CA PE - II ::Accounting : November 2006

Roll No…………………
Total No. of Questions— 6]	[Total No. of Printed Pages—5
Time Allowed : 3 Hours	Maximum Marks : 100
BF
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

The following is the Balance Sheet of A Ltd. as at 31st March, 2006:

Liabilities	Rs.	Assets	Rs.
8,000 equity shares of Rs.100 each 10% debentures Loan from A Creditors General Reserve	8,00,000 4,00,000 1,60,000 3,20,000 80,000 17,60,000	Building Machinery Stock Debtors Bank Goodwill Misc. Expenses	3,40,000 6,40,000 2,20,000 2,60,000 1,36,000 1,30,000 34,000 17,60,000

B Ltd. agreed to absorb A Ltd. on the following terms and conditions:

(1)

B Ltd. would take over all Assets, except bank balance at their book values less 10%. Goodwill is to be valued at 4 year’s purchase of super profits, assuming that the normal rate of return be 8% on the combined amount of share capital and general reserve.

(2)

B Ltd. is to take over creditors at book value.

(3)

The purchase consideration is to be paid in cash to the extent of Rs.6,00,000 and the balance in fully paid equity shares of Rs.100 each at Rs.125 per share.
The average profit is Rs.1,24,400. The liquidation expenses amounted to Rs.16,000. B Ltd. sold prior to 31st March, 2006 goods costing Rs.1,20,000 to A Ltd. for Rs.1,60,000. Rs.1,00,000 worth of goods are still in stock of A Ltd. on 31st March, 2006. Creditors of A Ltd. include Rs.40,000 still due to B Ltd.
Show the necessary Ledger Accounts to close the books of A Ltd. and prepare the Balance Sheet of B Ltd. as at 1st April, 2006 after the takeover.

P.T.O.

( 2 )

Marks

‘X’ and ‘Y’ carrying on business in partnership sharing Profit and Losses equally, wished to dissolve the firm and sell the business to ‘X’ Limited Company on 31-3-2006, when the firm’s position was as follows:

Liabilities	Rs.	Assets	Rs.
X’s Capital Y’s Capital Sundry Creditors	1,50,000 1,00,000 60,000 3,10,000	Land and Building Furniture Stock Debtors Cash	1,00,000 40,000 1,00,000 66,000 4,000 3,10,000

The arrangement with X Limited Company was as follows:

(i)

Land and Building was purchased at 20% more than the book value.

(ii)

Furniture and stock were purchased at book values less 15%.

(iii)

The goodwill of the firm was valued at Rs.40,000.

(iv)

The firm’s debtors, cash and creditors were not to be taken over, but the company agreed to collect the book debts of the firm and discharge the creditors of the firm as an agent, for which services, the company was to be paid 5% on all collections from the firm’s debtors and 3% on cash paid to firm’s creditors.

(v)

The purchase price was to be discharged by the company in fully paid equity shares of Rs.10 each at a premium of Rs.2 per share.

The company collected all the amounts from debtors. The creditors were paid off less by Rs.1,000 allowed by them as discount. The company paid the balance due to the vendors in cash.
Prepare the Realisation account, the Capital accounts of the partners and the Cash account in the books of partnership firm.

BF	Contind...

( 3 )

Marks

The following are the summarized Balance Sheets of ‘X’ Ltd. as on March 31, 2005 and 2006:

Liabilities	As on 31.3.2005 (Rs.)	As on 31.3.2006 (Rs.)
Equity share capital Capital Reserve General Reserve Profit and Loss A/c Long-term loan from the Bank Sundry Creditors Provision for Taxation Proposed Dividends	10,00,000 — 2,50,000 1,50,000 5,00,000 5,00,000 50,000 1,00,000 25,50,000	12,50,000 10,000 3,00,000 1,80,000 4,00,000 4,00,000 60,000 1,25,000 27,25,000

Assets	Year 2005 (Rs.)	Year 2006 (Rs.)
Land and Building Machinery Investment Stock Sundry Debtors Cash in Hand Cash at Bank	5,00,000 7,50,000 1,00,000 3,00,000 4,00,000 2,00,000 3,00,000 25,50,000	4,80,000 9,20,000 50,000 2,80,000 4,20,000 1,65,000 4,10,000 27,25,000

Additional Information:

(i)	Dividend of Rs.1,00,000 was paid during the year ended March 31, 2006.
(ii)	Machinery during the year purchased for Rs.1,25,000.
(iii)	Machinery of another company was purchased for a consideration of Rs.1,00,000 payable in equity shares.
(iv)	Income-tax provided during the year Rs.55,000.
(v)	Company sold some investment at a profit of Rs.10,000, which was credited to Capital reserve.
(vi)	There was no sale of machinery during the year.
(vii)	Depreciation written off on Land and Building Rs.20,000.

From the above particulars, prepare a cash flow statement for the year ended March, 2006 as per AS 3 (Indirect method).

P.T.O.

( 4 )

Marks

(a)

The life fund of Well-Life Assurance Co. was Rs.90,00,000 as on 31st December, 2005. The interim bonus paid during the valuation period was Rs.1,50,000. The periodical actuarial valuation determined the net liability at Rs.75,00,000. Surplus brought forward from the previous valuation was Rs.9,00,000. The directors of the company proposed to carry forward Rs.10,00,000 and to divide the balance between the shareholders and the policy holders. You are required to show:

(i)	The valuation Balance Sheet.
(ii)	The Net Profit for the valuation period.
(iii)	The distribution of the surplus.

(b)

The following is an extract from the Trial Balance of Dream Bank Ltd. as at 31st March, 2006:

Rebate on bills discounted as on 1-4-2005 Discount received	68,259 (Cr.) 1,70,156 (Cr.)
Analysis of the bills discounted reveals as follows:
Amount (Rs.) 2,80,000 8,72,000 5,64,000 8,12,000 6,00,000	Due date June 1, 2006 June 8, 2006 June 21, 2006 July 1, 2006 July 5, 2006

You are required to find out the amount of discount to be credited to Profit and Loss account for the year ending 31st March, 2006 and pass Journal Entries. The rate of discount may be taken at 10% per annum.

Mr. Ashok keeps his books in Single Entry system. From the following information, prepare Trading and Profit & Loss Account for the year ended 31st March, 2006 and the Balance Sheet as on that date:

Assets and Liabilities	31.3.2005 (Rs.)	31.3.2006 (Rs.)
Sundry Creditors Outstanding expenses Fixed Assets Stock Cash in Hand and at Bank Sundry Debtors	30,000 1,000 23,000 16,000 14,000 ?	25,000 500 22,000 22,500 16,000 36,000

BF	Contind...

( 5 )

Marks

Following further details are available for the Current year:

	Rs.		Rs.
Total receipts from debtors^∗ Returns inward Bad Debts Total Sales Discount received Return outwards Capital introduced (paid into Bank) Cheques received from Debtors	1,30,000 3,000 1,000 1,50,000 1,500 1,000 15,000 1,25,000	Cash purchases Fixed Assets purchased and paid by cheque Drawings by cheques Deposited into the bank Withdrawn from bank Cash in hand at the end Paid to creditors by cheques Expenses paid	2,000 1,000 6,500 10,000 18,500 2,500 1,20,000 20,000

Answer any four of the following:

(a)	What are the costs that are to be included in Research and Development costs as per AS 8.
(b)	The Company reviewed an actuarial valuation for the first time for its Pension Scheme, which revalued a surplus of Rs.12 lacs. It wants to spread the same over the next 2 years by reducing the annual contribution to Rs.4 lacs instead of Rs.10 lacs. The average remaining life of the employees, if estimated to be 6 years, you are required to advise the Company considering the accounting standards 5 and 15.
(c)	X Ltd. entered into an agreement to sell its immovable property included in the Balance Sheet at Rs.10 lacs to another company for Rs.15 lacs. The agreement to sell was concluded on 28th February, 2006 and the sale deed was registered on 1st May, 2006. Comment with reference to AS 4.
(d)	What are the conditions that are to be satisfied for ‘Amalgamation in the nature of Merger’?
(e)	Write short note on “Appropriation Act” with reference to Government Accounts.
(f)	Define related party transaction under AS 18.

4x4=16

CA PE - II :: Accounting : November 2006