CA PCC/PCE - Group I : Advanced Accounting - May 2010

CA PCC/PCE - Group I • Advanced Accounting • May 2010

This Paper has 19 answerable questions with 0 answered.

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

Answer all Questions

Wherever appropriate, suitable assumption(s) should be made by the candidates.

Working notes should form part of the answer.

Marks

(i)

The closing capital of Mr. B as on 31.3.2010 was Rs.4,00,000. On 1.4.2009 his capital was Rs.3,50,000. His net profit for the year ended 31.3.2010 was Rs.1,00,000. He introduced Rs.30,000 as additional capital in February, 2010. Find out the amount drawn by Mr. B for his domestic expenses.

10x2=20

(0)

(ii)

A machinery costing Rs.20 lakhs has useful life for 5 years. At the end of 5 years its scrap value would be Rs.2 lakhs. How much depreciation is to be charged in the books of the company as per Accounting Standard 6?

(0)

(iii)

A, B and C are partners; A became insolvent on 15.4.2010. The capital account balance of partner B is on the debit side. Partner B is solvent. Should partner B bear the loss arising on account of the insolvency of partner A?

(0)

(iv)

In Raj Co. Ltd., theft of cash of Rs.2 lakhs by the cashier in January, 2010 was detected in May, 2010. The accounts of the company were not yet approved by the Board of Directors of the company.

Whether the theft of cash has to be adjusted in the accounts of the company for the year ended 31.3.2010. Decide.

(0)

(v)

What do you mean by the term firm underwriting?

(0)

(vi)

Goverdhan Ltd. has equity capital of Rs.20,00,000 consisting of fully paid equity shares of Rs.10 each. The net profit for the year 2009–10 was Rs.30,00,000. It has also issued 18,000, 10% convertible debentures of Rs.50 each. Each debenture is convertible into five equity shares. The tax rate applicable is 30%. Compute the diluted earnings.

(0)

(vii)

The liquidator of a company is entitled to a remuneration of 2% on assets realized and 3% on the amount distributed to unsecured creditors. The assets realized Rs.10,00,000. Amount available for distribution to unsecured creditors before paying liquidator’s remuneration is Rs.4,12,000. Calculate liquidator’s remuneration if the surplus is insufficient to pay off unsecured creditors, in toto.

(0)

(viii)

The Maduri Municipal Corporation replaces part of its existing water mains with larger mains at the cost of Rs.1,50,000. The original cost of laying the old main was Rs.30,00,000 and the present cost of laying those mains would be three times the original cost. Calculate the amount to be capitalized.

(0)

(ix)

The life fund of a life assurance company was Rs.8,64,80,000 as on 31.3.2010. The interim bonus paid during the intervaluation period was Rs.14,80,000. The periodical actuarial valuation determined the net liability at Rs.742,50,000. Surplus brought forward from the previous valuation was Rs.85,00,000. Calculate the net profit for the valuation period.

(0)

(x)

X Ltd. was incorporated on 1.8.2009 to take over the running business of M/s Kumar Bros. with assets from 1.4.2009. The accounts of the company were closed on 31.3.2010.

The average monthly sales during the first four months of the year (2009–10) was twice the average monthly sales during each of the remaining eight months.

Calculate time ratio and sales ratio.

(0)

ABC Ltd. took over a running business with effect from 1^stApril, 2009. The company was incorporated on 1^st August, 2009. The following Profit and Loss Account has been prepared for the year ended 31.3.2010.

	Rs.		Rs.
To Salaries To Stationery To Travelling expenses To Advertisement To Miscellaneous trade expenses To Rent (office buildings) To Electricity charges To Director’s fee To Bad debts To Commission to selling agents To Audit fee To Debenture interest To Interest paid to vendor To Selling expenses To Depreciation on fixed assets To Net Profit	48,000 4,800 16,800 16,000 37,800 26,400 4,200 11,200 3,200 16,000 6,000 3,000 4,200 25,200 9,600 87,600	By Gross profit	3,20,000
	3,20,000		3,20,000

Additional information:

(a)	Total sales for the year, which amounted to Rs.19,20,000 arose evenly upto the date of 30.9.2009. Thereafter they spurted to record an increase of two–third during the rest of the year.
(b)	Rent of office building was paid @ Rs.2,000 per month upto September, 2009 and thereafter it was increased by Rs.400 per month.
(c)	Travelling expenses include Rs.4,800 towards sales promotion.
(d)	Depreciation include Rs.600 for assets acquired in the post incorporation period.
(e)	Purchase consideration was discharged by the company on 30^th September, 2009 by issuing equity shares of Rs.10 each.

Prepare the Profit and Loss Account in columnar form showing distinctly the allocation of expenses between pre and post incorporation periods.

(0)

The following balances have been extracted at the end of March, 2010, from the books of an electricity company:

	Rs.		Rs.
Share capital Fixed assets Depreciation reserve on fixed assets Reserve fund (invested in 8% Government securities at par) Contingency reserve invested in 7% state loan Amount contributed by consumers towards cost of fixed asset	4,00,00,000 10,00,00,000 1,20,00,000 2,40,00,000 48,00,000 8,00,000	Consumer deposit Tariffs and dividend control reserve Development reserve 12% Debentures Loan from State Electricity Board Intangible assets Current assets(monthly average)	1,60,00,000 40,00,000 32,00,000 80,00,000 1,00,00,000 32,00,000 60,00,000

The company earned a profit of Rs.1,12,00,000 (after tax in 2009–2010). Show how the profits have to be dealt with by the company assuming the bank rate was 10%. All workings should form part of your answer.

(0)

Siva Ltd. has two departments X and Y. From the following particulars prepare departmental trading accounts and general profits and loss account for the year ending 31^st March, 2009:

	Department X Rs.	Department Y Rs.
Opening stock(at cost) Purchases Carriage inward Wages Sales Purchased goods transferred By department Y to X By department X to Y Finished goods transferred By department Y to X By department X to Y Return of finished goods By department Y to X By department X to Y Closing stock Purchased goods Finished goods	80,000 3,68,000 8,000 48,000 5,60,000 40,000 – 1,40,000 – 40,000 – 18,000 96,000	48,000 2,72,000 8,000 32,000 4,48,000 – 32,000 – 1,60,000 – 28,000 24,000 56,000

Purchased goods have been transferred mutually at their respective departmental purchase cost and finished goods at departmental market price and that 25% of the closing finished stock with each department represents finished goods received from the other department.

(0)

(a)

Amar, Akbar and Antony are in partnership. The following is their Balance Sheet as at March 31, 2010 on which date they dissolved their partnership. They shared profit in the ratio of 5:3:2.

Liabilities	Rs.	Assets	Rs.
Creditors Loan A/c–Amar Capital A/cs –Amar Akbar Antony	80,000 20,000 1,00,000 30,000 90,000	Plant and machinery Premises Stock Debtors	60,000 80,000 60,000 1,20,000
	3,20,000		3,20,000

It was agreed to repay the amounts due to the partners as and when the assets were realised, viz.

April 15, 2010
May 1, 2010
May 31, 2010

Rs.60,000
Rs.1,46,000
Rs.94,000

Prepare a statement showing how the distribution should be made under maximum loss method and write up the cash account and partners’ capital accounts.

(0)

(b)

From the following information, prepare cash flow statement of A(P) Ltd. as at 31^st March, 2010 by using indirect method:

Balance Sheet
	2009 Rs.	2010 Rs.
Liabilities: Share capital Profit and loss account Long term loans Creditors	12,00,000 8,50,000 10,00,000 3,50,000	12,00,000 10,00,000 10,60,000 4,00,000
	34,00,000	36,60,000
Assets: Fixed assets Investment in shares Stock Debtors Cash Bills receivable	17,00,000 2,00,000 6,80,000 7,20,000 60,000 40,000	20,00,000 2,00,000 7,00,000 6,60,000 70,000 30,000
	34,00,000	36,60,000

Income Statement for the year ended 31^stMarch, 2010
		Rs.
Sales Less:Cost of sales Gross profit Less: Operating expenses: Administrative expenses Depreciation Operating profit Add: Non–operating incomes (dividend received) Less: Interest paid Profit before tax Less: Income–tax Profit after tax	(4,60,000) (2,20,000)	40,80,000 (27,20,000) 13,60,000 (6,80,000) 6,80,000 50,000 7,30,000 (1,40,000) 5,90,000 (2,60,000) 3,30,000

Statement of Retained Earnings
	Rs.
Opening balance Add:Profit Less:Dividend paid Closing balance	8,50,000 3,30,000 11,80,000 (1,80,000) 10,00,000

(0)

(a)

A Ltd. purchased fixed assets costing Rs.6,000 lakhs on 1.1.2009. This was financed by foreign currency loan (U.S. Dollars) payable in three annual equal installments. Exchange rates were 1 Dollar = Rs.40 and Rs.45 as on 1.1.2009 and 31.12.2009 respectively. First installment was paid on 31.12.2009.

You are required to state, how these transactions would be accounted for?

4x4=16

(0)

(b)

X Limited has provided depreciation as per accounting records of Rs.8,00,000 and as per tax records same is Rs.14,00,000. Unamortised preliminary expenses as per tax records is Rs.11,200. There is adequate evidence of future profit sufficiency. How much deferred tax asset/liability should be recognised. Tax rate is 40%.

(0)

(c)

X Ltd. has its financial year ended 31.3.2009, fifteen law suits outstanding, none of which has been settled by the time the accounts are approved by the directors. The directors have estimated that the probable outcomes as below:

Result	Probability	Amount of Loss Rs.
For first ten cases: Win Loss–low damagees Loss–high damagees For remaining five cases: Win Loss–low damagees Loss–high damagees	0.6 0.3 0.1 0.5 0.3 0.2	– 90,000 2,00,000 – 60,000 1,00,000

The directors believe that the outcome of each case is independent of the outcome of all the others.

Estimate the amount of contingent loss and state the accounting treatment of such contingent loss.

(0)

(d)

From the following information find out the amount of provision to be shown in the Profit and Loss account of a Commercial Bank:

Assets	Rs. in lakhs
Standard Sub-standard Doubtful upto one year Doubtful more than one year but upto three years Doubtful more than three years Loss assets	4,000 2,000 900 400 300 500

Doubtful assets are considered as fully secured.

(0)

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