1,000 shares of Rs. 100 each were issued to a promoter of the company for their legal services, rendered in the formation of the company. For this, company credited Share Capital Account and debited
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Solution
Shares issued to promoters will be debited to Goodwill A/c.
A company on non-receipt of First Call money of Rs. 2 per share and Final Call money of Rs. 3 per share from Rahul, debited Call-in-Arrears account by Rs. 2,000 and Rs. 3,000
respectively. After due notice 1,000 shares of Rs.10 each were forfeited from Rahul. The amount to be credited to First Call Account at the time of entry for forfeiture will be
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Solution
Share forfeiture is the process by which the directors of a company cancel the power of shareholder if he does not pay his call money when the company demands for it. Company will give 14 days’ notice; after 14 days if shareholder did not pay then company will forfeit his shares and cut off his name from the register of shareholder. Company will not pay his received funds from shareholder.
On non-receipt of the first call and final call money from Rahul, calls in arrear account was debited and there was no money lying in the first call account or the final call account . Thus when the amount was forfeited no amount will be credited in the first call account.
Bill of Rs. 10,000 accepted by Rajesh was endorsed by Ritesh to Dinesh on account of final settlement of Rs.10,500. The benefit of Rs.500 earned by Ritesh was:
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Solution
Ankush Ltd. had issued 10,000, 10% Redeemable Preference Shares of Rs. 100 each, fully paid up. The company decided to redeem these preference shares at par, by issue of sufficient number of equity shares of Rs. 10 each at a premium of Rs.2 per share as fully paid up. The amount to be transferred to capital redemption reserve account will be ______
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Solution
Capital Redemption Revere is an account to which is credited the nominal value of shares that have been redeemed insofar as the redemption was not paid for by the proceeds of a new issue of shares and was not a payment out of capital.
Since here all the shares redeemed was paid for by the proceeds of nea issue of equity shares thus
amount to be transferred to the capital redemption reserve = nil
Kena Ltd. issued 10,000 12% Debentures of Rs.100 each at a discount of 10%payable in full on application by 31st March, 2012. Applications were received for 12,000 debentures.
Debentures were allotted on 9th June, 2012. The amount of excess money refunded on the same date will be ______
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Solution
Rs. 12,000 × 90 – 10,000 × 90
Rs. 10,80,000 – 9,00,000 = Rs. 1,80,000
Ravi Ltd. issued 1,40,00,000, 9% debentures of Rs.100 each at a discount of 6%, redeemable at a premium of 5% after 3 years payable as Rs.50 on application and Rs.44 on allotment.
Total amount of loss on issue of debentures will be
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Solution
Discount Rs. 1,40,00,000 × .06 = Rs. 8,40,000
Premium on redemption Rs. 1,40,00,000 × .05 = Rs. 7, 00,000
Total Loss = Rs. 15,40,000
Closing inventory was not taken on 31.3.2012 but only on 7.4.2012. Following transactions had taken place during the period from 1.4.2012 to 7.4.2012. Sales Rs. 2,50,000, purchases Rs. 1,50,000, inventory on 7.4.2012 was Rs. 1,80,000 and the rate of gross profit on sales was 20%. Closing inventory on 31.3.2012 will be ______
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Solution
Out of four floors of a building, ground floor is used as a store house for trading goods, first and second floor is used for office purpose and third floor is used for residential purposes. Total depreciation of a building amounts to Rs. 80,000. The depreciation of building to be shown in the business books will be ______
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Solution
Depreciation on an asset will be charged on that part only which is being used for business purposes and not for personal use.
Here out of four floors of the building 1 is used for residential purposes and 3 floors are used for official purposes. Thus depreciation in the business books will be charged on only 3 floors.
Total depreciation = 80,000
Depreciation to be charged in the business books = 80,000 × 3/4 = Rs. 60,000
Net profit before commission has been Rs. 1,20,000. Manager’s commission is 20% of net profit before charging such commission. The amount of manager’s commission is
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Solution
Manager’s commission is calculated in two ways
1. On Profits before charging such commission:
Manager’s commission = Net Profits X (Percentage of commission / 100)
2. On Profits after charching such commission:
Manager’s commission = Net Profits X (Percentage of commission / 100 + % of commission)
Here the managers commission is 20% of net profit before charging such commission
So the managers commission will be = 1,20,000 × (20/100) = Rs. 24,000
Bank overdraft as per trial balance is Rs. 1,60,000. Bank has allowed the customer to overdrew 80% of the hypothecated value of the inventory. Hypothecation of inventory has
been done by the bank at 80% of the original closing inventory value. The amount of closing inventory is:
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Solution
Hypothecation is an established practice of a borrower pledging an asset as collateral for a loan, while retaining ownership of the assets and enjoying the benefits therefrom. With hypothecation, the lender has the right to seize the asset if the borrower cannot service the loan as stipulated by the terms in the loan agreement.
Here the bank has allowed the customer to overdraw 80% of the hypothecated value And the hypothecation of stock has been done by the bank at 80% of the original closing stock value.
Let the closing stock be x (say)
Then the hypothecated value of stock will be 80% of x
And the customer can withdraw 80% of (80% of x) = Rs. 1,60,000
Or 0.64 x = 1,60,000
Or x = Rs. 2,50,000 which is the closing stock.