(50 Marks) Department Trading Account For the year ending on In the books of Head Office (2 marks)

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Gerald Turner
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INTER CA MAY 218 Sub Accountancy & Advanced Accountancy Topic Redemption of Debentures, Investments Accounts, Departmental Accounts, Amalgamation & absorption & Internal reconstruction.

1 INTER CA MAY 218 Sub Accountancy & Advanced Accountancy Topic Redemption of Debentures, Investments Accounts, Departmental Accounts, Amalgamation & absorption & Internal reconstruction. Test Code M22 Branch: Multiple Date: (5 Marks) Note: All questions are compulsory. Question 1 (1 Marks) (i) Department Trading Account For the year ending on In the books of Head Office (2 marks) Particulars Particulars To Opening Stock 65, By Sales 3,, To Purchases 2,, By Shortage 1, 58,88 22,88 To Gross Profit c/d By Closing Stock 3,23,88 3,23,88 (ii) Memorandum stock account (for Department A) (at selling price) (4 marks) Particulars Particulars To Balance b/d 81,25 By Profit & Loss A/c 1, ( 65,+25% of 65,) (Cost of Shortage) To Purchases 2,5, By Memorandum Departmental 25 ( 2,, + 25% of Mark up A/c (Load on Shortage) 2,,) ( 1, x 25%) By Memorandum Departmental 1,2 Mark-up A/c (Mark-down on Current Purchases) By Debtors A/c (Sales) 3,, By Memorandum Departmental 6 Mark-up A/c (Mark Down on Opening Stock) By Balance c/d 28,2 3,31,25 3,31,25 (iii) Memorandum Departmental Mark-up Account (4 marks) Particulars Particulars To Memorandum Departmental 25 By Balance b/d 16,25 Stock A/c ( 81,25 x 25/125) ( 1, 25/1) To Memorandum Departmental 12 By Memorandum Departmental 5, Stock A/c Stock A/c(2,5, x 25/125) To Memorandum Departmental 6 1 Page

2 (i) Stock A/c To Gross Profit transferred to 58,88 Profit & Loss A/c To Balance c/d [( 28,2 + 4*) x 25/125-4] 5,32 66,25 66,25 *[ 1,2 5,/15,] = 4 Working Notes: Calculation of Cost of Sales (1 mark) A Sales as per Books 3,, B Add: Mark-down in opening stock (given) 6 C Add: mark-down in sales out of current Purchases ( 1,2 x 1, /15,) D Value of sales if there was no mark-down (A+B+C) 3,1,4 E Less: Gross Profit (25/125 of 3,1,4) subject to Mark Down (6,28 ( 6 + 8) ) F Cost of sales (D-E) 2,41,12 (ii) Calculation of Closing Stock (1 mark) A Opening Stock 65, B Add: Purchases 2,, C Less: Cost of Sales (2,41,12) (1, D Less: Shortage ) E Closing Stock (A+B-C-D) 22,88 8 Question 2 (16 Marks) In the books of R Ltd. Ledger Accounts Capital Reduction Account (3 marks) To Intangibles (68, 48,) 2, By 8% Cumulative preference shares capital account 1,6, To Plant and equipment account 1,, By Equity share capital account 4,8, (2,4, 1,4,) Freehol To Deferred revenue 48, By d premises account 2,4, expenditure account (3,8, 1,4,) To Profit and loss account 4,4, By Stock account 2, To Investment account (W.N. 2) 11,5 (2,5, 2,48,) 2 Page

3 To Provision for doubtful debts 6,4 To Capital reserve account (Bal Fig) 2,56,1 8,82, 8,82, Equity Share Capital Account (2 marks) To Capital reduction account 4,8, By Balance b/d 4,8, To Balance c/d 6,6, By Equity share final call 1,6, account (64, 2.5) 11,4, By Loan from Director s account (6, / 2.5 = 24, Equity Shares By Bank account (Further issue of 64, +24, Equity Shares: 2 for every 1 share held = 1,76, 2.5 each) 6, 4,4, 11,4, 8% Cumulative Preference Share Capital Account(1 marks) Cumulative To 1% preference 4,8, By Balance b/d share capital account To Capital reduction account 1,6, 6,4, 6,4, 6,4, Bank Account (1 marks) To Equity share final call account 1,6, By Balance b/d (overdraft) To Equity share capital account 4,4, By Balance c/d preferenc To 1% Cumulative e share capital account 1,2, 7,2, To Balance b/d 5,12, 2,8, 5,12, 7,2, 1% Cumulative Preferences Share Capital Account (1 marks) To Balance c/d 6,, By 8% Cumulative preference 4,8, 3 Page

4 By share capital account Bank ( 1 for every 4 pref shares held = 64, /4 = each) 1,2, 6,, 6,, By Balance b/d 6,, R. Ltd., (and Reduced) Balance Sheet as at 1 April, 28 ( 2 marks) Particulars Note No I. Equity and Liabilities (1) Shareholder's Funds (a) Share Capital 1 12,6, (b) Reserves and Surplus 2 2,56,1 (2) Current Liabilities 3 4,4, Total 19,56,1 II. Assets (1) Non-current assets (a) Fixed assets Tangible assets 4 5,2, Intangible assets 48, (b) Non-current investments 5 3,12,5 (2) Current assets (a) Inventories 2,5, (b) Trade receivables 6 3,13,6 (c) Cash and cash equivalents 5,12, Notes to Accounts (3 marks) Total 19,56,1 1. Share Capital Authorised 14,, Issued: 8, 1% Cumulative preference shares of 7.5 each 6,, 2,64, equity shares of 2.5 each 6,6, 12,6, 2. Reserve and Surplus Capital Reserve 2,56,1 3. Current liability creditors 4,4, 4. Fixed Assets Freehold premises 3,8, 4 Page

5 Plant and equipment 5. Non Current Investments 1,4, 5,2, Investment in Q Ltd., (W.N.1) 3,12,5 6. Trade receivables Debtors less provision for doubtful debts (3,2, 6,4) 3,13,6 Working Notes: (1 MARK) 1. Valuation of investments in shares of Q Ltd., = 2,5, 15 = 3,12,5 12%1 2. Reduction in the value of investment in shares of Q Ltd. Question 3 (8 Marks) 3,24, 3,12,5 = 11,5. Points for Considerations Sale Proceeds of Rights is to be credited to P&L A/c and not investment A/c. Reduce the Dividend on Shares acquired on 1 st September 217 from the cost of acquisition, to arrive at the Net Cost of Shares as on 31 st March 218, since it is Pre-Acquisition Dividend. Working Notes Particulars Computation (4 marks) Result 1. No. of Bonus Shares (4, + 1,) + 5 x 2 2, shares 2. no. of Rights Shares (4, + 1, + 2,) x 2, shares eligible 3. No. of Rights Shares 2, x 1 2 8, Renounced 4. No. of Rights Shares 2, 1, = 1, Shares at % Premium 12,5 subscribed 5. Total Dividend Received On OB + Fresh Purc. = 5, Shares x 1 x 2% 1, (a) Dividend on OB Shares 4, x 1 x 2% 8, taken to P&L (b) Dividend on Shares pure. On , x 1 x 2% is adjusted in Investment A/c. 2, 6. Cost of Shares sold on (6, + 14, + 12,5 2,) x, 42,25, Net Sale Proceeds for sale 8, shares x x ( 1 + 4) 56, on Profit on Sale of Shares on Net Sale Proceeds 56, less Cost 42,25 13,75 Investment (Equity Shares in Akash Ltd) Account (4 marks) Date Particulars Shares Nos. Date Particulars Shares Nos To balance b/d at 15 4, 6, By Bank (Dvd) (WN 5b) To Bank at 14 (1+4) 1, 14, To Bonus (WN 1) 2, By Bank (Sale of Shares) 4, To Bank (Rights) (WN4) 1, 12,5 (WN 7) To P&L Pft Lfr (WN 8) - 13, By balance c/d (Note) 4, 2, 56, 42,25 5 Page

6 Total 8, 1,,25 Total 8, 1,7,25 Note: 5% of the Shareholdings are sold, for which cost is 42,25 as per WN 6. Hence, Cost of Balance 5% Shareholdings at period end is also 42,25. Market Price = 4,5 x 13 = 58,5. Hence, Carrying Amount of current investment = Cost of Market Price, whichever is lower = 42,25. Question 4 (16 Marks) 6 Page

7 2 marks (all other entries will carry ½ mark) Balance Sheet of Kanak Ltd. as at (3 mark) Particulars Note No Amount() I. Equity and Liabilities 7 Page

8 (1) Shareholder's Funds (a) Share Capital 1 77,1, (b) Reserves and Surplus 2 2,72,7 (2) Non-current Liabilities (a) Long-term borrowings - 12% Debentures 12,, (3) Current Liabilities (a) Trade payables 17,25, Total 1,27,7,7 II. Assets (1) Non-current assets (a) Fixed assets (i) Tangible assets 58,8, (2) Current assets (a) Inventories 31,2, (b) Trade receivables 3,9, (c) Cash and cash equivalents 6,17,7 Total 1,27,7,7 2,4, is the balancing figure adjusted to general reserve A/c as per AS 14 Accounting for Amalgamation. Notes to Accounts 1 Share Capital (1/2 mark) Equity Share Capital 52,5, 9% Preference share capital 24,6, 2 Reserves and Surplus (1 mark) 77,1, Profit and Loss A/c 45, General Reserve Share Capital of Ronak Ltd. (Equity + Preference) 42,, Less: Share Capital issued by Kanak Ltd. 39,6, General reserve (resulted due to absorption) 2,4, Add: General reserve of Ronak Ltd. 5,1, General reserve of Kanak Ltd. 5,4, 12,9, Capital Reserve 7,37,7 Working Notes: (3 marks) 2,72,7 1. Arrear dividend to Preference Shareholders Preference Share Capital 9% will yield dividend of 1,35, per year and for 3 years = 4,5,. Out of this only 1% is paid and the balance is waived off. Hence, amount paid = 4,5. 2. Profit on redemption of own debentures 8 Page

9 Own Debentures with Nominal Value of 2,4, sold for 98 per deb = 2,4, x 98/1 = 2,35,2. Book Value = 5,76,/ 6,, X 2,4, = 2,3,4. Profit on own debentures sold = 2,35,2 2,3,4 = 4,8 Balance of Own Debentures = 5,76, 2,3,4 = 3,45,6 which are cancelled 3. Purchase Consideration Equity share capital 3, x 5/5 x 1 = 3,, 9% Preference share capital 12, x 4/5 x 1 = 9,6, 39,6, ************ 9 Page

(50 Marks) Date Particulars Nominal Interest Amount Date Particulars Nominal Interest Amount

(50 Marks) Date Particulars Nominal Interest Amount Date Particulars Nominal Interest Amount Note: All questions are compulsory. INTER CA MAY 2018 Sub: Advanced Accounts & Accounts Topics: Average Due Date, Self-Balancing Ledger, Investment Accounts, Underwriters Liability, Insurance Company Final