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Test paper 1

Chapters: Issue of debentures, Ratio analysis and Profits prior to incorporation


Marks: 50 Time: 1 ½ hour
All questions are compulsory
Q1. Fill in the blanks (1 mark each)
1. Premium on redemption on debentures can be accounted at the time______.
2. Capital gearing ratio is calculated as _______.
3. Excess of net assets paid to vendor is called __________.
4. Stock turnover ratio is calculated as ___________.
5. Profit prior to incorporation is credited to __________________.

Q2. Y Ltd issued 1000 15% debentures of Rs. 100 each on 1st Jan 2001 at discount of 10%
redeemable at a premium of 10% after 4 years. You are required to give journal entries for the
period ended 31st December 2001 assuming that the interest was payable half yearly on 30th
June and 31st December. Also assume the rate of TDS being 10% and Y Ltd follows calendar year
as its accounting year. (8 marks)

Q3. Vikram Industries Private Ltd. was incorporated on 1.2.2010. It took over the proprietary
business of Vikram with effect from 1.1.2010. The Balance Sheet of Vikram as at 31st December
2009 is as follows:
Liabilities Amount Assets Amount
Capital 3,45,200 Sundry debtors 20,560
Trade creditors 13,600 Building 88,000
Loan 6,800 Machinery 2,40,000
Creditors expense 2,000 Loss 19,040
Total 3,67,600 Total 3,67,600
It was agreed to pay Rs. 3,60,000 in equity shares to vikram. The company decided to close its
first year accounts as on 31st December 2010. The following are the further furnished to you:
Sales Rs. 2,40,000; Purchases 1,12,000; Salaries and wages Rs. 32,000; General expenses Rs.
25,600; Freight Rs.3,760; Interest paid Rs. 6,400; stock in trade Rs. 17,600; additions to building
Rs. 30,400; Depreciation may be provided at 10% on assets including additions.
The company has requested you to prepare profit and loss account showing pre incorporation
and post incorporation profit for the year ended 31 st December 2010. (5 marks)

Q4. Using the following data prepare the Balances Sheet of Fortune Ltd.as at 31.03.2012 :
(a) Gross Profit 25% of sales
(b) Gross Profit Rs. 2,40,000
(c) Shareholders Equity Rs. 40,000
(d) Credit Sales to Total Sales 80%
(e) Total Turnover to Total Assets 4 times
(f) Cost of Sales to Inventory 10 times
(g) Average Collection Period 5 days assume 365 days in a year
(h) Current Ratio 1.5
(i) Sundry Creditors Rs. 1,20,000 (10 marks)
Q5. Write short notes on: (5 marks each)
1. Profit prior to incorporation
2. Various turnover ratios
3. Solvency ratios

Q6. From the following information find out 1) Sales 2) Sundry Debtors 3) Closing stock and 4)
Sundry Creditors
Debtors velocity – 3 months Stock velocity – 8 months Creditors velocity – 2 months
Gross profit ratio – 25% Bills receivable – Rs. 25000 Bills payable – Rs. 20000
Gross profit for the current year amounts to Rs. 400000. Closing stock of the year is Rs. 10000
above the opening stock. (7 marks)