CA PCC/PCE - Group I : Advanced Accounting - November 2011

CA PCC/PCE - Group I • Advanced Accounting • November 2011

This Paper has 17 answerable questions with 0 answered.

Roll No………
Total No. of Questions — 7]	[Total No. of Printed Pages — 12
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)

A building costing Rs. 12,00,000 is depreciated for three years on straight line basis, assuming 10 years working life and Rs. 2,00,000 residual value. At the beginning of fourth year, the building was revalued upwards by Rs. 3,00,000. Residual value also revalued upwards by Rs. 1,00,000. The remaining useful life was reassessed at 10 years. Find depreciation to be charged for the fourth year onwards.

4x5=20

(0)

(b)

A accepted following several bills falling due on different dates, now desires to have these bills cancelled and to accept a new bill for the whole amount payable on the average due date:

S.NO.	Date of Bill	Amount (Rs.)	Usance of Bill
1.	1^stFebruary 2011	4,00,000	1 month
2.	14^thFebruary 2011	6,00,000	3 months
3.	2^ndMarch 2011	7,50,000	2 months
4.	10^thMarch 2011	5,00,000	4 months
5.	18^thMarch 2011	9,00,000	1 month

From above, find the average due date, on which A can pay the whole amount

(0)

(c)

From the information given below, find out the amount of provision to be shown in the Profit and Loss Account of a Commercial Bank:

Assets	Rs.(In Lakhs)
Standard Sub–standard Doubtful for more than three years (Fully Secured) Loss Assets	4,500 3,000 250 750

(0)

(d)

ABC (p) Limited ordered 10,000 kg. of certain material at Rs. 100 per kg. The purchase price includes Excise Duty Rs. 10 per kg., in respect of which full CENVAT credit is admissible. Freight, Loading and Unloading incurred amounted to Rs. 40,800. Normal Transit Loss is 2%. The enterprise, actually received 9760 kg. and consumed 9500 kg. Determine cost of inventory and allocation of material cost as per AS–2 "Valuation of Inventory".

(0)

XYZ (P) Limited was incorporated on 01–08–2010 to take over the business of M/s. Rank & Co. from 01–04–2010. The Profit & Loss Account as given by XYZ (P) Limited for the year ending 31–03–2011 is as under:

Profit & Loss Account for the year ending 31–03–2011
Dr.	Cr.
Particulars	Rs.	Particulars	Rs.
To Advertisement To Audit Fee To Bad Debts (Related to Sales) To Depreciation To Discount To Interest on Debentures To Preliminary Expenses To Rent To Salaries To Underwriting Commission To Net Profit	99,000 15,000 27,000 21,000 9,000 80,000 12,000 1,40,000 4,48,000 20,000 90,000	By Gross Profit B/d By Interest on Investment	9,45,000 16,000
	9,61,000		9,61,000

Prepare Profit & Loss Account showing allocation of Pre–Incorporation and Post–Incorporation profits after considering the following information:

(1)	G.P. Ratio was constant throughout the year.
(2)	Sales for August 2010 to November 2010 were 1½times the average monthly sales while for December 2010 to March 2011 were 2 times the average sales.
(3)	Company had to occupy additional space from 01^st December 2010 for which rent was Rs. 5,000 per month.
(4)	Bad Debts are shown after adjusting a recovery of Rs. 9,000 of Bad Debts for a sale made in July 2010.
(5)	Salary of one Manager was increased by Rs. 2,000 P.M. from August 2010. Salary of other employees remains unchanged.
(6)	All Investments were sold in May 2010 at a profit of Rs. 27,000. Profit on Sale of Investment inadvertently included to Sales and ultimately to Gross Profit.

(0)

Crystal Company Limited decided to reconstruct its business as it has accumulated huge losses. The following is the Balance Sheet of the company as on 31–03–2011 before reconstruction:

Balance Sheet as on 31–03–2011
Liabilities	Rs.	Assets	Rs.
3,00,000 Equity Shares of Rs. 10 each fully paid up 1,60,000, 6% Preference Shares of Rs. 10 each fully paid up 6% Debentures (Secured against Land & Building) Bank Overdraft Sundry Creditors Provision for Income Tax	30,00,000 16,00,000 15,00,000 5,80,000 12,00,000 2,00,000	Goodwill Patents Land & Building Plant & Machinery Investments (at Cost) Sundry Debtors Stock Profit & Loss A/c	5,20,000 1,50,000 17,00,000 2,00,000 2,20,000 17,40,000 17,00,000 18,50,000
	80,80,000		80,80,000

Following scheme of Reconstruction approved by all interested parties and Court :

(1)	All Equity Shares are reduced to Rs. 3 each and Preference Shares to Rs. 7 each.
(2)	Debenture holders agree to take over a part of Land and Building, Book value of which is Rs. 7,00,000, towards their 50% claim. Rate of interest of balance 50% debentures increased to 9%.
(3)	Goodwill and Patent will be written off.
(4)	10% of Sundry Debtors to be provided for bad debts..
(5)	Stock to be written off by Rs. 2,60,000.
(6)	50% of balance Land & Building sold for Rs. 6,00,000 and remaining Land & Building valued at Rs. 6,00,000.
(7)	Investments to be sold for Rs. 2,00,000.
(8)	There are pending contracts amounting to Rs. 10,00,000. These contracts are to be cancelled on payment of penalty @ 5% of pending contract amount.
(9)	The Income Tax Liability of the company is settled at Rs. 3,06,000. Provision for Income Tax will be raised accordingly.
(10)	1/3 of Sundry Creditors decided to forgo their claim.
(11)	After making all the above adjustments, balance amount available through scheme, will be utilised to write off the value of Plant & Machinery to that extent.

You are required to pass the Journal Entries and Draw up Balance Sheet of the company after reconstruction.

(0)

(a)

From the following particulars as provided by M/s. Thirumala & Co., prepare Debtors Ledger Adjustment A/c and Creditors Ledger Adjustment Alc. in General Ledger for the year ending 31^st March, 2011 :

Rs.

Opening Balance as on 01–04–2010 of Sundry Debtors
Opening Balance as on 01–04–2010 of Sundry Creditors
Cash Purchases
Credit Purchases
Cash Sales
Credit Sales
Cash paid to Creditors
Bills Payable accepted
Discount allowed by Creditors
Sundry charges debited by creditors
Cash received from Debtors
Bills Receivable received
Discount allowed to Debtors
Bad Debts
Bad Debts Recovered, written off during earlier Financial Year
Provision for Doubtful Debts
Return Inwards
Return Outwards

2,40,000
2,77,500
3,66,300
14,65,200
4,22,400
16,89,600
11,18,100
3,50,900
4,800
7,200
12,17,300
4,17,700
7,750
6,700
12,800
38,500
13,150
9,000

(0)

(b)

The premise of Green Limited was partially destroyed by fire on March 01, 2011 and as a result, the business was practically disorganized up to August 31, 2011. The company is insured under a loss of profits policy for Rs. 6,60,000, having an indemnity period of 6 months.
From the information given below, find out claim under the policy:

	Rs.
Actual Turnover from March 01, 2011 to August 31, 2011 Turnover from March 01, 2010 to August 31, 2010 Turnover from March 01, 2010 to February 28, 2011 Net Profit for last Financial Year Insured Standing Charges for last Financial Year Uninsured Standing Charges for last Financial Year Turnover for the last Financial Year	3,20,000 9,60,000 24,00,000 3,60,000 2,40,000 20,000 20,00,000

The company incurred additional expenses amounting to Rs. 40,000 immediately after fire, which reduced the loss in turnover. Otherwise turnover during the period of dislocation would have been only amounting to Rs. 2,20,000. The saving in Insured Standing Charges in consequences of the fire amounted to Rs. 10,800.

There had been a considerable increase in trade since the date of the last annual accounts and it has been agreed that an adjustment of 10% be made in respect of the upward trend in turnover. Assume that, trend adjustment is required on total amount of annual turnover.

(0)

(a)

P, Q and R were partners sharing profits and losses in the ratio of 2 : 2 : 1. R wants to retire from partnership on 31–3–2011 and S wants to join the partnership on the same date, to which both P & Q agreed. The Balance Sheet of the partnership firm as on 31–03–2011 and other information were as detailed below:

Balance Sheets as on 31–03–2011
Liabilities	Rs.	Assets	Rs.
Partner’s Capital A/c P Q R General Reserve Sundry Creditors	4,80,000 3,20,000 2,40,000 40,000 2,00,000	Fixed Assets Stock in Hand Sundry Debtors Cash at Bank Cash in Hand	6,00,000 2,00,000 2,80,000 1,60,000 40,000
	12,80,000		12,80,000

P, Q and S agrees to share profits and losses in equal ratio in future. Value of goodwill is taken to be Rs. 1,80,000. Fixed Assets are revalued upwards by Rs. 1,20,000 and Stock by Rs. 40,000. A debtor from whom Rs. 20,000 was due, become insolvent. No amount will be received from him in future and same is not recorded in the books and balance sheet as above. Claim of R will be settled in full. P, Q and S agree to make their capital proportionate to their new profit sharing ratio. Balance amount receivable from / payable to partners will be paid to partners / brought in by partners immediately. All these transactions viz., claim of R and amount receivable / payable to partners will be routed through bank only. New partners also want to maintain Rs. 3,20,000 bank balance for working capital requirement. However they don’t want to show goodwill in the books of accounts.

Prepare:

(i)	Revaluation Account
(ii)	Capital Accounts of Partners and
(iii)	Balance Sheet of the Firm as newly constituted.

(0)

(b)

From the following figures of Fire Insurance division of a General Insurance Company, show the amount of claim as it would appear in the Revenue Account for the year ended 31^st March,2011 :

	Direct Business Rs.	Re– Insurance Rs.
Claims paid during the year Claims payable 1^st April 2010 31^st March 2011 Claims received Claims receivable 1^st April 2010 31^st March 2011 Expenses of management (includes Rs. 52,500 Surveyor’s Fee and Rs. 67,500 Legal Expenses for settlement of claims)	70,05,000 11,44,500 12,18,000 — — — 3,45,000	10,50,000 1,30,500 79,500 3,45,000 97,500 1,69,500

(0)

(a)

Following is the Balance Sheet of Happy Limited as on March 31, 2011 :

Balance Sheets as on 31–03–2011
Liabilities	Rs.	Assets	Rs.
Authorised share capital 2,00,000 Equity shares of Rs. 10 each Issued and subscribed share capital 2,00,000 Equity shares of Rs. 10 each, Rs. 7 paid up Reserves and Surplus Capital Reserve (Profit on sale of Fixed Assets) Securities Premium (Includes Rs. 20,000 received otherwise than in cash) General Reserve Profit & Loss A/c Secured Loans 12% Fully Convertible Debentures @ Rs. 100 each Current Liabilities and Provisions	20,00,000 14,00,000 1,30,000 90,000 2,40,000 5,20,000 4,00,000 2,20,000	Fixed Assets Investments Current Assets, Loans & Advances	20,00,000 4,40,000 5,60,000
	30,00,000		30,00,000

On April 01, 2011, company has made final call @ Rs. 3 on 2,00,000 Equity Shares and received complete call money by April 30, 2011.

The company wants to issue Bonus Shares to its shareholders @ one share for every four shares held.

12% Debentures are convertible into equity shares of Rs. 10 each fully paid on June 01, 2011. Necessary resolutions were passed and requisite legal requirements were complied with. For issue of Bonus Shares it was decided that Reserves and Surpluses, other than Profit and Loss A/c, should be first capitalised.

Prepare Balance Sheet as on May 15, 2011, date on which all the formalities related to the Issue of Bonus Shares completed. For the purpose of preparation of Balance Sheet, assume that, Balance Sheet items as on March 31, 2011, which are not effected by issue of Bonus Shares as above, remains unchanged as on May 15, 2011. Also pass necessary Journal Entries in the books of the company related to issue of Bonus Shares, for the period from April 01, 2011 to May 15, 2011.

(0)

(b)

The Income & Expenditure Accounts of Neo Sports Club for the year ending March 31, 2011 is as follows:

Expenditure	Rs.	Income	Rs.
To Salaries To Depreciation To Bank Interest To Audit Fee To Insurance To Surplus transferred to Balance Sheet	7,20,000 90,000 38,400 20,000 9,000 22,600	By Subscription	9,00,000
	9,00,000		9,00,000

Following adjustments made while preparing Income & Expenditure A/c. as above:

(1)

Subscription outstanding as on 31–03–2010 amounting to Rs. 72,000 and as on 31–03–2011 amounting to Rs. 90,000.

(2)

Subscription received in advance as on 31–03–2010 amounting to Rs. 54,000 and as on 31–03–2011 amounting to Rs. 32,400.

(3)

Salary outstanding as on 31–03–2010 amounting to Rs. 55,000 and as on 31–03–2011 amounting to Rs. 60,000.

(4)

Audit Fee is same for F.Y. 2009–10 and F.Y. 2010–11. As a standard practice, Audit Fee of one F.Y. paid during next F.Y., after completion of audit.

(5)

A loan amounting to Rs. 3,20,000 taken from bank by Club on 01–10–2009. Interest on loan is payable @ 12% p.a. Interest of one F.Y. paid on April 01 of next F.Y. No amount of principal repaid by Club till 31–03–2011.

(6)

Assets of club as on 31–03–2010 were as under:

Land at cost
Building at WDV (Original Cost Rs. 7,00,000)
Sports Equipments WDV (Original Cost Rs. 5,00,000)

Rs. 10,00,000
Rs. 6,65,000
Rs. 4,50,000

(7)

Depreciation on Building to be provided @ 5% on straight line basis. There is no addition to Building during F.Y. 2010–11.

(8)

Depreciation on Sports Equipments to be provided @ 10% on straight line basis. Fresh sports equipments purchased during F.Y. 2010–11 on 01–10–2010.

(9)

Insurance paid on October 01 during each F.Y. and remains valid till September 30 of next F.Y. Prepaid Insurance as on 31–03–2010 was Rs. 4,200.

(10)

Cash & Bank Balance as on Rs. 31–03–2011 amounting to Rs. 1,56,000 and as on 31–03–2010 amounting to Rs. 1,59,400.

Prepare Receipts and Payments A/c for the year ending on March 31, 2011.

(0)

Answer any four questions:

4x4=16

(a)

List out assets to which AS 6 "Depreciation Accounting" will not be applicable.

(0)

(b)

Mr. Y bought a forward contract for three months of US $ 2,00,000 on 1st December 2010 at 1 US $ = Rs. 44.10 when the exchange rate was 1 US $ = Rs. 43.90. On 31–12–2010 when he closed his books, exchange rate was 1 US $ = Rs. 44.20. On 31st January, 2011 he decided to sell the contract at Rs. 44.30 per Dollar. Show how the profits from the contract will be recognized in the books of Mr. Y.

(0)

(c)

Briefly explain advantages of using Customised Accounting Package.

(0)

(d)

Books of India Limited could not recover Rs. 8 lakhs from a debtor. The company is aware that the debtor is in great financial difficulty. The accounts of the company were finalized for the year ended 31–3–2011 by making a provision at 20% of the amount due from the said debtor.

The debtor became bankrupt in April, 2011 and nothing is recoverable from him. Do you advise the company to provide for the entire loss of Rs. 8 lakhs in the Books of Accounts for the year ended 31st March, 2011:

(0)

(e)

On April 01, 2008, ABC & Associates acquired a Motor Caron hire purchase from MC & Co. The terms of the contract were as follows:

(i)	Cash price of Motor Car was Rs. 2,10,000.
(ii)	Rs. 70,000 were to be paid on signing of the contract and balance in two equal annual installments plus interest, to be paid at the beginning of the onward financial years i.e. on April 01, 2009 and so on.
(iii)	Interest chargeable on the outstanding balance was @ 12%p.a.
(iv)	Depreciation @ 10% p.a. to be written–off using written down value method.

You are required to prepare Motor Car A/c in the books of ABC & Associates from April 01, 2008 to March 31, 2011.

(0)

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