Advanced Financial Accounting – Question Bank (Sem 2), Exercises of Advanced Accounting

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AFA PAST QUESTIONS ALTERATION OF SHARE CAPITAL 1. Long Term Ltd., with an equity capital of Rs. 10,00,000 (Rs. 10 each), proposes to issue one bonus share for every two shares held. It has Rs. 3,00,000 in Capital Reserve; Rs. 2,00,000 in Securities Premium Account; Rs. 1,00,000 in Revaluation Reserve; Rs. 3,00,000 in General Reserve; and Rs. 1,50,000 in Surplus Account. You are required to: a. Pass necessary journal entries in the books of the company giving effect to the bonus issue by making optimum utilization of its reserves (3 marks); and b. Advise Mr. Arora, who held 20% (pre-bonus) equity in Long Term Ltd., on how the bonus issue would impact his shareholding/voting proportion in the company, and whether his bonus shares would carry dividend rights (2 marks). 2. The following is the abstract of the Balance sheet of Hathway Ltd. as on 31st March, 2017: Issued and paid-up Capital: | a 45 ,000 Equity shares of Rs. 10 each 4,50, 000 fully paid-u Less: Calls -in-arrears (5000 Equity 10,000 |4,40,000 sahres of Rs. 2 each) | | | 0000 Equity Shares of Rs. 10 each, Rs. 80.000 cash paid-up | r eserves and Surplus: apital Reserves (Realised in cash) Securities Premium Dividend Equalisation Reserve eneral Reserve Profit Loss Account 3,50, 000 a) to forfeit the shares on which final call of Rs. 2 each is due; b) to re-issue the forfeited shares@Rs. 12 each as fully paid-up; c) to issue fully paid-up bonus shares @ one fully paid bonus share for every two fully paid shares held; d) to use the minimum balance of profit and loss account. Pass necessary journal entries 3. Distinguish between Bonus Shares and Stock Split. 4. State the ESOP Life Cycle