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Roll No. ............................. GROUP I-PAPER
NOV 2012 ADVANCED ACCOUNTING
Total No. of Questions - 7 Total No. of PrintedPages- 11

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Time Allowed - 3 Hours MaximumMarks- 100

LCK
Answers to questions are to be given only in English except in the '~aseof candidates who have
opted for Hindi medium. If candidate who has not opted for Hindi medium, his answers in Hindi
medium will riot be valued.

Question No.1 is compulsory.

Attempt any five questio~ from the remaining six questions.

Working notes should form part ofthe answer

Wherever necessary, suitable assumptions may be made by the candidate.

Marks

1. (a) On 151December, 2011, BC Co. Ltd. undertook a contract to construct a 5

building of~ 21.25 lakhs. On 3151March, 2012 the company found that it had
already spent ~ 16,24,750 on the construction. Prudent estimate .of additional
cost for completion was ~ 8,00,250. What amoUI;ltshollid be charged to
, I

, revenue in the final accounts for the year ended 3151March, 2012 ?

(b) A fixed asset is purchased for ~ 20 lakhs. Government grant received towards 5
it is ~ 8 lakhs. Residual Value is ~ 4 Lakhs and usefUl life is 4 years. Assume
SLM depreciation. Asset is shown net 9f grant. After 1 year, grant beco,mes
refundable to the extent of ~ 5 Lakhs due to non compliance with conditions.
Pass journal entries.

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(c) The closing inventory at cost of a Company amounted to f 9,56,700. The 5

following items were included at cost in the total:

(i) 350 Shirts, which had cost f 380 each and normally sold for f 750 each.
Owing to a defect in manufacture, they were all sold after the Balance
Sheet date at 50% of their normal price. Selling expenses amounted to
5% of the proceeds.

(ii) 700 Trousers, which had cost f 520 each. These too were found to be
defective. Selling expense~ for the batch totaled f 3800. They were sold
for f 950 each.

What should be the closing inventory value, after considering the above
items?

(d) A plant was depreciated under two different methods as under: 5

Year SLM W.D.V.

( In lakhs) ( In lakhs)

1 39.00 106.90

2 39.00 79.00

3 39.00 58.40

4 39.00 4.20

156.00 287.50

5 39.00 31.90

What should be the amount of resultant surplus/deficiency, if the company

decides to switch over from W.D.V. method to S:tM method for first four
years? Also, state how will you treat the same.in Accounts.

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2. The following are the summarized Balance Sheet of X Ltd. and Y Ltd: as at 16
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31st March, 2012 : ~

(~ In lakhs)

Liabilities X Ltd. Y Ltd.

(

Fully Paid Equity Shares of 10 each 10,800 2,700

10% Preference Shares of 10 each, fully paid up 3,600 -

Capital Reserve 1,800 -

. General Reserve 6,300 -

Profit and Lo Account 2,340 -

8% Redeemable debentures offl,OOO .each - 900

Trade Creditors 7,.63 1,107

Provisions 2,610 279

34,113 4,986
.

Assets

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Plant and Machinery 12,645 1,404
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Furniture and Fixtures 7,200 549

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Motor Vehicles 153
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Stock , 7110
,. 1,332

Sundry Debtors 3,132 711

Cash at Bank 4,626 720

Preliminary Expenses
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- 99

Discount on Issue of Debentures - 18 - .

34,713 4,986

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A new Company Xy Ltd. was incorporated with an authorized capital of f 45,000

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lakhs divided into shares of f 10 each. For the purpose of amalgam~tion in the

nature of merger, X Ltd. and Y Ltd. were merged into XY Ltd. on the following

terms:

(i) Purchase Consideration for X Ltd.'s business is to be discharged by issue of

360 lakhs fully paid 11% preference shares and 2,160 lakhs fully paid equity

shares of Xy Ltd. to the preference and equity shareholders of X Ltd. in full

satisfaction of their claims.

(ii) To discharge purchase consideration for Y Ltd.'s business, Xy Ltd. to allot

270 lakhs fully paid up equity shares to shareholders of Y Ltd. in full

satisfaction of their claims.

(iii) Expenses on the liquidation of X Ltd. and Y Ltd. amounting to f 18 lakhs are

to be borne by Xy Ltd.

(iv) 8% redeemable debentures of Y Ltd. to be converted into 8.5% redeemable

debentures of Xy Ltd.

(v) Expenses on fucorporation of XY Ltd. were f 45 lakhs:

You are required to :

(a) Pass necessary Journal Entries in the books of Xy Ltd. to record the. above

transactions, and

(b) Prepare Balance Sheet of Xy Ltd. after merger.

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3 (a) On 31st March, 2011, Upkeep Bank Ltd. had a balance of ~ 27 crores in 8
'rebate on bills discounted'account.Duringthe year ended 31st March,2012,
,Upkeep Bank Ltd. discounted bills of exchange of ~ 12,000 crores charging
interest @ 18%, per annum the average period of discount being for 73 days.
Of these, bills of exchange of ~ 1,800 crores were due for realisation from the
acceptors/customersafter 31st March, 2012, the average period outstanding
after31st March,2012being 36.5days.

Upkeep Bank Ltd. (j.sks you to pass journal entries and show the ledger
accounts pertaining to:

(i) Discounting of bills of exchange and

(ii) Rebate on bills discounted.

(b) The following particulars are obtained from books of a Z Ltd. for the year 8
ended 31stMarch, 2012 :

Cash Sales 75,000 Bills Receivable 2,500

dishonoured

Credit Purchases 2,80,000 Returns Inward 10,500

Collection from 5,00,000 Payment to creditors 2,62,000
Debtors ..

Bills Receivable drawn 20,000 Discount allowed by 3,000

creditors

Discount Received 5,000 Debtors' cheque 7,000

returned dishonoured

Cash Purchases 72,000 Credit Sales 5,25,000

Bills Payable paid 6,500 Bills Receivables 10,000

collected

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Recovery of Bad Debts 1,500 Returns outward 3,700

Bills Receivable 8,000 Bills Receivable 7,900

disounted with Bank endorsed to

creditors

Interest charged on . 1,200 Overpayments 600

overdue Customer's refunded by suppliers
Accounts

Endorsed Bills 5,500 Bad Debts 1,000

Receivable dishonoured

Bills Payable accepted 16,000 Opening Balances

Sundry Debtors 78,000

Sundry Creditors 85,000

You are required to prepare the Total Debtors Account and Total Creditors
Account.

4. Mary Sports Club provides the following Receipts & Payments for the year ending 16
31 sl March, 2012 :
Receipt and Payment Account
Dr Cr

Receipts Amount Payments. Amount

To Cash & Bank Balances bId 36,900 By Municipal Taxes J 6,800

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To Subscription 57,300 By Salaries 36,000

To Donations (received for 25,000 By Electricity Charges 2,300

meeting capital expenditure)

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To Interest on Investments 5,000 By Sports Material 4,000

To Other Income 1,200. By Books for Library 17,000

By Newspapers 1,425

By Miscellaneous 1,235
Expenses

By Cash & Bank 56,640

Balances c/d

1,25,400 1,25,400

Assets As on 31.03.2011

(1) Books at Library 22,000

(2) Furniture & Fixtures 20,000
(3) Subscription Receivable 7,500
(4) Investment 75,000
(5) Accrued Interest on Investment 1,750
(6) Sports Material 12,000

Assets as on 31.03.2012 are as follows:

(1) Subscription receivable 17,500

(2) Accrued Interest on Investments 1,750
Liabilities
1. Outstanding Expenses 31.03.2011 31.03.2012

(a) Salaries 4,000 6,000

(b) Newspapers 350 450

(c) Municipal Taxes 850 900

(d) Electricity Charges 1,350 1,500

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Depreciation to be provided at the following rates

Furniture and Fixtures @ 10% p.a.

Sports Material @ 25% p.a.

Books at Library @ 10% p.a.

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You are required to prepare Mary Sports Club's Opening Balance Sheet as on
01.04.2011, Income and Expenditure Account for the year ended on 31st March,
2012 and Balance Sheet as on that date.

5. (a) On 31st December, 2012 the following balances 'appeared in the books of
Kolkatta Branch of an English firm having its HO office in New York: 8

Amount in Amount in

Stock on 1st Jan., 2012 93,600

Purchases and Sales 6,25,000 9,37,500

Debtors and Creditors 3,06,000 2,04,000

Bills Receivable and Payable 81,600, " 71,400

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Salaries and Wages 40,000

Rent, Rates and Taxes 42,500 -

Furniture 36,400 -

Bank Alc 2,27,460 -

New York Account - 2,39,660

14,52,560 14,52,560

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Stock on 31 st December, 2012 was ~ 2,55,000.

Branch account in New York books showed a debit balance of $5,360 on

31st December, 2012 and Furniture appeared in the Head Office books at
$700.

The rate of exchange on 31st December, 2011 was ~52 and on

31stDecember, 2012 was ~ 51. The average rate for the year was f 50.

Prepare in the Head Office books the Profit and Loss Nc and the Balance
Sheet of the Branch.

(b) On 1.4.2011, Mr. Sharma purchased 2,000 equity shares of ~ 100 each in 8

Reliance Ltd @ ~ 130 each from a Broker, who charged 1% brokerage. He

incurred 50 paise per ~ 100 as cost of shares transfer stamps. On 31.1.2012
Bonus was declared in the ratio of 1:2. Before and after the record date of

bonus shares, the shares were quoted at ~ 135 per share and ~ 82 per share
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. respectively. On 31.03.2012 Mr. Sharma sold bonus shares to a broker, who

charged 1% brokerage.

Show the Investment Account for the year ended March 31, 2012 in the

books of Mr. Sharma, who held the shares ,as current assets and closing value
of investments shall be made at Cost or Market value whichever is lower.

6. A and B are partners of B & Co. sharing profit and losses in the ratio of 3:1. B and 16

C are partners of C & Co. sharing profit and losses in the ratio of 2: 1. On 31st
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October, 2011, they decided to amalgamate and form a new firm MIs ABC & Co.
where in A, B and C would be partners sharing profit and losses in the ratio of
3:2:1.
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Their Balance Sheet on that date were as under:

Liabilities B & Co. C & Co. . Assets B & Co. C & Co.

f f f f

Due to X & Co. - Cash in Hand 30,000 15,000

1,20,000

Due to B & Co. - 1,50,000 Cash at Bank 45,000 60,000

Other Creditors 1,80,000 1,74,000 Due from C & Co. 1,50,000 -

Reserve 75,000 1,50,000 Due from X & Co. - 90,000

Capitals Other Debtors 2,40,000 3,00,000

A 3,60,000 - Stock 1,80,000 2,10,000

B 2,40,000 3,00,000 Furniture 30,000 9,000

C - 1,50,000 Vehicles - 2,40,000

Machinery 2,25,000 -

Building 75,000 -

9,75,000 9,24,000 9,75,000 9,24,000

The amalgamated finn took over the business on the following tenns:

(i) , Goodwillof B & Co. was worth f I,SO,OOO

and that of C & Co. f 1,50,000.
Goodwil1 account was not to be opened in the books of the new finn, the

adjustments bei~1?recorded through Capital Accounts ofthe partners.

(ii) . Building, Machinery and Vehicles were taken over at n,50,000, f 2,70,000
and f 3,00,000 respectively.

(iii) Provisions for doubtful debts has to be carried forward at f 12,000 in respect
of debtors of B & Co. and f 15,000 in respect of debtors of C & Co.
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You are required to:
1)
(a) Compute the adjustments necessary for Goodwill.

(b) Pass the journal entries in the books of ABC & Co. assuming that
excess/deficit capital (taking C's Capital as base) with reference to share in
profits are to be transferred to current accounts.

7. Attempt any four: 4

(a) No. of equity shares outstanding 50,00,000

Basic earnings per share ~ 2.00

No. of 12% convertible debentures of~ 100 each- 1,00,000

Each debenture is convertible into 10 equity shares

Tax Rate 30%

Compute Diluted Earnings per Share. Working note should form part of the
answer.

Differentiate between
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(b) Amalgamation, Absorption and External 4
Reconstruction.

(c) What are the salient features of accounting in computerisedenviironment ? 4

(~) Describe the significance of 'Average Clause' ina fire insurance policy with 4
an example.

(e) What are the disadvantages of outsourcing the accounting functions? 4

.LCK