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CA IPCC : Question Paper (with Answers) - ADVANCED ACCOUNTING Nov 2014

25 pages, 19 questions, 0 questions with responses, 0 total responses,

CA IPCC
Tilak Vidyalaya Higher Secondary School (TVHSS), Kallidaikurichi

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PAPER 5: ADVANCED ACCOUNTING Question No. 1 is compulsory. Answer 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 Answer the following questions: (a) A machine having expected useful life of 6 years, is leased for 4 years. Both the cost and the fair value of the machinery are ` 7,00,000. The amount will be paid in 4 equal instalments and at the termination of lease, lessor will get back the machinery. The unguaranteed residual value at the end of the 4th year is ` 70,000. The IRR of the investment is 10%. The present value of annuity factor of ` 1 due at the end of 4th year at 10% IRR is 3.169. The present value of ` 1 due at the end of 4th year at 10% rate of interest is 0.683. State with reasons whether the lease constitutes finance lease and also compute the unearned finance income. (b) A company is showing an intangible asset at ` 88 lakhs as on 01.04.2013. This asset was acquired for ` 120 lakhs on 01.04.2009 and the same was available for use from that date. The company has been following the policy of amortization of the intangible assets over a period of 15 years on straight line basis. Comment on the accounting treatment of the above with reference to the relevant Accounting Standard. (c) Stem Ltd. purchased a Plant for US$ 30,000 on 30th November, 2013 payable after 6 months. The company entered into a forward contract for 6 months @ ` 62.15 per dollar. On 30th November, 2013; the exchange rate was ` 60.75 per dollar. How will you recognise the profit or loss on forward contract in the books of Stem Ltd. for the year ended 31st March, 2014 ? (d) WZW Ltd. is in dispute involving allegation of infringement of patents by a competitor company who is seeking damages of a huge sum of ` 1000 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 5 = 20 Marks) Answer (a) (i) Determination of nature of lease Fair value of asset ` 7,00,000 Unguaranteed residual value ` 70,000 Present value of residual value at the end of 4th Year = ` 70,000 x 0.683 = ` 47,810

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