SHREE GURUKRIPA S INSTITUTE OF MANAGEMENT

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(1) SHREE GURUKRIPA S INSTITUTE OF MANAGEMENT Roll No. Total No. of Printed Pages 9 Total No. of Questions 7 Maximum Marks 100 Time Allowed 3 Hours ACC I MOD 01 15 Question No.

1 (1) SHREE GURUKRIPA S INSTITUTE OF MANAGEMENT Roll No. Total No. of Printed Pages 9 Total No. of Questions 7 Maximum Marks 100 Time Allowed 3 Hours ACC I MOD Question No.1 is compulsory Answer any five questions from the remaining six questions Working Notes should form part of the answer 1. Answer the Following Questions: 4 5 = 20 Marks (a) Digambar Ltd acquired a Machinery for Rs`25,00,000 five years ago. Depreciation was charged at 10% on SLM basis, for a useful life of ten years. Two years after acquisition, the Company revalued the Machinery to Rs`30,00,000 and created a Revaluation Reserve to that extent. Depreciation was provided on the revalued amount over the balance useful life of eight years. The Machinery was sold in the current year for Rs`11,25,000. Give the accounting treatment for the above in the Company s accounts. What will be the treatment, if the Machinery fetched only R`4,25,000 now? (b) The Board of Directors of Himadri Ltd decided on 31 st March 2012 to increase the sale price of certain items retrospectively from In view of this price revision with retrospective effect, the Company has to receive Rs`15 Lakhs from its customers in respect of sales made from to (i.e. 15 months period) and the Accountant cannot make up his mind whether to include Rs`15 Lakhs in the Sales for Comment on the accounting treatment. (c) An enterprise sold an asset (Book Value R`50,000) for Rs`36,000. The loss of R`14,000 was debited to the P & L Account. Is this transaction an Operating Activity? (d) HP is a leading distributor of Petrol. A detail Inventory of Petrol in hand is taken when the books are closed at the end of each month. At the end of the month, the following information is available:

2 (2) Sales Rs`47,25,000, General Overheads Cost Rs`1,25,000, Inventory at beginning `1,00,000 Litres at Rs`15 per Litre. Purchases: (a) June 1 Two Lakh Litres at 14.25; (b) June 30 One Lakh Litres at 15.15; (c) Closing Inventory 1.30 Lakh Litres Compute the following by the FIFO as per AS 2: (a) Value of Inventory on June 30. (b) Amount of Cost of goods sold for June. (c) Profit / Loss for the month of June Marks The following is the Balance Sheet of Ajit, Bhola and Chari who were Partners as on 31 st March. Liabilities ` Assets ` Ajit s Capital 33,600 Plant and Machinery 49,000 Bhola s Capital 25,200 Furniture 4,800 Chari s Capital 12,000 Stock in Trade 22,800 15% Mortgage Loan 16,600 Sundry Debtors 21,600 Sundry Creditors 12,000 Cash in Hand 1,000 Cash at Bank 200 Total 99,400 Total 99,400 They shared Profits and Losses in the ratio of 2:2:1. On the above date, Chari retired from the Firm and claimed his share of Secret Reserve / Profit arising out of the following: 1. During the year ended 31 st March, purchase of Machinery at a cost of Rs`10,000 was charged to Purchase Account and Rs`600 Erection Charges was debited to Machinery Repairs Account. (Depreciation is charged at 10% p.a.) 2. Rs.600 received from Mr. Puri on 30 th March towards Rent of the Property sublet was credited to his Personal Account so as to reduce his Debit Balance from Rs`1,000 to R`400 Debit on 31 st March. 3. Interest on Mortgage Loan was paid in advance upto 31 st May & the whole amount was charged to Interest Account during the year ended 31 st March. 4. After rectifying the above errors, it was mutually decided as under

3 (3) (a) The Goodwill of the Firm be valued at 5 times the Average Profits of the last 3 years. Such profits should be Correct Profits and not the Book Profits. The Book Profits for the last 3 financial years were: Rs`18,380, R`32,000, R`7,471. (b) Plant and Machinery to be depreciated by 10% and Provision for Bad Debts be maintained at 5% on Debtors. (c) The Goodwill should not appear in the books. (d) There is a liability for Rs`501 for Bills Discounted. This has to be accounted for. (e) Chari should be paid half of his dues in Cash which shall be brought in by Ajit and Bhola in their Profit Sharing Ratio, and the other half shall be left in the business as Chari s Loan fetching an interest of 18% p.a. 5. On 31 st March itself, the Firm admitted Vari as new partner. He takes 1/4 th of share of profits. The Loan of Chari should be transferred to Vari A/c on admission. Apart from this, Vari brings `50,000 as further Capital into business. Prepare P&L Adjustment A/c, Revaluation A/c, Capital A/c of Partners, and Balance Sheet of the Firm, after Vari s admission Marks The following is the Balance Sheet of Arudra Ltd as at 31 st March: Liabilities ` Assets ` 8,000 Equity Shares of Rs.100 each 8,00,000 Building 3,40,000 10% Debentures 4,00,000 Machinery 6,40,000 Loan from Directors 1,60,000 Stock 2,20,000 Creditors 3,20,000 Debtors 2,60,000 General Reserve 80,000 Bank 1,36,000 Goodwill 1,30,000 Misc. Expenditure 34,000 Total 17,60,000 Total 17,60,000 Bhagya Ltd agreed to absorb Arudra Ltd on the following terms and conditions: (a) Bhagya Ltd would take over all Assets, except Bank Balance, at their Book Values less 10%. Goodwill is to be valued at 4 years purchase of Super Profits, assuming that the Normal Rate of Return be 8% on the combined amount of Share Capital and General Reserve. (b) Bhagya Ltd is to take over Creditors at Book Value.

4 (4) (c) The Purchase Consideration is to be paid in cash to the extent of Rs.6,00,000 and the balance in fully paid Equity Shares of Rs`100 each at `125 per Share. The Average Profit is R`1,24,400. The Liquidation Expenses amounted to Rs`16,000. Bhagya Ltd sold prior to 31 st March, goods costing `1,20,000 to Arudra Ltd for R`1,60,000. R`1,00,000 worth of goods are still in Stock of Arudra Ltd on 31 st March. Creditors of Arudra Ltd include `40,000 still due to Bhagya Ltd. Further, Arudra Ltd also sold some goods costing `50,000 at a profit margin of 20% on cost. Such goods are still lying in the Closing Stock of Bhagya Ltd. Write the Journal Entries in the books of Bhagya Ltd and prepare the Balance Sheet Extract of Bhagya Ltd as at 1 st April, after the takeover. 4. (a) 12 Marks Hamsa Transporters Ltd purchased from Delhi Motors 3 Tempos costing `50,000 each on the Hire Purchase System on Payment was to be made `30,000 down and the remainder in 3 equal annual instalments payable on , and together with interest at 9% p.a. Hamsa Transporters Ltd writes off depreciation at 20% on the diminishing balance. It paid the instalment due at the end of the first year i.e but could not pay the next on Delhi Motors agreed to leave one Tempo with the purchaser on adjusting the value of other 2 Tempos against the amount due on The Tempos were valued on the basis of 30% depreciation annually. Show the accounts in the books of Hamsa Transporters Ltd for the years 2014, 2015 and (b) What are the disadvantages of using ERP in Accounting? 4 Marks 5. (a) 10 Marks On 1 st April 2011, Hari Ltd has 15,000 Equity Shares of Vaikuntam Ltd, at a Book Value of Rs.15 per Share (Face Value `10 per Share). On 1 st June 2011, Hari Ltd acquired 5,000 Equity Shares of Vaikuntam Ltd, for `1,00,000 on cum rights basis. Vaikuntam Ltd announced a Bonus and Rights Issue.

5 (5) (a) Bonus was declared, at the rate of one Equity Share for every five Shares held, on 1 st July (b) Rights Shares are to be issued to the existing Shareholders on 1 st September The Company will issue one Right Share for every 6 Shares at 20% Premium. No dividend was payable on these Shares. (c) Dividend for year ended was declared by Vaikuntam Ltd at 20%, and received by Hari Ltd on 31 st October (d) Hari Ltd (i) Took up half the Rights Issue, and (ii) Sold the remaining rights for Rs.8 per Share. (e) Hari Ltd sold half of its share holdings on 1 st January 2012 at `16.50 per Share, Brokerage being 1%. Prepare Investment A/c of Hari Ltd for the year ended 31 st March 2012, assuming the Shares are valued at Average Cost. (b) 6 Marks The Balance Sheet of Harihara Ltd as at 31 st March, having Net Assets `17,00,000 contained the following Liabilities ` Share Capital: Authorised: 1,50,000 Equity Shares of `10 each 15,00,000 Issued, Subscribed & Paid up: 80,000 Equity Shares of `7.50 each called 6,00,000 up & paid up Reserves: Capital Redemption Reserve 1,50,000 Plant Revaluation Reserve 20,000 Securities Premium 1,50,000 Development Rebate Reserve 2,30,000 Investment Allowance Reserve 2,50,000 General Reserve 3,00,000 Total 17,00,000 The Company wanted to issue Bonus Shares to its Shareholders at the rate of One Share for every Two Shares held. Necessary resolutions were passed, requisite legal requirements were complied with. You are required to give effect to the proposal by passing Journal Entries in the books of the Company.

6 (6) Marks The following is the Balance Sheet of Easwar, a Proprietor, as at the beginning of a financial year. Liabilities ` Assets ` Capital Account 2,52,500 Machinery 1,20,000 Sundry Creditors for Purchases 45,000 Furniture 20,000 Stock 33,000 Debtors 1,00,000 Cash at Bank 16,500 Cash in Hand 8,000 Total 2,97,500 Total 2,97,500 Riots occurred and fire broke out on the evening of 31 st March (year end) destroying the books of account and Furniture. The Cashier was grievously hurt and the Cash available in the Cash Box was stolen. Easwar gives you the following information 1. Sales are effected as 25% for Cash and the balance on Credit. His Total Sales for the year ended 31 st March were 20% higher than the previous year. All the Sales and Purchases of Goods were evenly spread throughout the year (as also in the last year). 2. Terms of Credit: Debtors 2 Months, Creditors 1 Month. 3. Stock Level was maintained at R`33,000 all throughout the year. 4. A steady Gross Profit Rate of 25% on the Turnover was maintained throughout. Creditors are paid by Cheque only, except for Cash Purchase of R`50,000. His private records and the Bank Pass Book disclose the following transactions for the year (a) Miscellaneous Business Expenses: R`1,57,500 (including `5,000 paid by Cheque and `7,500 was due as at the year end) (b) Repairs: R`3,500 (paid by Cash) (c) Addition to Machinery: `60,000 (paid by Cheque) (d) Private Drawings: `30,000 (paid by Cash) (e) Traveling Expenses: `18,000 (paid by Cash)

7 (7) (f) Introduction of Additional Capital by depositing into the Bank: `5,000 (g) Collection from Debtors was all through Cheques. (h) Depreciation on Machinery is to be provided at 15% on the Closing Book value. (i) The Cash Stolen is to be charged to the Profit and Loss A/c. (j) Loss of Furniture is to be adjusted from the Capital A/c. Prepare Trading, Profit and Loss A/c for the year ended 31 st March and Balance Sheet as on that date. Make appropriate assumptions wherever necessary. All workings should form part of your answer. 7. Answer any four of the following:- 4 4 = 16 Marks (a) From the following Profit and Loss Account (draft) of Swati Ltd. for the year ended 31 st March 2011, calculate whether the commission payable to the Managing Director and other Part time Directors of the Company, whose commission was 5% and 2% respectively on the profit of the company before charging their commission is permissible as per the Companies Act or not. Particulars ` Particulars ` To Salaries and Wages 20,00,000 By Gross Profit 51,00,000 To Rent, Rates and Taxes 4,50,000 By Bounties and Subsidies received 1,00,000 from the Government To Provision for Repairs 60,000 By Profit on Sale of Fixed Assets 80,000 To Miscellaneous Expenses 1,40,000 By Premium on Issue of Shares 20,000 To Workmen Compensation By Profit on Sale of Forfeited including Rs.10,000 Legal 25,000 Shares Compensation 10,000 To Interest on Bank Overdraft 40,000 To Interest on Debentures 50,000 To Director s Fee 18,000 To Donation to Charitable Fund 25,000 To Depreciation on Fixed Assets 1,00,000 To Loss on Sale of Investments 25,000 To Reserve for Redemption of Redeemable Preference Shares 1,50,000 To Development Rebate Reserve 1,00,000 To Provision for Taxation 10,00,000 To balance c/d 11,27,000 Total 53,10,000 Total 53,10,000

8 (8) Note: ` (1) Original Cost of the Fixed Assets sold 1,90,000 Written Down Value of the Fixed Assets sold 1,40,000 Sale Proceeds of the Fixed Assets 2,20,000 (2) Depreciation allowable as per Schedule XIV to the Companies Act, ,000 (3) Actual Repairs for the year 40,000 (b) From the following Summary Cash Account of X Ltd., prepare Cash Flow Statement for the year ended 31 st March 2011 in accordance with AS 3 (Revised) using the Direct Method. The Company does not have any Cash Equivalents. Summary Cash Account for the year ended Particulars Rs`000 s Particulars R`000 s To Balance on By Payment to Suppliers 2,000 To Issue of Equity Shares 300 By Purchase of Fixed Assets 200 To Receipts from Customers 2,800 By Overhead expense 200 To Sale of Fixed Assets 100 By Wages and Salaries 100 By Taxation 250 By Dividend 50 By Repayment of Bank Loan 300 By Balance on Total 3,250 Total 3,250 (c) A business maintains accounts on self balancing system for Customers and Suppliers. You are required to pass journal entries for Control A/c purposes in respect of the following transactions for September 1. Bills of Exchange for `3,00,000 drawn on Customers against Credit Sales, 2. Bills of Exchange for `2,50,000 accepted by Customers earlier now endorsed to Suppliers, 3. An endorsed Bill of Exchange for `13,000 dishonoured, Noting Charges `150 incurred by Holder.

9 (9) (d) The following are the transactions that took place between Rohan & Sunil during the half year ended 30 th June 2011: ` Balance due to Rohan by Sunil on 1 January, ,010 Goods sold by Rohan to Sunil on 7 January, ,430 Goods purchased by Rohan from Sunil on 16 February, ,480 Goods returned by Rohan to Sunil on 18 February, 2011 (out of the purcha ses of February, 2011) Goods sold by Sunil to Rohan on 24 March, ,560 Bill accepted by Rohan at 3 months on 22 April, ,500 Cash paid by Rohan to Sunil on 29 April, ,500 Goods sold by Rohan to Sunil on 17 May, ,710 Goods sold by Sunil to Rohan on 22 June, ,280 Draw up an account current to be rendered by Sunil to Rohan (by interest method) charging 10% per annum. (e) An amount of `9,90,000 was incurred on a contract work upto 31 st March. Certificates have been received to date to the value of `12,00,000 against which `10,80,000 has been received in cash. The cost of work done but not certified amounted to R`22,500. It is estimated that by spending an additional amount of `60,000 (including provision for contingencies) the work can be completed in all respects in another two months. The agreed contract price of work is `12,50,000. Compute a conservative estimate of the profit to be taken to the P&L A/c as per AS 7.

Test Series: September, 2014

MOCK TEST PAPER 1 INTERMEDIATE (IPC) : GROUP I PAPER 1: ACCOUNTING Question No. 1 is compulsory. Answer any five questions from the remaining six questions. Test Series: September, 2014 Wherever necessary