Reference no: EM13257092

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: -

	Rs.
Stock on 1st January 2007 (Invoice price)	15,000
Sundry debtors on 1st January	9,000
Cash in hand opening balance	400
Office furniture on 1st January	1,200
Goods invoiced from the head office (invoice price)	80,000
Goods returned to head office	1,000
Goods returned by debtors	480
Cash received from debtors	30,000
Cash sales	50,000
Credit sales	30,000
Discount allowed to debtors	30
Expenses paid by the head office:-
Rent	1,200
Salary	2,400
Stationary and printing	300
Petty expenses paid by branch manager	280
Stock on 31st December 2007 at invoice price	14,000
Depreciation is to be provided on branch furniture at 10% p.a.

Q. 3 P Limited is considering the acquisition of R limited. The financial data at the time of acquisition being:

 

Net profit after tax (Rs. In lakhs)	60	12
Number of shares (lakhs)	12	5
Earning per share (Rs.)	5
Market price per share (Rs.)	150	48
Price earning ratio	30	20

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.