IPCC : Accounting - May2012

IPCC • Accounting • May 2012

This Paper has 16 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

Question No. 1 is compulsory.

Answer any five questions from the remaining six questions.

Wherever appropriate, suitable assumption/s should be made and indicated in answer by the candidate.

Working notes should form part of the answer.

Marks

(a)

M/s Excellent Construction Company Limited undertook a contract to construct a building for Rs. 3 Crore on 1^st September, 2011. On 31^st March, 2012 the company found that it had already spent Rs. 1 Crore 80 Lakhs on the construction. Prudent estimate of additional cost for completion was Rs. 1 Crore 40 Lakhs. What amount should be charged, to revenue in the final accounts for the year ended on 31^st March, 2012, as per the provisions of Accounting Standard 7 "Construction Contracts (Revised)"?

4x5=20

(0)

(b)

M/s Innovative Garments Manufacturing Company Limited invested in the shares of another company on 1^st October, 2011 at a cost of Rs. 2,50,000. It also earlier purchased Gold of Rs. 4,00,000 and Silver of Rs. 2,00,000 on 1^st March, 2009. Market value as on 31^st March, 2012 of above investments are as follows:

	Rs.
Shares Gold Silver	2,25,000 6,00,000 3,50,000

How above investments will be shown in the books of accounts of M/s Innovative Garments Manufacturing Company Limited for the year ending 31^st March, 2012 as per the provisions of Accounting Standard 13 "Accounting for Investments"?

(0)

(c)

M/s Progressive Company Limited has not charged depreciation for the year ended on 31^st March, 2012, in respect of a spare bus purchased during the financial year 2011–12 and kept ready by the company for use as a stand – by, on the ground that, it was not actually used during the year. State your views with reference to Accounting Standard 6 "Depreciation Accounting".

Further during the year company made additions to its factory by using its own workforce, at a cost of Rs. 4,50,000 as wages and materials. The lowest estimate from an outside contractor to carry out the same work was Rs. 6,00,000. The directors contend that, since they are fully entitled to employ an outside contractor, it is reasonable to debit the Factory Building Account with Rs. 6,00,000. Comment whether the directors’ contention is right in view of the provisions of Accounting Standard 10 "Accounting for Fixed Assets" ?

(0)

(d)

Briefly explain the types of Amalgamations ?

(0)

M/s Platinum Limited has decided to reconstruct the Balance Sheet since it has accumulated huge losses. The following is the Balance Sheet of the company as on 31^st March, 2012 before reconstruction:

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Share Capital
50,000 shares of Rs. 50 each fully paid up	25,00,000	Goodwill	22,00,000
1,00,000 shares of Rs. 50 each Rs. 40 paid up	40,00,000	Land & Building Machinery	42,70,000 8,50,000
Capital Reserve	5,00,000	Computers	5,20,000
8% Debentures of Rs. 100 each	4,00,000	Stock	3,20,000
12% Debentures of Rs. 100 each	6,00,000	Trade Debtors Cash at Bank Profit & Loss Account	10,90,000 2,68,000 7,82,000
Trade Creditors Outstanding Expenses	12,40,000 10,60,000
Total	1,03,00,000	Total	1,03,00,000

Following is the interest of Mr. Shiv and Mr. Ganesh in M/s Platinum Limited:

	Mr. Shiv		Mr. Ganesh
8% Debentures 12% Debentures	3,00,000 4,00,000		1,00,000 2,00,000
Total	7,00,000	Total	3,00,000

The following scheme of internal reconstruction was framed and implemented, as approved by the court and concerned parties:

(1)	Uncalled capital is to be called up in full and then all the shares to be converted into Equity Shares of Rs. 40 each.
(2)	The existing shareholders agree to subscribe in cash, fully paid up equity shares of Rs. 40 each for Rs. 12,50,000.
(3)	Trade Creditors are given option of either to accept fully paid equity shares of Rs. 40 each for the amount due to them or to accept 70% of the amount due to them in cash in full settlement of their claim. Trade Creditors for Rs. 7,50,000 accept equity shares and rest of them opted for cash towards full and final settlement of their claim.
(4)	Mr. Shiv agrees to cancel debenture amounting to Rs. 2,00,000 out of total debentures due to him and agree to accept 15% Debentures for the balance amount due. He also agree to subscribe further 15% Debentures in cash amounting to Rs. 1,00,000.
(5)	Mr. Ganesh agrees to cancel debenture amounting to Rs. 50,000 out of total, debentures due to him and agree to accept 15% Debentures for the balance amount due.
(6)	Land & Building to be revalued at Rs. 51,84,000, Machinery at Rs. 7,20,000, Computers at Rs. 4,00,000, Stock at Rs. 3,50,000 and Trade Debtors at 10% less to as they are appearing in Balance Sheet as above.
(7)	Outstanding Expenses are fully paid in cash
(8)	Goodwill and Profit & Loss A/c will be written off and balance, if any, of Capital Reduction A/c will be adjusted against Capital Reserve.

You are required to pass necessary Journal Entries for all the above transactions and draft the company’s Balance Sheet immediately after the reconstruction.

(0)

(a)

M/s Ice Limited gives you the following information to find out Total Sales and Total Purchases:

Particulars

Amount (Rs.)

Debtors as on 01.04.2011
Creditors as on 01.04.2011
Bills Receivables received during the year
Bills Payable issued during the year
Cash received from customers
Cash paid to suppliers
Bad Debts recovered
Bills Receivables endorsed to creditors
Bills Receivables dishonoured by customers
Discount allowed by suppliers
Discount allowed to customers
Endorsed Bills Receivables dishonoured
Sales Return
Bills Receivable discounted
Discounted Bills Receivable dishonoured
Cash Sales
Cash Purchases
Debtors as on 31.03.2012
Creditors as on 31.03.2012

70,000
81,000
47,000
53,000
1,56,000
1,72,000
16,000
27,000
5,000
7,000
9,000
3,000
11,000
8,000
2,000
1,68,500
1,97,800
82,000
95,000

(0)

(b)

Good, Better and Best are in partnership sharing profits and losses in the ratio 3 : 2 : 4. Their capital account balances as on 31^st, March, 2012 are as follows:

	Rs.
Good Better Best	1,70,000 (Cr) 1,10,000 (Cr) 1,22,000 (Cr)

Following further information provided:

(1)	Rs. 22,240 is to be transferred to General Reserve.
(2)	Good, Better and Best are paid monthly salary in cash amounting to Rs. 2,400, Rs. 1,600 and Rs. 1,800 respectively.
(3)	Partners are allowed interest on their closing capital balance @6% p.a. and are charged interest on drawings @ 8% p.a.
(4)	Good and Best are entitled to commission @ 8% and 10%respectively of the net profit before making any appropriation.
(5)	Better is entitled to commission @ 15% of the net profit before charging Interest on Drawings but after making all other appropriations
(6)	During the year Good withdraw Rs. 2,000 at the beginning of every month, Better Rs. 1,750 at the end of every month and Best Rs. 1,250 at the middle of every month.
(7)	Firms’s Accountant is entitled to a salary of Rs. 2,000 per month and a commission of 12% of net profit after charging such commission.
	The Net Profit of the firm for the year ended on 31^st March, 2012 before providing for any of the above adjustments was Rs. 2,76,000.

You are required to prepare Profit and Loss Appropriation Account for the year ended on 31^st March, 2012.

(0)

From the following Income & Expenditure A/c of Premium Sports Club for the year ended 31^st March, 2012, you are required to prepare Receipts & Payment A/c for the year ended 31^st March, 2012 and Balance Sheet as on that date:

Expenditure	Amount (Rs.)	Income	Amount (Rs.)
To Salaries To Rent To Printing & Stationery To Postage & Telephone To Membership Fee To Electricity Charges To Garden Upkeep To Sports Material Utilized To Repairs & Maintenance To Depreciation To Miscellaneous Expenses To Surplus carried to Capital Fund	1,18,800 2,16,000 28,000 41,600 3,200 38,500 19,300 62,800 18,700 13,000 5,700 3,500	By Subscriptions By Entrance Fee By Profit on sale of Sports Material By Interest on 8% Government Bonds By Sale of Old Newspaper	4,20,000 1,20,000 5,500 12,000 11,600
Total	5,69,100	Total	5,69,100

The following additional information is provided to you:

(a)

	Balances as on 01.04.2011	Balances as on 31.03.2012
Fixed Assets Bank Balance Stock of Sports Material Outstanding Subscription Subscription received in advance 8% Government Bonds Outstanding Salaries Outstanding Rent Advance for Stationery Outstanding Repairs & Maintenance Creditors for purchase of Sports Material	2,40,000 8,300 43,450 10,200 2,400 1,50,000 16,000 21,000 1,350 1,200 3,400	? ? 35,670 5,700 4,900 1,50,000 14,300 15,000 1,550 Nil 4,200

(b)

Some of Fixed Assets were purchased on 01.10.2011 and depreciation is to be charged @ 5% p.a.

(c)

Sports Material worth Rs. 72,000 was purchased on credit during the year.

(d)

The Club became member of State Table Tennis Association on 01.01.2012 when it paid fee up to 31.12.2012.

(e)

50% of Entrance Fee is to be capitalized.

(f)

Interest on 8% Government Bonds was received for two quarters only.

(g)

A Fixed Deposit of Rs. 80,000 was made on 31^st March, 2012.

(0)

(a)

M/s Multistore Limited sells goods both on cash and hire purchase basis and record hire–purchase transactions on "Stock and Debtors System". It closes its books of accounts on 31^st March every year. On 1^st May, 2011 it sold to Man as a Scooter and a LCD TV.
The other information are as follows:

Particulars	Scooter	LCD TV
Cost Price Down Payment Number of Installments Payable Amount of each Installment Mode of Payment 1^st Installment due on	30,000 5,000 12 2,800 Monthly 1^st June, 2011	40,000 6,000 6 7,600 Quarterly 1^st July, 2011

Manas paid all the installments due except for those due on 1^st January, 2012. It was decided that M/s Multistore Limited will take back Scooter at an agreed price of Rs. 22,000 and excess amount, if any, will be adjusted against the installments due of LCD TV.

Scooter repossessed was sold for Rs. 24,500 after incurring repair charges of Rs. 1,000.

Prepare necessary ledger accounts to record the above transactions and find out the profit.

(0)

(b)

Mr. Brown has made following transactions during the financial year 2011–12 :

Date	Particulars
01.05.2011	Purchased 24,000 12% Bonds of Rs. 100 each at Rs. 84 cuminterest. Interest is payable on 30^th September and 31^st March every year.
15.06.2011	Purchased 1,50,000 equity shares of Rs. 10 each in Alpha Limited for Rs. 25 each through a broker, who charged brokerage @ 2%.
10.07.2011	Purchased 60,000 equity shares of Rs. 10 each in Beeta Limited for Rs. 44 each through a broker who charged brqkerage @2%.
14.10.2011	Alpha Limited made a bonus issue of two shares for every three shares held.
31.10.2011	Sold 80,000 shares in Alpha Limited for Rs. 22 each.
01.01.2012	Received 15% interim dividend on equity shares of Alpha Limited.
15.01.2012	Beeta Limited made a right issue of one equity share for every four shares held at Rs. 5 per share. Mr. Brown exercised his option for 40% of his entitlements and sold the balance rights in the market at Rs. 2.25 per share.
01.03.2012	Sold 15,000 12% Bonds at Rs. 90 ex–interest.
15.03.2012	Received 18% interim dividend on equity shares of Beeta Limited. Interest on 12% Bonds was duly received on due dates.

Prepare separate investment account for 12% Bonds, Equity Shares of Alpha Limited and Equity Shares of Beeta Limited in the books of Mr. Brown for the year ended on 31^st March, 2012.

(0)

Ramda & Sons had taken out policies (without Average Clause) both against loss of stock and loss of profit, for Rs. 2,10,000 and Rs. 3,20,000 respectively. A fire occurred on 1^st July, 2011 and as a result of which sales were seriously affected for a period of 3 months.
Trading and Profit & Loss A/c of Ramda & Sons for the year ended on 31^st March, 2011 is given below:

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Opening Stock To Purchases To Wages To Manufacturing Expenses To Gross Profit c/d	96,000 7,56,000 1,58,000 75,000 3,00,000	By Sales By Closing Stock	12,00,000 1,85,000
Total	13,85,000	Total	13,85,000
To Administrative Expenses To Selling Expenses (Fixed) To Commission on Sales To Carriag Outward To Net Profit	83,600 72,400 34,200 49,800 60,000	By Gross Profit b/d	3,00,000
Total	3,00,000	Total	3,00,000

Further detail provided is as below:

(a)

Sales, Purchases, Wages and Manufacturing Expenses for the period 01.04.2011 to 30.06.2011 were Rs. 3,36,000, Rs. 2,14,000, Rs. 51,000 and Rs. 12,000 respectively.

(b)

Other Sales figure were as follows:

	Rs.
From 01.04.2010 to 30.06.2010 From 01.07.2010 to 30.09.2010 From 01.07.2011 to 30.09.2011	3,00,000 3,20,000 48,000

(c)

Due to decrease in the material cost, Gross Profit during 2011–12 was expected to increase by 5% on sales.

(d)

Rs. 1,98,000 were additionally incurred during the period after fire. The amount of policy included Rs. 1,56,000 for expenses leaving Rs. 42,000 uncovered. Compute the claim for stock, loss of profit and additional expenses.

(0)

Answer any FOUR of the following:

4x4=16

(a)

M/s Stairs & Co. draw upon M/s Marble & Co. several bills of exchange due for payment on different dates as under:

Date of Bill	Amount (Rs.)	Tenure of Bill
12^th May 10^th June 1^st July 19^th July	44,000 45,000 14,000 17,000	3 months 4 months 1 month 2 months

Find out the average due date on which payment may be made in one single amount by M/s Marble & Co. to M/s Stairs & Co. 15^th August, Independence Day, is national holiday and 22^nd September declared emergency holiday, due to death of a national leader.

(0)

(b)

X, Y and Z are partners sharing profits and losses equally. On 1^st December, 2011 Z retired from the partnership firm. The capitals of the partners, after all necessary adjustments stood at Rs. 45,000, Rs. 75,000 and Rs. 50,000 respectively. X and Y continued to carry on the business without settling the accounts of Z. Final payment to Z made on 1^st March, 2012. The partnership firm made profit amounting to Rs. 30,000 during the period from 1^st December, 2011 to 29^th February, 2012.

What are the rights of Z to share subsequent profit as, per the provisions of Section 37 of the Indian Partnership Act?

(0)

(c)

A computer costing Rs. 60,000 is depreciated on, straight line basis, assuming 10 years working life and Nil residual value, for three years. The estimate of remaining useful life after third year was reassessed at 5 years. Calculate depreciation as per the provisions of Accounting Standard 6 "Depreciation Accounting" .

(0)

(d)

What are the maximum limits of managerial remuneration for companies having adequate profits?

(0)

(e)

"ERP package is gaining popularity in big organizations." Briefly explain the advantages of using an ERP package, in the fight of above statement.

(0)

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