FR Test-3
For Nov 2024 attempt
Time Allowed – 1.5 Hrs.
Maximum Marks - 50
All Questions are Compulsory.
Working Notes should form part of the respective answer.
PART I – Case Scenario based MCQs (14 Marks)
In CA Final FR Examination conducted by Institute, it is not required to show the working for MCQs.
However, for our test series, we highly recommend that students provide detailed workings. This allows
us to better evaluate your preparation and understanding of the concepts.
Case Scenario I: 5 X 2 = 10 Marks
A lessee entered in to 10 years lease for using 20000 square foot area space on annual payment of Rs. 200000 at end of
each year. Lessee's increment borrowing rate at starting of agreement is 10%. At the end of 6th Year, lessee agreed to use
only 16000 Sq. foot only and pay Rs. 1,50,000 each year. Borrowing Incremental rate of lessee on modification date is
12%.
Analyse the transactions mentioned above and choose the most appropriate option in the below questions 1 to 5 in line
with relevant Ind AS:
1. What will be the value of ROU at date of inception of this lease agreement? 2M
a) 20,00,000 c) 12,00,000
b) 12,28,800 d) 8,33,333
2 What is the book value of the lease Liability before the modification on modification date ? 2M
a) 8,00,000 c) 6,94,773
b) 4,91,520 d) 6,33,773
3 How much amount will be transferred to P/L on the date of modification? 2M
a) 1,26,755 c) 1,78,073
b) 98,403 d) 28,451
4. How much amount should be adjusted to Lease Liability and ROU at modification date for modified lease 2M
liability?
a) Reduce 51318 c) Reduce 98304
b) Reduce 126855 d) Add 51318
5 How much amount should be depreciated each year from ROU after the modification of terms ? 2M
a) 1,22,880 c) 1,11,135
b) 98,403 d) 85,475
// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM
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Case Scenario II: 2 X 2 = 4 Marks
Assets Ltd. contracted for the construction of a building for 40,00,000 on 1st April, 20X3. The
land under the building is regarded as a separate asset and is not part of the qualifying assets. The
building was completed at the end of March, 20X4, and during the period the following payments
were made to the contractor:
Payment Due ₹ in ‘000’
1 April, 20X3 250
st
31 May, 20X3 840
31st December, 20X3 2100
31st Jan, 20X4 810
Total 4000
Entity A’s borrowings at its year end of 31st March, 20X4 were as follows:
a. 12%, 3-year note with simple interest payable annually, which relates specifically to the
project; debt outstanding on 31st March, 20X4 amounted to ₹ 10,00,000. Interest of ₹
1,20,000 was incurred on these borrowings during the year, and interest income of ₹
50,000 was earned on these funds while they were held in anticipation of payments
b. 15.5% 5-year note with simple interest payable annually; debt outstanding at 1st April,
20X3 amounted to 800,000 and remained unchanged during the year; and
c. 11% 10-year note with simple interest payable annually; debt outstanding at 1st April,
20X3 amounted to 18,00,000 and remained unchanged during the year.
Analyze the case mentioned above and select the best option of the questions:
6. What is the capitalization rate? 2M
a) 12% c) 12.38%
b) 15.5% d) 15.83%
7 The amount of borrowing cost to be capitalized ……. 2M
a) 70000 c) 120000
b) 160993 d) None of the above
// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM
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PART II – Descriptive Questions (36 Marks)
Q.1 14 Marks
Balance Sheet of A Ltd., B Ltd. and C Ltd., as at 31st March, 20X4 are as under: (₹ in 000)
Particulars A Ltd. B Ltd. C Ltd.
Assets:
Non-current Assets
Property, Plant and Equipment 4,80,000 5,12,000 4,48,000
Investment
5760 thousand shares in B Ltd. 8,87,700 - -
3584 thousand shares in C Ltd. - 4,54,000 -
Current Assets
Inventories 3,93,600 2,33,600 3,77,600
Financial Assets
Trade Receivables 4,52,800 1,36,400 1,98,400
Bills Receivables 2,08,000 19,200 -
Cash in hand and at Bank 3,47,200 28,800 48,000
27,69,300 13,84,000 10,72,000
Equity & Liabilities:
Shareholders' Equity
Share Capital (₹ 100 per share) 10 88,000 6,40,000 5,12,000
Other Equity
Reserves 4,17,300 3,18,400 1,85,600
Retained earnings 3,29,600 1,92,000 1,69,200
Current Liabilities
Financial Liabilities
Trade Payables 9,34,400 2,20,800 1,87,600
Bills Payable
A Ltd. - 12,800
B Ltd. - - 17,600
27,69,300 13,84,000 10,72,000
A Ltd. acquired 90% shares in B Ltd. on 1 s t April, 20X3 and B Ltd. acquired 70% shares in C Ltd. on
30th September, 20X3. Business of B Ltd. and C Ltd. are not seasonal in nature.
The following balances are recorded on 1 s t April, 20X3 in books of B Ltd. & C Ltd.:
B Ltd. (₹ in 000) C Ltd. (₹ in 000)
Reserves 243200 166400
Retained earnings 153600 100000
The parent company has adopted an accounting policy to measure non-controlling interest at fair value
applying Ind AS 103. The fair value is to be determined at quoted market price. The given market price of B
Ltd. is ₹ 122 per share and C Ltd. is ₹ 128 per share.
Prepare the consolidated Balance Sheet as on 31st March, 20X4 of the group of companies.
// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM
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Q.2
(a) Jaggu Ltd. grants 100 shares to each of its 400 employees on 1st April, 20X2. The
employees should remain in service during the vesting period. The shares will vest at the
end of the
First year: if the company’s earnings increase by 14%;
Second year: if the company’s earnings increase by more than 22% over
the two years period
Third year: if the entity’s earnings increase by more than 25% over the
three -year period.
The fair value per share at the grant date is ₹ 180. In 20X1-X2, earnings increased by
12%, and 20 employees left the organisation. The company expects that the shares will
vest at the end of the year 20X2-X3. The company also expects that additional 25
employees will leave the organisation in the year 20X2-X3 and that 355 employees will
receive their shares at the end of the year 20X2-X3.
At year end 31st March, 20X3, company's earnings increased by 20%. Therefore, the
shares did not vest.
21 employees left the organization during 20X2-X3 and the Company believes that
additional 20 employees will leave in 20X3-X4 and earnings will further increase so that
the performance target will be achieved in 20X3-X4. At the year 31st March, 20X4, only 10
employees have left the organization.
Assume that the company’s earnings increased to desired level and the performance
target has been met. Determine the expense for each year and pass appropriate journal
entries?
(b) 6 Marks
Discuss with reasons whether these events are in nature of adjusting or non-adjusting and the
treatment needed in light of accounting standard Ind AS 10
i. RN Ltd. won an arbitration award on 28th April, 20X4 for Rs. 2 crore. From the arbitration
proceeding, it was evident that the Company is most likely to win the arbitration award.
The directors approved the financial statements for the year ending 31.03.20X4 on 15th
May, 20X4. The management did not consider the effect of the above transaction in
Financial Year 20X3-20X4, as it was favourable to the Company and the award came after
the end of the financial year.
ii. Oppo Ltd. has a trading business of Mobile telephones. The Company has purchased 1500
mobiles phones at Rs. 7,500 each on 25th March, 20X4. The manufacturers of phone had
announced the release of the new version on 11th March, 20X4 but had not announced the
price. Oppo Ltd. has valued inventory at cost of Rs. 7,500 each at the year ending 31st
March, 20X4.
Due to arrival of new advance version of Mobile Phone on 12th April, 20X4, the selling
prices of the mobile stocks remaining with Company was dropped at Rs. 6,500 each.
// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM
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The financial statements of the company valued mobile phones at Rs. 7,500 each and not
at the value at Rs. 6,500 less expenses on sales, as the price reduction in selling price was
effected after 31.03.20X4.
iii. There as an old due from a debtor amounting to Rs. 10 lakh against whom insolvency
proceedings was instituted prior to the financial year ending 31st March, 20X4. The debtor
was declared insolvent on 20th April, 20X4.
iv. Assume that subsequent to the year end and before the financial statements are approved,
Company’s management announces that it will restructure the operation of the company.
Management plans to make significant redundancies and to close a few divisions of
company’s business; however, there is no formal plan yet. Should management recognise
a provision in the books, if the company decides subsequent to end of the accounting year
to restructure its operations?
Q.3 4 X 2 = 8 Marks
(a) What is the functional currency of an entity? What are the primary and secondary factors that
influence determination of functional currency?
(b) Mr. Krishna is an independent director of a company Radhe Ltd. He plays a vital role in the
management of Radhe Ltd. and contributes in major decision-making process of the
organisation. Radhe Ltd. pays sitting fee of Rs.3,10,000 to him for every Board of Directors’
(BOD) meeting he attends. Throughout the year, Radhe Ltd. had 4 such meetings which was
attended by Mr. Krishna. Similarly, a non-executive director, Mr. Balram also attended 4 BOD
meetings and charged Rs. 1,80,000 per meeting. The Accountant of Radhe Ltd. believes that
they being not the employees of the organisation, their fee should not be disclosed as per related
party transaction.
Examine whether the sitting fee paid to independent director and non-executive director is
required to be disclosed in the financial statements prepared as per Ind AS?
// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM
