CA - IPCC COURSE MATERIAL

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1 CA - IPCC COURSE MATERIAL Quality Education beyond your imagination... GROUP 2 - GUESS QUESTIONS_34e APPLICABLE FOR MAY 2016 EXAMS INDEX S.No. Chapter Name Starting Page 1. Advanced Accounting 3 2. Auditing & Assurance Info. Technology & Strategic Management 51 Cell: / 26 Visit Mail: mastermindsinfo@ymail.com Facebook Page: Masterminds For CA Youtube Channel: Masterminds For CA 1

2 Get More Updates From DISCLAIMER: Dear students, a) Since CA is a professional course it is impossible to predict the questions / problems which may come in the public examination. b) We are not saying that it is enough to prepare the list of questions / problems given here. But compared to other questions / problems, put more focus on the questions / problems listed below and also questions / problems which are similar to questions / problems listed below. c) There are chances of getting questions / problems in the model which are similar to questions / problems listed below but don t expect exact questions / problems to repeat in the public examination. d) We have done this work based on the 34 th edition of IPCC materials. e) Don t blame us even if you don t get any questions from this list in the public exams of IPCC. f) Even if you get good number of questions / problems from this list in the public examinations then it is purely accidental. g) Questions mentioned in this document are based on the following editions of books: Study Material (SM) July 2015 edition Study Material for Taxation Oct 2015 edition Practice Manual (PM) July 2015 edition Practice Manual for Taxation Oct 2015 edition RavikanthMiryala text book for Accounting Standards 3rd edition Previous examination questions or problems can be referred in Scanner or similar text book. h) If you are planning to attempt Group 1 only then atleast prepare the guess questions released by us and attempt Group 2 also instead of leaving the Group 2 exams completely. i) One s May-2016 RTP & MTP are released; we will release Guess Questions from those RTP & MTP also. So students shall not forget to refer those Questions / Problems also. IPCC Guess Questions May 2016 Accounts 2

3 PROBLEMS: ADVANCED ACCOUNTING 1. UNDERWRITING 1) ABC Ltd. issued 10,000 shares of Rs.100 each at a premium of Rs.20 per share. The entire issue was underwritten by underwriters A, B and C as follows: Name No. of Shares A 5,000 shares (firm underwriting 1,000 shares) B 3,000 shares (firm underwriting 500 shares) C 2,000 shares (firm underwriting 500 shares) Shares applied for were 9,000 - the following being the marked forms (including firm Underwriting): A = 3, 500 shares, B = 1,400 shares, C = 1,600 shares. Money payable was as follows: On application - Rs.30 & On allotment - Rs.50. Balance on call, which was duly made and all allottees including the underwriters paid the money. Calculate the liability of each underwriter and the commission each will get, assuming it is the maximum allowed by law and also pass necessary journal entries recording the above transactions. 2) Scorpio Ltd. came out with an issue of 45,00,000 equity shares of Rs.10 each at a premium of Rs.2 per share. The promoters took 20% of the issue and the balance was offered to the public. The issue was equally underwritten by A & Co.; B & Co. and C & Co. Each underwriter took firm underwriting of 1,00,000 shares each. Subscriptions for 31,00,000 equity shares were received with marked forms for the underwriters as given below: A & Co. B & Co. C & Co. Total 7,25,000 shares 8,40,000 shares 13,10,000 shares 28,75,000 shares The underwriters are eligible for a commission of 5% on face value of shares. The entire amount towards shares subscription has to be paid along with application. You are required to: a) Compute the underwriters liability (number of shares) b) Compute the amounts payable or due to underwriters; and c) Pass necessary journal entries in the books of Scorpio Ltd. relating to underwriting. 3) Rosy Ltd made a public issue of 4,00,000 equity shares of Rs.10 each, Rs.2 payable on application. The entire issue was underwritten by five underwriters as follows: A 25%, B 25%, C 25%, D: 10% and E 15%. Under the underwriting terms, a commission of 2% was payable on the amount underwritten. Further, the underwriter was at liberty to apply, during the tenure of public issue, for any number of shares in which case he was entitled to a brokerage equal to 1/2% of the par value of shares so applied for. Applications received were to be analyzed on the basis of rubber stamp of the underwriters, who was to be given credit for the number of applications received bearing his rubber stamp. Applications received which did not bear any rubber stamp were considered as direct applications to be credited to all the underwriters in the ratio of their respective underwriting commitment. If, any such credit being given a surplus was to result in respect of any underwriter, as compared to his commitment, such surplus was to be distributed amongst the remaining underwriters in the ratio of their respective underwriting commitments. Bearing rubber stamp of A 1,02,000 shares - Do - B 95,000 shares - Do - C 60,000 shares - Do - D 32,000 shares - Do - E 51,000 shares IPCC Guess Questions May 2016 Advanced Accounting 3

4 Not bearing any stamp 10,000 shares 3,50,000 shares Included in the number of applications mentioned against D in the above table was an application made by D himself for 10,000 shares. The underwriters were informed of the amounts due to or from them, the amounts were duly received or paid. Show with the aid of necessary workings, the entries to record the amount so received or paid. 4) Sourav Flour Mills Pvt. Ltd. Floated a public issue of 1,50,000 Equity shares having face value of Rs.10 each at par. A,B&C has taken underwriting of the issue in equal share with the firm underwriting of 25,000;20,000 &20,000 shares respectively. Applications were received for 1,46,000 shares out of which the marked applications were as under:- (PM, SM, NOV 15) A - 24,600 B - 20,000 C - 15,000 Credit of unmarked applications is to be given to underwriters equally. The agreed underwriting commission was 5%. Total amount payable on application and allotment was Rs.5 and balance in calls. Compute the following: i) Liability of each underwriter (In shares as well as in amount). ii) Commission due to underwriters iii) Net cash paid/received from underwriters. Also pass journal entries for above. PROBLEMS: 2. ISSUE & REDEMPTION OF DEBENTURES 5) On 1 st January 2000, a company issued 1,000 6% debentures of Rs.1,000 each at Rs.950. Terms of issue provided that beginning with 2002 Rs.50,000 of debenture should be redeemed, either by drawings at par or by purchase in the market every year. The expenses of the issue amounted to Rs.3,000 which was written of in The company wrote off Rs.10,000 from the discount on debentures every year. In 2002 the debentures to be redeemed were repaid at the end of the year by drawings. In 2003, the company purchased for cancellation 50 debentures at the ruling price Rs.980 on 31 st December, the expenses being Rs.100. Interest is payable yearly. Ignore Income tax. Give Journal Entries & the Balance Sheet (as far as it relates to debentures) on 31 st Dec ) MM Ltd had the following among their ledger opening balances as on % Debentures A/c Debenture Redemption Fund A/c 13.5% Debentures in XX Ltd (F.V: Rs.20,00,000) Own Debentures (FV Rs.20,00,000) 50,00,000 45,00,000 19,50,000 18,50,000 On , the Debentures are to be redeemed; hence the company started buying own Debentures and made the following purchases in the open market ,000 Debentures at Rs.98 cum-interest 2,000 Debentures at Rs.99 ex-interest. Half yearly interest is due on the Debentures on 30 th June & 31 st December in case of both the companies. On 31 st December 2003 the Debentures in XX limited were sold for Rs.95 each ex-interest. On that date the outstanding Debentures of MM Limited were redeemed by payment and by cancellation. Show the entries in the books of MM Ltd (Ledger a/c s) during 2003: (a) Debenture Redemption Fund A/c (b) Own Debentures A/c (c) 13.5% Deb. in XX Ltd & (d) 11% Debentures A/c. IPCC Guess Questions May 2016 Advanced Accounting 4

5 7) A company had 16,000, 12% debentures of Rs. 100 each outstanding as on 1st April, 2012, redeemable on 31st March, On that day, sinking fund was Rs. 14,98,000 represented by 2,000 own debentures purchased at the average price of Rs. 99 and 9% stocks face value of Rs. 13,20,000. The annual instalment was Rs. 56,800. On 31st March, 2013 the investments were realized at Rs. 98 and the debentures were redeemed. You are required to write up the following accounts for the year ending 31st March 2013: 1. 12% Debentures account 2. Debenture redemption sinking fund account. 8) Indebted Ltd issued 10% Debentures at par for 8 lakhs on Interest was payable half yearly on 30 th June and 31 st December every year. Under the terms of the trust deed, the Debentures are redeemable at par (after three years of issue) by the company purchasing them in the open market and cancelling them with a minimum redemption of Rs.80,000 every year. In case there was a short fall in redemption by the company by open market operations, the shortfall would be made good by the company by payment on the last day of the accounting year to the trustees who would draw lots and redeem the Debentures. The company purchases its own Debentures for cancellation as under: On Rs.98 cum-interest On Rs.95 ex-interest On Rs.96 cum-interest The company carried out its obligations under the deed. Prepare the following ledger accounts for calendar years 2001, 2002 & 2003: (a) Debentures A/c (b) Debentures Redemption A/c and (c) Debenture Interest A/c and Ignore taxation. 3. LIQUIDATION OF COMPANIES THEORY: 9) What are the contents of Liquidators statement of account? (SM,PM,NOV 15) 10) Write the LISTS which should accompany the Statement of Affaires, in case of a winding up by Court. (SM, NOV 15) PROBLEMS: 11) The following information was extracted from the books of a limited Company on 31 st March, 2003 on which date a winding up order was made: Equity share capital 20,000 shares of Rs.10 each 14% preference share capital 30,000 shares of Rs.10 each Calls in arrears on Equity shares (estimated to realise Rs.2,000) 14% First Mortgage Debentures secured by a floating charge on the whole of the assets of the Company (interest paid to date) Creditors having a mortgage on the Freehold Land & Buildings Creditors having a second charge on Freehold Land & Buildings Trade Creditors Bills discounted (of these bills for Rs.15,000 are expected to be dishonoured) Unclaimed Dividends Bills payable Income tax due Salaries and wages (for 5 months) Bank Overdraft secured by a second charge on the whole of the assets of the Co. Cash in hand Debtors (of these Rs.60,000 are good; Rs.15,000 are doubtful, estimated to Rs. 2,00,000 3,00,000 4,000 2,00,000 85,000 90,000 2,70,000 40,000 6,000 10,000 25,000 40,000 20,000 1,200 IPCC Guess Questions May 2016 Advanced Accounting 5

6 12) realise Rs.5,000 and the rest bad). Bills of Exchange (considered good) Freehold Land & Buildings (estimated to realise Rs.1,65,000) Plant & Machinery (estimated to produce Rs.90,000) Fixtures and Fittings (estimated to produce Rs.8,000) Stock in trade (estimated to produce 25% less) Patents (estimated to produce Rs.45,000) 90,000 35,000 1,50,000 1,20,000 12,000 80,000 70,000 On 31 st March, 1997, the Company s share capital stood at the same figures as on 31 st March, 2003 but in addition, there was a General Reserve of Rs.65,000. In the Company earned a profit of Rs.1,43,000 but thereafter it suffered trading losses totaling in all Rs.4,67,000. In a speculation loss of Rs.91,000 was incurred. Preference dividend was paid for and and on equity shares a dividend of 15% was paid for only. Excise authorities imposed a penalty of Rs.1,60,000 for evasion of excise and income tax authorities imposed a penalty of Rs.60,400 for evasion of tax. Prepare the Statement of AffaiRs and the Deficiency A/c. a) 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 pay off unsecured Creditors in total. b) A Liquidator is entitled to receive remuneration at 2% on the assets realized, 3% on the amount distributed to Preferential Creditors and 3% on the payment made to Unsecured Creditors. The assets were realized for Rs. 25,00,000 against which payment was made as follows: Liquidation Rs. 25,000 Secured Creditors Rs. 10,00,000 Preferential Creditors Rs. 75,000 The amount due to Unsecured Creditors was Rs. 15,00,000. You are asked to calculate the total Remuneration payable to Liquidator. Calculation shall be made to the nearest multiple of a rupee. 13) The following relate to a Limited Company which has gone into voluntary liquidation. You are required to prepare the Liquidators Statement of Account allowing for his 2½% on all assets realized excluding call money received and 2% on the amount paid to unsecured Creditors including preferential Creditors. Share capital issued: 10,000 Preference shares of Rs.100 each fully paid up. 50,000 Equity shares of Rs.10 each fully paid up. 30,000 Equity shares of Rs.10 each, Rs.8 paid up. Assets realized Rs.20,00,000 excluding the amount realized by sale of securities held by partly secured Creditors. Preferential Creditors Unsecured Creditors Partly secured Creditors (Assets realized Rs.3,20,000) Debenture holders having floating charge on all assets of the company Expenses of liquidation 50,000 18,00,000 3,50,000 6,00,000 10,000 A call of 2 per share on the partly paid equity shares was duly received except in case of one shareholder owning 1,000 shares. Also calculate the percentage of amount paid to the unsecured Creditors to the total unsecured Creditors. IPCC Guess Questions May 2016 Advanced Accounting 6

7 14) Pessimist Ltd. has gone into liquidation on 10 th May, The details of members, who have ceased to be members, within the year ended 31 st March, 2011 are given below. The debts that could not be paid out of realization of assets and contribution from present members ( A contributories) are also given with their date wise break up. Shares are of Rs.10 each, Rs.6 per share paid up. You are to determine the amount realizable from each person. Shareholders No. of shares Proportionate Date of transfer transferred unpaid debts P 1, ,000 Q 1, ,000 R 1, ,200 S ,500 T , ACCOUNTING FOR EMPLOYEE SHARE BASED PAYMENTS THEORY: 15) What is employee stock option plan? Explain the importance of such plans in the modern time. PROBLEMS: 16) HCL grants 1,250 options on 1st April, 2005 at Rs.80 when the market price is Rs.200 and the face value is Rs.10. the vesting period is 3 years. The maximum exercise period is one year. 450 unvested options lapse on 1st May, 2007, 800 options are exercised on 31st August, Pass necessary journal entries to record the above transactions and Employee Stock Options Outstanding Account and state how these account will be shown in the Balance Sheet. 17) At the beginning of year 1, an enterprise grants 300 options to each of its 1,000 employees. The contractual life (comprising the vesting period and the exercise period) of options granted is 6 years. The other relevant terms of the grant are as below: Vesting Period 3 years Exercise Period 3 years Expected Life 5 years Exercise Price Rs. 50 Market Price Rs. 50 Expected forfeitures per year 3% The fair value of options, calculated using an option pricing model, is Rs.15 per option. Actual forfeitures, during the year 1, are 5 per cent and at the end of year 1, the enterprise still expects that actual forfeitures would average 3 per cent per year over the 3-year vesting period. During the year 2, however, the management decides that the rate of forfeitures is likely to continue to increase, and the expected forfeiture rate for the entire award is changed to 6 per cent per year. It is also assumed that 840 employees have actually completed 3 years vesting period. 200 employees exercise their right to obtain shares vested in them in pursuance of the ESOP at the end of year 5 and 600 employees exercise their right at the end of year 6. Rights of 40 employees expire unexercised at the end of the contractual life of the option, i.e., at the end of year 6. Face value of one share of the enterprise is Rs ) X Ltd provides you the following information. No. of employees No. of options to be granted to each employees Vesting period years No. of employees not expected to fulfill the vesting conditions other than conditions 1 st year 20% IPCC Guess Questions May 2016 Advanced Accounting 7

8 2 nd year 3 rd year 4 th year No. of employees not expected to fulfill the vesting conditions based on market conditions 1 st year 2 nd year 3 rd year 4 th year Fair of value of the option Exercise price Exercise period Face value of each share 15% 10% 10% 5% 7% 10% 12% Rs.5 Rs.50 3 years Rs.10 At the end of third year it has been re-estimated that all vesting conditions have been fulfilled and no other further conditions are required for options to vest and 600 employees exercise their option at the end of 4 th year, 800 employees exercise their option at the end of 5 th year and 100 employees exercise their option at the end of 6 th year. Rights of 30 employees expire unexercised at the end of 6 th year. Pass journal entries for above. 19) P. Ltd. granted option for 8000 equity shares on 1st October, 2010 at Rs 80 when the Market price was Rs.170. The vesting period is 4 ½ year unvested options lapsed on 1st December, options are exercised on 30th September, 2015 and 1000 vested Options lapsed at the end of the exercise period. Pass Journal Entries for above Transactions. (NOV 15) THEORY: 5. ACCOUNTING FOR BUY BACK OF SHARES 20) What are the conditions to be fulfilled by a joint stock company to buy-back shares? PROBLEMS: 21) Perrotte ltd. has the following capital structure as on (In crores) Rs. 1. Equity share capital( shares of Rs. 10 each fully paid) Reserves and surplus: General reserve 240 Securities premium account 90 Profit and loss account 90 Infrastructure development reserve Loan funds 1,800 The share holders of perrotte ltd., on the recommendations Nof their board of Directors, have approved on a proposal to buy back the maximum permissible number of equity shares considering the large surplus funds available at the disposal of the company. The prevailing market value of the company s shares is Rs.25 per share and in order to induce the existing Shareholders to offer their shares for buy back, it was decided to offer a price of 20% over market. You are also informed that the infrastructure reserve is created to satisfy income tax Act requirements. You are required to compute the maximum number of shares that can be bought back in the light of the above information and also under a situation where the loan funds of the company were either Rs.1,200 crores or Rs.1,500 crores. Assuming that the entire buy back is completed by , show the accounting entries in the company s book in each situation. IPCC Guess Questions May 2016 Advanced Accounting 8

9 22) Extra Ltd furnishes you with the following summarized balance sheet as on 31 st march, Name of the Company : Extra Limited Balance Sheet as at : 31 st March 2012 (In Lakhs) 1 a b 2 a a (i) (i) (ii) EQUITY AND LIABILITIES: Shareholder s funds Share capital Reserves and Surplus Non-current liabilities Long tem borrowings 10% Debentures Current liabilities ASSETS: Non-current assets Fixed assets Tangible assets Non-current investment (Investments at cost) Current Assets: Notes No. Rs TOTAL TOTAL Note to Accounts: (in lakhs) 1. Share capital Equity Shares of Rs.10 each fully paid 9% redeemable preference shares of Rs. 100 each fully paid 2. Reserves and Surplus Securities Premium Capital Reserve Revenue reserve 3. Tangible Assets Fixed Assets less depreciation a) The company redeemed the preference shares at a premium of 10% on 1 st april,2012 b) It also bought back 3 lakhs equity shares of Rs.10 each at Rs.30 per share. Rs The payment for the above was made out of huge bank balances, which appeared as a part of the current assets. c) Included in its investment were investments in own debentures costing Rs.2 lakhs (face value Rs.2.20 lakhs). These debentures were cancelled on 1 st April, d) The company had 1,00,000 equity stock options outstanding on the above mentioned date, to the employee at Rs.20 when the market price was Rs.30.(this was included under current liabilities). On employees exercised their options for 50,000 shares. e) Pass the journal entries to record the above. Prepare balance sheet as at IPCC Guess Questions May 2016 Advanced Accounting 9

10 PROBLEMS: DEPARTMENTAL ACCOUNTS 23) The Trading and Profit & Loss A/c of Radio and Gramophone Equipment Co., for the six months ended 31 st March, 2003 is presented to you in the following form: Rs. Rs. Sales: 1,40,700 Radios (A) 90,600 Gramophones (B) 64,400 Receipts from servicing & 48,000 Repair jobs (C) 10,800 Stocks on : 11,000 Radios (A) 34,500 Gramophones (B) Spare parts for servicing (C) Purchases: Radios (A) Gramophones (B) Spare parts for servicing (C) Salaries & Wages Rent Sundry exp. Profit 1,50,000 1,00,000 25,000 60,100 20,300 44,600 Prepare Departmental Accounts for each of the three departments A, B and C mentioned above after taking into consideration the following information: a) Radios and Gramophones are sold at the showroom; servicing and repairs are carried out at the workshop. b) Salaries & wages comprise that Showroom ¾; Workshop ¼; It was decided to allocate the show room salaries and wages in the ratio 1:2 between the departments A and B. The workshop rent is Rs.500 per month. The rent of the Showroom is to be divided equally between Departments A & B. Sundry exp. are to be allocated on the basis of the turnover of each department. 24) X Ltd. has two departments, A and B, From the following prepare the consolidated Trading A/c & Departmental Trading A/c for the year ending 31st Dec. 2003: A B Opening stock (at Cost) Purchases Sales Wages Carriage Closing stock: Purchased goods Finished goods Purchased goods transferred: By B to A By A to B Finished goods transferred: By A to B By B to A Return of finished goods: By A to B By B to A 20,000 92,000 1,40,000 12,000 2,000 4,500 24,000 10,000 40,000 7,000 12,000 68,000 1,12,000 8,000 2,000 6,000 14,000 8,000 35,000 10,000 You are informed that purchased goods have been transferred mutually at their respective departmental purchase cost and finished goods at dept. market price and that 20% of the finished stock (closing) at each dept. represented finished goods received from the other department. IPCC Guess Questions May 2016 Advanced Accounting 10

11 25) FGH Ltd has three departments I.J.K. The following information is provided for the year ended Opening stock Opening reserve for unrealized profit Material consumed Direct labour Closing stock Sales Area occupied (Sq. mtr.) No of employees I (Rs.) J (Rs.) K (Rs.) 5,000 8,000-2,000 16,000 20,000 9,000 10,000 5,000 20, ,500 1, ,000 3, ,000 80,000 1, Stocks of each department are valued at costs to the department concerned. Stocks of I are transferred to J at cost plus 20% and stocks of J are transferred to K at a gross profit of 20% on sales. Other common expenses are salaries and staff welfare Rs.18,000 rent Rs.6,000. Prepare departmental trading, profit and loss account for the year ending ) Martis Ltd. has several departments. Goods supplied to each department are debited to a Memorandum Departmental Stock Account at cost, plus a fixed percentage (mark-up) to give the normal selling price. The mark-up is credited to a memorandum departmental 'Mark-up account', any reduction in selling prices (mark-down) will require adjustment in the stock account and in mark-up account. The mark up for Department A for the last three years has been 25%. Figures relevant to Department A for the year ended 31st March, 2013 were as follows: Opening stock as on 1st April, 2012, at cost Rs.65,000 Purchase at cost Rs.2,00,000 Sales Rs.3,00,000 It is further ascertained that: 1) Shortage of stock found in the year ending , costing Rs.1,000 were written off. 2) Opening stock on including goods costing Rs.6,000 had been sold during the year and bad been marked down in the selling price by 600. The remaining stock had been sold during the year. 3) Goods purchased during the year were marked down by Rs.1,200 from a cost of Rs.15,000. Marked-down stock costing Rs.5,000 remained unsold on ) The departmental closing stock is to be valued at cost subject to adjustment for mark-up and mark-down. You are required to prepare: i) A Departmental Trading Account for Department A for the year ended 31st March, 2013 in the books of Head Office. ii) A Memorandum Stock Account for the year. iii) A Memorandum Mark-up Account for the year. 27) Sona Ltd has three departments P, Q & R. From the given below, compute: (i) The departmental results; (ii) The values of stock as on 31st Dec.2014; (i) P(Rs.) Q (Rs.) R (Rs.) Stock (on ) Purchases Actual sales Gross Profit on normal selling price 30,000 1,60,000 1,88,000 25% 45,000 1,30,000 1,66, % 15,000 60,000 93,000 40% (ii) During the year 2014 some items were sold at discount and these discounts were reflected in the above sales value. The details are given below: P (Rs.) Q (Rs.) R (Rs.) Sales at normal price Sales at actual price 15,000 11,000 8,000 6,000 6,000 4,000 IPCC Guess Questions May 2016 Advanced Accounting 11

12 PROBLEMS: 7. AMALGAMATION_II 28) P ltd and Q ltd have been carrying on same business independently. Due to competition in the market, they decided to amalgamate and form a new company called PQ Ltd. Name of the Companies : P Ltd and Q Ltd Balance Sheet as at : 31 st Dec, a a (i) Note to Accounts: Notes P Ltd ( Rs.) No. Q Ltd ( Rs.) EQUITY AND LIABILITIES: Shareholder s funds Share capital 7,75,000 8,55,000 Current liabilities TOTAL 6,23,500 13,98,500 5,57,600 14,12,600 ASSETS: Non-current assets Fixed assets Tangible assets 1 12,35,000 12,54,000 Current Assets TOTAL 1. Tangible Assets Plant and machinery Building 1,63,500 13,98,500 1,58,600 14,12,600 P Ltd ( Rs.) Q Ltd ( Rs.) 4,85,000 7,50,000 6,14,000 6,40,000 Following are the additional information: a) The authorized capital of the new company will be Rs.25,00,000 divided into 1,00,000 shares of Rs.25 each. b) Liabilities of P ltd include Rs.50,000 due to Q ltd. for the purchases made. Q Ltd. made a profit of 20% on sale of P ltd. c) P ltd. has goods purchased From Q ltd., cost to him Rs.10,000. This is included in the Current assets of P ltd. as at 31 st March, d) The assets of P ltd.and Q ltd.are to be revalued as under: Plant and Machinery Building P ltd. ( Rs.) Q ltd.(rs.) 5,25,000 7,75,000 6,75,000 6,48,000 e) The purchase consideration is to be discharged as under: i) Issue 24,000 equity shares of Rs.25 each fully paid up in the proportion of their profitability in the preceding 2 years. ii) Profit for the preceding 2 years are given below: P ltd. ( Rs.) Q ltd. ( Rs.) 1 st year 2 nd year 2,62,800 2,12,200 2,75,125 2,49,875 Total 4,75,000 5,25,000 IPCC Guess Questions May 2016 Advanced Accounting 12

13 iii) Issue 12% preference shares of Rs.10 each fully paid up at par to provide income equivalent to 8% return on capital employed in the business as on after revaluation of assets of P ltd. and Q ltd. respectively. You are required to: 1. Compute the amount of equity and preference shares issued to P ltd. and Q ltd. 2. Prepare the Balance Sheet of P Q Ltd. immediately after amalgamation 29) The following are the Balance Sheets of A Ltd. and B Ltd. as on : Name of the Companies : A Ltd. and B Ltd. Balance Sheet as at : 31 st march, 2010 (Rs. in 000) 1 a b a a b c a b a b (i) (ii) (i) (i) Note to Accounts: EQUITY AND LIABILITIES: Shareholder s funds Share capital Reserves and Surplus Non-current liabilities Long tem borrowings 10% Debentures (Secured) Loans from Banks Current liabilities Trade payables (Creditors) Short term provisions (Proposed dividend) Other current liabilities Notes A Ltd. B Ltd. No. ( Rs.) ( Rs.) (Bank over draft) TOTAL ASSETS: Non Current Assets Fixed Assets Tangible assets Other non current assets Investments (Including investments in B Ltd.) Current Assets Trade receivables (Debtors) Cash and cash equivalents (Cash at bank) TOTAL 1 2 2, ,050 2, ,050 1,000 (800) , ,000 A Ltd. ( Rs.) B Ltd. ( Rs.) 1. Share capital Equity shares of 100 each fully paid up 2. Reserves and Surplus 2, ,000 (800) B Ltd. has acquired the business of A Ltd. The following scheme of merger was approved: a) Banks agreed to waive off the loan of Rs.60 thousands of B Ltd. b) B Ltd. will reduce its shares to Rs.10 per share and then consolidate 10 such shares into one share of Rs.100 each (new share). IPCC Guess Questions May 2016 Advanced Accounting 13

14 c) Shareholders of A Ltd. will be given one share (new) of B Ltd. in exchange of share held. In A Ltd. d) Proposed dividend of A Ltd. will be paid after merger to Shareholders of A Ltd. e) Sundry Creditors of B Ltd. include Rs.100 thousands payable to A Ltd. f) A Ltd. will cancel 20% holding in B Ltd. as investment, which was held at a cost of Rs.250 thousands. Pass necessary entries in the books of B Ltd. and prepare Balance Sheet after merger. 30) Star and Moon had been carrying on business independently. They agreed to amalgamate and form a new company Neptune Ltd. with an authorized share capital of Rs.2,00,000 divided into 40,000 equity shares of Rs.5 each. On 31st December, 2012, the respective Balance Sheets of Star and Moon were as follows: Particular Star ( Rs.) Moon ( Rs.) Fixed Assets Current Assets 3,17,500 1,63,500 1,82,500 83,875 Less: Current Liabilities Representing Capital Additional Information: a) Revalued figures of Fixed and Current Assets were as follows: Fixed Assets Current Assets 4,81,000 (2, 98,500) 1,82,500 Star ( Rs.) Moon ( Rs.) 3,55,000 1,49,750 2,66,375 (90,125) 1,76,250 1,95,000 78,875 b) The Debtors and Creditors include Rs.21,675 owed by Star to Moon. The purchase consideration is satisfied by issue of the following shares and debentures : i) 30,000 equity shares of Neptune Ltd., to Star and Moon in the proportion to the profitability of their respective business based on the average net profit during the last three years which were as follows: 2010 Profit 2011 (Loss)/Profit 2012 Profit Star ( Rs.) Moon ( Rs.) 2,24,788 (1,250) 1,88,962 1,36,950 1,71,050 1,79,500 ii) 15% debentures in Neptune Ltd., at par to provide an income equivalent to 8% return on capital employed in their respective business as on 31 st December, 2012 after revaluation of assets. You are requested to: 1. Compute the amount of debentures and shares to be issued to Star and Moon. 2. A Balance Sheet of Neptune Ltd., showing the position immediately after amalgamation 31) Given below are the balance sheets of two companies as on 31 st December, 2011: Name of the Company : A Limited Balance Sheet as at : 31st December, a b 2 a EQUITY AND LIABILITIES: Shareholder s funds Share capital Reserves and Surplus Current liabilities Trade Payables (Creditors) Notes No. Rs TOTAL ,00,000 8,90,000 50,000 29,40,000 IPCC Guess Questions May 2016 Advanced Accounting 14

15 1 a 2 a b c (i) (ii) Note to Accounts: ASSETS: Non Current Assets: Fixed Assets Tangible assets Intangible assets (Patent rights) Current Assets: Inventories (Stock) Trade receivables (Debtors) Cash and cash equivalents (Cash and bank balance) TOTAL 1. Share capital: Issued and fully paid share capital: 50,000 8% cumulative preference shares of Rs.10 each 1,50,000 equity shares of Rs.10 each 2. Reserves and Surplus: General reserves Profit and loss A/c 3. Tangible assets: Land and buildings Plant and machinery Name of the Company : B Limited Balance Sheet as at : 31 st December, a b 2 a 1 a 2 a b c (i) (ii) Note to Accounts: EQUITY AND LIABILITIES: Shareholder s funds Share capital Reserves and Surplus Current liabilities Trade payables (Creditors) ASSETS: NON CURRENT ASSETS Fixed Assets Tangible assets Intangible assets (Goodwill) 3 21,50,000 2,00,000 3,50,000 80,000 1,60,000 29,40,000 IPCC Guess Questions May 2016 Advanced Accounting 15 Rs. Notes No. Rs TOTAL Current Assets Inventories (Stock) Trade receivables (Debtors) Cash and cash equivalents (Cash and bank balance) TOTAL 1 2 5,00,000 15,00,000 8,00,000 90,000 6,00,000 15,50,000 4,00,000 32,000 21,000 4,53, ,000 70,000 2,39,000 62,000 17,000 4,53,000

16 1. Share capital Issued and fully paid share capital: 2. Reserves and Surplus Profit and loss A/c 3. Tangible assets Motor Vehicles Furniture 40,000 shares of Rs.10 each Rs. 4,00,000 32,000 40,000 25,000 On 1st January, 2012, it has been agreed that both these companies should be wound up and a new company Shakti Ltd. should be formed to acquire the assets of both the companies on the following terms: a) Shakti Ltd. is to have an authorized capital of Rs.30,00,000 divided into 50,000 5% cumulative preference shares of Rs.10 each and 2,50,000 equity shares of Rs.10 each. b) Shakti Ltd. is to purchase whole of the assets of A Ltd. (Except cash and bank balances) for Rs.27,95,000 to be settled by paying Rs.5,45,000 in cash and balance by issue of 1,80,000 equity shares at a premium of Rs.2.50 each. c) Shakti Ltd. is to purchase whole of the assets of B Ltd. (except cash and bank balances) for Rs.3,81,000 to be settled by paying Rs.6,000 in cash and balance by issue of 30,000, equity shares Rs each. d) Shakti Ltd. is to make a public issue of 50,000, 5% cumulative preference shares at par and 30,000 equity shares, at the issue price of Rs per share, all payable in full on application. e) A Ltd. and B Ltd. both are to be wound up, the two Liquidators distributing the shares in Shakti Ltd. in kind among the equity Shareholders of the respective companies. f) The liquidator of A Ltd. is to pay the preference Shareholders Rs.10 in cash for every share held in full satisfaction of their claims. It is estimated that the costs of liquidation (including the Liquidators, remuneration) will be Rs.5,000 in case of A Ltd. and Rs.2,000 in the case of B Ltd. and that the preliminary expenses of Shakti Ltd. will amount to Rs.18,000 exclusive of the underwriting commission of Rs.23,750 payable on the public issue. The scheme has been sanctioned and carried through in its entirety. You are required to: a) Pass the necessary journal entries in the books of A Ltd. for winding up. b) Draw up the initial Balance Sheet of Shakti Ltd. on the basis that all assets other than goodwill are taken over at the books values. 32) Given below are the summarized balance sheets of Huge Ltd and Big Ltd. as on Big Ltd. was merged with Huge Ltd. with effect from Name of the Companies : Huge Ltd & Big Ltd Balance Sheet as at : 31 st March, 2012 Notes No. Rs. Rs a b 2 a 3 a b EQUITY AND LIABILITIES: Shareholder s funds Share capital Reserves and Surplus Non-current liabilities Long term borrowings (12% debentures) Current liabilities Trade Payable Short term provisions TOTAL ,00,000 6,20,000 2,50,000 2,25,000 1,00,000 1,00,000 40,000 2,40,000 17,00,000 45,000 1,10,000 7,30,000 IPCC Guess Questions May 2016 Advanced Accounting 16

17 1 2 a b Note to Accounts: a b c d 1. Share capital Equity shares of Rs.10 each 2. Reserves and Surplus General reserve Profit and loss account Export profit reserve 3. Short provision Provision for taxation Proposed dividend ASSETS: Non-Current Assets: Fixed Assets Tangible Assets Non-Current Investments Current Assets: Inventories Trade receivables Cash and cash equivalents Other current assets (advance tax) TOTAL 9,50,000 2,00, ,000 75,000 2,75,000 80,000 17,00,000 4,00,000 50,000 50,000 80,000 1,30,000 20,000 7,30,000 HUGE LTD ( Rs.) BIG LTD ( Rs.) 7,00,000 3,50,000 2,00,000 70,000 1,00,000 1,40,000 2,50,000 1,20,000 65,000 40,000 60,000 50,000 Huge Ltd. would issue 12% debentures to discharge the claims of the debenture holders of big Ltd. at par. Non-trade investments of Huge Ltd. 25% while those of Big Ltd. 18%. Profit of Huge Ltd. and Big Ltd. during 2010, 2011 and 2012 were as follows: Year Huge Ltd. Big Ltd. Rs. Rs ,00,000 1,50, ,50,000 2,10, ,75,000 1,80,000 Goodwill may be calculated on the basis of capitalization method taking 20% as the normal rate of return. Purchase consideration is discharged by Huge Ltd. on the basis of intrinsic value per share. Both companies decided to cancel the proposed dividend. Pass Journal Entries and prepare the balance sheet of Huge Ltd. after the merger. INTERNAL RECONSTRUCTION-II PROBLEMS: 33) The Balance Sheet of Y Limited as on 31 st March, 2008 was as follows: Name of the Company : Y Co. Ltd Balance Sheet as at : Notes No. Rs EQUITY AND LIABILITIES: Shareholder s funds 1 a b Share capital Reserves and Surplus a 3 Current liabilities 70,00,000 (15,00,000) Non-current liabilities Long term borrowings 3 17,00,000 IPCC Guess Questions May 2016 Advanced Accounting 17

18 1 2 a b c a a b c d Note to Accounts: (i) (ii) Trade Payable (Creditors) Other Current Liabilities Short term provisions TOTAL ASSETS: Non current assets Fixed assets Tangible assets Intangible assets Current Assets Current investments (At cost) Inventories (Stock) Trade receivables (Debtors) Other current assets (Discount on issue of Debentures) TOTAL ,00,000 3,00,000 1,00,000 81,00,000 45,00,000 15,00,000 5,00,000 10,00,000 5,00,000 1,00,000 81,00,000 S.NO Rs. 1. Share capital 5, 00,000 Equity shares of Rs.10 each fully paid 9% 20,000 Preference shares of Rs.100 each fully paid 50,00,000 20,00, Reserves and Surplus Profit and Loss A/c (15,00,000) 3. Long tem borrowings 10% First debenture 10% Second debentures Director's loan 4. Other Current Liabilities Bank OD Outstanding liabilities 6,00,000 10,00,000 1,00,000 1,00,000 40,000 1,60,000 Debentures interest Outstanding 5. Short term provisions Provision for income tax 1,00, Tangible Assets Land and Building Plant and Machinery Furniture and Fixtures Computers 7. Intangible Assets Goodwill Patent 30,00,000 10,00,000 2,00,000 3,00,000 10,00,000 5,00,000 Note: Preference dividend is in arrears for last three years. A holds 10% first debentures for Rs.4,00,000 and 10% second debentures for Rs.6,00,000. He is also Creditors for Rs.1,00,000. B holds 10% first debenture for Rs.2,00,000 and 10% second debentures for Rs 4,00,000 and is also Creditors for Rs.50,000. The following scheme of reconstruction has been agreed upon and duly approved by the court. 1. All the equity shares be converted into fully paid equity shares of Rs.5 each. 2. The preference shares be reduced to Rs.50 each and the preference share holders agree to forego their arrears of preference dividends in consideration of which 9% preference shares are to be converted into 10% preference shares. IPCC Guess Questions May 2016 Advanced Accounting 18

19 3. Mr. A is to cancel Rs.6,00,000 of his total debt including interest on debentures and to accept new 12% debentures for the balance a mount. 4. Mr. B is to cancel Rs.3,00,000 of his total debt including interest on debentures and to accept new 12% debentures for the balance amount. 5. Trade Creditors (Other than A and B) agreed to forego 50% of their claim. 6. Directors to accept settlement of their loans as to 60% there of by allotment of equity shares and balance being waived. 7. There were capital commitments totaling Rs.3,00,000. These contracts are to be cancelled on payment of 5% of the contract price as a penalty. 8. The Directors refund Rs.1,10,000 of the fees previously received by them. 9. Reconstruction expenses paid Rs.10, The taxation liability of the company is settled at Rs.80,000 and the same is paid immediately. 11. The assets are revalued as under : Land and Building Plant and Machinery Stock Debtors Computers Furniture and Fixtures Trade Investment Rs. 28,00,000 4,00,000 7,00,000 3,00,000 1,80,000 1,00,000 4,00,000 Pass journal entries for all the above mentioned transactions including amounts to be written off of Goodwill, Patents, Loss in profit & loss Accounts and Discount to issue of debentures. Prepare Bank Accounts and working of allocation of interest on debentures between A and B. 34) The Balance Sheet of R. Ltd., at March, 2008 was as follows: Name of the Company : R Co. Ltd Balance Sheet as at : Notes No. Rs a b EQUITY AND LIABILITIES: Shareholder s funds Share capital Reserves and Surplus ,20,000 (4,40,000) 2 Non-current liabilities a a b a a (i) (ii) (iii) (i) (ii) (iii) Long term borrowings-(loan from Directors) 60,000 Current liabilities Trade Payable-(Creditors) 4,40,000 Other Current Liabilities 2,08,000 (Bank overdraft) TOTAL 13,88,000 ASSETS: Non-current assets Fixed assets Tangible assets Intangible assets Non-Current investments Current Assets Inventories (stock) Trade receivables(debtors) Other current assets TOTAL ,80,000 68,000 3,24,000 2,48,000 3,20,000 48,000 13,88,000 IPCC Guess Questions May 2016 Advanced Accounting 19

20 Note to Accounts: 1. Share capital Share Capital Authorized: Issued : 64,000 8% Cumulative Preference Share of Rs.10 each, fully paid 64,000 Eq. shares of Rs.10 each, Rs.7.5 paid 2. Reserves and Surplus Profit and Loss Account 3. Tangible Assets Freehold premises at cost Plant and Equipment at cost less depreciation 4. Non-Current investments Investment in shares in Q Ltd. (at cost) 5.Other current assets Deferred Revenue Expenditure Note: The arrears of Preference Dividends amount to Rs.51,200. Rs. 14,00,0000 6,40,000 4,80,000 (4,40,000) 1,40,000 2,40,000 3,24,000 48,000 A scheme of reconstruction was duly approved with effect from 1 st April, 2008 under the conditions stated below: 1. The unpaid amount on the equity shares would be called up. 2. The preference Shareholders would forego their arrears of dividends. In addition, they would accept a reduction of Rs.2.5 per share. The dividend rate would be enhanced to 10% 3. The equity Shareholders would accept a reduction of Rs.7.5 per share. 4. R Ltd. holds 21,600 shares in Q Ltd. This represents 15% of the share capital of that company Q Ltd. is not a quoted company. The average net profit (after tax) of the company is Rs.2,50,000. The shares would be valued based on 12% capitalization rate. 5. A bad debt provision at 2% would be created. 6. The other assets would be valued as under: Intangible Rs.48,000, Plant Rs.1,40,000, Freeholds premises Rs.3,80,000, Stocks Rs.2,50, The profit and loss account debit balance and the balance standing to the debit of the deferred revenue expenditure account would be eliminated. 8. The Directors would have to take equity shares at the new face value of Rs.2.5 per share in settlement of their loan. 9. The equity Shareholders, including the Directors, who would receive equity shares in settlement of their loans, would take up two new equity shares for every one held. 10. The preference Shareholders would take up one new preference share for every four held. 11. The authorized share capital would be restated to Rs.14,00, The new face value of the shares preference and equity will be maintained at their reduced levels. You are required to prepare: a) Necessary ledger accounts to effect the above; and b) The balance Sheet of the company after reconstruction IPCC Guess Questions May 2016 Advanced Accounting 20

21 35) The Abridged Balance Sheet (Draft) of Cyber Ltd. as on 31 st March, 2012 is as under: 1 a b 2 a 3 a b 1 a 2 a b c (i) (i) (ii) Note to Accounts: Name of the Company : Cyber Ltd Balance Sheet As At : 31 st March, 2012 Notes No. Rs EQUITY AND LIABILITIES: Shareholder s funds Share capital 1 2,90,000 Reserve and surplus 2 (1,25,000) Non-current liabilities Long tem borrowings 8% Debentures 1,00,000 Current liabilities Trade Payable Other current liabilities TOTAL ASSETS: Non current assets Fixed assets Tangible assets Intangible assets (Good will) Current Assets Inventories Trade receivables Cash and cash equivalent (Bank) TOTAL 1.Share capital 24,000 equity shares of Rs.10 each 5,000 8% cumulative preference shares Rs.10 each 2. Reserves and Surplus Profit and account 3. Other current liabilities Accrued interest on debentures The following scheme is passed and sanctioned by the court: IPCC Guess Questions May 2016 Advanced Accounting ,00,000 8,000 3,73,000 2,57,000 5,000 50,000 60,000 1,000 3,73,000 2,40,000 50,000 (1,25,000) i) A new company Mahal Ltd is formed with Rs.3,00,000, divided into 30,000 Equity shares of Rs.10 each. ii) The new company will acquire the assets and liabilities of Cyber Ltd. on the following terms: a) Old company's debentures are paid by similar debentures in new company and for outstanding accrued interest, shares of equal amount are issued at par. b) The trade payables are paid for every Rs.100, Rs.16 in cash and 10 shares issued at par. c) Preference Shareholders are to get equal number of equity shares at par. For arrears of dividend amounting to Rs.12,000, 5 shares are issued at par for each Rs.100 in full satisfaction. d) Equity Shareholders are issued one share at par for every three shares held. e) Expenses of Rs.8,000 are to be borne by the new company. iii) Current Assets are to be taken at book value (Except stock, which is to be reduced by Rs.3,000). Goodwill is to be eliminated, balance of purchase consideration being attributed to fixed assets. iv) Remaining shares of the new company are issued to public at par and are fully paid. 8,000 Rs.

22 You are required to show: a) In the old company's books: i) Realisation Account ii) Equity Shareholder's Account b) In the new company's books: i) Bank Account ii) Summarised Balance Sheet as per the requirements of Schedule-III. 36) The following is the Balance sheet of Star Ltd. As on 31 st March, 2015: (NOV 15) A. Equity & Liabilities: Rs. 1. Shareholder s Fund: (a) Share Capital : 9,000 7% Preference Shares of Rs.100 Each fully paid 9,00,000 10,000 Equity Shares of Rs.100 each fully paid 10,00,000 (b) Reserve & surplus: Profit & loss account (2,00,000) 2. Non-current liabilities: A 6% debentures (secured on Bombay works) 3,00,000 B 6% debentures (secured on Chennai works) 3,50, Current liabilities and provisions: (a) Workmen s compensation fund: Bombay works 10,000 Chennai works 5,000 (b) Trade payables 1,25,000 Total 24,90,000 B. Assets : 1. Non-current assets: Tangible assets: Bombay works 9,50,000 Chennai works 7,75, Investment: Investment for workman s compensation fund 15, Current assets: (a) Inventories 4,50,000 (b) Trade receivables 2,50,000 (c) Cash at bank 50,000 Total 24,90,000 A reconstruction scheme was prepared and duly approved. The salient features of the scheme were as follows: i) Paid up value of 8% Preference share to be reduced to Rs.80, but the rate of dividend being raised to 9%. ii) Paid up value of equity shares to be reduced to Rs.10. iii) The Directors to refund Rs.50,000 of the fees previously received by them. iv) Debenture holders forego their interest of Rs.26,000 which is included among the sundry Creditors. v) The preference Shareholders agreed to waive their claims for preference share dividend, which is in arrears for the last three years. vi) B 6% Debenture holders agreed to take over the Chennai works at Rs.4,25,000 and to accept an allotment of 1,500 equity shares of Rs.10 each at par, and upon their forming a company called Zia Ltd. (to take over the Chennai works), they allotted 9,000 equity shares of Rs.10 each fully paid at par to Star Ltd. IPCC Guess Questions May 2016 Advanced Accounting 22

23 vii) The Chennai workmen s compensation fund disclosed that there were actual liabilities of Rs.1,000 only. As a consequence, the investment of the fund were realized to the extent of the balance. Entire investments were sold at a profit of 10% on book value and the proceeds were utilized for part payment of the Creditors. viii) Stock was to be written off by Rs.1,90,000 and a provision for doubtful debts is to be made to the extent of Rs.20,000. ix) Chennai works completely written off. x) Any balance of the capital reduction account is to be applied as 2/3 rd to write off the value of Bombay works and 1/3 rd to capital reserve. Pass necessary journal entries in the books of Star Ltd. After the scheme has been carried into effect. PROBLEMS: 9. PARTNERSHIP ACCOUNTS-II 37) E, P and G were in partnership sharing profits and losses-e. one half, P. one-third and G. and sixth. No interest was allowed on capital or charged on drawings, but loans from partners carried interest at the rate of 12 per cent per annum. The balance sheet of the partnership as on 31 st March, 2000 was as follows: Rs. Rs. Capital Accounts Machinery 60,000 E: 40,000 Fixtures and Fittings 10,000 P: 20,000 60,000 Motor Vehicle 20,000 E's Loan 20,000 Stock 35,000 Trade Creditors Bank Overdraft 70,000 20,000 Debtors G's Capital Account 40,000 5,000 1,70,000 1,70,000 Owing to pressure by Creditors and persistent negligence by G. the firm had to be dissolved on June 30, Between March 31, 2000 and June 30, 2000 goods were purchased of the value of Rs.25,000 and sales amounted to Rs.30,400. In addition to payments to trade Creditors, payments to third parties were made during the same period for wages, Rs.10,000 and expenses Rs.6,000. The partners' drawings during this period were: E. Rs.4,000; P. Rs.2,000; and G. Rs.1,000; On June 30, 2000 the Debtors amounted to Rs.35,000 and trade Creditors to Rs.80,000 and stock was valued at Rs.30,000. In the winding-up the assets realised the following amounts: Machinery Fixtures and Fittings Motor Vehicle Debtors Stock Rs. 40,000 5,000 25,000 30,000 27,000 The Creditors were paid in full. The costs of winding up came to Rs.2,000. Partners were able to contribute any sum required of them. P had joined the firm on 1st April, 1996, paying Rs.10,000 as Premium; it was agreed at that time that the partnership would be for 10 years. You are required to prepare: a) Account to show the realisation and distribution of the partnership assets, and b) Partners' capital accounts in columnar form. IPCC Guess Questions May 2016 Advanced Accounting 23

24 38) P, Q & R are partners sharing profits & losses in the ratio of 3:2:1. The partnership was dissolved on 31 st March, 2003 on which date the Balance Sheet of the firm was as follows: Liabilities Rs. Assets Rs. P's capital Q's capital Reserve Sundry Creditors 8,415 5,916 3,600 14,982 32,913 Sundry assets Sundry Debtors Bills receivable Stock R's A/c Cash on hand 6,750 3,415 2,518 4,516 12,500 3,214 32,913 The lives of the partners were insured severally for P: Rs.10,000; Q: Rs.5,000; and Rs.6,000. The premiums were charged to the Profit & Loss A/c. On the date of the dissolution, the surrender value of each of the policies was 30% of the sum assured. P took over his policy but the policies of Q and R were surrendered. In the course of realisation it was found: That a liability of Rs.1,500 for purchases of goods in had been omitted from the balance sheet and that the goods had been included in the stock. That bills receivable amounting to Rs.3,500 which were discounted by the firms were dishonored and proved to be valueless. P agreed to take over the goodwill of the firm at Rs.2,500. The bills receivable were retired by the acceptors for Rs.2,400. The remaining assets realised Rs.10,399. The expenses of realisation amounted to Rs.600. R is insolvent but his estate paid Rs.2,100. Prepare that final A/cs of the partners closing the books of the firm and show the result of the dissolution. 39) Ajay Enterprises, a Partnership firm in which A,B and C are three partners sharing profits and losses in the ratio of 4 : 3 : 3. the balance sheet of the firm as on 31st December, 2011 is as below: Liabilities Rs. Assets Rs. A s Capital B s Capital C s Capital B loan Sundry Creditors 15,000 7,500 15,000 4,500 16,500 Factory Building Plant & Machinery Debtors Stock Cash at bank 24,160 16,275 5,400 12, ,500 58,500 On balance sheet date all the three partners have decided to dissolve their partnership. Since the realization of assets was protracted, they decided to distribute amounts as and when feasible and for this purpose they appoint C who was to get as his remunerations 1% of the value of the assets realized other than cash at Bank and 10% of the amount distributed to the partners. Assets were realized piecemeal as under: First installment Rs.18,650 Second installment Rs.17,320 Third installment Rs.10,000 Last instilment Rs.7,000 Dissolution expenses were provided for estimated amount of Rs.3,000 The Creditors were settled finally for Rs.15,900 Prepare a statement showing distribution of cash amongst the partners by Higher Relative Capital Method. 40) The following is the Balance Sheet of M/s. A & B as on Liabilities Rs. Assets Rs. On : A's Capital 40,000 B's Capital 50,000 A's Loan General reserve 90,000 10,000 10,000 Land & Buildings Stock Debtors Investments: 6% Debns. in X Ltd. 50,000 30,000 20,000 20,000 IPCC Guess Questions May 2016 Advanced Accounting 24

25 Liabilities 20,000 Cash 10,000 1,3,0,000 1,3,0,000 It was agreed that Mr. C is to be admitted for a fifth share in the future profits from He is required to contribute cash towards goodwill and Rs.10,000 towards capital. The following further information is furnished. a) The partners A and B shared the profits in the ratio of 3:2 b) Mr. A was receiving a salary of Rs.500 p.m. from the very inception of the firm in 1978 in addition to share of profit. c) The future profit ratio between A, B and C will be 3:1:1. Mr. A will not get any salary after the admission of Mr. C. d) The goodwill of the firm shall be determined on the basis of 2 years purchase of the average profits from business of the last 5 years. The of the profits are as under: : (Profit): 20,000; : (Loss): 10,000; (Profit): 20,000; : (Profit): 25,000; : (Profit): 30,000; The above profits and losses are after charging the salary of Mr. A. The profit of the year ended included an extraneous profit of Rs.30,000 and the loss of the year ended was on A/c of loss by strike to the extent of Rs.20,000. It was agreed that the value of the goodwill of the firm should appear in the books of the firm. The trading profit for the year ended was Rs.40,000 before depreciation The partners had drawn each Rs.1,000 p.m. as drawings. The value of the other assets and liabilities as on were as under: Buildings (before depreciation) Rs.60,000; stock Rs.40,000; Debtors Nil; Investments Rs.20,000; Liabilities -Nil; Provide depreciation at 5% on Land & Buildings on the closing balance & interest at 6% on A's Loan. They applied for conversion of the firm into a private Limited Company Certificate received on They decided to convert capital A/cs of the partners into share capital in the ratio of 3:1:1 on the basis of total capital as on If necessary, partners have to subscribe to fresh capital or withdraw. Prepare the Profit & Loss A/c for the year ended and the Balance Sheet of the company. 41) The firm of Kapil & Dev has four partners and as of 31 st March 2003, its Balance Sheet stood as follows: Balance Sheet as at 31 st March, 2003 Liabilities Rs. Assets Rs. Capital A/c s: F. Kapil 2,00,000 S. Kapil 2,00,000 R. Dev 1,00,000 Current A/cs: F. Kapil 50,000 S. Kapil 1,50,000 R. Dev 1,10,000 Loan from NBFC Current liabilities. 5,00,000 3,10,000 5,00,000 70,000 13,80,000 Land Buildings Office equipment Computers Debtors Stocks Cash at Bank Other Current Assets Current A/c: B. Dev 50,000 2,50,000 1,25,000 70,000 4,00,000 3,00,000 75,000 22,600 87,400 13,80,000 The partners have been sharing Profits & Losses in the ratio of 4:4:1:1. It has been agreed to dissolved the IPCC Guess Questions May 2016 Advanced Accounting 25

26 firm on on the basis of the following understanding: a) The following assets are to be adjusted to the extent indicated with respect to the book values: Land: 200%, Buildings: 120%, Computers: 70%, Debtors: 95%, Stocks: 90%. b) In the case of the loan, the lenders are to be paid at their instance a pre-payment premium of 1%. c) B. Dev is insolvent and no amount is recoverable from him. His father, R. Dev, however, agrees to bear 50% of his deficiency. The balance of the deficiency is agreed to be appropriated according to law. Assuming that the Realisation of the Assets & Discharge of Liabilities is carried out immediately, show the Cash A/c, Realisation A/c & the Partner s A/cs. 42) Black & Green and Brown & Grey are two partnership firms carrying on a similar type of business. They agreed to amalgamate the two businesses as on 1 st January, 2003 under the name of Tints & Co. Black & Green share profits in the ratio of 8:7 and Brown & Grey 3:2. Their respective Balance Sheets as at 31 st December, 2002 were as under: Liabilities Black & Green ( Rs.) Brown & Grey ( Rs.) 64,000 56,000 Trade & Expense Creditors Current A/cs: Black Green Capital A/cs: Black Green Brown Grey Balance at Bank Investments Debtors Stocks Vehicles Fixtures Freeholds 10,000 6, ,20,000 1,05,000 1,10,000 78,000 3,05,000 2,44,000 Assets Black & Green ( Rs.) Brown & Grey ( Rs.) 42,000 15,000 71,000 59,000 25,000 18,000 75,000 31,000-65,000 67,000 17,000 14,000 50,000 3,05,000 2,44,000 The amalgamation agreement contained the following provisions: The Freeholds & Fixtures of brown and grey were sold for Rs.1,00,000 on 1 st Jan., Assets are to be revalued as under: Black & Green ( Rs.) Brown & Grey ( Rs.) Stock Vehicles Fixtures Freeholds 57,000 23,000 20,000 95,000 62,000 15, Provisions to be made for Bad Debts of Rs.4,000 by Black & Green, Rs.5,000 by Brown & Grey. The Creditors of each firm to be subject to a Discount of 2 ½%. Black to take over his firms investments at Rs.12,000. The Goodwill of Black & Green is to be taken at Rs.75,000 & that of Brown & Grey at Rs.50,000. Profits in the new firm are to be shared in the proportion of 6/20 to Black 5/20 each to Green and Brown and 4/20 to Grey. IPCC Guess Questions May 2016 Advanced Accounting 26

27 The capital of the new firm is to be Rs.5,00,000 to be provided by the partners in their profit sharing ratio; adjustments to be made in cash. You are required to Draft: The Capital A/Cs of Black & Green and Brown & Grey. The partners Capital A/Cs as they will appear in the books of the new firm on completion of the amalgamation together with the opening Balance Sheet. 43) Yash, Tanish and Ruchika were partners sharing Profit & Loss in ratio of 3:2:1. Balance Sheet of the firm is as follows: (NOV 15) Liabilities Amount Amount Assets (Rs.) (Rs.) Fixed Capital: Fixed Assets 45,000 - Yash 50,000 Investments 15,000 - Tanish 20,000 Current Assets: - Ruchika 10,000 - Stock 10,000 Current Accounts: - Debtors 27,500 - Yash 6,000 - Cash & Bank 12,500 - Ruchika 4,000 Current Account: Unsecured Loans 15,000 Tanish 10,000 Current Liabilities 15,0000 1,20,000 1,20,000 On 31st April, 2014 all the partners agreed to form a new company YTR Pvt. Ltd., which shall take over the firm as going concern including goodwill, but excluding cash and bank balances. The following matters were also agreed upon: i) Goodwill shall be valued at 3 years purchase of super profits. ii) Actual profit for the purpose of goodwill valuation will be Rs.20,000. iii) The normal rate of return will be 17.50% per annum of Fixed Capital. iv) All other Assets and Liabilities will be taken over at book value. v) The purchase consideration will be paid partly in share of Rs.1 each and Partly in cash. Yash and Tanish to acquire interest in new company in the ratio of 3:2 at face value. Ruchika agreed to retire after taking her share in cash. vi) Realization expenses amounted to Rs. 5,000. Prepare Realization Account, Cash and Bank Account, YTR Private Limited Account and Capital Accounts of the partners. PROBLEMS: 10. INSURANCE COMPANY ACCOUNTS 44) From the following of Birla Sun Life Insurance Business as on prepare the Revenue A/c, P & L A/c & B/S. (Rs. 000 s) Rs. Rs. Income-tax on interest, dividend & rents Income-tax paid Claims paid(net of re-insurances): By Death By Maturity Property at cost 3,000 2,500 25,000 17,000 60,000 Life Assurance fund: Opening Balance Premium less re-insurances O/s claims (net of Re-insurances): Opening balances: By death By maturity 4,50,000 2,00,000 11,000 7,500 IPCC Guess Questions May 2016 Advanced Accounting 27

28 (additions of Rs.80 lakh) Furniture & office equipment at Cost Annuities Stationery Cash at bank Cash in hand Surrenders (net of re-insurances) Commission Expenses of management Sundry Debtors Loans on policies Deposits with R.B.I. Investment in E. shares of Co.s 5,000 15, , ,000 40,000 1,200 35,000 3,000 5,80,000 8,36,000 Consideration for annuities Registration fees Interest, dividends and rents Contingencies reserve Provision for taxation Property depreciation Office Furniture Depreciation Sundry Creditors Share capital 10, ,000 20,000 5,000 3, ,000 1,00,000 8,36,000 Other information: a) Premium less re-insurances include Rs.8 crores first year s premium, Rs.11 crores renewal premium and Rs.1 Crore single premium. b) Premium O/s at the end of the year Rs.25 crores; Commission on O/s premium Rs.7,50,000. c) Claims less re-insurances outstanding at the end of the year are Rs.50 Lakhs (by death) and Rs.30,00,000 (by maturity). d) Depreciation to be provided Rs.10,00,000 on property &Rs.1,60,000 on Furniture & Office equipment. e) Income-tax provision to be made for Rs.20,00,000. f) Expenses of Rs.30,00,000 &Rs.10,00,000 are prepaid & O/s respectively at the end of the year. g) Accrued interest, dividend and rent are Rs.25,00, ) From the following balances, as on , prepare the necessary Revenue A/c for the Marine Insurance business of an Indian insurance Company. Direct Business Reinsurance Business Premium: Received Receivable: 1 st January 31 st December Paid Payable: 1 st January 31 st December Claims: Paid Payable: 1 st January 31 st December Received Receivable: 1 st January 31 st December Commission: On - insurance accepted On re-insurance ceded 46,00,000 2,48,000 3,36, ,50,000 1,66,000 2,08, ,20,000-7,20,000 27,000 34,000 4,60,000 37,500 62,000 3,00,000 39,000 44,000 1,70,000 16,000 23,000 19,000 26,000 IPCC Guess Questions May 2016 Advanced Accounting 28

29 a) Other Exp. & Income:Salaries Rs.3,20,000, Rent Rs.29,000; Postage Rs.43,000 Income Tax paid Rs.4,40,000, Interest, Dividend and Rent received (net) Rs.1,37,500, Income Tax deducted at source Rs.40,250, Legal expenses (includes Rs.40,000 for claims): Rs.72,000. b) Balance of Fund on 1 st Jan was Rs.38,45,000 including additional Reserve of Rs.4,45,000. Additional reserve is to be maintained at 5% of the net premium of the year. 46) The following figures have been extracted from the books of New India Insurance Company Ltd. in respect of their Marine Business for : ( Rs. in lakhs) Rs. Rs. Direct Business Income Received Reserve for unexpired risks as on Claims outstanding as on (Net) Bad Debts Income from investment and dividends (gross) Rent received from properties Investment in government securities as on Commission paid on Direct Business Expenses of Management Income tax deducted at source Profit and Loss Account: (Cr.) balance as on Other expenses Reinsurance premium receipts Outstanding claims as on (net) Direct claims paid (gross) IPCC Guess Questions May 2016 Advanced Accounting Investment in shares as on Reinsurance claims paid 4.00 Prepare a Revenue Account and Profit and Loss Account for the year taking into account the following further information: a) All direct risks are reinsured for 20% of the risk. b) Claim a Commission of 25% on reinsurance ceded. c) Provide 25% Commission on reinsurance accepted d) Market value of investments as on 31 st March, 2008 is as follows: i) Government Securities Rs.105 lakhs. ii) Shares Rs.18 lakhs Adjust separately for each of these two categories of investments. e) Provide 65% for Income tax. 47) From the following information as on 31st March, 2009, prepare the Revenue Accounts of Sagar Bhima Co. Ltd. engaged in Marine Insurance Business: Rs. Rs. I. Premium : Received Receivable 1st April, st March, 2009 Premium paid Payable 1st April, st March, 2009 II. Claims : Paid Payable 1st April, st March, ,00,000 1,20,000 1,80,000 2,40,000 16,50,000 95,000 1,75, ,60,000 21,000 28,000 20,000 42,000 1,25,000 13,000 22,000

30 Received Receivable 1st April, st March, 2009 III. Commission : On Insurance accepted On Insurance ceded 1,50,000 1,00,000 9,000 12,000 11,000 14,000 Other expenses and income: Salaries Rs.2,60,000; Rent, Rates and Taxes Rs.18,000; Printing and Stationery Rs.23,000; Indian Income Tax paid Rs.2,40,000; Interest, Dividend and Rent received (net) Rs.1,15,500; Income Tax deducted at source Rs.24,500; Legal Expenses (Inclusive of Rs.20,000 in connection with the settlement of claims) Rs.60,000; Bad Debts Rs.5,000; Double Income Tax refund Rs.12,000; Profit on Sale of Motor car Rs.5,000. Balance of Fund on 1st April, 2008 was Rs.26,50,000 including Additional Reserve of Rs.3,25,000. Additional Reserve has to be maintained at 5% of the net premium of the year. 48) From the following information prepare the Revenue Account of Anmol Fire Insurance Company Ltd. for the year ended 31st March, 2012: 1. Premium, Claims and Commission: On Direct On Re-Insurance On Re-insurance (a) Total Premium In India (b) Total Claims Outside India (c) Commission 2. Expenses: Business (Rs.) 30,00,000 80% 6,00,000 20% 3,00,000 ceded (Rs.) 10,00,000 80% 2,00,000 20% 1,00,000 accepted (Rs.) 20,00,000 80% 4,00,000 20% 2,00,000 Amount Employees remuneration and welfare benefits Managerial Remuneration Travel, conveyance and vehicle running expenses Rents, rates and taxes RepaiRs Printing and Stationery Communication expenses Legal and Professional charges Medical fees Auditor s fees, expenses etc. Advertisement and publicity Interest and Bank Charges Policy Stamps 2,31,000 3,00,000 59,000 30,000 20,000 10,000 5,000 6,000 7,000 8,000 6,000 5,000 3, Others: Amount Furniture and fixture (cost Rs.1,00,000) 58,000 Rate of Depreciation on furniture 10% an original cost Interest, Dividend and Rent Received Income Tax deducted at source thereon Profit and Sale of Motor Car Double Income Tax Refund Provision of Unexpired Risks (as on ) Additional Provision for Risks (as on ) 90,000 10,000 5,000 15,000 10,00,000 1,00,000 Accounting Policy Regarding Additional Provision in Fire- 5% of net premium of the year 49) Prepare revenue account of M/S Ishan Insurance Co. engaged in marine insurance business: IPCC Guess Questions May 2016 Advanced Accounting 30

31 Direct Business (Rs.) Re-Insurance (Rs.) I. Premium Received 3,60,000 38,000 Receivable -1 st April, st March, ,000 16,000 1,600 1,800 Premium paid - 24,000 Premium Payable - 1 st April, st March, ,000 2,200 II. Claims Paid 1,54,000 14,000 Payable -1 st April, st March, ,000 16,000 1,500 4,200 Received - 17,000 Receivable -1 st April, st March, ,400 1,900 III. Commission On insurance accepted 96,000 5,600 On insurance Ceded - 8,000 Details of other Expenses and Income is as below: Establishment Expenses 30,000 Rent, rates & taxes 14,000 Printing & stationery 1,800 Income tax paid 10,000 Income from dividend 18,000 Legal expenses (inclusive of Rs. 1,200 in connection with settlement of claims 2,000 Double income tax refund 24,000 Bad debts 1,300 Profit on sale of furniture 700 Balance of fund as on 1 st April, 2014 was Rs. 7,65,000 including additional reserve of Rs.33,000. Additional reserve is to be 5% of the net premium of the year. THEORY: BANK ACCOUNTS 50) Specify the conditions when cash credit overdraft account is treated as Out of order. PROBLEMS: 51) From the following information identify the non-performing assets (NPA) of a commercial bank for the year ending 31 st March Terms Loans:Rs.150 lakhs out of which interest remains overdue for three quaarters on Rs.50 lakhs and for three quarters on Rs.40 lakhs. Cash credit and overdrafts: Rs.1,120 lakhs out of which interest remained out of order for two quarters on Rs.150 lakhs, for three quarters on Rs.80 lakhs and for <90 days on Rs.70 lakhs. Bills purchased and discounted:rs.2,150 lakhs out of which remained over due for one quarter on Rs.750 lakhs, for 95 days on Rs.500 lakhs, for 180 days on Rs.400 lakhs and for 190 days on Rs.350 lakhs. Rs. IPCC Guess Questions May 2016 Advanced Accounting 31

32 52) From the following, compute the amount of provisions to be made in the profit and loss account of a commercial bank for the year ending on Assets (category of advances) Rs. in lakhs Standard advances 7,000 Sub-standard advances 3,500 (Include secured exposures Rs.1,000 lakhs and balances unsecured exposures Rs.2,500 lakhs includes Rs.1,500 lakhs in respect of infrastructure loan accounts where escrow accounts are available) Doubtful advances unsecured portion 1,500 Doubtful advances-secured portion For doubtful up to 1 year 500 For doubtful more than 1 year and up to 3 years 600 For doubtful more than 3 years 300 Loss advances ) Following facts have been taken out from the records of AdaRsha Bank Ltd. in respect of the year ending March 31, 2010: On Bills for collection were Rs.7,00,000. During bills received for collection amounted to Rs.64,50,000, bills collected were Rs.47,00,000 and bills dishonoured and returned were Rs.5,50,500. Prepare Bills for collection (Assets) A/c and bills for Collection (Liability) A/c. On , Acceptance, EndoRsement, etc. not yet satisfied amounted to Rs.14,50,000. During the year under question, Acceptance, EndoRsements, Guarantees etc., amounted to Rs.44,00,000. Bank honoured acceptances to the extent of Rs.25,00,000 and client paid off Rs.10,00,000 against the guaranteed liability. Clients failed to pay Rs.1,00,000 which the Bank had to pay. Prepare Acceptances, EndoRsements and other Obligations A/c as it would appear in the General ledger. It is found from the books, that a loan of Rs.6,00,000 was advanced on 10 per cent p.a. interest payable half yearly; but the loan was outstanding as on without any payment recorded in the meantime, either towards principal or towards interest. The security for the loan was 10,000 fully paid shares of Rs.100 each (the market value was Rs.98 as per the Stock Exchange Information as on 30 th September, 2010). But due to fluctuations, the price fell to Rs.40 per share in January, On , the price as per Stock Exchange rate was Rs.82 per share. State how you would classify the loan as secured / unsecured in the Balance Sheet of the Company. The following balances are extracted from the Trial Balance as on : Dr. Rs. Cr. Rs. Interest and Discounts Rebate for bills discounted Bills discounted and purchased 4,00,000 98,00,000 20,000 It is ascertained that the proportionate discounts not yet earned for bills to mature in amount to Rs.14,000. Prepare Ledger Accounts. 54) A Commercial Bank has the following capital funds and assets. Segregate the capital funds In to Tier I and Tier II capitals. Find out the risk adjusted asset and risk weighted assets ratio. ( Rs.in crores) Equity share capital Statutory reserve Capital reserve (of which Rs.16 crores were due to revaluation of assets and the balance due to sale of capital asset) Assets: Cash balance with RBI Balance with other banks IPCC Guess Questions May 2016 Advanced Accounting 32

33 Other investments Loans and advances: (i) Guaranteed by the Government (ii) Others Premises, furniture and fixtures Off-Balance Sheet items: (i) Guarantee and other obligations (ii) Acceptances, endorsements and letter of credit , , ) The following are the ledger balances (in Rupees thousands) extracted from the books of Vaishnavi Bank Limited as on March 31, 2012: Dr. Cr. Share Capital Current accounts Employee security deposits Investments in Govt. of India Bonds Gold Bullion Silver Constituent liabilities for acceptances and endorsements Borrowings from banks Building Furniture Money at call and short notice Commission & Brokerage Saving accounts Fixed deposits Balances with other banks Other investments Interest accrued on investments Reserve Fund Profit and Loss Account Bills for collection Interest Loans Bills discounted Interest Discounts Rents Audit fees Depreciation reserve (furniture) Salaries Rent, rates and taxes Cash in hand and with Reserve Bank Miscellaneous income Depreciation reserve (building) Directors fees Postage Loss on sale of investments Branch adjustments 9,43,70 1,51,30 20,00 5,65,00 6,50,00 50,00 2,60,00 4,63,50 5,56,30 2,46,20 4,35,00 18,10,00 1,25,00 79,50 50,00 2,12,00 1,20,00 7,50,00 10,00 12,50 2,00,00 2,00,00 19,00,00 9,70,00 74,20 5,65,00 7,72,30 2,53,00 1,50,00 2,30,50 14,00,00 65,00 4,35,00 6,20,00 4,20,00 6,00 2,00 39,00 8,00 79,10,00 79,10,00 IPCC Guess Questions May 2016 Advanced Accounting 33

34 Other information: The bank s Profit and Loss Account for the year ended and Balance Sheet as on 31 st March, 2012 are required to be prepared in appropriate form. Further information (in Rupees thousands) available is as follows a) Rebate on bills discounted to be provided 40,00 b) Depreciation for the year Building 50,00 Furniture 5,00 c) Included in the current accounts ledger are accounts overdrawn to the extent of 25,00. 56) Following information is furnished to you by Well-to-do Bank Ltd. for the year ended 31 st March, 2008: ( Rs. in thousands) Rs. Interest and discount - (Income) 8,860 Interest on public deposits (Expenditure) 2,720 Operating expenses 2,662 Other incomes 250 Provisions and contingencies (it includes provision in respect of Non-performing Assets (NPAs) and tax provisions) Rebate on bills discounted to be provided for as on Classification of Advances: Standard Assets Sub-standard Assets Doubtful Assets fully unsecured Doubtful assets fully secured Less than 1 year More than 1 year but less than 3 years More than 3 years Loss assets 2, ,000 1, You are required to prepare: Profit and Loss Account of the Bank for the year ended 31 st March, Provision in respect of advances. 57) The following figures have been taken from the books of National Bank Limited as on 31st March, 2011: Paid up share capital Interest and discount received Interest paid on deposits Salaries and allowances Rent and taxes paid Directors' fees and allowances Statutory reserve fund Postages and telegrams Rent received Commission, exchange and brokerage Profit on sale of investments Depreciation on bank's property Law charges Auditors' fees The following additional information is given to you: IPCC Guess Questions May 2016 Advanced Accounting 34 Rs ,00,000 74,11,000 40,74,000 4,00,000 1,80,000 60,000 16,00,000 1,20,000 1,30,000 3,80,000 4,00,000 60,000 80,000 10,000

35 One customer to whom a sum of Rs.20 lakhs was advanced has become insolvent and it is expected that only 50% of the amount will be recovered from his estate. Auditors find that a provision of Rs.3 lakhs is necessary against other debts. Rebate on bills discounted on 31st March, 2010 was Rs.24,000 and on 31st March, 2011 was Rs.32,000. Provide Rs.13, 00,000 for income tax. The Board of Directors decides to declare 10% after transfer of 25% of the year's profit to Statutory Reserve. You are required to prepare Profit and Loss Account of the bank with all the necessary schedules for the year ended 31st March, Ignore figures for the previous year and corporate dividend tax. 58) ABC Bank Ltd. Has a balance of Rs. 40 crores in Rebate on bills discounted account as on 31 st March, The Bank provides you the following information: (PM, NOV 15) i. During the financial year ending 31 st March, 2015 ABC Bank Ltd. Discounted bills of exchange of Rs.5000 crores charging 14% and the average period of discount being 146 days. ii. Bills of exchange of Rs.500 crores were due for realization from the acceptors/customers after 31 st March, The average period of outstanding after 31 st March, 2015 being 73 days. These bills of exchange of Rs. 500 crores were discounted charging p.a. You are requested to pass necessary Journal Entries in the books of ABC Bank Ltd. For the above transactions. BRANCH ACCOUNTS 59) Bengal Trading Co., with its head office in Kolkata, invoiced goods to its branch at Mumbai, at 20% less than the catalogue price which is cost plus 50%, with instructions that cash sales were to be made at invoice price and credit sales at catalogue price less discount at 15% on prompt payment. From the following available from the branch, prepare the necessary Accounts and Branch Trading and Profit & Loss A/c for the year ended 31 st March, 2002 in the head office books so as to show the actual profit or loss of the branch for the year: Stock on 1 st April, 2001 (invoice price) Debtors on 1 st April, 2001 Goods received from head office (invoice price) Sales (cash) Sales (credit) Cash realised from Debtors Discount allowed to Debtors Expenses at the branch Remittance to head office Debtors on 31 st March, 2002 Cash in hand on 31 st March, 2002 Stock on 31 st March, 2002 (invoice price) IPCC Guess Questions May 2016 Advanced Accounting 35 Rs. 12,000 10,000 1,32,000 46,000 1,00,000 85,635 13,365 6,000 1,20,000 11,000 5,635 15,000 Provision should be made for discount to be allowed to Debtors as on 31 st March, 2002, on the basis of the year s trend of prompt payment. 60) Harrison Ltd. Chennai has a branch at New Delhi to which goods are 20% above cost. The branch makes both cash and credit sales. Branch expenses are met partly from H.O. and partly by the branch. The statement of expenses incurred by the branch every month is sent to head office for recording. Following further details are given for the year ended 31 st December, Cost of goods sent to Branch at cost Goods received by Branch till at invoice price Credit Sales for the invoice price ` 2,00,000 2,20,000 1,65,000

36 Cash Sales for the invoice price Cash Remitted to head office Expenses paid by H.O. Bad Debts written off Balance as on: Stock Debtors Cash in Hand 59,000 2,22,500 12, ( `) ( `) 25,000 (Cost) 28,000 (Invoice price) 32,750 26,000 5,000 2,500 Prepare Branch Account using the above figures following Double Column Method. 61) Rahul Limited operates a number of retail outlets to which goods are invoiced at wholesale price which is cost plus 25%. These outlets sell the goods at the retail price which is wholesale price plus 20%. Following is the information regarding one of the outlets for the year ended : Rs. Stock at the outlet Goods invoiced to the outlet during the year Gross profit made by the outlet Goods lost by fire Expenses of the outlet for the year Stock at the outlet ,000 3,24,000 60,000? 20,000 36,000 You are required to prepare the following accounts in the books of Rahul Ltd. for the year ended : Outlet Stock A/c, Outlet Profit & Loss A/c and Stock Reserve A/c. 62) Give Journal Entries in the books of Branch A to rectify or adjust the following: 1. Head Office expenses `3,500 allocated to the Branch, but not recorded in the Branch Books. 2. Depreciation of branch assets, whose accounts are kept by the Head Office not provided earlier for `1, Branch paid `2,000 as salary to a H.O. Inspector, but the amount paid has been debited by the Branch to Salaries account. 4. H.O. collected `10,000 directly from a customer on behalf of the Branch, but no intimation to this effect has been received by the Branch. 5. A remittance of `15,000 sent by the Branch has not yet been received by the Head Office. 6. Branch A incurred advertisement expenses of `3,000 on behalf of Branch of B. 63) Concept with its Head Office at Mumbai has a branch at Nagpur. Goods are invoiced to the Branch at cost plus 33 1/3%. The following information is given in respect of the branch for the year ended 31st March, 2011: Goods sent to Branch (Invoice price) Stock at Branch on (Invoice price) Cash sales Return of goods by Customers to the Branch Branch expenses (Paid in cash) Branch Debtors balance on Discount allowed Bad debts Collection from Debtors Branch Debtors cheques returned dishonoured Stock at Branch on (Invoice price) Branch Debtors balance on ` 4,80,000 24,000 1,80,000 6,000 53,500 30,000 1,000 1,500 2,70,000 5,000 48,000 36,500 Prepare, under the Stock and Debtors system, the following Ledger Accounts in the books of the Head Office: IPCC Guess Questions May 2016 Advanced Accounting 36

37 (i) Nagpur Branch Stock Account (ii) Nagpur Branch Debtors Account (iii) Nagpur Branch Adjustment Account. Also compute shortage of Stock at Branch, if any 64) An Indian company has a branch at Washington. Its Trial Balance as at 30th September, 2008 is as follows: Plant and machinery Furniture & fixtures Stock, Oct. 1, 2007 Purchases Sales Goods from Indian Co. (H.O.) Wages Carriage inward Salaries Rent, rates and taxes Insurance Trade expenses Head Office A/c Trade Debtors Trade Creditors Cash at bank Cash in hand Dr. US $ 1,20,000 8,000 56,000 2,40, ,000 2,000 1,000 6,000 2,000 1,000 1,000 24,000 5,000 1,000 Cr. US $ 4,16,000 1,14,000 17,000 5,47,000 5,47,000 The following further information is given: 1) Wages outstanding $ 1,000. 2) Depreciate Plant and Machinery and Furniture and 10 % p.a. 3) The Head Office sent goods to Branch for `39,40,000. 4) The Head Office shows an amount of `43,00,000 due from Branch. 5) Stock on 30th September, 2008 $ 52,000. 6) There were no in transit items either at the start or at the end of the year. 7) On September 1, 2006, when the fixed assets were purchased, the rate of exchange was ` 38 to one $. On October 1, 2007, the rate was `39 to one $. On September 30, 2008, the rate was `41 to one $. Average rate during the year was `40 to one $. You are asked to prepare: a) Trial balance incorporating adjustments given under 1 to 4 above, converting dollars into rupees. b) Trading and Profit and Loss Account for the year ended 30th September, 2008 and Balance Sheet as on that date depicting the profitability and net position of the Branch as would appear in India for the purpose of incorporating in the main Balance Sheet. 65) Mess Ramchand & Co., Hyderabad have a branch in Delhi. The Delhi Branch deals not only in the goods from Head Office but also buys some auxiliary goods and deals in them. They, however, do not prepare any Profit & IPCC Guess Questions May 2016 Advanced Accounting 37

38 Loss Account but close all accounts to the Head Office at the end of the year and open them afresh on the basis of advice from their Head Office. The fixed assets accounts are also maintained at the Head Office. The goods from the Head Office are invoiced at selling prices to give a profit of 20 per cent on the sale price. The goods sent from the branch to Head Office are at cost. From the following prepare Branch Trading and Profit & Loss Account and Branch Assets Account in the Head Office Books. Trial Balance of the Delhi Branch as on Debit Amount Credit Amount Head office opening balance on Goods from H.O. Purchases Opening Stock (H.O. goods at invoice prices) Opening Stock of other goods Salaries Rent Office expenditure Cash on Hand Cash at Bank Sundry Debtors 15,000 50,000 20,000 4, ,000 3,000 2, ,000 15,000 1,21,000 Sales Goods to H.O. Head Office Current A/c Sundry Creditors 1,00,000 3,000 15,000 3,000 1,21,000 The Branch balances as on 1st January, 2012, were as under: Furniture Rs.5,000; Sundry Debtors Rs.9,500; Cash Rs.1,000, Creditors Rs.30,000; Stock (H.O. goods at invoice price) Rs.4,000; other goods Rs.500. The closing stock at branch of the head office goods at invoice price is Rs.3,000 and that of purchased goods at cost is Rs.1,000. Depreciation is to be provided at 10 per cent on branch assets. 13. PROBLEMS ON SCHEDULE III 66) State under which head these accounts should be classified in Balance Sheet as per Schedule III of the Companies Act: a) Share application money received in excess of issued share capital b) Share option outstanding account. c) Unpaid matured debenture and interest accrued thereon. d) Uncalled liability on shares and other partly paid investments. e) Calls unpaid. f) Intangible Assets under development. g) Money received against share warrant. h) Long term maturity of finance lease obligations. 67) Vasudha Ltd provides you the following information: 1. Raw material stock holding period: 3.5 months 2. Work-in-progress holding period: 1 month 3. Finished goods holding period: 4.5 months 4. Debtors collection period: 6 months You are required to compute the operating cycle of Vasudha Ltd. What would happen if the trade payables of the company are paid in 14 months whether these should be classified as current or non-current liability? 68) Prepare Comparative Income Statements from the following: Revenue from operations 10,00,000 15,00,000 IPCC Guess Questions May 2016 Advanced Accounting 38

39 Expenses 6,00,000 10,50,000 Other income 2,00,000 1,80,000 Income Tax 50% 50% ACCOUNTING STANDARDS AS-4 69) 70) 71) 72) Balance sheet of Anurag Trading Co. on 31 st March,2014 is given below: (NOV 15) Liabilities Amount (Rs.) Assets Amount (Rs.) Capital 50,000 Fixed Assets 69,000 Profit and Loss a/c 22,000 Stock in Trade 36,000 10% Loan 43,000 Trade Receivables 10,000 Trade Creditors 18,000 Deferred Expenditure 15,000 Additional Information: Bank 3,000 1,33,000 1,33,000 i) Remaining life of Fixed assets is 5 Years with even use. The net realizable value of fixed assets as on 31 st March, 2015 was Rs.64,000. ii) Frim s sales and purchases for the year amounted to Rs.5 lacs and Rs.4.50 lacs respectively. iii) The cost and net realizable value of the stock were Rs. 34,000 and Rs. 38,000 respectively. iv) General Expenses for the year were Rs. 16,500 v) Deferred Expenditure is normally amortized equally over 4 years starting from F.Y i.e Rs.5,000 per year. IPCC Guess Questions May 2016 Advanced Accounting 39

40 Get More Updates From vi) Out of Debtors worth Rs. 10,000, collection of Rs.4,000 depends on successful re-design of certain product already supplied to the customer. vii) Closing trade payable is Rs.10,000, which is likely to be settled at 95% viii) There is pre-payment penalty of Rs.2,000 for bank loan outstanding. Prepare profit & loss account for the year ended 31st March, 2015 by assuming it is not a Going Concern. AS-5 73) 74) 75) AS-11 76) 77) 78) 79) What are the indicators of Non- Integral Foreign Operation (NFO)? IPCC Guess Questions May 2016 Advanced Accounting Join with us 40

41 Get More Updates From 80) Explain briefly the accounting treatment needed in the following cases as per AS-11 as on Sundry Debtors include amount receivable from Umesh Rs.5,00,000 recorded at the prevailing exchange rate on the date of sales, transactions at US $1=Rs Long term loan taken from a U.S. company, amounting to Rs.60,00,000. It was recorded at US $1=Rs.55.60, taking exchange rate prevailing at the date of transaction. Us $1-Rs on AS-12 81) 82) 83) AS-16 84) 85) 86) IPCC Guess Questions May 2016 Advanced Accounting Join with us 41

42 Get More Updates From 87) Shan Builders Limited has borrowed a sum of US $ 10,00,000 at the beginning of Financial Year for its residential project at LIBOR + 3%. The interest is payable at the end of the Financial Year. At the time of Availment, exchange rate was Rs. 56 per US $ and the rate as on 31st March, 2015 was Rs. 62 per US $. If Shan Builders Limited borrowed the loan in India in Indian Rupee equivalent, the pricing of loan would have been 10.50%. Compute Borrowing Cost and exchange difference for the year ending 31st March, 2015 as per applicable Accounting Standards. (Applicable LIBOR is 1%). (NOV 15) AS-19 88) 89) 90) IPCC Guess Questions May 2016 Advanced Accounting Join with us 42

43 Get More Updates From 91) Aksat International Limited has given a machinery on lease for 36 months and its useful life is 60months. Cost & fair market value of the machinery is Rs.5,00,000. The amount will be paid in 3 equal Installments and the lessee will return the machinery to lessor at termination of lease. The unguaranteed residual value at the end of 3 years is Rs.50,000. IRR of investment is 10% and present value of annuity factor of Rs.1 due at the end of 3 years at 10% IRR is and present value of Rs.1 due at the end of 3rd year at 10% IRR is You are required to comment with reason whether the lease constitute finance lease or operating lease. If it is finance lease, calculate unearned finance income. (PM, NOV 15) AS-20 92) 93) 94) 95) What do you mean by Weighted average number of equity shares outstanding during the period and why is it required to be calculated? (PM, NOV 15) Compute weighted average number of equity shares in the following case: 1st April, th June, th January, st March, 2015 Balance of Equity Shares Equity Shares issued for cash Equity Shares bought back Balance of Equity Shares No. of shares IPCC Guess Questions May 2016 Advanced Accounting Join with us 43

44 Get More Updates From AS-26 96) 97) 98) AS-29 99) 100) IPCC Guess Questions May 2016 Advanced Accounting Join with us 44

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