CA PE - II :: Accounting : May 2004


Roll No…………………
Total No. of Questions— 6] [Total No. of Printed Pages—7

Time Allowed : 3 Hours Maximum Marks : 100
RS
Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued.
Answer all Questions
Wherever appropriate suitable assumptions should be made by the candidate.
Working notes should form part of the answer.
Marks
1.(a)

Sameera Corporation sells Computers on Hire-purchase basis at cost plus 25%. Terms of sales are 5,000/- as Down payment and 10 monthly instalments of Rs. 2,500/- for each Computer. From the following particulars, prepare Hire-purchase Trading A/c for the year 2002-03 :

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As on 1st April, 2002, last instalment on 20 Computers were Outstanding as these were not due upto the end of the Previous year. During 2002-03, the Firm sold 120 Computers. As on 31st March, 2003 the position of instalments outstandign were as under :
Instalments due but not collected
Instalment not yet due		 4 Instalments on 4 Computers and Last instalment on 9 Computers
6 Instalments on 50 Computers, 4 Instalmens on 20and Last
Instlament on 40 Computers.

Two Computers on which 8 Instalments were due and one Instalment not yet due on 31.03.2003, had to be repossessed. Repossessed stock is valued at 50% of cost. All other Instalments have been received.
RS P.T.O.


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RS Marks
(b)

Rajatapeeta Bank Ltd. had extended the following credit lines to a Small Scale Industry, which had not paid any Interest since March, 1997 :

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 Term LoanExport Credit
Balance Outstanding on 31.03.03
DICGC/ECGC over
Securities held
Realisable value of Securities		 Rs. 35 lakhs
        40%
Rs. 15 lakhs
Rs. 10 lakhs		 Rs. 30 lakhs
        50%
Rs. 10 lakhs
Rs. 08 lakhs

Compute necessary Provisions to be made for the year ended 31st March, 2003.
2.

Riu, Inu and Sinu were runnign Partnership business sharing Profits and Losses in 2 : 2 : 1 ratio. Their Balance sheet as on 31st March, 2003 stood as follows :

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Balance Sheet as on 31st March, 2003
(Figures in Rs.'000)
LiabilitiesAmount
Rs.		Amount
Rs.		AssetsAmount
Rs.
Fixed Capital :
   Riu
   Inu
   Sinu
Capital Account:
   Riu
   Sinu
Unsecured Loans
Current Liabilities
300.00
200.00
100.00

60.00
40.00


600.00


100.00
100.00
150.00		 Fixed Assets
Investments
Current Assets :
   Stock           100.00
   Debtors        275.00
   Cash & Bank 125.00		 400.00
 50.00



500.00
950.00 950.00

On 01.04.2003, they agreed to form a New company RIS (P) Ltd. with Inu and Sinu each taking up 200 shares of Rs. 10 each, which shall take over the firm as a going concern including Goodwill, but excluding Cash & Bank Balaces. The following are also agreed upon :
(a)Goodwill will be valued at 3 year's purchase of superprofits.

RS Contind...

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RS Marks
(b)The actual profit for the purpose of Goodwill valuation will be Rs. 2,00,000.
(c)The normal rate of return will be 18% per annum on Fixed Capital.
(d)All other Assets and Liabilities will be taken over at Book values.
(e)

The Purchase Consideration will be payabel party in Shares of Rs. 10 each and party in cash. Payment in Cash being to meet the requirement to Discharge Riu, who has agreed to retire.

(f)Inu and Sinu are to acquire Interest in the new company at the raito 3 : 2.
(g)Realisation expenses amounted to Rs. 51,000.
Yor are required to prepare Realisation Account, Cash and Bank Account, RIS (P) Limited Account and Capital Account of Partners.
3.

Mr. Shankar of Mumbai finding himself unable to meet his creditors, has to prepare a Statement of Affairs, for which the following particulars are available on the date of his adjudication as Insolvent as on 31.03.2003 :

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Leashold property Rs. 2,00,000, estimated to realise, Rs. 1,90,000.
Plant & Machinery Rs. 80,000, estimated to realise Rs. 60,000.
Stock in Trade Rs. 40,000, estimated to realise Rs. 28,000
Bookdebts : Good Rs. 1,20,000, Doubtful Rs. 10,000, estimated to realise 50%, Bad Rs. 28,000, Bills in Hand Rs. 7,500.

Life Policy for Rs. 50,000, whose Surrender value is Rs. 10,000 held by the insurance company against a loan of Rs. 4,000.
Household Furniture Rs. 7,200, Household Debts Rs. 5,800.
Bills Discounted Rs. 12,000, Rs. 4,000 likely to be dishonoured.

Bank Overdraft secured by Personal Guarantee of Shankar's Brother, and Second Mortgage on Leasehold Rs. 1,00,000.

Unsecured Creditors Rs. 3,00,000. Loan from Naresh Rs. 5,000 secured by a Second charge on Life Policy. Ground Rent on Household for three months accrued Rs. 750.

He could not pay his office clerks (two persons) salaries for six months, Rs. 3,000 and also Rates & Taxes amounting to Rs. 3,000 due to Government.
Prepare Statement of Affairs of Mr. Shankar as on 31.03.2003.
RS P.T.O.

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RS Marks
4.

ABC Ltd. gives you the following informations. You are required to prepare Cash Flow Statement by using indirect methods as per AS-3 for the year ended 31.03.2004 :

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Balance Sheet as on
Liabilities31 March
2003
Rs.		31 March
2004
Rs.		Assets31 March
2003
Rs.		31 March
2004
Rs.
Capital50,00,00050,00,000Plant &
RetainedMachinery27,30,00040,70,000
  Earnings26,50,00036,90,000Less :
Debentures—9,00,000Depreciation  6,10,000  7,90,000
21,20,00032,80,000
Current Assets
Debtors23,90,00028,30,000
Less:Provision1,50,0001,90,000
Current Liabilities22,40,00026,40,000
Creditors8,80,0008,20,000Cash15,20,00018,20,000
Bank Loan1,50,0003,00,000Marketable securities11,80,00015,00,000
Liablility for expenses3,30,0002,70,000Inventories20,10,00019,20,000
Dividend payable1,50,0003,00,000Prepaid Expenses90,0001,20,000
91,60,0001,12,80,00091,60,0001,12,80,000
Additional Information :
(i)

Net profit for the year ended 31st March, 2004, after charging depreciation Rs. 1,80,000 is Rs. 22,40,000.

(ii)

Debtors of Rs. 2,30,000 were determined to be worthless and were written off against the provision for doubtful debts account during the year.

(iii)ABC Ltd. declared of Rs. 12,00,000 for the year 2003-2004.
RS Contind...


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RS Marks
5.Following are the Balance Sheet of companies as at 31.12.2003 :16
LiabilitiesD Ltd
Rs.		V Ltd.
Rs.		AssetsD Ltd.
Rs.		V Ltd.
Rs.
Equity share capital
   (Rs.100)
General Reserve
Investment
   allowance reserve
Sundry Creditors
8,00,000
4,00,000

—
5,00,000
6,00,000
3,00,000

4,00,000
2,00,000		 Goodwill
Fixed Assets
Investments
Current Assets		 6,00,000
5,00,000
2,00,000
4,00,000		 —
8,00,000
4,00,000
3,00,000
17,00,00015,00,00017,00,00015,00,000

D Ltd. took over V Ltd. on the basis of the respective shares value, adjusting wherever necessary, the book values of assets and liabilities on the basis of the following information :
(i)

Investment allowance reserve was in respect of addition made to fixed assets by V Ltd.in the year 1997-2002 on which income tax relief has been obtained. In terms of the Income Tax Act, 1961, the company has to carry forward till 2006 reserve of Rs. 2,00,000 for utilisation.

(ii)

Investments of V Ltd. included 1000 shares in D Ltd. acquired at cost of Rs. 150 per share. The other investments of V Ltd. have a market value of Rs. 1,92,500.

(iii)The market value of investments of D Ltd. are to be taken at Rs. 1,00,000.
(iv)Goodwill of D Ltd. and V Ltd. are to be taken at Rs. 5,00,000 and Rs. 1,00,000 respectively.
(v)Fixed assets of D Ltd. and V Ltd. are valued at Rs. 6,00,000 and Rs. 8,50,000 respectively.
(vi)Current assets of D Ltd. included Rs. 80,000 of stock in trade received from V Ltd. at cost plus 25%.

RS P.T.O.

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RS Marks

The above scheme has been duly adopted. Pass necessary Journals Entries in the books of D Ltd. and prepare Balance Sheet of D Ltd., after taking over the business of V Ltd. Fractional share to be settled in cash, rest in shares of D Ltd. Calculation shall be made to the nearest multiple of a rupee.
6.Attempt any four of the following :4x4=16
(a)

X Limited received a grant of Rs. 2 crores from the Central Government for the purpose of a special Machinery during 1998-99. The cost of Machinery was Rs. 20 crores and had a useful life of 9 years. During 2002-03, the grant has become refundable due to non-fulfilment of certain conditions attached to it. Assuming the entire grant was deducted from the cost of Machinery in the year of acquisition. State with reasons, the accounting treatment to be followed in the year 2002-03.

(b)

The company deals in three products, A, B and C, which are neither similar nor interchangeable.At the time of closing of its account for the year 2002-03. The Historical Cost and net realisable value of the items of closing stock are determined as follows :
 
ItemsHistorical Cost
(Rs.in lakhs)		Net Realisable Value
(Rs.in lakhs)
A
B
C		 40
32
16		 28
32
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What will be the value of Closing Stock ?
(c)

During the current year 2002-03, X Limited made the following expenditure relating to its plant building :
 
 Rs. in lakhs
Routine Repairs
Repairing
  Partial replacement of roof tiles
  Substantial improvements to the electrical wiring
  system which will increase efficiency		 4
1
0.5

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What amount should be capitalised ?

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RS Marks
(d)A plant was depreciated under two different methods as under :
YearSLM
(Rs.in lakh)		W.D.V
(Rs.in lakh)
1
2
3
4

5		 7.80
7.80
7.80
7.80
31.20
7.80		 21.38
15.80
11.68
  8.64
57.50
6.38

What should be the amount of resultant surplus/deficiency, if the company decides to switch over from W.D.V. method to SLM method for first four years ? Also state, how will you treat the same in Accounts.

(e)Write a short note on Firm underwriting and Partial underwriting along with firm underwriting. 
(f)Briefly explain the methods of accounting for amalgamation as per Accounting Standard-14.
RS

 

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