CA PCC/PCE - Group I : Advanced Accounting - May 2011

CA PCC/PCE - Group I • Advanced Accounting • May 2011

This Paper has 17 answerable questions with 0 answered.

Roll No………
Total No. of Questions — 7]	[Total No. of Printed Pages — 8
Time Allowed : 3 Hours	Maximum Marks : 100

Q.No. 1 is compulsory.

Answer any five questions from the remaining six questions.

Working notes should form part of the answer.

Wherever necessary suitable assumptions should be made by the candidates.

Marks

(a)

GHI Limited obtained a loan for Rs. 70 lakhs on 15th April, 2010 from JKL Bank, to be utilized as under:

	Rs. in lakhs
Construction of Factory shed Purchase of Machinery Working capital Advance for purchase of Truck	25 20 15 10

In March 2011, construction of the factory shed was completed and machinery, which was ready for its intended use, was installed. Delivery of Truck was received in the next financial year. Total interest of Rs. 9,10,000 was charged by the bank for the financial year ending 31–03–2011.
Show the treatment of interest under AS 16 and also explain the nature of Assets.

5x4=20

(0)

(b)

In April, 2010, A Limited issued 18,00,000 Equity shares of Rs.10 each, Rs. 5 per share was called up on that date which was paid by all the shareholders. The remaining Rs. 5 was called up on 1–9–2010. All the Shareholders (except one having 3,60,000 shares) paid the sum in September 2010. The net profit for the year ended 31–3–2011 is Rs. 33 lakhs after dividend on preference shares and dividend distribution tax of Rs. 6.60 lakhs.
Compute the basic EPS for the year ended 31st March, 2011 as per AS 20.

(0)

(c)

Moon Limited sold goods worth Rs. 6,50,000 to M/s Star and Company. M/s Star and Company asked for trade discount of Rs. 53,000 which was agreed by Moon Limited. The sales was effected and goods were dispatched. After receiving, goods worth Rs. 67,000 was found defective, which was returned immediately by M/s Star and Company. It made the payments of Rs. 5,30,000 to Moon Limited. Accountant of the company booked the sales for Rs. 5,30,000. Discuss the accounting treatment given by the accountant with reference to Accounting Standard 9.

(0)

(d)

Base Limited is showing an intangible asset at Rs. 85 lakhs as on 1–4–2011. This asset was acquired for Rs. 112 lakhs on 1–4–2008 and the same was available for use from that date. The company has been following the policy of amortization of the intangible asset over a period of 12 years on straight line basis. Comment on the accounting treatment of the above with reference to the relevant accounting standard.

(0)

XYZ Limited was incorporated for taking over the business of Y from 1st April, 2010. The following is the Balance Sheet of Y on 31st March, 2010:

Liabilities	Rs.	Assets	Rs.
Capital Loans Creditors	10,08,000 12,00,000 7,12,000	Land and Building Plant and Machinery Furniture Sundry Debtors	16,00,000 2,80,000 2,00,000 8,40,000
	29,20,000		29,20,000

The company takes over the business with fixed assets and loans on the following terms:

(a)	The fixed assets should be depreciated @10%.
(b)	The value of Goodwill is estimated at Rs. 8,00,000.

The company realized Rs. 8,00,000 from Sundry debtors as the agent of the vendor in full settlement and discharged all the trade creditors by paying Rs. 6,80,000 for a commission of 3% on the amount collected and 2% on the amount paid.
(Commission is treated as pre–incorporation profit)

The lenders accepted 10% preference shares of Rs. 100 each in discharge of their loan. After realization of debts and discharge of the liabilities, the total amount due to the vendor was settled by payment of Rs. 54,400 in cash and the balance in shares of fully paid equity shares of Rs. 10 each.
You are required to:

(i)	Compute purchase consideration.
(ii)	Pass Journal Entries in the books of XYZ Limited after taking over the business of Y.
(iii)	Prepare the Balance Sheet of the company as on 1st April, 2010.

(0)

The following is the Balance Sheet of M/s Neel and Company as on 31st March, 2009:

Liabilities	Rs.	Assets	Rs.
Capital Loan Creditors	1,92,000 60,000 1,24,000	Building Furniture Motor car (for business) Stock Debtors Cash in hand Cash at bank	1,30,000 20,000 36,000 80,000 68,000 8,000 34,000
	3,76,000		3,76,000

A riot occurred on the night of 31st March, 2010 in which all books and records were lost. The cashier had absconded with the available cash. The following information is available:

(i)

The sales for the year ended 31st March, 2010 were 20% higher than the previous year’s sales. Firm always sells the goods at cost plus 25%; 20% of the total sales for the year ended 31st March, 2010 were for cash. There were no cash purchases.

(ii)

On 1st April, 2009, the stock level was raised to Rs. 1,20,000 and stock was maintained at this new level all throughout the year.

(iii)

Collections from Debtors amounted to Rs. 5,60,000 of which Rs. 1,40,000 was received in cash. Business expenses amounted to Rs. 80,000 of which Rs. 20,000 was outstanding on 31st March, 2010 and Rs. 24,000 was paid by cheque.

(iv)

Analysis of the pass book revealed the following for the year ended 31–3–2010:

	Rs.
Payment to creditors Personal Drawings Cash deposited into bank Cash withdrawn from bank	5,50,000 30,000 2,86,000 48,000

(v)

Gross profit as per last year’s audited accounts was Rs. 1,20,000.

(vi)

Provide depreciation on Building and Furniture @ 5% and Motor Car @ 20%.

(vii)

The amount defalcated by the cashier may be treated as recoverable from him.

You are required to prepare the Trading and Profit and Loss Account for the year ended 31st March, 2010 and the Balance Sheet as on date.

(0)

(a)

From the following information, calculate the amount of Provisions and Contingencies and prepare Profit and Loss Account of ‘Hamara Bank Limited’ for the year ending 31st March, 2010:

	Rs. in lakhs		Rs. in lakhs
Interest and discount Other Income Interest accrued on Investments	4,430 125 10	Interest expended Operating Expenses	1,360 1,331

Additional Information:

		Rs. in lakhs
(i) (ii) (iii) (iv)	Rebate on bills discounted to be provided for Classifications of Advances: Standard Assets Sub–Standard Assets Doubtful Assets not covered by security Doubtful Assets covered by security For 1 year For 2 years For 3 years For 4 years Loss Assets Make tax provisions @ 35% of the profit. Profit and Loss Account (Cr.) brought forward from the previous year	15 2,500 560 255 25 50 100 75 100 40

(0)

(b)

From the following transactions, draw up an account current by means of product up to 31st December, 2010 to be rendered by X to Y and give the amount of interest charging @ 8% per annum.

Date 2010	Particulars	Amounts (Rs. in thousands)
July 01 July 15 Aug. 21 Aug. 23 Oct. 23 Nov.01 Dec.03	Balance owing by Y Goods sold to Y Goods bought from Y Cash received from Y Y accepted X’s bill at 3 months Goods bought from Y Accepted a bill drawn by Y at 3 months (due date of bill is on Sunday)	600 900 700 450 300 950 400

On 31st December, 2010, X and Y settled their account after considering the interest factor. Show the cash amount received or paid by X on that date.

(0)

(a)

Jaipur Electric Company Limited rebuilt and re–equipped a part of their power house at the cost of Rs. 85 lakhs. The part of the old power house thus superseded originally costed Rs. 50 lakhs, but if erected at the present time would cost 40% more. Rs. 3 lakhs is realized from the sale of old materials. Old materials worth Rs. 6 lakhs are used in the reconstruction and are included in the cost of Rs. 85 lakhs mentioned above.

Give necessary Journal Entries for recording the above transactions in the books of the company, indicating the allocations between amount to be capitalized and amount to be written off to Revenue Account.

(0)

(b)

From the following information, prepare Cash Flow Statement of Amex Limited for the year ended 31st March, 2010 by using indirect method:

Balance Sheets as on
	31.3.2009		31.3.2010
Liabilities		Rs.		Rs.
Share Capital Reserves Profit and Loss Account Debentures Creditors for goods Provision for Income Tax Assets Gross Block Less: Depreciation Net Block Stock in trade Book Debts Cash in hand and at bank Miscellaneous Expenditure Discount on issue of shares Preliminary Expenses	10,00,000 (3,70,000)	5,00,000 1,50,000 40,000 3,00,000 1,70,000 60,000 12,20,000 6,30,000 2,40,000 2,50,000 80,000 10,000 10,000	11,20,000 (4,60,000)	6,00,000 1,80,000 65,000 2,50,000 1,60,000 80,000 13,35,000 6,60,000 3,70,000 2,30,000 60,000 7,500 7,500
		12,20,000		13,35,000

Profit and Loss Appropriation Account for the year ended 31st March, 2010
Particulars	Debit Rs.	Particulars	Credit Rs.
To Transfer to Reserves To Interim dividend paid To Balance carried to Balance Sheet	30,000 80,000 65,000	By Balance b/d By Net Profit for current year	40,000 1,35,000
	1,75,000		1,75,000

(0)

(a)

N Limited has retail branch at Noida. Goods are sold to customers at cost plus 100%. The wholesale price is cost plus 80%. Goods are invoiced to Noida at wholesale price. From the following particulars, find out the profit made by the Head Office and Noida Branch for the year ended 31st March, 2010 using invoice method.

	Head Office Rs.	Noida Rs.
Stock on April 1, 2009 Purchases Goods sent to branch (at invoice value) Sales Expenses	50,000 3,00,000 1,08,000 3,06,000 90,000	… … … 1,00,000 4,000

Sales at Head Office are made only on wholesale basis and sales at branch are made only to customers. Stock at branch is valued at invoice price.

(0)

(b)

Rising Sun Limited came up with an issue of 25,00,000 Equity shares of Rs. 10 each at par. 4,00,000 shares were issued to the promoters and balance offered to the public. Issue was underwritten by three underwriters A & Co., B & Co., and C & Co., equally with firm underwriting of 1,00,000 shares each. Subscription totalled 17,26,000 shares, including the marked forms which were as under:

A & Co.
B & Co.
C & Co.

5,18,000 Shares
5,50,000 Shares
4,72,000 Shares

The underwriters had applied for the number of shares covered by firm underwriting. The amount payable on application and allotment were Rs. 3 & Rs. 2 respectively. The agreed commission is 3%.
You are required to calculate:

(i)	The liability of each underwriter.
(ii)	The amount payable and/or receivable by the underwriter.

(0)

Answer any four questions:

4x4=16

(a)

A Limited company created a provision for bad and doubtful debts at 5% on debtors in preparing the financial statements for the year 2009–10. Subsequently on a review of the credit period allowed and financial capacity of the customers, the company decided to increase the provision to 10% on debtors as on 31–03–2010. The accounts are not approved by the Board of Directors till the date of decision. While applying the relevant accounting standard, can this revision be considered as an extraordinary item or prior period item?

(0)

(b)

What are the restrictions imposed by the Banking Regulations Act, 1949 on payment of dividend in case of banking companies?

(0)

(c)

In preparing the financial statements of Lotus Limited for the year ended 31st March, 2010 you come across the following information. State with reason, how you would deal with them in the financial statements?

(i)	An unquoted long term investment is carried in the books at a cost of Rs. 5 lakhs. The published accounts of the unlisted company received in May 2010 showed that the company was incurring cash losses with declining market share and the long term investment may not fetch more than Rs. 50,000.

(ii)	The company invested Rs. 50 lakhs in April, 2010 in the acquisition of another company doing similar business, the negotiations for which had just started.

(0)

(d)

Enumerate the advantages of computerized accounting.

(0)

(e)

On 31st October, 2009 , Bharat Construction Co. Ltd. undertook a contract to construct a Flyover for Rs. 215 crores. On 31st March, 2010, company found that its work certified is for Rs. 100 crores and work to be certified is for Rs. 35 crores. Prudent estimate of additional cost for completion was Rs. 90 crores. What amount should be charged to Revenue in the final accounts for the year ended 31st March, 2010 as per provisions of Accounting Standard 7 (revised).

(0)

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