CA PCC/PCE - Group I : Advanced Accounting - May2012

CA PCC/PCE - Group I • Advanced Accounting • May 2012

This Paper has 16 answerable questions with 0 answered.

Roll No………
Total No. of Questions — 7	Total No. of Printed Pages — 8
Time Allowed : 3 Hours	Maximum Marks : 100

Answers to questions are to be given only in English except in the case of candidates who
have opted for Hindi Medium. If a candidate has not opted for Hindi medium, his/her answers
in Hindi will not be valued.

Question No. 1 is compulsory.

Attempt any five questions from the remaining six questions.

Working notes should form part of the answer.

Wherever necessary, suitable assumptions should be made by the candidate.

Marks

(a)

Z Ltd. purchased a fixed asset for Rs. 75 lakhs, which has the estimated useful life of 5 years with the salvage value of Rs.7,50,000. On purchase of the asset, government granted it a grant of Rs.15 lakhs. Pass the necessary journal entries in the books of the company for first two years.

4x5=20
5

(0)

(b)

A Liquidator is entitled to receive remuneration at 2% on the assets realized, 3% on the amount distributed to Preferential Creditors and 3% on the payment made to Unsecured Creditors. The assets were realized for Rs. 25,00,000 against which payment was made as follows:

Liquidation expenses
Secured Creditors
Preferential Creditors

Rs. 25,000
Rs. 10,00,000
Rs. 75,000

The amount due to Unsecured Creditors was Rs.15,00,000. You are asked to calculate the total Remuneration payable to Liquidator. Calculation shall be made to the nearest multiple of a rupee.

(0)

(c)

ABC Ltd. wants to re-classify its investments in accordance with AS–13. Decide and state on the amount of transfer, based on the following information:

(1)	A portion of Current Investments purchased for Rs. 20 lakhs, to be reclassified as Long Term investment, as the company has decided to retain them. The market value as on the date of Balance Sheet was Rs.25 lakhs.

(2)	Another portion of current investments purchased for Rs. 15 lakhs, to be reclassified as long term investments. The market value of these investments as on the date of balance sheet was Rs. 6.5 lakhs.

(3)	Certain long term investments no longer considered for holding purposes, to be reclassified as current investments. The original cost of these was Rs.18 lakhs but had been written down to Rs. 12 lakhs to recognize permanent decline as per AS 13.

(0)

(d)

An earthquake destroyed a major warehouse of Daya Ltd. on 18.5.2011. The accounting year of the company ended on 31.3.2011. The accounts were approved on 30.6.2011.The loss from earthquake is estimated at Rs. 45 lakhs. State with reasons, whether the loss due to earthquake is an adjusting or non–adjusting event and how the fact of loss is to be disclosed by the company?

(0)

Ram Limited and Shyam Limited carry on business of a similar nature and it is agreed that they should amalgamate. A new company, Ram and Shyam Limited, is to be formed to which the assets and liabilities of the existing companies, with certain exceptions, are to be transferred. On 31^st March2011 the Balance Sheets of the two companies were as under:

Ram Limited
Balance Sheet as at 31^st March, 2011
Liabilities	Rs.	Assets	Rs.
Issued and Subscribed Share Capital: 30,000 Equity Shares of of Rs. 10 each, fully paid General Reserve Profit and Loss Account Sundry Creditors	3,00,000 1,60,000 40,000 1,50,000	Freehold Property at cost. Plant and Machinery, at cost less Depreciation Motor Vehicles; at cost Less Depreciation Stock Debtors Cash at Bank	2,10,000 50,000 20,000 1,20,000 1,64,000 86,000
	6,50,000		6,50,000

Shyam Limited
Balance Sheet as at 31st March, 2011
Liabilities	Rs.	Assets	Rs.
Issued and Subscribed Share Capital: 16,000 Equity Shares of of Rs. 10 each,fully paid Profit and Loss Account 6% Debentures Sundry Creditors	1,60,000 40,000 1,20,000 64,000	Freehold Property, at cost Plant and Machinery, at cost less Depreciation stock Debtors Cash at Bank	1,20,000 30,000 1,56,000 42,000 36,000
	3,84,000		3,84,000

Assets and Liabilities are to be taken at book–value, with the following exceptions:

(a)	Goodwill of Ram Limited and of Shyam Limited is to be valued at Rs.1,60,000 and Rs. 60,000 respectively.
(b)	Motor Vehicles of Ram Limited are to be valued at Rs. 60,000.
(c)	The debentures of Shyam Limited are to be discharged by the issue of 6% Debentures of Ram and Shyam Limited at a premium of 5%.
(d)	The Debtors of Shyam Ltd. realised fully and Bank Balance of Shyam Limited are to be retained by the liquidator and the Sundry Creditors of Shyam Ltd. are to be paid out of the proceeds thereof.

You are required to:

(i)	Compute the basis on which shares in Ram and Shyam Limited will be issued to the Shareholders of the existing companies assuming that the nominal value of each share in Ram and Shyam Limited is Rs.10.

(ii)	Draw up a Balance Sheet of Ram and Shyam Limited as of 1^st April, 2011, the date of completion of amalgamation.

(iii)

Write up Journal entries, including Bank entries, for closing the books of Shyam Limited.

(0)

(a)

The following particulars are extracted from the Books of the Commercial Bank Ltd. for the year ending 31^st March,2011.

(i)
(ii)
(iii)

Interest and Discounts
Rebate on Bills Discounted (balance on 1.4.2010)
Bills Discounted and purchased

1,98,64,800
70,080
77,46,400

It is ascertained that proportionate discount not yet earned, on the Bills Discounted which will mature during 2011–2012 amounted to Rs. 96,860.

Pass the necessary Journal entries with narration adjusting the above and show:

(a)	Rebate on Bills Discounted Account; and
(b)	Interest and Discount Account in the ledger of the Commercial Bank Limited.

(0)

(b)

On 1^st January, 2011 X’s account in Y’s ledger showed a debit balance of Rs.5,000. The following transactions took place between Y and X during the quarter ended 31^st March, 2011 :

2011			Rs.
Jan. Jan. Feb. Feb. Feb. March March March	11 24 01 04 07 01 18 23	Y sold goods to X Y received a promissory note from X 3 months date X sold goods to Y Y sold goods to X X returned goods to Y X sold goods to Y Y sold goods to X X sold goods to Y	6,000 5,000 10,000 8,200 1,000 5,600 9,200 4,000

Accounts were settled on 31^st March,2011 by means of a cheque.Prepare an Account Current to be submitted by Y to X as on 31^st March, 2011, taking interest into account @ 10% per annum. Calculate interest to the nearest multiple of a rupee.

(0)

From the following information in respect of a trader, prepare Trading and profit and Loss Account for the year ended 31^st March, 2011 and a Balance Sheet as at that date:

		31–03–2010	31–03–2011
(1)	Liabilities and Assets	Rs.	Rs.
	Stock in trade Debtors for sales Bills receivable Creditors for purchases Furniture at written down value Expenses outstanding Prepaid expenses Cash on hand Bank Balance	1,60,000 3,20,000 – 2,20,000 1,20,000 40,000 12,000 4,000 20,000	1,40,000 ? ? 3,00,000 1,27,000 36,000 14,000 3,000 9,500
(2)	Receipts and Payments during 2010–2011 :
	Collections from Debtors (after allowing 2½% discount) Payments to Creditors (after receiving 2% discount) Proceeds of Bills receivable discounted at 2% Proprietor’s drawings Purchase of furniture midway through the year 4% Government securities purchased at 96% on 1–10–2010 Expenses Miscellaneous Income		11,70,000 7,84,000 1,22,500 1,40,000 20,000 1,92,000 3,50,000 10,000
(3)	Sales are effected so as to realize a gross profit of 33⅓ % on the sale proceeds.
(4)	Goods, costing Rs.18,000, were issued as advertisement articles.
(5)	During the year, Bills Receivable of Rs.2,00,000 were drawn on debtors. Of these, Bills amounting to Rs. 40,000 were endorsed in favour of credtitors. Out of this latter amount, a Bill for Rs.8,000 was dishonoured by the debtor.
(6)	Capital introduced during the year by the proprietor by cheques was omitted to be recorded in the Cash Book, though the bank balance of Rs. 9,500 on 31^st March,2011(as shown above),is after taking the same into account.
(7)	Purchases and Sales are made only on credit.

(0)

(a)

On 19^th May, 2011, the premises of Shri Garib Das were destroyed by fire, but sufficient records were saved, where from the following particulars were ascertained:

	Rs.
Stock at cost on 1.1.2010 Stock at cost on 31.12.2010 Purchases less returns during 2010 Sales less returned during 2010 Purchases less returns during 1.1.2011 to 19.5.2011 Sales less returns during 1.1.2011 to 19.5.2011	36,750 39,800 1,99,000 2,43,500 81,000 1,15,600

In valuing the stock for the Balance Sheet as at 31^st Dec. 2010 Rs.1,150 had been written off on certain stock which was a poor selling line having the, cost Rs.3,450. A portion of these goods were sold in March, 2011 at a loss of Rs.125 on original cost of Rs. 1,725. The remainder of this stock was now estimated to be worth the original cost. Subject to the above exceptions, gross profit has remained at a uniform rate throughout. The stock salvaged was Rs.2,900. ,

Show the amount of the claim of stock destroyed by fire. Memorandum Trading Account to be prepared for the period from 1–1–2011to 19–5–2011 for Normal and abnormal items.

(0)

(b)

X Ltd. has three departments A, B and C. From the particulars given below compute:

(a)	the values of stock as on 31^st Dec.2011 and

(b)	the departmental results

(i)

Rs.

Stock (on 1.1.2011)
Purchases
Actual Sales
Gross Profit on normal
selling price

24,000
1,46,000
1,72,500

20%

36,000
1,24,000
1,59,400

25%

12,000
48,000
74,600

33⅓%

(ii)

During the year certain items were sold at discount and these discounts were reflected in the value of sales shown above. The items sold at discount were:

	Departments
	A	B	C
	Rs.	Rs.	Rs.
Sales at normal price Sales at normal price	10,000 7,500	3,000 2,400	1,000 600

(0)

Read, Write and Add give you the following Balance Sheet as on 31^st March,2011.

Liabilities	Rs.	Assets	Rs.
Read’s Loan Capital Accounts: Read30,000 Write10,000 Add2,000 Sundry Creditors Loan on Hypothecation of Stock Joint Life policy Reserve	15,000 42,000 17,800 6,200 12,400	Plant and Machinery at cost Fixtures and Fittings Stock Debtors18,400 Less: Provision400 Joint Life Policy Patents and Trademark Cash at Bank	30,000 2,000 10,400 18,000 15,000 10,000 8,000
	93,400		93,400

The partners shared profits and losses in the ratio of Read 4/9, Write 2/9 and Add 1/3. The firm was dissolved on 31^st March, 2011 and you are given the following information:

(a)

Add had taken a loan from insurers for Rs. 5,000 on the security of Joint Life Policy. The policy was surrendered and Insurers paid a sum of Rs.10,200 after deducting Rs. 5,000 for Add’s loan and Rs.300 as interest thereon.

(b)

One of the creditors took some of the patents whose hook value was Rs. 6,000 at a valuation of 4,500. The balance to that creditor was paid in cash.

(c)

The firm had previously purchased some shares in a joint stock company and had written them off on finding them useless. The shares were now found to be worth Rs. 3,000 and the loan creditor agreed to accept the shares at this value.

(d)

The remaining assets realised the following amounts:

	Rs.
Plant and Machinery Fixtures and Fittings Stock Debtors Patents 50% of their book value	17,000 1,000 9,000 16,500

(e)

The liabilities were paid and a total discount of Rs. 500 was allowed by the creditors.

(f)

The expenses of realisation amounted to Rs.2,300.

Prepare the Realisation Account, Bank Account and Partners Capital Accounts in columnar form.

(0)

Answer any four questions:

4x4=16

(a)

	Rs.
Net profit for the current year No. of equity shares outstanding Basic earnings per share No. of 12% convertible debentures of Rs. 100 each Each debenture is convertible into 10 equity shares. Interest expense for the current year Tax relating to interest expense (30%) Compute Diluted Earnings per Share.	2,00,00,000 1,00,00,000 2.00 2,00,000 24,00,000 7,20,000

(0)

(b)

A trader purchased goods for Rs.3,40,000. The opening stock of inventory prior to the said purchases was Rs. 60,000. His sale was Rs. 4,20,000. Find out the closing stock of inventory if the Gross profit margin is 25% on cost.

(0)

(c)

What are the advantages of outsourcing the accounting functions?

(0)

(d)

Perfect Assurance Co. Ltd. received Rs. 11,80,000 as premium on new policies and Rs. 2,40,000 as renewal premium. The company received Rs.1,80,000 towards reinsurance accepted and paid Rs.1,40,000 towards reinsurance ceded. How much will be credited to Revenue Account towards premium?

(0)

(e)

Computer Point sells computers on Hire Purchase basis at cost plus 25%. Terms of sale are Rs.10,000 down payment and eight monthly instalments of Rs. 5000 for each computer. Two computers were repossessed for non–payment of instalments and to be valued at 50% of cost price. Compute the value of repossessed computers.

(0)

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