Q1(a)Plant depreciation, WDV method
5 marks medium
In the books of Optic Fiber Ltd., plant and machinery stood at ₹5,32,000 on 1.4.2013. However on scrutiny it was found that machinery worth ₹1,20,000 was included in the purchases on 1.6.2013. On 30.6.2013 the company disposed a machine having book value of ₹1,89,000 on 1.4.2013 at ₹1,75,000 in part exchange of a new machine costing ₹2,56,000. The company charges depreciation @ 20% WDV on plant and machinery. Calculate: (i) Depreciation to be charged to P/L (ii) Book value of Plant and Machinery A/c as on 31.3.2014 (iii) Loss on exchange of machinery.
Q1(b)Revenue recognition AS 9, accruals concept
5 marks medium
Sarita Publications publishes a monthly magazine on the 15th of every month. It sells advertising space in the magazine to advertisers on the terms of 80% sale value payable in advance, and the balance within 30 days of the release of the publication. The sale of space for the March 2014 issue was made in February 2014. The magazine was published on its scheduled date. It received ₹2,40,000 on 10.3.2014 and ₹60,000 on 10.4.2014 for the March 2014 issue. Discuss in the context of AS 9 the amount of revenue to be recognized and the treatment of the amount received from advertisers for the year ending 31.3.2014. What will be the treatment if the publication is delayed till 2.4.2014?
Q1(c)Inventory costing, normal and abnormal wastage AS 2
5 marks medium
Capital Cables Ltd., has a normal wastage of 4% in the production process. During the year 2013-14 the company used 12,000 MT of raw material costing ₹150 per MT. At the end of the year 630 MT of wastage was in stock. The accountant wants to know how this wastage is to be treated in the books. Explain in the context of AS 2 the treatment of normal loss and abnormal loss and also find out the amount of abnormal loss if any.
Q1(d)Investment re-classification, AS 13
5 marks medium
Blue-chip Equity Investments Ltd., wants to re-classify its investments in accordance with AS 13. (i) Long term investments in Company A, costing ₹8.5 lakhs are to be re-classified as current. The company had reduced the value of these investments to ₹6.5 lakhs to recognize a permanent decline in value. The fair value on date of transfer is ₹6.8 lakhs. (ii) Long term investments in Company B, costing ₹7 lakhs are to be re-classified as current. The fair value on date of transfer is ₹8 lakhs and book value is ₹7 lakhs. (iii) Current investment in Company C, costing ₹10 lakhs are to be re-classified as long term as the company wants to retain them. The market value on date of transfer is ₹12 lakhs. (iv) Current investment in Company D, costing ₹15 lakhs are to be re-classified as long term. The market value on date of transfer is ₹14 lakhs. Pass necessary journal entries and explain the accounting treatment.
Q2Non-profit organization accounting, Receipts & Payments, Bal
16 marks very hard
The following information relates to Country Sports Club for the year ended 31.3.2014. You are required to prepare the Receipts and Payments Account for the year ended 31.3.2014 and Balance Sheet as on that date. [Income: Subscriptions ₹8,40,000; Receipts for annual sports ₹3,25,000 (less expenses ₹2,75,000 = ₹50,000 net); Entrance fees ₹1,80,000; Interest on 10% government bond ₹12,000; Rent on hire of club ground ₹84,000; Profit on sale of sports material ₹10,500; Sale of old newspaper ₹3,500. Expenditure: Salaries ₹3,36,000; Repairs and maintenance ₹88,000; Ground upkeep ₹1,66,500; Electricity charges ₹82,600; Sports material used ₹1,48,000; Printing and stationery ₹42,200; Groundsman wages ₹80,000; Depreciation ₹1,36,000; Prizes distributed (net) ₹4,000; Surplus carried to capital fund ₹96,700.] Additional information includes balances of fixed assets, stock, investments, subscriptions, debtors, creditors, and other items as provided.
Q3(a)Cash flow statement preparation
6 marks medium
Prepare Cash flow for Gamma Ltd., for the year ending 31.3.2014 from the following information: (1) Sales for the year amounted to ₹135 crores out of which 60% was cash sales. (2) Purchases for the year amounted to ₹55 crores out of which credit purchase was 80%. (3) Administrative and selling expenses amounted to ₹18 crores and salary paid amounted to ₹22 crores. (4) The company redeemed debentures of ₹20 crores at a premium of 10%. Debenture holders were issued equity shares of ₹15 crores towards redemption and the balance was paid in cash. Debenture interest paid during the year was ₹1.5 crores. (5) Dividend paid during the year amounted to ₹10 crores. Dividend distribution tax @ 17% was also paid. (6) Investment costing ₹12 crores were sold at a profit of ₹2.4 crores. (7) ₹8 crores was paid towards income tax during the year. (8) A new plant costing ₹21 crores was purchased in part exchange of an old plant. The book value of the old plant was ₹12 crores but the vendor took over the old plant at a value of ₹10 crores only. The balance was paid in cash to the vendor. [Additional: Debtors ₹50 crores (1.4.2013), ₹45 crores (31.3.2014); Creditors ₹21 crores (1.4.2013), ₹23 crores (31.3.2014); Bank ₹6 crores (1.4.2013)]
Q3(b)Balance sheet preparation, Schedule VI Companies Act
10 marks hard
From the following particulars furnished by Elegant Ltd., prepare the Balance Sheet as on 31st March 2014 as required by part I, revised Schedule VI of the Companies Act. [Given: Equity Share Capital ₹50,00,000 (₹100 each); Call in Arrears ₹5,000; Land & Building ₹27,50,000; Plant & Machinery ₹26,25,000; Furniture ₹2,50,000; General Reserve ₹10,50,000; Loan from State Financial Corporation ₹7,50,000; Raw Materials ₹2,50,000; Finished Goods ₹10,00,000; Provision for Taxation ₹3,40,000; Sundry Debtors ₹10,00,000; Advances ₹2,13,500; Proposed Dividend ₹3,00,000; Profit & Loss Account ₹5,00,000; Cash in Hand ₹1,50,000; Cash at Bank ₹12,35,000; Preliminary expenses ₹66,500; Unsecured Loan ₹6,05,000; Sundry Creditors ₹10,00,000.] Additional information: Preliminary expenses included ₹25,000 audit fees and ₹3,500 out of pocket expenses; 10,000 equity shares issued for non-cash consideration; Debtors of ₹2,60,000 due for more than 6 months; Cost of assets: Building ₹30,00,000, Plant & Machinery ₹35,00,000, Furniture ₹3,12,500; SFC Loan includes ₹37,500 interest accrued but not due, secured by plant hypothecation; Bank balance includes ₹10,000 with non-scheduled bank.
Q4(a)Internal reconstruction, capital reduction, journal entries
12 marks very hard
The Balance Sheet of Vaibhav Ltd. as on 31st March 2014 is as follows: [Liabilities: Equity Shares (₹100 each) ₹2,00,00,000; 6% Cumulative Preference Shares (₹100 each) ₹1,00,00,000; 5% Debentures (₹100 each) ₹80,00,000; Sundry Creditors ₹1,00,00,000; Provision for taxation ₹2,00,000; P&L Nc ₹12,00,000. Assets: Fixed Assets ₹2,50,00,000; Investments (Market Value ₹19,00,000) ₹20,00,000; Current Assets ₹2,00,00,000.] A scheme of Internal Reconstruction is sanctioned with the following adjustments: (i) All existing equity shares are reduced to ₹40 each. (ii) All preference shares are reduced to ₹60 each. (iii) Debenture interest rate increased to 6%; debenture holders exchange debentures of ₹100 each for fresh debentures of ₹70 each. (iv) Fixed assets written down by 20%. (v) Current assets revalued at ₹90,00,000. (vi) Investments brought to market value. (vii) A creditor owed ₹40,00,000 forgoes 40% of claim and is allotted 60,000 equity shares of ₹40 each in full settlement. (viii) Taxation liability settled at ₹3,00,000. (ix) Debit balance of Profit & Loss A/c to be written off. Pass journal entries and show the Balance Sheet after giving effect to the above adjustments.
Q4(b)Creditors ledger adjustment account
4 marks medium
From the following particulars, prepare the Creditors' Ledger Adjustment Account as would appear in the General Ledger of Mr. Sathish for the month of March 2014: [1 March: Purchase from Mr. Akash ₹7,500; 3 March: Paid ₹3,000 after adjusting the initial advance in full to Mr. Akash; 10 March: Paid ₹2,500 to Mr. Dev towards purchases made in February in full; 12 March: Paid advance to Mr. Giridhar ₹6,000; 14 March: Purchased goods from Mr. Akash ₹6,200; 20 March: Returned goods worth ₹1,000 to Mr. Akash; 24 March: Settled the balance due to Mr. Akash at a discount of 5%; 26 March: Goods purchased from Mr. Giridhar against the advance paid already; 29 March: Purchased from Mr. Nathan ₹3,500; 30 March: Goods returned to Mr. Prem ₹1,200 (originally purchased for cash in February 2014)].
Q5(a)Insurance claim calculation, stock valuation
8 marks hard
A fire occurred in the premises of M/s Kailash & Co. on 30th September 2013. From the following particulars relating to the period from 1st April 2013 to 30th September 2013, you are required to ascertain the amount of claim to be filed with the Insurance Company for the loss of stock. The company has taken an Insurance policy for ₹75,000 which is subject to average clause. The value of goods salvaged was estimated at ₹27,000. The average rate of Gross Profit was 20% throughout the period. [Given: Opening Stock not specified; Purchases made ₹2,40,000; Wages paid (including ₹5,000 for machine installation); Goods taken by proprietor (sale value); Cost of goods sent to consignee on 20th September 2013, lying unsold with them; Free samples distributed - Cost.]
Q5(b)Investment account, bonus shares, rights issue
8 marks hard
On 1st April 2014, Hasan has 20,000 equity shares of Vayu Ltd., at book value of ₹20 per share (face value ₹10 each). He provides the following information: (i) On 10th June 2014, he purchased another 5,000 shares in Vayu Ltd., @ ₹15 per share. (ii) On 1st August 2014, Vayu Ltd., issued one bonus share for every five shares held by the shareholders. (iii) On 31st August 2014, the directors of Vayu Ltd., announced a rights issue which entitle the shareholders to subscribe two shares for every six shares held @ ₹15 per share. The shareholders can transfer their rights in full or in part. Hasan sold 1/4th of his right shares holding to Harsh for a consideration of ₹3 per share and subscribed the rest on 31st October 2014. Prepare Investment Account in the books of Hasan as on 31st October 2014.
Q6Partnership retirement, goodwill, capital accounts
16 marks very hard
Anuj, Ayush and Piyush are in partnership sharing profits and losses in the ratio 2:2:1. Their Balance Sheet as on 31.3.2014 is as follows: [Capital accounts: Anuj ₹3,75,000 (total ₹7,87,000); Ayush ₹2,80,000; Piyush ₹2,25,000 (total ₹8,80,000); General Reserve ₹1,88,000; Creditors ₹2,16,000; Current assets: Stock ₹1,03,000, Debtors ₹1,56,000, Bank FD ₹2,25,000, Bank balance ₹13,000.] Anuj decided to retire with effect from 1.4.2014. The remaining partners agreed to share profits and losses equally in future. The following adjustments were agreed upon: (i) Goodwill valued at 1 year purchase of average profits of preceding 3 years. Average profits: 31.3.2014 ₹3,30,000 (draft); 31.3.2013 ₹2,32,000; 31.3.2012 ₹2,20,000. Partners decided not to raise goodwill account. (ii) Assets revalued: Plant depreciated 10%; Creditors omitted ₹10,000; Stock write-off ₹6,000; Provision for doubtful debts @ 5% of debtors; Interest accrued on FD ₹9,000 omitted. Adjustments made from draft profit before goodwill calculation. (iii) Anuj to take over bank FD including interest accrued; balance to remain as 8% p.a. loan. (iv) Ayush and Piyush to bring cash to make capital proportionate and maintain bank balance of ₹1,50,000. Prepare: (1) Capital accounts of partners as on 1.4.2014 giving effect to adjustments. (2) Balance Sheet as on 1.4.2014 after Anuj's retirement.
Q7(a)Asset capitalization AS 10, repairs vs. capital expenditure
5 marks medium
From the following information state the amount to be capitalized as per AS 10. Give the explanations for your answers: ₹5 lakhs as routine repairs and ₹1 lakh on partial replacement of a part of a machine. ₹10 lakhs on replacement of part of a machinery which will improve the efficiency of a machine.
Q7(b)Accounting information systems
4 marks medium
What are the advantages of customized accounting software?
Q7(c)Hire purchase vs. installment purchase
4 marks medium
What are the differences between Hire Purchase and Installment System?
Q7(d)Current account by product method, interest calculation
4 marks medium
From the following particulars prepare a current account, as sent by Mr. Ram to Mr. Siva as on 31st October 2014 by means of product method charging interest @ 5% p.a.: [1st July: Balance due from Siva ₹750; 15th August: Sold goods to Siva ₹1,250; 20th August: Goods returned by Siva ₹200; 22nd August: Siva paid by cheque ₹800; 15th October: Received cash from Siva ₹500.]
Q7(e)Average due date, interest calculation
4 marks medium
Kishanlal has made the following sales to Babulal. He allows a credit period of 10 days beyond which he charges interest @ 12% per annum. [Sales dates and amounts: 20-05-14 ₹12,000; 18-07-14 ₹19,000; 02-08-14 ₹16,500; 28-08-14 ₹9,500; 09-09-14 ₹15,500; 22-09-14 ₹13,500.] Babulal wants to settle his accounts on 30-9-2014. Calculate the interest payable by him using Average Due Date (ADD). If Babulal wants to save interest of ₹588, how many days before 30.9.2014 does he have to make payment? Also find the payment date in this case.