The Institute of Chartered Financial Analysts of India University 2007 PCC Group I 1 - Advance Accounting -2 - Question Paper
BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
PROFESSIONAL COMPETENCE COURSE GROUP-I
Model Test Paper - BOS/PCC/ Advanced Accounting - 2/2007
Time : 3 hours Maximum Marks: 100
PAPER -1 : ADVANCED ACCOUNTING
Answer all questions.
The following are the Balance Sheets of RS Ltd. and XY Ltd. as on 31.3.2006:
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Liabilities RS Ltd. XYLtd. Assets RS Ltd. Rs. 2,700 700 400 250 Rs. Share Capital: Equity Shares of Rs. 100 each fully paid up Reserves and Surplus 10% Debentures Loan from Financial Institutions Bank Overdraft Sundry Creditors Proposed Dividend Total 400 100 300 |
Rs. 800 500 250 300 200 4,050 |
Fixed Assets net of depreciation Investments Sundry Debtors Cash and Bank Profit and Loss Account |
Rs. in 000s XYLtd. Rs. 850 150 800 |
It was decided that XY Ltd. will acquire the business of RS Ltd. for enjoying the benefit of
carry forward of business loss. After acquisition, XY Ltd. will be renamed as XYZ Ltd.
The following scheme has been approved for the merger:
(i) XY Ltd. will reduce its shares to Rs. 10 and then consolidate 10 such shares into one share of Rs. 100 each (New Share).
(ii) Financial institutions agreed to waive 15% of the loan of XY Ltd.
(iii) Shareholders of RS Ltd. will be given one new share of XY Ltd. in exchange of every share held in RS Ltd.
(iv) RS Ltd. will cancel 20% holding of XY Ltd. Investments were held at Rs. 250 thousands.
(v) After merger the proposed dividend of RS Ltd. will be paid to the shareholders of RS Ltd.
(vi) Authorised Capital of XY Ltd. will be raised accordingly to carry out the scheme.
(vii) Sundry creditors of XY Ltd. includes payable to RS Ltd. Rs. 1,00,000.
Pass the necessary entries to implement the scheme in the books of RS Ltd. and XY Ltd.
and prepare a Balance Sheet of XYZ Ltd. (20 Marks)
2. (a) From the following Summary Cash Account of X Ltd. prepare Cash Flow Statement for the year ended 31st March, 2007 in accordance with AS 3 (Revised) using the direct method. The company does not have any cash equivalents.
Summary Cash Account for the year ended 31.3.2007
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Rs. 000 |
Rs.OOO | ||
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Balance on 1.4.2006 |
50 |
Payment to Suppliers |
2,000 |
|
Issue of Equity Shares |
300 |
Purchase of Fixed Assets |
200 |
|
Receipts from Customers |
2,800 |
Overhead expense |
200 |
|
Sale of Fixed Assets |
100 |
Wages and Salaries |
100 |
|
Taxation |
250 | ||
|
Dividend |
50 | ||
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Repayment of Bank Loan |
300 | ||
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Balance on 31.3.2007 |
150 | ||
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3,250 |
3,250 |
(b) Department X sells goods to Department Y at a profit of 25% on cost and to Department Z at 10% profit on cost. Department Y sells goods to X and Z at a profit of 15% and 20% on sales, respectively. Department Z charges 20% and 25% profit on cost to Department X and Y, respectively.
Department Managers are entitled to 10% commission on net profit subject to unrealised profit on departmental sales being eliminated. Departmental profits after
charging Managers commission, but before adjustment of unrealised profit are as under:
Rs.
Department X 36,000
Department Y 27,000
Department Z 18,000
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Stock lying at different departments at the end of the year are as under: | ||||||||||||||||||||||||||||||||||||||||||||||||
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On 31st March, 2006, the firm is dissolved and the following points are agreed upon: Ajay is to takeover sundry debtors at 80% of book value Shyam is to takeover the stocks at 95% of the value and Ram is to discharge sundry creditors.
Other assets realise Rs. 3,00,000 and the expenses of realisation come to Rs.30,000.
Vijay is found insolvent and Rs. 21,900 is realised from his estate.
Prepare Realisation Account and Capital Accounts of the partners. Show also the Cash A/c.
The loss arising out of capital deficiency may be distributed following the decision in Garner vs Murray.
(b) On 1st December, 2005, Vishwakarma Construction Co. Ltd. undertook a contract to construct a building for Rs. 85 lakhs. On 31st March, 2006 the company found that it had already spent Rs. 64,99,000 on the construction. Prudent estimate of additional cost for completion was Rs. 32,01,000. What amount should be charged to revenue in the final accounts for the year ended 31st March, 2006 as per provisions of Accounting Standard 7 (Revised)?
(c) A fire occurred in the premises of Agni on 25th August, 2006 when a large part of the stock was destroyed. Salvage was Rs. 15,000. Agni gives you the following information for the period of January 1, 2006 to August 25th, 2006:
(a) Purchases Rs. 85,000.
(b) Sales Rs. 90,000
(c) Goods costing Rs. 5,000 were taken by Agni for personal use.
(d) Cost price of stock on January 1, 2006 was Rs. 40,000
Over the past few years, Agni has been selling goods at a consistent gross profit margin of 33-1/3%.
The insurance policy was for Rs. 50,000. It included an average clause.
Agni asks you to prepare a statement of claim to be made on the insurance company. (12+5+4=21 Marks)
4. (a) From the following receipts and payments account of Mumbai Club, prepare income and expenditure account for the year ended 31.12.2006 and its balance sheet as on that date:
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Receipts |
Rs. |
Payments |
Rs. |
|
Cash in hand |
4,000 |
Salary |
2,000 |
|
Cash at bank |
10,000 |
Repair expenses |
500 |
|
Donations |
5,000 |
Purchase of furniture |
6,000 |
|
Subscriptions |
12,000 |
Misc. expenses |
500 |
|
Entrance fees |
1,000 |
Purchase of investments |
6,000 |
|
Interest on investments |
100 |
Insurance premium |
200 |
|
Interest received from bank |
400 |
Billiard table |
8,000 |
|
Sale of old newspaper |
150 |
Paper, ink etc. |
150 |
|
Sale of drama tickets |
1,050 |
Drama expenses |
500 |
|
Cash in hand (closing) |
2,650 | ||
|
Cash at bank (closing) |
7,200 | ||
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33,700 |
33,700 |
Information:
1. Subscriptions in arrear for 2006 Rs. 900 and subscriptions in advance for 2006 Rs.350.
2. Insurance premium outstanding Rs. 40.
3. Misc. expenses prepaid Rs. 90.
4. 50% of donation is to be capitalized.
5. Entrance fees are to be treated as revenue income.
6. 8% interest has accrued on investment for five months.
7. Billiard table costing Rs. 30,000 was purchased during the last year and Rs. 22,000 were paid for it.
(b) Calculate Average Due date from the following information:
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Date of the bill |
Term |
Amount Rs. |
|
August 10, 2004 |
3 months |
6,000 |
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October 23, 2004 |
60 days |
5,000 |
|
December 4, 2004 |
2 months |
4,000 |
|
January 14, 2005 |
60 days |
2,000 |
|
March 08, 2005 |
2 months |
3,000 |
(70+5= 15 Marks)
5. Answer any ten of the following (Give adequate reasoning or working notes in support of
your answer):
(i) All significant accounting policies adopted in preparation and presentation of financial statements must be disclosed. State whether the statement is true or false.
(ii) A, B and C share profits and losses in the proportion of 6/14, 5/14 and 3/14 respectively: They agreed to take D into partnership and give him 1/8th share. Compute new profit sharing ratio between A B, C and D.
(iii) As per the decision in Garner vs. Murray the loss on account of insolvency of a partner should be borne by the solvent partners in their profit sharing ratio. State the validity of the statement.
(iv) M/s Dogra & Co. installed a machinery for Rs. 5,00,000 on 1.1.2000. They were charging deprecation on straight line basis taking useful life of the machine as 10 years. In December, 2006 they found that the machine became obsolete which could not be used. The machine can fetch only Rs. 50,000. Classify this loss into capital or revenue.
(v) During 2005, subscription received in cash in Rs. 42,000. It includes Rs. 1,600 for 2004 and Rs. 600 for 2006. Also Rs. 3,000 has still to be received for 2005. Calculate amount to be credited to income and Expenditure Account in respect of
subscription.
(vi) The company deals in two products, A and B, which are neither similar nor interchangeable. At the time of closing of its account for the year 2005-06, the Historical Cost and Net Realizable Value of the items of closing stock are determined as follows:
Items Historical Cost Net Realisable Value
(Rs. in lakhs) (Rs. in lakhs)
A 40 28
B 16 24
What will be the value of Closing Stock?
(vii,) A plant was depreciated under two different methods as under:
Year SLM W.D.V.
(Rs. in lakhs) (Rs. in lakhs)
1 7.80 21.38
2 7M 15,80 15.60 37.18
3 7.80 6.38
What should be the amount of resultant surplus/deficiency, if the company decides to switch over from W.D.V. method to SLM method for first two years?
(viii) A Ltd. take over B Ltd. on April 01, 2007 and discharges consideration for the business as follows:
(a) Issued 42,000 fully paid equity shares of Rs. 10 each at par to the equity shareholders of B Ltd.
(b) Issued fully paid up 15% preference shares of Rs. 100 each to discharge the preference shareholders (Rs. 1,70,000) of B Ltd. at a premium of 10%.
(c) It is agreed that the debentures of B Ltd. (Rs. 50,000) will be converted into equal number and amount of 13% debentures of A Ltd.
Calculate the amount of purchase consideration.
(x) ABC Ltd. is constructing a fixed asset. Following are the expenses incurred on the construction:
Materials Rs. 10,00,000
Direct Expenses Rs. 2,50,000
Total Direct Labour Rs. 5,00,000
(1/10th of the total labour time was chargeable to the construction)
Total office & administrative expenses (5% is chargeable to the construction)
Depreciation on the assets used for the construction of this assets
Rs. 10,000
Calculate the cost of fixed assets.
(xi) In Account current, red-ink interest is treated as negative interest. Judge the validity
(10x2= 20 Marks)
of the statement.
6. Answer any four of the following:
(i) 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.
(ii) A Pharma Company spent Rs. 33 lakhs during the accounting year ended 31st March, 2006 on a research project to develop a drug to treat AIDS. Experts are of the view that it may take four years to establish whether the drug will be effective or not and even if found effective it may take two to three more years to produce the medicine, which can be marketed. The company wants to treat the expenditure as deferred revenue expenditure. Comment.
(iii) Distinguish between Receipt and Payment and Income and Expenditure account.
(iv) Explain Classification of Advances in the case of a Banking Company.
(v) State the different types of Leases contemplated in Accounting Standard 19 and discuss briefly. (4x3=12 Marks)
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Attachment: |
| Earning: Approval pending. |
