CA Final :: Advanced Accounting : November 2004

Roll No…………………
Total No. of Questions— 6]	[Total No. of Printed Pages—7
Time Allowed : 3 Hours	Maximum Marks : 100
AM
Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers in Hindi medium, answers in Hindi, his answers in Hindi will not be valued.
Answer all Questions

Working notes should form part of the answer. Wherever applicable, suitable assumptions may be made by the candidate.
Marks

The following are the summarised Balance Sheets of PD co. Ltd. and SD co. Ltd. as on 31.3.2004 :

Liabilities	PD Co. Ltd. Rs.	SD Co. Ltd. Rs.
Shares Capital: Authorised Issued and Subscribed Capital Equity shares of Rs. 10 each fully paid capital Reserve Revenue Reserve Profit and Loss Account Sundry Creditors Bills Payable	70,00,000 50,00,000 5,00,000 8,50,000 4,00,000 2,50,000 1,00,000	30,00,000 20,00,000 3,10,000 75,000 2,80,000 2,25,000 10,000
	71,00,000	29,00,000

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Assets	PD Co. Ltd. Rs.	SD Co. Ltd. Rs.
Land and Buildings Plant and Machinery Furniture Investments Stock Sundry Debtors Bills Receivable Bank	20,00,000 20,00,000 5,00,000 16,10,000 3,40,000 3,60,000 50,000 2,40,000	15,20,000 8,00,000 1,60,000 — 1,00,000 2,00,000 40,000 80,000
	71,00,000	29,00,000

PD Ltd. acquired 80% shares of SD Ltd. on 30.9.2003 at a cost of Rs. 18,10,000. On 1.10.03 SD Ltd. declared and paid dividend on Equity shares. PD Ltd. appropriately adjust its share of dividend in Investment Account.

On 1.4.03, the Capital Reserve and Profit and Loss Account stood in the books of SD Ltd. at Rs. 50,000 and Rs. 2,75,000 respectively.

Land and Buildings standing in the books of SD Ltd. at Rs. 16,00,000 on 1.4.03, revalued at Rs. 20,00,000 on 1.10.93, Furniture, which stood in the books at Rs. 2,00,000 on 1.4.03 revalued at Rs. 1,50,000 on 1.10.03. In both the cases the effects have not yet been given in the books.

SD Ltd. bought an item of machinery from PD Ltd. on hire-purchase basis. The following are the balances in respect of this machinery in the books on 31.03.04 :

	Rs.
Instalment due Instalment not due Hire-purchase stock reserve	20,000 8,000 1,600

The above items stood included under appropriate heads in Balance Sheet.

Prepare a Consolidated Balance Sheet of PD Ltd. and its subsidiary SD Ltd. as at 31.03.2004, complying with the requirements of AS-21.

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Marks

The following is the Profit and Loss Account of Galaxy Ltd. for the year ended 31.3.04. Prepare a Gross Value Added Statement of Galaxy Ltd. and show also the reconciliation between Gross Value added and profit before taxation :

Profit and Loss Account for the year ended 31.3.2004

Notes

Amount
(Rs. in lakhs)

Income :
    Sales
    Other Income

Expenditure
    Production and operational expenses
    Administration expenses(Factory)
    Interest
    Depreciation
    Profit before taxes
    provision for taxes
    profit after tax

    Balance as per last Balance Sheet
    Transferred to General Reserve
    Dividend paid

    Surplus carried to Balance Sheet

(a)
(b)
(c)

(d)

— — 641 33 29 17 — — — — 45 45 140 65	890 55 945 — — — 720 225 30 195 10 205 — — — —
205	—

Notes :

(a)	Production and Operational expenses :	Rs.
	Consumption of Raw materials Consumption of stores Salaries, wages, Gratuities etc. (Admn.) Cess and Local taxes Other manufacturing expenses	293 59 82 98 109
		641

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(b)

Administration expenses include salaries, commission to Directors Rs. 9.00 lakhs. Provision for doubtful debts Rs. 6.30.

(c)

Interest on loan from ICICI Bank for working capital Interest on loan from ICICI Bank for fixed loan Interest on loan from IFCI for fixed loan Interest on Debentures	9 10 8 2
	Rs. 29

(d)

The charges for taxation include a transfer of Rs. 3.00 lakhs to the credit of Deferred Tax Account.

(e)

Cess and Local taxes include Excise Duty, which is equal to 10% of cost of bought-in material.

The Capital Structure of M/s XYZ Ltd., on 31st March, 2003 was as follows :

Equity Capital 18,000 Shares of Rs. 100 each
12% Preference Capital 5,000 Shares of Rs. 100 each
12% Secured Debentures
Reserves
Profit earned before Interest and Taxes during the year
Tax Rate

18,00,000
5,00,000
5,00,000
5,00,000
7,20,000
40%

Generally the return on equity shares of this type of Industry is 15%.

Subjected to :

(a)
(b)
(c)

The profit after tax covers Fixed Interest and Fixed Dividends at least 4 times;
The Debt Equity ratio is at least2;
Yield on shares is calculated at 60% of distributed Profits and 10% of undistributed Profits;

The Company has been paying regularly an Equity dividend of 15%.

The risk premium for Dividends is generally assumed at 1%.

Find out the value of Equity shares of the Company.

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(a)

X Co. Ltd. supplied the following information. You are required to compute the basic earning per share :

(Accounting year 1.1.2002-31.12.2002)

Net Profit

No. of shares outstanding prior to Right Issue
Right Issue

Fair rate of one Equity share immediately prior to exercise right on 31.3.03

:
:
:
:

:

Year 2002 : Rs.20,00,000
year 2003 : Rs.30,00,000
10,000 shares.
One new share for each four outstanding i.e., 2,50,000 shares.
Right Issue Price - Rs. 20
Last Date if exercise rights - 31.3.2003.

Rs. 25

(b)

A Ltd. Leased a machinery to B Ltd. on the following terms :

	(Rs. in Lakhs)
Fair value of the machinery Lease term Lease Rental per annum Guaranteed Residual value Expected Residual value Internal Rate of Return	20.00 5 years 5.00 1.00 2.00 15%

Depreciation is provided on Straight line method @ 10% per annum. Ascertain unearned financial Income and necessary entries may be passed in the books of the Lessee in the First year.

(c)

The following particulars are stated in the Balance sheet of M/s Exe Ltd. as on 31.3.2003 :

	(Rs. in Lakhs)
Deferred Tax Liability (Cr.) Deferred Tax Assets (Dr.)	20.00 10.00

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The following transactions were reported during the year 2003-04 :

(i) (ii) (iii) (iv) (v) (vi)	Tax Rate Depreciation - As per Book Depreciation - for Tax purposes There were no addition to Fixed Assets during the year. Items disallowed in 2002-03 and allowed for Tax Purposes in 2003-04 Interest to Financial Institutions to accounted in the Books on accrual basis, but actual payment was made on 30.9.2004 Donations to private Trusts made in 2003-04 share issue expenses allowed under 35(D) of the I.T. Act, 1961 for the year 2003-04 (1/10th of Rs.50.00 lakhs incurred in 1999-2000)	50% 50.00 30.00 10.00 20.00 10.00 5.00
(vii)	Repairs to Plant and Machinery Rs. 100.00 lakhs was spread over the period 2003-04 and 2004-05 equally in the books. However the entire expenditure was allowed for Income-tax purposes.

Indicate clearly the impact of above items in terms of Deferred Tax liability/Deferred Tax Assets and the balances of Deferred Tax Liability/Deferred Tax Asset as on 31.03.2004.

(a)

From the following details of Loan Fund of Kanpur Institute of Technology for the year 2003-2004, you are required to prepare a statement showing changes in the Loan Fund Balance :

	Rs.
Fund balance as on 1.4.03 Grants from the Government and Society Grants from Revenue Fund Other transfer from Unrestricted Fund Investment income Interest on Loan Refund of Granters Bad Debts written off Administration and collection costs	25,00,000 12,00,000 50,000 70,000 60,000 40,000 25,000 15,000 25,000

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	(b)	Mr. Investor buys a stock option of ABC Co. Ltd. in July, 2003 with a strike price on 30.7.2003 Rs. 250 to be expired on 30.8.04. The premium is Rs. 20 per unit and the market lot is 100. The margin to be paid is Rs. 120 per unit.	12
		Show the accounting treatment in the books of Buyer when :
		(i) the option is settled by delivery of the asset, and
		(ii) the option is settled in cash and the Index price is Rs. 260 per unit.
6.	Write short notes on the following		4x4=16
	(a)	"Non-Performing Assets" as per NBSC Prudential Norms (RBI) directions.
	(b)	Some Key differences between IAS, USGAAP and Indian As with respect to
		(i) Fixed Assets
		(ii) Changes in Accounting Policy and Prior period items.
	(c)	Environmental Accounting.
	(d)	Advantages and disadvantages of setting of Accounting standards.