CA PE - II ::Accounting : November 2004

Roll No…………………
Total No. of Questions— 6]	[Total No. of Printed Pages—7
Time Allowed : 3 Hours	Maximum Marks : 100
JB
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 Sheets of Sneha Ltd. as on 31.3.2003 and 31.3.2004 prepare a Statement of Sources and Applications of Fund and a schedule of changes in working capital for the year ending 31.3.2004 :

Balance Sheets

Liabilities	31.3.2003 Rs.	31.3.2004 Rs.	Assets	31.3.2003 Rs.	31.3.2004 Rs.
Equity share Capital	13,00,000	16,90,000	Goodwill	65,000	42,500
Profit & Loss A/c	4,90,000	8,77,500	Building	11,70,000	11,37,500
10% Debentures	16,25,000	13,00,000	Machinery	16,18,500	21,38,500
Creditors	9,00,000	10,00,000	Non-tradeInvestments	5,07,000	3,93,250
Bills Payable	42,500	1,70,000	Debtors	4,16,000	11,70,000
Provision for Tax	2,60,000	9,75,000	Stock	5,07,000	7,99,500
Dividend Payable	—	42,250	Cash	2,60,000	2,92,500
			Prepaid Exp's	42,250	52,000
			Debenture
			Discount	31,850	29,000
	46,17,600	60,54,750		46,17,600	60,54,750

P.T.O.

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Marks

(i)

The following additional information is given:

	Building Rs.		Machinery Rs.
Accumulated Depreciation 31.3.2003 Accumulated Depreciation 31.3.2004 Depreciation for 2003-2004	4,87,500 5,20,000 32,500		15,92,500 15,66,500 1,36,500

(ii)

Profit and Loss Account for 2003-2004 is as follows:

	Rs.
Balance as on 31.3.2003 Add: Profit for 2003-2004 Less: Dividend	4,90,100 4,71,900 9,62,ooo 84,500
	8,77,500

(iii)

During 2003-2004 machinery costing Rs.2,92,500 was sold for Rs.97,500.

(iv)

Investments which were sold for Rs.1,17,000 had cost Rs.97,500.

(v)

Provision for Taxation and Dividend are to be taken as Non-current liabilities.

Lucky does not maintain proper books of accounts. However he maintains a record of his bank transactions and also is able to give the following information from which you are requested to prepare his final accounts for the year 2003:

	1.1.2003 Rs.	31.12.2003 Rs.
Debtors Creditors stock Bank Balance Fixed Assets	1,02,500 — 50,000 — 7,500	— 46,000 62,500 50,000 9,000

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Marks

Details of his bank transactions were as follows:

	Rs.
Received from Debtors Additional Capital brought in sale of Fixed Assets (book value Rs. 2,500) Paid to Creditors Expenses paid Personal Drawings Purchase of Fixed Assets	3,40,000 5,000 1,750 2,80,000 49,250 25,000 5,000

No cash transactions took place during the year. Goods are sold at cost plus 25%. Cost of goods sold was Rs. 2,60,000.

(a)

The Life Insurance Fund of an Insurance Company was On 31.3.2004 Rs.60 lakhs before providing for dividend of Rs. 20,000 for the year 2002-2003. While ascertaining the above fund figure, the following items were omitted:

(i)	Interest received on investments Rs. 63,000 after deduction of tax at source 10%.
(ii)	Bonus utilised for reduction of premium Rs.14,000.
(iii)	Death claim intimated, but not yet admitted Rs.36,000.
(iv)	Death claim covered under re-insurance Rs.12,000.
(v)	Consideration for annuities granted Rs.9,000.

Interim bonus for the valuation period paid was Rs.80,000

Net liabilities as per valuation was Rs. 50 lakh. It is now proposed to carry forward Rs. 2,70,000.

The company declared a reversionary bonus of Rs. 12 per share Rs. 1,000 and gave the policyholders an option to get the bonus in cash for Rs. 5 per Rs. 1,000. Total business of the company is Rs. 15 crores, 40% of the policyholders decided to get bonus in cash.

Prepare:

(i) Valuation Balance sheet as on 31.3.2004

(ii) Distribution Statement sharing the amount due to the policyholders.

Also give Journal Entries relating to reversionary bonus.

P.T.O.

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Marks

(b)

Power Electric company decides to replace one of its old plant by an improved plant with larger capacity. The cost of the new plant is Rs. 16,00,000.

Materials and Labour earlier and now are in the ratio of 4:6.

Original cost of the old plant is Rs.3,00,000. Materials cost has gone up by 2½ times and Labour cost by 3 times since then. Old materials worth Rs. 10,000 were used in the construction of the new plant and Rs. 20,000 were realised from the sale of old materials.

Give the necessary Journal Entries for recording the above transactions.

(a)

Liquidation of YZ Ltd. commenced on 2nd April,2004. certain creditors could not receive payments out of the realisation of assets and out of the contributions from A list contributions. The following are the details of certain transfers which took place in 2003-2004:

Shareholders	No of Shares transferred	Date of ceasing to be a member	Creditors remaining unpaid and outstanding on the date of such transfer
A P Q R S	2,000 1,500 1,000 500 300	1st March,2003 1st May,2003 1st October,2003 1st November,2003 1st February,2004	Rs. 5,000 Rs. 3,300 Rs. 4,300 Rs. 4,600 Rs. 6,000

All the shares were of Rs. 10 each, Rs.8 per share paid up. Show the amount to be realised from the various persons listed above ignoring expenses and remuneration to liquidator etc.

(b)

The position of Valueless Ltd. on its liquidation is as under:

Issued and paid up Capital:

3,000
3,000
1,000

11% preference shares of Rs. 100 each fully paid.
Equity shares of Rs. 100 each fully paid.
Equity shares of Rs. 50 each Rs.30 per share paid.

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Marks

Calls in Arrears are Rs. 10,000 and Calls received in Advance Rs. 5,000 Preference Dividends are in arrears for one year. Amount left with the liquidator after discharging all liabilities is Rs. 4,13,000. Articles of Association of the company provide for payment of preference dividend arrears in priority to return of equity capital. You are required to prepare the Liquidators final statement of account.

(a)

FGH Ltd. has three departments I.J.K. The following information is provided for the year ended 31.3.2004:

	I Rs.	J Rs.	K Rs.
Opening Stock Opening Reserve for unrealised profit Materials consumed Direct labour Closing stock Sales Area occupied (sq.mtr.) No of employees	5,000 — 16,000 9,000 5,000 — 2,500 30	8,000 2,000 20,000 10,000 20,000 — 1,500 20	19,000 3,000 — — 5,000 80,000 1,000 10

Stocks of each department are costs to the department concerned. stocks of I are transferred to J at cost plus 20% and stocks of J are transferred to K at a Gross Profit of 20% on sales. Other common expenses are Salaries and Staff Welfare Rs.18,000, Rent Rs. 6,000.

Prepare Department Trading, Profit and Loss Account for the year ending 31.3.2004.

(b)

Give Journal Entries in the books of Branch A to rectify or adjust the following:

(i)	Head Office expenses Rs. 3,500 allocated to the Branch, but not recorded in the Branch Books.
(ii)	Depreciation of branch assets, whose accounts are kept are kept by the Head Office not provided for Rs. 1,500.

P.T.O.

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Marks

(iii)	Branch paid Rs. 2,000 as salary to a H.O. Inspector, but the amount paid has been debited by the Branch to Salaries account.
(iv)	H.O. collected Rs.10,000 directly from a customer on behalf of the Branch, but no intimation to this effect has been received by the Branch.
(v)	A remittance of Rs. 15,000 sent by the Branch has not yet been received by the Head Office.
(vi)	Branch A incurred advertisement expenses of Rs. 3,000 on behalf of Branch B.

Attempt any four of the following:

4x4=16

(a)

On 20.4.2003 JLC Ltd. obtained a loan from the Bank for Rs. 50 lakhs to be utilised under:

	Rs.
Construction of a shed Purchase of Machinery working capital Advance for Purchase of Truck	20 lakh 15 lakh 10 lakh 5 lakh

In March, 2004 construction of shed was completed and machinery installed. Delivery of truck was not received. Total interest charged by the bank for the year ending 31.3.2004 was Rs. 9 lakh. show the treatment of interest under AS 16.

(b)

A limited company created a provision for bad and doubtful debts at 2.5% on debtors in preparing the financial statements for the year 2003-2004.

Subsequently on a review of the credit period allowed and financial capacity of the customers, the company decided to increase the provision to 8% on Debtors till the date of decision. While applying the relevant accounting standard can this revision be considered as an extraordinary item or prior period item?

(c)

Explain the treatment of cost arising from alteration in retirement benefit cost as per As 15.

JB	Contind...

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Marks

(d)

From the following information find out the amount of provisions to be shown in the Profit and Loss Account of a Commercial Bank :

Assets
Standard
Sub-standard
Doubtful one year
Doubtful three years
Doubtful more than three years
Loss Assets Rs.(In Lakhs)
4,000
2,000
900
400
300
500

(e)

What are the features of farm accounting in India?

(f)

Write a short note on Reserve for Unexpired Risks in an Insurance Company.

NSW

CA PE - II :: Accounting : November 2004