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TYBCOM SEM 5 || Advance Accounting MCQ of Amalgamation of Company
1. When two or more companies carrying on similar business decide to combine, a new company is formed, it is known as ..................
(A) Amalgamation
(B) Absorption
(C) Internal reconstruction
(D) External reconstruction
Ans: A
2. When one of the existing companies take over business of another
company or
companies, it is known as ...........
(A) Amalgamation
(B) Absorption
(C) Internal reconstruction
(D) External reconstruction
Ans: B
3. If the ABC Limited and DEF Limited are taken over by a new company XYZ Limited
(a) ABC Ltd. and DEF Ltd. are known as the “Vendor Companies”
(b) ABC Ltd. and XYZ Ltd. are known as the “Vendor Companies”
(c) XYZ Ltd. and DEF Ltd. are known as the “Vendor Companies”
(d) XYZ Ltd. is known as the “Vendor Company”
Ans:A
4. If the ABC Limited and DEF Limited are taken over by a new company XYZ Limited
(a) ABC Ltd. and DEF Ltd. are known as the “Purchasing Companies”
(b) ABC Ltd. and XYZ Ltd. are known as the “Purchasing Companies”
(c) XYZ Ltd. and DEF Ltd. are known as the “Purchasing Companies”
(d) XYZ Ltd. is known as the “Purchasing Company”
Ans:D
5. Which of the following statement is correct?
(A) The amount of Goodwill or Capital Reserve is recorded in the books of
purchasing company only
(B) The amount of Goodwill or Capital Reserve is recorded in the books of vendor
company only.
(C) Goodwill = Net Assets – Purchase price
(D) The face value of shares of purchasing company will be taken in to account while
calculating purchase consideration.
Ans:A
6. Himanshi Ltd. purchase consideration is Rs.22,345 and Net Assets Rs.6,568, then...........
(A) Goodwill Rs. 15,777
(B) Capital Reserve Rs. 15,777
(C) Goodwill Rs. 28,913
(D) Capital Reserve Rs. 28,913
Ans:A
7. Kirti Co’s Balance Sheet shows Fixed Asset Rs. 3,60,000. At the time of absorption calculation of Net Assets is 10% less than the market value, then market value of such fixed assets is ............
(A) Rs. 3,24,000
(B) Rs. 4,00,000
(C) Rs. 4,20,000
(D) None of these
Ans: B
Market value 100
Net assets less than 10%
Fixed assets. 90%
Market value fixed assets= 360000*100/90 = 400000
8. Net Assets of D.Co. for Purchase Consideration worth Rs. 4,00,000. At the time of absorption, the company has paid 32,000 equity shares each of Rs.10 each at 10% premium, then remaining cash will be -
(A) Rs. 48,000
(B) Rs. 84,000
(C) Rs. 80,000
(D) Rs. 90,000
Ans: A
P.C. = 400000
32000*11= - 352000
Cash. 48000
9. Intrinsic value of each equity shares of the vendor company is Rs. 250 and that of the purchasing company is Rs. 400. The exchange ratio of shares on the basis of intrinsic value is -
(A) 2:1
(B) 8:8
(C) 8:5
(D) None of the above
Ans: C
40/5. 25/5
10. While calculating purchase price, the following values of assets are considered
(A) Book value
(B) Revised Value
(C) Average values
(D) Market values
Ans: B
11. Shares received from the new company are recorded at -
(A) Face value
(B) Average price
(C) Market value
(D) None of the above
Ans: C
12. The Amalgamation Adjustment Account appears in the books, it is shown under the heading of ......... in the balance sheet.
(A) Reserve and Surplus
(B) Fixed Assets
(C) Investments
(D) Miscellaneous Expenditure
Ans:A
13. In case of amalgamation, miscellaneous expenses are shown ................
(A) New Company Account
(B) Equity Shareholders Account
(C) Cash Account
(D) Realization Account
Ans:B
14. If the intrinsic values of shares exchanged are not equal, the difference is
paid in ...........
(A) Cash
(B) Debenture
(C) Pref. share
(D)Assets
Ans: A
15. In case of .............., one existing company takes over the business of another company and no new company is formed.
(A) Amalgamation
(B) Absorption
(C) Reconstruction
(D) None of the Above
Ans:B
10. The assets which is not taken under the net assets method of calculating
Purchase Consideration is:
(A) Loose Tools
(B) Bills Receivable
(C) Machinery
(D) Share issued expenses
Ans: D
11. In amalgamation of two companies
(A) Both companies lose their existence
(B) Both companies continue
(C) Any one company continues
Ans: A
12. When purchasing company pays purchase consideration, it will be debited to
(A) Business purchase account
(B) Assets account
(C) Liquidator of vendor company’s account
(D) Purchasing Company account
Ans: C
13. When the purchasing company bears the liquidation expenses, it will debit the expenses
to ________
(A) Vendor Company’s Account
(B) Bank Account
(C) Goodwill Account
(D) Debtors Account
Ans: C
14. As per AS-14 purchase consideration is payable to _________________.
(A) Shareholders
(B) Creditors
(C) Debenture holders
(D) Bank
Ans: A
15. When the purchasing company does not take over a particular liability and the vendor
company pays that liability, it will debit it to______
(A) Realisation Account
(B) Bank Account
(D) Liability Account
(D) Creditors Account
Ans:A
16. When the Net Assets are less than the Purchase Consideration, the difference will be
(A) Debited to Goodwill A/c
(B) Debited to General Reserve
(C) None of these
(D) Debited to Capital Reserve
Ans:A
17. While calculating purchase consideration ............... values of assets is to be considered.
(A) Book value
(B) Revalued price
(C) Average price
(D) Capital
Ans:B
18. Net Assets minus Capital Reserve is _________
(A) Goodwill
(B) Total assets
(C) Purchase consideration
(D) None of these
Ans:C
20. The original amount of preference share capital should be transferred to ............ account
in the time of amalgamation in the books of vendor co.
(A) Preference shareholders Account
(B) Capital Reserve Account
(C) Equity share capital Account
(D) Equity share capital Account
Ans: A
21. Both of the old companies will not exist in ...........
(A) Internal reconstruction
(B) Absorption
(C) External reconstruction
(D) Amalgamation
Ans:D
22. When company purchases the business of another company ........ comes into existence.
(A) Amalgamation
(B) Absorption
(C) External Reconstruction
(D) Internal Reconstruction
Ans:B
23. When liquidation expenses is paid and borne by seller company then it is debited to_____
(A) Bank A/c
(B) Goodwill A/c
(C) Realisation A/c
(D) Capital Reserve A/c
Ans:C
24. The shares received from the new company is recorded at________
(A) Face value
(B) Market value
(C) Average price
(D) None of these
Ans: B
26. If the market price of the shares to be given for Purchase Consideration at the time of
absorption, ............ of the share is to be determined
(A) Fair Value (B) Face Value
(C) Intrinsic Value (D) Yield Value
Ans: C
29. Amalgamation of companies is governed by -
(A) AS -14 (B) AS-11
(C) AS- 13 (D) AS-9
Ans: A
30. Following is not a fixed asset -
(A) Goodwill (B) Loose Tools
(C) Copyright (D) Livestock
Ans: B
1. In case of public limited company, after getting the ----------- the company can start the business a) Memorandum of Association b) Table A c) Certificate of commencement of business d) Articles of Association
Answer: c
2. When two or more companies carrying on similar business decide to combine, a new company is formed, it is known as .................. a) Amalgamation b) Absorption c) Internal reconstruction d) External reconstruction
Answer: a
3. If Company A purchases the majority shares of Company B, what combination would this be referred to? a) Amalgamation b) Takeover c) Absorption d) None of the above
Answer: b
4. When one of the existing companies take over business of another company or companies, it is known as ........... a) Amalgamation b) Internal reconstruction c) Absorption d) External reconstruction
Answer: c
5. After getting minimum subscription of shares, the company has to allot shares with in ------------ days. a) 90 b) 100 c) 110 d) 120
Answer: d
6. If the minimum subscription is not received by the company, then the refund of application money should be made within ---------- days. a) 7 b) 9 c) 10 d) 22
Answer: c
7. Shares received from the new company are recorded at - a) Face value b) Average price c) Market value d) None of the above
Answer: c
8. Which of the following statement is correct? a) The amount of Goodwill or Capital Reserve is found out in the books of purchasing company only b) The amount of Goodwill or Capital Reserve is found out in the books of vendor company only c) Goodwill = Net Assets – Purchase price d) The face value of shares of purchasing company will be taken in to account while calculating purchase consideration
Answer: a
9. If the two companies have different accounting policies in respect of the same item, then they make necessary changes to adopt .............. Accounting policies a) Lifo method b) Fifo method c) Weighted method d) Uniform
Answer: d
10. While calculating purchase price, the following values of assets are considered a) Book value b) New values fixed c) Average values d) Market values
Answer: b
11. ………is concerned with accounting for amalgamation.
A. AS – 10 B. AS – 12 C. AS – 14 D. AS – 16
Ans:C
12. Amalgamation is done for ………….
A. Eliminating competition B. Dominating the market
C. Enjoying the benefits of large scale operation D. All of these
Ans:D
13. Purchase consideration is payable to …………..
A. Creditors B. Shareholders C. Debenture holders D. All of these
Ans:B
14. Pooling of interest method is used in the case of ……………..
A. Amalgamation in the nature of purchasesB. External reconstruction
C. Amalgamation in the nature of merger D. Internal reconstruction
Ans:c
15. Loss on realisation is transferred to …………..
A. Transferee Company Account B. Transferor Company Account
C. Shareholders Account D. Creditors Account
Ans:C
16. ………… is a statutory reserve
A. General Reserve B. Export profit reserve
C. Dividend equalization reserve D. Capital Reserve
Ans:B
17. Under purchase method, the excess of net assets over purchase consideration is ……….
A. Debited to goodwill account B. Credited to goodwill account
C. Credited to capital reserve account D. Debited to capital reserve account
Ans: C
18. Realisation Account is a …………..
A. Real Account B. Personal Account
C. Nominal Account D. Suspense Account
Ans:C
1. The Amalgamation Adjustment Account appears in the books, it is shown under the heading of ......... in the balance sheet. a) Reserve and Surplus b) Fixed Assets c) Investments d) Miscellaneous expenditure
Answer: d
2. If amalgamation is in the ..............., the General Reserve or Profit and Loss A/c balance will not be shown in the balance sheet. a) Form of Merger b) Form of purchase c) Net assets method d) Consideration method
Answer: b
3. If the intrinsic values of shares exchanged are not equal, the difference is paid in ........... a) Cash b) Debenture c) Pref. share d) Assets
Answer: a
4. In case of .............., one existing company takes over the business of another company and no new company is formed. a) Amalgamation b) Absorption c) Reconstruction d) None of the Above
Answer: b
5. When purchasing company pays purchase consideration, it will be debited to a) Business purchase account b) Assets account c) Liquidator of selling company’s account d) None of the above
Answer: c
6. In amalgamation of two companies a) Both companies lose their existence b) Both companies continue c) Any one company continues d) None of the above
Answer: a
7. When the purchasing company bears the liquidation expenses, it will debit the expenses to a) Vendor Company's Account b) Bank Account c) Goodwill Account d) None of the above
Answer: c
8. When the Vendor (seller) company agrees to bear liquidation expenses, it will debit a) Realisation Account b) Bank Account c) Goodwill Account d) None of the above
Answer: a
9. When the purchasing company does not take over a particular liability and the vendor company pays that liability, it will debit it to a) Realisation Account b) Bank Account c) Liability Account d) None of the above
Answer: a
10. When the Net Assets are less than the Purchase Consideration, the difference will be a) Debited to Goodwill A/c. b) Debited to General Reserve c) all of the above d) none of these
Answer: a
1. While calculating purchase consideration ............... values of assets is to be considered. a) Book value b) Revalued price c) Average price d) Capital
Answer: b
2. Net Assets minus Capital Reserve is _________ a) Goodwill b) Total assets c) Purchase consideration d) None of these
Answer: c
3. Hitanshi Ltd.‘s purchase consideration is Rs.12,345 and Net Assets Rs.3,568, then........... a) Goodwill Rs. 8,777 b) Capital Reserve Rs. 8,777 c) Goodwill Rs. 15,913 d) Capital Reserve R
Answer: a
4. The original amount of preference share capital should be transferred to ............ account in the time of amalgamation in the books of vendor co. a) Preference shareholders Account b) Capital Reserve Account c) Equity share capital Account d) None of the Above
Answer: a
5. Both of the old companies will not exist in ........... a) Internal reconstruction b) Absorption c) External reconstruction d) Amalgamation
Answer: d
6. When company purchases the business of another company ........ comes into existence. a) Amalgamation b) Absorption c) External Reconstruction d) Internal Reconstruction
Answer: b
7. When liquidation expenses is paid and borne by seller company then it is debited to _______ a) Bank A/c b) Goodwill A/c c) Realisation A/c d) Capital Reserve A/c
Answer: c
8. The shares received from the new company is recorded at a) Face value b) Market value c) Average price d) None of these
Answer: b
9. If the market price of the shares to be given for Purchase Consideration at the time of absorption, ............ of the share is to be determined a) Fair Value b) Face Value c) Intrinsic Value d) Yield Value
Answer: c
10. All direct & indirect expenses related to business are charged a) Profit and loss account b) Trading account c) Trading account Profit and Loss account d) Directly to Balance sheet
Answer: c
MCQ of Internal reconstruction
1. The reduction of capital is permitted under _____________ of Companies Act. a) 77 b) 100 c) 66 d) 75
Ans: c
2. The Capital reduction means reduction in ____________ value of shares. a) authorized capital b) Called up capital c) Uncalled capital d) paid–up value
Ans:D
3. The Sub – division of shares does not result in ___________ of capital. a) reduction b) added c) Compromise d) none of the above
4. The Shareholders can surrender shares for ________ or ____________ . a) re-issue, cancellation b)Fresh Issue, Redemption c) none of the above
5. The internal reconstruction results in proper valuation of _________ and __________ of companies. a) Profit & Loss Account b) reserve & surplus c) assets and liabilities d) none of the above
6. The scheme of internal reconstruction requires approval of ____________ . a) Shareholders b) Central Government c) NCLT d) all the above
7. __________ resolution is to be passed by shareholders for approval of scheme of reconstruction. a) ordinary b) Special c) both a & b d) none of the above
8. The fictitious debit balances are to be transferred to ___________ Account. a) internal reconstruction b) security premium c) share capital d) Capital Reduction
9. The difference in revaluation of assets is to be transferred to ___________ Account. a) internal reconstruction b) Capital Reduction c) security primium d) capital reserve
10. A scheme of __________ or __________ mean the scheme having same effect. a) capital reduction or internal reconstruction b) Capital Reduction or External reconstruction c) none of the above
Answers:1)66 2)paid–up value 3)reduction 4)re-issue, cancellation 5)assets and liabilities 6)NCLT 7)Special 8)Capital Reduction 9)Capital Reduction 10)capital reduction or internal reconstruction
11. The full balance of capital is to be debited, if _____________ value is reduced. a) face b) market c) both of a & b d) none of the above
12. Shareholders not approving scheme is called _________ shareholders. a) dissenting b) paying c) pay disentient shareholders d) none of the above
13. The Balance Sheet prepared after implementation of the scheme is to be prepared as per ____________. a) Schedule IV b) Schedule VI c) Schedule II d) Schedule III
14. The expenses for forming and implementing scheme should be debited to ____________ . a) security premium b) share capital c) Internal reconstruction d) capital reduction
15. The scheme of internal reconstruction can be utilized to provide ____________ for the company. a) funds b) share capital c) dividend d) none of the above
16. Capital Reduction Account is ________ by payment of reconstruction expenses. a) credited b) debited c) Cash Account d) none of the above
17. The objective of reconstruction is to write off ___________ . a) profit b) accumulated losses c) nil d) none of the above
18. Court Confirmation Order has to be registered with the __________ of companies. a) NCLT b) share capital c) Registrar d) none of the above
19. In ____________ , no new company is formed. a) External reconstruction b) Amalgamation c) internal reconstruction d) none of the above
20. Appreciation in the value of land & building is recorded on ________ side of Capital Reduction Account. a) credit b) debit c) both of a & b d) none of the above
1. When the object of reconstruction is usually to re-organise capital or to
compound with creditors or to effect economies then such type of
reconstruction is called
(a) Internal reconstruction with liquidation
(b) Internal reconstruction without liquidation of the company
(c) External reconstruction
2. The accumulated losses under scheme of internal reconstruction are written
off against
(a) Capital Reduction account
(b) Share Capital account
(c) Shareholders’ account
3. A process of reconstruction, which is carried out without liquidating the
company and forming a new one is called
(a) Internal reconstruction.
(b) External reconstruction.
(c) Amalgamation.
4. Reconstruction is a process by which affairs of a company are reorganized by
(a) Revaluation of assets and Reassessment of liabilities.
(b) Writing off the losses already suffered by reducing the paid up value of
shares and/or varying the rights attached to different classes of shares.
(c) Both (a) and (b).
5. For reduction of the share capital, the permission has to be sought from
(a) Court.
(b) Controller.
(c) State government.
6. In case of internal reconstruction
(a) Only one company is liquidated.
(b) Two or more companies are liquidated.
(c) No company is liquidated.
1. (b), 2. (a), 3. (a), 4. (c), 5. (a), 6. (c)
106.In………., an existing company’s financial structure is reorganized without liquidating the
existing company and forming a new company.
A. Amalgamation B. External reconstruction
C. Absorption D. Internal reconstruction
Ans:D
107.Internal reconstruction is done due to ………..
A. Accumulated losses B. Shortage of working capital
C. Large amount of fictitious assets D. All of these
Ans:D
108.In ………., the company does not loss its identity
A. Amalgamation B. External reconstruction
C. Absorption D. Internal reconstruction
Ans:D
109.Internal reconstruction can be ………
A. Alteration of share capital B. Reduction of share capital
C. Re‐organization of capital D. All of these
Ans:D
110.Capital of a company can be reduced by …………
A. Authorization of Articles B. Passing of a special resolution
C. Confirmation of court D. All of these
Ans:D
111.Capital Reduction Account is a ………..
A. Nominal Account B. Permanent Account
C. Temporary Account D. None of these
Ans:c
112.The balance in Capital Reduction Account is transferred to …………
A. General Reserve B. Profit and loss Account
C. Capital Reserve D. Goodwill Account
113.In internal reconstruction, increase in the value of fixed assets is credited to……….
A. Capital reserve B. Share capital
C. General reserve D. Capital reduction account
114. In case of subdivision of share capital, the amount of share capital……….
A. Increases B. Decreases
C. Does not change D. None of these
115.In case of subdivision of share capital, the total number of shares ……….
A. Increases B. Decreases
C. Does not change D. None of these
116.In internal reconstruction, the existing company will be ……….
A. Amalgamated B. Absorbed
C. Liquidated D. None of these
117.In internal reconstruction, amount sacrificed by shareholders are credited to……..
A. Capital reserve B. General Reserve
C. Capital reduction account D. None of these
118.When company converts its equity shares into capital stock, the account to be credited is …
A. Equity share capital account B. Equity capital stock account
C. No entry D. None of these
119.Alteration of shares of smaller amounts into shares of larger amount is called ……….
A. Subdivision of shares B. Consolidation of shares
C. Cancellation of shares D. None of these
120.In case of consolidation of share capital, the total number of shares ………….
A. Increases B. Decreases
C. Does not change D. None of these
123.CRR stands for …………
A. Current Reserve Ratio B. Capital Reserve Ratio
C. Cash Reserve Ratio D. Capital Redemption Ratio
124.SLR stands for ……………
A. Savings Level Ratio B. Statutory Liquidity Ratio
C. Standard Liquidity Ratio D. None of these
112. C
113. D
114. C
115. A
116. D
117. C
118. B
119. B
120. B
123. C
124. B
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 byHolding 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 twopreference 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
MID SEMESTER EXAMINATION
ADVANCED ACCOUNTING
MCQS = OCTOBER - 2013
(1) As per AS-14 purchase consideration includes payments made to _______ of Transferor Company.
(a) Only Equity Shareholders
(b) Only Preference share holders
(c) Both Equity and Preference Share holders
(d) Equity & Preference shareholders and Debenture holders.
(2) The profits earned by a subsidiary company before acquisition by holding company is known as:
(a) Revenue Profits
(b) Post acquisition Profits
(c) Capital Profits
(d) Super Profits
(3) When there is goodwill arising on amalgamation in the financial statements of Transferee Company, Such goodwill should be amortized to income. The amortization period should not exceed:
(a) 7 years
(b) 10 years
(c) 6 years
(d) 5 years
(4) If the holding company receives dividend out of pre-acquisition profits of the subsidiary company it will be _______
(a) Credited to investment account
(b) Debited to investment account
(c) Credited to consolidated profit and loss a/c
d) Debited to consolidated profit and loss a/c
(5) Which of the following statements is/ are true?
Holding company can acquire controlling interest over the subsidiary company by -
(a) Holding more than 50% of shares in subsidiary company having voting rights
(b) Controlling the composition of the board of directors
(c) Controlling a holding company which controls a subsidiary company
(d) All of above
(6) Minority interest consist of :
(a) Proportional capital profits
(b) Face value of the shares held by outsiders
(c) Proportional revenue Profits
(d) All of the above (a) (b) and (c)
(7) A company has issued capital of 10,000 equity shares of Rs.10 each fully paid. It decides to convert its capital into 20,000 equity shares of Rs.5 each. It is a case of:
(a) Sub-division of share capital
(b) Consolidation of share capital
(c) Decrease in unissued share capital
(d) None of the above
(8) When amalgamation is in the nature of merger, the accounting method to be followed is:
(a) Purchase Method
(b) Consolidated Method
(c) Equity Method
(d) Pooling of interest method
(9) 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
(10) Under the "purchase method of accounting" the transferee companies incorporate in its-books :
(a) The assets and liabilities of the transferor company
(b) The assets, liabilities and statutory reserves of the transferor company
(c) The assets, liabilities and non-statutory reserves of the transferor company
(d) The assets, liabilities and reserves of the transferor company
MID SEMESTER EXAMINATION
ADVANCED ACCOUNTING
MCQS = SEPTEMBER - 2017
1. With reference to consolidated financial statements, a group means
A. A parent
B. All subsidiaries
C. A parent and all its subsidiaries
D. None of A, B and C
2. In Amalgamation of companies, under the "purchase method of accounting" the
transferee company incorporate in its books _______________.
A. The assets, liabilities and statutory reserves of the transferor company
B. The assets, liabilities and non-statutory reserves of the transferor company
C. The assets, liabilities and reserves of the transferor company
D. The assets and liabilities of the transferor company
3. A company has issued capital of 10,000 equity shares of Rs. 10 each fully paid. It decides to convert its capital into 20,000 equity shares of Rs. 5 each. It is a case of ___________.
A. Conversion of shares into stock
B. Sub-division of share capital
C. Conversion of stock into shares
D. Consolidation of share capital
4. In case of amalgamation in the nature of merger, liquidation expenses of the transferor company borne by the transferee company are debited to ________
A. Profit & loss account
B. Goodwill account
C. Realization account
D. None of A,B and C
5. Holding company valued plant of subsidiary company at Rs 3,00,000 on date of acquisition i.e. on 01/10/2016. The effect of same has not been given in the books of subsidiary company. Subsidiary company charges depreciation. @ 10% p. a. on opening value of plant. Closing value of plant as per Balance Sheet as on March 31, 2017 is Rs 2,61,000. Additional depreciation to be charged would be:
A. Rs 600
B. Rs 500.
C. Rs 700
D. Rs 400
6. On July 01, 2016, H Ltd. acquired 12,000 equity shares of S Ltd. for a consideration of Rs.15,00,000. The share capital of S Ltd. consists of 15,000 equity shares of Rs. 100 each. The balances of General reserve and Profit and loss account of S Ltd. are as under:
6 Particulars
6 As on July 01,2016
6 As on March 31,2017 (RS.)
General Reserve
2,40,000
3,00,000
Profit and loss account
2,00,000
2,50,000
The amount of minority interest shown in the Consolidated Balance Sheet as on
March 31, 2017 is
A. Rs.4,60.000
B. Rs.4,10,000
C. Rs.5,12,500
D. None of A, B and C
7. H Ltd. acquired 80% equity shares of S Ltd on April 1, 2016 at a price of Rs.5,00,000. "The share capital of S Ltd. consists of 5,000 shares of Rs. 100 each. If the share of capital profits and revenue profits of H Ltd in S Ltd. are Rs. 1,28,000 and Rs.1,08,000 respectively. The cost of control of H Ltd in S Ltd is ___________
A. Rs.1,36,000 (Goodwill)
B. Rs. 28,000 (Capital Reserve)
C. Rs. 28,000 (Goodwill)
D. None of A, B and C
8. The Share Capital of S Ltd. consists of 75,000 equity shares of Rs. 10 each fully paid. On 01.10.2016, I Ltd. acquired 60,000 shares in S Ltd. at a premium of RS.2 per share. The ratio of holding and time ratio is:
A. 4:1,1:1
B. 1:1,1:1
C. 1:4, 1:1
D. None of A, B and C
9. ABC Ltd has sundry creditors of Rs.2,50,000. As a part of internal reconstruction scheme the sundry creditors agreed to waive 40% of their claim & to accept equity shares of Rs.50,000 of their renewed claim in part settlement. The sundry creditors would be shown in the balance sheet after reconstruction of the company at Rs. ________
A. Rs. 1,50,000
C. Rs. 1,00,000
B. Rs. 2,00,000
D. Nil
10. The closing balance of building is Rs. 3,15,000 as on 31.3.2017 after charging 10 % depreciation by subsidiary company. Holding company acquired the 80% shares of Subsidiary company on 1.4.2016 and revalued the building at Rs. 400,000. The book value of this building after revaluation and after charging depreciation as on 31.3.2017 shall be ______
A. Rs. 3,60,000
B. Rs. 3,00,000
C. Rs. 3,50,000
D. None of A,B and C
11. Goodwill arising on amalgamation is to be _________
A. Retained in the books of the transferee company
B. Amortized to income on a systematic basis normally over five years
C. Adjusted against profit and loss account balance
D.All of the above
12. For Amalgamation in the nature of merger. Shareholders holding not less than _________ of the face value of the equity shares of the transferor company become equity shareholders of Transferee Company by virtue of the amalgamation.
A. 90%
B. 51%
C. 75%
D. None of A.B and C
13. Bills receivable of Subsidiary company amounts to Rs 80,000 accepted by Holding company and Bills payable of Holding company amounts to Rs. 90,000 payable to Subsidiary company, there is a contingent liability of Rs. 10,000 for Subsidiary Company for bills discounted in bank. What will be the amount of Bills receivable and Bills payable in the Consolidated Balance Sheet?
A. B/R Nil and B/P Rs 10,000
B. B/R Rs 90,000 and B/P Rs 90,000
C. B/R 80,000 and B/P Rs 80,000
D. None of A, B and C
14. Debtors are Rs 15,000 and Rs. 12,000 of Holding and Subsidiary company respectively and Creditors amount to Rs 25,000 and Rs 35,000 respectively. During the year Subsidiary company had sold goods worth Rs 5,000 on credit to holding
company and also purchased goods worth Rs 4,000 on credit from holding company. At the time of preparing Consolidated Balance sheet what amount of consolidated Debtors and Creditors should be recorded?
A. Debtors Rs 18,000 and Creditors Rs 60,000
B. Debtors Rs 27,000 and Creditors Rs 51,000
C. Debtors Rs 18,000 and Creditors Rs 51,000
D. None of A, B and C
15. No Joumal entry is required for the cancellation of ________ share capital.
A. Called-up
B. Issued
C. Paid up
D. Unissued
16. Under Amalgamation, in the nature of purchase, to record the Statutory Reserves of the Transferor Company in the books of the Transferee Company, the relevant statutory Reserve account is credited and the corresponding debit is given to _____
A. Miscellaneous Account
B. Amalgamation Adjustment Account
C. Goodwill Account
D. Profit and Loss Account
17. The balance in the Capital Reduction Account, after writing off accumulated losses is transferred to ________ account.
A. General Reserve
B. Share Capital
C. Security Premium
D. Capital Reserve
18. The company which is amalgamated into another company is called as:
A. Transferor Company
B. Transferee Company
C. both A & B
D. None of A ,B and C
19. Following is/are inter-company transactions
A. Granting of loan by holding company to subsidiary company and Vice versa
B. Sale of goods on credit by the holding company to the subsidiary company and
Vice versa
C. Drawing of bills of exchange by the holding company on subsidiary company and Vice versa
D. All of the above
20. Minority interest shown in the consolidated balance sheet
A. Is Equity held by holding
B. Is Equity held by outsiders?
C. Is equity held by directors?
D. Is equity held by employee?
21. Reduction in share capital includes:
A. Refunding the surplus paid up capital
B. Writing off lost capital
C. both A & B
D. None of A, B and C
22. The goods sold by Subsidiary Company to Holding company is ________
A. Upward stream sale
B. Downward stream sale
C. Not considered as sale
D. None of A,B and C
23. B Ltd, a subsidiary company sold goods worth Rs. 12,000 to A Ltd., its holding company at 20% profit on cost. If 20% of the stock has remained unsold, theamount of unrealized profit to be deducted from the profits of selling company will be ________ (the holding ratio is 3:1)
A. 2,400
B. 2,000
C. 400
D. 300
24. The excess of cost of acquisition over the sum of paid up value of shares held and proportionate share in pre-acquisition profits is _______
A. Capital loss
B. Capital gain
C. Revenue Loss
D. Revenue gain
25. While preparing the consolidated balance sheet, the amount of cost of control (goodwill) is Rs. 2,50,000 and the consolidated amount of Capital Reserve is Rs. 2,20,000. Which of following treatment should be adopted?
A. Show Goodwill as intangible asset and Capital Reserve under the head Reserves &
Surplus
B. Show Goodwill Rs. 30,000 as Intangible asset
C. Do not disclose goodwill or Capital Reserve in the balance sheet
D. None of the A, B and C
26. Under pooling of interest method the difference between the purchase consideration and share capital of the transferor, company should be adjusted to:
A. General reserve and profit & loss account
B. Amalgamation adjustment account
C. Goodwill or capital reserve
D. None of A, B and C
27. Which of the following statements is/are true or false:
1. Goodwill or capital reserve arises only when the amalgamation is in the nature or merger
2.Under the pooling of interest method, the transferee company incorporates only the liabilities and assets of the transferor company.
3. Goodwill arising on amalgamation cannot be written off.
4. The process of two or more companies combining to form a new company is called reconstruction.
A. False, True, False, False
B. True, False, False, False
C. False, False, True, False
D. False, False, False, False
28. When the equity share capital face value is to be reduced from Rs. 10 (Rs. 7 called up) to Rs. 6 per share for the purpose of internal reconstruction then, what will be the amount credited to Capital reduction A/c?
A. Rs. 7
B. Rs. 1
C. Rs. 6
D. None of A, B and C
29. 'H' Limited acquired shares of 'S' Limited on 01.09.2016. The Profit and Loss Account of 'S' Limited showed a debit balance of Rs.3,00,000 on 1.4.2016 and balance of Profit and Loss Account on 31.03.2017 was Rs.1,80,000 (Cr.). The
Capital Profit/ Loss is Rs. ______
A. Rs.2,00,000 (Profit)
B. Rs.2,00,000 (Loss)
C. Rs.1,00,000 (Profit)
D. Rs.1,00,000 (Loss)
30. 'X' Limited take over 'Y' Limited on 01.04.2017 and discharges Purchase
Consideration as follows:-
(i) Issued 84,000 fully paid equity shares of Rs.10 each at par to the equity share
holders of 'Y' Limited.
(ii) Issued fully paid 11% preference shares of Rs.100 each to discharge the preference share holders (Rs.3,40,000) of 'Y' Limited at a premium of 10%.
(iii) It is agreed that the debentures of 'Y' Limited (Rs. 1,50,000) will be converted into equal number and amount of 12% debentures of X Limited.
The purchase consideration payable by 'X' Limited to 'Y' Limited is ________
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