Q. 1
a) Indicate the Financial Reporting Standard applicable on joint ventures. Summarize the important features of that specific FRS.
b) What is the accounting treatment for joint ventures? Explain with imaginary figures.
Q. 2
a) What do you understand by an independent branch?
b) The Bundi shoes Ltd., Bundi, is having its branch at Peshawar. Goods are invoiced to the branch at 20% profit on sales. Branch has been instructed to send all cash daily to the head office. All expenses are paid by the head office except petty expenses which are met the branch manager. From the following particulars prepare branch account in the books of Bundi Shoes Ltd: -
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Rs.
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Stock on 1st January 2007 (Invoice price)
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15,000
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Sundry debtors on 1st January
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9,000
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Cash in hand opening balance
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400
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Office furniture on 1st January
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1,200
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Goods invoiced from the head office (invoice price)
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80,000
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Goods returned to head office
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1,000
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Goods returned by debtors
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480
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Cash received from debtors
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30,000
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Cash sales
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50,000
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Credit sales
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30,000
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Discount allowed to debtors
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30
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Expenses paid by the head office:-
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Rent
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1,200
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Salary
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2,400
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Stationary and printing
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300
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Petty expenses paid by branch manager
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280
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Stock on 31st December 2007 at invoice price
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14,000
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Depreciation is to be provided on branch furniture at 10% p.a.
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Q. 3 P Limited is considering the acquisition of R limited. The financial data at the time of acquisition being:
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Net profit after tax (Rs. In lakhs)
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60
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12
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Number of shares (lakhs)
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12
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5
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Earning per share (Rs.)
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5
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Market price per share (Rs.)
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150
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48
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Price earning ratio
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30
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20
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It is expected that the net profit after tax of the two companies would continue to be Rs. 72 lakhs even after the amalgamation.
Explain the effect on EPS of the merged company under each of the following situations:
(i) P Ltd. Offers to pay Rs. 60 per share to the shareholders of R Ltd.
(ii) P Ltd. Offers to pay Rs. 78 per share to the shareholders of R Ltd.
The amount in both cases is to be paid in the form of shares of P Ltd.
Q. 4 Mohur Ltd. has equity capital of Rs. 40,00,000 consisting of fully paid equity shares of Rs. 10 each. The net profit for the year 2004-05 was Rs. 60,00,000. It has also issued 36,000, 10% convertible debentures of Rs. 50 each. Each debenture is convertible into five equity shares. The tax rate applicable is 30%. Compute the diluted earnings.
Q. 5 The directors of Departmental Stores Ltd. wish to ascertain net profits of A, B and C departments separately for the quarter-ended 31.3.2007. It is found impracticable actually to take stock on the date but the normal rates of gross profit for the are 40%, 30% and 20% on turnover respectively. Indirect expenses are charged in proportion to departmental turnover.