CWA/ICWA Inter :: Advanced Financial Accounting : December 2004

I—10(AFA)
Revised Syllabus

Time Allowed : 3 Hours Full Marks : 100
The figures in the margin on the right side indicate full marks.
Answer Question No. 1 which is compulsory and any five from the rest.
Marks
1.
(a)

What is the main objective of the International Accounting Standards Board (IASB)?

(b)How can a limited company take over limited companies?
(c)

How is cost of control computed when an interest in subsidiary company is acquired in blocks over a period of time?

(d)Mention the funds out of which a company can purchase its own shares.
(e)

Should there be any specific disclosure under A.S. –1 in respect of companies under liquidation?

(f)Can proceeds from sale of Fixed Assets in excess of original cost be directly credited to Capital Reserve?
(g)

State four items which are not to be included while finding out future maintainable profit related to valuation of share.

(h)

In respect of dependent branch, the Head Office (under Branch Accounting method) follows certain methods of accounting. List them out clearly.

(i)

For accounting purposes, certain steps are required in case of amalgamation in the nature of purchase or absorption or external reconstruction. List out these steps clearly.

(j)Name clearly the valuation methods of equity shares of a company.
 2x10
2. The summarised balance sheets of three companies as on 31st March, 2004 are as follows. 16
P. Ltd.
Rs./lakh		Q. Ltd.
Rs./lakh		R. Ltd.
Rs./lakh
Equity shares of Rs. 10 each
Share premium
Profit and loss account
Long term loan
Proposed dividends
Sundry creditors		 90.00
18.00
20.00
15.00
13.50
16.50		 15.00
—
5.00
—
—
10.00		 25.00
—
20.00
—
—
5.000
173.0030.0050.00
Land and Buildings
Plant and equipment
Stock
Debtors
Bank		 60.00
50.00
35.00
20.00
8.00		 —
10.00
5.00
5.00
10.00		 5.00
5.00
10.00
15.00
15.00
173.0030.0050.00

P. Ltd. takes over R. Ltd, by buying all the assets. The purchase consideration is 6,00,000 equity shares at a premium of 10%. The creditors of R. Ltd. will be taken over by P. Ltd. The assets of R. Ltd. are valued at:

Land and building
Plant and equipment
Stock
Debtors		Rs.
10,00,000
3,00,000
7,00,000
12,50,000

P. Ltd. takes over Q. Ltd. by exchanging with the shareholders of Q. Ltd. two shares in P. Ltd. at a premium of 10% for every share they hold.
Required
(a)State the nature of the two types of acquisition involved here;
(b)Give journal entries to record the acquisitions in th books of P. Ltd;;
(c)Close the books of R. Ltd.; and;
(d)Prepare the post-acquisition balance sheet of P. Ltd.
3. (a)

Ramnaresh Ram is engaged in commercial farming activity. The following Trial Balance of his farm is drawn as on 31st March, 2004:
ParticularsDebit
Rs.		Credit
Rs.
Land and buildings
Capital
Stock 1st April, 2003		12,00,000
10,50,000
Crops
Fertilizers
Cattle
Sheep		20,000
5,000
15,000
10,000
Purchases
Seeds
Cattle
Sheep
Cattle feed		5,000
10,000
5,000
5,000
Sales
Cattle
Sheep
Milk
Vegetables
Paddy		75,000
50,000
25,000
75,000
50,000
Bank loan from Rural Development Bank (RDB)
Cash
Bank
Sundry debtors
Bank interest
Farm machinery
Salaries
20,000
80,000
75,000
20,000
1,25,000
2,50,000
Manager
Staff		15,000
35,000
Expenses
Crops
Livestock
Machinery repairs		15,000
10,000
5,000
Sundry creditors
Co-operative loan		35,000
65,000
16,75,00016,75,000
Please turn over
 
( 2 )
I—10(AFA)
Revised syllabus
Marks
Other relevant particulars
(a)Closing stock (31st March, 2004)

Cattle
Sheep
Cattle feed
Seeds
Crops
Fertilizers		Rs.
25,000
15,000
10,000
10,000
8,000
22,000
(b)Depreciation is to be provided at 10% on farm machinery.
(c)Farm produce consumed by the livestock Rs. 7,500.
(d)Salaries are to be apportioned as:
60% crops
40% livestock.
(e)Interest accrued on co-operative loan Rs. 4,000.
(f)Personal consumption:

Milk
Vegetables
Paddy		Rs.
3,000
2,000
8,000
(g)No depreciation is to be charged on land and buildings.
From the above information, Prepare the final accounts of Ramnaresh Ram for the year ended 31st March, 2004.
 5+5+6
4. The following particulars relate to three companies: X Ltd., Y Ltd, and Z Ltd.:
(a)X. Ltd

Total assets
Long term debt
Current liabilities
Equity shares of Rs. 10 each, fully paid
Equity shares of Rs. 10 each, Rs. 6,00 paid
Preliminary expenses		 Rs. in lakh
28.00
7.00
5.00
6.00
3.00
0.50
(b)Y. Ltd
Summarised Profit & Loss Account for the year ended 31st March, 2004:

Sales
Cost of goods sold
Gross profit
Selling, distribution and general administrative expenses
Profit before interest and taxes (PBIT)		 Rs. in lakh
60.00
40.00
20.00
6.00
14.000
Extracts from the balance sheet as on 31st March, 2004:

Equity shares of Rs. 10 each
10% Preference shares of Rs. 10 each
11% Debentures
Reserve and surplus		 Rs. in lakh
25.00
8.00
10.00
7.00
The Applicable tax rate is 40%
(c)Z. Ltd
Extracts from the balance sheet at 31st March, 2004:
8% Preference shares (Rs. 10)
Equity shares (Rs. 10)
Share premium
Revenue reserve
Profit and loss account
Fixed assets
Advertisement suspense account		 Rs. in lakh
10.00
20.00
4.00
5.00
6.00
25.00
2.00
Other information:
(i)Fixed assets are revalued by professional valuers at Rs. 28,00,000
(ii)The company has an unrecorded obligation of Rs. 1,50,000
(iii)Maintainable after tax profit is Rs. 7,50,000
(iv)Normal return on equity fund is 12%.
Calculate the following:
(a)For X Ltd., assets based value for each category share based on liquidation assumption:
(b)For Y Ltd. equity share value based on a price earnings ratio of 8; and
(c)

For Z Ltd., net assets value per equity share after taking into account the value of the company's goodwill, which is to be taken at 3 years purchase of excess profits applicable to equity fund, normal return being 12%.

 6+4+6
 
( 3 )
I—10(AFA)
Revised syllabus
Marks
5. The cost structure of All-in-one Ltd. is as under:
Materials
Labour
Variable over heads
Fixed overheads
Net Profit		30%
20%
20%
15%
15%
Sales100%
Sales for 2003 amounted to Rs. 30,00,000
Future sales are expected to increase by 60% in 2004 and on that basis loss of profit policy was taken on 01-01-2004. All expenses were insured.
In 2004, opening stock was Rs. 4,00,000. There was fire on 1st September, and dislocation continued up to 30th November. During which period sales amounted to Rs. 3,00,000. Sales for the corresponding period in the previous year were Rs. 8,00,000. Through 60% increase was budgeted, actual sales were only 25% higher. Sales in 2004 up to 31st August amounted to Rs. 7,50,000. Purchases during the period were Rs. 5,00,000. There was no opening stock or closing stock of finished goods, cost structure remained same as before. Calculate the insurance claim for (a) loss of profit and (v) loss of stock. 8+8
6. A Trader keeps his books under Single Entry system. On 31st March, 2004 his statement of affairs stood as follows:
X. Ltd.
Rs.		Y. Ltd.
Rs.		Z. Ltd.
Rs.
Equity shares (Rs. 10)
Revenue reserves
9% debentures
Sundry creditors		 8,00,000
9,60,000
10,00,000
4,40,000		 6,00,000
4,80,000
—
2,20,000		 4,00,000
3,20,000
5,00,000
1,80,000
32,00,00013,00,00014,00,000
Fixed assets (Net)
Investments:
48,000 shares in Y Ltd.
24,000 shares in Z Ltd.
Current assets		 17,00,000

7,60,000
—
7,40,000		 6,00,000

—
3,84,000
3,16,000		 10,00,000

—
—
4,00,000
32,00,00013,00,00014,00,000
The shares in subsidiary companies were acquired on 1st April, 2000.
Balances in revenue reserve accounts as on 1st April, 2000 were as follows:
X. Ltd.
Rs.		Y. Ltd.
Rs.		Z. Ltd.
Rs.
4,70,00080,00036,000
You are required to prepare the consolidated Balance Sheet of X Ltd. and its subsidiaries as on 31st March, 2004. All relevant workings must be shown. 6+2x5=16
7.

As a Management Accountant, you are advised by a corporate house to draft a scheme of Reconstruction Accounts. While framing the scheme, what factors should be taken into consideration by you as an expert.

 16
8. Write Short notes on:-
(a)Consolidated fund of India;
(b)Contingency fund;
(c)Appropriation Act;
(d)The mode of classification of services in the Central Budget..
4x4=16

__________

 

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