CWA ICWA Inter Stage II : Advanced Financial Accounting - December 2004

CWA ICWA Inter - Stage II • Advanced Financial Accounting • December 2004

This Paper has 20 answerable questions with 0 answered.

*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

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

(a)

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

2x10

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(b)

How can a limited company take over limited companies?

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(c)

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

(0)

(d)

Mention the funds out of which a company can purchase its own shares.

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(e)

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

(0)

(f)

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

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(g)

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

(0)

(h)

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

(0)

(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.

(0)

(j)

Name clearly the valuation methods of equity shares of a company.

(0)

The summarised balance sheets of three companies as on 31^st March, 2004 are as follows.

	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 – – 5.00
	173.00	30.00	50.00
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
	173.00	30.00	50.00

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.

2+6+4
+4=16

(0)

(a)

Ramnaresh Ram is engaged in commercial farming activity. The following Trial Balance of his farm is drawn as on 31^st March, 2004:

Particulars	Debit 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
	16,75,000	16,75,000

Other relevant particulars

(a)

Closing stock (31^st 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 31^st March, 2004.

5+5+
6=16

(0)

The following particulars relate to three companies: X Ltd., Y Ltd, and Z Ltd.:

(a)

X. Ltd
Balances as on 31^st March, 2004

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 31^st 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
14.00

Extracts from the balance sheet as on 31^st 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 31^st 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

(0)

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%
Sales	100%

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 31^st 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=16

(0)

The summarised balance sheets of X Ltd., Y Ltd. and Z Ltd. as at 31^st March 2004 were 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
	32,00,000		13,00,000	14,00,000
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
	32,00,000		13,00,000	14,00,000
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.
	4,70,000	80,000		36,000

You are required to prepare the consolidated Balance Sheet of X Ltd. and its subsidiaries as on 31^st March, 2004. All relevant workings must be shown.

6+2x5=16

(0)

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.

(0)

Write Short notes on:-

4x4=16

(a)

Consolidated fund of India;

(0)

(b)

Contingency fund;

(0)

(c)

Appropriation Act;

(0)

(d)

The mode of classification of services in the Central Budget..

(0)

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