| 1. | Answer the following questions: | 4x5=20 | |
| | (a) | On 25th April, 2010 Neel Limited obtained a loan from the bank for Rs. 70 lakhs to be utilised as under: | Rs. in lakhs | Construction of factory shed
Purchase of Machinery
Working Capital
Advance for purchase of truck | 28
21
14
7 |
In March 2011, Construction of shed was completed and machinery installed. Delivery of truck was not received. Total interest charged by the bank for the year ending 31st March, 2011 was Rs. 12 lakhs. Show the treatment of interest under Accounting Standard – 16. | | (0) |
| | (b) | An equipment having expected useful life of 5 years, is leased for 3 years. Both the cost and the fair value of the equipment are Rs. 6,00,000. The amount will be paid in 3 equal instalments and at the termination of lease, lessor will get back the equipment. The unguaranteed residual value at the end of 3 years is Rs. 60,000. The IRR of the investment is 10%. The present value of annuity factor of Rs. 1 due at the end of 3rd year at 10% IRR is 2.4868. The present value of Rs. 1 due at the end of 3rd year at 10% rate of interest is 0.7513. State with reason whether the lease constitutes finance lease and also compute the unearned finance income. | | (0) |
| | (c) | On 1stApril, 2010, A Ltd had outstanding in its books 1,00,000 Debentures of Rs. 100 each, interest @ 12% per annum. The interest on debentures was paid half–yearly on 30thSeptember and 31stMarch of every year. On 31stMay, 2010 the company purchased 30,000 Debentures of its own @ Rs. 98 (ex–interest) per debenture. The company cancelled the debentures so purchased on 31stMarch, 2011.
Pass the necessary Journal Entries to record the above transactions for the year ended 31stMarch, 2011. | | (0) |
| | (d) | Global Limited has a branch which closes its books of account every year on 31stMarch. This is an independent branch which maintains comprehensive books of account for recording their transactions.
You are required to show journal entries in the books of branch on 31stMarch, 2011 to rectify or adjust the following: | (i) | Head Office allocates Rs. 1,35,000 to the branch as head office expenses, which have not yet been recorded by branch. | | (ii) | Depreciation of branch fixed assets, whose accounts are kept by head office in its books, not yet recorded in the branch books, Rs. 1,15,000. | | (iii) | Branch paid Rs. 1,40,000 as salary to an official from head office on visit to branch and debited the amount to its Salaries Account. | | (iv) | Head Office collected Rs. 1,30,000 directly from a branch customer on behalf of the branch, but no intimation was received earlier by the branch. Now the branch learns about it. | | (v) | It is learnt that a remittance of Rs. 1,50,000 sent by the branch has not been received by head office till date. |
| | (0) |
| 2. | P, Q, R and S had been carrying on business in partnership sharing profit & losses in the ratio of 4 : 3 : 2 : 1. They decide to dissolve the partnership on the basis of following Balance Sheet as on 30thApril, 2011 : | Liabilities | Amount
Rs. | Assets | Amount
Rs. | Capital Accounts
General Reserve
Capital Reserve
Sundry Creditors
Mortgage Loan |
2,76,000
95,000
25,000
36,000
1,10,000 | Land & Building
Furniture & Fixtures
Stock
Debtors
Cash in hand
Capital overdrawn: | 2,46,000
65,000
15,000
1,00,000
72,500
15,500
43,000 | | | 5,42,000 | | 5,42,000 |
| (i) | The assets were realized as under: Land & Building
Furniture & Fixture
Stock
Debtors | 2,30,000
42,000
72,000
65,000 |
| | (ii) | Expenses of dissolution amounted to Rs. 7,800. | | (iii) | Further creditors of Rs. 18,000 had to be met. | | (iv) | R became insolvent and nothing was realized from his private estate. |
Applying the principles laid down in Garner Vs. Murray, prepare the Realisation Account, Partner’s Capital Accounts and Cash Account. | 16 | (0) |
| 3. | X Ltd and Y Ltd were carrying on same business independently. The companies agreed to amalgamate on and from 1–4–2011 and formed a new company Z Ltd. to take over the assets and liabilities of the existing companies. The Balance Sheets of two companies as on 31–3–2011 are as follows: | Liabilities | X Ltd.
Rs. | Y Ltd.
Rs. |
|---|
Share capital: Equity shares of Rs. 10 each (fully paid up)
Securities Premium
General Reserve
Profit & Loss Account
10% Debentures
Secured Loan
Sundry Creditors | 30,00,000
6,00,000
9,00,000
5,40,000
15,00,000
—
7,80,00 | 18,00,000
—
7,50,000
4,80,000
—
9,00,000
5,10,000 | | | 73,20,000 | 44,40,000 | | Assets | X Ltd.
Rs. | Y Ltd.
Rs. |
|---|
Land & Building
Plant & Machinery
Investments (15,000 Shares of Y Ltd.)
Stock
Debtors
Cash at Bank | 27,00,000
15,00,000
2,40,000
15,60,000
12,30,000
90,000 | 13,50,000
11,40,000
—
10,50,000
7,80,000
1,20,000 | | | 73,20,000 | 44,40,000 |
Following are the additional information: | (i) | For the purpose of amalgamation, the shares of the existing companies are to be valued as under:
X Ltd. = Rs. 18 per share
Y Ltd. = Rs. 20 per share | | (ii) | A contingent liability of X Ltd. of Rs. 1,80,000 is to be treated as actual existing liability. | | (iii) | The shareholders of X Ltd and Y Ltd. are to be paid by issuing sufficient number of shares of Z Ltd. at a premium of Rs. 6 per share. | | (iv) | The face value of shares of Z Ltd. is to be of Rs. 10 each. | | You are required to : | | (i) | Calculate the purchase consideration (i.e. the number of shares to be issued to X Ltd. and Y Ltd.) | | (ii) | Prepare Realisation Account and Shareholders Account in the books of X Ltd. & Y Ltd. | | (iii) | Prepare the Balance Sheet of Z Ltd. after amalgamation. |
| 16 | (0) |
| 4. | M/s. Access Electricity Company earned a profit of Rs. 75,00,000 (after tax for the year 2010–11) after paying Rs. 2,40,000 @ 12% as debenture interest for the year ended March 31, 2011. The following further information has been extracted from the Books of company. | | Amount
Rs. | Share capital
Fixed Assets
Depreciation Reserve on Fixed Assets
Loan from Electricity Board
Reserve Fund Investments, at par, invested in 8% Govt. securities
Contingencies Reserve Investments, at par, 10%
Tariff and Dividends Control Reserve
Security Deposits of Consumers
Consumer’s contribution to cost of fixed assets
Intangible Assets
Monthly average of current assets, including amount
due from consumers, Rs. 7,00,000
Development Reserve | 3,00,00,000
9,00,00,000
3,00,00,000
1,20,00,000
50,00,000
24,00,000
16,00,000
10,00,000
3,40,000
7,60,000
34,60,000
12,00,000 |
Show, how the profits have to be dealt with by the company under the provisions of the Electricity Act. Assume the Bank Rate to be 10% | 16 | (0) |
|
| 5. | (a) | M/s. AM Enterprise had two departments, Cloth and Readymade Clothes. The Readymade clothes were made by the firm itself out of the cloth supplied by the Cloth Department at its usual selling price. From the following figures, prepare Departmental Trading and Profit & Loss Account for the year ended 31st March, 2011: | | Cloth
Department
Rs. | Readymade
Clothes
Department Rs. | Opening Stock on 1st April, 2010
Purchases
Sales
Transfer to Readymade Clothes Department
Manufacturing Expenses
Selling Expenses
Rent & Warehousing
Stock on 31st March, 2011 | 31,50,000
2,10,00,000
2,31,00,000
31,50,000
—
2,10,000
8,40,000
21,00,000 | 5,32,000
1,68,000
47,25,000
—
6,30,000
73,500
5,60,000
6,72,000 |
In addition to the above, the following information is made available for necessary consideration: The stock in the Readymade Clothes Department may be considered as consisting of 75% cloth and 25% other expenses. The Cloth Department earned a gross profit at the rate of 15% in 2009–10. General Expenses of the business as a whole amount to Rs. 10,85,000. | 8 | (0) |
| | (b) | The following particulars are extracted from the records of M/s. Engco Bank Limited for the year ended 31st March, 2011 : | Amount
Rs. | Rebate on bills discounted (not due on March 31st, 2010)
Discount received
Bills Discounted | 60,610
6,10,800
24,42,250 | | An analysis of the bills discounted is as follows: | | Amount (Rs.) | Due Date | 3,75,000
4,90,000
2,45,000
3,68,000
4,85,000 | April 15, 20,11
May 6,2011
June 1,2011
June 20, 2011
July 4, 2011 |
The rate of discount is 12% per annum. You are required to : | (i) | Calculate rebate on bills discounted as on 31st March, 2011 | | (ii) | Determine the amount of discount to be credited to the profit and loss account for the year ended 31st March, 2011. | | (iii) | Show the necessary Journal Entries in the books of M/s. Engco bank Ltd. as on 31st March, 2011. |
| 8 | (0) |
| 6. | (a) | M/s. ABC Limited has gone into liquidation on 25th June, 2011. Certain creditors could not receive payments out of the realization of assets and out of the contributions from A list contributories. The following are the details of certain transfers which took place in the year ended 31st March, 2011 : | Shareholders | No. of shares
transferred | Date of ceasing
to be a member | Creditors remaining unpaid
and outstanding on the date
of transfer (Rs.) | | P | 4,000 | 10–5–2010 | 9,000 | | Q | 3,000 | 22–7–2010 | 12,000 | | R | 2,400 | 15–9–2010 | 13,500 | | S | 1,600 | 14–12–2010 | 14,000 | | T | 1,000 | 09–03–2011 | 14,200 |
All the shares are of Rs. 10 each, Rs. 8 per share paid up. Show the amount to be realized from the persons listed above. Ignore remuneration to liquidator and other expenses. | 8 | (0) |
| | (b) | From the following information of M/s. Bigfish Marine Insurance Co. Ltd., prepare the Revenue Account as per regulations of IRDA for the year ended 31st March, 2011: | Particulars | Amount (Rs.) | Premiums Received
Premium outstanding on March 31, 2011
Premium paid on reinsurance ceded
Claims paid
Estimated liability in respect of outstanding claims:
On April 1, 2010
On March 31,2011
Expenses of management (includes Rs. 45,000 Surveyor’s fee.
and Rs.65,000 Legal expenses paid for settlement of claims)
Interest and Dividend (Gross)
Income tax on the above
Profit on sale of investments
Commission paid | 18,75,000
1,25,000
2,28,000
10,54,000
1,89,000
2,25,000
4,85,000
1,65,250
49,575
46,000
l,94,000 |
Balance of fund on 1st April, 2010 was Rs. 18,50,000 including Additional reserve of Rs. 1,80,000. Additional reserve has to be maintained at 10% of net premiums for the year. | 8 | (0) |
| 7. | Answer any four of the following: | 4x4=16 | |
| | (a) | MEC Limited could not recover an amount of Rs. 8 lakhs from a debtor. The company is aware that the debtor is in great financial difficulty. The accounts of the company for the year ended 31–3–2011 were finalized by making a provision @ 25% of the amount due from that debtor. In May 2011, the debtor became bankrupt and nothing is recoverable from him. Do you advise the company to provide for the entire loss of Rs. 8 lakhs in books of account for the year ended 31–3–2011? | | (0) |
| | (b) | Sunshine Company Limited imported raw materials worth US Dollars 9,000 on 25th February, 2011, when the exchange rate was Rs. 44 per US Dollar. The transaction was recorded in the books at the above mentioned rate. The payment for the transaction was made on 10th April, 2011, when the exchange rate was Rs. 48 per US Dollar. At the year end 31st March, 2011, the rate of exchange was Rs. 49 per US Dollar. The Chief Accountant of company passed an entry on 31st March, 2011 adjusting the cost of raw material consumed for the difference between Rs. 48 and Rs. 44 per US Dollar. Discuss whether this treatment is justified as per the provisions of AS–II (Revised) | | (0) |
| | (c) | A company has its share capital divided into shares of Rs. 10 each. On 1–4–2010, it granted 5,000 employees stock option at Rs. 50, when the market price was Rs. 140. The options were to be exercised between 1–12–2010 to 28–2–2011. The employees exercised their options for 4,800 shares only; the remaining option lapsed. Pass the necessary Journal Entries for the year ended 31–3–2011, with regard to employee’s stock option. | | (0) |
| | (d) | Explain the treatment of Refund of Government Grants as per Accounting Standard–l2 | | (0) |
| | (e) | What are the qualitative characteristics that improve the usefulness of information provided in the financial statements? | | (0) |
