CS Inter Group I : Company Accounts and Cost and Management Accounts - December 2003

CS Inter - Group I • Company Accounts and Cost and Management Accounts • December 2003

This Paper has 28 answerable questions with 0 answered.

Roll No…………………
Time allowed : 3 hours	Maximum marks : 100
Total number of questions : 8	Total number of printed pages : 5

*NOTE :* All working notes should be shown distinctly.
PART— A
(Answer Question No.1 which is compulsory and any two of the rest from this part.)
Marks

NOTE : All working notes should be shown distinctly.

PART— A

(Answer Question No.1 which is compulsory
and any two of the rest from this part.)

Marks

(a)

15,000, 9% Redeemable preference shares of Rs.100 each of Global Customer Care Ltd., repayable at a premium of 12% are now due for redemption. The company has accumulated reserves the amount of which is much in excess of the sum required for redemption. In addition, there is a large balance lying in securities premium account which is available for payment of premium on redemption.
Show the journal entries in the books of the company to give effect to the above.

(0)

(b)

Under what circumstances, a company is required to present a ‘consolidated financial statement’ ?

(0)

(c)

Distinguish between ‘preliminary expenses’ and ‘pre–operative expenses’. State how these two expenses are to be treated in a balance sheet ?

(0)

(d)

From the following particulars of a limited company, calculate the maximum remuneration payable to managing director and other part-time directors of a company :

		Rs.
—	Net profit before provision for income-tax and managerial remuneration, but after depreciation and provision for repairs	86,84,100
—	Depreciation provided in the books	32,00,000
—	Repairs of machinery provided for during the year	2,50,000
—	Actual expenditure incurred on repairs during the year	1,50,000

(0)

(e)

Explain the circumstances when dividend can be paid out of capital profits of a company.

(0)

(a)

Explain how ‘amalgamation’ is different from ‘external reconstruction’.

(0)

(b)

Define ‘mutual fund’. State its objectives.

(0)

(c)

The balance sheet of Modern Marbles Ltd. as at 31^st March, 2003 is as follows:

Liabilities	Rs.(in lakh)	Assets	Rs.(in lakh)
Share capital of Rs.10 each General reserve Securities premium Profit and loss a/c 12% Debentures Term loan Current liabilities & provisions	50,00,000 6,50,000 5,40,000 3,75,000 25,00,000 13,25,000 8,67,000	Fixed assets Investments Stock Sundry debtors Cash and bank Balance	66,00,000 18,00,000 11,87,000 9,60,000 7,10,000
	1,12,5700		1,12,5700

The shareholders adopted the resolution on the date of the above mentioned balance sheet to :

(i)	Buy–back 20% of the paid-up capital @ Rs. 15 per share;
(ii)	Issue 13% debentures of Rs.5,00,000 at a premium of 10% to finance the buy-back of shares;
(iii)	Maintain a balance of Rs.3,00,000 in general reserve account; and
(iv)	Sell investments worth Rs.8,00,000 for Rs.6,50,000.

You are required to pass the necessary journal entries to record the above transactions and prepare the balance sheet immediately after the buy–back.

(0)

(a)

Write short note on ‘reasonable return’ under the Electricity (Supply) Act, 1948.

(0)

(b)

What are the objectives of ‘database management system’?

(0)

(c)

The balance sheet of Dreamers Ltd. as on 31^st March, 2003 stood as under:

Liabilities	Rs. (in lakhs)	Assets	Rs. (in lakhs)
Share capital: 10% Preference shares of Rs.100 each Equity shares of Rs.10 each General reserve 12% Debentures Current liabilities	30 60 36 20 28	Fixed assets Investments Current assets	13 24 20
	174		174

Performers Ltd. signified their agreement to take over the assets and liabilities of Dreamers Ltd. as per the following terms and conditions:

(i)	Fixed assets at 90% of the book value.
(ii)	Investments at 10% above the par value.
(iii)	Current assets and liabilities at book value except that stock–in–trade at cost amounting to Rs.10 lakh was agreed to be taken over at a discount of 20%.
(iv)	12% Debentures are to be discharged at a premium of 15% by issuing 12% debentures of Performers Ltd.
(v)	Preference shareholders are to be discharged at a premium of 15% by issuing 10% preference shares of Rs.100 each.
(vi)	The equity shareholders in Dreamers Ltd. are to be issued 5 equity shares of Rs.10 each in Performers Ltd. for every 3 shares held by them. Work out the consideration for the take–over under: — Net assets method; and — Net payment method

(0)

(a)

Mention the various provisions to be made by a banking company with respect to its quality of assets.

(0)

(b)

The capital structure of Hertz Ltd. is as follows:

	Rs.
14% Preference shares of Rs.10 each Equity shares of Rs.10 each Reserves and surplus 10% Debentures 11% Loans from banks/financial institutions	20,00,000 32,00,000 16,00,000 24,00,000 28,00,000
	1,20,00,000

The average annual profit before payment of tax and interest is Rs.24,00,000. The income–tax rate is assumed to be @ 40%. Price–earning ratio is 9.

(0)

(c)

On 1^st August, 2002, Honey Ltd. purchased 8,000 shares in Sony Ltd. at Rs.175 per share. The balance sheet of Sony Ltd. as at 31^st March, 2003 is as follows:

Liabilities	Rs.	Assets	Rs.
Share capital (fully paid shares of Rs.100 each) Reserves (as on 1.4.2002) Profit & loss account 10% Debentures of Rs.100 each Sundry creditors	10,00,000 4,00,000 3,00,000 2,00,000 4,00,000	Goodwill Fixed assets (cost Rs.20,00,000) Current assets	1,00,000 16,00,000 6,00,000
	23,00,000		23,00,000

Additional information:
—	the opening balance in the profit and loss account was Rs.1,60,000 out of which dividend amounting to Rs.1,00,000 was paid in September, 2002.
—	Honey Ltd. held 50% of the debentures in Sony Ltd
—	Sundry creditors include Rs.40,000 payable to Honey Ltd. You are required to ascertain the (i) minority interest; and (ii) cost of control (or capital reserve).
You are required to pass the necessary journal entries to record the above transactions and prepare the balance sheet immediately after the buy–back.

(0)

PART— B
(Answer Question No.5 which is compulsory and any two of the rest from this part.)

PART— B

(Answer Question No.5 which is compulsory and any two of the rest from this part.)

(a)

In Process – A of a manufacturing concern, 10,000 units are introduced during May, 2003. The normal loss is estimated to be 4% of the input. At the end of the month 1,200 units were lying as incomplete. The stage wise completion of the inventory was given as under:
Material 80% complete; labour 60% complete; and overheads 50% complete.

You are required to prepare a statement of equivalent production assuming that 8,300 units were transferred to finished goods stores.

(0)

(b)

Enumerate the importance of ‘flexible budgeting’ as a tool of control.

(0)

(c)

“Job order costing method is a specific order costing method”. Explain.

(0)

(d)

Discuss the basic principles of ‘responsibility accounting’.

(0)

(e)

The following data are available from the books of Customers Choice Ltd. as on 31^st March, 2003:

	1^st April, 2002 Rs.	31^st March, 2003 Rs.
Cash Book debts Creditors Loan	3,500 25,000 18,000 40,000	4,500 30,000 22,000 40,000

You are required to work out the net monetary result of the company as at 31^st March, 2003 considering the following ‘retail price index numbers’: 1^st April, 2002 — 240; 31^st March, 2003 — 360; and Average for the year — 300.

(0)

(a)

What do you understand by ‘weighted average method’ of stock valuation ?

(0)

(b)

Mention the basis of apportionment of the following items of overheads:

(i)	Rent, rates and taxes paid for the building
(ii)	Insurance and depreciation of plant, machinery and equipment
(iii)	Works manager’s remuneration
(iv)	Electric light
(v)	Electric power
(iv)	Other fringe benefits to workers.

(0)

(c)

The balance sheets of Magus Technologies Ltd. for the year ended 31^st March, 2002 and 31^st March, 2003 are reproduced below :

Liabilities	31.03.2003 (Rs.)	31.03.2002 (Rs.)
Equity share capital 8% Preference share capital Capital reserve General reserve Profit and loss account Proposed dividends Sundry creditors Bills payable Liability for expenses Provision for taxation	6,00,000 1,50,000 30,000 75,000 72,000 75,000 70,500 24,000 54,000 75,000	4,50,000 2,25,000 — 60,000 45,000 63,000 37,500 30,000 45,000 60,000
	12,25,500	10,15,500

Assets	31.03.2003 (Rs.)	31.03.2002 (Rs.)
Goodwill Land and building Plant and machinery Investments Sundry debtors Stock Bills receivable Cash in hand Cash at bank Preliminary expenses	1,20,000 2,55,000 3,00,000 45,000 2,55,000 1,63,000 45,000 15,000 12,000 15,000	1,50,000 3,00,000 1,20,000 30,000 2,10,000 1,15,500 30,000 22,500 15,000 22,500
	12,25,500	12,25,500

The additional information is as under:-

(i)	An interim dividend of Rs.30,000 has been paid in 2002 — 03.
(ii)	Investments are trade investments –Rs.4,500 by way of dividends is received which included Rs.1,500 from pre–acquisition profit which has been credited to investment account.
(iii)	A machinery was sold for Rs.15,000. The written down value of the machine was Rs.18,000. Depreciation of Rs.15,000 is charged on plant and machinery in 2002 – 03.
(iv)	A piece of land has been sold during the year and profit on sale has been credited to capital reserve account. Depreciation charged on buildings during the year amounted to Rs.7,500. existed under this head during the current year. No additions You are required to prepare a cash flow statement for the year ended 31^st March, 2003 in accordance with AS–3 (Revised).

(0)

(a)

What are ‘imputed costs’ and ‘common costs’.

(0)

(b)

State briefly the recent trends in presenting ‘financial statements’.

(0)

(c)

From the following data available in the books of a manufacturing concern, work out the fixed overhead variance analysed into various heads:

Budgeted output for the year
Budgeted fixed overheads for the year
Standard output per hour
Actual output for the month
Actual fixed overhead for the month

2,40,000 units
Rs.4,80,000
100 units
17,000 units
Rs.48,000

The company follows a budget year of 50 weeks with 48 hours per week. The month consists of 4 working weeks. Due to idle time, two hours are lost every week. Due to erratic supply of materials, the company had to curtail its manufacturing operations to 5–day a week instead of six.

(0)

(a)

State the objectives of ‘transfer pricing’.

(0)

(b)

Dinesh Ltd. has provided following information :

Sale price Variable cost Fixed overheads	: : :	Rs. 20 per unit Rs. 14 per unit Rs. 7,92,000 per annum
How many units must be sold to earn 10% of sales.

(0)

(c)

Following are the selected ratios of Sharp Publishers Ltd.:

Total debt to net worth
Total assets turnover
Inventory turnover (sales divided by inventory)
Average collection period
(Assume 360 days in a year)
Current ratio
Quick ratio
Total debts

1.4
3 times
9 times
20 days

3.3
1.3
Rs. 7,00,000

On the basis of above information, prepare the balance sheet of Sharp Publishers Ltd.

(0)

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