On 1st January 2010, Badri of Kanpur consigned 100 cases, cost price Rs. 7,500, at a proforma invoice price of 25% profit on sales to his agent Anil of Allahabad. Balance of
Goods sent on consignment A/c transferred to General Trading A/c will be
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Solution
Which of the following is correct?
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Solution
Profit or loss is equal to closing capital + drawing less (addition during year and opening capital).
(i) 1,00,000 Equity shares of 10 each fully called up.
(ii) Calls in arrears Rs. 10,000
(iii) Calls in advance Rs. 5,000
(iv) Proposed dividend 15%
Dividend payable will be
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Solution
Dividends payable are dividends that a company’s board of directors has declared to be payable to its shareholders. Until such time as the company actually pays the shareholders, the cash amount of the dividend is recorded within a dividends payable account as a current liability.
Here dividend payable will be 15% of (Equity share capital called up – Calls in arrear ) = 15% of (1000000 – 10000) = Rs. 1,48,500
Issued 2,000, 12% Debentures of Rs. 100 each at a discount of 2% redeemable at a premium of 5%. Loss on issue of debentures will be
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Solution
Loss will be 2,000 × Rs. 100 × .02 + 2,000 × Rs. 100 × .05 = Rs. 14,000.
A company purchased an established business for Rs. 4,00,000 payable Rs. 1,30,000 in cash and the balance by 12% debentures of Rs. 100 each at discount of 10%. Discount on issue of debentures will be
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Solution
Remaining amount to be paid by issue of 12% debentures = 4,00,000 – 1,30,000 = 2,70,000
Value per debenture after discount = Rs. 90
Thus number of debentures to be issued = 2,70,000/90 = 3,000 debentures
Face Value of debentures issued = 3,000 × 100 = Rs. 3,00,000
Thus Discount amount will be = 3,00,000 – 2,70,000 = Rs. 30,000
X Ltd. purchased the business of Y Ltd. for Rs. 90,000 payable in fully paid shares of Rs. 9 each. No. of shares given to vendors will be
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Solution
Total value of business purchased = Rs. 90,000
Amount to be paid by issue of shares = 90,000
Value per share = Rs. 9
Thus number of shares to be issued = 10,000 shares
D Ltd. forfeited 800 shares of Rs. 10 each fully called up, on which the holder has paid only application money of Rs. 3 per share. Out of these 500 shares were reissued as Rs. 11 per share fully paid up. Capital Reserve will be credited by
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Solution
This is the case of Reissue of forfeited shares at premium and at par, originally issued at par In this case the whole of the amount that has been credited to Shares Forfeited A/c is transferred to Capital Reserve A/c on the reissue of such shares.
Given that D Ltd. forfeited 800 shares of Rs. 10 each fully called up, on which the holder has paid only application money of Rs. 3 per share. Out of these 500 shares were reissued as Rs. 11 per share fully paid up.
The amount available in shares forfeited account for the shares reissued will be = 500 × 3 = Rs. 1,500
A Ltd. forfeited 400 shares of Anil of Rs. 10 each fully called up for non payment of final call of Rs. 2 per share and reissued to Sunil as fully paid for Rs. 10 per share. Amount transferred to Capital Reserve will be
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Solution
When the shares forfeited are reissued at discount, Bank account is debited by the amount received and Share capital account is credited by the paid up amount. The amount of discount allowed is debited to Share Forfeited Account. This is for adjusting the amount of discount so allowed from the amount forfeited at the time of forfeiture.
Now the amount of discount allowed on reissue of shares at the most can be equal to the forfeited amount on such shares. In that case the share forfeited account after reissue will show a zero balance.But in case, this amount of discount is less than the amount forfeited, the remaining forfeited amount will be profit for the company. This profit is a capital gain to the company and is transferred to Capital Reserve account.
In the above question discount on shares reissued = number of shares reissued × discount allowed per share = nil
Amount available for the reissued shares in shares forfeiture account = number of shares reissued × amount forfeited per share = 400 × (8) = Rs. 3,200
The surplus amount to be transferred to capital reserve account = Rs. 3,200
X and Y are partners in a firm sharing profits in the ratio of 3:2 with capitals of Rs. 1,20,000 and Rs. 54,000 respectively. They admitted Z as a partner with Rs. 75,000 for 1/3rd share in the profits of the firm. Adjust the capitals of the partners according to Z’s capital and his share in the business. What cash will be paid off to X?
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Solution
Here capital brought in by Z = 1/3rd of total capital = 75,000
Thus total capital = 75,000 × 3 = Rs. 2,25,000
Thus combined capital of X and Y = 2,25,000 × 2/3 = Rs. 1,50,000
Thus X’s share = 1,50,000 × 3/5 = Rs. 90,000
So cash to be paid back to X = 1,20,000 – 90,000 = Rs. 30,000
The capitals of A and B after all adjustments and revaluations are Rs. 24,000 and Rs.16,000 respectively. They admitted C as a new partner with 1/5th share in the profits. Capital to be brought by C will be
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Solution
When a new partner is admitted in the firm, the existing/old partners have to sacrifice, what is given to the new partner, from their future profits, the reputation they have gained in their past efforts and the side of capital they have taken before. The new partner when admitted, has to compensate for all these sacrifices made by the old ones. The compensation for such sacrifice can be termed as ‘goodwill’.
Hence, at the time of admission of the new partner, it is necessary to account the valuation of goodwill in the firm.
Here C’s share in profit is 1/5th
The combined capital of A and B = 24,000 + 16,000 = Rs. 40,000
This combined capital constitutes 4/5 th of the total capital
So total capital of the firm will be = 40,000 × 5/4 = Rs. 50,000
Thus C’s capital will be = 50000/5 = Rs. 10,000