CA PE II Group I : Accounting - May 2004

CA PE II - Group I • Accounting • May 2004

This Paper has 12 answerable questions with 0 answered.

Roll No…………………………
Total No. of Questions— 6]	[Total No. of Printed Pages—7
Time Allowed : 3 Hours	Maximum Marks : 100

Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued.
Answer all Questions
Wherever appropriate suitable assumptions should be made by the candidate.
Working notes should form part of the answer.
Marks

Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium.
If a candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued.

Answer all Questions

Wherever appropriate suitable assumptions should be made by the candidate.

Working notes should form part of the answer.

Marks

(a)

Sameera Corporation sells Computers on Hire–purchase basis at cost plus 25%. Terms of sales are 5,000/– as Down payment and 10 monthly installments of Rs. 2,500/– for each Computer. From the following particulars, prepare Hire–purchase Trading A/c for the year 2002–03 :

As on 1st April, 2002, last installment on 20 Computers were Outstanding as these were not due upto the end of the Previous year. During 2002–03, the Firm sold 120 Computers. As on 31st March, 2003 the position of installments outstandig were as under :

Instalments due but not collected
Instalment not yet due

4 Instalments on 4 Computers and Last installment on 9 Computers
6 Instalments on 50 Computers, 4 Instalments on 20and Last
Instlament on 40 Computers.

Two Computers on which 8 Instalments were due and one Instalment not yet due on 31.03.2003, had to be repossessed. Repossessed stock is valued at 50% of cost. All other Instalments have been received.

(0)

(b)

Rajatapeeta Bank Ltd. had extended the following credit lines to a Small Scale Industry, which had not paid any Interest since March, 1997 :

	Term Loan	Export Credit
Balance Outstanding on 31.03.03 DICGC/ECGC over Securities held Realisable value of Securities	Rs. 35 lakhs 40% Rs. 15 lakhs Rs. 10 lakhs	Rs. 30 lakhs 50% Rs. 10 lakhs Rs. 08 lakhs

Compute necessary Provisions to be made for the year ended 31st March, 2003.

(0)

Riu, Inu and Sinu were running Partnership business sharing Profits and Losses in 2 : 2 : 1 ratio. Their Balance sheet as on 31st March, 2003 stood as follows :

Balance Sheet as on 31st March, 2003
*(Figures in Rs.'000)*
Liabilities	Amount Rs.	Amount Rs.	Assets	Amount Rs.
Fixed Capital : Riu Inu Sinu Capital Account: Riu Sinu Unsecured Loans Current Liabilities	300.00 200.00 100.00 60.00 40.00	600.00 100.00 100.00 150.00	Fixed Assets Investments Current Assets : Stock 100.00 Debtors 275.00 Cash & Bank 125.00	400.00 50.00 500.00
		950.00		950.00

On 01.04.2003, they agreed to form a New company RIS (P) Ltd. with Inu and Sinu each taking up 200 shares of Rs. 10 each, which shall take over the firm as a going concern including Goodwill, but excluding Cash & Bank Balaces. The following are also agreed upon :

(a)	Goodwill will be valued at 3 year's purchase of super profits.
(b)	The actual profit for the purpose of Goodwill valuation will be Rs. 2,00,000.
(c)	The normal rate of return will be 18% per annum on Fixed Capital.
(d)	All other Assets and Liabilities will be taken over at Book values.
(e)	The Purchase Consideration will be payable party in Shares of Rs. 10 each and party in cash. Payment in Cash being to meet the requirement to Discharge Riu, who has agreed to retire.
(f)	Inu and Sinu are to acquire Interest in the new company at the raito 3 : 2.
(g)	Realisation expenses amounted to Rs. 51,000.

Yor are required to prepare Realisation Account, Cash and Bank Account, RIS (P) Limited Account and Capital Account of Partners.

(0)

Mr. Shankar of Mumbai finding himself unable to meet his creditors, has to prepare a Statement of Affairs, for which the following particulars are available on the date of his adjudication as Insolvent as on 31.03.2003 :
Leasehold property Rs. 2,00,000, estimated to realise, Rs. 1,90,000.
Plant & Machinery Rs. 80,000, estimated to realise Rs. 60,000.
Stock in Trade Rs. 40,000, estimated to realise Rs. 28,000
Book debts : Good Rs. 1,20,000, Doubtful Rs. 10,000, estimated to realise 50%, Bad Rs. 28,000, Bills in Hand Rs. 7,500.
Life Policy for Rs. 50,000, whose Surrender value is Rs. 10,000 held by the insurance company against a loan of Rs. 4,000.
Household Furniture Rs. 7,200, Household Debts Rs. 5,800.
Bills Discounted Rs. 12,000, Rs. 4,000 likely to be dishonored.
Bank Overdraft secured by Personal Guarantee of Shankar's Brother, and Second Mortgage on Leasehold Rs. 1,00,000.
Unsecured Creditors Rs. 3,00,000. Loan from Naresh Rs. 5,000 secured by a Second charge on Life Policy. Ground Rent on Household for three months accrued Rs. 750.
He could not pay his office clerks (two persons) salaries for six months, Rs. 3,000 and also Rates & Taxes amounting to Rs. 3,000 due to Government.
Prepare Statement of Affairs of Mr. Shankar as on 31.03.2003.

(0)

ABC Ltd. gives you the following informations. You are required to prepare Cash Flow Statement by using indirect methods as per AS-3 for the year ended 31.03.2004 :

Liabilities	31 March 2003 Rs.	31 March 2004 Rs.	Assets	31 March 2003 Rs.	31 March 2004 Rs.
Capital	50,00,000	50,00,000	Plant &
Retained			Machinery	27,30,000	40,70,000
Earnings	26,50,000	36,90,000	Less :
Debentures		9,00,000	Depreciation	6,10,000	7,90,000

				21,20,000	32,80,000
			Current Assets
			Debtors	23,90,000	28,30,000
			Less:Provision	1,50,000	1,90,000
Current Liabilities				22,40,000	26,40,000
Creditors	8,80,000	8,20,000	Cash	15,20,000	18,20,000
Bank Loan	1,50,000	3,00,000	Marketable securities	11,80,000	15,00,000
Liablility for expenses	3,30,000	2,70,000	Inventories	20,10,000	19,20,000
Dividend payable	1,50,000	3,00,000	Prepaid Expenses	90,000	1,20,000
	91,60,000	1,12,80,000		91,60,000	1,12,80,000

(i)	Net profit for the year ended 31st March, 2004, after charging depreciation Rs. 1,80,000 is Rs. 22,40,000.
(ii)	Debtors of Rs. 2,30,000 were determined to be worthless and were written off against the provision for doubtful debts account during the year.
(iii)	ABC Ltd. declared of Rs. 12,00,000 for the year 2003-2004.

(0)

Following are the Balance Sheet of companies as at 31.12.2003 :

Liabilities	D Ltd Rs.	V Ltd. Rs.	Assets	D Ltd. Rs.	V Ltd. Rs.
Equity share capital (Rs.100) General Reserve Investment allowance reserve Sundry Creditors	8,00,000 4,00,000 — 5,00,000	6,00,000 3,00,000 4,00,000 2,00,000	Goodwill Fixed Assets Investments Current Assets	6,00,000 5,00,000 2,00,000 4,00,000	— 8,00,000 4,00,000 3,00,000
	17,00,000	15,00,000		17,00,000	15,00,000

D Ltd. took over V Ltd. on the basis of the respective shares value, adjusting wherever necessary, the book values of assets and liabilities on the basis of the following information :

(i)	Investment allowance reserve was in respect of addition made to fixed assets by V Ltd.in the year 1997-2002 on which income tax relief has been obtained. In terms of the Income Tax Act, 1961, the company has to carry forward till 2006 reserve of Rs. 2,00,000 for utilisation.
(ii)	Investments of V Ltd. included 1000 shares in D Ltd. acquired at cost of Rs. 150 per share. The other investments of V Ltd. have a market value of Rs. 1,92,500.
(iii)	The market value of investments of D Ltd. are to be taken at Rs. 1,00,000.
(iv)	Goodwill of D Ltd. and V Ltd. are to be taken at Rs. 5,00,000 and Rs. 1,00,000 respectively.
(v)	Fixed assets of D Ltd. and V Ltd. are valued at Rs. 6,00,000 and Rs. 8,50,000 respectively.
(vi)	Current assets of D Ltd. included Rs. 80,000 of stock in trade received from V Ltd. at cost plus 25%.

The above scheme has been duly adopted. Pass necessary Journals Entries in the books of D Ltd. and prepare Balance Sheet of D Ltd., after taking over the business of V Ltd. Fractional share to be settled in cash, rest in shares of D Ltd. Calculation shall be made to the nearest multiple of a rupee.

(0)

Attempt any four of the following :

4x4=16

(a)

X Limited received a grant of Rs. 2 cores from the Central Government for the purpose of a special Machinery during 1998–99. The cost of Machinery was Rs. 20 cores and had a useful life of 9 years. During 2002–03, the grant has become refundable due to non–fulfillment of certain conditions attached to it. Assuming the entire grant was deducted from the cost of Machinery in the year of acquisition. State with reasons, the accounting treatment to be followed in the year 2002–03.

(0)

(b)

The company deals in three products, A, B and C, which are neither similar nor interchangeable.At the time of closing of its account for the year 2002-03. The Historical Cost and net realisable value of the items of closing stock are determined as follows :

Items	Historical Cost (Rs.in lakhs)	Net Realisable Value (Rs.in lakhs)
A B C	40 32 16	28 32 24

What will be the value of Closing Stock ?

(0)

(c)

During the current year 2002-03, X Limited made the following expenditure relating to its plant building :

	Rs. in lakhs
Routine Repairs Repairing Partial replacement of roof tiles Substantial improvements to the electrical wiring system which will increase efficiency	4 1 0.5 10

What amount should be capitalized ?

(0)

(d)

A plant was depreciated under two different methods as under :

Year	SLM (Rs.in lakh)	W.D.V (Rs.in lakh)
1 2 3 4 5	7.80 7.80 7.80 7.80 31.20 7.80	21.38 15.80 11.68 8.64 57.50 6.38

What should be the amount of resultant surplus/deficiency, if the company decides to switch over from W.D.V. method to SLM method for first four years ? Also state, how will you treat the same in Accounts.

(0)

(e)

Write a short note on Firm underwriting and Partial underwriting along with firm underwriting.

(0)

(f)

Briefly explain the methods of accounting for amalgamation as per Accounting Standard–14.

(0)

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