| 1. | The Balance Sheets of three companies Angle Ltd., Bolt Ltd., and Canopy Ltd., as at 31st December, 2007 are given below: | Liabilities | Angle Ltd.
Rs. | Bolt Ltd.
Rs. | Canopy Ltd.
Rs. | Share capital
(Equity shares of Rs.100 each)
Reserves
Profit and Loss A/c
Sundry creditors
Bills payable
Angle Ltd. |
15,00,000
2,00,000
5,00,000
2,00,000
–
– |
10,00,000
1,25,000
2,75,000
2,50,000
–
1,00,000 |
6,00,000
75,000
2,50,000
1,00,000
50,000
80,000 | | 24,00,000 | 17,50,000 | 11,55,000 | Goodwill
Plant and Machinery
Furniture and Fittings
Shares in–
Bolt Ltd. (7,500 shares)
Canopy Ltd. (1,000 shares)
Canopy Ltd. (3,500 shares)
Stock in trade
Sundry debtors
Bills receivable
Due from–
Bolt Ltd.
Canopy Ltd.
Cash in hand | 2,50,000
4,00,000
2,00,000
9,00,000
1,50,000
–
1,00,000
1,40,000
50,000
1,20,000
80,000
10,000 | 5,80,000
2,50,000
1,50,000
–
5,20,000
1,50,000
70,000
20,000
–
–
10,000 | 4,50,000
3,25,000
1,40,000
–
–
1,60,000
70,000
–
–
–
10,000 | | Total | 24,00,000 | 17,50,000 | 11,55,000 |
| (a) | All shares were acquired on 1st July, 2006. | | (b) | On 1st January, 2006, the balances were: | Angle Ltd.
Rs. | Bolt Ltd.
Rs. | Canopy Ltd.
Rs. | Reserves
Profit and Loss account
Profit during 2006 were earned evenly over the year
| 1,00,000
50,000
3,00,000 | 1,00,000
50,000)Dr.
2,50,000 | 50,000
30,000
1,00,000 |
| | (c) | Each company declared a dividend of 10% in the year 2007 on its shares out of Profits for the year 2006; Angle Ltd. and Bolt Ltd. have credited their Profit and Loss account with the dividends received. | | (d) | The increase in reserves in case of Angle Ltd., Bolt Ltd., and Canopy Ltd., was effected in the year 2006. | | (e) | All the bills payable appearing in Canopy Ltd.’s Balance Sheet were accepted in favour of Bolt Ltd., out of which bills amounting Rs.30,000 were endorsed by Bolt Ltd., in favour of Angle Ltd. | | (f) | Stock with Bolt Ltd. includes goods purchased from Angle Ltd., for Rs.18,000. Angle Ltd., invoiced the goods at cost plus 20%. Prepare consolidated Balance Sheet of the group as at 31st December, 2007. Working should be part of the answer. Ignore taxation including dividend distribution tax, disclose minority interest as per AS 21. |
| 20 | (0) |
| 2. | The following are the Balance Sheets of Andrew Ltd. and Barry Ltd., as at 31.12.2007: | Andrew Ltd. | | (in Rs.’000s) | | Liabilities | | Assets | | Share capital
3,00,000 Equity shares of Rs.10 each
10,000 Preference shares of Rs.100 each
General reserve
Secured loans (secured against
pledge of stocks)
Unsecured loans
Current liabilities |
3,000
1,000
400
16,000
8,600
13,000 | Fixed assets
Stock (pledged with secured
loan creditors)
Other Current assets
Profit and Loss account | 3,400
18,400
3,600
16,600 | | 42,000 | | 42,000 | | Barry Ltd. | | (in Rs.’000s) | | Liabilities | | Assets | | Share capital
1,00,000 Equity shares of Rs.10 each
General reserve
Secured loans
Current liabilities |
1,000
2,800
8,000
4,600 | Fixed assets
Current assets | 6,800
9,600 | | 16,400 | | 16,400 |
Both the companies go into liquidation and Charlie Ltd., is formed to take over their businesses. The following information is given: | (a) | All Current assets of two companies, except pledged stock are taken over by Charlie Ltd. The realisable value of all Current assets are 80% of book values in case of Andrew Ltd. and 70% for Barry Ltd. Fixed assets are taken over at book value. | | (b) | The break up of Current liabilities is as follows: | Andrew Ltd.
Rs. | Barry Ltd.
Rs. | Statutory liabilities (including Rs.22 lakh in case of
Andrew Ltd. in case of a claim not having been
admitted shown as contingent liability)
Liability to employees |
72,00,000
30,00,000 |
10,00,000
18,00,000 |
The balance of Current liability is miscellaneous creditors. | | (c) | Secured loans include Rs.16,00,000 accrued interest in case of Barry Ltd. | | (d) | 2,00,000 equity shares of Rs.10 each are allotted by Charlie Ltd. at par against cash payment of entire face value to the shareholders of Andrew Ltd. and Barry Ltd. in the ratio of shares held by them in Andrew Ltd. and Barry Ltd. | | (e) | Preference shareholders are issued Equity shares worth Rs.2,00,000 in lieu of present holdings. | | (f) | Secured loan creditors agree to continue the balance amount of their loans to Charlie Ltd. after adjusting value of pledged security in case of Andrew Ltd. and after waiving 50% of interest due in the case of Barry Ltd. | | (g) | Unsecured loans are taken over by Charlie Ltd. at 25% of Loan amounts. | | (h) | Employees are issued fully paid Equity shares in Charlie Ltd. in full settlement of their dues. | | (i) | Statutory liabilities are taken over by Charlie Ltd. at full values and miscellaneous creditors are taken over at 80% of the book value. |
Show the opening Balance Sheet of Charlie Ltd. Workings should be part of the answer. | 16 | (0) |
| 3. | (a) | From the following information of Beta Ltd. calculate Earning Per Share (EPS) in accordance with AS–20: |
Year
31.3.08 | (Rs.)
Year
31.3.07 | | 1. | Net profit before tax | 3,00,000 | 1,00,000 | | 2. | Current tax
Tax relating to earlier year
Deferred tax | 40,000
24,000
30,000 | 30,000
(13,000)
10,000 | | 3. | Profit after tax | 2,06,000 | 73,000 | | 4. | Other information: | (a) | Profit includes compensation from Central Government towards loss on account of 1,00,000 NIL earthquake in 2005 (non–taxable) | | (b) | Outstanding convertible 6% Preference shares 1,000 issued and paid on 30.9.2006. Face value Rs.100, Conversion ratio 15 equity shares for every preference share. | | (c) | 15% convertible debentures of Rs.1,000 each total face value Rs.1,00,000 to be converted into 10 Equity shares per debenture issued and paid on 30.6.2006. | | (d) | Total no. of Equity shares outstanding as on 31.3.2008, 20,000 including 10,000 bonus shares issued on 1.1.08, face value Rs.100. |
|
| 8 | (0) |
| | (b) | From the following details in respect of loan funds of Excellent School of Management for 2007–08, prepare a statement showing changes in fund balance during the year: | Rs. | Fund balance at the end of the year
Loan fund matching grant from revenues funds
Private and Government grants
Other transfers from unrestricted revenue funds
Interest on loans
Investment income
Loan cancellations and write offs
Refunded to grantors
Administrative and Collection costs | 30,30,000
30,000
11,00,000
1,50,000
60,000
35,000
15,000
60,000
25,000 |
| 8 | (0) |
| 4. | (a) | From the following Profit and Loss account of New Mode Reporting Ltd., prepare a gross value added statement for the year ended 31st December, 2007. Show also the reconciliation between GVA and Profit before taxation: | Profit and Loss Account | | Rs.‘000s | Rs.‘000s | Income
Sales
Other income |
12,480
110 |
12,590 | | Expenditure | Production and Operational expenditure
Administrative expenses
Interest and other charges
Depreciation | 8,640
360
1,248
32 |
10,280 | Profit before tax
Less: Provision for tax
Profit after tax
Add: balance as per last Balance Sheet | 2,310
110
2,200
120
2,320 | Less:Transfer to Fixed assets replacement Reserve
Dividend paid
Surplus carried to Balance Sheet | 800
320 |
1,120
1,200 |
Additional information: | (i) | Production and Operational expenses consists of | Rs. | Consumption of Raw materials
Consumption of Stores
Local tax
Salaries to Administrative staff
Other Manufacturing expenses | 64,20,000
80,000
16,000
12,40,000
8,84,000 |
| | (ii) | Administrative expenses include salaries and commission to directors – Rs.10,000 | | (iii) | Interest and other charges include– | Rs. | (a)
(b)
(c)
(d) | Interest on bank overdraft
(overdraft is of temporary nature)
Fixed loan from SIDBI
Working capital loan from IFCI
Excise duties |
2,18,000
1,02,000
40,000
? |
| | (iv) | Excise duties amount to one-tenth of total value added by manufacturing and trading activities. |
| 10 | (0) |
| | (b) | Anischit Finance Ltd. is a non–banking finance company. It makes available to you the costs and market price of various investments held by it as on 31.3.2008: | (Figures in Rs. Lakhs) | | | Cost | Market Price | Scripts:
A. |
Equity Shares-
A
B
C
D
E
F
G |
60.00
31.50
60.00
60.00
90.00
75.00
30.00 |
61.20
24.00
36.00
120.00
105.00
90.00
6.00 | | B. | Mutual funds–
MF–1
MF–2
MF–3 |
39.00
30.00
6.00 |
24.00
21.00
9.00 | | C. | Government securities–
GV–1
GV–2 |
60.00
75.00 |
66.00
72.00 |
| (i) | Can the company adjust depreciation of a particular item of investment within a category? | | (ii) | What should be the value of investments as on 31.3.2008? | | (iii) | Is it possible to off–set depreciation in investment in mutual funds against appreciation of the value of investment in equity shares and government securities? |
| 6 | (0) |
|
| 5. | (a) | Golden Eagle Ltd., has been successful jewellers for the past 100 years and sales are against cash only. The company diversified into apparels. A young senior executive was put in charge of Apparels business and sales increased 5 times. One of the conditions for sales that dealers can return the unsold stocks within one month of the end of season. Sales return for the year was 25% of sales. Suggest a suitable Revenue Recognition Policy with references to AS–9. | 4x4=16 | (0) |
| | (b) | Discuss the concept of Cost v/s Fair value with reference to Indian Accounting Standards. | | (0) |
| | (c) | Why Human Resources Asset is not recognised in the Balance sheet? | | (0) |
| | (d) | A company has a scheme for payment of settlement allowance to retiring employees. Under the scheme, retiring employees are entitled to reimbursement of certain travel expenses for class they are entitled to as per company rule and to a lump-sum payment to cover expenses on food and stay during the travel. Alternatively employees can claim a lump sum amount equal to one month pay last drawn.
The company’s contentions in this matter are: | (i) | Settlement allowance does not depend upon the length of service of employee. It is restricted to employee’s eligibility under the Travel rule of the company or where option for lump–sum payment is exercised, equal to the last pay drawn. | | (ii) | Since it is not related to the length of service of the employees, it is accounted for on claim basis. |
State whether the contentions of the company are correct as per relevant Accounting Standard. Give reasons in support of your answer. | | (0) |
| 6. | (a) | XYZ Ltd., with a turnover of Rs.35 lakhs and borrowings of Rs.10 lakhs during any time in the previous year, wants to avail the exemptions available in adoption of Accounting Standards applicable to companies for the year ended 31.3.2008. Advise the management the exemptions that are available as per Companies (AS) Rules, 2006.
If XYZ is a partnership firm is there any other exemptions additionally available. | 8 | (0) |
| | (b) | Briefly explain any two of the following terms: | 2x4=8 | |
| | | (i) | IFRS | | (0) |
| | | (ii) | NACAS | | (0) |
| | | (iii) | Convergence of Accounting Standards with IFRS. | | (0) |
