IPCC : Accounting - November 2009

IPCC • Accounting • November 2009

This Paper has 22 answerable questions with 2 answered.

Roll No………
Total No. of Questions — 6]	[Total No. of Printed Pages — 4
Time Allowed : 3 Hours	Maximum Marks : 100

All questions are compulsory.

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

Working notes should form part of the answer.

Marks

(i)

On 1^st April, 2008, Chhotu started business with an initial Capital of Rs.70,000. On 1^st October, 2008, he introduced additional capital of Rs.40,000. On 7^th of every month, he withdraws Rs.5,000 for household expenses. On 31^st March, 2009 his Assets and Liabilities were Rs.2,00,000 and Rs.70,000 respectively.

Ascertain the profit earned by Chhotu during the year ended 31^st March, 2009.

10x2=20

(1)

(ii)

Year to year results of a company were not found comparable on the basis of gross profit margin. List out the probable reasons.

(0)

(iii)

MY Ltd. had acquired 200 equity shares of YZ Ltd. at Rs.105 per share on 01.01.2009 and paid Rs.200 towards brokerage, stamp duty and STT. On 31^st March, 2009, shares of YZ Ltd. were traded at Rs.110 per share. At what value investment is to be shown in the Balance Sheet of MY Ltd. as at 31^st March, 2009.

(0)

(iv)

On 1^st April, 2008, X, Y and Z enter into partnership introducing capital of Rs.80,000, Rs.50,000 and Rs.50,000 respectively. They agree to share Profits and Losses equally. At the end of the accounting year on 31^st March, 2009, X claims that he be paid interest on his additional Capital of Rs.30,000 @ 10% per annum, while Z demands salary of Rs.600 per month for the extra hours devoted by him daily at the shop. The partnership deed is silent on these matters.
Decide the matters with reasons.

(0)

(v)

What are the basic characteristics of a Private Ltd. Company?

(0)

(vi)

Sumo Ltd. has a profit of Rs.25 lakhs before charging depreciation for financial year 2008–09. Depreciation in the books was Rs.11 lakhs and depreciation chargeable under Section 205 comes to Rs.17 lakhs. Compute divisible profit for the year.

(0)

(vii)

From the following data, find out value of inventory as on 30.04.2009 using (a) LIFO method, and (b) FIFO method:

(1)
(2)
(3)
(4)

01.04.2009 Purchased
06.04.2009 Sold
09.04.2009 Purchased
18.04.2009 Sold

10 units @ Rs.70 per unit
6 units @ Rs.90 per unit
20 units @ Rs.75 per unit
14 units @ Rs.100 per unit

(0)

(viii)

Explain contract costs as per Accounting Standard–7 related to ‘Construction Contracts’.

(0)

(ix)

Omshanti Club has 500 members with annual fee of Rs.1,000 per member. At the end of the accounting year, accountant noticed that 40 members have not paid annual fee and 70 members had paid fee in advance. Help the accountant to compute cash receipts of annual fee for the year.

(1)

(x)

The Companies Act, 1956 limits the payment of managerial remuneration. What is the maximum managerial remuneration, which can be paid in case of a company consistently earning profits and has more than one managerial person?

(0)

The following are the Balance Sheets of M Ltd. and N Ltd. as at 31^st March, 2009:

	(Rs. in lakhs)
Liabilities	M Ltd.	N Ltd.
Fully paid equity shares of Rs.10 each 10% preference shares of Rs.10 each, fully paid up Capital Reserve General Reserve Profit and Loss Account 8% Redeemable debentures of Rs.1,000 each Trade Creditors Provisions	3,600 1,200 600 2,100 780 – 2,421 870	900 – – – – 300 369 93
	11,571	1,662
Assets Plant and Machinery Furniture and Fixtures Motor Vehicles Stock Sundry Debtors Cash at Bank Preliminary Expenses Discount on Issue of Debentures	4,215 2,400 – 2,370 1,044 1,542 – –	468 183 51 444 237 240 33 6
	11,571	1,662

A new Company MN Ltd. was incorporated with an authorised capital of Rs.15,000 lakhs divided into shares of Rs.10 each. For the purpose of amalgamation in the nature of merger, M Ltd. and N Ltd. were merged into MN Ltd. on the following terms:

(i)	Purchase consideration for M Ltd.’s business is to be discharged by issue of 120 lakhs fully paid 11% preference shares and 720 lakhs fully paid equity shares of MN Ltd. to the preference and equity shareholders of M Ltd. in full satisfaction of their claims.
(ii)	To discharge purchase consideration for N Ltd.’s business, MN Ltd. to allot 90 lakhs fully paid up equity shares to shareholders of N Ltd. in full satisfaction of their claims.
(iii)	Expenses on the liquidation of M Ltd. and N Ltd. amounting to Rs.6 lakhs are to be borne by MN Ltd.
(iv)	8% redeemable debentures of N Ltd. to be converted into 8.5% redeemable debentures of MN Ltd.
(v)	Expenses on incorporation of MN Ltd. were Rs.15 lakhs.
You are requested to:
(a)	Pass necessary Journal Entries in the books of MN Ltd. to record above transactions, and
(b)	Prepare Balance Sheet of MN Ltd. after merger.

(0)

E, F and G were partners sharing Profits and Losses in the ratio of 5:3:2 respectively. On 31^st March, 2009 Balance Sheet of the firm stood as follows:

Liabilities

Rs.

Assets

Rs.

Capital A/cs

E
F
G

50,000
40,000
28,000

Creditors
Outstanding Expenses

1,18,000
33,500
1,700

Buildings
Furniture
Stock
Debtors
Cash at Bank

55,000
25,000
42,000
20,000
11,200

1,53,200

On 31^st March, 2009, E decided to retire and F and G decided to continue as equal partners. Other terms of retirement were as follows:

(i)	Building be appreciated by 20%.
(ii)	Furniture be depreciated by 10%
(iii)	A provision of 5% be created for bad debts on debtors.
(iv)	Goodwill be valued at two years’ purchase of profit for the latest accounting year. The firm’s Profit for the year ended 31^st March, 2009 was Rs.25,000. No goodwill account is to be raised in the books of accounts.
(v)	Fresh capital be introduced by F and G to the extent of Rs.10,000 and Rs.35,000 respectively.
(vi)	Out of sum payable to retiring partner E, a sum of Rs.45,000 be paid immediately and the balance be transferred to his loan account bearing interest @ 12% per annum. The loan is to be paid off by 31st March, 2011.

One month after E’s retirement, F and G agreed to admit E’s son H as a partner with one–forth share in Profits/Losses. E agreed that the balance in his loan account be converted into H’s Capital. E also agreed to forgo one month’s interest on his loan.

It was also agreed that H will bring in, his share of goodwill through book adjustment, valued at the price on the date of E’s retirement. No goodwill account is to be raised in the books.

You are requested to pass necessary Journal Entries to give effect to the above transactions and prepare Partners’ Capital Accounts.

(0)

(a)

A fire broke out in the godown of a business house on 8th July, 2009. Goods costing Rs.2,03,000 in a small sub-godown remain unaffected by fire. The goods retrieved in a damageed condition from the main godown were valued at Rs.1,97,000.

The following particulars were available from the books of accounts:

Stock on the last Balance Sheet date at 31^st March, 2009 was Rs.15,72,000. Purchases for the period from 1^st April, 2009 to 8^th July, 2009 were Rs.37,10,000 and sales during the same period amounted to Rs.52,60,000. The average gross profit margin was 30% on sales.

The business house has a fire insurance policy for Rs.10,00,000 in respect of its entire stock. Assist the Accountant of the business house in computing the amount of claim of loss by fire.

(0)

(b)

A trader allows his customers, credit for one week only beyond which he charges interest @ 12% per annum. Anil, a customer buys goods as follows:

Date of Sale/Purchase	Amount (Rs.)
January 2, 2009 January 28, 2009 February 17, 2009 March 3, 2009	6,000 5,500 7,000 4,700

Anil settles his account on 31^st March, 2009. Calculate the amount of interest payable by Anil using average due date method.

(0)

(a)

The Income and Expenditure Account of City Sports Club for the year ended 31^st March, 2009 was as follows:

Expenditure		Amount (Rs.)	Income		Amount (Rs.)
To To To To To To To To To	Salaries Printing and Stationery Rent Repairs Sundry Expenses Annual Dinner Expenses Interest to Bank Depreciation on Sports equipment Excess of Income over Expenditure	1,20,000 6,000 12,000 10,000 8,000 30,000 6,000 6,000 12,000	By By By By	Subscriptions Entrance Fees Contribution for Annual dinner Profit on Annual Sports meet	1,60,000 10,000 20,000 20,000
		2,10,000			2,10,000

The above account had been prepared after the following adjustments:

	Rs.
Subscriptions outstanding on 31.03.2008 Subscriptions received in advance on 31.03.2008 Subscriptions received in advance on 31.03.2009 Subscriptions outstanding on 31.03.2009	12,000 9,000 5,400 15,000

Salaries outstanding at the beginning and at the end of the financial year were Rs.8,000 and Rs.10,000 respectively. Sundry expenses included prepaid insurance expenses of Rs.1,200.

The Club owned a freehold ground valued Rs.2,00,000. The Club has sports equipment on 01.04.2008 valued at Rs.52,000. At the end of the year, after depreciation, the sports equipment amounted to Rs.54,000. The Club raised a loan of Rs.40,000 from a bank on 01.01.2008, which was unpaid till 31.03.2009. On 31.03.2009, cash in hand was Rs.32,000.

Prepare Receipts and Payments account of the Club for the year ended 31^st March, 2009 and Balance Sheet as on that date.

(0)

(b)

Rama Udyog Limited was incorporated on August 1, 2008. It had acquired a running business of Rama & Co. with effect from April 1, 2008. During the year 2008–09, the total sales were Rs.36,00,000. The sales per month in the first half year were half of what they were in the later half year. The net profit of the company, Rs.2,00,000 was worked out after charging the following expenses:

(i) Depreciation Rs.1,08,000, (ii) Audit fees Rs.15,000, (iii) Directors’ fees Rs.50,000, (iv) Preliminary expenses Rs.12,000, (v) Office expenses Rs.78,000, (vi) Selling expenses Rs.72,000 and (vii) Interest to vendors upto August 31, 2008 Rs.5,000.

Please ascertain pre-incorporation and post–incorporation profit for the year ended 31^st March, 2009.

(0)

Answer any four of the following:

4x4=16

(i)

Market is full of ready–made accounting softwares. What factors will you consider to choose one of them for your enterprise?

(0)

(ii)

As per Accounting Standard–14, what are the conditions which must be satisfied for an amalgamation in the nature of merger?

(0)

(iii)

What do you mean by Customised Accounting Software?

(0)

(iv)

Rose Ltd. had made an investment of Rs.500 lakhs in the equity shares of Nose Ltd. on 10.01.2009. The realisable value of such investment on 31.03.2009 became Rs.200 lakhs as Nose Ltd. lost a case of patent rights. Rose Ltd. follows financial year as accounting year. How will you recognize this reduction in Financial statements for the year 2008–09.

(0)

(v)

A company provided Rs.10,00,000 for dividend payment. Is the Corporate Dividend Tax payable in this case? If yes, please compute Corporate Dividend Tax assuming rate of 15% plus surcharge of 10% and disclose as it would appear in profit and loss account of the company.

(0)

(vi)

SAD Enterprises, a partnership firm, had purchased business of SWAD enterprises on 01.04.2008 and paid Rs.50,000 towards goodwill. On 01.04.2009, SAD enterprises decided to admit W as partner and the goodwill was valued at Rs.1,00,000 for the purpose.
Please explain with reasons, at what price goodwill can be shown in the books of account.

(0)

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