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PCE
GROUP I-PAPER
2010
Roll No............................... MAY
ADV ANCED ACCOUNTING
Total No. of Questions-6] [Total No. of Printed Pages-8
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Time Allowed-3 Hours Maximum Marks-=-100
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Answers to questions are to be given only in English except in the case of candidates
who have opted for Hindi medium. If a candidate who has not opted for Hindi
medium, his answers in Hindi will not be valued.
An,swer all questions.
Wherever appropriate, suitable assumptions should be made by the candidate.
Working notes should form part of the answer.
Marks
1. Answer all questions: 10x2=20
(i) The closing capital of Mr. B as on 31.3.2010 was Rs. 4,00,000. On 1.4.2009 his
capital was Rs. 3,50,000. His net profit for the year ended 31.3.2010 was
Rs. 1,00,000. He introduced Rs. 30,000 as additional capital in February,
2010. Find out the amount drawn by Mr. B for his domestic expen~es.
(ii) A Machinery costing Rs. 20 lakhs has useful life for 5 years. At the end of
5 years its scrap value would be Rs. 2 lakhs. How much depreciation is to be
charged in the books of the company as per Accounting Standard-6 ?
(iii) A, Band C are partners A became insolvent on 15.4.2010. The capital account
balance of partner B is on the debit side. Partner B is solvent. Should partner
B bear the loss arising on account of the insolvency of partner A ?
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(iv) In Raj Co. Ltd., theft of cash of Rs. 2 lakhs by the Cashier in January, 2010
was detected in May, 2010. The accounts ofthe company were not yet approved
by the Board of Directors of the company.
Whether the theft of cash has'to be adjusted in the accounts of the company
for the year ended 31.3.2010. Decide.
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(yo.),Wltat do you mean by the term Firm u'nclerwriting ?
(vi) Goverdhan Ltd. has equity capital of Rs. 20,00,000 consisting of fully paid
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equity shares of Rs. 10 each. The net profit for the year 2009-10 w.as
Rs. 30,00,000. It has also issued 18,000, 10% convertible debentures of Rs. 50
each. Each debenture is convertible into five equity shares. The tax rate
applicable is 30%. Compute the diluted earnings.
(vii) The liquidator of a company is entitled to a remuneration of 2% on assets
realized and 3% on the amount distributed to unsecured creditors. The assets
realized Rs. 10',00,000. Amount available for distribution to unsecured creditors
before paying liquidator's remuneration is Rs. 4,12,000. Calculate liquidator's
remuneration if the surplus is insufficient to payoff unsecured creditors
in toto.
(viii) The Maduri Municipal Corporation replaces part of its existing Water Mains
with larger Mains at the cost of Rs. 1,50,00,000. The Original <;::ostof laying
the old main was Rs. 30,00,000 and the present cost of laying those
Mains would be three times the original cost. Calculate the amount to be
capitalized.
(ix) The life fund of a life assurance company was Rs. 8,64,80,000 as on 31.3.2010.
The interim bonus paid during the intervaluation period was Rs. 14,80,000.
The periodical actuarial valuation determined the net liability at R~. 7,42,50,000.
Surplus brought forward from the previous valuation was Rs. 8,5,00,pOO.Calculate
the net profit for the Valuation period.
(x) X Ltd. was incorporated on 1.8.2009 to take over the running business of
M~s Kumar Bros. with assets from 1.4.2009. The accounts of the company
were closed on 31.3.2010.
The average monthly Sales during the first four months of the year (2009-10)
was twice the average monthly sales during each of the remaining eight
months.
Calculate Time Ratio and Sales Ratio.
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2. ABC Ltd. took over a. running business with effect from 1st April, 2009. The
company was incorporated on 1st August, 2009. The following P & LAIc has been
prepared for the year ended 31.3.2010 :
Dr. Rs. Cr. Rs. . ~ ,
To Salaries 48,000 By Gross profit 3,20,000
To Stationery 4,800
To Travelling expenses 16,800.
To Advertisement 16,000
To Misc. trade expo 37,800
26,400
To Rent (office buildir:gs)
To Electricity charges 4,200
To Director's fees 11,200
To Bad debts 3,200
To Commission to selling Agents 16,000
To Audit fees 6,000
To Debenture interest 3,000
To Int. paid to vendors 4,200
To Selling expenses 25,200
To Depreciation on fixed assets 9,600
To Net profit 87,600
3,20,000 , 3,20,000
Additional information:
(a) Total sales for the year, which amounted to Rs. 19,20,000 arqse evenly upto
the date of 30.9.2009. Thereafter they spurted to record an increase of two-
third during the rest of the year. .
(b) Rent,of office building was paid @Rs. 2,000 per month upto Septeniber, 2009
and thereafter it was increased by Rs. 400 per month.
(c) Travelling expenses include Rs. 4,800 towards sales promotion.
(d) Depreciation include Rs. 600 for assets acquired in the post incorporation
period.
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(e)' Purchase consideration was discharged by the company on 30th September,
2009 by issuing equity shares of Rs. 10 each.
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Prepare the P & L Alc in columnar form showing distinctly the allocation t>f
expenses between pre and post incorporation periods.
3. The following balances have been extracted at. the end of March, 2010, from the 16
books of an electricity company:
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Rs. Rs.
Share capital 4,00,00,000 Consumer deposit 1,60,00,000
Fixed assets 10,00,00,000 Tariffs and dividend
Depreciation reserve (control reserve) 40,00,000
on fixed assets 1,20,00,000 Development reserve ,32,00;000
Reserve fund 12% debenture 80,00,000
(invested in 8% Loan from State Electricity
government securities) Board 1,00,00,000
(at par) 2,40,00,000 Intangible assets
Contingency reserve (monthly average) 32,00,000
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invested in 7% state loan 48,00,000 Current assets (monthly
Amount (Contributed by average) 60,00,000
consumers towards cost
of fixed asset) 8,00,000
The company earned a profit of Rs. 1,12,00,000 (after tax in 2009-2010). Show how
the profits have to be dealt with by the company assuming the bank rate was 10%.
All workings should form part of your answers.
4. Siva Ltd. has two departments X and Y.From the following 'particulars prepare 16
departmental trading accounts and general profit and loss account for the year
ending 31st March, 2009 : .
Dept. X Dept. Y
Rs. Rs.
Opening stock (at cost) 80,000 48,000
Purchases 3,68,000 2,72,000
Carriage inward 8,000 8,000
Wages 48,000 32,000
Sa~es 5,60,000 4,48,000
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Dept. X Dept. Y
Rs. Rs.
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Purchased goods transferred "
By Dept. Y To X 40,000
By Dept. ~ to Y 32,000
Finished goods transferred
By Dept. Y to X 1,40,000
By Dept. X to Y 1,60,000
Return of finished goods
By Dept. Y to X 40,000
By Dept. X to Y 28,000
Closing stock
Purchased goods 18,000 24,000
Finished. goods 96,000 56,000
Purchased goods have been transferred mutually at their respective departmental
purchase cost and finished goods at departmental market price and that 25% of
the closing finished stock with eac4 department represents finished goods received
from the other department.
5. (a) Amar, Akbar and Antony are in partnership. The following is their .Balance 8
Sheet as at March 31, 2010 on which date they dissolve partnership. The
share Profit in the ratio of 5 : 3 : 2 :
Liabilities Rs. Assets Rs.
Creditors 80,000 Plant and machinery- 60,000
Loan Alc - Amar 20,000 Premises 80,000
Capital Alc - Amar 1,00,000 Stock 60,000
Akbar 30,000 Debtors 1,20,000
Antony 90,000
3,20,000 3,20,000
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It was agreed to repay the amounts due to the partners as and when the
assets Were realised, viz.
April 15, 2010 Rs. 60,000
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May 1, 2010 Rs. 1,46,000
May 31, 2010 Rs. 94,000
Prepare a statement showing how the distribution should be made under
maximum loss method and write- up the Cash account and Partner's capital
account.
(b) From the following information, prepare cash flow statement of A (P) Ltd. as 8
at 31st March, 2010 by using indirect method:
Balance Sheet
Liabilities 2009 2010
Rs. Rs.
Share capital 12,00,000 12,00,000
Profit & Loss Alc 8,50,000 10,00,000
Long Term Loans 10,00,000 10,60,000
Creditors 3,50,000 4,00,000
34,00,000 36,60,000
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Assets
Fixed Assets 17,00,000 20,00,000
Investment in shares 2,00,000 2,00,000
Stock 6,80,000 7,00,000
Debtors 7,20,000 6,60,000
Cash 60,000 70,000
Bills Receivable 40,000 30,000
34,00,000 36,60,000
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Income Statement for the year ended 31st March, 2010
Sales 40,80,000
Less: Cost of sales 27,20,000
Gross Profit 13,60,000 ~
Less: Operating expenses
Administrative expenses 4,60,000
Depreciation 2,20,000
6,80,000 6,80,000
Operating Profit 6.,80,000
Add .:Non-operating incomes (dividend received) 50,000
7,30,000
Less: Interest paid 1,40,000
5,90,000
Less: Income-tax 2,60,000
Profi t after tax 3,30,000
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Statement of Retained Earnings
Rs.
Opening balance 8,50,000
Add: Profit 3,30,000
11,80,000
Less: Dividend paid 1,80,000
Closing balance 10,00,000
6. (a) A Ltd. purchased fixed assets costing Rs. 6,000 lakhs on 1.1.2009. This 4
was financed by foreign currency loan (U.S. Dollars) payable in three
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annual equal instalments. Exchange rates were 1 Dollar , Rs. 40 and Rs. 45
as on 1.1.2009 and 31.12.2009 respectively. First instalment was paid on
31.12.2009.
You are required to state, how these transactions would be accounted for?
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(b) X Limited has provided depreciation as per accounting records of Rs. 8,00,000 4
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and as per tax records same is Rs. 14,00,000. Unamortised preliminary expenses
as per tax records is Rs. 11,200. There is adequate evidence of future profit
sufficiency. How much deferred tax asset/liability should be recognised. Tax ..
rate is 40%.
(c) X Ltd. has its financial year ended 31.3.2009, fifteen Law suits outstanding, 4
none of which has been settled by the time the accounts are approved by the
directors. The directors have estimated that the probable outcomes as below:
Result Probability Amount of Loss
Rs.
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For first ten cases:
Win 0.6
Lose-low damages 0.3 90,000
Lose-high damages 0.1 2,00,000
For remaining five cases:
Win 0.5
Lose-low damages 0.3 60,000
Lose-high damages 0.2 1,00,000
The directors believe that the outcome of each case is independent of the
outcome of all the others.
Estimate the amount of contingent loss and state the accounting treatment of
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such contingent loss.
(d) From the following information find out the amount of provision to be shown 4
in the Profit and Loss account of a Commercial Bank: .
Assets Rs. in lakhs
Standard 4,000
Sub,standard 2,000
Doubtful upto one year 900
Doubtful more than one year but upto three years 400
Doubtful more than three years 300
Loss assets 500
Doubtful assets are considered as fully secured.
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