CA Inter Adv Accounting

For the year 1, how much borrowing cost should be capitalised to the project:

For the year 2, how much borrowing cost should be capitalised to the project:

For the year 5, how much borrowing cost should be expensed:

For the year 5, how much borrowing cost should be capitalised to the project:

A dealer in machinery, Shakti Equipments Pvt. Ltd., leased out one of its machines to Delta Tools Ltd. on a 3-year operating lease. The machine was given on equal annual lease rentals, and the dealer intended to earn a 20% profit margin on the cost of the machinery. The cost of the machinery to the dealer was ₹3,00,000. The economic life of the machinery is estimated at 5 years, and the total expected output over its useful life is Year I: 50,000 units, Year II: 60,000 units, Year III: 40,000 units, Year IV: 65,000 units, Year V: 85,000 units. Under the lease agreement, Delta Tools Ltd. will use the machine for 3 years (Years I–III) and then return it to Shakti Equipments Pvt. Ltd. The dealer recognizes revenue as per AS 9 Revenue Recognition, since the transaction represents revenue from services rendered in the form of lease rentals. You are required to compute the amount of annual lease rent that will provide the dealer with a 20% profit margin on cost.

A private limited company manufacturing fancy terry towels had valued its closing inventory of inventories of finished goods at the realisable value, inclusive of profit and the export cash incentives. Firm contracts had been received and goods were packed for export, but the ownership in these goods had not been transferred to the foreign buyers. Comment on the valuation of the inventories by the company.

You are the accountant of Zenith Industries Ltd., a company engaged in the manufacture and sale of consumer products across India. The company has its corporate office in Mumbai and an extensive network of stockists and distributors throughout the country. You are preparing the financial statements for the year ended 31st March, 2025. After the close of the financial year, the following significant events and accounting considerations came to light. Explain the appropriate accounting treatment for each:

The accountant of Beryl Limited has asked you to identify the following items as: Change in Accounting Policies / Change in Accounting Estimates / Extraordinary Items / Prior period items / Ordinary Activity.

Best Ltd. is engaged in the business of providing consultancy services. A few days back, it received a notice from GST department raising a demand of GST on consultancy services provided by it for ₹2,50,000. Recently Best Ltd. paid the demand. In the books, the payment is recorded as an extraordinary expenditure. Whether payment of tax demand raised by the taxation authority can be recognised as an extraordinary item?

A construction contractor has entered into a fixed-price contract of ₹18,000 lacs to construct a bridge within a three-year time frame. The contract specifies the total contract price and includes provisions for variations in work, which may affect revenue and costs during the contract period. Contract costs incurred and estimated profit are provided for three years. Using the provisions of Accounting Standard (AS) 7 Construction Contracts (Revised), compute the following year-wise: (1) Revenue to be recognized in the Statement of Profit and Loss, (2) Expenses to be recognized in the Statement of Profit and Loss, (3) Contract costs to complete the remaining work, (4) Profit or loss to be recognized each year.

Class Ltd. is a well-established real-estate developer and builder engaged in residential and commercial projects. In the financial year 2025, the company purchased a unit of land situated in a prime location for ₹225 crore, intending to develop a high-end residential complex. Within a few months of acquisition, due to a strategic decision to reallocate resources to another project and take advantage of favorable market conditions, Class Ltd. sold the land at a price of ₹360 crore. The company maintained proper books of accounts, and all legal formalities for the transfer were duly completed. Advise Class Ltd. on the recognition of revenue from this transaction in the final statement of accounts for the year ended 31st March, 2025.

Zenith Ltd., a medium-sized manufacturing company engaged in the production of precision industrial components, has provided the following details of its fixed assets. You are required to calculate depreciation for each asset for the year ended 31st March, 2025, in accordance with the provisions of AS 10 (Revised) – Property, Plant and Equipment.

Mediwell Hospitals Ltd., a reputed healthcare company operating a chain of multi-specialty hospitals across India, had acquired 40 units of Doppler Scan Machines from Holiver Inc., USA, at a cost of US$1,65,100 per unit at the beginning of the financial year 2022–23. The prevailing exchange rate at that time was ₹50 per US$. The acquisition was partly financed through a government grant amounting to ₹5 crores, which was sanctioned specifically for the purchase of these machines under a healthcare modernization scheme. The grant was sanctioned with a specific condition that, in the event of a change in management or ownership control of the company, the grant must be refunded to the government. In April 2025, 51% of the company's shareholding was acquired by an overseas investor, thereby resulting in a change in management control. Consequently, the company became liable to refund the entire government grant. The expected useful life of each Doppler scan machine is 5 years, and the company follows a Straight Line Method (SLM) of depreciation at 20% per annum. Additionally, Mediwell Hospitals Ltd. incurred the following directly attributable costs: Bank charges: US$4,000 (for the import transaction as a whole), Sea freight: ₹7,500 per unit. The company has not maintained any Capital Reserve or Deferred Income Account in respect of the government grant received. You are required to advise the accounting treatment in the books of Mediwell Hospitals Ltd. as a result of the return of the government grant, in light of the relevant provisions of Accounting Standard (AS) 12 – Accounting for Government Grants.

Can interest be included in the cost of inventories?

Garnet Limited has 4 operating segments with the following financial data: Fan segment has inter-segment sales of 3,200, external sales of 10,900, and total assets of 23,700; Light segment has inter-segment sales of 200, external sales of 1,400, and total assets of 13,200; Lamp segment has inter-segment sales of 0, external sales of 1,500, and total assets of 4,200; Printer segment has inter-segment sales of 1,100, external sales of 200, and total assets of 3,400. How many reportable segments does Garnet Limited have as per the Revenue and Assets criteria given in AS 17? State Reasons for your answer.

Mr. Rajiv KMP of Raijada Limited received a cheque of ₹70,000 towards reimbursement of expenses incurred on stay in hotel, conference expenses etc. visiting some meeting on behalf of the company. You are required to guide whether the above transaction is covered under AS-18?

On 1st April, 2024, Mansi Ltd. sold a plant for ₹8,52,800. The carrying amount of the plant on that date was ₹1,80,000. The sale was a part of a package under which Akash Ltd. leased the asset to Mansi Ltd. for eight years. The economic life of the asset is estimated as 8 years. The minimum lease rents payable by the lessee has fixed at ₹1,60,000 payable annually beginning from 31st March, 2025. The incremental borrowing interest rate of Mansi Ltd. is estimated at 10% p.a. Calculate the net effect on the Statement of Profit and Loss in the books of Mansi Ltd.

Should appropriation to mandatory reserves be excluded from net profit attributable to equity shareholders? AB Limited is a company engaged in manufacturing industrial packaging equipment. As per the terms of an agreement entered into with its debenture holders, the company is required to appropriate adequate portion of its profits to a specific reserve over the period of maturity of the debentures such that, at the redemption date, the reserve constitutes at least half the value of such debentures. As such appropriations are not available for distribution to the equity shareholders, AB limited has excluded this from the numerator in the computation of Basic EPS. Is this treatment correct?

Swift Limited acquired patent rights to manufacture Solar Roof Top Panels at a cost of ₹600 lacs. The product life cycle has been estimated to be 5 years and the amortization was decided in the ratio of future cash flows which are estimated as: Year 1: ₹300 lacs, Year 2: ₹300 lacs, Year 3: ₹300 lacs, Year 4: ₹150 lacs, Year 5: ₹150 lacs. After 3rd year, it was estimated that the patents would have an estimated balance future life of 3 years and Swift Ltd. expected the estimated cash flow after 5th year to be ₹75 Lacs. Determine the amortization cost of the patent for each of the above years as per Accounting Standard 26.

Briefly explain scope and forms of Joint Venture as per AS 27.

X Ltd. purchased a fixed asset four years ago for ₹150 lakhs and depreciates it at 10% p.a. on straight line method. At the end of the fourth year, it has revalued the asset at ₹75 lakhs and has written off the loss on revaluation to the profit and loss account. However, on the date of revaluation, the market price is ₹67.50 lakhs and expected disposal costs are ₹3 lakhs. What will be the treatment in respect of impairment loss on the basis that fair value for revaluation purpose is determined by market value and the value in use is estimated at ₹60 lakhs?

An oil company has been contaminating land for several years. It does not clean up because there is no legislation requiring cleaning up. At 31st March 2025, it is virtually certain that a law requiring a clean-up of land already contaminated will be enacted shortly after the year end. Is provisioning presently necessary?