Q1(i)Revenue recognition with inspection requirements
0 marks hard
Case: RTS Ltd, ("RTS" or the "Company"), is engaged in the business of manufacturing of equipment/components. The Company has a contract with the Indian Railways for a brake component which is structured such that: The Company's obligation is to deliver the component to the Railways' stockyard, while the delivery terms are ex-works, the Company is responsible for engaging a transporter for delivery. Railways sends an order for a defined quantity. The Company manufactures the required quantity and informs Railways for carrying out the inspection. Railways representatives visit the Company's factory a…
When should RTS Ltd recognize revenue as per the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006? Would your answer be different if inspection is normally known to lead to no quality rejections?
(a) Revenue should be recognized on dispatch of components. The assessment would not change even in case where inspection is normally known to lead to no quality rejections.
(b) Revenue should be recognized on completion of inspection of components. The assessment would not change even in case where inspection is normally known to lead to no quality rejections.
(c) Revenue should be recognized on dispatch of components. The assessment would change where inspection is normally known to lead to no quality rejections.
(d) Revenue should be recognized on delivery of the component to the Railways' stockyard. The assessment would change where inspection is normally known to lead to no quality rejections.
Q1(ii)Inventory valuation with normal and abnormal waste
0 marks hard
Case: RTS Ltd, ("RTS" or the "Company"), is engaged in the business of manufacturing of equipment/components. The Company has a contract with the Indian Railways for a brake component which is structured such that: The Company's obligation is to deliver the component to the Railways' stockyard, while the delivery terms are ex-works, the Company is responsible for engaging a transporter for delivery. Railways sends an order for a defined quantity. The Company manufactures the required quantity and informs Railways for carrying out the inspection. Railways representatives visit the Company's factory a…
In respect of A Ltd, state with reference to Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006, what would be value of the inventory to be recorded in the books of accounts?
(a) ` 47,00,000
(b) ` 50,00,000
(c) ` 49,50,000
(d) ` 49,47,368
Q1(iii)Accounting treatment of government grants and non-monetary a
0 marks hard
Case: RTS Ltd, ("RTS" or the "Company"), is engaged in the business of manufacturing of equipment/components. The Company has a contract with the Indian Railways for a brake component which is structured such that: The Company's obligation is to deliver the component to the Railways' stockyard, while the delivery terms are ex-works, the Company is responsible for engaging a transporter for delivery. Railways sends an order for a defined quantity. The Company manufactures the required quantity and informs Railways for carrying out the inspection. Railways representatives visit the Company's factory a…
Please guide regarding the accounting treatment of both the grants mentioned above in line with the requirements of Accounting Standard 12.
(a) Distribution of dividend out of grant is correct. In the second case also not recording land in the books of accounts is correct.
(b) Distribution of dividend out of grant is incorrect. In the second case, not recording land in the books of accounts is correct.
(c) Distribution of dividend out of grant is correct. In the second case, land should be recorded in the books of accounts at a nominal value.
(d) Distribution of dividend out of grant is incorrect. In the second case, land should be recorded in the books of accounts at a nominal value.
Q2Capitalisation of borrowing costs
0 marks easy
Gyan Ltd. borrowed ` 10 crore for construction of a plant at the rate of 10% per annum (interest paid annually ` 1 crore). The construction was being carried on and out of the borrowings, ` 4 crore was temporarily placed in a fixed deposit at the rate of 6% per annum (interest earned ` 24 lakh). At the year end, how much cost of borrowing Gyan Limited will capitalise?
(a) Interest paid on ` 10 crore i.e. ` 1 crore
(b) Interest paid on ` 6 crore as only this amount was utilized i.e. ` 60 Lakh
(c) Interest paid less income on temporary investment i.e. ` 76 lakh
(d) Nothing will be capitalized
Q3Ind AS carve-outs and carve-ins
0 marks easy
What do you mean by Carve outs/ins in Ind AS? Explain
Q4Capital maintenance and dividend calculation
0 marks easy
Shiva started a business on 1st April 2022 with ` 15,00,000 represented by 80,000 units of ` 25 each. During the financial year ending on 31st March, 2023, he sold the entire stock for ` 35 each. In order to maintain the capital intact, calculate the maximum amount, which can be withdrawn by Shiva in the year 2022-23 if Financial Capital is maintained at historical cost.
Q5Classification of entities for Accounting Standards
0 marks easy
Based upon criteria for rating of non-corporate entity, categorize the following as Level I, Level II, Level III and Level IV entities for the purpose of compliance of Accounting Standards in India.
Q6Cash flow statement - operating activities
0 marks easy
From the following particulars calculate cash flows from Operating activities. Particulars: Retained earning ` 17,000, Depreciation ` 4,000, Loss on Sale of Machinery ` 3,000, Provision for tax ` 7,000, Interim Dividend paid during the year ` 10,000, Dividend paid during the year ` 8,000, Premium payable on redeemable Preference Shares ` 2,000, Profit on sale of investment ` 10,000, Refund of tax ` 1,000. Additional Information: Trade Receivable (31.3.22: ` 10,000, 31.3.23: ` 12,000), Trade Payable (31.3.22: ` 7,000, 31.3.23: ` 15,000), Provision for Tax (31.3.22: ` 4,000, 31.3.23: ` 7,000), Prepaid Expenses (31.3.22: ` 2,000, 31.3.23: ` 1,000), Outstanding Expenses (31.3.22: ` 1,400, 31.3.23: ` 1,000).
Q7Related party identification and disclosures
0 marks easy
Suggest how the following transactions will be treated as at the closing date i.e. on 31st March, 2023 for the purposes of AS 18 'Related Party Disclosures'.
Q8Discontinuing operations definition and criteria
0 marks easy
Arzoo Ltd. is in the business of manufacture of passenger cars and commercial vehicles. The company is working on a strategic plan to shift from the passenger car segment to the commercial vehicles segment over the coming 5 years. However, no specific plans have been drawn up for sale of neither the division nor its assets. As part of its plan, it has planned that it will reduce the production of passenger cars by 20% annually. It also plans to commence another new factory for the manufacture of commercial vehicles plus transfer of employees in a phased manner. These plans have not been approved from the Board of Directors and the new factory for manufacture of commercial vehicles has not yet started. You are required to comment if mere gradual phasing out in itself can be considered as a 'Discontinuing Operation' within the meaning of AS 24.
Q9Investment accounting with FIFO valuation
0 marks easy
ABC Ltd. holds 2,000, 15% Debentures of ` 100 each in XYZ Ltd. as on April 1, 2022 at a cost of ` 2,50,000. Interest is payable on June 30 and December 31 each year. Following are the details of 15% Debentures purchased and sold during the year 2022-23: On May 1, 2022, 1,000 debentures are purchased cum-interest at ` 1,05,000. On November 1, 2022, 1200 debentures are sold ex-interest at ` 1,28,200. On November 30, 2022, 500 debentures are purchased ex-interest at ` 54,500. On December 31, 2022, 900 debentures are sold cum-interest for ` 1,18,000. You are required to prepare the investment Account showing value of holdings on March 31, 2023 at cost, using FIFO Method.
Q10Capitalisation of borrowing costs for construction
0 marks easy
H Ltd. began the construction of a new building on 1st April 2022. It obtained a special loan of ` 6,00,000 on 1st April 2022 at an interest of 12% to finance the construction of the building. The company's other outstanding two non-specific loans on 1st April, 2022 were: ` 30,00,000 at 14% and ` 54,00,000 at 16%. The expenditure incurred on the building project was: 1st May, 2022 ` 12,00,000, 1st July, 2022 ` 15,00,000, 1st October, 2022 ` 27,00,000, 1st March, 2023 ` 7,20,000. The building was completed by 31st March 2023. Following the provisions of Accounting Standard 16, you are required to calculate the amount of interest to be capitalized and also give one Journal Entry for capitalizing the cost and borrowing cost in respect of the building.
Q11Lease classification as operating vs finance lease
0 marks easy
Sooraj Limited wishes to obtain a machine costing ` 30 lakhs by way of lease. The effective life of the machine is 14 years, but the company requires it only for the first 3 years. It enters into an agreement with Star Ltd., for a lease rental for ` 3 lakhs p.a. payable in arrears and the implicit rate of interest is 15%. The chief accountant of Sooraj Limited is not sure about the treatment of these lease rentals and seeks your advice. (Use annuity factor at @ 15% for 3 years as 2.28)
Q12Accounting for goodwill, franchise, and patent intangibles
0 marks easy
Naresh Ltd. had the following transactions during the financial year 2022-2023. Prepare a schedule showing the intangible assets section in Naresh Ltd. Balance Sheet at 31st March, 2023.
Q13Actuarial gains/losses in employee benefit accounting
0 marks easy
Hello Limited belongs to the manufacturing industry. The company received an actuarial valuation for the first time for its pension scheme which revealed a surplus of ` 12 lakhs. It wants to spread the same over the next 2 years by reducing the annual contribution to ` 4 lakhs instead of ` 10 lakhs. The average remaining life of the employees is estimated to be 6 years. You are required to advise the company on the following items from the viewpoint of finalization of accounts, taking note of the mandatory accounting standards.
Q14Classification of events after balance sheet date
0 marks easy
Surya Limited follows the financial year from April to March. Keeping in view the provisions of AS-4, you are required to state with reasons whether the above events are to be treated as Contingencies, Adjusting Events or Non-Adjusting Events occurring after Balance Sheet date.
Q15Construction contracts revenue recognition
0 marks easy
The following data is provided for M/s. Raj Construction Co. Contract Price ` 85 lakhs, Materials issued ` 21 Lakhs out of which Materials costing ` 4 Lakhs is still lying unused at the end of the period, Labour Expenses for workers engaged at site ` 16 Lakhs (out of which ` 1 Lakh is still unpaid), Specific Contract Costs ` 5 Lakhs, Sub-Contract Costs for work executed ` 7 Lakhs, Advances paid to Sub-Contractors ` 4 Lakhs, Further Cost estimated to be incurred to complete the contract ` 35 Lakhs. You are required to compute the Percentage of Completion, the Contract Revenue and Cost to be recognized as per AS-7.
Q16Revenue recognition for various sales scenarios
0 marks easy
Following information of BS Products Ltd. is given. You are required to advise the accountant of BS Products Ltd., with valid reasons, the amount to be recognized as revenue in above cases in the context of AS 9 and also determine the total revenue to be recognized for the year ending 31-03-2023.
Q17Goodwill calculation in consolidated financial statements
0 marks easy
Zoom Ltd. acquired 70% shares of Star Ltd. @ ` 30 per share. Following is the extract of Balance Sheet of Star Ltd.: Equity Shares of ` 10 each 1,50,00,000, 15% Debentures 15,00,000, Trade Payables 82,50,000, Property, Plant and Equipment 1,05,00,000, Investments 67,50,000, Current Assets 1,02,00,000, Loans and Advances 33,00,000. On the same day Star Ltd. declared dividend at 20% and as agreed between both the companies Property, Plant and Equipment were to be depreciated @ 10% and investment to be taken at market value of ` 90,00,000. Calculate the Goodwill or Capital Reserve to be recorded in Consolidated Financial Statements.
Q18Preparation of financial statements
0 marks easy
Aqua Ltd. has authorized capital of ` 50 lakhs divided into 5,00,000 equity shares of ` 10 each. Their books show the following ledger balances as on 31st March, 2023. [Detailed list of assets and liabilities provided]. The inventory (valued at cost or market value, which is lower) as on 31st March, 2023 was ` 7,05,000. Outstanding liabilities for wages ` 25,000 and business expenses ` 36,500. Charge depreciation on written down values of Plant & Machinery @ 5%, Engineering Tools @ 20% and Furniture & Fixtures @10%. Provide ` 25,000 as doubtful debts for trade receivables. Provide for income tax @ 30%. It was decided to transfer ` 10,000 to reserves. You are required to prepare a Statement of Profit & Loss for the year ended 31st March, 2023 and Balance Sheet as at that date.
Q19Share buyback and bonus issue journal entries
0 marks easy
Mukti Ltd. (a non-listed company) provide the following information as on 31.3.2023: Land and Building ` 21,50,000, Plant & Machinery ` 15,00,000, Non-current Investment ` 2,00,000, Trade Receivables ` 5,50,000, Inventories ` 1,80,000, Cash and Cash Equivalents ` 40,000, Share capital: 1,00,000 Equity Shares of ` 10 each fully paid up ` 10,00,000, Securities Premium ` 3,00,000, General Reserve ` 2,50,000, Profit & Loss Account (Surplus) ` 1,50,000, 10% Debentures (Secured by floating charge on all assets) ` 20,00,000, Unsecured Loans ` 8,00,000, Trade Payables ` 1,20,000. On 21st April, 2023 the Company announced the buy back of 15,000 of its equity shares @ ` 15 per share. For this purpose, it sold all its investment for ` 2.50 lakhs. On 25th April, 2023, the company achieved the target of buy back. On 1st May, 2023 the company issued one fully paid up share of ` 10 each by way of bonus for every eight equity shares held by the equity shareholders. You are required to pass necessary Journal Entries for the above transactions.
Q20Company reconstruction accounting entries
0 marks easy
As a part of the reconstruction scheme of Getting better Ltd, the following terms were agreed upon: The shareholders to receive in lieu of their present holdings (viz. 10,000 shares of ` 50 each), the following: 15,000 Fully paid equity shares of ` 10 each; 12% fully paid preference shares to the extent of 2/5 of total equity shares; To pay them ` 50,000 and transfer the remaining to the reconstruction account. 8% Preference share capital ` 3,00,000 to write down the value of preference shares to ` 50 (original face value ` 100). 14% debentures of the nominal value of ` 2,00,000 along with accrued interest ` 56,000 was waived off for three fourths of the total amount, and the remaining being paid in cash. Show the necessary journal entries in the books of Getting better company based on the above scheme.