CA PE II Group I : Accounting - November 2008

CA PE II - Group I • Accounting • November 2008

This Paper has 15 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

Ram carried on business as retail merchant. He has not maintained regular account books. However, he always maintained Rs. 10,000 in cash and deposited the balance into the bank account. He informs you that he has sold goods at profit of 25% on sales.
Following information is given to you:

Assets and Liabilities	As on 1.4.2007	As on 31.3.2008
Cash in Hand Sundry Creditors Cash at Bank Sundry Debtors Stock in Trade	10,000 40,000 50,000 (Cr.) 1,00,000 2,80,000	10,000 90,000 80,000 (Dr.) 3,50,000 ?

Analysis of his bank pass book reveals the following information:

(a) (b) (c) (d) (e)	Payment to creditors Rs. 7,00,000 Payment for business expenses Rs. 1,20,000 Receipts from debtors Rs. 7,50,000 Loan from Laxman Rs. 1,00,000 taken on 1.10.2007 at 10% per annum Cash deposited in the bank Rs. 1,00,000
He informs you that he paid creditors for goods Rs. 20,000 in cash and salaries Rs. 40,000 in cash. He has drawn Rs. 80,000 in cash for personal expenses. During the year Ram had not introduced any additional capital. Surplus cash if any, to be taken as cash sales. Prepare:
(i) (ii)	Trading and Profit and Loss Account for the year ended 31.3.2008. Balance Sheet as at 31^st March, 2008.

(0)

(a)

Following information is furnished to you by Sound Bank Ltd. for the year ended 31st March, 2008:

	(Rs. in thousands)
Interest and discount – (Income) Interest on public deposits – (Expenditure) Operating expenses Other incomes Provisions and contingencies (it includes provision in respect of Non–performing Assets (NPAs) and tax provisions) Rebate on bills discounted to be provided for as on 31.3.2008	8,860 2,720 2,662 250 2,004 30
Classification of Advances: Standard Assets Sub–standard Assets Doubtful Assets – fully unsecured Doubtful assets – fully secured Less than 1 year More than 1 year but less than 3 years More than 3 years Loss assets	5,000 1,120 200 50 300 300 200

You are required to prepare:

(i)
(ii)

Profit and Loss Account of the Bank for the year ended 31st March, 2008.
Provision in respect of advances.

(0)

(b)

Heaven Life Insurance Co. furnishes you the following information:

	Rs.
Life Insurance fund on 31.3.2008 Net liability on 31.3.2008 as per actuarial valuation Interim bonus paid to policyholders during intervaluation period	52,00,000 40,00,000 3,00,000

You are required to prepare:

(i)
(ii)
(iii)

Valuation Balance Sheet;
Statement of Net Profit for the valuation period; and
Amount due to the policyholders.

(0)

(a)

On 1st April, 2007, in MK Ltd’s ledger 9% debentures appeared with a opening balance of Rs. 50,00,000 divided into 50,000 fully paid debentures of Rs. 100 each issued at par.
Interest on debentures was paid half–yearly on 30th of September and 31st March every year.
On 31.5.2007, the company purchased 8,000 debentures of its own @ Rs. 98 (exinterest) per debenture.
On 31.12.2007 it cancelled 5,000 debentures out of 8,000 debentures acquired on 31.5.2007.
On 31.1.2008 it resold 2,000 of its own debentures in the market @ Rs. 101 (ex–interest) per debenture.
You are required to prepare:

(i)
(ii)
(iii)

Own debentures account;
Interest on debentures account; and
Interest on own debentures account.

(0)

(b)

Easy buy Corporation sells goods on hire–purchase basis. The hire–purchase price is cost plus 60%.
It furnishes you the following information:

	Rs.
Hire Purchase stock on 1.4.2007 Installments due on 1.4.2007 Goods sold on hire purchase from 1.4.2007 to 31.3.2008 Cash collected from HP debtors during 1.4.2007 to 31.3.2008 Stock with customers at hire-purchase price on 31.3.2008	2,40,000 7 45,000 9,60,000 30,000 6,40,000

You are required to prepare Hire Purchase Trading Account for the year ended 31st March, 2008.

(0)

(a)

Following is the cash flow abstract of Alpha Ltd. for the year ended 31st March, 2008:

Cash Flow Abstract
Inflows	Rs.	Outflows	Rs.
Opening balance: Cash Bank Share capital – shares issued Collection from Debtors Sale of fixed assets	10,000 70,000 5,00,000 3,50,000 70,000	Payment to creditors Salaries and wages Payment of overheads Fixed assets acquired Debentures redeemed Bank loan repaid Taxation Dividends Closing balance: Cash bank	90,000 25,000 15,000 4,00,000 50,000 2,50,000 55,000 1,00,000 5,000 10,000
	10,00,000		10,00,000

Prepare Cash Flow Statement for the year ended 31st March, 2008 in accordance with Accounting standard – 3.

(0)

(b)

X, Y and Z are partners of the firm XYZ and Co., sharing Profits and Losses in the ratio of 4 : 3 : 2. Following is the Balance sheet of the firm as at 31st March, 2008:

Balance Sheet as at 31st March, 2008
Liabilities	Rs.	Assets	Rs.
Partners’ Capitals: X Y Z General Reserve Sundry Creditors	4,00,000 3,00,000 2,00,000 90,000 3,20,000	Fixed Assets Stock in trade Sundry debtors Cash in hand	5,00,000 3,00,000 5,00,000 10,000
	13,10,000		13,10,000

Partners of the firm decided to dissolve the firm on the above said date. It was found that a credit purchase of Rs. 20,000 in January, 2008 had not been recorded in the books of the firm.
Fixed assets realized Rs. 5,20,000 and book debts Rs. 4,40,000.
Stocks were valued at Rs. 2,50,000 and it was taken over by partner Y.
Creditors allowed discount of 5% and the expenses of realization amounted to Rs. 6,000.
You are required to prepare:

(i)
(ii)
(iii)

Realisation account;
Partners capital account; and
Cash account.

(0)

(a)

Gemini Ltd. came up with public issue of 30,00,000 Equity shares of Rs. 10 each at Rs. 15 per share. A, B and C took underwriting of the issue in 3 : 2 : 1 ratio.
Applications were received for 27,00,000 shares.
The marked applications were received as under:

A
B
C

8,00,000 shares
7,00,000 shares
6,00,000 shares

Commission payable to underwriters is at 5% on the face value of shares.

(i)	Compute the liability of each underwriter as regards the number of shares to be taken up.
(ii)	Pass journal entries in the books of Gemini Ltd. to record the transactions relating to underwriters.

(0)

(b)

Following is the Balance Sheet of X Co. Ltd. as at 31st March, 2008:

Balance Sheet as at 31st March, 2008
Liabilities	Rs.	Assets	Rs.
Equity share capital (Rs. 100 each) 11% Pref. share capital General reserve Sundry creditors	15,00,000 5,00,000 3,00,000 2,00,000	Land and building Plant and machinery Furniture and fittings Stock in trade Sundry debtors Cash in hand and at bank	10,00,000 7,00,000 2,00,000 3,00,000 2,00,000 1,00,000
	25,00,000		25,00,000

Y Co. Ltd. agreed to take over X Co. Ltd. on the following terms:

(i)	Each equity share in X Co. Ltd. for the purpose of absorption is to be valued at Rs. 80.
(ii)	Equity shares will be issued by Y Co. Ltd. by valuing its each equity share of Rs. 100 each at Rs. 120 per share.
(iii)	11% Preference shareholders of X Co. Ltd. will be given 11% redeemable debentures of Y Co. Ltd. at equivalent value.
(iv)	All the Assets and Liabilities of X Co. Ltd. will be recorded at the same value in the books of Y Co. Ltd. (a) Calculate Purchase consideration. (b) Pass Journal entries in the books of Y Co. Ltd. for absorbing X Co. Ltd.

(0)

Answer any four of the following:

4x5=20

(a)

B Ltd. undertook a construction contract for Rs. 50 crores in April, 2007. the cost of construction was initially estimated at Rs. 35 crores. The contract is to be completed in 3 years. While executing the contract, the company estimated the cost of completion of the contract at Rs. 53 crores.
Can the company provide for the expected loss in the book of account for the year ended 31st March, 2008?

(0)

(b)

List any five related party transactions, which require disclosure as per AS 18.

(0)

(c)

A Government grant of Rs. 25 lakhs received 3 years ago in respect of a machinery which costs Rs. 200 lakhs, became refundable in March, 2008.

(i)
(ii)

How the receipt of grant would have been recorded in the books of the recipient?
How the refund of grant would be reflected in the books, at the time of its refund?

(0)

(d)

Draw a list of direct crop costs and another of common costs in agricultural farming.

(0)

(e)

List the conditions to be fulfilled as per Accounting Standard 14 (AS 14) for an amalgamation to be in the nature of merger, in the case of companies.

(0)

(f)

Discuss the treatment of exchange loss relating to fixed assets as per AS 11 vis – a – vis the Schedule VI disclosure under the Companies Act, 1956.

(0)

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