Trending ▼   ResFinder  

CA IPCC : Question Paper (with Answers) - ACCOUNTING Nov 2010

31 pages, 20 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 >   F Also featured on: rohityadav27

Formatting page ...

PAPER 1 : ACCOUNTING Question No. 1 is compulsory Attempt any five questions from the remaining six questions. Wherever necessary, suitable assumption(s) may be made by the candidates. Working notes should form part of the answer. Question 1 (a) Following two problems are regarding issues in Partnership Accounts, kindly solve both: (i) Anil and Mukesh are partners sharing profit and losses in the ratio of 3 : 2. Govind is admitted for th share of firm. Thereafter Madan enters for 20 paisa in a rupee. Compute new profit sharing ratios under both the admission of partners. (ii) The following Goodwill Account was opened by the partners R and S, on the admission of H as a new partner into firm Om and Sons. Calculate the share of profit agreed to be given to H . Goodwill A/c Dr. Cr. ` ` 1-4-2010 To R s Capital A/c 24,800 1-4-2010 By R s Capital A/c 12,400 1-4-2010 To S s Capital A/c 18,600 1-4-2010 By S s Capital A/c 1-4-2010 By H s Capital A/c 12,400 18,600 43,400 43,400 (b) 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 month following information is available: Sales General overheads cost ` ` Inventory at beginning Purchases 47,25,000 1,25,000 1,00,000 litres @ 15 per litre June 1 two lakh litres @ 14.25 June 30 one lakh litres @ 15.15 Closing inventory 1.30 lakh litres Compute the following by the FIFO as per AS 2: B. Value of Inventory on June, 30. (ii) Amount of cost of goods sold for June. (iii) Profit/Loss for the month of June. The Institute of Chartered Accountants of India INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 (c) A and B decide to amalgamate themselves into Sharp Limited. The following are their Balance Sheets as on 31st December, 2009. Liabilities A Ltd. B. Ltd. Assets Face value and paid up capital: Share capital (` 100 each) General Reserves A Ltd. B Ltd. Investments: 5,00,000 4,00,000 1,000 shares in B Ltd. 1,30,000 - 2,00,000 1,00,000 2,000 shares in A Ltd. - 2,10,000 10% Debentures 2,00,000 1,50,000 Sundry Assets 7,70,000 4,40,000 9,00,000 6,50,000 9,00,000 6,50,000 Compute the amount of purchase consideration for each of these companies under purchase method as per AS 14. (d) H purchased 500 equity shares of ` 100 each in the ABC Company Limited for ` 62,500 inclusive of brokerage and stamp duty. Some years later the company decided to capitalise its profit and to issue to the holders of equity shares one equity share as Bonus for every equity share held by them. Prior to capitalization, the shares of ABC Company Limited were quoted at ` 175 per share. After the capitalization, the shares were quoted at ` 92.50 per share. H sold the Bonus shares and received ` 90 per share. Show Investment A/c in H s books on average cost basis as per AS 13. (4 5 = 20 Marks) Answer (a) (i) 1. At the time of admission of Govind Let the total share of profit at the time of admission of Govind = 1 Share of New Partner - Govind = Remaining share of profit = 1 = Now, New share of Anil = 3 3 9 x = 4 5 20 New share of Mukesh = 6 3 2 x = 4 5 20 New ratio of Anil, Mukesh and Govind 9 6 1 : : 20 20 4 2. i.e. = 9:6:5 At the time of admission of Madan Let total share at the time of admission of Madan = 1 2 The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING Share of new partner - Madan = 1/5 Remaining share = 1 1/5 = 4/5 Now, New share of Anil = 4 9 9 x = 5 20 25 New share of Mukesh = 4/5 x 6/20 = 6/25 New share of Govind = 4/5 x 5/20 =5/25 New ratio of Anil, Mukesh, Govind and Madan 9 6 5 1 : : : 25 25 25 5 i.e. 9 : 6 :5 :5 (ii) Share of H in profit sharing ratio may be calculated as follows: H s share = Share of H in Goodwill 18,600 3 = = 43,400 Total Goodwill 7 (b) ` (i) Cost of closing inventory for 1,30,000 litres as on 30th June 1,00,000 litres @ ` 15.15 30,000 litres @ ` 14.25 Total (ii) Calculation of cost of goods sold Opening inventories (1,00,000 litres @ ` 15) Purchases June-1 (2,00,000 litres @ `14.25) June-30 (1,00,000 litres @ `15.15) Less: Closing inventories Cost of goods sold (iii) Calculation of profit 15,15,000 4,27,500 19,42,500 ` 15,00,000 28,50,000 15,15,000 58,65,000 (19,42,500) 39,22,500 ` Sales (Given) (A) 47,25,000 Cost of goods sold 39,22,500 1,25,000 Add: General overheads Total cost (B) 40,47,500 Profit (A-B) 6,77,500 3 The Institute of Chartered Accountants of India INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 (c) Let the net assets of A Ltd. be x and net assets of B Ltd. be y. Then x = 7,70,000 2,00,000 + y x = 5,70,000 + y 4x-y = 22,80,000 (i) Similarly y = 4,40,000 1,50,000 + 2/5 x y = 2,90,000 + 2/5 x - 2x +5y = 14,50,000 (ii) By multiplying equation (ii) by 2, we get -4x + 10y = 29,00,000 (iii) By adding equation (i) with equation (iii), we get 4x-y = 22,80,000 -4x+10y = 29,00,000 51,80,000 9y = 51,80,000 i.e. y = = ` 5,75,556 9 Putting the value of y in equation (i) we get 4x 5,75,556 = 22,80,000 4x = 22,80,000 + 5,75,556 28,55,556 x= = 7,13,889 4 A Ltd. ` 7,13,889 Total value of net assets B Ltd ` 5,75,556 Less: 1/4 for shares held by A Ltd. - 1,43,889 Less: 2/5 for shares held by B Ltd. 2,85,556 - 4,28,333 4,31,667 Purchase consideration Presuming that the shares in Sharp Ltd. consist of ` 100 each, Sharp Ltd. may satisfy the purchase consideration as follows: A Ltd. ` 4,28,300 4 The Institute of Chartered Accountants of India 67 4,28,333 Cash ` 4,31,600 33 Shares in Sharp Ltd. (` 100) B Ltd. 4,31,667 PAPER 1 : ACCOUNTING (d) In the books of H Investment Account (Equity Shares of ABC Co. Ltd.) Particulars Face Value Cost Particulars Face Value Cost ` ` 50,000 62,500 By Bank A/c 50,000 45,000 50,000 50,000 31,250 1,00,000 76,250 ` To Balance b/d * To Bonus Shares A/c To Profit & Loss A/c (Refer W.N. 1) ` - By Balance c/d 13,750 (Refer W.N.2) (Profit on sale) Working Note: 1. 1,00,000 76,250 Calculation of profit on sale of bonus shares: ` Sale price of bonus shares 45,000 62,500 x 50,000 = (31,250) 1,00,000 Less: Average cost of shares sold Profit 2. 13,750 Value of closing investment: Market value of shares 50,000 92.50 100 46,250 = Cost price of shares (W.N. 1) = 31,250 Value of investment will be least of market value or average cost price, i.e. ` 31,250 Question 2 The Young Trust runs a Charitable Hospital and a Dispensary. The following information is available for the year ended 31st March, 2009 from the books of accounts: Dr. Capital fund Donations received during the year Recovery of the rent * Cr. ` ` 9,00,000 6,00,000 2,75,000 Bonus issue was made some years later to the purchase of initial 500 equity shares. 5 The Institute of Chartered Accountants of India INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 Fee received from patients Recovery of food supplies Surgical equipments Building & operation theatres Consumption in the hospital of: Medicines Food stuff Chemicals Closing stock of hospital Medicines Food stuff Chemicals Sales of medicines (dispensary) Opening stock of medicines (dispensary) Purchase of medicines (dispensary) Salaries: Administrative staff Doctors/Nurses Assistant at the dispensary Electricity & power charges: Hospital Dispensary Furniture & equipments Ambulance Postage & telephone expenses less recovery Subscription to medical journals Ambulance maintenance charges less recovery Consumption of bed sheets Fixed deposits made on 01-04-2008 for three years at interest @ 11% p.a. Cash & bank balances Sundry debtors (dispensary) Sundry creditors (dispensary) Remuneration to trustees, trust office expenses etc. Additional information : 4,55,000 3,20,000 3,00,000 1,40,000 1,20,000 90,000 30,000 20,000 4,000 1,000 55,000 3,00,000 3,10,000 30,000 1,50,000 15,000 1,05,000 2,000 80,000 30,000 26,000 21,000 90,000 5,00,000 41,300 60,500 21,000 800 41,000 (a) The dispensary supplied medicines to the hospital worth ` 60,000, for which no adjustment was made in the books. (b) The closing stock of the medicines was ` 40,000 at the dispensary. 6 The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING (c) The stock of medicines on 31st March, 2009 at the hospital included ` 4,000 worth of medicines belonging to the patients, which has not been considered while arriving at the figure of consumption of medicines. (d) The donations were received towards Corpus of the Trust. (e) On 15th August, 2008, surgical equipments were donated having market value of ` 40,000. (f) The hospital is to receive the grant of 25% of the amount spent on treatment of the poor patients from the Red Cross Society. Such expenditure was ` 50,000. (g) Out of the fee recovered from the patients, 10% is to be given to the Specialist retained by the Hospital. (h) Depreciation on the assets on the closing balances: Surgical Equipments @ 20% Building @ 5% Furniture & Equipments @ 10% Ambulance @ 30% You are required to prepare: (i) Income and Expenditure Account of the Hospital, Dispensary and Trust. (ii) Statement of Affairs of the Trust for the year ended 31st March, 2009. (16 Marks) Answer Income & Expenditure Account of Dispensary for the year ended 31st March, 2009 Particulars Amount Particulars ` To Opening stock of medicines To Purchase of medicines ` 55,000 By Sales of medicine 3,10,000 3,00,000 By Supply of medicines to hospital 60,000 By Closing stock of medicines 40,000 To Salaries to assistants 15,000 To Electricity & power charges 2,000 To Surplus transferred to trust income & expenditure account (Bal. Fig.) 38,000 4,10,000 7 The Institute of Chartered Accountants of India Amount 4,10,000 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 Income & Expenditure Account of Hospital for the year ended 31st March, 2009 Particulars To Consumption of: Medicines (W.N.1) 1,84,000 Food stuff 90,000 Chemicals 30,000 To Salaries: Admn. staff 30,000 Doctors & nurses 1,50,000 To Electricity & power charges To Subscription to medical journals To Consumption of bed sheets To Retainership of specialists outstanding (W.N.2) To Depreciation on: Surgical equipments 99,000 Building 16,000 Furniture & fixtures 8,000 Ambulance 9,000 Amount Particulars ` By Fees received from patients By Recovery for rent By Recovery of food supplies 3,04,000 By Ambulance maintenance charges less recovery By Grant receivable 1,80,000 from Red Cross 1,05,000 Society 21,000 (25% of ` 50,000) 90,000 By Deficit transferred to trust income & 30,000 expenditure account 1,32,000 8,62,000 Income & Expenditure Account of the Young Trust Amount ` 3,00,000 2,75,000 1,40,000 800 12,500 1,33,700 8,62,000 for the year ended 31st March, 2009 Particulars To Deficit from hospital To Postage & telephone expenses less recovery To Remuneration to trustees, trust office expenses etc. Amount Particulars ` 1,33,700 By Surplus from dispensary By Interest accrued on 26,000 fixed deposits 21,000 By Deficit (Excess of expenditure over income) 1,80,700 8 The Institute of Chartered Accountants of India Amount ` 38,000 55,000 87,700 1,80,700 PAPER 1 : ACCOUNTING Statement of Affairs of Young Trust as on 31st March, 2009 Liabilities Amount Assets Amount ` Capital fund: Opening balance ` Building Less: Depreciation Surgical equipment Add: Donation Cash Surgical equipment 6,00,000 40,000 15,40,000 Less: Deficit 87,700 99,000 Furniture Add: Donations: 4,55,000 40,000 4,95,000 Less: Depreciation 9,00,000 3,20,000 16,000 80,000 Less: Depreciation 14,52,300 Ambulance Sundry creditors (dispensary) 41,000 Less: Depreciation Stock: Outstanding retainership to specialist (W.N.2) 30,000 8,000 3,04,000 3,96,000 72,000 30,000 9,000 Medicines: Dispensary 40,000 Hospital 21,000 16,000 Food stuff Hospital (20,000 4,000) Chemicals Sundry debtors 4,000 1,000 61,000 (Dispensary) Grant receivable from Red Cross 60,500 Society 12,500 fixed deposits 5,00,000 Interest accrued Cash & bank balance 15,23,300 41,300 15,23,300 9 The Institute of Chartered Accountants of India 55,000 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 Working Notes: 1. Consumption of medicines in hospital: ` Medicines 1,20,000 Supplies received from dispensary 60,000 Medicines in stock belonging to patients 4,000 Total 2. 1,84,000 Calculation of fee given to specialist: 10% of ` 3,00,000 = ` 30,000 Note: It is presumed that surgical equipment donated on 15th August 2008 was not included in the closing balance of surgical equipments as on 31 st March, 2009. Question 3 From the following information, prepare a Cash Flow Statement as per AS 3 for Banjara Ltd., using direct method: Balance Sheet as on March 31, 2010 (` 000) 2010 2009 Assets: Cash on hand and balances with bank 200 25 Marketable securities (having one month maturity) 670 135 1,700 1,200 100 900 1,950 2,500 2,500 Sundry debtors Interest receivable Inventories Investments Fixed assets at cost 2,180 1,910 Accumulated depreciation Fixed assets (net) (1,450) (1,060) 730 850 6,800 6,660 Sundry creditors 150 1,890 Interest payable 230 100 Income tax payable 400 1,000 Long term debt 1,110 1,040 Total liabilities 1,890 4,030 Total assets Liabilities: 10 The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING Shareholder s fund: Share capital 1,500 1,250 Reserves 3,410 1,380 4,910 Total liabilities and shareholders fund 6,800 Statement of Profit or Loss for the year ended 31-3-10 2,630 6,660 (` 000) Sales 30,650 Cost of sales (26,000) Gross profit 4,650 Depreciation (450) Administrative and selling expenses (910) Interest expenses Interest income (400) 300 Dividend income 200 Net profit before taxation and extraordinary items Extraordinary items: Insurance proceeds from earthquake disaster settlement 3,390 140 Net profit after extraordinary items Income tax 3,530 (300) Additional information: 3,230 (` 000) (i) An amount of ` 250 was raised from the issue of share capital and a further ` 250 was raised from long-term borrowings. (ii) Interest expense was ` 400 of which ` 170 was paid during the period ` 100 relating to interest expense of the prior period was also paid during the period. (iii) Dividends paid were ` 1,200. (iv) Tax deducted at source on dividends received (including in the tax expense of ` 300 for the year) amounted to ` 40. (v) During the period the enterprise acquired fixed assets for ` 350. The payment was made in cash. (vi) Plant with original cost of ` 80 and accumulated depreciation of ` 60 was sold for ` 20. (vii) Sundry debtors and Sundry creditors include amounts relating to credit sales and credit purchase only. (16 Marks) 11 The Institute of Chartered Accountants of India INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 Answer Cash Flow Statement (direct method) ` Cash flows from Operating Activities Cash receipts from customers (W.N.2) 30,150 Cash paid to suppliers, employees and for expenses (W.N.3) Cash generated from operations Income tax paid (W.N.4) (27,600) 2,550 (860) 1,690 Cash flow before extraordinary item: proceeds from earthquake disaster settlement 140 Net cash from operating activities 1,830 Cash flows from Investing Activities Purchase of fixed assets (350) Proceeds from sale of equipment 20 Interest received (300 100) 200 Dividends received (200 40) Net cash from investing activities 160 30 Cash flows from Financing Activities Proceeds from issuance of share capital 250 Proceeds from long term borrowings Repayment of long term borrowings (W.N.5) 250 (180) Interest paid (W.N.6) Dividends paid (270) (1,200) Net cash used in financial activities (1,150) Net increase in cash and cash equivalents 710 Cash and cash equivalents at beginning of the period (W.N.1) 160 Cash and cash equivalents at end of the period (W.N.1) Working Notes: 870 (1) Cash and cash equivalents Cash and cash equivalents consist of cash in hand and balances with banks and investments in money market instruments for short period. 12 The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING ` 000 2010 2009 Cash in hand and balance with bank 200 25 Short-term investments 670 135 870 160 Cash and cash equivalents (2) Cash receipts from customers ` 000 Total sales 30,650 Add: Sundry debtors at the beginning of the year 1,200 31,850 Less: Sundry debtors at the end of the year (1,700) Cash sales (3) Cash paid to suppliers, employees and for expenses 30,150 Cost of sales Administrative and selling expenses Add: Sundry creditors at the beginning of the year Inventories at the end of year Less: Sundry creditors at the end of year Inventories at the beginning of the year (4) Income tax paid (including TDS from dividends received) Income tax expense for the year (including tax deducted at source from dividends received) Add: Income tax liability at the beginning of the year Less: Income tax liability at the end of the year 1,890 900 (150) (1,950) ` 000 26,000 910 26,910 2,790 29,700 (2,100) 27,600 ` 000 300 1,000 1,300 (400) 900 Out of ` 900 thousands, tax deducted at source on dividends received (amounting to `40 thousands) is included in cash flows from investing activities and the balance of `860 thousands is included in cash flows from operating activities. 13 The Institute of Chartered Accountants of India INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 (5) Repayment of long term borrowings during the year Long term debts at the beginning of the year Add: Long term borrowings made during the year ` 000 1,040 250 1,290 Less: Long term borrowings at the end of the year (1,110) 180 ` 000 (6) Interest paid during the year Interest expense for the year 400 Add: Interest payable at the beginning of the year 100 500 Less: Interest payable at the end of the year (230) 270 Question 4 Ramu, Shamu and Raju were partners sharing profits and losses in the ratio of 3 : 2 : 2. Their Balance Sheet as on 01-01-2009 was as follows: Liabilities ` Assets Capital accounts Fixed assets 20,000 80,000 Stock Debtors Ramu 30,000 Shamu 20,000 Raju ` 15,000 12,000 70,000 Cash & bank Reserves 14,000 Creditors 1,951 24,951 On (i) 1st 1,08,951 October, 2009, Ramu died. His heirs agreed that: 1,08,951 Goodwill of the firm be valued at 2 years purchase of average profit of past three years. Profits for the year 2006, 2007 and 2008 were ` 30,000, ` 40,000 and ` 47,600 respectively. (ii) Fixed assets be revalued at ` 1,01,000 (iii) Profit to be shared, earned in subsequent period after death of Ramu till settlement of his executors claim. Ramu s heirs account was settled on 31-12-2009 by bringing in required cash by remaining partners in equal proportion leaving cash balance of ` 1,234. Each partner had drawn @ ` 1,000 per month for personal use. 14 The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING Profit for the current year after charging depreciation of ` 9,000 (` 6,000 for first three quarters and ` 3,000 for last quarter ) was ` 46,600 earned evenly through-out the year. You are requested to prepare Profit & Loss Appropriation A/c, Cash & Bank A/c, Ramu s Executor s A/c and Partners Capital Accounts for the year ended on 31-12-2009 assuming remaining partners decided not to retain goodwill in the books. (16 Marks) Answer (i) Profit & Loss Account ` (for ` (for ` (for nine ` (for nine three months) three months) months months) 6,000 3,000 By Profit 41,700 13,900 (W.N.1) 35,700 10,900 41,700 13,900 41,700 13,900 Profit & Loss Appropriation Account To Depreciation To Net profit ` (for nine months) To Partners capital A/cs Ramu Shamu Raju To Ramu s Executor A/c (W.N.2) (ii) ` (for three months 15,300 10,200 10,200 By Net Profit 3,043 3,044 4,813 35,700 10,900 35,700 st Partners Capital Accounts as on 1 October, 2009 Ramu To Ramu s Executors A/c To Balance c/d Shamu Raju (`) To Drawings ` (for nine ` (for months) three months 35,700 10,900 (`) (`) 9,000 9,000 87,414 - - By Reserves - 55,276 10,900 55,276 By Goodwill * 9,000 By Balance b/d * Ramu Shamu (`) Raju (`) (`) 30,000 20,000 20,000 6,000 4,000 4,000 As per para 36 of AS 10, Accounting for fixed Assets, goodwill should be recorded in the books only when some consideration in money or money s worth has been paid for it. However, 15 The Institute of Chartered Accountants of India INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 (W.N.3) 36,114 24,076 9,000 24,076 6,000 6,000 15,300 10,200 10,200 96,414 64,276 64,276 By Fixed Assets ** By Profit & Loss Appropriation A/c 96,414 (iii) 64,276 64,276 Partners Capital Accounts as on 31.12.2009 Shamu Raju Shamu Raju (`) (`) (`) (`) By Balance b/d 55,276 55,276 To Drawings 3,000 3,000 By Cash 62,255 62,255 To Goodwill 42,133 42,133 To Balance c/d 75,441 75,442 3,043 3,044 1,20,574 1,20,575 1,20,574 1,20,575 By Profit & Loss Appropriation A/c Ramu s Executors A/c as on 31.12.2009 (iv) To Bank (v) To Balance b/d To Shamu s capital A/c To Raju s capital A/c (`) 92,227 By Balance b/d By P&L Appropriation A/c 92,227 Cash & Bank A/c (`) 1,951 By Ramu s executors A/c 62,255 By Partners Capital A/cs (Drawings): 62,255 Ramu Shamu Raju By Balance c/d 1,26,461 (`) 87,414 4,813 92,227 (`) 92,227 9,000 12,000 12,000 1,234 1,26,461 in the above solution, goodwill has been raised in the books at the time of death of a partner and written off by the remaining partners, as per the information given in the question. ** Appreciation of fixed assets may also be recorded through Revaluation Account . 16 The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING Working Notes: 1. Profit for the year before depreciation: ` Profit after depreciation 46,600 9,000 Add: Depreciation 2. Profit before depreciation 55,600 As per section 37 of Partnership Act, in case of settlement of deceased partner s account on the date other then the date of death, the executor of deceased partner has a choice to take Either(A) Profit earned on un-settled capital = Profit x Unsettled capital as on 1.10.09 Total capital as on 1.10.09 = 10,900 x 87,414 (87,414 + 55,276 + 55,276) = 10,900 x 87,414 = ` 4,813 1,97,966 Or(B) Interest on capital @ 6% i.e. ` 87,414 6% 3/12 = ` 1,311 Option A is beneficial, therefore heirs of Ramu will opt for proportionate share of profit i.e. ` 4,813. 3. Valuation of Goodwill: Weight Product Profit for 2006 ` 30,000 1 30,000 2007 40,000 2 80,000 2008 47,600 3 1,42,800 1,17,600 6 2,52,800 Weighted Average Profit = 2,52,800 = ` 42,133 6 Goodwill = 2 years purchase of average profit = ` 42,133 2 = ` 84,266. 17 The Institute of Chartered Accountants of India INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 Question 5 (a) The following is the Balance Sheet of Bumbum Limited as at 31st March, 2009: ` Sources of funds Authorized capital 5,00,000 50,000 Equity shares of ` 10 each 10,000 Preference shares of ` 100 each 10,00,000 15,00,000 Issued subscribed and paid up 30,000 Equity shares of ` 10 each 3,00,000 5,000 Redeemable 8% Preference shares of ` 100 each 5,00,000 Reserves & Surplus Securities Premium 6,00,000 General Reserve Profit & Loss A/c 6,50,000 1,80,000 2,50,000 2500, 9% Debentures of ` 100 each Sundry Creditors 1,70,000 26,50,000 Application of funds Fixed Assets (net) Investments (market value ` 5,80,000) 7,80,000 4,90,000 Deferred Tax Assets Sundry Debtors 3,40,000 6,20,000 Cash & Bank balance Preliminary expenses 2,80,000 1,40,000 26,50,000 In Annual General Meeting held on 20th June, 2009 the company passed the following resolutions: (i) To split equity share of ` 10 each into 5 equity shares of ` 2 each from 1st July, 09. (ii) To redeem 8% preference shares at a premium of 5%. (iii) To redeem 9% Debentures by making offer to debenture holders to convert their holdings into equity shares at ` 10 per share or accept cash on redemption. (iv) To issue fully paid bonus shares in the ratio of one equity share for every 3 shares held on record date. 18 The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING On 10th July, 2009 investments were sold for ` 5,55,000 and preference shares were redeemed. 40% of Debentureholders exercised their option on accept cash and their claims were settled on 1st August, 2009. The company fixed 5th September, 2009 as record date and bonus issue was concluded by 12th September, 2009. You are requested to journalize the above transactions including cash transactions and prepare Balance Sheet as at 30 th September, 2009. All working notes should form part of your answer. (12 Marks) (b) Ujju Enterprise furnishes you the following information for the period October to December, 2009. You are requested to draw up Debtors Ledger Adjustment account in the General Ledger: (i) Total sales amounted to ` 2,20,000 including sale of old motor car for ` 10,000 (book value ` 5,000). Total credit sales were 80% higher than the cash sales. (ii) Cash collection from debtors amounted to 60% of the aggregate of the opening debtors amounting to ` 40,000 and credit sales for the period. Debtors were allowed discount of ` 10,000. (iii) Bills receivables drawn during the period totalled ` 20,000 of which one bill of ` 5,000 was dishonoured for non-payment as the party became insolvent and his estate realized 50 paise in a rupee. (iv) A sum of ` 3,000 was written off as bad debts, ` 7,000 was realized against bad debts written off in earlier years and provision of ` 6,000 was made for doubtful debts. (4 Marks) Answer (a) Bumbum Limited Journal Entries 2009 July 1 Dr. (`) Equity Share Capital A/c (` 10 each) Dr. Cr. (`) 3,00,000 3,00,000 To Equity share capital A/c (` 2 each) (Being equity share of ` 10 each splitted into 5 equity shares of ` 2 each) July 10 Cash & Bank balance A/c Dr. To Investment A/c To Profit & Loss A/c 4,90,000 65,000 (Being investment sold out and profit on sale credited to Profit & Loss A/c) 19 The Institute of Chartered Accountants of India 5,55,000 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 July 10 8% Redeemable preference share capital A/c Dr. 5,00,000 Premium on redemption of preference share A/c Dr. 25,000 To Preference shareholders A/c 5,25,000 (Being amount payable to preference share holders on redemption) July 10 Preference shareholders A/c Dr. 5,25,000 To Cash & bank A/c 5,25,000 (Being amount paid to preference shareholders) July 10 Securities premium A/c Dr. 5,00,000 To Capital redemption reserve A/c 5,00,000 (Being amount equal to nominal value of preference shares transferred to Capital Redemption Reserve A/c on its redemption as per the law) Aug 1 9% Debentures A/c Dr. 2,50,000 Interest on debentures A/c Dr. 7,500 To Debentureholders A/c 2,57,500 (Being amount payable to debentureholders along with interest payable) Aug. 1 Debentureholders A/c Dr. 2,57,500 To Cash & bank A/c (1,00,000 + 7,500) 1,07,500 To Equity share capital A/c 30,000 To Securities premium A/c 1,20,000 (Being claims of debenture holders satisfied) Sept. 5 Securities premium A/c Dr. 1,10,000 To Bonus to shareholders A/c 1,10,000 (Being securities premium capitalized to issue bonus shares) Sept. 12 Bonus to shareholders A/c Dr. To Equity share capital A/c (Being 55,000 fully paid equity shares of ` 2 each issued as bonus in ratio of 1 share for every 3 shares held) 20 The Institute of Chartered Accountants of India 1,10,000 1,10,000 PAPER 1 : ACCOUNTING Sept. 30 Securities Premium A/c Dr. 25,000 To Premium on redemption of preference shares A/c 25,000 (Being premium on preference shares adjusted from securities premium account) Sept. 30 Profit & Loss A/c To Interest on debentures A/c Note: Dr. 7,500 7,500 (Being interest on debentures transferred to Profit and Loss Account) For capitalisation of Bonus shares and transfer to capital redemption reserve account any other free reserves given in the balance sheet may also be used. Balance Sheet as at 30th September, 2009 (`) Sources of funds Authorized share capital 5,00,000 2,50,000 Equity shares of ` 2 each 10,000 Preference shares of `100 each 10,00,000 15,00,000 Issued, subscribed and paid up 4,40,000 2,20,000 Equity shares of ` 2 each Reserves & Surplus Securities Premium 85,000 Capital Redemption Reserve General Reserve 5,00,000 6,50,000 Profit & Loss A/c (1,80,000 + 65,000 7,500) 2,37,500 Current Liabilities & Provisions 1,70,000 Sundry Creditors Total 20,82,500 Application of funds Fixed assets (Net) 7,80,000 Deferred tax assets 3,40,000 Sundry debtors 6,20,000 Cash & bank balance 2,02,500 1,40,000 Preliminary expenses Total 21 The Institute of Chartered Accountants of India 20,82,500 INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 Working Notes: ` 1. Redemption of preference share: 5,00,000 5000 preference shares of ` 100 each 25,000 Premium on redemption @ 5% Amount Payable 2. 5,25,000 Redemption of Debentures 2,50,000 2,500 Debentures of ` 100 each Less:Cash option exercised by 40% holders Conversion option exercised by remaining 60% Equity shares issued on conversion = (1,00,000) 1,50,000 1,50,000 = 15,000 shares 10 4. Issue of Bonus Shares Existing equity shares after split (30,000 x 5) ` 1,50,000 shares Equity shares issued on conversion Equity shares entitled for Bonus 3. 15,000 shares 1,65,000 shares Bonus shares (1 share for every 3 shares held) to be issued Securities Premium A/c 55,000 shares Balance as per balance sheet ` 6,00,000 Add: Premium on equity shares issued on conversion of debentures (15,000 x 8) 1,20,000 7,20,000 Less: Capitalization for bonus issue (55,000 x 2) Adjustment for premium on preference shares Transfer to capital redemption reserve 5. Balance Cash and Bank Balance (1,10,000) (25,000) (5,00,000) 85,000 Balance as per balance sheet Add: Realization on sale of investment 2,80,000 5,55,000 Less: Paid to preference share holders 8,35,000 (5,25,000) Paid to Debenture holders (7,500 + 1,00,000) Balance (1,07,500) 2,02,500 22 The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING 6. Interest of ` 7,500 paid to debenture holders have been debited to Profit & Loss Account. (b) In the book of Ujju Enterprise Debtors Ledger Adjustment Account in the General Ledger Dr. Cr. 2009 ` 2009 Oct. 1 To Oct. 1 to To Dec.31 Balance b/d 40,000 Oct. 1 By General Ledger to Dec. Adj. A/c: 31 General Ledger Adj. A/c: Sales (Refer W.N.) ` Collection from debtors-bank [60% of ` 1,35,000 1,05,000 (40,000 + 1,35,000)] 5,000 Discount allowed 10,000 Bills receivables Bills Receivables dishonoured 20,000 Bad debts (`2500 + `3000) By Balance c/d Note: Total 1,80,000 Total No entries are to be made: 5,500 39,500 1,80,000 (a) For ` 7,000 realised against bad debts written off in earlier years, and (b) For provision of ` 6,000 made for doubtful debts. Working Note: Calculation of credit sales : = Less: Cash sales = 2,10,000 100 (180 + 100 ) Credit sales = (75,000) = Total trade sales = 2,20,000 10,000 ` 2,10,000 1,35,000 Question 6 (a) The partners of Shri Enterprises decided to convert the partnership firm into a Private Limited Company Shreya (P) Ltd. with effect from 1st January, 2008. However, company could be incorporated only on 1 st June, 2008. The business was continued on behalf of the company and the consideration of ` 6,00,000 was settled on that day along with 23 The Institute of Chartered Accountants of India INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 interest @ 12% per annum. The company availed loan of ` 9,00,000 @ 10% per annum on 1st June, 2008 to pay purchase consideration and for working capital. The company closed its accounts for the first time on 31 st March, 2009 and presents you the following summarized profit and loss account: ` Sales ` 19,80,000 Cost of goods sold 11,88,000 Discount to dealers 46,200 Directors remuneration 60,000 Salaries 90,000 Rent 1,35,000 Interest Depreciation 1,05,000 30,000 Office expenses Sales promotion expenses 1,05,000 33,000 15,000 18,07,200 Preliminary expenses (to be written off in first year itself) Profit 1,72,800 Sales from June, 2008 to December, 2008 were 2 times of the average sales, which further increased to 3 times in January to March quarter, 2009. The company recruited additional work force to expand the business. The salaries from July, 2008 doubled. The company also acquired additional showroom at monthly rent of ` 10,000 from July, 2008. You are required to prepare a Profit and Loss Account showing apportionment of cost and revenue between pre-incorporation and post-incorporation periods. Also suggest how the pre-incorporation profits/losses are to be dealt with. (10 Marks) (b) Sonam Corporation sells goods on hire purchase basis. The hire purchase price is cost plus 50%. From the following particulars prepare Hire Purchase Trading Account for the year ended 31st March, 2010: ` Instalments not yet due on 01-04-09 Instalments due on 01-04-09 Goods sold on hire purchase during the year Instalments collected from HP debtors Stock with customers at hire purchase price Goods re-possessed during the year On 31-03-2010 Goods repossessed were valued at 24 The Institute of Chartered Accountants of India 3,00,000 1,50,000 9,00,000 6,80,000 4,50,000 60,000 Cost less 40% (6 Marks) PAPER 1 : ACCOUNTING Answer (a) To Cost of sales To Gross profit To Discount to dealers To Directors remuneration To Salaries (W.N.2) To Rent (W.N.3) To Interest (W.N.4) To Depreciation To Office expenses To Preliminary expenses To Sales promotion expenses To Net profit Shreya (P) Limited Profit and Loss Account for 15 months ended 31st March, 2009 Pre. inc. Post inc. (5 (10 months) months) (`) (`) 1,80,000 10,08,000 By Sales 1,20,000 6,72,000 (W.N.1) 3,00,000 16,80,000 7,000 39,200 By G.P. - 60,000 18,750 15,000 30,000 10,000 35,000 - 3,00,000 1,20,000 16,80,000 6,72,000 71,250 1,20,000 75,000 20,000 70,000 15,000 5,000 28,000 1,73,550 1,20,750 6,72,000 Treatment of pre-incorporation loss: By Loss Pre. inc. Post inc. (5 (10 months) months) (`) (`) 3,00,000 16,80,000 750 1,20,750 6,72,000 Pre-incorporation loss may, either be considered as a reduction from any capital reserve accruing in relation to the transaction or be treated as goodwill. Working Notes: 1. Calculation of sales ratio: Let the average sales per month in pre-incorporation period be x Average Sales (Pre-incorporation) = x X 5 = 5x Sales (Post incorporation) from June to December, 2008 = 2 x X 7 = 17.5x From January to March, 2009 = 3 x X 3 = 10.5x Total Sales 28.0x Sales ratio of pre-incorporation & post incorporation is 5x : 28x 25 The Institute of Chartered Accountants of India INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 2. Calculation of ratio for salaries Let the average salary be x Pre-incorporation salary = x X 5= 5x Post incorporation salary June, 2008 = x July to March, 2009 = x X 9 X 2 = 18x 19x Ratio is 5 : 19 3. 4. Calculation of Rent ` Total rent 1,35,000 Less: Additional rent for 9 months @ ` 10,000 p.m. 90,000 Rent of old premises apportioned in time ratio 45,000 Apportionment Pre Inc. Post Inc. Old premises rent 15,000 30,000 Additional Rent 90,000 15,000 1,20,000 Calculation of interest Pre-incorporation period from January, 2008 to May, 2008 6,00,000 12 5 = 100 12 ` 30,000 Post incorporation period from June, 2008 to March, 2009 9,00,000 10 10 = 100 12 ` 75,000 ` 1,05,000 (b) Hire Purchase Trading Account for the year ended 31.03.2010 ` To Opening balance: Hire purchase stock Hire purchase debtors 3,00,000 1,50,000 To 9,00,000 Goods sold on hire purchase To Hire purchase stock reserve (closing) 1,50,000 26 The Institute of Chartered Accountants of India ` By Hire purchase stock reserve (opening) By Bank (Installments Collected) By Goods repossessed (W.N.3) By Goods sold on hire purchase (loading) 1,00,000 6,80,000 24,000 3,00,000 PAPER 1 : ACCOUNTING To Profit & Loss A/c 2,14,000 By Closing balances: Hire purchase stock By Hire purchase debtors (W.N.2) 17,14,000 Working Notes: 4,50,000 1,60,000 17,14,000 Memorandum Hire Purchase Stock A/c (1) ` 3,00,000 By Hire purchase debtors A/c (Bal. fig.) To Goods sold on hire By Balance c/d 9,00,000 purchase 12,00,000 (2) Memorandum Hire Purchase Debtors A/c To Balance b/d To Balance b/d To Hire purchase stock A/c (W.N.1) ` 1,50,000 By Bank/Cash 7,50,000 By Goods repossessed 9,00,000 By Balance c/d (Bal. fig.) (3) Value of goods re-possessed: (` 60,000 x 100 60 ) = ` 24,000 x 150 100 ` 7,50,000 4,50,000 12,00,000 ` 6,80,000 60,000 1,60,000 9,00,000 Note : It is assumed that figures given in the question are at invoice price. Question 7 Answer any four of the following: (a) A company installed a plant at a cost of ` 20 lacs with estimated useful life of 10 years and decided to depreciate on straight line method. In the fifth year, company decided to switch over from straight line method to written down value method. Compute the resultant surplus/deficiency if any, and state how will you treat the same in the accounts. (b) 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? (c) An amount of ` 9,90,000 was incurred on a contract work upto 31-03-2010. 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 ` 22,500. It is estimated that by spending an additional amount of ` 60,000 (including provision for 27 The Institute of Chartered Accountants of India INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 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 Profit and Loss Account as per AS 7. (d) A trader intends to take a loss of profit policy with indemnity period of 6 months, however, he could not decide the policy amount. From the following details, suggest the policy amount: ` Turnover in last financial year 4,50,000 Standing charges in last financial year 90,000 Net profit earned in last year was 10% of turnover and the same trend expected in subsequent year. Increase in turnover expected 25%. To achieve additional sales, trader has to incur additional expenditure of ` 31,250. (e) From the following details find out the average due date: Date of Bill Amount (`) Usance of Bill 29th January, 2009 5,000 1 month 20th March, 2009 4,000 2 months 12th July, 2009 7,000 1 month 10th August, 2009 6,000 2 months (4 4 = 16 Marks) Answer (a) Table showing depreciation under Straight Line Method (SLM) and depreciation under Written Down Value Method (WDV) ` in lacs Depreciation Year SLM WDV I II 2.00 1 2.00 2.00 2 1.80 III 2.00 1.62 1 Depreciation as per SLM ` 20 lakhs/10years = ` 2 lakhs. Depreciation rate under SLM is 10% (2,00,000/20,00,000 100). depreciation rate will remain same under WDV method also. 2 28 The Institute of Chartered Accountants of India It is assumed that PAPER 1 : ACCOUNTING IV 2.00 Total 1.46 * 8.00 6.88 Resultant surplus on change in method of depreciation from SLM to WDV = (8.00 6.88) ` 1.12 lakhs. As per para 21 of AS 6 Depreciation Accounting , when a change in the method of depreciation is made, depreciation should be re-calculated in accordance with the new method from the date of the asset put to use. The deficiency or surplus arising from retrospective re-computation of depreciation in accordance with the new method should be adjusted in the accounts in the year in which the method of depreciation is changed. In the given case, surplus amounting ` 1.12 lakhs (8.00 6.88) should be credited to profit and loss statement in the fifth year. Such a change should be treated as a change in accounting policy and its effect should be quantified and disclosed as per AS 5. Net Profit loss for the period, prior period items and changes in Accounting Policies). (b) 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. (c) Computation of estimate of profit as per AS 7 ` Expenditure incurred upto 31.3.2010 Estimated additional expenses (including provision for contingency) Estimated cost (A) Contract price (B) 10,50,000 12,50,000 Total estimated profit [(B-A)] 2,00,000 Percentage of completion (9,90,000 / 10,50,000) x 100 * Rounded off up to two decimals. 29 The Institute of Chartered Accountants of India 9,90,000 60,000 94.29% INTEGRATED PROFESSIONAL COMPETENCE EXAMINATION : NOVEMBER, 2010 Computation of estimate of the profit to be taken to Profit and Loss Account: Total estimated pr ofit 2,00,000 Expenses incurred till 31.3.2010 Total estimated cost 9,90,000 = ` 1,88,571 10,50,000 According to para 21 of AS 7 Construction Contracts , when the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract should be recognised as revenue and expenses respectively by reference to stage of completion of the contract activity at the reporting date. Thus estimated profit amounting `1,88,571 should be recognised as revenue in the statement of profit and loss. (d) (a) Calculation of Gross Profit = Net Profit + Standing Charges 100 Turnover = Gross Profit 45,000 + 90,000 100 = 30% 4,50,000 (b) Calculation of policy amount to cover loss of profit ` Turnover in the last financial year 4,50,000 Add: 25% increase in turnover 1,12,500 5,62,500 Gross profit on increased turnover (5,62,500 x 30%) 1,68,750 Add: Additional standing charges 31,250 Policy Amount 2,00,000 Therefore, the trader should go in for a loss of profit policy of ` 2,00,000. 30 The Institute of Chartered Accountants of India PAPER 1 : ACCOUNTING (e) Calculation of Average Due Date (Taking 3rd March, 2009 as base date) Date of bill Term 2009 Due date Amount 2009 Product No. of days from the base date i.e. 3rd March,2009 (`) 29th January 20th March 12th July 10th August (`) (`) 3rd 5,000 0 0 2 months 23rd May 4,000 81 3,24,000 1month 14th Aug. 2 7,000 164 11,48,000 6,000 224 13,44,000 1 month 2 months March 1 13th Oct. 22,000 Average due date = Base date + Days equal to = 3rd March, 2009 + = Sum of Products Sum of Amounts 3rd March, 2009 + 128 days = 28,16,000 9th July, 2009 28,16,000 22,000 1 Bill dated 29th January, 2009 has the maturity period of one month, but there is no corresponding date in February, 2009. Therefore, the last day of the month i.e. 28th February, 2009 shall be deemed maturity date and due date would be 3rd March, 2009 (after adding 3 days of grace). 2 Bill dated 12th July, 2009 has the maturity period of one month, due date (after adding 3 days of grace) falls on 15th August, 2009. 15th August being public holiday, due date would be preceding date i.e. 14th August, 2009. 31 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 ...

 

  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