|Total No. of Questions — 7]||[Total No. of Printed Pages — 12|
|Time Allowed : 3 Hours||Maximum Marks : 100|
| Answers to questions are to be given only in English except in the case of candidates who |
have opted for Hindi Medium. If a candidate has not opted for Hindi medium, his/her answers
in Hindi will not be valued.
|Question No. 1 is compulsory.|
|Candidates are also required to answer any five questions from the remaining six questions.|
|Working notes should form part of the respective answers.|
| Wherever necessary, candidates are permitted to make suitable assumptions which should be|
disclosed by way of a note
|1.||(a)||Primus Hospitals Ltd. had acquired 40 units of Doppler scan machines from Holiver USA at a cost of US $ 165,100 per unit in the beginning of Financial Year 2008–09. The prevailing rate of exchange was Rs. 50 to the US $. The acquisition was partly funded out of a government grant of Rs. 5 crore. The grant relating to such machines was given with a rider that in the event of a change in management, the entity is bound to return the grant. In April 2011, 51% control in the company was taken over by an overseas investor. The expected productive period of such an asset is normally reckoned at 5 years. The depreciation rate adopted was 20% p.a. S.L.M. basis. The company had incurred expenditure of US $ 4000 towards Bank charges and Rs. 7500 per unit as sea freight. You are also informed that neither Capital Reserve nor deferred Income account has been maintained by the company. You are required to suggest the accounting treatment as a result of the return of the grant, in the light of the relevant AS.||5||(0)|
|(b)||The following balances are extracted from the Books of Ram Ltd. a real estate company on 31st March, 2011 |
|(c)||On 1st April, 2010, A company offered 100 shares to each of its 500 employees at Rs. 50 per share. The employees are given a month to decide whether or not to accept the offer. The shares issued under the plan (ESPP) shall be subject to lock–in on transfers for three years from grant date. The market price of shares of the company on the grant date is Rs. 60 per share. Due to post–vesting restrictions on transfer, the fair value of shares issued under the plan is estimated at Rs. 56 per share. |
On 30th April, 2010, 400 employees accepted the offer and paid Rs. 50 per share purchased. Nominal value of each share is Rs. 10.
Record the issue of shares in the book of the company under the aforesaid plan.
|(d)||From the following details, compute the total value of human resources of skilled and unskilled group of employees according to Lev and Schwartz (1971) model. |
|2.||Kim and Kin floated a new company KimKin Ltd. on 1st April 2010 with a capital of Rs. 5 lakhs represented by 50,000 ordinary shares of Rs.10/- each, subscribed equally by both groups. |
Kimkin Ltd. made the following acquisitions on the same date:
You are supplied with the following information and requested to compile the consolidated Balance Sheet as on 31st March 2011, of the entire Group.
|3.||As part of its expansion Strategy White Ltd has decided to amalgamate its business with that of Black Ltd and a new company Black & White Ltd being incorporated on the 1st of September 2010 having an authorized equity capital of 2 crore shares of Rs. 10/- each. M/s Black & White Ltd. shall in turn acquire the entire ownership of White Ltd and Black Ltd in consideration for issuing its equity at 25% premium on 1st Oct.2010. It is also agreed that the consideration shall be based on the product of the profits available to equity shareholders of each entity, times its PE multiple. The Preference Shareholders & Debenture holders are to be satisfied by the issue of similar instruments in Black & White Ltd on 1–10–2010 in lieu of their existing holdings. Accordingly the relevant information is supplied to you as under: |
To augment the Cash retention level of Black & White Ltd it is decided that on Ist Oct 2010 Black& White Ltd. shall collect full share application money for the issue 20,00,000 equity shares @ 40% premium under Private Placement. The allotment of the shares will be made on 31–12–2010 and such shares shall qualify for dividend from 2011 only.
Black & White Ltd also shall avail a 12.50% TOD of Rs. 15 lakhs to meet its preliminary expenses and cost of working which amount to Rs. 12 lakhs and Rs. 2 lakhs respectively. The TOD will be availed on 1st Nov 2010 and closed on 31st Dec. 2010. Preliminary expenditure is tax deductible @ 20% each year.
Due to an accounting omission the opening inventory of Black Ltd of Rs. 5 Lakh & the closing stock of White Ltd. of Rs. 2.20 lakh was understated & overstated by 5% and 10% respectively.
The dividend schedule proposed is that all companies would pay interim dividend for equity, for the period from 1st Oct 2010 to 31st Dec. 2010. The rates of dividend being White Ltd. @ 5%, Black Ltd @ 2% and Black & White Ltd @ 3.5%. The preference Shareholders & debenture holders dues for the post take over period are discharged on 31.12.2010.
It is proposed that in the period Oct–Dec 2010 Black & White Ltd would carry out trade in futures that would generate an absolute post tax return of 18% by using the funds generated from the Private Placement. The trades would be squared off on 31–12–2010. Proceeds from such transactions are not liable to withholding taxes.
You are required to prepare a projected Profit & Loss A/c for the period ended 31st Dec.2010 and a Balance Sheet on that date for Black & White Ltd. The corporation tax rate for the company is 40%.
|4.||(a)||Prepare a value added statement for the year ended on 31–03–2011 and reconciliation of total value added with profit before taxation, from the profit and loss account of Paradise Ltd. for the year ended on 31–03–2011. |
The following additional information are given:
|(b)||Eagle Ltd had acquired 51% in Sparrow Ltd. for Rs. 75.80 lakhs on April, 1st 2010. On date of the acquisition Sparrow’s Assets stood at Rs. 196 lakhs and liabilities at Rs. 16 lakhs. The Net asset position of Sparrow Ltd as on 31st March, 2011 & 30th September 2011 were Rs. 280 lakhs & Rs. 395 lakhs respectively, the increase resulting from profits earned during the period. |
On 1st Oct, 2011 25.5% holdings were sold for Rs. 125 lakhs. You are required explain the nature of the relationship between the two companies on the relevant dates and the accounting adjustments that are necessary as a result of any change in the relationship. The profit arising on part sale of investment, carrying value of the portion unsold & goodwill/capital reserve that arises on change in nature of the investment may also be worked out by you.
|5.||The following is the Balance Sheet of BAT Ltd. as on 31st March, 2010: |
|6.||(a)||Life Industries Ltd (LIL) furnishes the following information from which you are required to calculate the Prevailing Economic Value Added of the company and also explain the reason for the difference, if any, between the EVA as calculated by you and the M.V.A.(Market Value Added) of LIL amounting to Rs. 14005 crore. |
It is a prevailing practice for companies in the industry to which LIL belongs to pay at least a dividend of 15% p.a. to its common shareholders.
|(b)||Sparrow Holdings is a S.E.B.I. Registered Mutual Fund which made its maiden N.F.O. (New Fund offer) on l0th April, 2010 @ Rs. 10/- Face Value per unit. Subscription was received for 90 lakhs units: An underwriting arrangement was also entered into with Affinity Capital Markets Ltd that agreed to underwrite the entire NFO of 100 lakh units on a commission of 1.5%. |
Out of the monies received Rs. 892.50 lakhs was invested in various capital market instruments. The marketing expenses for the N.F.O. amounted to Rs. 11.25 1akhs. During the F.Y. ended March, 2011 the Fund sold securities having cost of Rs. 127.25 lakhs (FV 54.36 lakhs) for Rs. 141.25 lakhs. The fund in turn purchased securities for Rs. 130 lakhs. The management expenses of the fund are regulated by S.E.B.I stipulations which state that the same shall not exceed 0.25% of the average funds invested during the year. The actual amount spent towards management expenses was Rs. 2.47 lakhs of which Rs. 47,000 was in arrear. The dividends earned on the investments held amounted to Rs. 2.51 1akhs of which a sum of Rs. 25,000 is yet to be collected. The fund distributed 80% of realized earnings. The closing Market Value of the Port folio was Rs. 1120.23 lakhs.
You are required to determine the closing per unit NAV of the fund.
|7.||Answer any four parts of this question:||4x4=16|
|(a)||Mega Ltd. issued Rs. 100,00,000 worth of 8% Debentures of face value Rs. 100/- each on par value basis on 1st Jan, 2011. These debentures are redeemable at 12% premium at the end of 2014 or exchangeable for Ordinary shares of Mega Ltd on 1 : 1 basis. The interest rate for similar debentures that do not carry conversion entitlement is 12%. You are required to calculate the value of the debt portion of the above compound financial instrument. The Present Value of the rupee at the end of years 1 to 4 at 8% and 12% are supplied to you as: |
|(b)||G Ltd acquired machine on 1st April, 2005 for Rs. 7 crore that had an estimated useful life of 7 years. The machine is depreciated on straight line basis and does not carry any residual value. On 1st April, 2009, the carrying value of the machine was reassessed at Rs. 5.10 crore and the surplus arising out of the revaluation being credited to revaluation reserve. For the YE March 2011 conditions indicating an impairment of the machine existed and the amount recoverable ascertained to be only Rs. 79 lakhs. You are required to calculate the loss on impairment of the machine and show how this loss to be treated in the books of G Ltd. G Ltd. had followed the policy of writing down the revaluation surplus by the increased charge of depreciation resulting from the revaluation.||(0)|
|(c)||FEE Ltd borrows a sum of Rs. 20 crore from COFEE Ltd. repayable as a single bullet payment at the end of 5 years. The interest thereon @ 5% p.a. is payable at yearly rests. Since the market rate is 8% FEE Ltd paid an origination fee of Rs. 2.40 Crores to COFEE Ltd to compensate COFEE Ltd for the lower rate of interest. Apart from the above, there are no other transactions between the two parties. You are required to show the value at which COFEE Ltd would recognize the lean and the annual interest thereon.||(0)|
|(d)||On 1st April, 2010 a mutual fund scheme had 9 lakh units, face value of Rs. 10 each outstanding. The scheme earned Rs. 81 lakhs in 2010–11. Out of which Rs. 45 lakhs was earned in first half year. 1 lakh units were sold on 30th Sep., 2010. at NAV Rs. 60. |
Show important accounting entries for sale of units and distribution of dividend at the end of 2010–11.
|(e)||BEE Ltd. has entered into a contract by which it has the option to sell its identified property, plant and equipment (PPE) to AXE Ltd. for Rs. 100 lakhs after 3 years whereas its current market price is Rs. 150 lakhs. Is the put option of BEE Ltd. a financial instrument? Explain.||(0)|