Q1(a)Stock valuation - NRV method
5 marks medium
Hello Ltd. purchased goods at the cost of ` 20 lakhs in October. Till the end of the financial year, 75% of the stocks were sold. The Company wants to disclose closing stock at ` 5 lakhs. The expected sale value is ` 5.5 lakhs and a commission at 10% on sale is payable to the agent. You are required to ascertain the value of closing stock?
Q1(b)Government grant refund treatment - AS 12
5 marks medium
Viva Ltd. received a specific grant of ` 30 lakhs for acquiring the plant of ` 150 lakhs during 2018-19 having useful life of 10 years. The grant received was credited to deferred income in the balance sheet and was not deducted from the cost of plant. During 2021-22, due to non-compliance of conditions laid down for the grant, the company had to refund the whole grant to the Government. Balance in the deferred income on that date was ` 21 lakhs and written down value of plant was ` 105 lakhs. What should be the treatment of the refund of the grant and the effect on cost of the fixed asset and the amount of depreciation to be charged during the year 2021-22 in profit and loss account?
Q1(c)AS 10 - capitalization of pre-opening expenses
5 marks medium
Neon Enterprise operates a major chain of restaurants located in different cities. The company has acquired a new restaurant located at Chandigarh. The new-restaurant requires significant renovation expenditure. Management expects that the renovations will last for 3 months during which the restaurant will be closed. Management has prepared the following budget for this period – Salaries of the staff engaged in preparation of restaurant before its opening ` 7,50,000 and Construction and remodelling cost of restaurant ` 30,00,000. Explain the treatment of these expenditures as per the provisions of AS 10 "Property, Plant and Equipment".
Q1(d)AS 11 - foreign exchange transactions
5 marks medium
ABC Ltd. borrowed US $ 5,00,000 on 01/01/2021, which was repaid as on 31/07/2021. ABC Ltd. prepares financial statement ending on 31/03/2021. Rate of Exchange between reporting currency (INR) and foreign currency (USD) on different dates are: 01/01/2021 1 US$ = ` 68.50; 31/03/2021 1 US $ = ` 69.50; 31/07/2021 1 US $ = ` 70.00. You are required to pass necessary journal entries in the books of ABC Ltd. as per AS 11.
Q2(a)Preference share redemption with capital redemption reserve
10 marks hard
The capital structure of Preet Ltd. consists of 20,000 Equity Shares of `10 each fully paid up and 1,000 8% Redeemable Preference Shares of `100 each fully paid up. Undistributed reserve and surplus stood as: General Reserve ` 90,000; Profit and Loss Account ` 20,000; Investment Allowance Reserve is ` 20,000 out of which ` 15,000 is not ascertained as free reserve; Cash at bank amounted to ` 98,000. Preference shares are to be redeemed at a premium of 10% and for the purpose of redemption, the directors are empowered to make fresh issue of Equity Shares at par after utilizing the undistributed reserves and surplus, subject to the condition that a sum of ` 30,000 shall be retained in general reserve which should not be utilized. You are required to pass Journal Entries to give effect to the above arrangements and also show how the relevant items will appear in the Balance Sheet of the company after the redemption is carried out.
Q2(b)Insurance claim calculation - average clause
10 marks hard
On 30th March, 2022 fire occurred in the premises of M/s Alok & Co. The concern had taken an insurance policy of ` 1,20,000 which was subject to the average clause. From the books of accounts the following particulars are available relating to the period 1st January to 30th March, 2022: (i) Stock as per Balance Sheet at 31st December, 2021 ` 1,91,200 (ii) Purchases (including purchase of machinery costing ` 60,000) ` 3,40,000 (iii) Wages (including wages ` 6,000 for installation of machinery) ` 1,00,000 (iv) Sales (including goods sold on approval basis amounting to ` 99,000) ` 5,50,000, no approval received for 2/3rd of goods sold on approval (v) Average rate of gross profit is 20% of sales (vi) Value of salvaged goods was ` 24,600. You are required to compute the amount of the claim to be lodged to the Insurance Company.
Q3(a)Foreign branch accounting - AS 11
12 marks very hard
Moon Star has a branch at Virginia (USA). The Branch is a non-integral foreign operation of Moon Star with trial balance as at 31st March, 2022 provided. Further information includes: (1) Salaries outstanding $ 400. (2) Depreciate office equipment and furniture & fixtures @10% p.a. at written down value. (3) Head Office sent goods to Branch for `15,80,000. (4) Head Office shows amount of ` 20,50,000 due from Branch. (5) Stock on 31st March, 2022 - $21,500. (6) No transit items at start or end of year. (7) Exchange rates: 01.04.2020 ` 43 per $; 01.04.2021 ` 47 per $; 31.03.2022 ` 50 per $; average ` 45 per $. Prepare Trial balance incorporating adjustments converting dollars into rupees and Trading, Profit and Loss Account for the year ended 31st March, 2022 of the Branch as would appear in the books of Moon Star.
Q3(b)Departmental accounting - inter-departmental transfers
8 marks hard
Alpha firm has two departments--X and Y. Product of Department Y is made with material supplied by Department X at its usual selling price. Prepare Departmental Trading and Profit and Loss Account for the year 2021 with following data: Department X Opening Stock ` 3,00,000, Sales ` 24,00,000, Purchases ` 20,00,000, Supply to Department Y ` 3,00,000, Selling expenses ` 20,000, Wages ` 60,000, Closing Stock ` 2,00,000. Department Y Opening Stock ` 50,000, Sales ` 4,00,000, Purchases ` 15,000, Selling expenses ` 6,000, Wages ` 20,000, Closing Stock ` 60,000. Stock in Department Y consists of 75% material and 25% other expenses. Department X earned Gross Profit at 15% on sales in 2020. General expenses ` 1,10,000. Firm adopts FIFO method.
Q4(a)Incomplete records - preparation of final accounts
14 marks very hard
Following is the incomplete information of Jyotishikha Traders with balances as on 31.03.2021 and 31.03.2022 for various assets and liabilities. Other information includes: Collections from Trade receivables ` 9,25,000, Payment to Trade payables ` 5,25,000, Payment of office expenses ` 42,000, Salary paid ` 32,000, Selling expenses ` 15,000, Cash sales ` 2,50,000, Credit sales (80% of total), Credit purchases ` 5,40,000, Cash purchases (40% of total), GP Margin at cost plus 25%, Discount Allowed ` 5,500, Discount Received ` 4,500, Bad debts (2% of closing receivables). Depreciation: Land and Building 5%, Plant and Machinery 10%, Office Equipment 15%. Other adjustments: (i) Machine sold 01.10.21 with Book Value ` 40,000 (31.03.2021) at loss of ` 15,000; new machine purchased 01.01.2022. (ii) Office equipment sold 01.04.2021 at book value. (iii) Loan partly repaid 31.03.22 with interest. You are required to prepare Trading, Profit & Loss Account and Balance Sheet as on 31.03.2022.
Q4(b)Investment accounting - bonus and rights issue
6 marks medium
On 1st April, 2021, Rajat has 50,000 equity shares of P Ltd. at book value of ` 15 per share (face value ` 10 each). Further information: (1) On 20th June, 2021 he purchased another 10,000 shares at ` 16 per share. (2) On 1st August, 2021, P Ltd. issued one equity bonus share for every six shares held. (3) On 31st October, 2021, directors announced right issue entitling holders to subscribe three shares for every seven shares at ` 15 per share. Shareholders can transfer rights fully or partially. Rajat sold 1/3rd of entitlement to Umang for ` 2 per share and subscribed the rest on 5th November, 2021. You are required to prepare Investment A/c in the books of Rajat for the year ending 31st March, 2022.
Q5(a)Balance sheet preparation per Schedule III - Companies Act
15 marks very hard
From the following particulars furnished by Hello Ltd., prepare the Balance Sheet as on 31st March 2022 as required by Part I, Schedule III of the Companies Act, 2013 with trial balance items: Equity Share Capital (Face value ` 100 each) ` 50,00,000, Building ` 27,50,000, Plant & Machinery ` 26,25,000, Furniture ` 2,50,000, General Reserve ` 10,50,000, Loan from State Financial Corporation ` 7,50,000, Inventory (Raw Materials ` 2,55,000, Finished Goods ` 10,00,000) ` 12,55,000, Provision for Taxation ` 6,40,000, Trade receivables ` 10,00,000, Short term Advances ` 2,13,500, Profit & Loss Account ` 4,33,500, Cash in Hand ` 1,50,000, Cash at Bank ` 12,35,000, Unsecured Loan ` 6,05,000, Trade payables ` 10,00,000. Additional information: (i) 10,000 shares issued for non-cash consideration. (ii) Trade receivables of ` 2,60,000 due more than 6 months. (iii) Asset costs: Building ` 30,00,000, Plant & Machinery ` 35,00,000, Furniture ` 3,12,500. (iv) State Finance loan secured by hypothecation. (v) Bank balance includes ` 10,000 with non-scheduled bank. (vi) Transfer ` 20,000 to general reserve.
Q5(b)Convertible debentures - redemption and conversion
5 marks medium
Aman Ltd. has issued 2,000, 12% convertible debentures of ` 100 each redeemable after five years at premium of 5%. Debenture holders had option at redemption to convert 20% of holdings into equity shares of ` 10 each at price of ` 20 per share and balance in cash. Debenture holders amounting ` 40,000 opted for conversion into equity shares. You are required to calculate the number of shares issued and cash paid for redemption of ` 40,000 debenture holders and also pass journal entry for conversion and redemption of debentures.
Q6(a)Borrowing cost capitalization - AS 16
5 marks medium
Omega Limited has borrowed a sum of US $ 10,00,000 at the beginning of Financial Year 2021-22 for its residential project at 4%. Interest is payable at end of Financial Year. At availment, exchange rate was ` 56 per US $ and as on 31st March, 2022 was ` 62 per US $. If loan had been borrowed in India in Indian Rupee equivalent, pricing would have been 10.50%. You are required to compute Borrowing Cost and exchange difference for the year ending 31st March, 2022 as per applicable Accounting Standards.
Q6(b)Effective capital computation - Schedule V
5 marks medium
The following extract of Balance Sheet of Ram Ltd. (a non-investment company) as on 31st March, 2022 is provided: Issued and subscribed capital: 20,000 14% Preference shares of ` 100 each ` 20,00,000; 1,20,000 Equity shares of ` 100 each ` 80 paid-up ` 96,00,000; Capital reserves (` 1,50,000 is revaluation reserve) ` 1,95,000; Securities premium ` 50,000; 15% Debentures ` 65,00,000; Unsecured loans: Public deposits payable after one year ` 3,70,000; Investment in shares, debentures, etc. ` 75,00,000; Profit and Loss account (debit balance) ` 15,00,000. You are required to compute Effective Capital as per the provisions of Schedule V to Companies Act, 2013.
Q6(c)Bonus share issue - minimum free reserves
5 marks medium
Following items appear in the Trial Balance of Mehta Ltd. as on 31st March, 2022: 9,000 Equity Shares of `100 each ` 9,00,000, Securities Premium (realized in cash) ` 80,000, Capital Redemption Reserve ` 1,40,000, General Reserve ` 2,10,000, Profit and Loss Account (Cr. Balance) ` 90,000. Company decided to issue bonus shares to equity shareholders at rate of 1 share for every 3 shares held with minimum reduction in free reserves. You are required to give the necessary Journal Entries in the books of Mehta Ltd.
Q6(d)Cash flow statement - activity classification
5 marks medium
Classify the following activities as (i) Operating Activities, (ii) Investing activities, (iii) Financial activities and (iv) Cash Equivalents: (1) Cash receipts from Trade Receivables (2) Highly liquid Marketable Securities without risk of change in value (3) Purchase of investment (4) Proceeds from long term borrowings (5) Wages and Salaries paid (6) Bank overdraft (7) Purchase of Goodwill (8) Interim dividend paid on equity shares (9) Short term Deposits (10) Underwriting commission paid
Q6(e)Hire purchase accounting - present value calculation
5 marks medium
Hari Enterprises purchased a generator on hire purchase from Sanctum Ltd. on 1st April, 2022. Hire purchase price was ` 48,000. Down payment was ` 12,000 and balance is payable in 3 annual instalments of ` 12,000 each payable at end of each financial year. Interest is payable @ 8% p.a. and is included in annual payment of `12,000. Depreciation at 10% p.a. is to be written off using straight line method. You are required to calculate the cash price of the generator and the interest paid on each instalment.