CORPORATE ACCOUNTING

ASSIGNMENT 2

Q. 1. a) Explain the features of Goodwill and need for valuation of Goodwill.

b) State the ‘Transfer to Reserves Rules’ before distribution of dividend to shareholders.

Q. 2. Mention the circumstances, when need for valuation of shares arises. Also state the factors
affecting value of shares.

Q. 3. The net assets of a company are Rs. 1,00,000 out of which Rs. 10,000 were in the form of 8%
government securities purchased at par. The expected future profits of the company are Rs.
15,000. The normal rate of return is 10%. Calculate the value of goodwill according to the
following methods:
a) Three years’ purchase of average profits.
b) Five years’ purchase of super profits.
c) Capitalisation of average profits.
d) Capitalisation of super profits.

Q. 4. Calculate the fair value of share from the following information:

10,000 Equity shares of Rs. 100 each 1,00,000
500, 7% preference shares of Rs. 10 each 5,000
Reserve and surplus 95,000
Debentures 30,000
Creditors 20,000
Sundry assets 2,50,000
Normal rate of return is 10%
Average net profit of the company after tax 10,000
Transfer to reserve 300

Q. 5. Calculate the value of share from the following information by earning capacity method:
8,000 Equity shares of Rs. 100 each, Rs. 60 paid up 4,80,000
Reserve and surplus 2,00,000
Current liabilities including provision for taxation 2,50,000
Fixed assets market value Rs. 6,00,000 5,00,000
10% investments face value Rs. 1,00,000 80,000
Current assets 2,10,000
Preliminary expenses 20,000
Net profit for current year after 50% taxation
Return on net capital employed in such type of other companies is 10%

Q. 6. From the following details, find the intrinsic value of share:

20,000 Equity shares of Rs. 10 each 2,00,000
General reserve 1,50,000
Statement of profit and loss (Cr.) 60,000
Bank loan 1,20,000
Sundry creditors 70,000
Outstanding expenses 10,000
Fixed assets 3,80,000
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CS (Dr.) Sangeeta Bagga
 Current assets 2,25,000
Share issue expenses 5,000
Fixed assets are expected to realise Rs. 4,50,000 and current assets for Rs. 2,00,000. Ascertain
the value of shares by net assets method.

Q. 7. After preparing the Statement of Profit and Loss for the year ended 2023-24, the following
balances stood in the books of Bharat Trading Limited as on 31st March, 2024:
Share capital 20,00,000
Calls-in-arrears 20,000
Cash in hand 10,000
Cash with bank on Fixed deposit 10,00,000
Cash with bank on Current Account 2,10,000
Motor vehicles - Cost Rs. 16,00,000 12,00,000
Furniture – Cost Rs. 20,000 12,000
Investments in Government securities at cost 9,00,000
Securities premium reserve 40,000
General reserve 6,00,000
Dividend equalisation reserve 2,00,000
Interest accrued on investments 6,000
Sundry debtors 1,70,000
Provision of doubtful debts 50,000
Prepaid insurance 50,000
Unpaid dividends 54,000
Sundry creditors 2,40,000
Statement of profit and loss including Rs. 70,000 4,28,000
brought forward from 2014-15
Advances to staff 34,000
Total 36,12,000 36,12,000
After taking into consideration the following information, prepare Balance Sheet of the
company as at 31st March 2024:
a) The authorised capital of the company is Rs. 25,00,000 divided into shares of Rs. 100 each.
b) The directors transferred Rs. 2,00,000 to general reserve and recommended a dividend of
10% on paid-up capital for the year 2023-24.

Q. 8. The following is the Trial Balance of XYZ Company Ltd. as at 31st March 2024:

Particulars Amount (Dr.) Amount (Cr.)

Stock (April 1st, 2023) 75,000
Purchases returns 10,000
Purchases and Sales 2,45,000 3,40,000
Wages 30,000
Discount 3,000
Carriage inward 950
Furniture and fittings 17,000
Salaries 7,500
Rent 4,000

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CS (Dr.) Sangeeta Bagga
Sundry expenses 7,050
Statement of profit and loss (April 1st, 2023) 16,350
Dividend paid for 2022-23 9,000
Dividend distribution tax paid @17% 1,530
Share capital (Face value Rs. 10 per share) 1,00,000
Debtors and Creditors 27,500 17,500
Plant and machinery 29,000
Cash at bank 46,020
General reserve 15,500
Patents and trade marks 4,800
Bills receivable and Bills payable 5,000 7,000
TOTAL 5,09,350 5,09,350
Prepare the final accounts of the company as at that date after taking into consideration the
following adjustments:
a) Stock as at 31st March 2024 was valued at 88,000.
b) Provide depreciation on plant and machinery @ 15%, furniture and fittings @ 10%, and
patents and trade- marks @ 5%.
c) Make a provision for income tax @ 31%.
d) On 31st March 2024, outstanding rent amounted to Rs. 800 while outstanding salaries were
Rs. 900.
e) Make a provision for doubtful debts amounting to Rs. 510.
f) The Board of Directors proposed a dividend @ 15% per annum for the year ended 31st March
2024 after the minimum transfer to General Reserve as required by law.

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CS (Dr.) Sangeeta Bagga