CA PE II Group I : Accounting - May 2008

CA PE II - Group I • Accounting • May 2008

This Paper has 14 answerable questions with 0 answered.

Roll No………
Total No. of Questions — 6]	[Total No. of Printed Pages — 4
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

Following incomplete information of X Ltd. are given below:

Trading and Profit & Loss Account for the year ended 31^st March, 2008
	Rs.’000		Rs.’000
To Opening stock To Purchases To Direct expenses To Gross profit c/d To Establishment expenses To Interest on loan To Provision for taxation To Net profit c/d To Proposed dividends To Transfer to general reserve To Balance transferred to Balance sheet	700 ? 175 ? ? 740 60 ? ? ? ? ? ? ?	By Sales By Closing stock By Gross profit b/d By Commission By Balance b/f By Net profit b/d	? ? ? ? 100 ? 140 ? ?
Balance Sheet as at 31st March, 2008
Liabilities	Amount (Rs.’000)	Assets	Amount (Rs.’000)
Paid–up capital General reserve: Balance at the beginning of the year Proposed addition Profit and loss account 10% Loan account Current liabilities	1,000 ? ? ? ? ? ?	Fixed assets: Plant & machinery Other fixed assets Current assets: Stock Sundry debtors Cash at bank	1,400 ? ? ? 125 ?

Other information:

(i)	Current ratio is 2:1.
(ii)	Closing stock is 25% of sales.
(iii)	Proposed dividends to paid–up capital ratio is 2:3.
(iv)	Gross profit ratio is 60% of turnover.
(v)	Loan is half of current liabilities.
(vi)	Transfer to general reserves to proposed dividends ratio is 1:1.
(vii)	Profit carried forward is 10% of proposed dividends.
(viii)	Provision for taxation is equal to the amount of net profit of the year.
(ix)	Balance to credit of general reserve at the beginning of the year is twice the amount transferred to that account from the current year’s profits.
All working notes should be part of your answer. You are required to complete:
(i)	Trading and Profit and Loss account for the year ended 31^st March, 2008 and
(ii)	The Balance Sheet as on that date.

(0)

The Balance Sheet of A Limited and B Limited as at 31^st March, 2008 are as follows:

Liabilities	A Ltd.	B Ltd	Assets	A Ltd.	B Ltd
Equity share of Rs.10 each General reserve Creditors	20,00,000 4,00,000 6,00,000	12,00,000 2,20,000 3,80,000	Sundry assets 40,000 Equity shares in A Ltd.	30,00,000 —	14,00,000 4,00,000
	30,00,000	18,00,000		30,00,000	18,00,000

A Ltd. absorbed B Ltd. on the basis of intrinsic value of the shares. The purchase consideration is to be discharged in fully paid-up equity shares. A sum of Rs.1,00,000 is owed by A Ltd. to B Ltd., also included in the stock of A Ltd. is Rs.1,20,000 goods supplied by B Ltd. at cost plus 20%.
Give Journal entries in the books of both the companies, if entries are made at intrinsic value. Also prepare Balance Sheet of A Ltd. after absorption.

(0)

S and T were carrying on business as equal partners. Their Balance Sheet as on 31^st March, 2007 stood as follows:

Liabilities		Rs.	Assets	Rs.
Capital accounts: S T Creditors Bank overdraft Bills payable	6,40,000 6,60,000	13,00,000 3,27,500 1,50,000 62,500	Stock Debtors Furniture Joint life policy Plant Building	2,70,000 3,65,000 75,000 47,500 1,72,500 1,72,500
		18,40,000		18,40,000

The operations of the business was carried on till 30^th September, 2007. S and T both withdrew in equal amounts, half the amount of profits made during the current period of 6 months after 10% p.a. had been written off on building and plant and 5% p.a. written off on furniture. During the current period of 6 months, creditors were reduced by Rs.50,000, Bills payables by Rs.11,500 and bank overdraft by Rs.75,000. The Joint life policy was surrendered for Rs.47,500 on 30^th September, 2007. Stock was valued at Rs.3,17,000 and debtors at Rs.3,25,000 on 30^th September, 2007. The other items remained the same as they were on 31^st March, 2007.

On 30^th September, 2007 the firm sold its business to ST Ltd. The goodwill was estimated at Rs.5,40,000 and the remaining assets were valued on the basis of the balance sheet as on 30^th September, 2007. The ST Ltd. paid the purchase consideration in equity shares of Rs.10 each. You are required to prepare a Realisation account and Capital accounts of the partners.

(0)

The Washington branch of XYZ Limited, Mumbai sent the following trial balance as on 31^st December, 2007:

	$	$
Head office A/c Sales Debtors and creditors Machinery Cash at bank Stock, 1 January, 2007 Goods from H.O. Expenses	— — 4,800 24,000 1,200 11,200 64,000 5,000 1,10,200	22,800 84,000 3,400 — — — — — 1,10,200

In the books of head office, the Branch A/c stood as follows:

Washington Branch A/c
	Rs.		Rs.
To Balance b/d To Goods sent to branch	8,10,000 29,26,000 37,36,000	By Cash By Balance c/d	28,76,000 8,60,000 37,36,000

Goods are sent to the branch at cost plus 10% and the branch sells goods at invoice price plus 25%. Machinery was acquired on 31^st January, 2002, when $ 1.00 = Rs.40.
Rates of exchange were:

1^st January, 2007
31^st December, 2007
Average

$ 1.00
$ 1.00
$ 1.00

=
=
=

Rs.46
Rs.48
Rs.47

Machinery is depreciated @ 10% and the branch manager is entitled to a commission of 5% on the profits of the branch.
You are required to:

(i)	Prepare the Branch Trading & Profit & Loss A/c in dollars.
(ii)	Convert the Trial Balance of branch into Indian currency and prepare Branch Trading & Profit and Loss A/c and the Branch A/c in the books of head office.

(0)

(a)

The following are the figures extracted from the books of New Generation Bank Limited as on 31.3.2008:

	Rs.
Interest and discount received Interest paid on deposits Issued and subscribed capital Salaries and allowances Directors fee and allowances Rent and taxes paid Postage and telegrams Statutory reserve fund Commission, exchange and brokerage Rent received Profit on sale of investments Depreciation on bank’s properties Statutory expenses Preliminary expenses Auditor’s fee	37,05,738 20,37,452 10,00,000 2,00,000 30,000 90,000 60,286 8,00,000 1,90,000 65,000 2,00,000 30,000 40,000 25,000 5,000

The following further information is given:

(i)	A customer to whom a sum of Rs.10 lakhs has been advanced has become insolvent and it is expected only 50% can be recovered from his estate.
(ii)	There were also other debts for which a provision of Rs.1,50,000 was found necessary by the auditors.
(iii)	Rebate on bills discounted on 31.3.2007 was Rs.12,000 and on 31.3.2008 was Rs.16,000.
(iv)	Provide Rs.6,50,000 for Income–tax.
(v)	The directors desire to declare 10% dividend.

Prepare the Profit and Loss account of New Generation Bank Limited for the year ended 31.3.2008 and also show, how the Profit and Loss account will appear in the Balance Sheet, if the Profit and Loss account opening balance was Nil as on 31.3.2007.

(0)

(b)

Prepare the Fire Insurance Revenue A/c as per IRDA regulations for the year ended 31^st March, 2008 from the following details:

	Rs.
Claims paid Legal expenses regarding claims Premiums received Re–insurance premium paid Commission Expenses of management Provision against unexpired risk on 1^st April, 2007 Claims unpaid on 1^st April, 2007 Claims unpaid on 31^st March, 2008	4,90,000 10,000 13,00,000 1,00,000 3,00,000 2,00,000 5,50,000 50,000 80,000

(0)

Answer any four of the following:

4x4=16

(i)

(a)

X Ltd. purchased debentures of Rs.10 lacs of Y Ltd., which are traded in stock exchange. How will you show this item as per AS 3 while preparing cash flow statement for the year ended on 31^st March, 2008?

(0)

(b)

Mr. Raj a relative of key management personnel received remuneration of Rs.2,50,000 for his services in the company for the period from 1.4.2007 to 30.6.2007. On 1.7.2007, he left the service.

Should the relative be identified as a related party at the closing date i.e., on 31.3.2008 for the purpose of AS 18?

(0)

(ii)

A manufacturing company purchased shares of another company from stock exchange on 1^st May, 2007 at a cost of Rs.5,00,000. It also purchased Gold of Rs.2,00,000 and Silver of Rs.1,50,000 on 1^st April, 2005. How will you treat these investments as per the applicable AS in the books of the company for the year ended on 31^st March, 2008, if the values of these investments are as follows:

	Rs.
Shares 0 Gold Silver	2,00,000 4,00,000 2,50,000

(0)

(iii)

(a)

Wye Ltd. received Rs.50 lacs from the Central Government as subsidy for setting up an industry in backward area. How will you treat it in accounts?

(0)

(b)

How Government grant relating to Specific Fixed Assets is treated in the books as per AS 12?

(0)

(iv)

A Ltd. had 6,00,000 equity shares on April 1, 2007. The company earned a profit of Rs.15,00,000 during the year 2007–08. The average fair value per share during 2007–08 was Rs.25. The company has given share option to its employees of 1,00,000 equity shares at option price of Rs.15. Calculate basic EPS and diluted EPS.

(0)

(v)

Give names of books required to be maintained in agriculture farm accounting.

(0)

(vi)

In a production process, normal waste is 5% of input. 5,000 MT of input were put in process resulting in wastage of 300 MT. Cost per MT of input is Rs.1,000. The entire quantity of waste is on stock at the year end. State with reference to Accounting Standard, how will you value the inventories in this case?

(0)

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