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Roll No............................... ADVANCeDACCOUNt'MI
MAY?OrD
Total No. of Questions-6] [Total No. of Printed Pages-ll
4
Time Allowed-3 Hours Maximum Ma~ks-100
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Answers to questions are to be given only in English~ePt in the case of candidates
who have opted for Hindi mediu;>If a candidate ~o has not opted for Hindi
medium, his answers in Hindi will not be valued.
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All questions are compulsory.
Working notes should form part of the answer.
Wherever necessary suitable assumptions may be made by the candidates.
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10x2
1. Answer the following questions:
=20
(i) A Company had issued 20,000, 13% Convertible debentures of Rs. 100
each on 1st April, 2007. The debentures are due for redemption on
1st July, 2009. The terms of issue of debentures provided that they were
redeemable at a premium of 5% and also conferred option to the debenture-
holders to convert 20% of their holding into equity shares (Nominal value
Rs. 10) at a price of Rs. 15 per share. Debentureholders holding 2,500
debentures did not exercise the option. Calculate the humber of equity
shares to be allotted to the Debentureholders exercising the option to the
maXImum.
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(ii) Santosh Ltd. has received a grant of Rs. 8 crores from the Govt. for setting
up a factory in a backward area. Out of this grant, ~he company distributed
Rs. 2 crores as dividend. Also, Santosh Ltd. received land free of cost from
the State Government but it has not recorded it at all in the books as no
money has been spent. In the light of AS 12, examine, whether the treatment
of both the grants is correct.
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(iii) Rohini Limited has obtained loan from an Institution for Rs. 500 lacs for
.modernization and renovating its Plant and Machinery. The installation of
plant and machinery was completed on 31.3.2009 amounting to Rs. 320 lacs
and Rs. 50 lacs advanced to suppliers of additional assets and the balance of
Rs. 130 lacs has been utilized for working capital requirements. Total interest ..
paid for the above loan amounted to Rs. 65 lacs during 2008-09. You ar~
required to state how the interest on institutional loan is to be accounted for
in the year 2008-09.
(iv) A Company follows April to March as its Financial Year. The Company recognizes
cheques dated 31st March or before, received from customers after balance
sheet date, but before approval of Financial statement by debiting cheques in
hand Nc and crediting Debtors Nc. The cheques in hand is shown in the
Balance Sheet as an item of cash and cash equivalents. All cheques in hand
are presented to bank in the month of April and are also realised in the same
month in normal course after deposit in the bank. State with reasons, whether
the collection of cheques bearing date 31st March or before, but received after
Balance Sheet date is an adjusting event and how this fact is to be disclosed
by the company?
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(v) What is Piecemeal payments method under Partnership Dissolut,ion ? Briefly
explain the two methods followed for determining the order in which the
payments are made?
(vi) Briefly explain "Reserve for Unexpired Risks" under General Insurance Business.
What are the percentages of such reserve to be created under IRDA Act for
various General Insurance?
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(vii) On 31st March, 2010, the following Ledger balances have been extracted from
the books of Washington branch office:
Ledger Alc $
180
Building
Stock as on 1.4.2009 26
Cash and Bank Balances 57
,
Purchases 96
Sales 110
28
Commission receipts
Debtors 46
Creditors 65
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You are required to convert above Ledger balances into Indian Rupees.
Use the following rates of exchange:
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Opening Rate $ 46
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Closing Rate $ 50
Average Rate $ = 48
For Fixed Assets $ = 42
(viii) Mention the condition when a Cash credit overdraft account is treated as 'Out
of order'.
(ix) From the following information, calculate the amount of Sundry Debtors as
on 31.3.2010 :
Balance as on 1.4.2009 is Rs. 50,000.
Bad debts are 2% and discount to the customers is given @ 1% of the opening
balance of Sundry Debtors.
Returns from the customers are Rs. 3,000.
Cash received from Debtors is Rs. 2,30,000.
Cash received from Debtors in transit is Rs. 14,000.
Cash Sales are Rs. 5,00,000.
Credit Sales are Rs. 2,50,000.
(x) Clo.sing stock for the year ending on 31.3.2010 is Rs: 50,000 which includes
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stock damaged in a fire in 2008-09. On 31.3.2009 the estimated net realisable
value of the damaged stock was Rs. 12,000. The revised estimate of net
realisable value included in closing stock of 2009-10 is Rs. 4,000.
Find the value of Closing stock to be shown in Profit and Loss account for the
year 2009-10.
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2. P and Q are partners of P & Co., sharing Profit and Losses in the ratio of 16
3 : 1 and Q and R are partners of R & Co., sharing Profits and Losses in the
ratio of 2 : 1. On 31st March, 2009, they decide to amalgamate and form a new
firm Mis. PQR & Co., wherein P, Q and R would be partners sharing Profits ~
and Losses in the ratio of 3 : 2 : 1. The Balance Sheets of two firms on the
above date are as under:
Figures in Rs.
Liabilities P & Co. R & Co. Assets P & Co. R & Co.
Capitals: Fixed Assets:
P 2,40,000 - Building 50,000 60,000
Q 1,60,000 2,00,000 Plan & Machinery 1,50,000 .1,60,000
R - 1,00,000 Office equipment 20,000 6,000
Reserves 50,000 1,50,000 Current Assets:
Sundry Creditors 1,20,000 1,16,000 Stock-in trade 1,20,000 1,40,000
Due to P & Co. - 1,00,000 Sundry Debtors 1,60,000 2,00,000
Bank Overdraft 80,000 - Bank Balance 30,000 90,000
Cash in hand 20,000 10,000
Due from R & Co. 1,00,000
6,50,000 6,66,000 6,50,000 6,66,000
The amalgamated firm took over the business. on the following terms:
(a) Building of P & Co. was valued at Rs. 1,00,000.
(b) Plant and Machinery of P & Co. was valued at Rs. 2,50,000 and that of
R & Co. at Rs. 2,00,000.
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(c) All Stock in Trade is to be appreciated by 20%.
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(d) Goodwill valued ofP & Co. at Rs. 1,20,000 and R & Co. at Rs. 60,000, but the
same will not appear in the books of PQR & Co.
(e) Partners of new firm will bring the necessary cash to pay other partners to
adjust their capitals .according to the Profit sharing ratio.
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(f) Provisions for doubtful debts has to be carried forward at Rs. 12,000 in respect
of aebtors of P & Co. and Rs. 26,060 in respect of debtors of R & Co.
You are required to prepare the Balance Sheet of new firm and Capital accounts
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of the partners in the books of old firms.
3. Following is the Balance Sheet of XYZ Ltd. as on 31st March, 2010 : 16
Liabilities Rs. Assets Rs.
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8000 - 7 % Preference Plant and Machinery 8,50,000
shares @ Rs. 100 each Furniture and Fittings 1,60,000
fully paid 8,00,000 Patents and Copy right 60,000
1,80,000 Equity shares Goodwill 35,000
@ Rs. 10 each fully paid 18,00,000 Investments (at cost) 65,000
11% Debentures 10,00,000 Sundry debtors 12,00,000
Bank overdraft 1,65,000 Stock 13,00,000
Loan from director 15,000 Cash in hand 12,000
Trade creditors 6,20,000 Profit & Loss Alc 7,18,000
44,00,000 44,00,000
Due to heavy losses and overvaluation ofAssets, the following scheme ofreconstruction
was finalised :
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(i) Preference shareholder will surrender their 20% shares and they have been
allotted 9% (new) preference shares for remaining amount.
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(ii) Debentureholders having charge on plant and machinery would .accept plant
and machinery in full settlement.
(iii) Trade 'creditors accepted to take over the stock upto the value of Rs. 6,20,000.
(iv) Equity shareholders are to accept reduction of Rs. 4 per share.
(v) Investment is to be valued at market price i.e. Rs. 60,000.
(vi) Sundry debtors and remaining stock is to be valued at 90% of their book
value.
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(vii) Directors have to forgo their loan in full.
(viii) Patents and Copy Right and Goodwill have no more value.
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Pass necessary Journal entries in the books ofXYZ Ltd. assuming that all the
legal formalities have been completed. Prepare Capital reduction account and
Balance Sheet of the company after reduction.
4. (a). Ram Limited of Chennai has a branch at Nagpur to which office, goods are 8
invoiced at cost plus 25%. 'I;he branch makes sales both for cash and on
credit. Branch expenses are paid direct from Head Office and the branch has
t~ remit all c~sh received into the Head Office Bank Account at Nagpur.
From the following details, relating to the year 2009, prepare the accounts in
Head Office Ledger and ascertain Branch Profit. Branch does not maintain
any books of accounts, but sends weekly returns to Head Office:
Rs.
Goods received from Head Office. at invoice price 1,20,000
Returns of Head Office at invoice price 2,400
Stock at Nagpur' Branch on 1.1.2009 12,000
Sales during the year- Cash 40,000
Credit 72,000
Debtors at Nagpur Branch 14,400
Cash received from Debtors 64,000
Discounts allowed to Debtors 1,200
Bad Debts during the year 800
Sales Returns at Nagpur Branch 1,600
Salaries and Wages at Branch 12,000
Rent, Rates and Taxes at Branch 3,600
Office expenses at Nagpur Branch, 1,200
Stock at Branch on 31.12.2009 at invoice price 24,000
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(b) From the following information furnished to you by Ayushman Insurance Co. 8
Ltd., you are required to pass Journal entries relating to unexpired risk
reserve and show in columnar form "Unexpired Risks Reserve Alc" for 2009.
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(a) On 31.12.2008, it had reserve for. unexpired risks amounting to Rs. 40
crores. It comprised ofRs. 15 crores in respect ofMarine Insurance business,
Rs. 20 crores in respect of Fire Insurance business and Rs. 5 crores in
respect of Miscellaneous Insurance business.
(b) Ayushman Insurance Co. Ltd. creates reserves at 100% of net premium
income in respect of Marine Insurance policies and at 50% of net premium
income in re~pect of Fire and Miscellaneous income policies.
(c) During 2009, the following Business was conducted: (Amount in crores)
Marine Fire Miscellaneous
Premium collected from:
(a). Insured in respect of
policies issued 18.00 43.00 12.00
(b) Other insurance companies in
respect of risks undertaken 7.00 5.00 4.00
Premium paid/payable to other
insurance companies on business
ceded 6~70 4.30 7.00
5. (a) Given below is an extract from the trial-balance of T.K. Bank Limited as on 8
31st December, 2009 :
Particulars Debit Credit
Rs. Rs.
Bills discounted 12,64,000
Rebate on bills discounted (1.1.2009) 8,340
Discount received for the year 85,912
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An analysis of the bills discounted is shown below:
Amount Due date in 2010 Rate of discount
Rs. (% p.a.) ,
1,40,000 March 6th 5
4,36,000 March 12th 4.5
2,82,000 March 26th 6
4,06,000 April 6th 4
Show the workings, how the relevant items appear in the Bank's Profit and
Loss account as on 31st December, 2009 and in Bank's Balance Sheet as on
31st December, 2'009.
(b) From the following Trial Balance ofPQ Ltd. on 31.12.2009, prepare liquidators 8
Final statement of account:
Rs. Rs.
9% Preference share capital 1,25,000
(1250 Pref. shares @ 100 each fully paid)
Equity share capital:
2,000 .Equity shares @ 100 each fully paid 2,00,000
2,000 Equity shares @ 100 each Rs. 50 paid up 1,00,000
Plant 3,00,000
Stock-in-trade 3,60,000
Sundry Debtors 85,000
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Sundry Creditors 2,21,000
Bank balance 1,20,000
Preliminary expenses 6,000
6% Mortgage loan 2,30,000
Outstanding liabilities for expenses 25,000
Profit and Loss Alc 30,000 -
(Trading loss for the year 2009)
9,01,000 9,01,000
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Follo"'.'ing points should be kept in mind:
(i) On 21 January, 2010 the liquidator of PQ Ltd. sold plant for Rs. 2,95,000
and stock in trade at 10% less than the book value. He realised 80% of ~
Sundry debtors and incurred cost of collection of Rs. 1,850 (remaining
debtors are to be treated as bad).
(ii) The loan mortagage was discharged as 31st January, 2010 along\vith
interest for 6 months. Creditors were discharged subject to 5% discount.
Out standing expenses paid at 20% less.
(iii) Preference share dividend is due for one year and paid with final payment.
(iv) Liquidation expenses incurred are Rs. 1,800 and liquidators
remuneration is settled at 4% on disbursement to members, subject to
minimum of Rs. 10,000.
6. Answer the following:
(a) Chaitanya Limited issues 40,000 shares. Issue is underwritten by A, Band 4
C in the ratio of 5 : 3 : 2 respectively. Unmarked applications totalled ,2000
whereas marked applications are as follows:
A 16,000
B 5,700
C 8,300
Calculate the Net liability of each one of the underwriters.
(b) How will you disclose the following Ledger balances in the Finalac;counts of 4
DVD bank:
Rs. in Lacs
Current accounts '700
Saving accounts 500
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Fixed deposits 700
Cash credits 600
Term Loans 500
Bills discounted & purchased 800
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Additional information:
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(i) Included in the Current accounts ledger are accounts overdraw~ to the
extent of Rs. 250 lacs.
(ii) One of the Cash Credit account of Rs. 10 lacs (including interest
Rs. 1 lacs) is doubtful.
(iii) 60%. of term loans are secured by government guarantees, 20% of cash
credits are unsecured, other portion is secured by tangible assets.
(c) B&P Ltd. availed a lease from N&L Ltd. The conditions of the lease terms are. 4
asunder:
(i) Lease period is 3 years, in the beginning of the year 2009, for equipment
costing Rs. 10,00,000 and has an expected useful life of 5 years.
(ii) The Fair market value is also Rs. 10,00,000.
(iii) The property reverts back to the lessor on termination of the lease.
(iv) The unguaranteed value is estimated at Rs. 1,00,000 at the end of the
year 2011.
(v) 3 equal annual payments are made at the end of each year.
Consider IRR 10%
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The present value of Re. 1 due at the end of 3rd year at 10% rate of interest
is Re. 0.7513.
The present value of annuity of Re. 1 due at the end of 3rd year at 10% IRR
is Rs. 2.4868.
State whether the lease constitute finance lease and also calculate unearned
Finance income.
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4
Cd) ABC Electricity Company laid down a main at a cost of Rs. 24,00,000.
Some years later the company replaced by improving the plant 2/3 portion
of the main at a cost of Rs. 40,00,000. The cost of material and labour 4
having gone up by 25%. Sale of old material realised Rs. 95,000. Old
material value Rs. 1,05,000 were used in renewal (included in above).
Calculate the amount to be Capitalised and show the Journal entries for
recording the transaction.
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