T.Y. B.COM
SEMESTER - 5
ADVANCED ACCOUNTING
MCQs - OCTOBER 2019
1. Which the following is True?___________.
(a) The two companies amalgamate so as to enjoy economies of large scale operations
(b) The companies amalgamate to increase the managerial effectiveness
(c) The companies amalgamate to decrease the cut throat competition and increase the market share
(d) All of the above
2. The Holding ratio is 9:7. The annual sales of Subsidiary company include Rs. 80,000 sold to Holding company of which 60% remained unsold as on the last date of accounting year. The subsidiary company sales goods at 20% on cost. The amount of unrealized profit to be adjusted in the consolidated Balance Sheet is __________.
(a) Rs. 8,000
(b) Rs. 4,500
(c) Rs. 3,500
(d) Rs. 4,800
3. The balance in Workmen Compensation Reserve as on 31st March was Rs. 1,00,000 while the Liability for Compensation to workers materialized at Rs. 1,50,000. Which of the following is correct?
(a) Capital Reduction account will be credited by Rs. 50,000,
(b) Capital Reduction account will be debited by Rs. 50,000,
(c) Bank account will be debited by Rs. 50,000,
(d) None of the above.
4. A Ltd. is having 60% control over B Ltd., while B Ltd is having 75% control over C Ltd. and C Ltd is having 55% control over D Ltd. Which company/companies are required to prepare the Consolidated Financial Statements?
(a) A Ltd., B Ltd., C Ltd.,
(b) B Ltd and C Ltd.,
(c) C Ltd and D Ltd.,
(d) Only by A Ltd.
5. The holding ratio is 4:1. The Share capital of the subsidiary company consists of 1,20,000 equity shares of Rs. 10 each fully paid and its Reserves & Surplus showed a balance of Rs. 7,00,000. The claim of the Minority Shareholders is_________.
(a) Rs. 1,40,000
(b) Rs. 3,80,000
(c) Rs. 2,40,000
(d) None of these
6. As a part of Internal Reconstruction, the preference shareholders agreed to waive the arrears of preference dividend of past five years. The company's capital structure consist of 8% 50,000 preference shares of Rs. 10 each fully paid up. Which of the following accounting treatment is correct?
(a) Capital Reduction will be debited by Rs. 40,000,
(b) Capital Reduction will be credited
by Rs. 2,00,000,
(c) Pref. dividend a/c will be debited & Capital Reduction a/c will be credited by Rs. 2,00,000,
(d) None of the above
7. The Company had issued 12% Debentures of Rs. 4,00,000. As per reconstruction scheme it has been decided to issue new Debentures to existing debenture holders carrying interest @ 15% p.a. of such value that income of debenture holders is maintained. The value of Debentures issued is Rs. __________.
(a) Rs. 4,00,000
(b) Rs. 4,80,000
(c) Rs. 3,20,000
(d) None of these
8. Amit Ltd. absorbed Biren Ltd & took over all Fixed Assets at 110% and Liabilities at 90% of their book value. It issued 2,00,000 equity shares of Rs. 10 each; Rs. 8 paid up, 12% 9,000 Debentures of Rs.100 each to the shareholders of B Ltd and also paid cash of Rs. 5,00,000 to the Debenture holders of B Ltd. The amount of purchase consideration is Rs. _______.
(a) 30,00,000
(b) 14,00,000
(c) 25,00,000
(d) None of these
9. A Ltd acquired business of B Ltd. The Assets and Liabilities of B Ltd. were taken over at an agreed value of Rs. 82,50,000 and Rs. 65,00,000 respectively. A Ltd. agreed to issue 75,000 equity shares of Rs. 10 each fully paid and 10% 50,000 Preference shares of Rs. 10 each fully paid to the equity shareholders and preference shareholders of B Ltd. respectively. The Realization expenses of Rs. 25,000 were paid by the Transferee Company. The Capital Reserve account will be credited by Rs. ____________.
(a) Rs. 5,00,000
(b) Rs. 4,75,000
(c) Rs. 17,50,000
(d) Rs. 5,25,000
10. Under pooling of interest method the difference between the purchase consideration and the existing share capital of the transferor company should be adjusted against _______.
(a) Reserves of Transferee Company,
(b) Amalgamation adjustment account,
(c) Goodwill or capital reserve,
(d) None of the above.
11. On 1st March 2019, Strong Ltd. drew three bills on its subsidiary Weak Ltd. of Rs. 20,000 each which was duly accepted. On the same day Strong Ltd. discounted one bill with bank at 10%. On 31st March 2019, the balances of Bills receivable account of Strong Ltd. and Weak Ltd were Rs. 80,000 and Rs. 50,000 respectively. The amount of bills receivable to be shown in the consolidated balance sheet is ________.
(a) Rs. 1,30,000
(b) Rs. 80,000
(c) Rs. 40,000
(d) Rs. 90,000
12. On 1st April 2019, Fundamental Ltd. a newly formed company took over business of Superfluous Ltd. This is a case of ______________.
(a) Absorption
(b) Amalgamation
(c) External Reconstruction
(d) Internal Reconstruction
13. Which of the following statement is True?
(a) An existing company taking over the business of another existing company is Absorption,
(b) The term Trade Liabilities includes debentures and outstanding
salaries,
(c) Accumulated Profits are transferred to Realisation account in case of
Amalgamation,
(d) Third party liabilities includes Preference shareholders.
14. H Ltd. acquired 75% shares in S Ltd on 31st July 2018. On 1/4/2018, S Ltd had in its books General Reserve Rs. 28,000 and Profit & loss account balance of Rs. 32,000. The net profit of the current year after transferring 12,000 to General Reserve amounted to Rs.1,08,000. The pre-acquisition profit is _______.
(a) Rs. 1,00,000
(b) Rs. 60,000
(c) Rs. 1,80,000
(d) Rs. 1,20,000
15. The company decided to reduce the paid up value of equity share by Rs. 2 per share without reducing its face value. The company has Equity share capital of Rs. 3,20,000 divided into shares of Rs. 10 each, Rs. 8 paid up. The new balance sheet of the company after implementation of internal reconstruction shall disclose paid up share capital of ________.
(a) Rs. 2,40,000
(b) Rs. 3,20,000
(c) Rs. 2,56,000
(d) None of these
16. Amalgamation adjustment account is opened in the books of Transferee Company to incorporate ____________.
(a) The assets of the transferor company,
(b) The liabilities of the transferor company,
(c) The statutory reserves of the transferor company,
(d) The non-statutory reserves of the transferor company.
17. Under the Internal Reconstruction scheme, an unrecorded liability of Rs. 25,000 is settled by the company at Rs. 15,000. The unpaid amounts of Rs. 10,000 will __________.
(a) be credited to Capital Reduction Account.
(b) be shown as liability in the New Balance sheet after Internal Reconstruction
(c) not be recorded at all,
(d) be debited to Capital Reduction Account.
18. A Ltd. absorbed business of B Ltd and agreed to issue such an amount of fully paid 5% debentures of its own at 96% as is sufficient to discharge the 6% Rs. 2,00,000 debentures of B Ltd. at a premium of 5%. The value of debentures issued by A Ltd. is _______.
(a) Rs. 2,10,000
(b) Rs. 2,18,750
(c) Rs. 1,92,000
(d) None of these
19. X Ltd. acquired 7,500 equity shares of Rs. 10 each, 5 paid up out of 10,000 equity shares of Y Ltd. as on August 2018 on which date books of Y Ltd showed a debit balance of Rs.5,000 in profit & loss account and Rs. 25,000 in General Reserve. If the cost of acquiring shares is Rs. 41,250 the Cost of control / Capital Reserve _________.
(a) Goodwill Rs. 52,500,
(b) Capital Reserve Rs. 48,750
(c) Capital Reserve, 11,250
(d) None of these
20. On 31st March 2019, the capital structure of PQR Ltd showed Debentures worth Rs. 55,00,000 on which the Interest at 10% p.a. was outstanding for last two years. Under the internal reconstruction scheme, they were handed over the Freehold property having book value of Rs. 50,00,000 and realizable value of Rs. 62,00,000 in full settlement of their dues. The Capital Reduction account will be credited by _______.
(a) 4,00,000
(b) 12,00,000
(c) 16,00,000
(d) None of these
21. While preparing the Consolidated Balance sheet of Holding & Subsidiary company, the value of Minority Interest consists of proportionate share of minority shareholders in the _______.
(i) Nominal value of share capital of subsidiary company
(ii) Reserves of Holding company
(iii) Reserves and profits of the subsidiary company at time of acquisition by Holding company
(iv) Income of subsidiary company after its acquisition by the Holding company.
(a) Only (i) above
(b) Both (i) & (ii) above
(c) Only (ii) above
(d) (i), (iii) & (iv) above
22. Which of the following statement is Correct?_________.
(a) Conversion of Shares from larger to smaller denomination is Alteration of Capital,
(b) Refunding the Surplus paid up capital is Reduction of Capital
(c) The Credit Balance of Capital Reduction is transferred to Capital Reserve Account
(d) All the above
23. While preparing consolidated financial statements, which of the following items need not be eliminated?
(a) Inter - company profit in ending inventory
(b) Inter - company profit on inter - company sale of a fixed asset
(c) Inter - company dividends receivable /payable,
(d) Inter - company profit on inventory sold to non-affiliated company.
24. Y Ltd was absorbed by X Ltd. The net assets of Y Ltd & X Ltd as on the date of absorption were Rs. 90 lakhs & Rs. 180 lakhs respectively. It was agreed that the shareholders of Transferor Company will be allotted shares in Transferee Company in the proportion of their intrinsic value per share. Considering that the number of Equity shares of Transferor & Transferee are 50,000 & 8,00,000 shares respectively, the number of shares issued by Transferee Company as a part of purchase consideration will be _____&____.
(a) 50,000
(b) 8,00,000
(c) 4,00,000
(d) 8,50,000
From the following information answer Question No. 25, 26 & 27
The book value of Machinery of Subsidiary Company as on 1/4/2018 was Rs. 4,50,000 while its closing value as on 31/3/2019 was Rs. 4,05,000. The holding company while acquiring shares of subsidiary company as on 31/7/2018 revalued this machinery at Rs. 4,50,000.
25.The revaluation gain is _______.
(a) Rs. 22,500
(b) Rs. 15,000
(c) Rs. 45,000
(d) None of these
26.The depreciation is undercharged by Rs._________.
(a) Nil
(b) Rs. 30,000
(c) Rs. 15,000
(d) Rs. 45,000
27. The carrying value of Machinery in the consolidated balance sheet will be _________.
(a) Rs. 4,50,000
(b) Rs. 4,95,000
(c) Rs. 4,20,000
(d) None of these
28. KC Ltd holds 65% equity shares in NK Ltd. Up to the date of acquisition, the operating profit earned by NK, Ltd. was Rs. 3,00,000 while its total operating profit in the year of acquisition amounted to Rs. 6,50,000. The balance of profit & loss a/c in the Consolidated Balance sheet will increase by _______.
(a) Rs. 2,27,500
(b) Rs. 1,95,000
(c) Rs. 4,22,500
(d) None of these
29. Rapid Ltd absorbed the business of Fast Ltd. and agreed to issue one equity shares of Rs.10 each, 8 paid up at a premium of Rs. 4 against two equity share and also to issue one 10% preference shares of Rs. 10 each, 5 paid up at a premium of Rs. 3 against every two preference shares of Fast Ltd. The share capital of Fast Ltd. consists of 3,00,000 equity shares of Rs. 5 each fully paid up and 2,00,000 8% preference shares of Rs. 10 each fully paid up. The amount of purchase consideration will be _______.
(a) Rs. 17,00,000
(b) Rs. 20,00,000
(c) Rs. 26,00,000
(d) None of these
30. Considering the information given in question no. 29, the transferee company will credit Rs. __________ to Security premium account.
(a) Rs. 5,00,000
(b) Rs. 6,00,000
(c) Rs. 3,00,000
(d) Rs. 9,00,000
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