INTERI'IEDIATE (IPC) ilov ?

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Rotl No. .....................GROIJP II
- PAPER 5
ADVANCED ACCOUNTING
Total No. ofQuestions - 7 Total No. of Printed Pages - 12

,Tine Allowed - 3 Houn Marimum Marks - 100

Arswers 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, hiVher answen in Hindi witl nol be valued.

Working notes should form part ofthe respective answer.

Wh€rever necessary, suitable assumptions may tte made by the candidates and disclosed
as a note forming Part of the answer.

Question No. I is comPulsory'

Candidates are required to answer any iive questions from the remaining six questions.

Marks

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l. Answer the following questions
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(a) A machin€ having expected useful life of6 yean, is leased for 4 years. 5
Both the cost and the fair value of the machinery are { 7,00,000 The
amount will be paid in 4 equal instalmens and at the termination of
lease, lessor witl get back the machinery. The unguaranteed residual

value at the end ofthe 46 year is I 70.000. The IRR of the investment is

l0%. The present value of annuity factor of { I due at the end of

4th year at l0% IRR is 3.169. The present value of{ I due at the end of
4rh year at l0% mte of interest is 0.683.

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lease and also
Stat€ with reasons whether the lease constitutes finance

compute the uneamed finance income'

(b) A company is showing an intangible asset at { 88 lakhs as on 5

0t.04.2013. This asset was acquired for { 120 laHls on 0l'04'2009 and

has been
the same was available for use from that date' The company
over a
following the policy of amortization of the htangible assets

period of 15 yeals on straight line basis' Comment on the accounting

treatment of the above with reference to the releva Accounting

Standard.

(c) Stem Ltd. Purchased a Plant for US$ 30,000 on 30rh

November' 2013 5

contract
payable after 6 months. The company entered into a forward

62.15 p€r dollar' On 30th November' 2013'

the
for 6 months @ <

excharge mte was I 60.75 per dollar'

in the
How will you recognise the profit or loss on forward contract

books of Stem Ltd. for the year ended 3ls March,

2014 ?

(d) WZW Ltd. is in dispute involving allegation of infringem€nt of

patents 5

sum of
by a competitor company who is seeking damages of a huge

{ 1000 Lakhs. The directors are of the opinion that the

claim can be

you deal the same in

successfully resisted by the company How would

the Annual Accounts of the comPanY ?

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2. P anl Q were carrying on business sharing profrts and losses equally' The 15

firms' Balance Sheet as at 31.12'2013 was :

Lirbilitieg Asets I
Capital Accounts: Plant l,60,000

P 1,50,000 Building 48,000

Q 1.30.000 2;80,000 Debtors 75,000

Sundry Creditors E0,000 Stock 70,000

Bank Overdraft 45,000 Joint Life policy 6,000

Profit & Loss A/c 30,000

Drawings Account :

P 9,000

a 7.000 16,000

Totsl 4,05,000 Total 4,0s,000

The operations of the business were carried on till 30.06.2014' P & Q both
withdrew in equal amount half the amount of profit made during the current
period of six months after charging depreciation at l0olo per armum on plant

and after writing off 5% on building.

During the cunent period of six months, creditors were reduced by {20,000
and bank overdraft by t 5,000'

The joint life policy was surrendered for ( 6,000 before 30h June 2014' Stock
was valued at { 84,000 and debtors at { 68,000 on 30d June 2014' The other

items remained the same as at 31.12 2013.

On 30.06.2014, the firm sold its business to PQ Lld. The value of goodwill
was estimated at { 1,30,000 and the remaining assets were valued on the

basis of the balance sheet as on 30.06.2014.

PQ Ltd. paid the purchase consideration in equity shares of{ l0 each'

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You are required to prepare :
,

(a) Balance sheet ofthe frm as at 30.06.2014,

@) Realisation account, .,,.

(c) PartErs' Capital Accormts showing the final setdement between thern.

3. (a) X Ltd. grurted 500 slock options to its employees on 1.4.201I at ? 50

per sharc. The vesting penod is 2Y, yean and lhe maximum exercise
period is one year. Market price on that date is { 140 per share All the
options were exercised on 30.06.2014. Pass joumal entries giving
suitable narations, ifthe face value of equity share is ( l0 per share.

(b) Venus Limited recently made a public issue in respect of which the

. following information is available :

(i) No. of partly convertible debentures issued 4,00,000 ; face value
and issue price of ? 100 per debenture.
(ii) Convertible portion per debenture - 80o/o, date of conversion - on

expiry of 7 months from the &te of closing of issue.

(iii) Date of closure of subscription list - 01.06.2013, date of
atlotment - 01.07.2013, Rate of inter€st on debentures l0olo p.a.
payable from the date of allotrnent. Value of equity share for the
purpose of conversion -{ 40 (Face value { l0)
(iv) Underwriting commission - 3olo

(v) No. ofdebentues applied for 3,00,000

(vi) lnterest payable on debentures - half yearly on 30'h September and
3l "' March.

Write relevant joumal entries for all transactions arising out of the
above during the year ended on 3l't March, 2014 (including cash and
bank entries).

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(5) i
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4. The Balance She€t ofx Ltd- as at 3lr March,2014 tas as follows: 16

)i Linlted
Balance Sheet es at 31.03.2014

Particulars Amount ( ? )
I Equity rnd Liabilities
I Shareholder's Fund
Share Capital
(a) ,t0000 equity shares of? 100 each tully ,10,00,000

Paid
(b) 20000, l0olo preference shares ofl 100 20,00,000
each fully paid
Reserve & Surplus
(a) Secudties Premium Account 1,50,000
(b) Profit & Loss Account (23,00,000)

2 Non Current Liabilities

Long Term Borrowings
7% Debentures of { 100 each 4,00,000

3 Curent Liabilities
Other Current Liabilities
(a) Creditors 10,00,000
(b) Loan from Director 2,00,000
Total Lirbilities 54.50.000
II Assets
I Non Cunent Ass€ts
Fixed Assets
(a) Land&Building 20,00,000
(b) Plant & Machinery 12.00.000 32,00,000
Intangible Assets
Goodwill 4,00,000

2 Current Assets
(a) Debtors 12,00,000
(b) Stock 5,00,000
(c) Cash at Bank 18,50,000
Total Assets s4.50.000

No Dividend on Preference Shares has been paid for last 5 years.

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. The following scheme ofr@rganisation was duly approved by the Coud :

(i) Each equity share to be r€duced to < 25.

(ii) Each existing Preferenog Share to be reduced to t 75 and then

exchanged for one new 13% Preference Share of { 50 each and one

E4uity Share of? 25 each.

(iii) Preference Shareholders have forgone their right for dividend for four
years. One year's dividend at the old rate is however, payable to them

in tully paid equity sharcs of( 25.

(iv) The Deb€nture Holders be given the option to either accept 90% oftheir
claims in cash or to convert their claims in fult into new 13%
Prefercnce Shares of ( 50 each issued at par. One-fourth (in value) of
the Deb€nture Holders accepted Preference Shares for their claims The
rest were paid in cash.

(v) Contingent Liability of ? 2,00,000 is payable which has been created by

wrong action of one Director. He has agreed to compeDsate this loss out
of the loan given by th€ Director to the Company
(vi) Goodwill does not have any value in the present' Dgcrease the value of
Plant & Machinery, Stock and Debtors by ( 3,00,000 ; I 1,00,000 and

( 2,00,000 respectively. Increase the value of Land & Building to

t 25,00,000.

(vii) 50,000 new Equity Shares of ? 25 each are to be issued at par payable
in full on application. The issue was underwritten for a commission of
4%. Shares were fully taken uP.
(viii)Total expenses incuned by the Company in connection with the
Scheme excluding Underwriting Comrnission amounted to { 20,000-

Pass necessary Journal Entries to record the above transactions'

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5. (a) Merro General tnsurance ,o-l} *Oto the following

for the year ended 3l r March, 2014 :
""r-"0"I*:
Prrticuhrf Dhcct Business Relnsurence

o (o
Pr€mium receiv€d 75,25,000 8,25,000
Premium paid 4,90,000
Clains paid during the year 49,70,000 5,10,000
Claims payable :

lr' April, 2013 6,85,000 95,000

3ls Marcl! 2014 7,38,000 70,000

Claims received 3,95,000
Clains rcceivable :

n
I April, 20 I 3 75,000
3ls March, 2014 1,25,000
Expcnses of Management 2,90,000
Commission :

On Insuance accepted 1,60,000 15,000

On Insurance ceded 18,000

The following additional inforrnation are also available :

(l) Expenses of Management include I 45,000 Surveyor's fees and

( 55,000 Legal expens€s for settlement ofclaims.
(2) Reserve for unexpired risk is to be maintained @ 40o/o. The
balance of Reserve for unexpired risk as on 01.04.2013 was
? 28,40,000.

You are rcquired to make the Revenue Account for the year ended
3ln March, 2014.
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(b) A conmaoiat bank.'hrs the following capital funds and assets. 8
Segregate the capitalffinds into Tier I ana,fiier II capitals. Find out the

risk adjusted asset ahd'risk weighted assot ratio. State your observation
on the risk weighted asset mtio.

Amount
Prftculels
(? in crores)

Equity Share Capital ,m0.00

Statutory Reserve 250.00

Capital Reserve (ofwhich { l8 crores were due to 86.00

revaluation of assets and the balance due to sale of

capital assets)

Asscls :

Cash Balance with RBI 12.00

Balance with other Banks 20.00

Other Investments 40.00

loans &Advances .:
(i) Cuaranteed by Governmeni 14.50

(ii) Others s,465.00

Premises Fumiture & Fixtures 74.00

Off Balance Sheet Items

(i) Guarantees and other obligations 700.00

(ii) Acceptances, endorsements and letter of credit 4,900.00

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6. (a) LMN is having branch at Mumbai. [Link] invoiced to the branch ar S
25% profit on sale. Branch bas been instnrcted to send all cash daily to
head office. All expensestarc paid by [Link] except pctq/ expens6,
which are met by the Branch. From the following particulars, prepare
branch [Link] in the books ofhead office :

Particulars Amount Prrdculers Amo|rnt

(? (o
Stock as on l"'April, 40,000 Discount allowed to 300
2013 (Invoice Price) debtoB
Sundry Debton as 25,000 Experses paid by head
on l'r April, 20 I 3 ofiice:
Cash in hand as on 1,000 Satary
l3 April, 2013

t;
Oflice furniture as 4,000 Staff Welfare
on ln April,20l3
Goods invoiced from 1,80,000 Telephone Expenses
the head office
(invoice price)

Goods retum to head 6,000 Other Misc. Expenses 700

office paid by branch
Goods retum by |,250 Stock as on 3l"i 35,000
debtors March,2014
(at invoice price)
Cash received from Depreciation to be t0% p.a.
Debtors 65,000 provided on branch
fumiture
Cash sales 1,20,000
Credit sales 70,000

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Mega Ltd. has two departments, A and B. From the

following E
o)
particulars, prepar€ depsrtm€ntal Tra'ling A"/c and General
hofit &
Loss Account for the year etrded 3ln Marcb, 2014'

Prrdculers

70,000 54,000
Op€ffiS stockas on 01.04.2013 (at cost)
3,92,000 2,98,000
Purcbases
6,000 9,000
Carriage Inward
54,000 36,000
Wages
5,72,000 4,60,000
Sales

Purchased Coods Transf€rred :

By Departsnent B to A 50,000

By D€partment A to B
Finished Goods Transfened :
By D€pafinent B to A r,50,000
1,75,000
By Departnent A to B
Retum of Finished Goods :

By Departrnent B to A
By Departrnent A to B
Closinq Stock :

Purchased Goods 24,000

Finished Coods 1,02,000

Puchased goods have been transfened mutually at their respective

d€partrnental purchase cost and finished goods at
departmental market

price and that 30% of the closing firnished stock with each department
represents frnished goods receiv€d fiom the other department'
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4

(b) What are the indicalo$ ofNon-Integral Forcign Operation (NFQ) ? 4 ..

(o) In thc following list of shares issued for thc purpose of calculation of 4

weighted average numb€r of shar€s, from which dare weight iS to be

considcred :

I (t Equity Shar€s issued in exchange ofcasb,

(ii) Equity Shares issued as a r€sult of conversion of a debt
instument,

(iiD ESuity Shares issued in exchange for the setdement ofa liability
of thc enterprise,

(iv) Equity Shares issued for rendering of services lo the enterprise,

(v) Equity Sharcs issued in lieu of interest and/or principal of an other

financiat instrument,

(vi) Equity Shares issued as consideration for the acquisition of an

asset oiher than in cash-

Also define Polential Equity Shar€.

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(d) Find out the inbbme to bd*ecognised by ABC Bank Ltd. for the year 4
€nded 3lr March, 20la'iitr€spoct of inter€st on advances [ ? in hkhs]
as dctailcd below :

Perforring A:cet N.P.A.

Intcrcrt Inrai6t Interst IDter€3t
eerned rccelved eerned received

Term loan 280 180 170 20

Cash cr€dits and overdirfti 1700 1630 3r0 48

Bills purchased and 400 ,,100 180 70

discounted

State any four altemativC iccounting tejtment of the fimd received by

an Electdcity Company ion'bonsuoer towards capiral cxpenditure/
servicc line corributions.

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