ADVANCED FINANCIAL ACCOUNTING ASSIGNMENT QUESTIONS

Assignment 4 Pages

MES INSTITUTE OF MANAGEMENT

Financial Management

HRK

Contributed by

Hanuman Ram Korpal

1
ADVANCED FINANCIAL ACCOUNTING
ASSIGNMENT QUESTIONS
Chapter 1 – Insurance Claims
1. A fire occurred in the premises of Mr. Akash on 15-10-2015. The stock salvaged was
Rs.8,000. From the following details given below, ascertain the claim to be lodged:
Stock on 01-01-2015 - Rs.45,000
Purchases from 01-01-2015 till the date of fire – Rs.2,00,000
Sales from 01-01-2015 till the date of fire – Rs.3,00,000
Manufacturing wages from 01-01-2015 till the date of fire – Rs.10,000
Salary from 01-01-2015 till the date of fire – Rs.18,000
Rate of Gross profit is 30%
It was practice in the firm to value the stock at 10% less than the cost. Amount of Policy
is Rs.30,000. There was an average clause in the policy.
Prepare a Claim for insurance.

2. A fire occurred in the premises of Mr. Arun on 31-03-2016. The stock salvaged was
Rs.500. From the following details given below, ascertain the claim to be lodged:
Stock on 01-01-2016 - Rs.25,300
Purchases from 01-01-2016 till the date of fire – Rs.52,400
Sales from 01-01-2016 till the date of fire – Rs.1,56,000
Manufacturing wages up to the date of fire – Rs.61,300
Salary from 01-01-2016 till the date of fire – Rs.18,000
During March 2016, goods costing Rs.2,000 were distributed as free samples. The rate
of Gross profit on cost is 30%.

3. The Premises of Lucky Traders were destroyed by fire on 15-3-2015. From the books
and other records that were saved the following information is available. The stock on
hand has always been valued at 10% less than cost. Determine the amount of claim to
be recovered from Insurance Co.
Particulars
2012
2013
2014
2015
Opening stock
54,180
64,800
72,000
73,800
Purchase less returns
1,49,800
1,60,000
1,62,000
12,000
Sales less returns
2,40,000
2,64,000
2,80,000
24,000
Wages
34,800
32,800
47,200
4,000
Closing stock
64,800
72,000
73,800
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1
Vinutha T.N.
Assistant Professor, MES Institute of Management, Rajajinagar
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4. The Premises of Ravi were destroyed by fire on 30-4-2017. From the books and other
records that were saved the following information is available. The stock on hand has
always been valued at 10% less than cost. Stock salvaged is Rs.1,500/-. Determine the
amount of claim to be recovered from Insurance Co.
Particulars
2014
2015
2016
2017
Opening stock as valued
27,000
32,000
36,000
38,000
Purchase less returns
74,000
80,000
81,000
6,000
Sales less returns
1,20,000
1,32,000
1,40,000
12,000
Wages
17,000
19,000
20,000
2,000
Closing stock as valued
32,000
36,000
38,000
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5. The Premises of John Traders were destroyed by fire on 20
th
June, 2015. From the
books and other records that were saved the following information is available. The
stock on hand has always been valued at 10% less than cost. Determine the amount
of claim to be recovered from Insurance Co.
Particulars
2012
2013
2014
2015
Opening stock
2,709
3,240
3,600
3,690
Purchases
7,490
8,000
8,100
600
Sales
12,000
13,200
14,000
1,200
Wages
1,740
1,900
2,090
200
Closing stock
3,240
3,600
3,690
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Chapter 2 – Royalty Accounts
6. John Coal Ltd. is engaged in working a coal mine. On January 1, 2013 it entered into
an agreement with the owner of the land which provided for:
a) A Royalty of Rs.20 per ton of coal raised
b) A Minimum Rent of Rs.50,000 per annum
c) The recovery of short workings within a period of first 3 years
The annual output was as follows:
Prepare necessary Ledger Accounts
7. Charan Mining Company took a lease from a landlord for a period of 10 years from
1
st
January 2010 on a royalty of Rs.5 per ton coal raised with a minimum rent of
Rs.40,000 and the power to recoup the short workings during the lifetime of the lease.
The annual output was as follows:
Year
2010
2011
2012
2013
2014
Output (Tons)
4000
6000
8000
9000
10000
Prepare necessary Ledger Accounts
Year
2013
2014
2015
2016
2017
Output (Tons)
2000
2250
3000
3800
5000
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8. Mr. Karun, the author of an Accounting Textbook entered into a Royalty agreement
with Himalaya Publishers Ltd. on 1
st
January 2014. Royalty was agreed @ Rs.50 per
copy sold subject to minimum rent of Rs.4,00,000 p.a. with the right to recover short
workings during the subsequent two years from the year in which short working arises.
The other details were as follows. Prepare Royalty Analysis Table.

Year
No. of Copies Printed
Closing Stock
2014
6,200
1,200
2015
8,000
1,800
2016
9,000
2,000
2017
10,000
1,500
2018
12,000
1,000

Chapter 3 – Conversion of Partnership Firm into a Limited Company
9. Calculate the purchase consideration from the following details: The purchasing
company has agreed to issue 3000 equity shares of Rs.10 each at a premium of 10%;
100, 8% preference shares of Rs.100 each at par; 1,000 6% debentures of Rs.100 each
at 10% discount and pay cash equal to 20% of total purchase consideration.

10. Calculate the purchase consideration from the following details: The purchasing
company has agreed to issue 20,000 equity shares of Rs.10 each at a premium of 10%;
2,000 7% preference shares of Rs.10 each at par; 2,000 8% debentures of Rs.100 each
at 10% discount and pay cash equal to 10% of face value of shares and debentures

11. SP Firm, having S and P as equal partners agrees to sell its business to a limited
company. The limited company agrees to take over all the assets and liabilities except
cash and investments at the values as agreed upon which are as follows:
Cash
20,000
Machinery
99,000
Debtors
1,70,000
Bills Receivable
22,500
Stock
2,33,500
Investment
30,000
Goodwill
53,000
Creditors
1,85,000
Bills Payable
60,000

The Purchasing company agrees to discharge the purchase consideration in the form of
cash, shares and debentures. The company has issued Shares worth Rs.2,00,000 and
Debentures worth Rs.1,00,000 and pay the balance in Cash.
Calculate the Purchase Consideration and Prepare necessary incorporation
entries in the books of purchasing company.

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12. X, Y and Z are in partnership sharing profits and losses in the ratio of 4:3:1 respectively.
On 31-12-2015 they agreed to sell their business to a Limited Company. The position
on that day was as follows.

Liabilities
Amount
Asset
Amount
Capital

Freehold Property
36,000
X
40,000
Machinery
24,000
Y
30,000
Debtors
30,000
Z
26,000
Stock
26,000
Loan from Bank
8,000
Cash
4,000
Creditors
16,000

1,20,000

1,20,000

The Company took the following assets except cash at the valuation shown below:
Freehold property - 44,000; Machinery - 22,000; Book Debts - 28,000; Stock -24,000;
Goodwill – 8,000. The Company also agreed to pay the creditors which was agreed at
Rs.15,400. Th Company paid 3,300 shares of Rs.10 each fully paid and the balance in
cash. The realization expenses amounted to Rs. 1,000.
Prepare necessary ledger accounts in the books of the firm.

13. Swathi and Preethi are in partnership sharing profits and losses in the ratio of 2:1
respectively. On 31-12-2016 they agreed to sell their business to a Limited Company.
The position on that day was as follows.
Liabilities
Amount
Asset
Amount
Capital

Cash in Hand
300
Swathi
30,000
Bills Receivable
5,000
Preethi
15,000
Debtors 60,000

Bills Payable
10,000
(Less) Reserves 3,000
57,000
Loan from Bank
31,000
Stock
43,700
Creditors
40,000
Machinery
20,000

1,26,000

1,26,000

The Company took the following assets and liabilities as follows:
Machinery – 16,000; Stock – 35,000; Debtors – 50,700; Bills Receivable – 5,000;
Goodwill – 6,000. The Company also agreed to pay the creditors which was agreed at
Rs.38,000 and Bills Payable at Rs.10,000.
The company paid Rs.40,000 of the purchase price in Rs.10 fully paid equity shares
and the balance in cash. The realization expenses amounted to Rs.300. Distribute the
shares as per original capital ratio.
Prepare necessary ledger accounts in the books of the firm.
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