GLIM Financial Accounting Q-3

Instructor: Dr. Manaswee K Samal

Name: Time: 30 minutes, Points: 10 The following is the balance sheet of RMC Steel Ltd. as on 30.06.11. Sources Equity share capital [Par value: Rs.100 each] 9% Preference share capital (Redeemable on 30.09.11 at par) General reserve Debenture redemption reserve Amount[Rs.] Application 4,00,000 Property, Plant & Equipment 2,00,000 Less: Provision for depreciation

Roll No

Amount[Rs.] 10,00,000 (3,00,000)

3,00,000 Net Assets 7,00,000 1,00,000 Investments ( in raw material 1,30,000 supplier) Revaluation reserve 40,000 Investments in 182 days T-bills 70,000 Debtors 70,000 Material supplier 3,10,000 Investment in land 80,000 Expense payable 50,000 Cash in hand & bank 3,00,000 Inventory 50,000 Ignore dividend payable on preference shares for 2011-12. The company has no plan to issue new shares for redemption of preference shares. Debentures of Rs.1,00,000 were redeemed on 30.06.11 at par. Calculate the following from the above Balance Sheet on 31.10.11 (except item number 3) taking substance of the items over form. 1. Free Reserve Rs.

Show the items you would consider: Upon redemption of debentures on 30.06.12, the DRR has served its purpose. So, it will be transferred to the GR. Therefore, it is in essence a free reserve. Revaluation reserve is not a free reserve. And, since for redemption of preference capital, no fresh issue will happen, a matching amount has to be transferred to CRR from GR. CRR is not a free reserve. So, FR = 2,00,000 2. Operating assets Rs.

Show the items you would consider: Except investment in T-bills, all assets are used for operating purpose of the enterprise. The investment in raw material suppliers business is for a trading benefit. So, it will be a part of assets for operating purpose. Cash balance will be less by 2 lakhs after redemption.

3. Current liability as on 30.06.11 Rs5,60,000 (Preference share redeemable just after three months, hence a part of current liability) 4. Book value per share Rs.-------------------------

BV = Equity / no. of equity shares Equity as on 31.10.11 : Equity share capital = 4,00,000 General reserve = 2,00,000 (including the transfer from DRR and after transfer of 200000 to CRR upon redemption of preference shares) CRR = 2,00,000 Revaluation reserve 40,000 840000 No. of equity shares 4000 So, BV per share is Rs.210

5. Bonus issue capacity Rs400000 (both GR and CRR ca be used) If it is an unlisted company, even RR can be utilized. But, that is a bard thing to do.

GLIM Financial Accounting Q-3

Instructor: Dr. Manaswee K Samal

Name: Time: 30 minutes, Points: 10

Roll No

The following is the balance sheet of RMC Steel Ltd. as on 30.06.11. It is a listed company. Sources Equity share capital [Par value: Rs.10 each] 9% Preference share capital (Redeemable on 30.09.11 at par) General reserve Debenture redemption reserve Revaluation reserve Dividend fluctuation reserve Material supplier Expense payable Amount[Rs.] Application 4,00,000 Property, Plant & Equipment 3,00,000 Less: Provision for depreciation 4,00,000 1,00,000 50,000 1,00,000 2,10,000 50,000 Net Assets Investments in HUL Investments in 91 days T-bills Debtors Investment in land Cash in hand & bank Inventory Amount[Rs.] 9,00,000 (3,00,000)

6,00,000 2,30,000 70,000 70,000 80,000 5,00,000 60,000 16,10,000 16,10,000 Ignore dividend payable on preference shares for 2011-12. The company issues minimum shares required for the purpose of redemption of preference shares. Debentures of Rs.1,00,000 were redeemed on 30.06.11 at par. Calculate the following from the above Balance Sheet on 31.10.11 (except item number 3) taking substance of the items over form. 1. Free Reserve Rs6,00,000 [GR+DRR+DFR]

Show the items you would consider: GR, DFR,DRR 2. Operating assets Rs12,30,000.

Show the items you would consider: Net fixed assets, debtors, cash,inventory

3. Current liability as on 30.06.11 Rs5,60,000.. Material supplier, exp payable, pref cap reedemable

4. Book value per share

Rs.Rs.19.29 [ 70000 shares ]-

5. Bonus issue capacity

Rs.6,00,000---