Trending ▼   ResFinder  

CA IPCC : Sample / Mock Test Paper (with Model Answers) - ADVANCED ACCOUNTING Sep 2014

20 pages, 19 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 ...

Test Series: September, 2014 MOCK TEST PAPER 1 INTERMEDIATE (IPC): GROUP II PAPER 5 : ADVANCED ACCOUNTING Question No. 1 is compulsory. Answer any five questions from the remaining six questions. Wherever necessary, suitable assumptions may be made and disclosed by way of a note. Working notes should form part of the answer. Time Allowed 3 Hours 1. Maximum Marks 100 (a) A major fire has damaged the assets in a factory of a Limited Company on 5th April five days after the year end and closure of accounts. The loss is estimated at Rs. 10 crores out of which Rs. 7 crores will be recoverable from the insurers. Explain briefly how the loss should be treated in the final accounts for the previous year. (b) Sohan Ltd. provides you the following information: Issued capital 1,00,000 equity shares of Rs. 10 each Reserves and surplus Capital reserve Rs. 5,00,000 Securities premium Rs. 9,00,000 Revenue reserve Rs. 15,00,000 The company resolved to buy 10% of its equity share capital @ Rs. 60 per share. Give the necessary journal entries in the books of Sohan Ltd. (c) A loan account remains out of order as on the date of Balance Sheet of a Bank. The account has been classified as doubtful assets (upto 1 year). Details of the accounts are: Outstanding Rs. 6,73,000 ECGC coverage 25% (Limited to Rs. 1,00,000) Value of security held Rs. 1,50,000 Compute the necessary provision to be made by a Bank as per applicable rates. (d) A company went into liquidation whose creditors are Rs. 36,000. This amount of Rs. 36,000 includes Rs. 6,000 on account of wages of 15 men at Rs. 100 per month for 4 months, immediately before the date of winding up, Rs. 9,000 being the salaries of 5 employees at Rs. 300 per month for the previous 6 months, Rent for godown for the last six months amounting to Rs. 3,000; Income-tax deducted out of salaries of employees Rs. 1,000. In addition it is estimated that the company would The Institute of Chartered Accountants of India have to pay Rs. 3,000 as compensation to an employees for injuries suffered by him, which was contingent liability not accepted by the company and not included in above said creditors figure. Find the amount of Preferential Creditors. 2. (4 x 5 = 20 Marks) Ajay Enterprises, a Partnership firm in which A, B and C are three partners sharing profits and losses in the ratio of 4 : 3 : 3. The balance sheet of the firm as on 31st December, 2013 is as below: Liabilities A s Capital B s Capital Rs. Assets 15,000 Factory Building 7,500 Plant & Machinery Rs. 24,160 16,275 C s Capital 15,000 Debtors 5,400 B s Capital Sundry Creditor 4,500 Stock 16,500 Cash at Bank 12,390 275 58,500 58,500 On balance sheet date all the three partners have decided to dissolve their partnership. Since the realization of assets was protracted, they decided to distribute amounts as and when feasible and for this purpose they appoint C who was to get as his remunerations 1% of the value of the assets realized other than cash at Bank and 10% of the amount distributed to the partners. Assets were realized piecemeal as under: First instalment Second installment Rs. 18,650 Rs. 17,320 Third installment Last installment Rs. 10,000 Rs. 7,000 Dissolution expenses were provided for estimated amount of The creditors were settled finally for Rs. 3,000 Rs. 15,900 Prepare a statement showing distribution of cash amongst the partners by Highest Relative Capital Method . (16 Marks) 3. (a) M/s. AM Enterprise had two departments, Cloth and Readymade Clothes. The readymade clothes were made by the firm itself out of the cloth supplied by the Cloth Department at its usual selling price. From the following figures, prepare Departmental Trading and Profit & Loss Account for the year ended 31st March, 2012: The Institute of Chartered Accountants of India Cloth Department 1st Opening stock on April, 2011 Purchases Sales Transfer to Readymade Clothes Department Manufacturing expenses Selling expenses Rent & warehousing Stock on 31st March, 2012 Rs. 31,50,000 2,10,00,000 2,31,00,000 31,50,000 2,10,000 8,40,000 21,00,000 Readymade Clothes Department Rs. 5,32,000 1,68,000 47,25,000 6,30,000 73,500 5,60,000 6,72,000 In addition to the above, the following information is made available for necessary consideration: The stock in the Readymade Clothes Department may be considered as consisting of 75% cloth and 25% other expenses. The Cloth Department earned a gross profit at the rate of 15% in 2010-11. General expenses of the business as a whole amount to Rs. 10,85,000. (b) Prepare the Fire Insurance Revenue A/c as per IRDA regulations for the year ended 31st March, 2013 from the following details: Claims paid Legal expenses regarding claims Premiums received Re-insurance premium paid Commission Expenses of management Provision against unexpired risk on 1st April, 2012 Claims unpaid on 1st April, 2012 Claims unpaid on 31st March, 2013 Rs. 4,90,000 10,000 13,00,000 1,00,000 3,00,000 2,00,000 5,50,000 50,000 80,000 (8 +8 =16 Marks) 4. Following is the Balance Sheet of M Ltd. as at 31st March, 2013: Liabilities 15,000, 10% Preference shares of Rs. 100 each 35,000 Equity shares of Rs. 100 each The Institute of Chartered Accountants of India Rs. Assets 15,00,000 Goodwill 35,00,000 Land & Buildings Rs. 3,50,000 15,00,000 Securities Premium account 7% Debentures of Rs. 100 each Trade payables Loan from Director 1,00,000 5,00,000 12,50,000 1,50,000 Plant & Machinery Inventory Trade receivables Cash at bank Profit & Loss A/c 70,00,000 10,00,000 6,00,000 15,00,000 1,00,000 19,50,000 70,00,000 No dividend on Preference shares has been paid for the last 5 years. The following scheme of reorganization was duly approved by the Tribunal: (i) Each Equity share to be reduced to Rs. 25. (ii) Each existing Preference share to be reduced to Rs. 75 and then exchanged for 1 new 13% Preference share of Rs. 50 each and 1 Equity share of Rs. 25 each. (iii) Preference shareholders have forgone their right for dividend for four years. One year s dividend at the old rate is however, payable to them in fully paid equity Shares of Rs. 25. (iv) The Debentureholders be given the option to either accept 90% of their claims in cash or to convert their claims in full into new 13% Preference shares of Rs. 50 each issued at par. One half (in value) of the debentureholders accepted Preference shares for their claims. The rest were paid cash. (v) Contingent liability of Rs. 1,50,000 is payable, which has been created by wrong action of one Director. He has agreed to compensate this loss out of the loan given by the Director to the company. (vi) Goodwill does not have any value in the present. Decrease the value of Plant and Machinery, Inventory and Trade receivables by Rs. 4,00,000, Rs. 1,00,000 and Rs. 1,50,000 respectively. Increase the value of Land and Buildings to Rs. 18,00,000. (vii) 40,000 new Equity shares of Rs. 25 each are to be issued at par, payable in full on application. The issue was underwritten for a commission of 4%. Shares were fully taken up. (viii) The total expenses incurred by the company in connection with the scheme excluding underwriting commission amounted to Rs. 15,000. Pass necessary Journal Entries to record the above transactions. 5. (16 Marks) (a) X Co. Ltd. has its share capital divided into equity shares of Rs. 10 each. On 1.1.2012 it granted 20,000 employees stock option at Rs. 50 per share, when the market price was Rs. 120 per share. The options were to be exercised between 15th March, 2013 and 31st March, 2013. The employees exercised their options for 16,000 shares only and the remaining options lapsed. The company closes its books on 31st March every year. Show Journal entries (with narration) as would The Institute of Chartered Accountants of India appear in the books of the company up to 31st March, 2013. (b) A joint stock company resolved to issue 10 lakh equity shares of Rs. 10 each at a premium of Rs. 1 per share. One lakh of these shares were taken up by the directors of the company, their relatives, associates and friends, the entire amount being received forthwith. The remaining shares were offered to the public, the entire amount being asked for with applications. The issue was underwritten by X, Y and Z for a commission @ 2% of the issue price, 65% of the issue was underwritten by X, while Y s and Z s shares were 25% and 10% respectively. Their firm underwriting was as follows : X 30,000 shares, Y 20,000 shares and Z 10,000 shares. The underwriters were to submit unmarked applications for shares underwritten firm with full application money along with members of the general public. Marked applications were as follows: X 1,19,500 shares, Y 57,500 shares and Z 10,500 shares. Unmarked applications totaled 7,00,000 shares. Accounts with the underwriters were promptly settled. You are required to prepare a statements calculating underwriters liability for shares other than shares underwritten firm. (8 + 8 = 16 Marks) 6. The following figures are extracted from the books of KLM Bank Ltd. as on 31-03-2013: Rs. Interest and discount received Interest paid on deposits Issued and subscribed capital Salaries and allowances Directors Fees and allowances Rent and taxes paid Postage and telegrams Statutory reserve fund Commission, exchange and brokerage Rent received Profit on sale of investment Depreciation on assets Statutory expenses Auditor's fee The Institute of Chartered Accountants of India 38,00,160 22,95,360 10,00,000 2,50,000 35,000 1,00,000 65,340 8,00,000 1,90,000 72,000 2,25,800 40,000 68,000 12,000 The following further information is given: (1) A customer to whom a sum of Rs. 10 lakhs was advanced has become insolvent and it is expected only 55% can be recovered from his estate. (2) There was also other debts for which a provisions of Rs. 2,00,000 was found necessary. (3) Rebate on bill discounted on 31-03-2012 was Rs. 15,000 and on 31-03-2013 was Rs. 20,000. (4) Income tax of Rs. 2,00,000 is to be provided. The directors desire to declare 5% dividend. Prepare the Profit and Loss account of KLM Bank Ltd. for the year ended 31-03-2013 and also show, how the Profit and Loss account will appear in the Balance Sheet if the Profit and Loss account opening balance was NIL as on 31-03-2012. (16 Marks) 7. Answer any four of the following: (a) A Company had issued 20,000, 13% Convertible debentures of Rs. 100 each on 1st April, 2011. The debentures are due for redemption on 1 st July, 2013. The terms of issue of debentures provided that they were redeemable at a premium of 5% and also conferred option to the debenture holders to convert 20% of their holding into equity shares (Nominal value Rs. 10) at a price of Rs. 15 per share. Debenture holders holding 2,500 debentures did not exercise the option. Calculate the number of equity shares to be allotted to the Debenture holders exercising the option to the maximum. (b) Compute Basic Earnings per share from the following information: Date Particulars 1st Balance at the beginning of the year Issue of shares for cash 1st April, 2013 August, 2013 31st March, 2014 Buy back of shares No. of shares 1,500 600 500 Net profit for the year ended 31st March, 2014 was Rs. 2,75,000. (c) Explain monetary item as per Accounting Standard 11. How are foreign currency monetary items to be recognized at each Balance Sheet date? Classify the following as monetary or non-monetary item: (i) Share Capital (ii) Trade Receivables (iii) Investments (iv) Fixed Assets. The Institute of Chartered Accountants of India (d) Santosh Ltd. has received a grant of Rs. 8 crores from the Government for setting up a factory in a backward area. Out of this grant, the company distributed Rs. 2 crores as dividend. Also, Santosh Ltd. received land free of cost from the State Government but it has not recorded it at all in the books as no money has been spent. In the light of AS 12 examine, whether the treatment of both the grants is correct. (e) A company is in a dispute involving allegation of infringement of patents by a competitor company who is seeking damages of a huge sum of Rs. 900 lakhs. The directors are of the opinion that the claim can be successfully resisted by the company. How would you deal the same in the annual accounts of the company? (4 x 4 =16 Marks) The Institute of Chartered Accountants of India Test Series: September, 2014 MOCK TEST PAPER 1 INTERMEDIATE (IPC) : GROUP II PAPER 5: ADVANCED ACCOUNTING SUGGESTED ANSWERS/HINTS 1. (a) The loss due to break out of fire is an example of event occurring after the balance sheet date. The event being in the nature of a fire which is unpredictable does not relate to conditions existing at the balance sheet date. It has not affected the financial position as on the date of balance sheet and therefore requires no specific adjustments in the financial statements. However, paragraph 8.6 of AS 4 states that disclosure is generally made of events occurring after balance sheet date i.e. in subsequent periods that represent unusual changes affecting the existence or substratum of the enterprise after the balance sheet date. In the given case, the amount of loss of assets in a factory is material and may be considered as an event affecting the substratum of the enterprise. Hence, as recommended in paragraph 15 of AS 4, disclosure of the event should be made. (b) Journal Entries Equity shares buy back A/c To Bank A/c (Being Buy back of 10,000 shares @ Rs. 60) Equity share capital A/c Securities premium A/c To Equity shares buy back A/c (Being cancellation of equity shares bought back) Revenue reserves A/c To Capital redemption reserve A/c (Being amount equal to nominal value of shares bought back transferred to capital redemption reserve) Dr. Dr. 6,00,000 (Rs ) Cr. 6,00,000 Dr. Dr. 1,00,000 5,00,000 6,00,000 Dr. 1,00,000 1,00,000 (c) Doubtful Assets (upto 1 year) Less: Value of security (excluding ECGC cover) The Institute of Chartered Accountants of India Rs. 6,73,000 (1,50,000) 5,23,000 (1,00,000) 4,23,000 Less: ECGC coverage (limited to Rs. 1,00,000) Unsecured portion Provision: for unsecured portion @100% on Rs. 4,23,000 for secured portion @ 25% on Rs. 1,50,000 Total provision to be made in the books of the bank 4,23,000 37,500 4,60,500 (d) Calculation of Preferential Creditors Rs. 1,000 6,000 6,000 3,000 16,000 Tax deducted at source on salaries Wages (15 men for 4 months at Rs. 100 each) Salaries (5 men for 4 months at Rs. 300 each) Workmen s compensation Total Note: (i) Wages or Salaries payable to any employee due for the period not exceeding 4 months within the twelve months next before commencement of winding up subject to maximum 20,000 per claimant are preferential creditors. (ii) Rent for godown is not included in preferential creditors. 2. Statement showing distribution of cash amongst the partners Creditors Balance Due 16,500 On 1st Instalment amount with the 18,925 firm Rs. (275 + 18,650) Less: Dissolution expenses provided for (3,000) 15,925 Less: C s remuneration of 1% on assets realized (18,650 x 1%) (187) 15,738 Less: Payment made to creditors (15,738) (15,738) Balance due Nil 762 2nd instalment realised 17,320 Less: C s remuneration of 1% on assets realized (17,320 x 1%) (173) The Institute of Chartered Accountants of India B s Loan A(Rs.) 4,500 15,000 Capitals B(Rs.) C(Rs.) 7,500 15,000 Less: Payment made to creditors Transferred to P& L A/c Less: Payment for B s loan A/c Amount available for distribution to partners Less: C s remuneration of 10% of the amount distributed to partners (12,485 x 10/110) Balance distributed to partners on the basis of HRCM Less: Paid to C (W.N.1) 17,147 (162) 16,985 (4,500) 12,485 (162) 600 (4,500) nil (1,135) 11,350 (3,750) 7,600 Less: Paid to A and C in 4:3 (7,600) (W.N.1) Balance due nil Amount of 3rd instalment 10,000 Less: C s remuneration of 1% on assets realized (10,000 x 1%) (100) 9,900 Less: C s remuneration of 10% of the amount distributed to partners (9,900 x 10/110) (900) 9,000 Less: Paid to A and C in 4:3 for (Rs. 8,750 7,600) (W.N.1) (1,150) 7,850 Less: Paid to A, B and C in 4:3:3 (7,850) Balance due nil Amount of 4th and last instalment 7,000 Less: C s remuneration of 1% on assets realized (7,000 x 1%) (70) 6,930 Less: C s remuneration of 10% of the amount distributed to partners (6,930 x 10/110) (630) 6,300 Less: Paid to A, B and C in 4:3:3 (6,300) Loss suffered by partners The Institute of Chartered Accountants of India (4,343) 10,657 (3,750) 11,250 - (3,257) 7,500 7,993 (657) - (493) 10,000 7,500 7,500 (3,140) (2,355) (2,355) 6,860 5,145 5,145 (2,520) (1,890) (1,890) 4,340 3,255 3,255 Working Note: (i) Rs. 275 added to the first instalment received on sale of assets represents the Cash in Bank (ii) The amount due to Creditors at the end of the utilization of First Instalment is Rs. 762/-. However, since the creditors were settled for Rs. 15,900/- only the balance 162/- were paid and the balance Rs. 600/- was transferred to the Profit & Loss Account. (iii) Highest Relative Capital Basis Balance of Capital Accounts (A) Profit sharing ratio Capital Profit sharing ratio Capital in profit sharing ratio taking B s Capital as base (B) Excess of A s Capital and C s Capital (A-B) =(C) Again repeating the process Profit sharing ratio Capital Profit sharing ratio Capital in profit sharing ratio taking A s Capital as base (D) Excess of C s Capital (C-D)=(E) A Rs. 15,000 4 3,750 B Rs. 7,500 3 2,500 C Rs. 15,000 3 5,000 10,000 5,000 7,500 nil 7,500 7,500 4 1,250 3 2,500 5,000 nil 3,750 3,750 Therefore, firstly Rs. 3,750 is to be paid to C then A and C to be paid in proportion of 4:3 upto Rs. 8,750 to bring the capital of all partners A, B and C in proportion to their profit sharing ratio. Thereafter, balance available will be paid in their profit sharing ratio 4:3:3 to all partners viz A, B and C. 3. (a) Departmental Trading and Profit and Loss Account for the year ended 31st March, 2012 Particulars (Rs.) To Opening stock To Purchases Cloth Readymade Clothes (Rs.) 31,50,000 5,32,000 2,10,00,000 Total Particulars Cloth (Rs.) (Rs.) 36,82,000 By Sales 1,68,000 2,11,68,000 By Transfer to Readymade Clothes Deptt. The Institute of Chartered Accountants of India Readymade Clothes (Rs.) Total (Rs.) 2,31,00,000 47,25,000 2,78,25,000 31,50,000 - 31,50,000 To Transfer from Cloth Department 31,50,000 To Manufacturing expenses 6,30,000 6,30,000 9,17,000 51,17,000 To Gross profit c/d 42,00,000 31,50,000 By Closing stock 2,83,50,000 53,97,000 3,37,47,000 To Selling expenses To Rent & warehousing To Net profit 2,10,000 73,500 2,83,500 By Gross profit b/d 8,40,000 31,50,000 5,60,000 2,83,500 9,17,000 51,17,000 27,72,000 2,83,50,000 53,97,000 3,37,47,000 42,00,000 9,17,000 51,17,000 42,00,000 9,17,000 51,17,000 14,00,000 34,33,500 42,00,000 21,00,000 6,72,000 General Profit and Loss Account Particulars Amount (Rs. Particulars ) To General expenses 10,85,000 By Net profit To Unrealized profit (Refer 20,790 W.N.) 23,27,710 To General net profit (Bal.fig.) 34,33,500 Amount (Rs. ) 34,33,500 34,33,500 Working Note: Calculation of Stock Reserve Rate of Gross Profit of Cloth Department, for the year 2011-12 = ` 42,00,000 100 100 = 16% ` ( 2,31,00,000 + 31,50,000 ) Gross Pr ofit x 100 Total Sales Closing Stock of cloth in Readymade Clothes Department = 75% i.e. Rs. 6,72,000 x 75% = Rs. 5,04,000 Stock Reserve required for unrealized profit @ 16% on closing stock Rs. 5,04,000 x 16% = Rs. 80,640 Stock reserve for unrealized profit included in opening stock of readymade clothes @ 15% i.e. (Rs. 5,32,000 x 75% x 15%) = Rs. 59,850 Additional Stock Reserve required during the year = Rs. 80,640 Rs. 59,850 = Rs. 20,790. The Institute of Chartered Accountants of India (b) FORM B - RA Name of the Insurer: Registration No. and Date of Registration with the IRDA: Fire Insurance Revenue Account for the year ended 31st March, 2013 Particulars (1) (2) (3) (4) (5) (6) Schedule Premium earned Other income Interest, dividend and rent Total (A) Claims incurred Commission Operating expenses related to Insurance business Total (B) Operating Profit (A)- (B) 1 2 3 4 Schedule 1 : Premium earned (net) Premium received Less: Re-insurance premium Net premium Adjustment for change in reserve for unexpired risks (Refer W.N.) Schedule 2 : Claims Incurred Claims paid including legal expenses (4,90,000 + 10,000) Add : Claims outstanding at the end of the year Less : Claims outstanding at the beginning of the year Total claims incurred Schedule 3 : Commission Commission paid Schedule 4: Operating expenses Expenses of management The Institute of Chartered Accountants of India Amount (Rs.) 11,50,000 11,50,000 5,30,000 3,00,000 2,00,000 10,30,000 1,20,000 Rs. 13,00,000 (1,00,000) 12,00,000 (50,000) 11,50,000 Rs. 5,00,000 80,000 (50,000) 5,30,000 Rs. 3,00,000 3,00,000 Rs. 2,00,000 2,00,000 Working Note: Change in the provision for unexpired risk Unexpired risk reserve on 31st March, 2013 = 50% of net premium i.e. 50% of Rs. 12,00,000 (See Schedule 1) Less : Unexpired risk reserve as on 1st April, 2012 Change in the provision for unexpired risk 4. 2. 3. 4. 5. 6,00,000 (5,50,000) 50,000 Journal Entries in the books of M Ltd. Particulars 1. Rs. Equity Share Capital (Rs. 100) A/c To Equity Share Capital (Rs. 25) A/c To Capital Reduction A/c (Being Equity shares of Rs. 100 each reduced to Rs. 25 each and balance transferred to Capital Reduction A/c) 10% Preference Share Capital (Rs. 100) A/c To 10% Preference Share Capital (Rs. 75) A/c To Capital Reduction A/c (Being Preference shares of Rs. 100 each reduced to Rs. 75 each and balance transferred to Capital Reduction A/c, Total Pref Shares = 15,000) 10% Preference Share Capital (Rs. 75) A/c To 13% Preference Share Capital (Rs. 50) A/c To Equity Share Capital A/c (Being one new 13% Preference share of Rs. 50 each and one equity share of Rs. 25 each issued against 10% Preference Share of Rs. 75 each. Total Pref Shares = 15,000) Capital Reduction A/c To Preference share dividend payable A/c (Being arrear of Preference share dividend payable for one year) Preference share dividend payable A/c To Equity Share Capital A/c (Being Equity Shares of Rs. 25 each issued for arrears of Preference Share dividend) The Institute of Chartered Accountants of India Dr. Dr. Amount (Rs.) 35,00,000 Cr. Amount (Rs.) 8,75,000 26,25,000 Dr. 15,00,000 11,25,000 3,75,000 Dr. 11,25,000 7,50,000 3,75,000 Dr. 1,50,000 1,50,000 Dr. 1,50,000 1,50,000 6. 7. 8. 9. 10. 11. 12. 13. 14. 7% Debentures A/c To Debenture holders A/c (Being balance of 7% Debentures transferred to Debenture holders A/c ) Debenture holders A/c To 13% Preference Share Capital A/c To Bank A/c To Capital Reduction A/c (Being 50% of Debenture holders opted to take 13% Preference shares at par and remaining took 90% cash payment for their claims) Loan from Director A/c To Provision for Contingent Liability A/c (Being provison for contingent liability of Rs. 1,50,000 as it is payable and the same is adjusted against Loan from director A/c) Bank A/c To Equity Share Application & Allotment A/c (Being application money received on 40,000 Equity shares @ Rs. 25 each) Equity Share Application & Allotment A/c To Equity Share Capital A/c (Being application money transferred to capital A/c, on allotment) Underwriting Commission A/c To Bank A/c (Being underwriting commission paid) Land & Buildings A/c To Capital Reduction A/c (Being value of Land & Buildings appreciated) Expenses on Reconstruction A/c To Bank A/c (Being payment of expenses on reconstruction ) Capital Reduction A/c To Goodwill A/c To Plant & Machinery A/c The Institute of Chartered Accountants of India Dr. 5,00,000 5,00,000 Dr. 5,00,000 2,50,000 2,25,000 25,000 Dr. 1,50,000 1,50,000 Dr. 10,00,000 10,00,000 Dr. 10,00,000 10,00,000 Dr. 40,000 40,000 Dr. 3,00,000 3,00,000 Dr. 15,000 15,000 Dr. 31,75,000 3,50,000 4,00,000 To Inventory A/c To Trade receivables A/c To Profit & Loss A/c To Expenses on Reconstruction A/c To Underwriting Commission A/c To Capital Reserve A/c (bal fig) (Being various losses written off and balance of Capital Reduction A/c transferred to Capital Reserve A/c) 5. (a) 1,00,000 1,50,000 19,50,000 15,000 40,000 1,70,000 Journal Entries 15.03.2013 to 31.3.13 31.3.13 Rs. Dr. 8,00,000 Dr. 11,20,000 Rs. Bank A/c Employee compensation expense A/c To Equity share capital A/c 1,60,000 To Securities premium A/c 17,60,000 (Being shares issued to the employees against the options vested to them in pursuance of Employee Stock Option Plan) Profit and Loss A/c Dr. 11,20,000 To Employee compensation expenses 11,20,000 A/c (Being transfer of employee compensation transfer to Profit and Loss Account) Working Notes: 1. No entry is passed when Stock Options are granted to employees. Hence, no entry will be passed on 1st April 2012; 2. Market Price = Rs. 120 per share wheres as stock option price = Rs. 50, Hence, the difference Rs. 120 Rs. 50 = Rs. 70 per share is equivalent to employee cost or employee compensation expense and will be charged to P/L Account as such for the number of options exercised i.e. 16,000 shares. (b) Statement showing underwriters liability for shares other than shares underwritten firm X Gross liability (Issued shares purchased by promoters, directors etc) (9,00,000 shares in the ratio of 65 : 25 : 10) The Institute of Chartered Accountants of India Y Z Total 5,85,000 2,25,000 90,000 9,00,000 Less: Marked applications (1,19,500) (10,500) (1,87,500) 4,65,500 1,67,500 79,500 7,12,500 (4,55,000) (1,75,000) (70,000) (7,00,000) 10,500 Less : Allocation of unmarked applications (including firm underwriting i.e. 7,00,000) in the ratio 65 : 25 : 10 (57,500) (7,500) 9,500 12,500 (6,500) 7,500 (1,000) 4,000 8,500 12,500 Surplus of Y allocated to X and Z in the ratio 65 : 10 Additional shares to be purchased by X & Z XRs. ZRs. 44,000 Additional Liability for additional shares @ Rs. 11 YRs. 93,500 Underwriting commission payable on Gross Liability (Shares underwritten as Gross liability Rs. 11 2%) Net Amount payable (1,28,700) (84,700) Net Amount receivable 6. (49,500) (19,800) (49,500) - - - 73,700 KLM Bank Limited Profit and Loss Account for the year ended 31st March, 2013 Schedule I. Income: Interest earned Other income 13 14 37,95,160 4,87,800 42,82,960 15 16 22,95,360 5,70,340 Total II. Expenditure Interest expended Operating expenses Provisions and contingencies (4,50,000+2,00,000+2,00,000) Total IIII. Profits/Losses Net profit for the year Profit brought forward The Institute of Chartered Accountants of India Year ended 31.03.2013 Rs. 8,50,000 37,15,700 5,67,260 Nil 5,67,260 IV. Appropriations Transfer to statutory reserve (25% of 5,67,260) Proposed dividend Balance carried over to balance sheet 1,41,815 50,000 3,75,445 5,67,260 Profit & Loss Account balance of Rs. 3,75,445 will appear under the head Reserves and Surplus in Schedule 2 of the Balance Sheet. Year ended 31.3.2013 Rs. I. Schedule 13 Interest Earned Interest/discount on advances/bills (Refer W.N.) I. II. III. Schedule 14 Other Income Commission, exchange and brokerage Profit on sale of investment Rent received I. Schedule 15 Interest Expended Interests paid on deposits I. II. III. IV. V. VI. VII. Schedule 16 Operating Expenses Payment to and provisions for employees (salaries & allowances) Rent, taxes paid Depreciation on assets Director s fee, allowances and expenses Auditor s fee Statutory (law) expenses Postage and telegrams 37,95,160 37,95,160 1,90,000 2,25,800 72,000 4,87,800 22,95,360 22,95,360 2,50,000 1,00,000 40,000 35,000 12,000 68,000 65,340 5,70,340 Working Note: Interest and discount received Add: Rebate on bills discounted on 31.3. 2012 The Institute of Chartered Accountants of India Rs. 38,00,160 15,000 Less: Rebate on bills discounted on 31.3. 2013 7. (a) (20,000) 37,95,160 Calculation of number of equity shares to be allotted Total number of debentures Less: Debenture holders not opted for conversion Debenture holders opted for conversion Option for conversion Number of debentures to be converted (20% of 17,500) Redemption value of 3,500 debentures at a premium of 5% [3,500 x (100+5)] Equity shares of Rs. 10 each issued on conversion [Rs. 3,67,500/ Rs. 15 ] Number of debentures 20,000 (2,500) 17,500 20% 3,500 Rs. 3,67,500 24,500 shares (b) Computation of weighted average number of shares outstanding during the period Date (1) 1st April, 2013 1st August, 2013 31st March, 2014 Total (2) (3) (4) Weighted average number of shares (5) = (2) x (4) 1,500 (Opening) 12 months 12/12 1,500 600 (Additional issue) 8 months 8/12 400 500 (Buy back) 0 months 0/12 - No. of equity shares Period outstanding Weights (months) 1,900 Basic Earnings Per Share = = Net Profit or Loss for the period attributable to Equity Shareholders Weighted Average Number of Equity Shares outstanding during the period 2,75,000 = Rs. 144.74 1,900 shares (c) As per AS 11 The Effects of Changes in Foreign Exchange Rates , Monetary items are money held and assets and liabilities to be received or paid in fixed or determinable amounts of money. Foreign currency monetary items should be reported using the closing rate at each balance sheet date. However, in certain circumstances, the closing rate may not The Institute of Chartered Accountants of India reflect with reasonable accuracy the amount in reporting currency that is likely to be realised from, or required to disburse, a foreign currency monetary item at the balance sheet date. In such circumstances, the relevant monetary item should be reported in the reporting currency at the amount which is likely to be realised from or required to disburse, such item at the balance sheet date. Share capital Trade receivables Investments Fixed assets Non-monetary Monetary Non-monetary Non-monetary (d) As per AS 12 Accounting for Government Grants , when government grant is received for a specific purpose, it should be utilized for the same. So the grant received for setting up a factory is not available for distribution of dividend. In the second case, even if the company has not spent money for the acquisition of land, land should be recorded in the books of accounts at a nominal value. The treatment of both the elements in the treatment of the grant is incorrect as per AS 12. (e) As per para 14 of AS 29, 'Provisions, Contingent Liabilities and Contingent Assets , a provision should be recognized when (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision should be recognized. In the given situation, since, the directors of the company are of the opinion that the claim can be successfully resisted by the company, therefore there will be no outflow of the resources. The company will disclose the same as contingent liability by way of the following note: Litigation is in process against the company relating to a dispute with a competitor who alleges that the company has infringed patents and is seeking damages of Rs. 900 lakhs. However, the directors are of the opinion that the claim can be successfully resisted by the company. 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 ...

 

  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