SPECIAL STUDIES IN FINANCE
N.B.: 1) Section I is compulsory.                                                                          (60 marks)
2) In Section II solve any 3 out of 4 questions.                                       2hrs.
Section I
1. Concepts                                                                                                                         (5)
(a)Â Segment Reporting
(b)Â Sweat Equity
(c)Â Wealth Maximization
(d) Non-monitory items as per Accounting standard (AS) – 11.
(e)Â Return on Investment.
2. (A) Case study.
| Answer the following questions with the help of the following. |
(15) |
Greenland Ltd is an extending business set up having sales turnover of Rs. 3 Crores. It wants to double its turnover in the coming years and is very confident of achieving the same. The company produces and sells a basic drug component, being the raw material for OTC (over the counter) medicines.
The firm was set up 5 years ago, as partnership firm, but converted itself into a company 2 years ago. The current capital employed of the company is totally debt free at Rs. 2 crores and hopes to raise it to Rs. 4.5 crores, the term loan applied for being Rs. 2 crores.
The term lending institution offers the loan for 5 years tenure @ rate of 10% p.a. being advance towards purchase of additional to the primary security.
The company has its establishment at Silvasa which enjoys an 8 years tax holiday from the date of inception. Depreciation on new machinery is estimated at Rs. 40 lacs p.a. The average Tax applicable to a company is 30%. Expected ROI @ 18% p.a. for years 1 to 3 years after inception and 22% p.a. thereafter.
(a)Â Prepare a Flash Report of Greenland Ltd.
(b)Â Prepare Statement of Profitability and DSCR for the tenure of the loan.
(c)Â Comment on the viability of the project in brief.
| (B) Solve any 2 from the following: |
(10) |
(i)Â Â Â Explain the term financial assets as per accounting standards 31.
(ii)Â Â From the following information, compute EVA of TCS Ltd. (Assume 35% tax rate) Equity Share Capital ` 1,000 lakhs
12% Debentures ` 500 lakhs Cost of equity is 20% Financial leverage is 1.5 times.
(iii)Â Vijay Ltd. Is considering a project with an initial outlay of ` 1,00,000 comprising of machinery worth ` 75,000 and balance towards, working capital exclusively for this project ` 25,000. The entire amount can be borrowed at a rate of 12% p.a. The machinery can be used for 5 yrs at the end of which there is salvage value of ` 10,000. It can be assumed that the machinery is depreciated on SLM basis @20% p.a. for tax purpose. The tax rate assumes to be 35%. Evaluate whether the project is viable under NPV method. Also calculate the pay- back period and briefly recommend for the project given the following annual sales and expenses. Annual Sales – ` 2,00,000. Expenses excluding depreciation ` 20,000.
Section II
(Any 3, 10marks each)
3.   What is Lease Financing? Write advantages and limitations of Lease Financing?
Â
4.   PQR Ltd. has purchased a machine (cash price ` 1,09,737) on hire purchase system from HP Ltd. on 1-1-2010. The term are that PQR Ltd. would pay ` 40,000 as down payment on signing of the agreement and 4 annual equated instalment of ` 22,000 each including interest @10% commencing from the beginning of the next year. PQR ltd. charged depreciation @20% p.a. on WDV method in their Hire purchase contract. Prepare Journal Entries, Machinery account and HP Ltd. account for first 2 years in the book of PQR Ltd.
Â
5.   Manthan Ltd. Imported goods from Mayur company worth US$ 5 lakhs on 1 – 8 – 2009 when exchange rate was US$ 1 = ` 42.90. He agreed to pay in 5 instalments as below:
6.
| Date |
Instalments (US$) |
Rate of Exchange (`) |
|
10-10-2009 |
75,000 |
42.75 |
|
10-12-2009 |
1,50,000 |
43.50 |
|
10-2-2010 |
60,000 |
44.80 |
|
10-4-2010 |
75,000 |
42.90 |
|
10-6-2010 |
Balance |
43.00 |
The rate of exchange was ` 43.00 as on 31-3-2010. Pass journal entries (including those for cash) in the books of Mayur in accordance with AS-11.
- 7.    (a) XYZ Ltd has provided depreciation as per accounting records ` 20 lakhs but as per tax records ` 40 lakhs. The unamortized preliminary expenses, as per tax records are `
10, 000. There is adequate evidence of future profit sufficiency. Tax rate 30%. How much deferred tax asset /liability should be recognised as transition adjustment as per
| AS – 22? |
(5) |
(b) ABC Ltd. IPO opened on 6th October & closed on 8th October- Company issued 20 crore shares in the price band 1200-1300. Public applied for 200 crore shares. The BRLM J.P. Morgan in consultation with company announced issue price ` 1250. Average Price of application receive is ` 1270. Pass necessary journal entries in books of coal India Ltd. Refund and Allotment of shares of face value of ` 10 were done on
| 20th Oct. 2011. |
(5) |
ADMISSIONS IN PROGRESS FOR VI SEM
REFUND OF 50% FEES IN CASE OF KT
4 Comments