|Total No. of Questions— 6]||[Total No. of Printed Pages—5|
|Time Allowed : 3 Hours||Maximum Marks : 100|
|Answer all questions.|
|Working notes should form part of the answer.|
|Wherever necessary, suitable assumptions may be made by the candidates.|
|1.|| The summarized Balance Sheets of Kush Ltd. and Shuk Ltd. as at 31st March, 2010 are as follows: |
You are required to consolidate the accounts of the two companies and prepare a Consolidated Balance Sheet of Kush Ltd. and its subsidiary as at 31st March,2010.
|2.||(a)|| The summarized Balance Sheet of ‘Janmejay’ Private Ltd. as on 31.03.2010 is as under: |
A holder of 10,000 equity shares in the company has agreed to sell these shares at a value based on the above Balance Sheet, but subject to adjustment of the valuation of the following:
|(b)|| From the following data compute the Economic Value Added: |
|3.||(a)|| Modern Cars Ltd. is engaged in the business of manufacture of electric passenger cars. The Company requires you to determine the value of its goodwill also showing the leverage effect on goodwill. Its Balance Sheet as on 31.03.2010 is as under: |
The closing exchange rate for the U.S. dollar was INR 48. There was a loss for the year ended 31.03.2010 owing to write down of cost of acquisition of non trade investments by 4%. There was no other transaction under non-trade investments during the year.
Current year depreciation charged on historical cost was Rs. 100 lakhs. Current cost of Fixed assets is determined at Rs. 2,000 lakhs.
While current cost of closing stock is Rs.367, that of the opening stock was Rs. 200 lakhs against its historical cost of Rs. 148 lakhs. The market value of non-trade Investments at the year end was Rs. 300 lakhs. The overseas debtors made settlements in U.S. $ only.
The industry average rate of return on current cost of capital employed is 12% on long-term debt, and 15% on equity. The opening balance in general reserve was Rs. 150 lakhs. While prevailing tax rate is 30% such rate is expected to decline by 5%.
Using the above information you are required to arrive at value of the goodwill of the company under equity and long-term fund approaches and also show the leverage effect on Goodwill
|(b)||Aakshaya Ltd. has given a 12.50% fixed rate loan to its subsidiary Shaya Ltd. Aakshaya Ltd. measures this loan at an amortised cost of Rs. 2,50,000. Aakshaya Ltd. has plans to hive off the receivable at a later stage and as a measure to safeguard against fall in value of its dues enters into a pay-fixed, receive floating interest rate swap to convert the fixed interest receipts into floating interest receipts. Aakshaya Ltd. designates the swap as a Hedging instrument in a fair value hedge of the Loan Asset. |
Over the following months, market interest rates increase and Aakshaya Ltd. earns interest income of Rs. 25,000 on the loan and Rs. 1,000 as net interest payments on the swap. The Fair value of the Loan Asset decreases by Rs. 5,000 while that of the interest rate swap increases by 5,000. You are informed that all conditions required for the Hedge Accounting are satisfied. You are required to pass Journal Entries, with suitable narrations, in the books of Aakshaya Ltd. to record the above transactions.
|4.||(a)|| Perrotte Ltd. has the following Capital Structure as on 31.03.2009: |
The Shareholders of Perrotte Ltd., on the recommendation of their Board of Directors, have approved on 12.09.2009 a proposal to buy back the maximum permissible number of Equity shares considering the large surplus funds available at the disposal of the company.
The prevailing market value of the company’s shares is Rs. 25 per share and in order to induce the existing shareholders to offer their shares for buy back, it was decided to offer a price of 20% over market.
You are also informed that the Infrastructure Reserve is created to satisfy Income–tax Act requirements.
You are required to compute the maximum number of shares that can be bought back in the light of the above information and also under a situation where the loan funds of the company were either Rs. 1,200 crores or Rs. 1,500 crores.
Assuming that the entire buy back is completed by 09.12.2009, show the accounting entries in the company’s books in each situation. Narrations should form part of your answer.
|(b)|| Friendly Ltd granted Rs. 100 lakhs as loan to its employees on 1st Particulars January, 2009 at a concessional rate of interest of 4 per cent per annum on the condition that the loan is to be repaid in five equal annual installments along with interest thereon. You are informed that the prevailing lending rate for such risk profiles is 10% p.a. You are required to find out at what value the loan should be recognized initially and the amount of annual amortization till closure thereof. Show Journal Entries with appropriate narrations that will be recorded in the company’s Books in the year 2009. |
[Present value of an Indian Rupee at a discount rate of 10 per cent per annum will be .9090, .8263, .7512, .6829 and .6208 which is to be adopted for purposes of calculation].
|5.||(a)|| A plant was acquired 15 years ago at a cost of Rs. 5 crores. Its accumulated depreciation as at 31st March, 2009 was Rs. 4.15 crores. Depreciation estimated for the Financial year 2009-10 is Rs. 25 lakhs. Estimated Net Selling Price as on 31st March, 2009 was Rs. 30 lakhs, which is expected to decline by 20 per cent by the end of the next financial year. |
Its value in use has been computed at Rs. 35 lakhs as on 1st April, 2009, which is expected to decrease by 30 per cent by the end of the Financial year.
|(b)|| ‘Suram’ Ltd. wants to re-classify its Investment in accordance with AS 13. Decide on the treatment to be given in each of the following cases: |
|(c)||On 1st December, 2009, “Sampath” Construction Company Limited undertook a contract to construct a building for Rs. 108 lakhs. On 31st March, 2010 the company found that it had already spent Rs. 83.99 lakhs on the construction. A prudent estimate of additional cost for completion was Rs. 36.01 lakhs. |
What is the provision for foreseeable loss, which must be made in the Final Accounts for the year ended 31st March, 2010 based on AS 7 “Accounting for Construction Contracts.”
|6.||(a)|| From the following data in respect of an employer kindly calculate the total value of human Capital under ‘Lev and Schwartz’ Model: |
Retirement age is 55 years. Apply discount factor of 20%. In calculation of total value of human factor the lowest age of each class should be taken. Annuity factor @ 20 per cent are:
|(b)||Refiners and Projects Limited is a company in the oil and gas sector. It undertakes extensive research and development work as part of its operations. It has till the end of the financial year 31 |
The development of a new process was completed in the accounting year 2008-2009 after incurring an expenditure of Rs. 322.26 crores. In the accounting year 2009-2010, the company implemented the new process resulting in a post tax saving of Rs. 100 crores in the first year of operation and savings of Rs. 80 crores per annum thereafter for the next four years. March, 2008 spent Rs. 592.23 crores on research expenses.
The cost of capital to the company is 12 per cent.
Kindly indicate how you will, in the background of accounting standards prescribed, proceed to record the transactions in the books of accounts of the company.
You are given to understand that the research expenses shown above do not include any general or selling and administrative expenses.
The present value discounted at 12 per cent of a Rupee can be adopted at .893, .797, .712, .636 and .567 for the purposes of calculation.