CA PE - II ::Accounting : May 2003

Roll No…………………
Total No. of Questions— 6]	[Total No. of Printed Pages—7
Time Allowed : 3 Hours	Maximum Marks : 100
GN
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, his answers in Hindi will not be valued.
Answer all Questions
Wherever appropriate suitable assumptions should be made by the candidate.
Working notes should form part of the answer.
Marks

From the following Balance Sheet and information, prepare Cash Flow Statement of Ryan Ltd. for the year ended 31st March, 2003:

Balance Sheet

	31st March, 2003 Rs.	31st March, 2002 Rs.
Liabilities Equity share Capital 10% Redeemable Preference Capital Capital Redemption Reserve Capital Reserve General Reserve Profit and Loss Account 9% Debentures Sundry Creditors Bills Payable Liabilities for Expenses Provision for Taxation Proposed Dividend	6,00,000 -------- 1,00,000 1,00,000 1,00,000 70,000 2,00,000 95,000 20,000 30,000 95,000 90,000	5,00,000 2,00,000 -------- -------- 2,50,000 50,000 -------- 80,000 30,000 20,000 60,000 60,000
	15,00,000	12,50,000

P.T.O.

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Marks

	31st March, 2003 Rs.	31st March, 2002 Rs.
Assets Land and Building Plant and Machinery Investments Inventory Bills Receivable Sundry Debtors Cash and Bank Preliminary Expenses Voluntary Separation Payments	1,50,000 7,65,000 50,000 95,000 65,000 1,75,000 10,000 10,000 1,25,000	2,00,000 5,00,000 80,000 90,000 70,000 1,30,000 90,000 25,000 65,000
	15,00,000	12,50,000

Additional information:

(i)	A piece of land has been sold out for Rs. 1,50,000 (Cost-- Rs. 1,20,000) and the balance land was revalued. Capital Reserve consisted of Profit on sale and profit on revaluation.
(ii)	On 1st April, 2002 a plant was sold for Rs. 90,000 (Original Cost-- Rs. 70,000 and W.D.V.--Rs. 50,000) and Debentures worth Rs. 1 lakh was issued at par as part consideration for Plant of Rs. 4.5 lakh acquired.
(iii)	Part of the investments (Cost--Rs. 50,000) was sold for Rs. 70,000
(iv)	Pre-acquisition dividend received Rs. 5,000 was adjusted against cost of Investment.
(v)	Directors have proposed 15% dividend for the current year.
(vi)	Voluntary separation cost of Rs.50,000 was adjusted General Reserve.
(vii)	Income-tax liability for the current year was estimated at Rs. 1,35,000.
(viii)	Depreciation @ 5% has been written off from Plant account but no depreciation has been charged on Land and Building.

GN	Contind...

( 3 )

Marks

Ram, Rahim and Robert are partners of the firm 'RR Traders' for the past 5 years. The partners decided to dissolve the firm consequent to insolvency of partner Robert in October, 2002. The Balance Sheet of the firm as on 31.10.2002 is furnished below. They share profit and losses equally :

Liabilities	Rs.	Assets	Rs.
Capital Accounts : Ram Rahim Robert General Reserve Creditors	4,50,000 4,50,000 2,00,000 2,10,000 2,90,000	Land and Building Plant and Machinery Furnitue and Fittings Stock in trade Debtors Cash at Hand/Bank	5,00,000 2,00,000 50,000 3,00,000 5,00,000 50,000
	16,00,000		16,00,000

The Partners Ram and Rahim decided to form a new firm 'RR Enterprises' and takeover all the assets and liabilities of the firm at values given below:

Land and Building	Rs.3,50,000
Plant and Machinery	Rs.1,50,000
Furniture and Fittings	Rs. 20,000
Stock in trade	Rs.2,00,000

Debtors include Rs. 3,00,000 lakhs due from SK & Co. owned by Robert. (Nothing is recoverable from the said concern.)

Other debtors can be recovered fully.

Prepare :

(i) Realisation account, Partners capital account in the books of RR Traders; and

(ii) The Balance Sheet of RR Enterprise (immediately after commencement).

Ram commenced business on 1.7.1997 with a capital of Rs. 2,00,000. On 31st March, 2003 an adjudication order for insolvency was made against him. Following are the other details available relating to his business as on 31.3.2003 :

P.T.O.

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Marks

Sundry Creditors
Mortgage Loan (of building)
Godown Rent (2 months)
Wages due
Mrs.Ram loan (given out of her own source)
Cost of Building (estimated to realise Rs. 1,00,000)
Debtors (includes bad of Rs. 10,000)
Stock in trade (Realisation value 10,000)
Cash in Hand/Bank

Rs.
1,50,000
1,00,000
5,000
8,000
25,000
1,60,000
90,000
15,000
10,000

He maintained books upto 31.3.2000 and profit upto 31.3.2000 was Rs. 1,40,000.He did not maintain books from 1.4.2000 onwards. He has been drawing Rs. 4,000 per month and goods worth Rs. 1,500 per month uniformly from April, 2000 onwards.

Prepare statement of affairs and deficiency account.

(a)

Show adjustment Journal entry in the books of Head Office at the end of April,2003 for incorporation of inter-branch transacitons assuming that only Head Office maintains different branch accounts in its books.

A. Delhi Branch :

(1)	Received goods from Mumbai-- Rs. 35,000 and Rs. 15,000 from Kolkata.
(2)	Sent goods to Chennai-- Rs. 25,000, Kolkata-- Rs. 20,000.
(3)	Bill Receivable received-- Rs. 20,000 from Chennai.
(4)	Acceptances sent to-- Mumbai-- Rs.25,000, Kolkata-- Rs. 10,000.

B. Mumbai Branch (apart from the above):

(5)	Received goods from Kolkata-- Rs. 15,000, Delhi-- Rs.20,000.
(6)	Cash sent to Delhi-- Rs. 15,000,Kolkata-- Rs. 7,000.

C. Chennai Branch (apart from the above):

(7)	Received goods from Kolkata-- Rs. 30,000
(8)	Acceptances and Cash sent to Kolkata-- Rs. 20,000 and Rs. 10,000 respectively.

GN	Contind...

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Marks

D. Kolkata Branch (apart from the above):

(9)	Sent goods to Chennai-- Rs. 35,000.
(10)	Paid cash to Chennai-- Rs. 15,000.
(11)	Acceptances sent to Chennai-- Rs. 15,000.

All working should form part of the answer.

(b)

A acquired on 1st January,2003 a machine under a Hire-Purchase agreement which provides for 5 half-yearly installments of Rs. 6,000 each, the first installment being due on 1st July, 2003. Assuming that the applicable rate of interest is 10% per annum, calculate the cash value of the machine. All working should form part of the answer.

Emergent Ltd. was incorporated on 1st April, 2002 to take over the running business of Mr.A.

The purchase consideration was satisfied by allotment of :

(i)

15,000 equity shares of Rs. 10 each issued at a premium of Rs. 2 per share.

(ii)

12,000 10% Redeemable Preference shares of Rs. 10 each at per, redeemable on 31.3.2001.

(iii)

Rs. 70,000 paid in cash.

The company issued a Prospectus for issuing 50,000 equity shares of Rs. 10 each, at a premium of Rs. 2 per share and 20,000 10% Redeemable Preference shares of Rs. 10 each, at par. The entire amount in respect of the issue was received by 30th June, 2002 except final call of Rs. 3 per share on 2,500 shares issued to Mr.X, a director. Underwritting commission @ 2.5% on nominal value of equity shares and @ 3% on preference shares were paid to a merchant banker.

The preliminary expenses were estimated at Rs. 75,000 in the prospectus but the actual expenses incurred was as under :

		Rs.
Solicitor's fee	—	15,000
Printing of memorandum	—	20,000(Rs.10,000 remaining unpaid)
Stamping and registration	—	25,000
Advertisement expenses	—	30,000

P.T.O.

( 6 )

Marks

The Company purchased a plot of land for Rs. 1,00,000. Further, it advanced Rs. 2,50,000 for construction of office building and Rs. 3,50,000 to a supplier, being 35% of contract price for supply of machinery. A part of the investments taken over from Mr.A was sold for Rs. 80,000 (Rs. 5,000 in excess of their book value).

Prepare a Receipts and Payments Account and other relevent financial information to be included in the Statutory Report pursuant to Section 165 of the Companies Act, 1956 in respect of Emergent Ltd. made up to 30th June, 2002.

Attempt any four of the following questions:

4x4=16

(a)

X Co.Ltd. charged depreciation on its asset on SLM basis. For the year ended 31.3.2003 it changed to WDV basis. The impact of the change when computed from the date of the asset coming to use amounts to Rs. 20 lakhs being additional charge.

Decide how it must be disclosed in Profit and Loss Account. Also, discuss, when such changes in method of depreciation can be adopted by an enterprise as per AS-6.

(b)

Decide when research and development cost of a project can be defered to future periods as per AS-8.

(c)

You are an Accountant preparing accounts of A Ltd. as on 31.3.2003. After year end of the following events have taken place in April, 2003 :

(i) A fire broke out in the premises damaging,uninsured stock worth Rs. 10 lakhs (Salvage value Rs. 2 lakhs).

(ii) A suit against the company's advertisement was filed by a party claiming damage of Rs. 20 lakhs.

(iii) Dividend approved @ 20 on share capital of Rs. 100 lakhs.

Describe, how above will be dealt with in the account of the company for the year ended on 31.3.2003.

GN	Contind...

( 7 )

Marks

	(d)	How the Government Grants related to specific fixed assets should be presented in the Balance Sheet as per AS-12 ?
	(e)	Briefly describe the disclosure requirements for Amalgamation including additional disclosure, if any, for different methods of amalgamation as per AS-14.
	(f)	Mention the prescribed accounting treatment in respect of Gratuity benefits payable to Employees as per AS-15.

CA PE - II :: Accounting : May 2003