Institute of Chartered Financial Analysts of India (ICFAI) University 2007 Certification Finance Financial Accounting – II (112): - Question Paper

ques. Paper Financial Accounting – II (112): January 2007
• ans all ques..
• Marks are indicated against every ques..
1.
The Balance Sheet of Lion Ltd. as on March 31, 2006 is as under:
Liabilities
Rs.
Assets
Rs.
Equity share capital
5,40,000
Land and building
4,50,000
Reserves and surplus
2,30,000
Plant and machinery
2,30,000
18% Debentures
1,50,000
Furniture and fixtures
1,90,000
Sundry creditors
75,000
Sundry debtors
1,00,000
Bank overdraft
25,000
Inventories
75,000
Provision for taxation
50,000
Cash
25,000
Total
10,70,000
Total
10,70,000
The subsequent assets are revalued as under:
Land and building
Rs.5,00,000
Plant and machinery
Rs.2,00,000
Sundry debtors
Rs. 95,000
The profit of the company for the year 2005-2006 is Rs.1,10,000. The company charges depreciation on all its fixed assets at the rate of 10%. The depreciationadjustment on the revalued assets should be made for 1 year. The return oncapital employed was
(a)
13.12%
(b)
13.76%
(c)
11.02%
(d)
12.34%
(e)
14.01%.
(2 marks)
< ans >
2.
On disposal of investments
(a)
The sale proceeds shall be credited to investments account
(b)
Profit on sale of current investments alone shall be recognized in the Profit and Loss account
(c)
The difference ranging from carrying amount and net disposal proceeds should be charged or credited to the Profit and Loss account
(d)
The difference ranging from carrying amount and net disposal is charged or credited to general reserve account
(e)
Any of the above treatment.
(1 mark)
< ans >
3.
The subsequent is the balance sheet of Rainbow Ltd. as on March 31, 2006.
Liabilities
Rs.
Rs.
Assets
Rs.
80,000 Equity shares of Rs.10 every
8,00,000
Goodwill
40,000
General reserve
1,00,000
Plant & Machinery
4,70,000
Profit & loss A/c.:
Land & Building
4,20,000
Balance as on April 01, 2005
40,000
Investments (10%)
50,000
Profit before tax for the year
1,60,000
2,00,000
Stock
40,000
Sundry creditors
70,000
Sundry debtors
1,00,000
Bills payable
30,000
Bills receivable
40,000
Provision for taxation
50,000
Cash & Bank
50,000
Discount on problem of shares
40,000
Total
12,50,000
Total
12,50,000
Additional Information:
1. The assets were revalued as under:
Plant & Machinery Rs.5,00,000
Land & Building Rs.4,00,000
Investments Rs. 70,000
2. Profit includes Rs.5,000 income from non-trading investments.
3. Normal return on capital employed in the similar business is 10%.
4. Adjustment of depreciation is not needed for evaluation of goodwill.
5. Income-tax rate is 30%.
The value of goodwill on the basis of four years’ purchase of super profits of thecompany is

Earning:   Approval pending.