. Initially, the Cost of Capital Is Uncertain, so Construct Npv Profiles for the Two Projects (on the Same Graph) to Assist in the Analysis. the Profiles Cross at What Cost of Capital? What Is the Significance of That?

ACCOUNTS 32

(Three hours)

(Candidates are allowed additional 15 minutes for only reading the paper.

They must NOT start writing during this time)

Answer Question 1 (compulsory) and Question 2 (compulsory) from Part I and any other five questions from Part II.

The intended marks for questions or parts of questions are given in brackets [ ].

Transactions should be recorded in the answer book.

All calculations should be shown clearly.

All working, including rough work, should be done on the same sheet as, and adjacent to, the rest of the answer.

PART I

Question 1 [6 × 2]

Q1. Mention two differences between Premium on Issue of Debentures and Premium on Redemption of Debentures.

Answer:

Q2. Explain ‘pro-rata allotment of shares’ by means of a suitable example

Q3. Mention any two differences between Revaluation Account and Realisation Account.

Q4. Why is the word memorandum affixed to the Memorandum Joint Venture

Account ?.

Q5. Mention any four sources of funds.

Q6. When drafting a company balance sheet under Schedule VI Part I, under which heading and sub-heading will calls in arrear and calls in advance appear ?

PART II

Question 2The following is the Balance Sheet of Anju and Manju sharing profits in the ratio of 3:2 as on December 31, 2003 :Balance Sheet as at December 31, 2003 Liabilities | | Amount | Assets | | Amount |

| | (Rs.) | | | (Rs.) |

| | | | |

Creditors | | 12,000 | Plant and Machinery | 14,000 |

Loan by Anju’s brother | 5,000 | Furniture and Fixtures | 2,000 |

Loan by Manju | | 7,500 | Investment | | 5,000 |

General Reserve | | 1,250 | Stock | | 3,000 |

Capitals : | | | Debtors | 10,000 | |

Anju | 5,000 | | Less: provision | 500 | 9,500 |

Manju | 4,000 | 9,000 | Bank | | 5,750 |

Bank loan | | 7,000 | Profit and Loss | | 2,500 |

| | | | | |

Total | | 41,750 | Total | | 41,750 |

| | | | | |

The firm was dissolved on March 31, 2003....