A/c doubt plz help

akash according to AS 2 inventory should be valued at cost or market value which ever is higher . so no change in profits. goodwill=2000+26100+31200/3

Originally posted by : mounika
	akash according to AS 2 inventory should be valued at cost or market value which ever is higher . so no change in profits. goodwill=2000+26100+31200/3

@ monika- as per AS2 Inventory is valued at cost or net realizable value which ever is less.....n not higher.

sorry so cost or nrv which ever is lower . deduct cost price of such goods from gross profit and then calculate goodwil

Hi Akash, the above answer is absolutely wrong. goodwill is always valued on the basis of correct profits. so if there is any error while calculating the profit u need to rectify  the same. the correct profits are calculated as under :

                                                       1998-99             1999-00               2000-01

profits given                                   2,000                     26,100             31,200

( - )closing stock overvalued                                      (2,200)             (6,200)

(+) opening stock overvalued                                                                2,200

correct profits                               2,000                        23,900             27,200

average profits                 2,000 + 23,900 + 27, 200

                                                       3

                                             17,700

since nothing is mentioned about no. of years purchase, it will be taken as 1

therefore, goodwill  = 17,700 x 1 = 17,700

Originally posted by : shakuntala chhangani
	Hi Akash, the above answer is absolutely wrong. goodwill is always valued on the basis of correct profits. so if there is any error while calculating the profit u need to rectify  the same. the correct profits are calculated as under :                                                        1998-99             1999-00               2000-01 profits given                                   2,000                     26,100             31,200 ( - )closing stock overvalued                                      (2,200)             (6,200) (+) opening stock overvalued                                                                2,200 correct profits                               2,000                        23,900             27,200 average profits                 2,000 + 23,900 + 27, 200                                                        3                                              17,700 since nothing is mentioned about no. of years purchase, it will be taken as 1 therefore, goodwill  = 17,700 x 1 = 17,700

Mam I got one question dont we have to use weighted avg method since profit has increasing trend

Hi again, the answer to ur 1st question is :

(a) the ratio of shares applied and shares alloted is 6:5 (2,40,000 : 2,00,000)

since 4,000 shares were alloted to E, it means he must have applied for 4,800 shares and have paid application money for those many shares. ( 4,000 x 6/5).

total amount paid by E = 4,800 x Rs. 20 = 96,000

this amt. will be transferred to share forfeiture a/c at the time of forfeiture of E,s shares.

(b) F has paid application and allotment i.e Rs. 20 and Rs. 50 = Rs. 70 

however, Rs. 50 of allotment includes premium of Rs. 20  which has already been credited to securities premium a/c at the time allotment money was due, by application of sec. 78, it can not be used for any purposes other than those mentiones under s. 78(2). hence amount available will be Rs. 20 application + Rs. 30  (Rs. 50 - Rs. 20 premium) of allotment = Rs. 50 per share

no. of F's shares  = 6,000

amount to be transferred to S.F a/c = 6,000 x Rs. 50 = Rs. 3,00,000

(c) Except E, every other shareholder has paid premium money hence -

total no. of shares issued = 2,00,000

default in payment of premium = 4,000

shares premium paid on = 1,96,000 shares

total premium paid = 1,96,000 x Rs. 20 = 39,20,000

(d) since E,s 4,000 shares have been reissued, there will be no balance in share forfeiture a/c for his shares

out of F's 6,000 shares , 4,000 shares have been reissued therefore there will be balance in share forfeiture a/c for the remaining 2,000 shares @ Rs. 50 per share (refer ans c above)

balance in share forfeiture account = 2,000 shares x Rs. 50 per share = Rs. 1,00,000

Regards, CA Shakuntala Chhangani

balance in 

Hi Akash, average means simple average. but if u don't get answer by simple average then only apply weighted average

Regards, CA Shakuntala Chhangani

Hi Ma'm

Why the F's share has not taken as 7200 shares; since as per the prorata basis he sh'd have applied 7200 shares...?. 7200 X 5 / 6

Pls xplain this also 'Money excess received on application was employed on account of sum
due on allotment as part of share capital'...

Thnx,

Girish

Hi Girish, the answer to ur question is :

U know whatever a co. receives from the  defaulting shareholder (except premium), it is transferred to S. F A/c.  In the above case the co. received total96,000 from E a part of which was towards application money due on shares alloted (4,000 shares x20 =80,000)and balance16,000 MONEY EXCESS RECEIVED ON APPLICATION to be adjusted towards allotment money due. now this can not be treated as premium as the person who is not paying the face value of shares can not be assumed to have paid premium. so this16,000 will be part recovery of face value of shares. It means in this case, premium is not received. and therefore, the whole amount received from E has been transferred to S F A/c

In case of F :

No. of shares applied for                                                                                     7,200 shares

no. of shares alloted                                                                                             6,000 shares

Amount paid on application by F (7,200 x 20)                                            1,44,000

application money due on 6,000 shares alloted to him (6,000 x 20) Rs. 1,20,000

excess application money to be adjusted towards allotment                24,000   

allotment money due   (6,000 x 50)                                                           3,00,000

excess application money adjusted                                                             24,000               

Balance paid by F                                                                                          2,76,000

total amount paid by F (1,44,000 + 2,76,000 OR 6,000shares x70) 4,20,000

(-) premium included in above amount (6,000 x20)                             Rs. 1,20,000

Balance paid towards face value to be transferred to S. F. A/c           Rs. 3,00,000

so whatever is received from F (excluding premium) is transferred to S.F A/c. since we get the amount directly (as the question says that F paid application and allotment money), there is no need to follow such lengthy procedure.

hope I have cleared ur doubt.

Regards, CA Shakuntala Chhangani

Thanks so much Ma'am...!!

Regards,

Girish

accounts-pl help

question no.46 of model test papers-vol 11, test paper no3 - pl help, thanx in advance

Ram, Mohan, Sohan are partners in a firm sharing profits and losses in the ratio of 5:3:2. The firm took out separate life policy of Rs.50000, Rs.100000, and Rs.150000 for Ram, Mohan and Sohan respectively.  The share of Mohan in the policy will be Rs.90000/- as per answer given. How?? 

Hi Bhavna, joint life policy is taken by the firm on the lives of partners either jointly or severally. In any case, policy remains the property of the firm. In the given case, the firm takes three JLPs on the individual lives of the partners and pays premium. So policies are the property of the firm total of which comes to 3,00,000 (50,000 + 1,00,000 + 1,50,000). Mohan share in the firm is 3/10. If u take 3/10 * 3,00,000, it is Rs. 90,000. 

Regards, CA Shakuntala Chhangani