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Question Paper

Advanced Accounting Duration: 65

Details: Test – 4 (CH-4) Marks: 35

Instructions:

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Q-1

Perrotte Ltd. has the following capital structure as on 31-03-22

(Rs. In crores)

ESC (Shares of Rs. 10 each fully paid) 330

Reserve & Surplus

General Reserve 240

Security premium account 90

P&L a/c 90

Infrastructure Development Reserve 180 600

Loan funds 1,800

The shareholders of Perrotte Ltd. have on the recommendation of their Board of Directors
approved on 12-9-22 a proposal to buy back the maximum permissible number of Equity
shares considering the large surplus funds available at the disposal of the company.

The prevailing market value of the company’s shares is Rs. 25 per share and in order to
induce the existing shareholders to offer their shares for buy back, it was decided to offer a
price of 20% over market.

You are also informed that the Infrastructure Reserve is created to satisfy Income-Tax
requirements. You are required to compute the maximum number of shares that can be
bought back in the light of the above information and also under a situation where the loan
funds of the company were either Rs. 1,200 crores or Rs. 1,500 crores.

Assuming that the entire buy back is completed by 09.12.2022, show the accounting entries
in the company’s books in each situation.

(8 Marks)

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Q-2

Complicated Ltd. (an unlisted company) gives the following information as on 31.3.2022:

Particulars Amount (Rs.)

Equity shares of Rs. 10 each, fully paid up 13,50,000

Share option outstanding Account 4,00,000

Revenue Reserve 15,00,000

Securities Premium 2,50,000

Profit & Loss Account 1,25,000

Capital Reserve 2,00,000

Unpaid dividends 1,00,000

12% Debentures (Secured) 18,75,000

Advance from related parties (Long term - Unsecured) 10,00,000

Current maturities of long term borrowings 16,50,000

Application money received for allotment due for refund 2,00,000

Property, plant and equipment 46,50,000

Current assets 40,00,000

The Company wants to buy back 25,000 equity shares of Rs. 10 each, on 1st April, 2022 at
Rs. 15 per share. Buy back of shares is duly authorized by its Articles and necessary
resolution has been passed by the Company for this. The buy-back of shares by the
Company is also within the provisions of the Companies Act, 2013. The payment for buy
back of shares was made by the Company out of sufficient bank balance available shown as
part of Current Assets.

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You are required to prepare the necessary journal entries towards buy back of shares and
prepare the Balance Sheet of the company after buy back of shares.

(8 Marks)

Q-3

The following was the summarized balance sheet of Bhoomi Ltd. as on 31 st March, 2022:

Equity & Liability Rs.(In Assets Rs. (In

Lakhs) Lakhs)

Authorised Capital: Property, Plant and equipment 1,12,000

Equity shares of Rs. 10 each 80,000 Investments 24,000

Issued capital

Equity shares of Rs. 10 each Fully 64,000 Cash at bank 13,200

Paid up

10% Redeemable Preference 20,000 Trade Receivables 66,000

Shares of 10 each, Fully paid up

Reserves & Surplus:

Capital Redemption Reserve 8,000

Securities premium 6,400

General Reserve 48,000

Profit & Loss Account 2,400

9% Debentures 40,000

Trade Payables 26,400

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 2,15,200 2,15,200

On 1st April, 2022 the Company redeemed all its Preference Shares at a Premium of 10% and
bought back 25% of its Equity Shares at Rs. 20 per Share. In order to make Cash available,
the Company sold all the Investments for Rs. 25, 000 Lakhs and raised a Bank Loan
amounting to Rs. 16, 000 lakh on the Security of the Company's Plant.

Give the necessary Journal Entries considering that the buyback is authorized by the articles
of company and necessary resolution is passed by the company for this. The amount of
Securities premium may be utilized to the maximum extent allowed by law. .

(6 Marks)

Q-4

The following summarized Balance Sheet P Limited (a non-listed company) furnishes as at

31st March, 2022:

Rs. Rs.

Equity & Liabilities

Share capital:

Authorised capital

2,50,000 Equity shares of Rs. 10 each fully paid up 25,00,000

5,000, 10% Preference shares of Rs. 100 each 5,00,000 30,00,000

Issued and subscribed capital:

2,40,000 Equity shares of Rs. 10 each fully paid up 24,00,000

3,000, 10% Preference shares of Rs. 100 each 3,00,000 27,00,000

CATESTSERIES.ORG
(Issued two months back for the purpose of buy back)

Reserves and surplus:

Capital reserve 10,00,000

Revenue reserve 25,00,000

Securities premium 27,00,000

Profit and loss account 35,00,000 97,00,000

Current liabilities

Trade payables 13,00,000 16,00,000

Other current Liabilities 3,00,000 1,40,00,000

Assets

Tangible assets

Building 25,00,000

Machinery 31,00,000

Furniture 20,00,000 76,00,000

Non-current Investments 30,00,000

Current assets

Inventory 12,00,000

Trade receivables 7,00,000

Cash and bank balance 15,00,000 34,00,000

1,40,00,000

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On 1st April, 2022, the company passed a resolution to buy back 20% of its equity capital @
Rs. 60 per share. For this purpose, it sold all of its investment for Rs. 25, 00,000.

The company achieved its target of buy-back. You are required to:

(a) Give necessary journal entries and

(b) Give the Balance Sheet of the company after buy back of shares.

(8 Marks)

Q-5

M/s. Vriddhi Infra Ltd. (a non-listed company) provide the following information as on
31.3.2022:

(Rs.)

Land & Building 21,50,000

Plant & Machinery 15,00,000

Non-Current Investments 2,00,000

Trade Receivables 5,50,000

Inventories 1,80,000

Cash and Cash Equivalents 40,000

Share Capital: 1, 00,000 Equity Shares of Rs. 10 Each fully paid up 10,00,000

Securities Premium 3,00,000

General Reserve 2,50,000

Profit & Loss Account (Surplus) 1,50,000

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10% Debentures (Secured by floating charge on all assets) 20,00,000

Unsecured Loans 8,00,000

Trade Payables 1,20,000

On 21st April, 2022 the Company announced the buyback of 15,000 of its equity shares @
Rs. 15 per share. For this purpose, it sold all its investment for Rs. 2.50 lakhs. On 25th April,
2022, the company achieved the target of buy back. On 1st May, 2022 the company issued
one fully paid-up share of Rs. 10 each by way of bonus for every eight equity shares held by
the equity shareholders.

You are required to pass necessary Journal Entries for the above transactions.

(5 Marks)

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