Sure Ltd. issued 5,000, 15% Debentures of Rs.100 each at a premium of Rs.10 each. These debentures were to be redeemed at a premium of Rs.4 each after 5 years. The amount to be credited to the securities premium account will be
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Solution
When debentures are issued at a premium , the amount of premium so received is credited in the debentures premium account.
Thus amount to be transferred to debenture premium account = 5,000 × 10 = Rs. 50,000
A and B enter into a joint venture for purchase and sale of Type-writer. A purchased Typewriter costing Rs. 1,20,000. Repairing expenses Rs. 10,000, printing expenses Rs 10,000. B sold it at 20% margin on selling price. The sales value will be:
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Solution
A draws a bill on B for Rs 30,000 for mutual accommodation. A discounted that bill for Rs.28,000 from bank and remitted Rs.14,000 to B. On due date A will send to B
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Solution
Discounting bills of exchange is a financial service, where the Bank purchases drawn bills, from the domestic trade transactions, confirmed in particular with an invoice - with right of recourse to you - and credits you with the amount of the bill of exchange less discount interest and additional costs related to the bill, accrued in advance from the discount date to the bill payment term.
On the maturity Rs. 30,000 is to be paid to the bank and thus A will send to B half of the total amount i.e. Rs. 15000.
Deepak consigned 100 sets of TVs to Sudeep @ Rs.10,000 each. 5 TVs were damaged in transit due to unavoidable reason whose price was adjusted in the remaining TVs. The new price of each TV will be
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Solution
The cost of the damaged TVs = 10,000 × 5 = 50,000
Cost of remaining TVs = 10,000 × 95 = Rs. 9,50,000
Since the cost of damaged TVs were adjusted with the remaining TVs thus the cost of the remaining TVs will be 9,50,000 + 50,000 = Rs. 10,00,000
So the cost per TV will be = 10,00,000/95 = Rs. 10,526
X, Y and Z are equal partners in a firm. At the time of division of profit for the year there was dispute between the partners. Profits before salary of partners’ capital was Rs. 60,000 and Y claimed salary for his extra services to the firm @ 2,000 p.m. There was no agreement on this point. Calculate the amount payable to X, Y and Z respectively.
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Solution
In the absence of partnership deed No salary is given to any partner for participation in the work of partnership firm. Thus the claim of Y for getting salary is wrong and will not be allowed. Thus the profit of the firm will be distributed among the partners in their profit sharing ratio i.e.1:1:1. Amount payable to X, Y and Z will be 60,000/3 = Rs. 20,000 each.
A, B and C share profits and losses in the ratio of 4:4:2. They have a joint life insurance policy of Rs.1,00,000, whose premium is paid by the firm. Surrender value of the policy at the beginning of the year 2010 in the balance sheet is Rs. 80,000. On the death of A on 2nd January 2010, the amount to be credited in C’s account will be
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Solution
Share of C = Rs.20, 000 × 2/10
Rs. 20,000 is the difference between policy value and surrender value, to be credited to partners.
Trade receivables of M/s Santosh amounts to Rs. 25,000 and bad debts Rs.3,000. M/s Santosh provides for Doubtful debts @ 2% and for discount @ 1%. The amount of net trade receivables to be shown in the Balance Sheet will be
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Solution
The provision created to cover the next year’s bad debt expense out of the current year’s trade receivables is known as provision for bad debts. The provision for bad debt is calculated on the trade receivable’ balance obtained after deducting the bad debt written off.
The provision created to cover the expense of discount that may be allowed to the trade receivable during the coming year when they pay their debt on time. The provision for discount on trade receivable is calculated on the trade receivable balance after deducting the bad debt and the provision for bad debt amount.
Thus provision for doubtful debt = 2% of (25,000 – 3,000) = 440
Provision for discount = 1% of (25,000 – 3,000 – 440) = 216
Net trade receivable to be shown in balance sheet = 25,000 – 3,000 – 440 – 216 = Rs. 21,344
A machine purchased on 1st April 2010 for Rs. 10,000 is showing a balance of Rs. 6,000 as on 1st April 2012 when depreciation is charged on S.L.M. basis. Now, company wants to switch over to W.D.V method by charging depreciation @ 20%. The amount of excess/ short depreciation of last two years will be
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Solution
A change from one method of providing depreciation to another should be made only if the adoption of the new method is required by statute or for compliance with an accounting standard or if it is considered that the change would result in a more appropriate preparation or presentation of the financial statements
of the enterprise. When a change in the method of depreciation is made, depreciation should be recalculated
in accordance with the new method from the date of the asset coming into use. The deficiency or surplus arising from the retrospective recomputation of depreciation in accordance with the new method would be adjusted in the accounts in the year in which the method of depreciation is changed.
The original cost of the machine = Rs. 10000
Depreciation of 2 years charged till now according to straight line method = 10,000 – 6,000 = Rs. 4,000
Rate of depreciation according to WDV method = 20%
Depreciation for the 1st year according to wdv method = 20% of 10,000 = 2,000
WDV as on 31-3-2011 will be = 10,000 – 2,000 = 8,000
Depreciation for the 2nd year = 20% of 8,000 = Rs. 1,600
Total depreciation for 2 years calculated according to wdv method = 2,000 + 1,600 = 3,600
Thus excess depreciation charged till now will be 4,000 – 3,600 = Rs. 400
Jadu Ltd. reissued 2,000 shares, which were forfeited by crediting Share forfeiture account by Rs.3,000. These shares were reissued Rs. 9 per share. The amount to be transferred to Capital Reserve account 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 per share = Rs. 1
Total discount on the reissued shares = Rs. 2,000
Amount available in shares forfeiture account = Rs. 3,000
The surplus amount to be transferred to capital reserve account = 3,000 – 2,000 = Rs. 1,000
Taksh Ltd. purchased land and building from Daksh Ltd. for a book value of Rs.5,00,000. The consideration was paid by issue of 10% Debentures of Rs.100 each at a discount of 20%. The debentures account will be credited with
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Solution
The debentures are being issued at a discount thus the value of each debenture will be 100 – 20 = Rs. 80
Total value of machinery purchased = 5,00,000
Number of debentures issued in consideration = total value of machinery purchased/value per debenture = 5,00,000/80 = 6,250 debentures
Thus the actual value of the debentures issued = 6,250 × 100 = Rs. 6,25,000 should be credited to debentures account