Institute of Chartered Financial Analysts of India (ICFAI) University 2007 Certification Finance Financial Accounting (CFA510):2009 - Question Paper
Monday, 17 June 2013 10:55Web
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47. C
Dr. Machinery Account Cr.
Date Particulars Rs. Date Particulars Rs.
April 1, 2006 To Balance b/d 1,20,000 March 31, 2007 By Depreciation 24,000
March 31, 2007 By Balance c/d 96,000
1,20,000 1,20,000
April 1, 2007 To Balance b/d 96,000 Sept.30, 2007 By Depreciation* 9,600
Sept.30, 2007 By Bank 60,000
March 31, 2008 By P&L a/c (loss) 26,400
96,000 96,000
* Depreciation = Rs.96,000 × 20% × six months ÷ 12 months = Rs.9,600.
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48. C Machine acquired by the company 5 years ago. Company charged depreciation for last five years (8
years – 3years) on straight line method.
Amount of depreciation per year =
Rs.13,000 -Rs.1,000
8 = Rs.1,500.
Amount of accumulated depreciation till date (before revision) = Rs.1,500 × 5years = Rs.7,500.
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49. B When a company revalues its fixed assets and if there is a profit on revaluation, it should be
transferred to Capital Reserve a/c.
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50. D choices (a), (b), (c) and (e) are features of purchased goodwill, which arises when 1 business
buys a different and the purchase consideration is more than the value of net tangible assets received.
Hence there is no subjective judgment involved.
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51. D calculation of avg. capital employed :
Particulars Rs. Rs.
Assets
Land and building (1,20,000 × 1.4) 1,68,000
Plant and Machinery (1,30,000 × 1.35) 1,75,500
Stock 50,000
Debtors 45,000
Cash at Bank 33,000
4,71,500
Less : Current Liabilities
Sundry creditors 54,000
Provision for taxation 30,000 84,000
Closing capital employed 3,87,500
Less: 50% of profit for 2007-08 38,000
avg. capital employed 3,49,500
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52. B When stock exchange quotation is available it forms the basis of for ascertaining the value of a
business and hence, goodwill need not be valued separately. Hence choice (b) is accurate ans.
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53. A
Particulars computations Rs.
avg. profit Rs.(80,000 + 1,00,000 + 1,20,000 + 1,80,000) ÷ four 1,20,000
Maintainable profit avg. profit – increase in rent
Rs.1,20,000 – Rs.5,000 = Rs.1,15,000
1,15,000
Normal profit Capital employed x Normal rate
Rs.5,00,000 × 15%
75,000
Super profit Maintainable profit – Normal profit 40,000
Under capitalization of
super profit method
Goodwill will be
Super profit /Normal rate of return = Rs.40,000/15% 2,66,667
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54. E The excess of the fair value of net identifiable assets, tangible as well as intangible over any
liabilities presumed by the purchaser is recorded as an asset i.e. goodwill by the acquiring company.
Hence, choice (e) is accurate ans.
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55. C Trading profits for the last 3 years :
Particulars Rs.
Year one 1,61,400
Year two 1,36,050
Year three 1,68,750
Total 4,66,200
avg. Profit (Rs.4,66,200 ÷ 3) 1,55,400
Less : Remuneration of the directors 18,000
avg. Maintainable Profits 1,37,400
Less : Normal Profit expected @ 10% on avg.
capital employed
10
Rs.9,00,000×
100
? ?
? ?
? ?
90,000
Super Profit 47,400
Goodwill at three years’ purchase (Rs.47,400 ? 3) 1,42,200
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56. A The avg. maintainable profits of the company are
Year Rs. Rs.
2005-06 Profit 6,61,500
Less: Omission of office expenses 24,750 6,36,750
2006-07 Profit 9,67,500
Less: 10% non-recurring 96,750 8,70,750
2007-08 Profit 7,20,000
Add: Provision for bad debts 47,250 7,67,250
Total profits 22,74,750
The simple avg. maintainable profits of the company
= Rs.22,74,750 ? three = Rs.7,58,250.
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57. C Selling old furniture at a price higher than its book value will provide rise to profit on sale of assets that
will increase the net profit and hence the owners’ equity. The other choices do not affect the
owners’ equity. Hence choice (c) is accurate ans.
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58. B According to Schedule VI of the Companies Act 1956, loose tools should be indicated in current
assets. Livestock, development of property, railway sidings and leaseholds are to be indicated under
fixed assets.
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59. D
Particulars Rs.
Provision for taxation of the previous year 21,90,000
Dividend on 10%, 50,000 Preference Shares of Rs.100 every 5,00,000
10% Dividend on 6,50,000 equity shares of Rs.10 every 6,50,000
The total amount debited to Profit and Loss appropriation account 33,40,000
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60. E computation of Transfer to General Reserve:
Final dividend declared [Rs.6,02,000 – Rs.2,000] ? 10% = Rs.60,000
Total of dividend declared and proposed during the year
= Rs.(42,000 + 60,000) = Rs.1,02,000
Dividends as a percent of paid-up capital
= (Rs.1,02,000 ÷ 6,00,000) ? 100 = 17%
Since this rate of dividend falls in the slab – greater than 15% but less than 20% – the transfer to
reserves should be 7.5% of the current profits.
Transfer to reserves = Rs.94,800 × 7.5% = Rs.7,110.
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61. B
Particulars Rs.
Reserves & Surplus (opening balance) 10,00,000
Add: Transfer to General Reserve 1,00,000
Balance in Profit & Loss A/c 1,00,000
Reserves & Surplus (at year end) 12,00,000
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62. B Loss on sale of undertaking is not deductible for calculation of net profit for calculating
managerial remuneration.
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63. C In case of companies extracting natural resources, after estimating the total production potential, the
unit cost can be calculated by using units of production method. Therefore, the method of
depreciation that is considered to be most improper for petroleum and mining companies for
charging depreciation on oil wells and mines is units of production method. Straight-line method
Diminishing Balance method and Sum-of-The-Years’-Digits methods are not improper. Hence,
choice (c) is accurate ans.
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64. C According to part 226(3) of the Companies Act, 1956, a body corporate, an officer of the
company, a person indebted to the company for an amount exceeding Rs.1,000, a person
disqualified to be appointed as an auditor of its subsidiary company, a person holding any security
of the company are disqualified to be appointed as an auditor. However, a person holding the shares
of the company as a nominee or a trustee for any 3rd person and in which the holder has no
beneficial interest shall not be disqualified. Hence the ans is (c).
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65. D The dividend finally decided as payable, by the shareholders in the Annual General Meeting is
termed as declared dividend.
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66. D An auditor is needed to check to see whether or not loans and advances made by the company
have been shown as deposits. The other choices are actual in respect of the duties of an auditor.
Hence, choice (d) is accurate ans.
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67. C In an Annual General Meeting, submission of funds flow statement is not mandatory. But
submission of Balance Sheet, Profit & Loss account, Directors’ report and Auditors’ report are
mandatory. Hence, (c) is accurate ans.
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68. D Auditors are stated to problem an unqualified opinion when they consider the financial statements ‘a fair
presentation’.
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69. D Of the Rs.8,10,000 paid, Rs.2,70,000 was paid toward dividends in arrears and Rs 5,40,000 was
paid toward dividends for 2007-08. Of the Rs.5,40,000, Rs.3,03,750 was paid to preferred
shareholders (33,750 shares × Rs 100 per share × 0.09), leaving Rs.2,36,250 to be paid to equity
shareholders.
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70. B Retained earnings is the difference ranging from profit after tax and dividend. Hence, choice (b) is
accurate ans.
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71. A
Dr. Machinery Account Cr.
Date Particulars Rs. Date Particulars Rs.
2007
April 01
To Balance b/d 8,50,000 2007
Dec. 31
By Bank a/c (sale of old
machine)
30,000
July 01 To Bank a/c
(new machine)
25,000 Dec. 31 By Depreciation a/c (WN – 2) 4,500
2008
March 31
By Profit & loss a/c (WN – 2) 5,500
March 31 By Deprecation a/c (WN – 1) 1,15,875
March 31 By Balance c/d 7,19,125
8,75,000 8,75,000
Working Notes:
(1) computation of
depreciation for year
2007-08
Rs. (2) computation of loss on
sale of machinery
Rs.
Opening balance (original) 12,00,000 Written down value on April
01, 2007
40,000
Less: Original cost of
machine sold
60,000 Less : Depreciation @ 10%
p.a. on Rs.60,000 for 9
months)
4,500
11,40,000 Written down value on
December 31, 2007
(Date of sale)
35,500
Depreciation @ 10% p.a.
(old machine)
1,14,000 Less: Sales value 30,000
Depreciation for nine months
(new machine)
1,875 Loss 5,500
1,15,875
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72. C Depreciation under the sum-of-the years-digits method for the year 2007-08, being the 3rd year
=
3
× Rs.1,50,000
1 + two + three + four + five = Rs.30,000.
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73. A
2004-05 2005-06 2006-07 2007-08
Particulars
(Rs.) (Rs.) (Rs.) (Rs.)
Post-tax profits 1,50,000 1,65,000 2,20,000 2,50,000
Add: Tax (50%) 1,50,000 1,65,000 2,20,000 2,50,000
Pre-tax profits 3,00,000 3,30,000 4,40,000 5,00,000
Add: Excessive depreciation – – 10,000 –
Abnormal loss – 20,000 – –
3,00,000 3,50,000 4,50,000 5,00,000
avg. pre-tax profits =
Rs.(3,00,000 + 3,50,000 + 4,50,000 + 5,00,000)
4
= Rs. 4,00,000
Less: Additional salaries Rs. 20,000
Rs. 3,80,000
Less: Tax @50% = Rs. 1,90,000
Future maintainable profits Rs. 1,90,000
Goodwill = Rs.1,90,000 × three = Rs.5,70,000.
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74. C Trial Balance of Net Services as on December 31, 2008
Heads of Accounts Debit (Rs.) Credit (Rs.)
1. Cash at bank 98,000
2. Sundry Debtors Account 87,000
3. Purchases Account 80,000
4. Prepaid Rent Account 1,000
5. Rent Expenses Account 1,000
6. Salaries Account 8,000
7. Inventory Account 10,000
8. Sundry Creditors Account 81,000
9. Sales Account 85,000
10. Share Capital Account 1,00,000
11. Profit and Loss account 19,000
Total 2,85,000 2,85,000
Working Notes:
1. Cash account Rs.
Opening Cash 42,000
Add: Collections from debtors 88,000
1,30,000
Less: Paid to creditors 24,000
Salaries paid 8,000
Closing cash balance 98,000
2. Sundry debtors
Opening balance 90,000
Add: Credit sales 85,000
1,75,000
Less: Cash received 88,000
Closing balance 87,000
3. Sundry creditors
Opening balance 25,000
Add: Credit purchases 80,000
1,05,000
Less: Cash paid 24,000
Closing balance 81,000
4. Prepaid rent
Opening balance 2,000
Less: Rent recognized 1,000
Closing balance 1,000
5. Rent account 1,000
6. Sales 85,000
7. Purchases 80,000
8. Salaries 8,000
9. There is no change in closing stock,
capital and profit and loss accounts
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75. B Purchase of delivery van is capital expenditure. Raw-materials and loose tools form part of
inventory and purchase of consumables is revenue expenditure. Cost of advertisement is generally a
revenue expenditure and in case benefit is available for more than 1 accounting period, it is
considered as a deferred revenue expenditure.
| Earning: Approval pending. |
