AL-UMAR COLLEGE OF LAHORE

1st A/2013 Examination: - B.Com. PART- II Subject: - Advanced Financial Accounting Paper: - BC-401 Attempt any FIVE questions. All question carry equal marks. Q1:(a) The following are the extracts from the draft Balance sheet of XYZ Company Limited as on 30th June, 2007: Authorized Capital: RS. 30,000 ordinary shares of RS. 100 each issued 30, 00,000 Subscribed & paid up capital: 20,000 shares of RS. 100 each 20, 00,000 Reserve Fund 12, 00,000 Profit & loss Account 7, 00,000 The Board of Directors recommended.
i. To issue bonus shares in the ratio of one bonus share for every four ordinary share held. ii. To issue right shares in the ratio of one right share for every five ordinary shares held. The bonus shares will to be entitled for above right shares. For the purpose of issue of bonus shares, the funds were to be provided out of profit & loss account and reserve fund in equal proportion.

TIME ALLOWED: 3 hrs. MAX. MARKS: 100

Required: Make necessary journal entries to give effect to the recommendation of the Board and show how would they affect the balance sheet. (b): A company has 12% outstanding debentures of Rs. 250,000 on 1st January 2007. It purchases its own debentures, as investment of Rs. 25,000 at 97 ex-interest on 1st April,2007. On 31st December, 2007, the company decides to cancel the own debentures purchased by it earlier. You are required to pass the necessary journal entries in the books of the company. Q 2: The following data are extracted from the published accounts of two companies in an industry:
ABC Co. Ltd. Rs. 32,00,000 26,48,000 1,23,000 10,00,000 2,32,000 8,00,000 3,82,000 60,000 15,99,000 3,31,000 5,44,000 XYZ Co. Ltd. Rs. 30,00,000 24,27,000 1,58,000 8,00,000 6,42,000 6,60,000 5,49,000 2,00,000 15,90,000 8,09,000 4,52,000

Sales Cost of goods sold Profit after tax Equity Capital (Rs. 10 per share fully paid) General Reserve Long-term Debts Creditors Bank Draft (Short-term) Fixed Assets Inventories Other Current Assets From the data given above calculate for both ABC Co. Ltd. And XYZ Co. Ltd. : i. Current Ratio ii. iii. iv. v. Quick Ratio Net Profit Ratio Stock Turnover Ratio Proprietory Ratio

Q 3: A contractor makes up his account to December 31 in each year. Contract NO. 534 Commenced on April 1, 2007. The Cost records yield the following information on December 31, 2007. Rs. Material Charged out to site 2,150 Lab our 5,011 Foremen 631

A machine costing Rs. 1,500 has been on site for 73 days. Its working life is estimate at five year . its final scrap value of Rs. 100. A Supervisor, who is paid. RS.1,200 per annum, has spent approximately one half of his time on this contract. All other expenses and administration expenses amounted to RS.1,261 . Materials in store at site at year end cost RS. 255. The contract price is Rs.20,000 . On 31st December 2007, 2/3 of the contract was completed. Architects certificate has been issued covering RS. 10,000 and RS.7500 has so far been on account. Prepare a Contract Account and state how much profit or loss should be included in respect of Contract No. 534 in the financial account to 31st December, 2007. On 1st January 2001 Ehsan trading Co, acquired a machine on hire purchase basis. The terms of the contract were as follows: 1. The cash price of the machine was RS. 10,000. 2. RS. 1,000 were to be paid on the signing of the contract. 3. The balance was to be paid in annual installment of RS. 3,000 plus interest . 4. Interest chargeable on the outstanding balance was 6% per annum. Depreciation at 10% per annum is to be written off on the diminishing balance method. Required: 1. Prepare the machine account and Hire vendor account in the books of E hsan trading Co. foom 1st January 2001 to 31st December 2002. 2. Show the machine account in the balance. Sheet of the purchase as it would appear on December 31, 2002. Q 5: The Nadeem stores Ltd. Multan has branch at Hyderabad, Goods are invoiced to the branch at a selling price, being cost plus 20% . The branch keeps its on sale ledger and deposits all cash received daily to the credit of the head of the Head office account opened at eh MCB, Hyderabad,. All expenses are paid by cheque form Multan. From the following information prepare Branch account in the head office books and make the necessary adjustments therein to arrive at the actual branch profit or loss during the year 2007: Stock on 1-1-07 30,000 Q 4: Stock on 31-12-07 Sundry Debtors on 1-1-07 Sundry debtors on 31-12-07 Good invoiced from H.O Rent, Rates and taxes Sundry Expenses Cash sales for the year Credit sales Cash received form Debtors Wages paid 36,000 16,800 21,600 2,18,400 9,600 1,920 1,29,600 84,000 79,200 8,960

Q 6:Sajjad Ltd. Co. with and authorized capital of Rs. 3,00,000, divided into 30,000 shares of Rs. 10 each. The company
issued 25,000 shares which are fully paid. The following is the trial balance extracted from companys Account as on December 31, 2006. Debit Balances Carriage Purchases Insurance Rent General Expenses Debtors Advertisement Salaries Bad Debts Plant and Machinery Equipment Furniture Stock (1-1-2006) Cash in hand & at bank Total Rs. 11,500 2,60,000 3,000 5,000 6,900 40,000 500 25,000 1,600 90,500 1,00,000 60,000 45,000 21,400 6,70,400 Credit Balances Issued, subscribed & paid-up capital Sales Profit & Loss (Cr.) Provision for Bad Debts General Reserve Rs. 2,50,000 4,00,000 8,000 2,400 10,000

Total

6,70,400

Adjustments: a) Closing stock is Rs. 1,05,500. b) Insurance of Rs. 630 is paid in advance. c) Depreciation is to be charged @ 10% on Plant & Machinery and Equipment and 5% on Furniture. d) Rent of Rs. 600 is outstanding. e) Debtors of Rs. 400 write off now and create a further provision 5% on remaining debtors.

Required: Prepare Trading and Profit & Loss A/c for the year ended 31 st December 2006 and Balance Sheet as on that date.

Q 7: Discuss the factors, which should be considered while making the decision regarding issue of right shares. Q 8: What is the need for valuation of shares? Share the factors affecting valuation of shares.