CA Inter Adv Accounting — Revision Test Paper (RTP) — November 2022

The following balances appeared in the books of Oliva Ltd. as on 31-03-2022. [Trial balance with items including Inventory, Purchases, Manufacturing Expenses, Salaries, General Charges, Fixed Assets, Investments, Trade Receivables, Cash, Trade Payables totaling ₹24,07,200 each side]. From the above balances and the following information, prepare the company's statement of Profit and Loss for the year ended 31st March, 2022 and company's Balance Sheet as on that date: 1. Inventory on 31st March, 2022- Raw material ₹25,800 and finished goods ₹60,000. 2. Outstanding Expenses: Manufacturing Expenses ₹67,500 & Salaries & Wages ₹4,500. 3. Interest accrued on Securities ₹300. 4. General Charges prepaid ₹2,490. 5. Provide depreciation: Building @ 2% p.a., Machinery @ 10% p.a., Furniture @ 10% p.a. & Motor Vehicles @ 20% p.a. 6. Current maturity of long term loan is ₹1,000. 7. The Taxation provision of 40% on net profit is considered.

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The following information of X Ltd. (a non-investment company) as on 31st March, 2022 was obtained: Authorized capital: 15,000 14% preference shares of ₹100 = ₹15,00,000; 1,50,000 Equity shares of ₹100 each = ₹1,50,00,000. Issued and subscribed capital: 14,000 14% preference shares of ₹100 each fully paid = ₹14,00,000; 1,30,000 Equity shares of ₹100 each ₹90 paid-up = ₹1,17,00,000. Capital reserves (₹1,75,000 is revaluation reserve) ₹2,00,000. Securities premium ₹50,000. 15% Debentures ₹70,00,000. Investment in shares, debentures, etc. ₹60,00,000. Profit and Loss account (debit balance) ₹13,50,000. You are required to compute Effective Capital as per the provisions of Schedule V to the Companies Act, 2013.

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The Balance Sheet of Max Ltd. for the year ending 31st March, 2022 and 31st March, 2021 were summarised as: [Balance Sheet with Equity and Liabilities, Assets, Notes to Accounts]. The Profit and Loss statement for the year ended 31st March, 2022 disclosed: Profit before tax ₹8,000; Income Tax (₹7,000); Profit after tax ₹1,000. Further Information: 1. Depreciation on Building ₹1,000. 2. Depreciation on Furniture & Fixtures ₹2,000. 3. Depreciation on Cars ₹5,000. One car was disposed during the year for ₹3,400 whose written down value was ₹2,000. 4. Purchases investments for ₹6,000. 5. Sold investments for ₹10,000, cost ₹2,000. Prepare Cash Flow Statements for the year ended 31st March, 2022 as per AS-3 (revised) using indirect method.

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The promotors of Shiva Ltd. took over on behalf of the company a running business with effect from 1st April 2021. The company got incorporated on 1st August 2021. The annual accounts were made up to 31st March, 2022 which revealed that the sales for the whole year totalled ₹24 lakhs out of which sales till 31st July, 2021 were for ₹6 lakhs. Gross profit ratio was 20%. The expenses from 1st April 2021, till 31st March, 2022 were: Salaries ₹75,000; Rent, Rates and Insurance ₹30,000; Sundry Office Expenses ₹72,000; Traveller's Commission ₹20,000; Discount allowed ₹16,000; Bad Debts ₹8,000; Directors' Fee ₹30,000; Tax Audit Fee ₹16,000; Depreciation on PPE ₹15,000; Debenture Interest ₹14,000. Prepare a statement showing the calculation of profits for the pre-incorporation and post-incorporation periods.

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Pass Journal Entries in the following circumstances:

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Meeta Ltd. has decided to increase its existing share capital by making rights issue to its existing shareholders. The company is offering one new share for every two shares held by the shareholder. The market value of the share is ₹360 and the company is offering one share of ₹180 each. Calculate the value of a right. What should be the ex-right value of a share?

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Dheeraj Limited had 5,000, 10% Redeemable Preference Shares of ₹100 each, fully paid up. The company had to redeem these shares at a premium of 10%. It was decided by the company to issue the following: (i) 40,000 Equity Shares of ₹10 each at par. (ii) 2,000 12% Debentures of ₹100 each. The issue was fully subscribed and all accounts were received in full. The payment was duly made. The company had sufficient profits. Show journal entries in the books of the company.

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XYZ Ltd. has issued 1,000, 12% convertible debentures of ₹100 each redeemable after a period of five years. According to the terms & conditions of the issue, these debentures were redeemable at a premium of 5%. The debenture holders also had the option at the time of redemption to convert 20% of their holdings into equity shares of ₹10 each at a price of ₹20 per share and balance in cash. Debenture holders amounting ₹20,000 opted to get their debentures converted into equity shares as per terms of the issue. You are required to calculate the number of shares issued and cash paid for redemption of ₹20,000 debenture holders.

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Alpha Ltd. purchased 5,000, 13.5% Debentures of Face Value of ₹100 each of Pergot Ltd. on 1st May 2021 @ ₹105 on cum interest basis. The interest on these debentures is payable on 31st & 30th of March & September respectively. On August 1st 2021 the company again purchased 2,500 of such debentures @ ₹102.50 each on cum interest basis. On October 1st, 2021 the company sold 2,000 Debentures @ ₹103 each on ex-interest basis. The market value of the debentures as at the close of the year was ₹106. You are required to prepare the Investment in Debentures Account in the books of Alpha Ltd. for the year ended 31st Dec. 2021 on Average Cost Basis.

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On 27th July, 2022, a fire occurred in the godown of M/s. Vijay Exports and most of the stocks were destroyed. However goods costing ₹5,000 could be salvaged. From the salvaged accounting records, the following information is available relating to the period from 1.4.2022 to 27.7.2022: 1. Stock as per balance sheet as on 1.4.2022 ₹63,000. 2. Purchases (including purchase of machinery costing ₹10,000) ₹2,92,000. 3. Wages (including wages paid for installation of machinery ₹3,000) ₹53,000. 4. Sales (including goods sold on approval basis amounting to ₹40,000, of which no approval has been received in respect of 1/4th of the goods) ₹4,12,300. 5. Cost of goods distributed as free sample ₹2,000. Other Information: (i) While valuing the stock on 31.3.2022, ₹1,000 had been written off in respect of certain slow moving items costing ₹4,000. A portion of these goods were sold in June, 2022 at a loss of ₹700 on original cost of ₹3,000. The remainder is now estimated to be worth its original cost. (ii) Past record shows the normal gross profit rate is 20%. (iii) The Company had taken the fire insurance policy of ₹55,000 with the average clause. Compute the amount of claim of stock destroyed by fire, to be lodged to the Insurance Company. Also prepare Memorandum Trading Account for the period 1.4.2022 to 27.7.2022 for normal and abnormal items.

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Leena Transport Limited purchased from Ethnic Motors, 4 tempos costing ₹2,75,000 each on the hire purchase system on 1.1.2020. Payment was to be made ₹2,00,000 down and the balance in 3 equal annual instalments payable on 31.12.2020, 31.12.2021 and 31.12.2022 together with interest @ 12% p.a. Leena Transport Ltd. charge depreciation at the rate of 10% p.a. on the diminishing balance. It paid the instalment due at the end of the first year, i.e., 31.12.2020, but could not pay the next on 31.12.2021. Ethnic Motors decided to takeover 2 tempos and to leave the other 2 tempos with the purchaser on 1.1.2022, adjusting the value of the 2 tempos (taken over) against the amount due on 31.12.2021. The tempos taken over were valued on the basis of 15% depreciation (W.D.V method) annually. Show the necessary accounts in the books of Leena Transport Ltd. for the years 2020, 2021 and 2022 assuming the balance was paid to ethnic Motors Ltd. on 31.12.2022.

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M/s. Bombay Cotton has 2 Departments Y and Z. The following information is provided for the year ended 31st March, 2022: Opening Stock - Y ₹60,000, Z ₹40,000. Purchases - Y ₹1,20,000, Z ₹3,05,400. Wages - Y ₹70,000, Z ₹32,000. Sales - Y ₹3,10,300, Z ₹3,72,700. Closing Stock - Y ₹23,700, Z ₹40,700. Other Expenses: Salaries ₹30,000; Rent ₹9,000; Advertisement ₹24,000; General Expenses ₹3,000; Depreciation ₹18,000. All Expenses are to be allocated between the Departments in the ratio of their Gross Profit. Department Y sells goods to Department Z at a profit of 25% on sales. Department Z sells goods to Department Y at a profit of 28% on cost. Each Department Manager is entitled to 10% Commission on Net Profit subject to unrealized profit on departmental sales being eliminated. Stock Transfer during the year from Department Y to Department Z was ₹40,000 and from Department Z to Department Y was ₹50,000. Closing Stock includes transfer from Department Y to Department Z ₹12,000 and from Department Z to Department Y ₹21,200. Opening stocks do not include any inter-department transfer. Prepare Departmental Trading and Profit & Loss Account for the year ended 31st March, 2022.

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M & S Co. of Lucknow has a branch (integral foreign operation) in Canberra, Australia. As on 31st March 2022, the following ledger balances have been extracted from the books of the Lucknow office and the Canberra branch. [Ledger balances provided in original]. The following information is also available: (i) Stock as at 31st March, 2022: Lucknow ₹1,50,000; Canberra A$ 3,125 (all stock from purchases made abroad). (ii) Head Office always sent goods to the Branch at cost plus 25%. (iii) Provision is to be made for doubtful debts at 5%. (iv) Depreciation is to be provided on Buildings at 10% and on Plant and Machinery at 20% on written down value. You are required to: (1) Convert the Branch Trial Balance into rupees by using the following exchange rates: Opening rate 1 A$ = ₹50; Closing rate 1 A$ = ₹53; Average rate 1 A$ = ₹51.00; For Fixed Assets 1 A$ = ₹46.00. (2) Prepare Trading and Profit and Loss Account for the year ended 31st March 2022 showing to the extent possible H.O. results and Branch results separately.

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Aman, a readymade garment trader, keeps his books of account under single entry system. On the closing date, i.e. on 31st March, 2021 his statement of affairs showed: Aman's capital ₹4,80,000; Loan ₹1,50,000; Creditors ₹3,10,000; Building ₹3,25,000; Furniture ₹50,000; Motor car ₹90,000; Stock ₹2,00,000; Debtors ₹1,70,000; Cash in hand ₹20,000; Cash at bank ₹85,000. Riots occurred and a fire broke out on 31st March, 2022, destroying the books of accounts. The cashier had absconded with the available cash. You are furnished with: 1. Sales for 2021-22 were 20% higher than previous year's, of which 20% were for cash. He always sells at cost plus 25%. No cash purchases. 2. Collection from debtors ₹14,00,000, out of which ₹3,50,000 in cash. 3. Business expenses ₹2,00,000, of which ₹50,000 outstanding on 31st March, 2022 and ₹60,000 paid by cheques. 4. Gross profit as per last year's audited accounts was ₹3,00,000. 5. Depreciation on building and furniture at 5% each and motor car at 20%. 6. Private records and Bank Pass Book disclosed: Payment to creditors ₹13,75,000; Personal drawings ₹75,000; Repairs ₹10,000; Travelling expenses ₹15,000; Cash deposited in bank ₹7,15,000; Cash withdrawn from bank ₹1,20,000. 7. Stock level was maintained at ₹3,00,000 throughout the year. 8. Amount defalcated by cashier to be written off to P&L Account. You are required to prepare Trading and Profit and Loss A/c for the year ended 31st March, 2022 and Balance Sheet as on that date of Aman. All workings should form part of the answer.

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Summarised Balance Sheet of Cloth Trader as on 31.03.2021: Equity & Liabilities: Proprietor's Capital ₹3,00,000; Profit & Loss Account ₹1,25,000; 10% Loan Account ₹2,10,000; Trade payables ₹50,000. Assets: Property, plant and equipment ₹3,60,000; Closing Inventory ₹1,50,000; Trade receivables ₹1,00,000; Deferred Expenses ₹50,000; Cash & Bank ₹25,000. Additional Information: (1) Remaining life of PPE is 8 years with even use pattern. Net realisable value on 31.03.2022 was ₹3,25,000. (2) Purchases and Sales in 2021-22: ₹22,50,000 and ₹27,50,000 respectively. (3) Cost and net realizable value of inventory on 31.03.2022: ₹2,00,000 and ₹2,50,000 respectively. (4) Expenses including interest on loan for the year: ₹78,000. (5) Deferred Expenses are amortized equally over 5 years. (6) Sundry Debtors on 31.03.2022 are ₹1,50,000 of which ₹5,000 is doubtful. Collection of another ₹25,000 depends on successful re-installation. (7) Closing Sundry Creditors ₹75,000, likely to be settled at 10% discount. (8) Cash balance on 31.03.2022 is ₹4,22,000. (9) Early repayment penalty for the loan of ₹25,000. You are required to prepare (Not assuming going concern): (1) Profit & Loss Account for the year 2021-22. (2) Balance Sheet as on 31st March, 2022.

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The closing stock of finished goods (at cost) of a company amounted to ₹4,50,000. The following items were included at cost in the total: (a) 100 coats, which had cost ₹2,200 each and normally sold for ₹4,000 each. Owing to a defect in manufacture their NRV was determined at 50% of their normal selling price. (b) Shirts which had cost ₹50,000, their net realizable value at Balance sheet date was ₹55,000. Commission @ 10% on sales is payable to agents. What should the inventory value be according to AS 2 after considering the above items?

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RS Ltd. has acquired a heavy plant at a cost of ₹2,00,00,000. The estimated useful life is 10 years. At the end of the 2nd year, one of the major components i.e. the Boiler has become obsolete (which was acquired at price of ₹50,00,000) and requires replacement, as further maintenance is uneconomical. The remainder of the plant is perfect and is expected to last for next 8 years. The cost of a new boiler is ₹60,00,000. Can the cost of the new boiler be recognised as an asset, and, if so, what should be the carrying value of the plant at the end of second year?

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A company had imported raw materials worth US Dollars 6,00,000 on 5th January, 2022, when the exchange rate was ₹43 per US Dollar. The company had recorded the transaction in the books at the above mentioned rate. The payment for the import transaction was made on 5th April, 2022 when the exchange rate was ₹47 per US Dollar. However, on 31st March, 2022, the rate of exchange was ₹48 per US Dollar. The company passed an entry on 31st March, 2022 adjusting the cost of raw materials consumed for the difference between ₹47 and ₹43 per US Dollar. In the background of the relevant accounting standard, is the company's accounting treatment correct? Discuss.

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Two case-based scenarios on Accounting Standards AS 12 and AS 13

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Harish Construction Company is constructing a huge building project consisting of four phases. It is expected that the full building will be constructed over several years but Phase I and Phase II of the building will be started as soon as they are completed. Following is the detail of the work done on different phases of the building during the current year (₹ in lakhs): Phase I - Cash expenditure ₹10, Building purchased ₹24, Total ₹34. Phase II - Cash expenditure ₹30, Building purchased ₹34, Total ₹64. Phase III - Cash expenditure ₹25, Building purchased ₹30, Total ₹55. Phase IV - Cash expenditure ₹30, Building purchased ₹38, Total ₹68. Total expenditure of all phases ₹221. Loan taken @ 15% at the beginning of the year ₹200. During mid of the current year, Phase I and Phase II have become operational. Find out the total amount to be capitalized and to be expensed during the year.

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