IPCC : Accounting - May 2011

IPCC • Accounting • May 2011

This Paper has 14 answerable questions with 0 answered.

Roll No………
Total No. of Questions — 7]	[Total No. of Printed Pages — 16
Time Allowed : 3 Hours	Maximum Marks : 100

Q.No. 1 is compulsory.

Answer any five questions from the remaining six questions.

Wherever necessary suitable assumptions should be made by the candidates.

Working notes should form part of the answer.

Marks

Answer the following question:

4x5=20

(a)

The abstract of the Balance Sheet of the AXE Ltd. as at 31^st March 2011, are as follows:

Liabilities	Rs.
Essquity share capital (Rs. 100 each) 12% Preference share capital (Rs. 100 each) 13% Debentures	15,00,000 8,00,000 3,00,000

On 31^st March, 2011, BXE Ltd. agreed to take over AXE Ltd. on the following terms:

(1)	For each preference share in AXE Ltd., Rs. 10 in cash and one 9% preference share of Rs. 100 in BXE Ltd.
(2)	For each equity share AXE Ltd. Rs. 20 in cash and one equity share in BXE Ltd. of Rs. 100 each. It was decided that the share in BXE Ltd. will be issued at market price Rs. 140 per share.
(3)	Liquidation expenses of AXE Ltd. are to be reimbursed by BXE Ltd. to the extent of Rs. 10,000. Actual expenses amounted to Rs. 12,500.

You are required to compute the amount of purchase consideration.

(0)

(b)

On 30^th March, 2011 fire occurred in the premises of M/s Suraj Brothers. The concern had taken an insurance policy of Rs. 60,000 which was subject to the average clause. From the books of accounts, the following particulars are available relating to the period 1^st January to 30^th March 2011.

(1)	Stock as per Balance Sheet at 31^st December, 2010, Rs. 95,600.
(2)	Purchases (including purchase of machinery costing Rs. 30,000) Rs. 1,70,000
(3)	Wages (including wages Rs. 3,000 for installation of machinery) Rs. 50,000.
(4)	Sales (including goods sold on approval basis amounting to Rs. 49,500) Rs. 2,75,000. No approval has been received in respect of 2/3^rd of the goods sold on approval.
(5)	The average rate of gross profit is 20% of sales.
(6)	The value of the salvaged goods was Rs. 12,300.

You are required to compute the amount of the claim to be lodged to the insurance company.

(0)

(c)

Shiv and Mohan are partners in a firm sharing profits and losses equally. On 31^st March, 2011, the balances of their capital accounts were Rs. 3,00,000 and Rs. 2,00,000 respectively. The average profits of the firm are Rs. 1,36,000 and the rate of normal profit is 20%.
On 1^st April, 2011 they agreed to admit Hari as a partner for one fourth share. Hari will bring Rs. 1,00,000 as capital.
You are required to compute the value of the goodwill of the firm on admission of Hari, if goodwill is to be calculated on the basis of:

(1)	5 years purchase of super profit
(2)	Capitalization method
(3)	3 years purchase of average profit.

(0)

(d)

On 1^st April, 2010, Rajat has 50,000 equity shares of P Ltd. at a book value of Rs. 15 per share (face value Rs. 10 each). He provides you the further information:

(1)	On 20^th June, 2010, he purchased another 10,000 shares of P Ltd. at Rs. 16 per share.
(2)	On 1^st August, 2010, P Ltd. issued one equity bonus share for every six shares held by the shareholders.
(3)	On 31^st October, 2010, the directors of P Ltd. announced a right issue which entitle the holders to subscribe three shares for every seven shares at Rs. 15 per share. Shareholders can transfer their rights in full or in part.

Rajat sold 1/3^rd of entitlement to Umang for a consideration of Rs. 2 per share and subscribe the rest on 5^th November, 2010.
You are required to prepare Investment A/c in the books of Rajat for the year ending 31^st March, 2011.

(0)

Amit and Sumit are partners sharing profits and losses in the ratio of 3:2. Their Balance Sheet as on 31^st March 2011 is given below:

Liabilities	Amount Rs.	Assets	Amount Rs.
Capital Accounts: Amit Sumit Loan from Puneet General Reserve Employer’s provident fund Creditors	1,76,000 2,54,000 3,00,000 30,000 10,000 50,000 8,20,000	Land & building Investments (Market value Rs. 55,000) Debtors 3,00,000 Less: Provision for doubtful debts 10,000 Stock Cash at bank	3,20,000 50,000 2,90,000 1,10,000 50,000 8,20,000

They decided to admit Puneet as a new partner from 1^st April, 2011 on the following terms:

(1)	Amit will give 1/3^rd of his share and Sumit will give 1/4^th of his share to Puneet.
(2)	Puneet’s loan account will be converted into his capital.
(3)	The Goodwill of the firm is valued at Rs. 3,00,000. Puneet will bring his share of goodwill in cash and the same was immediately withdrawn by the partners.
(4)	Land and building was found undervalued by Rs. 1,00,000.
(5)	Stock was found overvalued by Rs. 60,000.
(6)	Provision for doubtful debts will be made equal to 5% of debtors.
(7)	Investments are to be valued at their market price.

It was decided that the total capital of the firm after admission of new partner would be Rs. 10,00,000. Capital accounts of partners will be readjusted on the basis of their profit sharing ratio and excess or deficiency will be adjusted in cash.
You are required to prepare:

(a)	Revaluation A/c
(b)	Partners’ capital A/cs
(c)	Balance Sheet of the firm after admission of a new partner.

(0)

The Balance Sheet of Mars Limited as on 31st March, 2011 was as follow:

Liabilities	Rs.	Assets	Rs.
Share Capital: 1,00,000 Equity shares of Rs. 10 each fully paid up Reserve and surplus Capital reserve Contingency reserve Profit and loss A/c Current Liabilities & Provisions Bills payable Sundry creditors Provisions for income tax	10,00,000 42,000 2,70,000 2,52,000 40,000 2,26,000 2,20,000 20,50,000	Fixed Assets: Land and building Current Assets Stock Sundry debtors 1,60,000 Less : Provision for doubtful debts 8,000 Bill receivable Cash at bank	7,64,000 7,75,000 1,52,000 30,000 3,29,000 20,50,000

On 1^st April, 2011, Jupiter Limited agreed to absorb Mars Limited on the following terms and conditions:

(1)

Jupiter Limited will take over the assets at the following values:

	Rs.
Land and building Stock Bills receivable	10,80,000 7,70,000 30,000

(2)

Purchase consideration will be settled by Jupiter Ltd. as under:
4,100 fully paid 10% preference shares of Rs. 100 will be issued and the balance will be settled by issuing equity shares of Rs. 10 each at Rs. 8 paid up.

(3)

Liquidation expenses are to be reimbursed by Jupiter Ltd. to the extent of Rs. 5,000.

(4)

Sundry debtors realized Rs. 1,50,000. Bills payable were settled for Rs. 38,000. Income tax authorities fixed the taxation liability at Rs. 2,22,000 and the same was paid.

(5)

Creditors were finally settled with cash remaining after meeting liquidation expenses amounting to Rs. 8,000

You are required to:

(i)	Calculate the number of equity shares and preference shares to be allotted by Jupiter Limited in discharge of purchase consideration
(ii)	Prepare the Realisation account, Bank account, Equity shareholders account and Jupiter Limited’s account in the books of Mars Ltd.

(0)

The following are the summarized Balance Sheets of Lotus Ltd. as on 31^st March 2010 and 2011:

Liabilities	31–3–2010 Rs.	31–3–2011 Rs.
Equity share capital (Rs. 10 each) Capital reserve Profit and loss A/c Long term loan from the bank Sundry creditors Provision for taxation	10,00,000 4,00,000 5,00,000 5,00,000 50,000 24,50,000	12,50,000 10,000 4,80,000 4,00,000 4,00,000 60,000 26,00,000
Assets	Rs.	Rs.
Land and building Machinery Investment Stock Sundry debtors Cash in hand Cash at bank	4,00,000 7,50,000 1,00,000 3,00,000 4,00,000 2,00,000 3,00,000 24,50,000	3,80,000 9,20,000 50,000 2,80,000 4,20,000 1,40,000 4,10,000 26,00,000

Additional information:

(1)	Depreciation written off on land and building Rs. 20,000.
(2)	The company sold some investment at a profit of Rs. 10,000, which was credited to Capital Reserve.
(3)	Income–tax provided during the year Rs. 55,000.
(4)	During the year, the company purchased a machinery for Rs. 2,25,000. They paid Rs. 1,25,000 in cash and issued 10,000 equity shares of Rs. 10 each at par.

You are required to prepare a cash flow statement for the year ended 31^st March 2011 as per AS 3 by using indirect method.

(0)

The following is the Receipt and Payment Account of Park View Club in respect of the year ended 31^st March, 2011.

Receipt	Amount Rs.	Payments	Amount Rs.
To Balance b/d To Subscriptions^∗ 2009–104,500 2010–112,11,000 2011–127,500 To Profit on sports meet To Income from investments	1,02,500 2,23,000 1,55,000 1,00,000 5,80,500	By Salaries By Stationery By Rent By Telephone expenses By Investment By Sundry expenses By Balance c/d	2,08,000 40,000 60,000 10,000 1,25,000 92,500 45,000 5,80,500

Additional information:

(1)

There are 450 members each paying an annual subscription of Rs. 500. On 1^st April, 2010 outstanding subscription was Rs. 5,000

(2)

There was an outstanding telephone bill for Rs. 3,500 on 31^st March, 2011.

(3)

Outstanding sundry expenses as on 31^st March, 2010 totalled Rs. 7,000.

(4)

Stock of stationery:

On 31^st March, 2010	Rs. 5,000
On 31^st March, 2011	Rs. 9,000

(5)

On 31^st March, 2010 building stood in the books at Rs. 10,00,000 and it was subject to depreciation @ 5% per annum.

(6)

Investment on 31^st March, 2010 stood at Rs. 20,00,000.

(7)

On 31^st march, 2011, income accrued on the investments purchased during the year amounted to Rs. 3,750.

Prepare an Income and Expenditure Account for the year ended 31^st March, 2011 and the Balance Sheet as at that date.

(0)

Mr A runs a business of readymade garments. He closes the books of accounts on 31^st March, 2010. The Balance Sheet as on 31^st March, 2010 was as follows:

Liabilities	Rs.	Assets	Rs.
A’s capital a/c Creditors	4,04,000 82,000 4,86,000	Furniture Stock Debtors Cash in hand Cash at bank	40,000 2,80,000 1,00,000 28,000 38,000 4,86,000

You are furnished with the following information:

(1)	His sales, for the year ended 31^st March, 2011 were 20% higher than the sales of previous year, out of which 20% sales was cash sales. Total sales during the year 2009–10 were Rs. 5,00,000.
(2)	Payments for all the purchases were made by cheques only.
(3)	Goods were sold for cash and credit both. Credit customers pay be cheques only.
(4)	Deprecition on furniture is to be charged 10% p.a.
(5)	Mr A sent to the bank the collection of the month at the last date of the each month after paying salary of Rs. 2,000 to the clerk, office expenses Rs.1,200 and personal expenses Rs. 500.

Analysis of bank pass book for the year ending 31^st March 2011 disclosed the following:

	Rs.
Payment to creditors Payment of rent up to 31^st March, 2011 Cash deposited into the bank during the year	3,00,000 16,000 80,000

The following are the balances on 31^st March, 2011:

	Rs.
Stock Debtors Creditors for goods	1,60,000 1,20,000 1,46,000

On the evening of 31^st March 2011, the cashier absconded with the available cash in the cash book.
You are required to prepare Trading and Profit and Loss A/c for the year ended 31^st March, 2011 and Balance Sheet as on that date. All the workings should form part of the answer.

(0)

Answer any four of the following:

4x4=16

(a)

A and B are partners in a firm and share profits and losses equally. A has withdrawn the following sum during the half year ending 30^th June 2010:

Date	Amount Rs.
January 15 February 10 April 5 May 20 June 18	5,000 4,000 8,000 10,000 9,000

Interest on drawings is charged @ 10% per annum. Find out the average due date and calculate the interest on drawings to be charged on 30^th June 2010.

(0)

(b)

Best Ltd. deals in five products, P, Q, R, S, and T which are neither similar nor interchangeable. At the time of closing of its accounts for the year ending 31^st March 2011, the historical cost and net realizable value of the items of the closing stock are determined as follows:

Items	Historical cost Rs.	Net realizable value Rs.
P Q R S T	5,70,000 9,80,000 3,16,000 4,25,000 1,60,000	4,75,000 10,32,000 2,89,000 4,25,000 2,15,000

What will be the value of closing stock for the year ending 31^st March, 2011 as per AS 2 "Valuation of Inventories"?

(0)

(c)

X,Y and Z are partners sharing profits an losses in the ratio of 4:3:2 respectively. On 31^st March, 2011 Y retires and X and Z decide to share profits and losses in the ratio of 5:3. Then immediately, W is admitted for 3/10^th shares in profits, 2/3^rd of which was given by X and rest was taken by W from Z . Goodwill of the firm is valued at Rs. 2,16,000 W brings required amount of goodwill.
Give necessary Journal Entries to adjust goodwill on retirement of Y and admission of W if they do not want to raise goodwill in the books of accounts.

(0)

(d)

"In business today, the accounts which were earlier maintained in a manual form, are replaced with computerized accounts". Explain the significance of computerized accounting system in modern time.

(0)

(e)

On 1^st October, 2010, the debit balances of debtors account is Rs. 77,500 in the books of M/s Zee Ltd. Transactions during the 6 months ended on 31^st March 2011 were as follows:

	Rs.
Total sales (including cash sales Rs. 14,000) Payment received from debtors in cash Bills receivable received Discount allowed to customers for prompt payment Goods rejected and returned back by the customer Bad debts recovered (written off in 2009) Interest debited for delay in payment	84,000 38,000 26,000 1,000 2,550 900 1,250

You are required to prepare a Debtors Account for the period ending 31^st March in the General of M/s Zee Ltd.

(0)

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