CWA/ICWA Inter :: Advanced Financial Accounting : June 2004

I—10(AFA)
Revised Syllabus

Time Allowed : 3 Hours Full Marks : 100
(Attempt Question No. 1 which is compulsory and any five from the rest.)
Marks
1.
(a)

What is the primary consideration in the selection of accounting policies by an enterprise?

(b)When is an asset judged to have suffered an impairment loss?
(c)How should basic earnings per share be calculated under As-20?
(d)When is a banking company allowed to form subsidiary companies?
(e)

State the function of "interest suspense account" under the Instalment purchase system.

(f)What entries would you make in holding company's accounts to record dividends received from a subsidiary's pre-acquisition profits?
(g)Which of the following is not a satisfactory balance sheet equation?
(i)Assets – liabilities = owners' equity;
(ii)Assets = liabilities + owners' equity;
(iii)Assets = liabilities &minus owners' equity;
(iv)Assets – owners' equity = liabilities.
(h)

State any two ways to create a Secret Reserve.

(i)State three occasions when goodwill needs to be quantified.
(j)What do you mean by "clear profit"?
 2x10
2. The summarised balance sheets of X Ltd. and Y Ltd. as on 31st March 2004 were as follows:
X Ltd.
Rs.		Y Ltd.
Rs.
Fully paid up equity shares of Rs. 10 each
Share premium account
General Reserve
Profit & Loss A/c
10% Debentures
Secured Loan
Sundry Creditors		 10,00,000
2,00,000
3,00,000
1,80,000
5,00,000
&minus
2,60,000		 6,00,000
&minus
2,50,000
1,60,000
−
3,00,000
1,70,000
24,40,00014,80,000
Land & Buildings
Plant & Machinery
Investments (5000 shares in Y Ltd.)
Stock
Debtors
Bank		 9,00,000
5,00,000
80,000
5,20,000
4,10,000
30,000		 4,50,000
3,80,000
—
3,50,000
2,60,000
40,000
24,40,00014,80,000
The companies agree on a scheme of amalgamation on the following terms:
(a)A new Co. XY Ltd. is to be formed.
(b)XY Ltd. to take over all assets and liabilities of the existing companies.
(c)For the purpose of amalgamation, the shares of the existing companies are to be valued as under:
X Ltd — Rs. 18 per share.
Y Ltd — Rs. 20 per share.
(d)A contingent liability os X Ltd. of Rs. 60,000 is to be treated as real liability.
(e)The share holders of X Ltd. and Y Ltd. are to be paid by issuing sufficient number of shares in XY Ltd. at par.
(f)The shares in XY Ltd. are to be of Rs. 10 each.
Required:
(i)Show the computation of the number of shares XY Ltd. will issue to the shareholders of the existing companies.
(ii)Pass the journal entries to close the books of X Ltd. and
(iii)Prepare the opening balance sheet of X Y Ltd.
[Ignore liquidation and formation expenses.]
 3+8+5
Please turn over
 
( 2 )
I—10(AFA)
Revised syllabus
Marks
3. M/s Star & Co. has two departments which maintain separate records. Prepare Trading and Profit & Loss A/c for each department and Balance Sheet for the company for the year ended 31.3.2003. Provide depreciation on Plant and Machinery @ 33 1/3%. Building by 5%, Furniture @ 10%, other un-allocated expenses to be allocated on the basis of net sales of each department: 4+6+6
Dept. I
Rs.		Dept. II
Rs.
Opening Stock (1.4.02)
Purchases
Purchase Returns
Sales
Sale Return
Wages & Salaries
Misc. expenses
Closing stock (31.3.03)		 1,00,000
9,20,000
8,000
25,32,000
12,000
7,20,000
1,40,000
1,04,000		 80,000
7,60,000
4,000
19,68,000
8,000
6,40,000
1,28,000
96,000
General balance for the year:
Rs.
Debtors
Creditors
Plant & Machinery
Land
Building
Furniture
Sales Overheads
Cash on 31.3.03
Bank balance on 31.3.03
Capital		 7,60,000
6,92,000
9,60,000
3,20,000
4,80,000
1,92,000
5,12,000
32,000
4,40,000
20,00,000
4. The following particulars have been furnished in respect of Mr. Bright's business. From these you are required to prepare Trading A/c, Profit & Loss A/c and Balance Sheet as on 31.3.2003: 4+4+8
1.4.2002
Rs.		31.3.2003
Rs.
Cash
Bank balance
Debtors
Creditors
Stock		 3,750
7,50,000
25,00,000
22,50,000
3,75,000		 —
5,25,000
31,25,000
25,00,000
6,25,000
Analysis of the bank pass book the following have been revealed:
(a) Withdrawal for petty cash expenses @ Rs. 37,500 per month.
(b) Collection from debtors Rs. 33,75,000.
(c)
Sales price being cost + 33
1
3
 %.
(d) Any difference in Cash A/c and Bank A/c to be treated as personal drawings to Mr. Bright.
(e) Petty cash expenses during the year Rs. 4,46,250.
(f) All purchases were made on credit and paid by cheques.
(g) All sales were made on credit and dues collected by cheques.
5. Mr. Glostar commenced business on 1st April 2003. He sells washing machines of a standard type and size on hire purchase terms. The total amount, including interest payable for each washing machine is Rs. 4,500. Customers are required to pay an initial deposit of Rs. 900, followed by eight quarterly instalments of Rs. 450 each. The following trial balance is extracted from Mr. Glostar's books as on 31.3.2004; 5+5+6
Trial Balance
ParticularsDebit
Rs.		Credit
Rs.
Capital
Furniture
Purchase
Cash collected from customers
Salaries and wages
Office expenses
Creditors
Bank overdraft
Bank interest
Drawings		 —
1,50,000
27,00,000
—
1,92,000
82,500
—
—
6,000
60,000		 15,00,000
—
—
11,47,500
—
—
2,49,000
2,94,000
—
31,90,00031,90,000
850 machines were sold during the year on hire purchase terms. Mr. Glostar has decided to take credit of profits and interest in proportion to cash collections. He purchases at a cost of Rs. 3,000 each.
You are required to prepare the hire purchase Trading A/c, Profit & Loss A/c and Balance Sheet as on that date. All workings are to be shown.
 
( 3 )
I—10(AFA)
Revised syllabus
Marks
6. The Balance Sheet of New City College as at 31st March 2003 was as follows: 16
Rs.Rs.
Capital Fund
Building Construction Fund
General Fund Outstanding
Salary (teachers)		 21,00,000
8,00,000
6,40,000
1,60,000		 Land & Buildings
Furniture
Labourators Equipment
Library Books
Investments
Accrued Tuition Fee
Cash & Bank		 20,00,000
3,00,000
2,50,000
3,60,000
6,50,000
10,000
1,30,000
37,00,00037,00,000
The Receipts and Payments account for the year ended 31st March 2004 was drawn as under:
Rs.Rs.
To Opening bal. (1.4.2003)
to Govt. Grants (revenue)
To Donation for Building
    Construction
To Tuition Fees & Session
    Charges
To Investment Income
To Rental Income (college Hall)		 1,30,000
50,00,000

2,00,000

18,20,000
70,000
40,000		 By Salaries & Allowances
    Teaching Staff
By Non-Teaching Staff
By Printing & Stationery

By Laboratory Exp.
By Laboratory Equipment
By Library Books
By Office Exp;
By Electricity & Telephone
By Audit fees
By Municipal Taxes
By Building Repairs
By Purchase of Furniture
By Games & Sports-
By Welfare Exp.
By New Investments
By Closing Balance (31.3.2004)
42,00,000
20,00,000
80,000

60,000
1,20,000
2,50,000
60,000
75,000
2,000
1,000
40,000
80,000
20,000
30,000
1,50,000
92,000
72,60,00072,60,000
Other Informations:
(i)Tuition fee outstanding as on 31.3.2004 — Rs. 40,000.
(ii)Salary of teaching staff outstanding for March 2004 — Rs. 2,50,000
(iii)Books received as donations from various parties — Rs. 30,000 (valued).
(iv)Outstanding building repair expenses as on 31.3.2004 — Rs. 15,000.
(v)Applicable depreciation rates:
Land & Buildings
Furniture
Laboratory Equipment
Library Books		2&
8%
10%
20%
You are required to prepare the Income and Expenditure account for the year ended 31st March 2004 and a Balance Sheet as on that date.
7. The following information is obtained from the books of Paragon Insurance Co. in respect of fire insurance as on 31.12.2003. Prepare the Fire Insurance Revenue account for the year ended 31.12.2003.
Increase the additional reserve by 10% of the net premium.		 16
Rs.
Reserved for unexpired risk on 1.1.03
Additional reserve on 1.1.03
Claim paid
Estimated liability in respect of outstanding claims —
On 1.1.03
On 31.12.03
Managerial Exp. (including Rs. 52,500 Legal Expenses in
connection with claims)
Re-insurance premium
Claims covered by re-Insurance
Premiums
Interests & dividends (less Income Tax)
Profit on sale of Investments
Commission		 8,75,000
1,75,000
5,95,000

1,13,750
1,57,500

4,90,000
1,31,250
35,000
19,68,750
1,01,500
19,250
2,66,000
8. Write short notes on the following:
(a)Conceptual Framework of Accounting;
(b)Major sources of U.S. GAAP;
(c)Public Accounts Committee;
(d)Discontinuing operations.
 4x4=16

__________

 

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