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Past papers › Audit & Ethics › May 2020

CA Inter Audit & Ethics — Mock Test Paper (MTP) — May 2020

This page contains all 2 questions from the CA Inter Auditing & Ethics Mock Test Paper (MTP) for the May 2020 attempt cycle, sourced from VSI Jaipur.

Q1Operating lease rent recognition, software development costs
20 marks very hard
Question No. 1 is compulsory. Answer all four parts.
Q2Amalgamation in nature of merger, pooling of interests metho
20 marks very hard
The following were summarized Balance sheets of Robert Ltd. and Diamond Ltd. as at 31.03.2020: Liabilities (Rs. in lakhs) — Robert Ltd. / Diamond Ltd.: Equity Share Capital (fully paid shares of Rs. 10 each): 22,500 / 9,000 Securities Premium: 4,500 / — Foreign Project Reserve: — / 465 General Reserve: 14,250 / 4,800 Profit and Loss Account: 4,305 / 1,237.5 12% Debentures: — / 1,500 Trade payables: 1,800 / 694.5 Provisions: 2,745 / 1,053 Total: 50,100 / 18,750 Assets (Rs. in lakhs) — Robert Ltd. / Diamond Ltd.: Land and Buildings: 9,000 / — Plant and Machinery: 21,000 / 7,500 Furniture, Fixtures and Fittings: 3,456 / 2,550 Inventory: 11,793 / 6,061.5 Trade receivables: 3,180 / 1,650 Cash at Bank: 1,671 / 913.5 Cost of Issue of Debentures: — / 75 Total: 50,100 / 18,750 All the bills receivable held by Diamond Ltd. were Robert Ltd.'s acceptances. On 1st April 2020, Robert Ltd. took over Diamond Ltd. in an amalgamation in the nature of merger. It was agreed that in discharge of consideration for the business, Robert Ltd. would allot three fully paid equity shares of Rs. 10 each at par for every two shares held in Diamond Ltd. It was also agreed that 12% debentures in Diamond Ltd. would be converted into 13% debentures in Robert Ltd. of the same amount and denomination. Trade Payables detail (Rs. in lakhs) — Robert Ltd. / Diamond Ltd.: Creditors: 1,620 / 694.5; Bills Payable: 180 / —; Total: 1,800 / 694.5 Trade receivables detail (Rs. in lakhs) — Robert Ltd. / Diamond Ltd.: Debtors: 3,180 / 1,530; Bills Receivables: — / 120; Total: 3,180 / 1,650 Expenses of amalgamation amounting to Rs. 1.5 lakhs were borne by Robert Ltd. You are required to: (i) Pass journal entries in the books of Robert Ltd. and (ii) Prepare Robert Ltd.'s Balance Sheet immediately after the merger considering that the cost of issue of debentures shown in the balance sheet of Diamond Ltd. is not transferred to Robert Ltd.