs. 32,000

(ii) Calculation of Liquid Ratio:
\[ \text{Liquid Assets} = \text{Current Assets} - \text{Closing Stock} = \text{Rs. } 1,00,000 - \text{Rs. } 32,000 = \text{Rs. } 68,000 \]
\[ \text{Liquid Ratio} = \frac{\text{Liquid Assets}}{\text{Current Liabilities}} = \frac{\text{Rs. } 68,000}{\text{Rs. } 70,000} \approx 0.97:1 \]

(iii) Calculation of Operating Profit Ratio:
\[ \text{Operating Profit} = \text{Total Sales} - \text{Cost of Goods Sold} - \text{Operating Expenses} \]
\[ \text{Operating Profit} = \text{Rs. } 2,00,000 - \text{Rs. } 1,50,000 - \text{Rs. } 20,000 = \text{Rs. } 30,000 \]
\[ \text{Operating Profit Ratio} = \left(\frac{\text{Operating Profit}}{\text{Total Sales}}\right) \times 100 = \left(\frac{\text{Rs. } 30,000}{\text{Rs. } 2,00,000}\right) \times 100 = 15\% \]

Question. Closing Stock Rs.30,000 Opening stock Rs. 20,000 Sales Rs.1,00,000 Administrative and selling expenses Rs.20,000 Purchases Rs. 70,000
Calculate (i) Gross profit Ratio (ii) Net Profit Ratio (iii) Stock turnover Ratio
Answer:
(i) Calculation of Gross Profit Ratio:
\[ \text{Cost of Goods Sold (COGS)} = \text{Opening Stock} + \text{Purchases} - \text{Closing Stock} \]
\[ \text{COGS} = \text{Rs. } 20,000 + \text{Rs. } 70,000 - \text{Rs. } 30,000 = \text{Rs. } 60,000 \]
\[ \text{Gross Profit} = \text{Sales} - \text{COGS} = \text{Rs. } 1,00,000 - \text{Rs. } 60,000 = \text{Rs. } 40,000 \]
\[ \text{Gross Profit Ratio} = \left(\frac{\text{Gross Profit}}{\text{Sales}}\right) \times 100 = \left(\frac{\text{Rs. } 40,000}{\text{Rs. } 1,00,000}\right) \times 100 = 40\% \]

(ii) Calculation of Net Profit Ratio:
\[ \text{Net Profit} = \text{Gross Profit} - \text{Administrative and Selling Expenses} \]
\[ \text{Net Profit} = \text{Rs. } 40,000 - \text{Rs. } 20,000 = \text{Rs. } 20,000 \]
\[ \text{Net Profit Ratio} = \left(\frac{\text{Net Profit}}{\text{Sales}}\right) \times 100 = \left(\frac{\text{Rs. } 20,000}{\text{Rs. } 1,00,000}\right) \times 100 = 20\% \]

(iii) Calculation of Stock Turnover Ratio:
\[ \text{Average Stock} = \frac{\text{Opening Stock} + \text{Closing Stock}}{2} = \frac{\text{Rs. } 20,000 + \text{Rs. } 30,000}{2} = \text{Rs. } 25,000 \]
\[ \text{Stock Turnover Ratio} = \frac{\text{COGS}}{\text{Average Stock}} = \frac{\text{Rs. } 60,000}{\text{Rs. } 25,000} = 2.4 \text{ times} \]

Question. From the following Balance sheet of XYZ Ltd.as on 31st March 2010 and 31st March 2011 prepare a cash flow statement.

During the year equipment costing Rs. 50,000 was purchased. Loss on sale of equipment amounted to Rs. 6,000. Rs. 9,000 was charged on equipment.
Answer:
XYZ Ltd. — Cash Flow Statement for the Year Ended 31st March 2011

Working Note on Equipment Account:
\[ \text{Opening Balance} = \text{Rs. } 2,50,000 \]
\[ \text{Add: Purchases during the year} = \text{Rs. } 50,000 \]
\[ \text{Less: Depreciation charged} = \text{Rs. } 9,000 \]
\[ \text{Less: WDV of Sold Equipment (Balancing Fig.)} = \text{Rs. } 41,000 \]
\[ \text{Closing Balance} = \text{Rs. } 2,50,000 \]
Since loss on sale is Rs. 6,000, Sale Value = \( 41,000 - 6,000 = \text{Rs. } 35,000 \).

Question. X Ltd. Made a profit of Rs. 1,00,000. Calculate cash flow from operating activities.
Depreciation of fixed assets: Rs. 20,000
Writing off of preliminary expenses: Rs. 10,000
Loss on sale of furniture: Rs. 1,000
Provision of taxation: Rs. 1,60,000
Transfer to general reserve: Rs. 14,000
Profit on sale of machinery: Rs. 6,000

Answer:
Calculation of Cash Flow from Operating Activities: