IPCC : Accounting - November 2011

IPCC • Accounting • November 2011

This Paper has 17 answerable questions with 0 answered.

Roll No………
Total No. of Questions — 7]	[Total No. of Printed Pages — 11
Time Allowed : 3 Hours	Maximum Marks : 100

Question No. 1 is compulsory.

Answer any five questions from the remaining six questions.

Wherever appropriate, suitable assumption/s should be made and indicated in answer by the candidate.

Working notes should form part of the answer.

Marks

Answer the following question:

4x5=20

(a)

Calculate the maximum remuneration payable to the Managing Director based on effective capital of a non-investment company for the year, from the information given below:

		(Rs. in ’000)
(i)	Profit for the year (calculated as per Section 349, 350 & 351 of the Companies Act, 1956)	3,000
(ii)	Paid up Capital	18,000
(iii)	Reserves & Surplus	7,200
(iv)	Securities Premium	1,200
(v)	Long term Loans	6,000
(vi)	Investments	3,600
(vii)	Preliminary expenses not written off	3,000
(viii)	Remuneration paid to the Managing Director during the year	600

(0)

(b)

M/s. Vijoy Electricals sends goods to its customer on sale or returnable basis. The following transactions took place during January to March 2011.

2011		Rs.
January – 10	Sent goods to customer on sale or returnable basis at cost plus 25%.	5,00,000
January – 30	Goods returned by customer	2,00,000
February – 28	Received letter of approval from customer	2,00,000
March – 31	Goods with customer awaiting approval	1,00,000

Vijoy Electricals records sale or return transactions as ordinary sales transaction. You are required to pass the necessary Journal Entries in the books of accounts assuming that the accounting year closes on 31st March, 2011.

(0)

(c)

In the Trial Balance of M/s Sun Ltd. as on 31–3–2011, balance of machinery appears Rs. 5,60,000. The company follows rate of depreciation on machinery @ 10% p.a. on Straight Line Method. On scrutiny it was found that a machine appearing in the books on 1–4–2010 at Rs. 1,60,000 was disposed of on 30–9–2010 at Rs. 1,35,000 in part exchange of a new machine costing Rs. 1,50,000.
You are required to calculate:

(i)	Total depreciation to be charged in the Profit and Loss Account.
(ii)	Loss on exchange of machine
(iii)	Book value of machinery in the Balance Sheet as on 31–3–2011.

(0)

(d)

A and B are in partnership sharing profits and losses in the ratio of 3 : 2. The capitals of A and B are Rs. 80,000 and Rs. 60,000 respectively. They admit C as a partner who contributes Rs. 35,000 as capital for 1/5^th share of profits to be acquired equally from both A & B. The capital accounts of old partners are to be adjusted on the basis of the proportion of C’s capital to his share in the business. Calculate the amount of actual cash to be paid off or brought in by the old partners for the purpose and pass the necessary Journal Entries.

(0)

The Balance Sheet of M/s. Ice Ltd. as on 31–3–2011 is given below: –

Liabilities	Rs.	Assets	Rs.
1,00,000 equity shares of Rs. 10 each fully paid up 4,000, 8% preference shares of Rs. 100 each fully paid 6% Debenture 4,00,000 (secured by freehold property) Arrear interest 24.000 Sundry Creditors Director's Loan	10,00,000 4,00,000 4,24,000 1,01,000 3,00,000	Freehold Property Plant and Machinery Trade investment (at cost) Sundry Debtors Stock–in–Trade Deferred Advertisement Expenses Profit and Loss Account	5,50,000 2,00,000 2,00,000 4,50,000 3,00,000 50,000 4,75,000
	22,25,000		22,25,000

The Board of Directors of the Company decided upon the following scheme of reconstruction with the consent of respective stakeholders:

(i)	Preference shares are to be written down to Rs. 80 each and equity shares to Rs. 2 each.
(ii)	Preference dividend in arrear for 3 years to be waived by 2/3^rd and for balance 1/3^rd, equity shares of Rs. 2 each to be allotted.
(iii)	Debenture holders agreed to take one freehold property at its book value of Rs. 3,00,000 in part payment of their holding. Balance debentures to remain as liability of the company.
(iv)	Arrear debenture interest to be paid in cash.
(v)	Remaining freehold property to be valued at Rs. 4,00,000
(vi)	Investment sold out for Rs. 2,50,000.
(vii)	75% of Director’s loan to be waived and for the balance, equity share of Rs. 2 each to be allotted.
(viii)	40% of sundry debtors, 80% of stock and 100% of deferred advertisement expenses to be written off.
(ix)	Company’s contractual commitments amounting to Rs. 6,00,000 have been settled by paying 5% penalty of contract value.

Show the Journal Entries for giving effect to the internal re–construction and draw the Balance Sheet of the company after effecting the scheme.

(0)

Bear Bar Club was registered in a city and the accountant prepared the following Receipts and Payments Account for, the year ended March 31, 2011 and showed a deficit of Rs. 14,520.

Receipts	Amount	Payments	Amount
Subscriptions Fair receipts Variety show receipts (net) Interest Bar Collection Excess Cash spent Deficit	62,130 7,200 12,810 690 22,350 1,000 14,520	Premises Honorarium to Secretary Rent Rate & Taxes Printing & Stationary' Sundry Expenses Wages Fair Expenses Bar purchases payments Repair New car (less proceeds of old car Rs. 9,000)	30,000 12,000 2,400 3,780 1,410 5,350 2,520 7,170 17,310 960 37,800
	1,20,700		1,20,700

The following additional information are :

	01–04–2010	31–03–2011
Cash in hand Bank balances as per pass book Cheque issued not presented for sundry expenses Subscriptions due Premises at cost Accumulated depreciation on premises Car at cost Accumulated depreciation on car Bar stock Creditors for the bar purchases	450 24,690 270 3,600 87,000 56,400 36,570 30,870 2,130 1,770	— 10,440 90 2,940 1,17,000 — 46,800 — 2,610 1,290

Cash excess spent represent honorarium to secretary not withdrawn due to cash deficit.
His annual honorarium is of Rs. 12,000.
Depreciation on premises and car is to be provided at 5% and 20% on written down value method.
You are required to prepare the correct Receipts and Payments Account, Income and Expenditure Account and Balance Sheet on March 31, 2011.

(0)

(a)

Balance Sheet of M/s. Hero Ltd. as on 31^st March, 2010 and 2011 are as follows:

Liabilities	31–3–10	31–3–11	Assets	31–3–10	31–3–11
Equity Share Capital Capital Reserve General Reserve Profit and Loss Alc. Long term loan from Bank Sundry Creditors Provision for taxation Proposed Dividends	1,000 — 250 150 500 500 50 100	1,150 10 300 180 400 400 60 125	Land and Buildings Machinery Investments Stock Sundry Debtors Cash in Hand Cash at Bank	500 750 100 300 400 200 300	480 820 50 280 420 165 410
	2,550	2,625		2,550	2,625

Additional Information:

(i)	Dividend of Rs.1,00,000 was paid during the year ended 31^stMarch, 2011.
(ii)	Machinery purchased during the year for Rs. 1,25,000.
(iii)	Company sold some investment at a profit of Rs. 10,000 which was credited to capital reserve.
(iv)	Depreciation written off on Land and Building Rs. 20,000.
(v)	Income tax provided during the year Rs. 55,000.

From the above particulars, prepare a cash flow statement for the year ended 31^st March, 2011 as per AS–3 using indirect method.

(0)

(b)

A firm M/s. Alag, which was carrying on business from 1st July, 2010 gets itself incorporated as a company on 1^st November, 2010. The first accounts are drawn upto March 31, 2011. The gross profit for the period is Rs. 56,000. The general expenses are Rs. 14,220; Director’s fees Rs. 12,000 p.a.; incorporation expenses Rs. 1,500. Rent upto 31^stDecember was Rs. 1,200 p.a., after which it is increased to Rs. 3,000 p.a. Salary of the manager, who upon Incorporation of the company was made a director, is Rs. 6,000 p.a. His remuneration thereafter is included in the above figure of fees to the directors.

Give Profit and Loss Account showing pre and post incorporation profit. The net sales are Rs. 8,20,000, the monthly average of which for the first four months is one–half of that of the remaining period. The company earned a uniform profit. Interest and tax may be ignored.

(0)

(a)

A fire occurred in the premises of M/s. Fire proof Co. on 31^stAugust, 2010. From the following particulars relating to the period from 1^st April, 2010 to 31^st August, 2010 you are requested ascertain the amount of claim to be filed with the insurance company for the loss of stock. The concern had taken an insurance policy for Rs. 60,000 which is subject to average clause.

		Rs.
(i)	Stock as per Balance Sheet at 31–03–2010	99,000
(ii)	Purchases	1,70,000
(iii)	Wages (including wages for the installation of a machine Rs. 3,000)	50,000
(iv)	Sales	2,42,000
(v)	Sale value of goods drawn by partners	15,000
(vi)	Cost of goods sent to consignees on 16^th August, 2010, lying unsold with them	16,500
(vii)	Cost of goods distributed as free samples	1,500

While valuing the stock at 31^st March, 2010, Rs. 1,000 were written off in respect of a slow moving item. The cost of which was Rs. 5,000. A portion of these goods were sold at a loss of Rs. 500 on the original cost of Rs. 2,500. The remainder of the stock is now estimated to be worth the original cost. The value of goods salvaged was estimated at Rs. 20,000. The average rate of gross profit was 20% throughout.

(0)

(b)

Explain the factors to be considered before selecting the pre–packaged accounting software.

(0)

(a)

Following is the extract from the Balance Sheet of M/s. Yahoo Ltd. as at 31^st March, 2011 :

	In Rs.
Authorised Capital:
50,000, 10% preference share off Rs. 10 each 2,00,000 equity shares off Rs. 10 each	5,00,000 20,00,000
Issued and Subscribed Capital:
40,000; 10% preference shares of Rs. 10 each fully paid 1,80,000; equity shares off Rs. 10 each, of which Rs. 7.50 paid up	4,00,000 13,50,000
Reserve and Surplus :
General Reserve Capital Reserve Securities Premium Profit and Loss Account	2,40,000 1,50,000 50,000 3,00,000

On 1^st April, 2011, the company has made a final call @ Rs. 2.50 each on 1,80,000 equity shares. The call money was received by 30^th April, 2011. There after the company decided to capitalize its reserves by issuing bonus shares at the rate of one share for every three shares held. Securities premium of Rs. 50,000 includes a premium of Rs. 20,000 for shares issued to vendor for purchase of a special machinery. Capital reserve includes Rs. 60,000 being profit on exchange of plant and machinery.
Show necessary Journal Entries in the books of the company and prepare the extract of the Balance Sheet after bonus issue. Necessary assumption, if any should form part of your answer.

(0)

(b)

Mr. Black accepted the following bills drawn by Mr. White:

Date of Bill	Period	Amount (Rs.)
09–03–2010 16–03–2010 07–04–2010 18–05–2010	4 months 3 months 5 months 3 months	4,000 5,000 6,000 5,000

He wants to pay all the bills on a single date. Interest chargeable is @ 18% p.a. and Mr. Black wants to save Rs. 150 on account of interest payment. Find out the date on which he has to effect the payment to save interest of Rs. 150. Base date to be taken shall be the earliest due date.

(0)

Answer any four of the following:

4x4=16

(a)

M/s. Tiger Ltd. allotted 7500 equity shares of Rs. 100 each fully paid up to Lion Ltd. in consideration for supply of a special machinery. The shares exchanged for machinery are quoted at National Stock Exchange (NSE) at Rs. 95 per share, at the time of transaction. In the absence of fair market value of the machinery acquired, how the value of the machinery would be recorded in the books of Tiger Ltd. ?

(0)

(b)

M/s. SEA Ltd. recognized Rs. 5.00 lakhs on accrual basis income from dividend during the year 2010–11, on shares of the face value of Rs. 25.00 lakhs held by it in Rock Ltd. as at 31^st March, 2011. Rock Ltd. proposed dividend @ 20% on 10^th April, 2011. However, dividend was declared on 30^th June, 2011. Please state with reference to relevant Accounting Standard, whether the treatment accorded by SEA Ltd. is in order.

(0)

(c)

What disclosures should be made in the first financial statements following the amalgamation?

(0)

(d)

From the following data, show Profit and Loss A/c (Extract) as would appear in the books of a contractor following Accounting Standard–7 :

	(Rs. in lakhs)
Contract Price (fixed) Cost incurred to date Estimated cost to complete	480.00 300.00 200.00

(0)

(e)

M/s. Son Ltd. charged depreciation on its assets on SLM basis. In the year ended 31^st March, 2011 it changed to WDV basis. The impact of the change when computed from the date of the assets putting into use amounts to t 18 lakhs being additional depreciation. Discuss, when should an enterprise change method of charging depreciation and how it should be dealt with in Profit and Loss A/c.

(0)

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