Q1(a)Self-balancing ledgers, Debtors Ledger adjustment
5 marks medium
A business concern maintains self-balancing ledgers. On the basis of following information, prepare General Ledger Adjustment Account in Debtors Ledger for the month of April, 2012:
Debit balances in Debtors Ledger on 01-04-2012: ₹3,58,200
Credit balances in Debtors Ledger on 01-04-2012: ₹9,400
Transactions during April 2012:
Total Sales (including Cash Sales ₹1,00,000): ₹20,95,400
Sales Returns: ₹33,100
Cash received from credit customers: ₹17,25,700
Bills Receivable received from customers: ₹95,000
Bills Receivable dishonoured: ₹7,500
Cash paid to customers for returns: ₹6,000
Transfers to Creditors Ledger: ₹16,000
Credit balances in Debtors Ledger on 30-04-2012: ₹9,800
Q1(b)Partnership admission, goodwill, ratio of sacrifice
5 marks medium
Arun and Varun were partners sharing profits in the ratio of 13:11 respectively. On 1st April, 2012 they admitted Tarun as a new partner on the following conditions: (i) All partners would share profits equally in the new firm. (ii) Tarun would bring in ₹52,000 as his capital and ₹36,000 as his share of goodwill. No goodwill account appeared in the books of the firm at the time of Tarun's admission and it was decided not to open any goodwill account. Adjustment for Tarun's goodwill being made through capital accounts. Pass journal entries to record all the transactions on Tarun's admission. Clearly show the calculation of ratio of sacrifice.
Q1(c)Hire purchase, cash price calculation
5 marks medium
On 1st April, 2012 Fastrack Motors Co. sells a truck on hire purchase basis to Teja Transport Co. for a total hire purchase price of ₹9,00,000 payable as ₹2,40,000 as down payment and the balance in three equal annual instalments of ₹2,20,000 each payable on 31st March, 2013, 2014 and 2015. The hire vendor charges interest @ 10% per annum. You are required to ascertain the cash price of the truck for Teja Transport Co. Calculations may be made to the nearest rupee.
Q1(d)Not-for-profit entity, subscription accounting
5 marks medium
During the year ended 31st March, 2012, Sachin Cricket Club received subscriptions as follows: For year ending 31st March, 2011: ₹12,000; For year ending 31st March, 2012: ₹6,15,000; For year ending 31st March, 2013: ₹18,000; Total: ₹6,45,000. There are 500 members and annual subscription is ₹1,500 per member. On 31st March, 2012, a sum of ₹15,000 was still in arrears for subscriptions for the year ended 31st March, 2011. Ascertain the amount of subscriptions that will appear on the credit side of Income and Expenditure Account for the year ended 31st March, 2012. Also show how the items would appear in the Balance Sheet as on 31st March, 2011 and the Balance Sheet as on 31st March, 2012.
Q2Company amalgamation, merger accounting
16 marks very hard
The following was the Balance Sheet of V Ltd. as on 31st March, 2012: Share Capital (80 lakh Equity Shares of ₹10 each fully paid up: ₹800 lakh; 35 lakh 12% Cumulative Preference Shares of ₹10 each fully paid up: ₹350 lakh); Reserves and Surplus (Debit Balance of P&L: ₹87 lakh); Long-term Borrowings (10% Secured Cumulative Debentures of ₹100 each fully paid up: ₹600 lakh; Outstanding Debenture Interest: ₹30 lakh); Current Assets (Inventories: ₹380 lakh; Trade Receivables: ₹256 lakh; Cash and Cash Equivalents: ₹75 lakh); Non-current Assets (Land and Buildings: ₹445 lakh; Plant and Machinery: ₹593 lakh; Furniture, Fixtures and Fittings: ₹114 lakh).
On 1st April, 2012 P Ltd. took over the entire business of V Ltd. on the following terms:
- V Ltd.'s equity shareholders would receive 4 fully paid equity shares of P Ltd. of ₹10 each issued at a premium of ₹2.50 each for every five shares held by them in V Ltd.
- Preference shareholders of V Ltd. would get 35 lakh 13% Cumulative Preference Shares of ₹10 each fully paid up in P Ltd., in lieu of their present holding.
- All the debentures of V Ltd. would be converted into equal number of 10.5% Secured Cumulative Debentures of ₹100 each, fully paid up after the take over by P Ltd., which would also pay outstanding debenture interest in cash.
- Expenses of amalgamation would be born by P Ltd. Expenses came to be ₹2 lakh.
- P Ltd. discovered that its creditors included ₹7 lakh due to V Ltd. for goods purchased.
- P Ltd.'s stock included goods of the invoice price of ₹5 lakh earlier purchased from V Ltd., which had charged profit @20% of the invoice price.
You are required to: (i) Prepare Realisation A/c in the books of V Ltd. (ii) Pass journal entries in the books of P Ltd. assuming it to be an amalgamation in the nature of merger.
Q3(a)Hire purchase accounting, stock and debtors accounts
8 marks hard
A Trader sold out goods on hire purchase at a profit of 25% on cost price. Prepare (i) Hire Purchase Stock A/c (ii) Shop Stock A/c (iii) Hire Purchase Debtors' A/c and (iv) Hire Purchase Adjustment A/c in the books of the trader from the following details:
Stock in Godown on 01-04-2011: ₹6,00,000
Stock in Godown on 31-03-2012: ₹5,00,000
Overdue Instalments on 01-04-2011: ₹40,000
Overdue Instalments on 31-03-2012: ₹60,000
Goods with Customer on Hire Purchase on 01-04-2011: ₹7,20,000
Purchases: ₹12,92,000
Instalments received: ₹12,00,000
Q3(b)Share capital calls, bonus shares issuance
8 marks hard
The following notes pertain to Brite Ltd.'s Balance Sheet as on 31st March, 2012: Share Capital - Authorised: 20 crore shares of ₹10 each (₹20,000 lakh); Issued and Subscribed: 10 crore Equity Shares of ₹10 each (₹10,000 lakh) and 2 crore 11% Cumulative Preference Shares of ₹10 each (₹2,000 lakh); Called and paid up: 10 crore Equity Shares of ₹10 each @ ₹8 per share called and paid up (₹8,000 lakh) and 2 crore 11% Cumulative Preference Shares of ₹10 each fully called and paid up (₹2,000 lakh); Reserves and Surplus: Capital Reserve (₹485 lakh), Capital Redemption Reserve (₹1,000 lakh), Securities Premium (₹2,000 lakh), General Reserve (₹1,040 lakh), Surplus/credit balance of P&L Account (₹273 lakh).
On 2nd April, 2012 the company made the final call on equity shares @ ₹2 per share. The entire money was received in the month of April, 2012.
On 1st June, 2012 the company decided to issue to equity shareholders bonus shares at the rate of 2 shares for every 5 shares held and for this purpose, it decided to utilize the capital reserves to the maximum possible extent.
Pass journal entries for all the above mentioned transactions. Also prepare the notes on Share Capital and Reserves and Surplus relevant to the Balance Sheet of the company immediately after the issue of bonus shares.
Q4Missing figures reconstruction, financial ratios analysis
16 marks very hard
Following information of the Final Accounts of Kumaran Ltd. are missing as shown below: [Trading and Profit & Loss A/c with missing figures for Sales, Closing Stock, Gross Profit, Provision for Taxation, Net Profit, Proposed Dividends, Transfer to General Reserves, and Balance Transfer to Balance Sheet]. [Balance Sheet with missing figures for Other Fixed Assets, Stock in Trade, Sundry Debtors, General Reserves Balance, Proposed addition, P&L Appropriation A/c, Debentures, Current Liabilities, and Total amounts].
You are required to provide the missing figures with the help of following information: (i) Current Ratio 2:1. (ii) Closing stock is 25% of sales. (iii) Proposed dividends are 40% of the paid up capital. (iv) Gross profit ratio is 60%. (v) Ratio of Current Liabilities to Debentures is 2:1. (vi) Transfer to General Reserves is equal to proposed dividends. (vii) Profit carried forward are 10% of the proposed dividends. (viii) Provision for taxation is 50% of profits. (ix) Balance to the credit of General Reserves at the beginning of the year is twice the amount transferred to that account from the current profits.
Q5(a)Investment accounting, bonus shares, lower of cost or market
8 marks hard
On 01-04-2011, Mr. T. Shekharan purchased 5,000 equity shares of ₹100 each in V. Ltd. @₹120 each from a broker, who charged 2% brokerage. He incurred 50 paisa per ₹100 as cost of shares transfer stamps. On 31-01-2012 bonus was declared in the ratio of 1:2. Before and after the record date of bonus shares, the shares were quoted at ₹175 per share and ₹90 per share respectively. On 31-03-2012 Mr. T. Shekharan sold bonus shares to a broker, who charged 2% brokerage. Show the Investment Account in the books of T. Shekharan, who held the shares as Current Assets and closing value of investments shall be made at cost or market value whichever is lower.
Q5(b)Insurance claim calculation, average clause
8 marks hard
On 29th August, 2012 the godown of a trader caught fire and a large part of the stock of goods was destroyed. However, goods costing ₹1,08,000 could be salvaged incurring fire fighting expenses amounting to ₹4,700. The trader provides you the following additional information:
Cost of stock on 1st April, 2011: ₹7,10,500
Cost of stock on 31st March, 2012: ₹7,90,100
Purchases during the year ended 31st March, 2012: ₹56,79,600
Purchases from 1st April, 2012 to the date of fire: ₹33,10,700
Cost of goods distributed as samples for advertising from 1st April, 2012 to the date of fire: ₹41,000
Cost of goods withdrawn by trader for personal use from 1st April, 2012 to the date of fire: ₹2,000
Sales for the year ended 31st March, 2012: ₹80,00,000
Sales from 1st April, 2012 to the date of fire: ₹45,36,000
The insurance company also admitted firefighting expenses. The trader had taken the fire insurance policy for ₹9,00,000 with an average clause. Calculate the amount of the claim that will be admitted by the insurance company.
Q6Partnership retirement, revaluation, capital accounts
16 marks very hard
Atul, Balbir and Chatur were carrying on a business in partnership sharing profits in the ratio of 5:3:2 respectively. On 31st March, 2012 their Balance Sheet stood as follows:
Liabilities: Atul's Capital (₹6,25,000), Balbir's Capital (₹3,75,000), Chatur's Capital (₹2,50,000), General Reserve (₹1,00,000), Trade Creditors (₹2,10,000).
Assets: Goodwill (₹80,000), Land and Buildings (₹7,00,000), Furniture (₹1,65,000), Stock (₹2,86,000), Trade Debtors (₹1,80,000), Less: Provision for Bad Debts (₹3,600), Cash at Bank (₹1,52,600).
Atul retired on the above mentioned date and partners agreed that: (i) The current value of goodwill be taken to be equal to the book value of the asset. (ii) Land and Buildings be considered worth ₹9,00,000. (iii) The provision for bad debts on trade debtors be raised to 5%. (iv) Provision be made for compensation of ₹5,000 to an ex-employee. (v) Half of the amount due to Atul be paid immediately in cash and the balance be treated as 10% loan, repayable within 3 years.
In order to facilitate cash payment to Atul, Balbir and Chatur brought in ₹3,00,000 in the ratio of 3:2 respectively.
Prepare Revaluation Account, the Capital Accounts of all the partners and Bank Account. Also draw the Initial Balance Sheet of Balbir and Chatur, immediately after Atul's retirement.
Q7(a)Average due date, interest calculation
4 marks medium
T owes to K the following amounts: ₹7,000 due on 15th March, 2012; ₹12,000 due on 5th April, 2012; ₹30,000 due on 25th April, 2012; ₹20,000 due on 11th June, 2012. He desires to make the full payment on 30th June, 2012 along with interest @ 10% per annum from the average due date. Find out the average due date and the amount of interest. Amount of interest may be rounded off to the nearest rupee.
Q7(b)Stock valuation, accounting principles
4 marks medium
From the following information ascertain the value of stock as on 31st March, 2012:
Stock as on 01-04-2011: ₹28,500
Purchases: ₹1,52,500
Manufacturing Expenses: ₹30,000
Selling Expenses: ₹12,100
Administration Expenses: ₹6,000
Financial Expenses: ₹4,300
Sales: ₹2,49,000
At the time of valuing stock as on 31st March, 2012 a sum of ₹3,500 was written off on a particular item, which was originally purchased for ₹10,000 and was sold during the year for ₹9,000. Barring the transaction relating to this item, the gross profit earned during the year was 20% on sales.
Q7(c)Fixed asset capitalization, construction cost allocation
4 marks medium
PQR Ltd. constructed a fixed asset and incurred the following expenses on its construction: Materials (₹16,00,000), Direct Expenses (₹3,00,000), Total Direct Labour (₹6,00,000; 1/15th of the total labour time was chargeable to the construction), Total Office & Administrative Expenses (₹9,00,000; 4% is chargeable to the construction), Depreciation on assets used for the construction of this asset (₹15,000). Calculate the cost of the fixed asset.
Q7(d)Accounting Standard 2, inventory valuation principles
4 marks medium
In determining the cost of inventories, it is appropriate to exclude certain costs and recognize them as expenses in the period in which they are incurred. Provide example of such costs as per AS-2: Valuation of Inventories.
Q7(e)Accounting software, limitations and disadvantages
4 marks medium
Write any four disadvantages of Pre-packaged Accounting Software.