QeBonus Share Issuance and Capital Accounting
4 marks medium
Following items appear in the Trial Balance of Saral Ltd. as on 31st March, 2014: 4,500 Equity Shares of ₹100 each (₹4,50,000), Capital Reserve including ₹40,000 being profit on sale of Plant (₹90,000), Securities Premium (₹40,000), Capital Redemption Reserve (₹30,000), General Reserve (₹1,05,000), Profit and Loss Account Cr. Balance (₹65,000). The company decided to issue to equity shareholders bonus shares at the rate of 1 share for every 3 shares held. Company decided that there should be the minimum reduction in free reserves. Pass necessary Journal Entries in the books Saral Ltd.
Q1Accounting - Inventory Valuation
5 marks medium
Calculate the value of raw materials and closing stock based on the following information:
Raw material X:
Closing balance: 500 units
Cost price including excise duty: ₹ 200 per unit
Excise duty: ₹ 10 per unit
(Cenvat credit is receivable on the excise duty paid.)
Freight inward: ₹ 20 per unit
Unloading charges: ₹ 10 per unit
Replacement cost: ₹ 150 per unit
Finished goods Y:
Closing Balance: 1200 units
Material consumed: ₹ 220 per unit
Direct labour: ₹ 60 per unit
Direct overhead: ₹ 40 per unit
Total Fixed overhead for the year was ₹ 2,00,000 on normal capacity of 20,000 units.
Q1bFixed Assets - Depreciation with revaluation and additions
5 marks medium
On 01.04.2010 a machine was acquired at ₹ 4,00,000. The machine was expected to have a useful life of 10 years. The residual value was estimated at 10% of the original cost. At the end of the 3rd year, an attachment was made to the machine at a cost of ₹ 1,80,000 to enhance its capacity. The attachment was expected to have a useful life of 10 years and zero terminal value. During the same time the original machine was revalued upwards by ₹ 90,000 and remaining useful life was reassessed at 9 years and residual value was reassessed at NIL.
Find depreciation for the year, if
(i) attachment retains its separate identity.
(ii) attachment becomes integral part of the machine
Q1cFixed Assets valuation - Accounting Standards
5 marks medium
Ascertain the value at which various items of Fixed Assets are to be shown in the Financial Statements of Velvet Ltd. and amount to be debited to the Profit and Loss Account in the context of the relevant Accounting Standard.
Narrations for the adjustments made should form part of the answer:
(i) Goodwill was valued at ₹ 1,20,000 by independent valuers and no consideration was paid. The Company has not yet recorded the same.
(ii) Balance of Office Equipment as on 01.04.2013 is ₹ 1,20,000. On 01.04.2013, out of the above office equipment having book value ₹ 20,000 has been retired from use and held for disposal. The net realizable value of the same is ₹ 2,000. Rate of depreciation is 15% p.a. on WDV basis.
(iii) Book Value of Plant and Machinery as on 01.04.2013 was ₹ 7,20,000. On 01.08.2013 an item of machinery was purchased in exchange for 500 equity shares of face value ₹ 10. The Fair Market value of the equity shares on 01.08.2013 was ₹ 120. Rate of depreciation is 10% p.a. on WDV basis.
Q1dAccounting Standard 7 - Construction Contracts
5 marks medium
M/s. Highway Constructions undertook the construction of a highway on 01.04.2013. The contract was to be completed in 2 years. The contract price was estimated at ₹ 150 crores. Up to 31.03.2014 the company incurred ₹ 120 crores on the construction. The engineers involved in the project estimated that a further ₹ 45 crores would be incurred for completing the work.
What amount should be charged to revenue for the year 2013-14 as per the provisions of Accounting Standard 7 "Construction Contracts"? Show the extract of the Profit & Loss A/c in the books of M/s. Highway Constructions.
Q2aArticles of Association - Profit appropriation
8 marks hard
The Articles of Association of Samson Ltd. provide the following:
(i) That 25% of the net profit of each year shall be transferred to reserve fund.
(ii) That an amount equal to 10% of equity dividend shall be set aside for staff bonus.
Q5Hire Purchase Accounts
8 marks hard
Case: Happy Valley Florists Ltd. acquired a delivery van on hire purchase on 01.04.2010 from Ganesh Enterprises. Hire Purchase Price: ₹180,000; Down Payment: ₹30,000; Installments: ₹50,000 (1 yr), ₹50,000 (2 yrs), ₹30,000 (3 yrs), ₹20,000 (4 yrs). Cash price: ₹150,000; Depreciation: 10% WDV.
Happy Valley Florists Ltd. acquired a delivery van on hire purchase on 01.04.2010 from Ganesh Enterprises. The hire purchase price was ₹180,000 with a down payment of ₹30,000. Installments of ₹50,000, ₹50,000, ₹30,000, and ₹20,000 were payable after 1, 2, 3, and 4 years respectively. The cash price of the van was ₹150,000 with depreciation charged at 10% WDV.
Q5Investment Accounts
0 marks easy
Smart Investments had the following transactions:
15.12.2013 - Sold 3,000 shares @ ₹ 300. Brokerage of 1% was incurred extra.
15.01.2014 - Received interim dividend @ 10% for the year 2013-14
31.03.2014 - The shares were quoted in the stock exchange @ ₹ 220
Prepare Investment Accounts in the books of Smart Investments. Assume that the average cost method is followed.
Q6Partnership Admission and Reconstitution
16 marks very hard
The Balance Sheet of Amit, Bhushan and Charan, who share profits and losses as 3:2:1 respectively, as on 01.04.2013 shows:
Capital Accounts: Amit ₹ 1,80,000; Bhushan ₹ 1,60,000; Charan ₹ 1,40,000
Current Accounts: Bhushan ₹ 16,000
Creditors ₹ 1,20,000
Machinery ₹ 1,50,000; Furniture ₹ 1,50,000; Debtors ₹ 80,000 (Less: Provision ₹ 4,000); Stock ₹ 2,10,000; Cash ₹ 20,000; Current Accounts: Charan ₹ 10,000
Dev is admitted as a partner on 01.04.2013 for 1/5 share in the profit and loss with the following agreements:
(1) The profit and loss sharing ratio among the old partners will be equal.
(2) Dev brings in ₹ 1,50,000 as capital but is unable to bring the required amount of premium for goodwill.
(3) The goodwill of the firm is valued at ₹ 60,000.
(4) Assets and liabilities are to be valued as follows: Machinery ₹ 2,06,000; Furniture ₹ 1,28,000; Provision for doubtful debts @ 10% on debtors.
(5) Necessary adjustments regarding goodwill and profit/loss on revaluation are to be made through the Partner's Current Accounts.
(6) It is decided that the revalued figures of assets and liabilities will not appear in the Balance Sheet of the new firm.
(7) Capital Accounts of the old partners in the new firm should be proportionate to the new profit and loss sharing ratio, taking Dev's Capital as base. The existing partners will not bring cash for further capital. The necessary adjustments are to be made through the Partner's Current Accounts.
Prepare Partner's Capital & Current Account, and the Balance Sheet of the new firm after admission.
Q7aClub Accounting - Subscription Income
4 marks hard
From the following extract of Receipts and Payments Account and the additional information, you are required to calculate the Income from Subscription for the year ending March 31, 2014 and show them in the Income & Expenditure Account, and the Balance Sheet of a Club.
An extract of Receipts and Payments Account for the year ended 31st March, 2014:
Receipts (₹):
To Subscription:
2012-13: 4,000
2013-14: 20,000
2014-15: 5,000
Total: 29,000
Information:
(i) Subscription outstanding on 31.03.2013: ₹ 5,000
(ii) Subscription outstanding on 31.03.2014: ₹ 4,000
(iii) Subscription received in advance on 31.03.2013 for 2013-14: ₹ 5,000
Q7bCash Flow Statement - AS 3 treatment
4 marks medium
Intelligent Ltd., a non financial company has the following entries in its Bank Account. It has sought your advice on the treatment of the same for preparing Cash Flow Statement.
(i) Loans and Advances given to the following and interest earned on them:
(1) to suppliers
(2) to employees
(3) to its subsidiaries companies
(ii) Investment made in subsidiary Smart Ltd. and dividend received
(iii) Dividend paid for the year
(iv) TDS on interest income earned on investments made
(v) TDS on interest earned on advance given to suppliers
(vi) Insurance claim received against loss of fixed asset by fire
Discuss in the context of AS 3 Cash Flow Statement.
Q7cAverage Due Date
4 marks medium
Define Average Due Date. List out the various instances when Average Due Date can be used.
Q7dAccounting Standard-6 - Depreciation
4 marks medium
What are depreciable assets as per Accounting Standard-6? Explain why AS 6 does not apply to Land.