Trending ▼   ResFinder  

CA IPCC : Revision Test Paper (with Answers) - ACCOUNTING Nov 2012

42 pages, 31 questions, 0 questions with responses, 0 total responses,    0    0
CA IPCC
Tilak Vidyalaya Higher Secondary School (TVHSS), Kallidaikurichi
+Fave Message
ProfileTimelineUploadsQ & A
 Home > ca_ipcc >

Instantly get Model Answers to questions on this ResPaper. Try now!
NEW ResPaper Exclusive!

Formatting page ...

PAPER 1 : ACCOUNTING PART I : ANNOUNCEMENTS STATING APPLICABILITY & NON-APPLICABILITY FOR NOVEMBER, 2012 EXAMINATION A. Applicable for November, 2012 examination Schedule VI revised by the Ministry of Corporate Affairs The Ministry of Corporate Affairs (MCA) has revised Schedule VI to the Companies Act 1956 on the 28th February, 2011 pertaining to the preparation of Balance Sheet and Profit and Loss Account under the Companies Act, 1956. This revised Schedule VI has been framed as per the existing non-converged Indian Accounting Standards notified under the Companies (Accounting Standards), Rules, 2006. The Revised Schedule VI shall come into force for the Balance Sheet and Profit and Loss Account to be prepared for the financial year commencing on or after 1.4.2011. B. Not applicable for November 2012 examination Ind ASs issued by the Ministry of Corporate Affairs The MCA has hosted on its website 35 converged Indian Accounting Standards (Ind AS) without announcing the applicability date. These are the standards which are being converged by eliminating the differences of the Indian Accounting Standards vis- -vis IFRS. These standards shall be applied for all companies falling under Phase I to Phase III as prescribed under the roadmap issued by the core group. These Ind ASs are not applicable for the students appearing in November, 2012 Examination. PART II : QUESTIONS AND ANSWERS QUESTIONS Preparation of Financial Statements of Companies P&L A/c 1. The summarized financial position of A Limited at 31st December, 2012 was as follows: Liabilities Authorised, Issued and Subscribed Capital 40,000, 5 % Redeemable Preference shares of ` 10 each, fully paid ` Assets 4,00,000 20,000 Equity shares of ` 10 each, fully paid Securities Premium Account 2,00,000 Profit and Loss Account Sundry Liabilities 2,80,000 2,10,000 8,40,000 3,00,000 50,000 11,40,000 The Institute of Chartered Accountants of India Assets Cash and Bank ` 11,40,000 2 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 As per the terms of issue of the Preference Shares these were redeemable at a premium of 5 % on 1st February, 2013 and it was decided to arrange this as far as possible out of the company s resources subject to leaving a balance of ` 50,000 in the credit of the Profit and Loss Account. It was also decided to raise the balance amount by issue of 17,000 Equity Shares of ` 10 each at a premium of ` 2.50 per share. You are required to prepare the necessary Ledger Accounts giving effect to the above arrangements in the company s books. Journal Entries are not required. Profit or Loss Prior to Incorporation 2. Aman Ltd. was incorporated on 1.7.2011 and it took over the business of a vendor w.e.f. 1.4.2011. Following information was made available for the year ended 31.3.2012: Gross profit ` 98,000, Commission ` 2,625, Advertisement ` 5,250, Discount ` 350, Directors Fees ` 9,000, Salaries ` 18,000, Depreciation ` 2,800. Insurance ` 600, Preliminary Expenses ` 700, Rent and Taxes ` 3,000, Bad Debts ` 1,250, Interest to vendor (upto 1.10.2011) ` 2,000, Audit Fee ` 2,000 and Bad Debts recovered (on 1.5.2011) ` 500. Following additional information was provided: 1. Average monthly turnover from September onwards was double than that of average monthly turnover of the first four months. However, in August, 2011, the turnover was 150% of the turnover in the following month. 2. Rent for the first three months was paid @ ` 20 per month and thereafter, it was increased by ` 50 per month. 3. Bad debts for the period from September 1, 2011 to March 31, 2012 amount to ` 350 only. 4. Audit fee was allocated on time basis. You are required to find out the amount of profit for pre and post incorporation period, clearly showing, the basis of allocation. Accounting for Issue of Bonus Shares 3. (a) Following is the extract of the Balance Sheet of Floora Ltd., a listed company as at March 31, 2012: ` Authorised Capital: 40,000, 12% Preference shares of ` 10 each 4,00,000, Equity shares of ` 10 each 4,00,000 40,00,000 44,00,000 Issued and Subscribed Capital: The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING 3 3,20,000 32,000, 12% Preference shares of ` 10 each fully paid 36,00,000 3,60,000 Equity shares of ` 10 each fully paid-up Reserves and Surplus: Revaluation reserves 80,000 General reserve Capital reserve 5,00,000 3,00,000 Securities premium 1,00,000 Profit & Loss (Cr.) 7,00,000 Secured Loan: 20,00,000 12% Partly convertible debentures @ ` 10 each On April 30, 2012, the company decided to capitalise its reserves by way of Bonus at the rate 1:4. Securities premium of ` 1,00,000 includes a premium of ` 20,000 for shares issued pursuant to a scheme of amalgamation. Capital reserve includes ` 1,60,000, being profit on sale of Plant and Machinery. 20% of 12% Debentures are convertible into Equity shares of ` 10 each fully paid on April 30, 2012. State with reason on the following: (i) Whether Revaluation Reserve be capitalised? (ii) How much amount of Capital reserve can be capitalised? (iii) How much amount of Securities Premium A/c can be capitalised? (iv) Are the convertible debentureholders entitled to Bonus shares? (v) The minimum number of Equity shares to be issued by way of Bonus as on 30th April, 2012. (vi) What should be the minimum amount of authorised capital, if the decision to issue Bonus shares gets implemented? Cash Flow Statement (b) From the following Balance Sheets of Mr. Kunaal, prepare a Cash Flow Statement as per AS 3 for the year ended 31.3.2012: Balance Sheets of Mr. Kunaal As on 1.4.2011 As on 31.3.2012 ` ` Kunaal s Capital Account 5,00,000 6,12,000 Sundry creditors 1,60,000 1,76,000 Liabilities: The Institute of Chartered Accountants of India 4 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Mrs. Kunaal s loan 1,00,000 -- Long term loan from bank 1,60,000 2,00,000 9,20,000 9,88,000 Land 3,00,000 4,40,000 Plant and Machinery Stock 3,20,000 1,40,000 2,20,000 1,00,000 Debtors 1,20,000 2,00,000 40,000 28,000 9,20,000 9,88,000 Assets: Cash Additional information: A machine costing ` 40,000 (accumulated depreciation there on ` 12,000) was sold for ` 20,000. The provision for depreciation on 1.4.2011 was ` 1,00,000 and on 31.3.2012 was ` 1,60,000. The net profit for the year ended on 31.3.2012 was ` 1,80,000. Amalgamation of Companies 4. New Express Ltd. and Old Express Ltd. were in competing business. They decided to form a new company named New Old Express Ltd. The summarized balance sheets of both the companies were as under: New Express Ltd Balance Sheet as at 31st December, 2012 ` 20,000 Equity shares of ` 100 each Provident fund Sundry creditors Insurance reserve 20,00,000 1,00,000 60,000 1,00,000 22,60,000 ` Buildings Machinery Stock Sundry debtors Cash at bank Cash in hand 10,00,000 4,00,000 3,00,000 2,40,000 2,20,000 1,00,000 22,60,000 Old Express Ltd. Balance Sheet as at 31st December, 2012 ` 10,000 Equity shares of ` 100 each Employees profit sharing account Sundry creditors The Institute of Chartered Accountants of India 10,00,000 Goodwill 60,000 Buildings 40,000 Machinery ` 1,00,000 6,00,000 5,00,000 PAPER 1 : ACCOUNTING Reserve account Surplus 1,00,000 Stock 1,00,000 Sundry debtors Cash at bank Cash in hand 13,00,000 5 40,000 40,000 10,000 10,000 13,00,000 The assets and liabilities of both the companies were taken over by the new company at their book values. The companies were allotted equity shares of ` 100 each in lieu of purchase consideration. Prepare opening balance sheet of New Old Express Ltd. Internal Reconstruction of a Company 5. The following is the Balance sheet of Mohan Ltd. as on 31.3.2012: Liabilities ` Assets ` 1,25,00,000 Equity shares of ` 100 each 1,00,00,000 Fixed assets 12% cumulative preference Investments (Market value 50,00,000 ` 9,50,000) 10,00,000 shares of ` 100 each 40,00,000 Current assets 1,00,00,000 10% debentures of ` 100 each Sundry creditors 50,00,000 P & L A/c 6,00,000 Provision for taxation 1,00,000 2,41,00,000 2,41,00,000 The following scheme of reorganization is sanctioned: (i) All the existing equity shares are reduced to ` 40 each. (ii) All preference shares are reduced to ` 60 each. (iii) The rate of interest on debentures is increased to 12%. The debenture holders surrender their existing debentures of ` 100 each and exchange the same for fresh debentures of ` 70 each for every debenture held by them. (iv) One of the creditors of the company to whom the company owes ` 20,00,000 decides to forgo 40% of his claim. He is allotted 30,000 equity shares of ` 40 each in full satisfaction of his claim. (v) Fixed assets are to be written down by 30%. (vi) Current assets are to be revalued at ` 45,00,000. (vii) The taxation liability of the company is settled at ` 1,50,000. (viii) Investments to be brought to their market value. Pass Journal entries and show the Balance sheet of the company after giving effect to the above. The Institute of Chartered Accountants of India 6 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Average Due Date 6. Energy purchases goods on credit. His due dates for payments were as under: Transaction Date March 5 April 15 May 10 June 5 ` 300 200 275 400 Due Date April 08 May 18 June 13 July 08 Calculate Average due date. Account Current 7. Following transactions took place between L and M during the month of April, 2012: Date 1.4.2012 7.4.2012 10.4.2012 10.4.2012 12.4.2012 15.4.2012 20.4.2012 20.4.2012 Particulars Amount payable by L to M Received acceptance of L to M for 2 months Bills receivable (accepted by M) on 7.2.2012 is honoured on this due date L sold goods to M (due date 10.5.2012) L received cheque from M (due date 15.5.2012) M sold goods to L (due date 15.5.2012) L returned goods sold by M on 15.4.2012 Bill accepted by M is dishonoured on this due date ` 10,000 5,000 10,000 15,000 7,500 6,000 1,000 5,000 Prepare the M s account in the books of L for the month of April, 2012, taking interest into account @18% p.a. Self Balancing Ledgers 8. On 1st April, 2012 the details of the balances owed by customers were as following:- ` Om Ram (Considered to be 60% bad; adequate provision maintained) Sohan Others Less: Advance by Kamal 1,500 2,100 1,800 35,600 41,000 2,000 39,000 Sales during the month totaled ` 1,55,500 including ` 1,11,400 as cash sales; of the credit sale, a sale of ` 2,600 was to Kamal. Om returned goods to the extent of ` 500 and sent a bill receivable accepted by A for the balance. A sum of ` 450 was received The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING 7 from Ram and the balance was written off. On instructions from B, Sohan s balance was transferred to B s account in the Creditors Ledger. A s acceptance as dishonoured and noting charges were ` 10. R sent an advance of ` 1,800 for supply of goods. Out of the amount due from others on April 1, 2012 a sum of ` 27,300 was received; the customers had earned 2 % discount on the amount paid. Similarly, out of the sales in April, a sum of ` 9,750 had been received, earning discount at the same rate. C who owed ` 1,100 and R who owed ` 800 turned doubtful; a provision of 50% of the amounts due was created. All other debts were considered good. Prepare Total Debtors account for April 2012. Accounting for Not-For-Profit Organisations 9. The Accountant of Strong Club furnishes you the following receipts and payments account for the year ending 30th September, 2012: Receipts Amount Payments Amount ` Opening balance: Cash and bank Subscription Sale of old newspapers Entertainment fees Bank interest Bar receipts ` Honoraria to secretary Misc. expenses Rates and taxes Groundman s wages Printing and stationary Telephone expenses Payment for bar purchases Repairs New car (Less sale proceeds of old car of ` 6,000 ) Closing balance: Cash and bank 9,600 3,060 2,520 1,680 940 4,780 11,540 640 25,200 1.10.2011 30.9.2012 ` ` 2,400 1,960 180 60 Club premises at cost 58,000 - Depreciation on club premises provided so far 37,600 - Car at cost 24,380 - 16,760 21,420 4,800 8,540 460 14,900 _____ 66,880 6,920 66,880 Additional informations: Subscription due (not received) Cheques issued, but not presented for payment of printing The Institute of Chartered Accountants of India 8 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Depreciation on car 20,580 - Value of Bar stock 1,420 1,740 Amount unpaid for bar purchases 1,180 860 Depreciation is to be provided @ 5% p.a. on the written down value of the club premises and @ 15% p.a. on car for the whole year. You are required to prepare an income and expenditure account of Strong Club for the year ending 30th September, 2012 and balance sheet as on that date. Accounts from Incomplete Records 10. Shri Ashok furnishes you with the following information relating to his business : (a) Assets and liabilities as on 1.1.2012 31.12.2012 ` ` Furniture (w.d.v) 6,000 6,350 Stock at cost Sundry Debtors 8,000 16,000 7,000 ? Sundry Creditors Prepaid expenses 11,000 600 15,000 700 2,000 1,200 1,800 625 Unpaid expenses Cash in hand and at bank (b) Receipts and payments during 2012: Collections from debtors, after allowing discount of ` 1,500 amounted to ` 58,500. Collections on discounting of bills of exchange, after deduction of discount of ` 125 by the bank, totalled to ` 6,125. Creditors of ` 40,000 were paid ` 39,200 in full settlement of their dues. Payment for freight inwards ` 3,000. Amount withdrawn for personal use ` 7,000. Payment for office furniture ` 1,000. Investment carrying annual interest of 4% was purchased at ` 96 on 1st July, 2012 and payment made there for. Expenses including salaries paid ` 14,500. Miscellaneous receipts ` 500. (c) Bills of exchange drawn on and accepted by customers during the year amounted to ` 10,000. Of these, bills of exchange of ` 2,000 were endorsed in favour of creditors. An endorsed bill of exchange of 400 was dishonoured. (d) Goods costing ` 900 were used as advertising materials. (e) Goods are invariably sold to show a gross profit of 331/3% on sales. The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING (f) 9 Difference in cash book, if any, is to be treated as further drawing or introduction by Shri Ashok. (g) Provide at 2.5% for doubtful debts on closing debtors. Shri Ashok asks you to prepare Trading and Profit and Loss A/c for the year ended 31st December, 2012 and the balance sheet as on that date. Hire Purchase Instalment Payment System 11. Accent Ltd. has a hire-purchase department which fixes hire-purchase price by adding 40% to the cost of the goods. The following additional information is provided to you : ` On 1st April, 2011 : Goods out on hire-purchase (at hire-purchase price) Instalments due 2,10,000 14,000 Transactions during the year : Hire-purchase price of goods sold Instalments received 9,80,000 8,12,000 Value of goods repossessed due to defaults (hire-purchase instalments unpaid ` 5,600) On 31st 7,800 March, 2012: Goods out on hire-purchase (at hire-purchase price) 3,78,000 You are required to prepare Hire-purchase Trading Account, ascertaining the profit made by the department during the year ended 31st March, 2012. Investments Accounts 12. Kumar invests and disinvests from time to time in 10% Non-convertible Debentures (NCD) of Apple Ltd. on FIFO basis. From the following transactions, prepare Investment account as it would appear in her books: 15.6.2011 Purchased 3,000 NCD, ex-interest @ ` 96 each 15.9.2011 Sold 3,000 NCD, ex-interest @ ` 100 each 15.12.2011 Purchased 2,000 NCD, cum interest @ ` 99 each 15.2.2012 Sold 2,000 NCD, cum interest @ ` 102 each Opening balance of NCD of ` 100 each was ` 2,00,000 on 1.4.2011 and Cost of acquisition was ` 1,80,000. Interest payment dates on NCD are 30th June and 31st December. Kumar follows financial year as accounting year. The Institute of Chartered Accountants of India 10 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Insurance Claim for Loss of Stock 13. A fire occurred in the premises of Hanuman Sons on 15th October, 2011 and normal business operations were restored on 1st April, 2012. The company had taken loss of profit policy for ` 1,50,000 with indemnity period of six months and a clause for adjustment of 20% to be made in respect of the expected incremental turnover. From the following information compute amount of claim under Loss of Profit policy: ` Actual turnover from 15th October, 2011 to 31st March, 2012 1,20,000 Turnover during the corresponding period of previous year Turnover from 15th October, 2010 to 14th October, 2011 2,40,000 4,80,000 Net profit for the last financial year Insured standing charges for the last financial year 90,000 67,500 Turnover for the last financial year 4,50,000 Partnership: Admission of a Partner 14. Aaj and Kal are partners in a firm, sharing Profits and Losses in the ratio of 3 : 2. The Balance Sheet of Aaj and Kal as on 1.1.2012 was as follow: Liabilities Amount Assets Amount ` Sundry Creditors ` 12,900 Building Bill Payable Bank Overdraft 4,100 Furniture 9,000 Stock-in-Trade Capital Account: Debtors Aaj 44,000 Less: Provision Kal 36,000 26,000 5,800 21,400 35,000 200 80,000 Investment _______ Cash 1,06,000 34,800 2,500 15,500 1,06,000 Shyam was admitted to the firm on the above date on the following terms: (i) He is admitted for 1/6th share in future profits and to introduce a Capital of ` 25,000. (ii) The new profit sharing ratio of Aaj, Kal and Shyam will be 3 : 2 : 1 respectively. (iii) Shyam is unable to bring in cash for his share of goodwill, partners therefore, decide to raise goodwill account in the books of the firm. They further decide to The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING 11 calculate goodwill on the basis of Shyam s share in the profits and the capital contribution made by him to the firm. (iv) Furniture is to be written down by 870 and Stock to be depreciated by 5%. A provision is required for Debtors @ 5% for Bad Debts. A provision would also be made for outstanding wages for ` 1,560. The value of Buildings having appreciated be brought upto ` 29,200. The value of investment is increased by ` 450. (v) It is found that the creditors included a sum of ` 1,400, which is not to be paid off. Prepare the following: (i) Revaluation Account. (ii) Partners Capital Accounts. (iii) Balance Sheet of New Partnership firm after admission of Shyam . Partnership: Death of a partner 15. M, N and O were partners of a firm sharing profits and losses in the ratio of 3 : 4 : 3. The Balance Sheet of the firm, as at 31st March, 2011 was as under: Liabilities ` Assets Capital Accounts Fixed Assets M 48,000 Current Assets : N O 64,000 48,000 Stock 1,60,000 Debtors Reserve 20,000 Cash and Bank Creditors 40,000 2,20,000 ` 1,00,000 30,000 60,000 30,000 1,20,000 2,20,000 The firm had taken a Joint Life Policy for ` 1,00,000; the premium periodically paid was charged to Profit and Loss Account. Partner O died on 30th September, 2011. It was agreed between the surviving partners and the legal representatives of O that : (i) Goodwill of the firm will be taken at ` 60,000. (ii) Fixed Assets will be written down by ` 20,000. (iii) In lieu of profits, O should be paid at the rate of 25% per annum on his capital as on 31st March, 2011. Policy money was received and the legal heirs were paid off. The profits for the year ended 31st March, 2012, after charging depreciation of ` 10,000 (depreciation upto 30th September was agreed to be ` 6,000) were ` 48,000. The Institute of Chartered Accountants of India 12 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Partners Drawings Accounts showed balances as under : M ` 18,000 (drawn evenly over the year) N ` 24,000 (drawn evenly over the year) O (up-to-date of death) ` 20,000 On the basis of the above figures, please indicate the entitlement of the legal heirs of O, assuming that they had not been paid anything other then the share in the Joint Life Policy. Accounting in Computerized Environment 16. A large size multi department s hospital decided to outsource the accounting functions. Hospital invited proposals from vendors through open tender and received three proposals. How will you select the vendor? Accounting Standards AS-1 17. (a) Explain the concept of materiality in brief. AS-2 (b) In order to value the inventory of finished goods, Sona Ltd. has adopted the standard cost of raw material, labour and overheads. Income tax officer wants to know the method, as per AS-2, for the valuation of raw material. AS-6 18. (a) Amar Ltd. has two divisions. It provides depreciation for both divisions on straight line basis as per rates prescribed by Schedule XIV to the Companies Act. While finalizing the accounts for the year ended 31-3-2012, it however wants to change the method to Written Down Value method for one of its divisions since in the opinion of the management the assets of the said division suffer faster wear and tear. Please advise the company on the above and also whether the change should be prospective or retrospective. AS-7 (b) Mr. Lal as a contractor has just entered into a contract with a local municipal body for building a flyover. As per the contract terms, Lal will receive an additional ` 2 crore if the construction of the flyover were to be finished within a period of two years of the commencement of the contract. Mr. Lal wants to recognize this revenue since in the past he has been able to meet similar targets very easily. AS-9 19. (a) Token company has taken a Transit Insurance Policy. Suddenly in the year 20112012 the percentage of accident has gone up to 7% and the company wants to The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING AS-10 13 recognise insurance claim as revenue in 2011-2012 in accordance with relevant Accounting Standard. Do you agree? (b) A newly set up Lion Private Ltd. manufacturing company has incurred following expenditures for the acquisition of plant & Machinery: (i) Foreign tour expenses of directors for purchasing Plant & Machinery. (ii) Technical staff s salary for erection of Plant & Machinery. (iii) Non-techincal staff s salary during the period of installation of Plant & Machinery (iv) Other sundry expenses such as stationery, printing, postage, telegram and telephone and local conveyance charge etc. The company intends to capitalize the above expenses. Is the company justified? State with reasons. AS-3 20. (a) Raman Ltd. acquired fixed assets viz. plant and machinery for ` 20 lakhs. During the same year it sold its furniture and fixtures for ` 5 lakhs. Can the company disclose, net cash outflow towards purchase of fixed assets in the cash flow statement as per AS-3? AS-13 (b) An unquoted long-term investment is carried in the books at cost of ` 2 lacs. The published accounts of unlisted company received in May, 2012 showed that the company has incurred cash losses with decline market share and the long-term investment may not fetch more than ` 20,000. How you will deal with it in the financial statement of investing company for the year ended 31.3.2012? SUGGESTED ANSWERS/HINTS 1. 5% Redeemable Preference Share Capital Account 2013 Feb. 1 ` 2013 To Preference Share holders A/c 4,00,000 Jan. 1 ` By Balance b/d 4,00,000 4,00,000 4,00,000 Preference Shareholders Account 2013 Feb. 1 ` 2013 To Bank A/c 4,20,000 The Institute of Chartered Accountants of India Feb. 1 ` By 5% Redeemable 14 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Preference Share Capital A/c 4,00,000 By Premium on Redemption A/c 4,20,000 20,000 4,20,000 Premium on Redemption Account 2013 Feb. 1 ` 2013 To Preference Share-holders A/c Feb. 1 20,000 ` By Securities Premium A/c 20,000 Equity Shares Application and Allotment Account 2013 Feb. 1 ` 2013 To Equity Share To Capital A/c Securities ` Feb. 1 By Bank A/c 2,12,500 1,70,000 Premium A/c 42,500 2,12,500 2,12,500 Capital Redemption Reserve Account 2013 Feb. 1 ` 2013 To Balance c/d 2,30,000 Feb. 1 ` By Profit and Loss A/c 2,30,000 2,30,000 2,30,000 Equity Share Capital Account 2013 Feb. 1 ` 2013 To ` Balance c/d 3,70,000 Jan. 1 By Balance b/d Feb. 1 By Equity shares 2,00,000 application and allotment A/c 3,70,000 1,70,000 3,70,000 Securities Premium Account 2013 Feb. 1 ` To Premium on The Institute of Chartered Accountants of India 2013 Jan. 1 ` By Balance b/d 50,000 PAPER 1 : ACCOUNTING To Redemption A/c 20,000 Balance c/d 72,500 92,500 Feb. 1 By 15 Equity Shares Application and Allotment A/c 42,500 92,500 Cash and Bank Account 2013 ` 2013 Jan. 1 To Balance b/d Feb. 1 To Equity Share ` 3,00,000 Feb. 1 By Preference Share 4,20,000 Holders A/c Application and By Allotment A/c Balance c/d 92,500 2,12,500 5,12,500 5,12,500 Note: No dividend has been paid on preference shares in the above solution. Alternatively, dividend may be paid at the rate of 5% for one month because the redemption takes place on 1st February, 2013 assuming that the articles of the company and terms of contract of company with the preference shareholders provide for such dividend. 2. Profit and Loss Account showing calculation of pre-incorporation and post-incorporation profit Particulars Basis Pre Post ` Particulars Basis ` To Commission (1:6) 375 2,250 By Gross Profit (1:6) To Advertisement To Discount (1:6) (1:6) 750 50 4,500 By Bad Debts 300 Realised Actual To Directors Fees Actual - 9,000 To Salaries (1:3) To Depreciation (1:3) 700 2,100 To Insurance (1:3) 150 450 To Preliminary Expenses Actual - 700 To Rent (W.N.3) 60 630 To Taxes (W.N.3) 578 1,732 To Bad Debts (W.N.4) 386 864 1,000 1,000 To Interest to vendor (upto 1-10-2011) (1:1) 4,500 13,500 The Institute of Chartered Accountants of India Pre Post ` ` 14,000 84,000 500 - 16 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 To Audit Fees To Capital reserve (1:3) 500 1,500 5,451 To Net profit 45,474 14,500 84,000 14,500 84,000 Working Notes: 1. Calculation of Sales Ratio: Let average monthly turnover during first four months (April, May, June and July) = 100 Average monthly turnover from September onwards = 100 x 2 = 200 Monthly turnover during August = 150% of 200 = 300 Turnover during pre-incorporation period = 100 x 3 = 300 Turnover during post-incorporation period (for July + August + September to March) = 100 + 300 + (200 x 7) = 1,800 Sales Ratio = 300: 1,800 = 1:6 2. Calculation of Time ratio: April 2011 to June 2011 : July 2011 to March 2012 3 months : 9 months or 1:3 3. Break-up of Rent and Taxes: Rent = (20 x 3) + (70 x 9) = ` 690 Taxes = 3,000 690 = 2,310. 4. Allocation of Bad Debts: Bad Debts from April to August = 1,250-350 = ` 900 Sales ratio upto August (i.e. April, May and June): (July and August) (100 + 100 + 100) : (100 + 300) = 3:4 ` 900 allocated in the ratio of 3:4 is ` 386 and ` 514 Post-incorporation bad debts = 514 + 350 = ` 864 and Pre-incorporation bad debts = ` 386 3. (a) (i) As per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 Reserves created by Revaluation of fixed assets can not be capitalized. (ii) As per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, Capital Reserve realized in cash can be utilized for issue of fully paid Bonus shares. Therefore, ` 1,60,000 being profit on sale of plant, is a capital profit which has been realized in cash, can be utilized for issue of the bonus The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING 17 shares. For remaining balance in capital reserve account, no further details of its constituents have been given. Therefore, no comment on it can be made. (iii) As per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, Securities Premium collected in cash only can be utilized for Bonus issue, therefore ` 80,000 (i.e. ` 1,00,000 ` 20,000) can be utilized for Bonus issue. (iv) As per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, no company can issue bonus shares to its shareholders without extending similar benefit to convertible debentureholders. Pending such conversion, necessary number of shares should be earmarked for convertible debentureholders. Therefore, convertible debentureholders are also entitled to the bonus shares in the same ratio as the equity shareholders. (v) Minimum number of Equity shares to be issued as bonus shares In shares Issue of Bonus Shares to existing Equity Shareholders 90,000 Add: Number of bonus shares to be issued after conversion 20,00,000 20% 1 of debentures 10 4 Total bonus issue through equity shares 10,000 1,00,000 (vi) Minimum Authorised Share Capital Shares ` 3,60,000 36,00,000 Bonus to Equity Shareholders 90,000 9,00,000 20% conversion of 12% Debentures 40,000 4,00,000 Bonus shares to be issued to Debentureholders after conversion 10,000 1,00,000 5,00,000 50,00,000 40,000 4,00,000 Equity share capital Existing Equity Shares Authorised Equity Share Capital Preference share capital 12% Preference Shares Minimum Authorised Capital The Institute of Chartered Accountants of India 54,00,000 18 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 (b) Cash Flow Statement of Mr. Kunaal for the year ended 31.3.2012 ` (i) Cash flow from operating activities Net Profit (given) Adjustments for Depreciation on Plant & Machinery (W.N.2) Loss on Sale of Machinery (W.N.1) Operating Profit before working capital changes Decrease in Stock Increase in Debtors Increase in Creditors Net cash from operating activities (ii) Cash flow from investing activities Sale of Machinery Purchase of Land (4,40,000 3,00,000) Net cash used in investing activities (iii) Cash flow from financing activities Repayment of Mrs. Kunaal s Loan Drawings (W.N.3) Loan from Bank Net cash used in financing activities Net decrease in cash Cash balance as on 1.4.2011 Cash balance as on 31.3.2012 1,80,000 72,000 8,000 40,000 (80,000) 16,000 20,000 (1,40,000) (1,00,000) (68,000) 40,000 80,000 2,60,000 (24,000) 2,36,000 (1,20,000) (1,28,000) (12,000) 40,000 28,000 Working Notes: 1. Plant & Machinery A/c ` To Balance b/d ` 4,20,000 By Bank Sales (3,20,000 + 1,00,000) By Provision for Depreciation A/c By Profit & Loss A/c Loss on Sale (40,000 20,000 12,000) By Balance c/d (2,20,000+1,60,000) 4,20,000 The Institute of Chartered Accountants of India 20,000 12,000 8,000 3,80,000 4,20,000 PAPER 1 : ACCOUNTING 2. 19 Provision for depreciation on Plant and Machinery A/c ` To Plant and Machinery A/c To Balance c/d ` 12,000 By Balance b/d 1,00,000 1,60,000 By Profit & Loss A/c (Bal.fig.) 1,72,000 3. 72,000 1,72,000 Mr. Kunaal s drawings ` Opening Capital Add: Net Profit 5,00,000 1,80,000 6,80,000 (6,12,000) 68,000 Less: Closing Capital Drawings (Bal. fig.) 4. Balance Sheet of New Old Express Ltd. as at 1st Jan., 2013 Particulars Notes ` Equity and Liabilities 1 Shareholders' funds a Share capital b Reserves and Surplus 2 Non-current liabilities a Long-term provisions 3 1 30,00,000 2 3,60,000 3 1,00,000 Current liabilities a Trade Payables 1,00,000 Total 35,60,000 Assets 1 Non-current assets a Fixed assets Tangible assets Intangible assets 2 4 5 25,00,000 1,00,000 Current assets Inventories 3,40,000 Trade receivables 2,80,000 The Institute of Chartered Accountants of India 20 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Cash and cash equivalents 6 Total 3,40,000 35,60,000 Notes to accounts ` 1 Share Capital Equity share capital Issued, subscribed and paid up 30,00,000 30,000 Equity shares of ` 100 each Total 30,00,000 2 Reserves and Surplus Reserve account Surplus Insurance reserve Employees profit sharing account 1,00,000 1,00,000 1,00,000 60,000 Total 3 Long-term provisions Provident fund 1,00,000 Total 4 Tangible assets Buildings Machinery 1,00,000 16,00,000 9,00,000 Total 5 Intangible assets Goodwill 25,00,000 1,00,000 Total 6 Cash and cash equivalents Balances with banks Cash on hand 1,00,000 2,30,000 1,10,000 Total The above solution is based on pooling of interests method. The Institute of Chartered Accountants of India 3,60,000 3,40,000 PAPER 1 : ACCOUNTING 21 Alternative solution under the purchase method is given below : Balance Sheet of New Old Express Ltd. as at 1st Jan., 2013 Particulars Notes ` Equity and Liabilities 1 Shareholders' funds a b 2 Share capital Reserves and Surplus 1 2 32,00,000 60,000 3 1,00,000 Non-current liabilities a Long-term provisions a Current liabilities Trade Payables 3 1,00,000 Total Assets Non-current assets 1 a 2 34,60,000 Fixed assets Tangible assets 4 25,00,000 Intangible assets Current assets 5 0 Inventories Trade receivables 3,40,000 2,80,000 Cash and cash equivalents 6 Total 3,40,000 34,60,000 Notes to accounts ` 1 Share Capital Equity share capital Issued, subscribed and paid up 32,00,000 32,000 Equity shares of ` 100 each Total 2 Reserves and Surplus The Institute of Chartered Accountants of India 32,00,000 22 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Employees profit sharing account 60,000 Total 60,000 3 Long-term provisions Provident fund 1,00,000 Total 1,00,000 4 Tangible assets Buildings Machinery 16,00,000 9,00,000 Total 25,00,000 5 Intangible assets Goodwill 1,00,000 Less: Adjustment under scheme of amalgamation (1,00,000) 0 Total 0 6 Cash and cash equivalents Balances with banks 2,30,000 Cash on hand 1,10,000 Total 3,40,000 Working Notes : Calculation of Purchase Consideration Total assets on 31.12.2012 (excluding goodwill) Less: New Express Ltd. Old Express Ltd. 22,60,000 12,00,000 1,00,000 60,000 60,000 40,000 21,00,000 11,00,000 Provident fund Employees profit sharing account Sundry creditors Net assets taken over 5. Journal Entries in the books of Mohan Ltd. ` (i) Equity share capital (` 100) A/c Dr. ` 1,00,00,000 To Equity Share Capital (` 40) A/c 40,00,000 To Capital Reduction A/c 60,00,000 (Being conversion of equity share capital of ` 100 each into The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING 23 ` 40 each as per reconstruction scheme) (ii) 12% Cumulative Preference Share capital (` 100) A/c Dr. 50,00,000 To 12% Cumulative Preference Share Capital (` 60) A/c 30,00,000 To Capital Reduction A/c 20,00,000 (Being conversion of 12% cumulative preference share capital of ` 100 each into ` 60 each as per reconstruction scheme) (iii) 10% Debentures A/c Dr. 40,00,000 To 12% Debentures A/c 28,00,000 To Capital Reduction A/c 12,00,000 (Being 12% debentures issued to 10% debenture-holders for 70% of their claims. The balance transferred to capital reduction account as per reconstruction scheme) (iv) Sundry Creditors A/c Dr. 20,00,000 12,00,000 To Equity Share Capital A/c 8,00,000 To Capital Reduction A/c (Being a creditor of ` 20,00,000 agreed to surrender his claim by 40% and was allotted 30,000 equity shares of ` 40 each in full settlement of his dues as per reconstruction scheme) (v) Provision for Taxation A/c Dr. 1,00,000 Capital Reduction A/c Dr. 50,000 1,50,000 To Liability for Taxation A/c (Being conversion of the provision for taxation into liability for taxation for settlement of the amount due) (vi) Capital Reduction A/c Dr. 99,50,000 6,00,000 To P & L A/c To Fixed Assets A/c 37,50,000 To Current Assets A/c 55,00,000 To Investments A/c 50,000 To Capital Reserve A/c 50,000 (Being amount of Capital Reduction utilized in writing off P & L A/c (Dr.) Balance, Preliminary Expenses, Fixed Assets, Current Assets, Investments and the Balance transferred to Capital Reserve) (vii) Liability for Taxation A/c The Institute of Chartered Accountants of India Dr. 1,50,000 24 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 To Current Assets (Bank A/c) 1,50,000 (Being the payment of tax liability) Balance Sheet of Mohan Ltd. (and reduced) as on 31.3.2012 Particulars Notes ` Equity and Liabilities 1 Shareholders' funds a Share capital b Reserves and Surplus 2 82,00,000 50,000 3 28,00,000 Non-current liabilities a Long-term borrowings 3 1 2 Current liabilities a Trade Payables 30,00,000 Total Assets Non-current assets 1 a Fixed assets Tangible assets b 2 1,40,50,000 Investments Current assets Total 4 87,50,000 5 6 9,50,000 43,50,000 1,40,50,000 Notes to accounts ` 1. Share Capital Equity share capital Issued, subscribed and paid up 1,30,000 equity shares of ` 40 each 52,00,000 Preference share capital Issued, subscribed and paid up 12% Cumulative Preference shares of ` 60 each Total 2. Reserves and Surplus The Institute of Chartered Accountants of India 30,00,000 82,00,000 PAPER 1 : ACCOUNTING 25 Capital Reserve 50,000 3. Long-term borrowings Secured 12% Debentures 4. Tangible assets 28,00,000 Fixed Assets 1,25,00,000 Adjustment under scheme of reconstruction (37,50,000) 5. Investments 87,50,000 10,00,000 Adjustment under scheme of reconstruction (50,000) 6. Current assets 9,50,000 45,00,000 Adjustment under scheme of reconstruction (1,50,000) 43,50,000 Working Note: Capital Reduction Account ` To Liability for taxation A/c To P & L A/c To Fixed assets 50,000 By Equity share capital 6,00,000 By 12% Cumulative 37,50,000 preference share capital 60,00,000 20,00,000 To Current assets To Investment 55,00,000 By 10% Debentures 50,000 By Sundry creditors 12,00,000 8,00,000 To Capital Reserve (balancing figure) 6. ` 50,000 _________ 1,00,00,000 1,00,00,000 Calculation of average due date (Base date: 8th April) Due Date Amount No. of days from base date ` Product ` 8th April 300 0 0 18th May 13th June 200 275 40 66 8,000 18,150 8th July 400 1,175 91 91 36,400 62,550 The Institute of Chartered Accountants of India 26 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Average due date = Base date + = 8th April + 7. Total Product Total Amount 62,550 = 8th April + 53 days = 31st May 1,175 M in Account Current with L as at 30.04.2012 Date Due Date Particulars 7.4.2012 to 10.6.2012 To 10.4.2012 10.5.2012 To Amount Bills Payable A/c 5,000 Sales 15,000 A/c 20.4.2012 to To Purchase 15.5.2012 Return A/c 20.4.2012 to To Bills 20.4.2012 Receivable A/c 30.4.2012 to To Difference of Product 30.4.2012 1,000 Days 41 10 15 5,000 10 Product Date Due Date 2,05,000 1.4.2012 to 1.4.2012 Particulars By Balance b/d 12.4.2012 to By A/c 1,50,000 15.5.2012 15.4.2012 15,000 to15.5.2012 By 30.4.2012 By 30.4.2012 By 50,000 _____ 4,17,500 26,000 97,500 A/c Bank Purchases A/c* c/d Interest Balance Amount Days 10,000 7,500 6,000 30 Product 3,00,000 15 1,12,500 15 90,000 205.90 - 2,294.10 ______ 26,000 97,500 *4,17,500 18/100 1/365 = ` 205.90 Note that no entry is required for transaction of April 10, 2012. 8 Total Debtors Accounts 2012 Apr. 1 30 30 30 30 To Balance b/d To Credit Sales To Bills Receivable A/c To Cash (Noting Charges) To Balance c/d (R) ` 2012 41,000 Apr. 1 44,100 1,000 30 10 30 1,800 30 30 30 30 2012 May 1 87,910 To Balance b/d 30 2012 40,710 May 1 The Institute of Chartered Accountants of India By Balance b/d (Advance) By Cash By Discount Account By Bad Debts Account (2100-450) By Returns Inwards A/c (Om) By Bills Receivable A/c By Total Creditor A/c (Transfer) (Sohan) By Balance c/d To Balance b/d ` 2,000 39,300 950 1,650 500 1,000 1,800 40,710 87,910 1,800 PAPER 1 : ACCOUNTING 27 Working Notes: ` ` (i) Cash Received: From Ram 450 From R (Advance) 1,800 2,250 Ex sales before April 1 (700) Ex sales during April 27,300 9,750 37,050 39,300 (ii) Discount: ` 37,050 2 / 97 = ` 950 (iii) The creation of the Provision for Doubtful Debts will not affect the Total Debtors Account. 9. Income and Expenditure Account of Strong Club for the year ended 30th September, 2012 Expenditure Amount Income ` To Honoraria to secretary To Misc. expenses To Rates and taxes To Groundman's wages To Printing and stationary To Telephone expenses To Bar expenses Opening bar stock Add: Purchases (W.N.2) Less: Closing bar stock To Repairs To Depreciation Club premises (W.N. 4) Car (W.N. 6) To Excess of income over expenditure transferred to capital fund 9,600 3,060 2,520 1,680 940 4,780 1,420 11,220 12,640 1,740 1,020 4,680 The Institute of Chartered Accountants of India Amount ` By By By By By By Subscriptions (W.N.3) Sale of old newspapers Entertainment fees Bank interest Bar receipts Profit on sale of car (W.N.5) 20,980 4,800 8,540 460 14,900 2,200 10,900 640 5,700 12,060 51,880 51,880 28 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Balance Sheet of Strong Club as on 30th September, 2012 Liabilities Capital fund (W.N. 1) Add: Excess of income over expenditure Outstanding liabilities for bar purchases ` 43,600 12,060 Amount Assets ` Club Premises Car 55,660 Bar stock Outstanding 860 subscription Cash and bank 56,520 Amount ` 19,380 26,520 1,740 1,960 6,920 56,520 Working Notes: 1. Balance Sheet of Strong Club as on 1st October, 2011 Liabilities Amount Assets Amount ` Amount due for bar purchases Capital fund 1.10.2011 Club premises on 58,000 1,180 Less: Depreciation Car 43,600 (37,600) 24,380 20,400 Less: Depreciation (20,580) 3,800 (balancing figure) 2. ` Bar stock 1,420 Outstanding subscription 2,400 ______ Cash at bank 16,760 44,780 44,780 Calculation of bar purchases for the year: ` Bar payments as per receipts and payments account Add: Amount due on 30.9.2012 Less: Amount due on 1.10.2011 11,540 860 12,400 ( 1,180) 11,220 The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING 3. 29 Calculation of subscriptions accrued during the year: ` Subscriptions received as per receipts and payments account 21,420 Add: Outstanding on 30.9.2012 1,960 23,380 Less: Outstanding on 1.10.2011 (2,400) 20,980 4. Depreciation on club premises and written down value on 30th September, 2012: ` 5. Written down value on 1.10.2011 (58,000-37,600) 20,400 Less: Depreciation for the year 2011-2012 @ 5% p.a. (1,020) 19,380 Calculation of profit on sale of car: ` Sale proceeds of old car Less: Written down value of old car: Cost of car on 1.10.2011 Less: Depreciation upto 1.10.2011 6. 6,000 24,380 (20,580) (3,800) 2,200 Depreciation on car and written down values on 30th September, 2012: ` Cost of new car purchased (25,200 + 6,000) 31,200 Less: Depreciation for the year @ 15% p.a. (4,680) Written down value on 30.9.2012 26,520 Note: The opening and closing balance of cash and bank shown in the Receipts and Payments Account (given in the question), include the bank balance as per cash book. Therefore, no adjustment has been made in the above solution on account of cheques issued, but not presented for payment of printing. The Institute of Chartered Accountants of India 30 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 10. Trading and Profit and Loss Account of Shri Ashok for the year ended 31st December, 2012 ` To Opening Stock To Purchases Less : For advertising To Freight inwards To Gross profit c/d ` 8,000 By Sales By Closing stock 44,700 3,000 24,350 80,050 14,200 By Gross profit b/d 900 By Interest investment 45,600 (900) To Sundry expenses To Advertisement To Discount allowed 73,050 7,000 on 80,050 24,350 2 4 1 ` 100 100 2 Debtors Bills Receivable 1,500 125 By Discount received 1,625 By Miscellaneous income 650 To Depreciation on furniture To Provision for doubtful debts To Net Profit 800 500 486 7,791 25,652 25,652 Balance Sheet as on 31st December, 2012 Liabilities Amount Assets Amount ` Capital as on January, 2012 Less : Drawings 1st Add : Net Profit Sundry creditors Outstanding expenses ` 18,800 Furniture 6,000 (7,904) Additions during the year 1,000 10,896 7,791 18,687 Less : Depreciation 15,000 Investment 1,800 Interest accrued Closing Stock Sundry debtors The Institute of Chartered Accountants of India 7,000 (650) 19,450 6,350 96 2 7,000 PAPER 1 : ACCOUNTING 35,487 Working Notes : Less : Provision for doubtful debts Bills receivable Cash in hand and at bank Prepaid expenses 31 (486) 18,964 1,750 625 700 35,487 (1) Capital on 1st January, 2012 Balance Sheet as on 1st January, 2012 Liabilities Capital (Balancing figure) Creditors Outstanding expenses ` Assets ` 18,800 Furniture (w.d.v.) 11,000 Stock at cost 2,000 Debtors Cash in hand and at bank Prepaid expenses 31,800 6,000 8,000 16,000 1,200 600 31,800 (2) Purchases made during the year Creditors Account ` To Cash and bank A/c To Discount received A/c To Bills Receivable A/c To Balance c/d ` 39,200 By Balance b/d 11,000 800 By Debtors A/c 2,000 By Purchases A/c (Bal.fig.) 400 45,600 15,000 57,000 57,000 (3) Sales made during the year ` Opening stock Purchases Less : For advertising Freight inwards 8,000 45,600 (900) 44,700 3,000 55,700 The Institute of Chartered Accountants of India 32 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Less : Closing stock (7,000) Cost of goods sold 48,700 Add : Gross profit (@ 50% on cost) 24,350 73,050 (4) Debtors on 31.12.2012 Debtors Account To Balance b/d To Sales A/c To Creditors A/c (bill dishonoured) ` 16,000 By Cash and bank A/c 73,050 By Discount allowed A/c 400 By Bills receivable A/c By Balance c/d (Bal.fig.) 89,450 ` 58,500 1,500 10,000 19,450 89,450 (5) Additional drawings by Shri Ashok Cash and Bank Account To Balance b/d To Sundry debtors A/c To Bills Receivable A/c To Miscellaneous income A/c ` 1,200 58,500 6,125 500 By Freight inwards A/c By Furniture A/c By Investment A/c By Expenses A/c By Creditors A/c By Drawings A/c (` 7,000+` 904) By Balance c/d 66,325 ` 3,000 1,000 96 14,500 39,200 7,904 625 66,325 (6) Amount of expenses debited to Profit and Loss A/c Expenses Account ` To Prepaid expenses A/c (on 1.1.2012) To Bank A/c To Outstanding expenses A/c (on 31.12.2012) The Institute of Chartered Accountants of India ` 600 By Outstanding expenses A/c 2,000 (on 1.1.2012) 14,500 By Profit and Loss A/c 1,800 (Balancing figure) 14,200 By Prepaid expenses A/c (on 31.12.2012) 700 16,900 16,900 PAPER 1 : ACCOUNTING 33 (7) Bills Receivable on 31.12.2012 Bills Receivable Account ` To Debtors A/c ` 10,000 By Creditors A/c By Bank A/c By Discount on bills receivable A/c By Balance c/d (Bal.fig.) 10,000 2,000 6,125 125 1,750 10,000 Note: As regards investment, it has been assumed that investment purchased for ` 96 was of the face value ` 100. 11. Accent Ltd. Hire Purchase Trading Account ` To Opening Balances: Hire purchase stock 2,10,000 Instalments due ` By 14,000 By Opening hire purchase stock reserve Bank (Instalments received) To Goods sold on hire purchase 9,80,000 By Goods repossessed To Closing hire purchase stock reserve (W.N.3) 1,08,000 By Goods sold on hire purchase (Loading) (W.N.2) To Profit and loss Account (Transfer of profit) By 2,34,200 60,000 8,12,000 7,800 2,80,000 Closing Balances: Hire purchase stock Instalments due (W.N.4) 15,46,200 3,78,000 8,400 15,46,200 Working Notes: (i) (ii) (iii) Opening hire purchase stock reserve = ` 2,10,000 Loading on goods sold = ` 9,80,000 40 140 Closing hire purchase stock reserve = ` 3,78,000 (iv) Closing instalments due: Opening hire purchase stock Opening instalments due Goods sent on hire purchase The Institute of Chartered Accountants of India 40 140 40 140 ` 60,000 2,80,000 1,08,000 2,10,000 14,000 9,80,000 12,04,000 34 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Less: Instalments received Unpaid instalments on repossessed goods Closing hire purchase stock 12. 8,12,000 5,600 3,78,000 (11,95,600) 8,400 In the books of Kumar 10% Non-Convertible Debentures (NCD) Account Particulars Face Interest Value ` April 1 To b/d Balance 2,00,000 June 15 To Bank Sept. 15 To P&L A/c Dec. 15 To Bank Feb. 15 To P&L A/c Mar.31 To P&L A/c (Bal. fig.) Cost ` Particulars ` ` 5,000 1,80,000 June 30 By Bank 3,00,000 13,750 2,88,000 Sept. 15 By Bank 2,00,000 Face Interest Value 24,000 Dec. 31 By Bank 9,167 1,88,333 Feb. 15 By Bank 9,500 Mar.31 By c/d ` Cost ` 25,000 3,00,000 6,250 3,00,000 20,000 2,00,000 2,500 2,01,500 balance 2,00,000 5,000 1,88,333 7,00,000 58,750 6,89,833 30,833 7,00,000 58,750 6,89,833 Working Notes (i) Profit/Loss on sale of NCD ` Sold on 15.09.2011 Selling price (3,000 x 100) Less: Cost of purchases 2000 x 90 (opening) 1000 x 96 (purchases) Profit 3,00,000 (1,80,000) ( 96,000) 24,000 Sold on 15.02.2012 Selling price (2,000 x 102) Less: Interest included 2,04,000 (2,500) 2,01,500 Less: Cost of purchases (2000 x 96) Profit (1,92,000) 9,500 (ii) As the disinvestment is done on FIFO basis, NCDs purchased on 15.12.2011 remained in stock on 31.03.2012 at a cost of ` 1,88,333 The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING 35 (iii) Interest calculation on various dates: ` (a) On 1.4.11: 2,00,000 x 10% x 3 (1.1.09 31.3.09) 12 = 5,000 5.5 (1.1.09 15.6.09) = 12 13,750 6 (1.1.09 30.6.09) 12 = 25,000 2.5 (1.7.09 15.9.09) = 12 6,250 5.5 (1.7.09 15.9.09) 12 9,167 (b) On 15.6.11: 3,00,000 x 10% x (c) On 30.6.11: 5,00,000 x 10% x (d) On 15.9.11: 3,00,000 x 10% x (e) On 15.12.11 2,00,000 x 10% x (f) = On 31.12.11: 4,00,000 x 10% x 6 (1.7.09 31.12.09) = 12 20,000 1. 5 (1.1.10 15.2.10) = 12 2,500 3 (1.1.10 31.3.10) 12 5,000 (g) On 15.2.2012: 2,00,000 x 10% x (h) On 31.3.2012: 2,00,000 x 10% x 13. = Computation of the amount of claim for the loss of profit ` (i) Ascertainment of turnover: Turnover from 15th October, 2010 to 31st March, 2011 Add: 20% expected increase The Institute of Chartered Accountants of India 2,40,000 48,000 36 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 2,88,000 Less: Actual turnover from 15th October, 2011 to 31st (1,20,000) March, 2012 Reduction in turnover due to fire 1,68,000 Gross profit on reduction in turnover @ 35% (see working note) 58,800 (ii) Claim amount: Amount of claim without application of average clause ` 58,800 Application of average clause = Amount of Policy X Amount of claim G.P. on Turnover = 1,50,000 X 58,800 2,01,600 = ` 43,750 Therefore, amount of claim = ` 43,750 Working Notes: (i) ` Rate of Gross Profit for last financial year: Net Profit Add: Insured standing charges 90,000 67,500 1,57,500 Turnover for the last financial year Rate of Gross Profit = 4,50,000 1,57,500 X 100 4,50,000 = 35% (ii) ` Adjusted Annual Turnover: Turnover from 15th October, 2010 to 14th October, 2011 Add: 20% expected increase 4,80,000 96,000 5,76,000 Gross Profit @ 35% on incremental turnover The Institute of Chartered Accountants of India 2,01,600 PAPER 1 : ACCOUNTING 14. (i) 37 Revaluation Account Dr. To To To To ` 870 1,070 1,550 Furniture Stock Provision of doubtful debts (` 1,750 ` 200) Outstanding wages (ii) By By By Cr. ` 3,200 1,400 450 Building Sundry creditors Investment 1,560 5,050 ____ 5,050 Partners' Capital Accounts Aaj Kal ` To Balance c/d Shyam Aaj Kal Shyam ` ` ` ` ` 71,000 54,000 25,000 By Balance b/d 44,000 36,000 By Cash A/c 25,000 _____ _____ By Goodwill 27,000 18,000 A/c(W.N.) - 71,000 54,000 25,000 71,000 54,000 25,000 _____ (iii) Balance Sheet of New Partnership Firm (after admission of Shyam) as on 1.1.2012 Liabilities ` Assets Sundry Creditors (12,900 1,400) ` Goodwill 11,500 Building (26,000 + 3,200) 45,000 29,200 Bills Payable 4,100 Furniture (5,800 870) 4,930 Bank Overdraft 9,000 Stock-in-trade (21,400 1,070) Outstanding wages 1,560 Debtors Capital Accounts: 20,330 35,000 Less:Provision for bad debt (1,750) 33,250 Aaj 71,000 Investment (2,500 + 450) 2,950 Kal 54,000 Cash (15,500 + 25,000) 40,500 Shyam 25,000 1,50,000 ______ 1,76,160 1,76,160 The Institute of Chartered Accountants of India 38 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Working Note: Calculation of goodwill: Shyam's contribution of ` 25,000 consists only 1/6th of capital. Therefore, total capital of firm should be ` 25,000 6 = ` 1,50,000. But combined capital of Aaj, Kal and Shyam amounts ` 44,000 + 36,000 + 25,000 = ` 1,05,000. Thus, Hidden goodwill is ` 45,000 (i.e. ` 1,50,000 ` 1,05,000). 15. Computation of entitlement of legal heirs of O) (1) Profits for the half year ended 31st March, 2012 ` Profits for the year ended 31st March, 2012 (after depreciation) Add : Depreciation Profits before depreciation Profits for the first half (assumed : evenly spread) Less : Depreciation for the first half Profits for the first half year (after depreciation) Profits for the second half (i.e., 1st October, 2011 to 31st March, 2012) Less : Depreciation for the second half Profits for the second half year (after depreciation) (2) Capital Accounts of Partners as on 30th September, 2011 48,000 10,000 58,000 29,000 (6,000) 23,000 29,000 (4,000) 25,000 Dr. Cr. M ` N ` O ` To Fixed Assets (loss on revaluation) 6,000 To Drawings 9,000 To O Executor s A/c To Balance c/d 57,000 8,000 12,000 76,000 6,000 20,000 52,000 72,000 96,000 78,000 The Institute of Chartered Accountants of India M ` By Balance b/d48,000 By Reserve 6,000 By Goodwill 18,000 By P & L Appropriation A/c (Interest on ` 48,000 @ 25% for 6 months) 72,000 N ` O ` 64,000 8,000 24,000 48,000 6,000 18,000 96,000 6,000 78,000 PAPER 1 : ACCOUNTING 39 (3) Application of Section 37 of the Partnership Act Legal heirs of O have not been paid anything other than the share in joint life policy. The amount due to the deceased partner carries interest at the mutually agreed upon rate. In the absence of any agreement, the representatives of the deceased partner can receive at their option interest at the rate of 6% per annum or the share of profit earned for the amount due to the deceased partner. Thus, the representatives of O can opt for Either, (i) Interest on ` 52,000 for 6 months @ 6% p.a. = ` 1,560 Or (ii) Profit earned out of unsettled capital (in the second half year ended 31st March, 2012) ` 25,000 52,000 = ` 7,027 (approx.) 57,000 + 76,000 + 52,000 In the above case, it would be rational to assume that the legal heirs would opt for ` 7,027. (4) Amount due to legal heirs of O Balance in O s Executor s account Amount of profit earned out of unsettled capital [calculated in (3)] Amount due ` 52,000 7,027 59,027 16. The proposals will be evaluated and vendor will be selected considering the following criteria: 1. Quantum of services provided and whether the same matches with the requirements of the hospital. 2. Reputation and background of the vendor. 3. Comparative costs of the various propositions. 4. Organizational set up of the vendor particularly technical staffing to obtain services without inordinate delay. 5. Assurance of quality, confidentiality and secrecy. 6. Data storage and processing facilities. 17. (a) Para 17 of AS 1 Disclosure of Accounting Policies , states that financial statements should disclose all material items, i.e., items the knowledge of which might influence the decisions of the user of the financial statements. Materiality depends on the size of item or error judged in the particular circumstances of its omission or The Institute of Chartered Accountants of India 40 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 misstatement. From a positive perspective, materiality has to do with the significance of an item or event to warrant attention in the accounting process. From a negative view point, materiality is critical because otherwise a great deal of time might be spent on trivial matters in the accounting process. Individual judgments are required to assess materiality, or to decide what the appropriate minimum quantitative criteria are to be set for given situations. What is material to one organization, may not be material for another organization. For example, a long term investor is interested in the current value of fixed asset like building, while the banker may not consider it significant for a short-term loan. Similarly a pair of scissors, ball pens, sharpeners, waste-paper baskets could be used for a number of years but still it is treated as an expense and not an asset. The omission of paise in the financial statements is also due to their insignificant effect to the users of the financial statement in making a decision. (b) The use of standard cost of elements of cost of production has been suggested by AS-2 as a matter of convenience only. In fact, AS-2 aims to suggest the use of absorption costing based on normal capacity. AS-2 says that standard cost system may be used for convenience if the results approximate the actual cost. If the company can adopt absorption costing for value of inventory, then the standard cost systems need not be adopted. 18. (a) According to the Guidance Note on Accounting for Depreciation in Companies issued by ICAI, it is permissible for a company to adopt more than one method of depreciation simultaneously that is to say that1. Company may follow different methods for different types of assets; and 2. Company geographical locations can follow different methods. Only condition is that same methods should be consistently adopted from year to year. Change in the method of depreciation is a change in accounting policy. According to AS 6, such a change is permissible only when at least one of the following 3 conditions is satisfied:(i) Such change is required by law. (ii) Such change is required by the Accounting Standards (iii) Such change will result in more appropriate presentation. Here, from the facts given it appears that condition (iii) is satisfied i.e. change will lead to more appropriate presentation (since WDV method will better represent the pattern of faster wear & tear instead of SLM). According to AS 6, change should be retrospective. Any difference arising thereon should be changed/ credited to P&L account in the year of change. The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING 41 (b) As per Revised AS-7 incentive payments are additional amounts payable to the contractor if specified performance standards are met. A contract may allow for an incentive payment to the contractor for early completion of the contracts. Incentive payments are included in contracts revenue when the contract is sufficiently advanced that it is probable that the specified performance standards will be met and the amount of the incentive payment can be measured reliably. In the given problem, the contracts is not even begun and hence the contractor should not recognise any revenue of this account 19. (a) AS 9 on Revenue Recognition defines revenue as gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of the enterprise from the sale of goods, from the rendering of services and from the use by others of enterprise resources yielding interest, royalties and dividends . To recognise revenue AS 9 requires that revenue arises from ordinary activities and that it is measurable and there should be no uncertainty. As per para 9.2 of the Standard, where the ability to assess the ultimate collection with reasonable certainty is lacking at the time of raising any claim, revenue recognition is postponed to the extent of uncertainty involved. In such cases, it may be appropriate to recognise revenue only when it is reasonably certain that the ultimate collection will be made. In the given case, Token company wants to suddenly recognise Insurance claim because it has increased over the previous year. But, there are uncertainties involved in the settlement of the claim. Also, the claim does not seem to be in the course of ordinary activity of the company. Hence, Token company is not advised to recognise the Insurance claim as revenue. (b) (i) Yes, as foreign tour expenses of directors for purchase of Plant and Machinery is for the acquisition of the asset, therefore it should be capitalised. (ii) Yes, salary of technical staff for erection of Plant and Machinery is the cost directly attributable for bringing the asset to its working conditions for its intended use. Therefore, it should be capitalised. (iii) No, as per para 9 of AS 10 only salary of technical staff can be said to as directly attributable to bring the asset to its working conditions for its intended use. Therefore, salary of non-technical staff cannot be capitalised. (iv) No, as per para 9.3 of AS 10, administration and other general overhead expenses are usually excluded from the cost of fixed assets because they do not relate to a specific fixed asset. Hence the same should not be capitalized. 20. (a) According to Para 21 of AS 3 (Revised) Cash Flow Statements , an enterprise should report separately major classes of gross cash receipts and gross cash payments arising from investing and financing activities, except to the extent that cash flows described in paragraphs 22 and 24 are reported on a net basis. The Institute of Chartered Accountants of India 42 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2012 Acquisition and disposal of fixed assets is not prescribed in para 22 and 24 of the standard. Hence, the company cannot disclose net cash flow in respect of acquisition of plant and machinery and disposal of furniture and fixtures. (b) As per para 32 of AS 13 Accounting for Investments , investment classified as long term investments should be carried in the financial statements at cost. However, provision for diminution shall be made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually. As per para 17 of the standard, indicators of the value of an investment are obtained by reference to its market value, the investee s assets and results and the expected cash flows from the investment. The facts of given case clearly suggest that there is decline in the market share of the company and the investment will not fetch more than `20,000. Therefore, the provision of `1,80,000 should be made to reduce the carrying amount of long term investment to `20,000 in the financial statements for the year ended 31st March, 2012. The Institute of Chartered Accountants of India

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

Formatting page ...

 

  Print intermediate debugging step

Show debugging info


 


Tags : CA IPCC, sample / model / mock / past / previous / old / online test papers, Group I, Group II, accounting technician course, atc, accounts, accounting, business laws, ethics, communiation, cost accounts, cost accounting, financial management, fm, tax, taxation, advanced accounting, audit, auditing, assurance, itsm, it & sm, information technology, strategic management, Integrated Professional Competence Course, may, november, 2015, 2014, 2013, 2012, 2011, 2010, 2009.  

© 2010 - 2025 ResPaper. Terms of ServiceContact Us Advertise with us

 

ca_ipcc chat