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Past papers/ Audit & Ethics/ July 2021
Paper 26 Qs
Question Paper · July 2021

CA Inter Audit & Ethics

This page contains all 26 questions from the CA Inter Auditing & Ethics Question Paper for the July 2021 attempt cycle, sourced from CATS, VSI Jaipur.

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Q.a 05 marks medium AS-7 Construction Contracts, Revenue Recognition ⚡ Try this Q →
Sub-Contract Costs for work executed – ₹7 Lakhs, Advances paid to Sub-Contractors – ₹4 Lakhs. Further Cost estimated to be incurred to complete the contract – ₹35 Lakhs. You are required to compute the Percentage of Completion, the Contract Revenue and Cost to be recognized as per AS-7.
CTTP

Worked Solution

✓ Verified

Note on Missing Data: The question as stated does not provide the Total Contract Price (Contract Revenue). Without this figure, Contract Revenue to be recognised cannot be computed numerically. However, all steps of the methodology are demonstrated below, and the Percentage of Completion and Contract Cost to be recognised are fully computed from the given data.

Treatment of Advances under AS-7 (Accounting Standard 7 – Construction Contracts):
As per AS-7, when computing the stage of completion using the cost-to-cost method, costs incurred to date should relate only to work performed. Advances paid to sub-contractors represent a prepayment for future work and are excluded from the numerator of the percentage of completion formula.

Step 1 – Costs Incurred to Date (for work performed):
Only Sub-Contract Costs for work executed are considered = ₹7 Lakhs.
Advances paid to Sub-Contractors (₹4 Lakhs) are excluded as they do not reflect work performed.

Step 2 – Total Estimated Contract Cost:
Costs incurred to date (work performed): ₹7 Lakhs
Further costs estimated to complete: ₹35 Lakhs
Total Estimated Contract Cost = ₹7 + ₹35 = ₹42 Lakhs

Step 3 – Percentage of Completion:
Percentage of Completion = (Costs incurred for work performed ÷ Total Estimated Contract Cost) × 100
= (7 ÷ 42) × 100 = 16.67%

Step 4 – Contract Revenue to be Recognised:
As per AS-7, Contract Revenue to be recognised = Total Contract Price × Percentage of Completion.
Since the Total Contract Price is not provided in the question, let the Total Contract Price = ₹X Lakhs.
Contract Revenue to be recognised = ₹X × 16.67%

Step 5 – Contract Cost to be Recognised:
As per AS-7, Contract Costs to be recognised in the period = Total Estimated Cost × Percentage of Completion
= ₹42 Lakhs × 16.67% = ₹7 Lakhs
(This logically equals costs incurred for work performed to date, confirming internal consistency.)

Summary:
Percentage of Completion = 16.67%
Contract Cost recognised = ₹7 Lakhs
Contract Revenue recognised = 16.67% of Total Contract Price (requires contract price to compute).

Key Principle: Advances paid are excluded from the stage of completion calculation under AS-7, as including them would overstate the degree of completion and prematurely recognise revenue.

Accounting Standard 7 (AS-7) – Construction Contracts, issued by ICAIParagraph 25 of AS-7 – Stage of Completion (Cost-to-Cost Method)Paragraph 26 of AS-7 – Exclusion of costs not reflecting work performed (advances to sub-contractors)Paragraph 22 of AS-7 – Recognition of Contract Revenue and Costs
PLAN

Write it like this

Time target 9 min

1The skeleton

- Lead with the AS-7 exclusion rule for advances — state upfront that advances paid to sub-contractors are excluded from costs incurred to date because they represent prepayment for future work, not work performed; examiners are specifically checking if you know THIS distinction.
- Build your cost table in two clear lines — Costs for work executed: ₹7L; Further costs to complete: ₹35L; Total Estimated Contract Cost: ₹42L — laying it out as a mini-table signals you know the formula inputs and grabs partial marks even if your percentage is wrong.
- Show the percentage formula explicitly — write '(Costs incurred for work performed ÷ Total Estimated Contract Cost) × 100 = (7 ÷ 42) × 100 = 16.67%' on its own line; examiners award a method mark here, so never skip the formula.
- Call out the missing contract price instead of leaving a blank — write 'Total Contract Price not given; let it be ₹X' and then express Revenue = 16.67% of X; this shows examiner you know the next step and protects you from losing the revenue recognition mark entirely.
- End with Contract Cost recognised = ₹7L and note the internal consistency — stating this equals costs incurred to date shows you understand the cost-to-cost method and closes the answer professionally, which late-checkers reward.

2Examiner-rewarded phrases

“costs incurred to date that relate to work performed”“stage of completion determined using the cost-to-cost method as per AS-7”“advances paid to sub-contractors do not reflect work performed and are excluded from the computation”

3Common trap

Don't fall for this

Heads up — almost everyone adds the ₹4L advance into the numerator (costs incurred = ₹11L) and gets 23.91%, which is wrong and kills 2-3 marks in one shot. AS-7 is crystal clear: only costs for work already executed go in the numerator, not prepayments.

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Q.c 05 marks hard AS-4 Events After Balance Sheet Date ⚡ Try this Q →
Case: Surya Limited follows the financial year from April to March. It has provided the following information.
Keeping in view the provisions of AS-4, you are required to state with reasons whether the above events are to be treated as Contingencies, Adjusting Events or Non-Adjusting Events occurring after Balance Sheet date.
CTTP

Worked Solution

✓ Verified

Framework under AS-4 (Events After the Balance Sheet Date):

AS-4 (Revised) issued by ICAI classifies post-balance sheet events into: (a) Contingencies — uncertain conditions existing at the balance sheet date whose outcome depends on future events; (b) Adjusting Events — events after the balance sheet date that provide additional evidence of conditions existing at that date, requiring adjustment to financial statements; and (c) Non-Adjusting Events — events indicating conditions that arose after the balance sheet date, requiring only disclosure (no adjustment). The balance sheet date for Surya Limited is 31st March 2021.

(i) Suit filed on 5th April 2021 claiming ₹5 lakhs:

This is a Non-Adjusting Event occurring after the balance sheet date. The legal claim (suit) came into existence on 5th April 2021 — i.e., after the balance sheet date. No legal obligation or liability existed as at 31st March 2021 arising from a pending suit. The underlying event (the advertisement) may have occurred before 31st March, but the contingent liability crystallised only upon filing of the suit. Since the condition did not exist at the balance sheet date, no adjustment is required. However, disclosure should be made in the financial statements as it is a material event. The possible liability of ₹5 lakhs should be disclosed by way of a note.

(ii) Proposal to sell property in March 2021; offer registered on 15th April 2021:

This is a Non-Adjusting Event. As at 31st March 2021, only a proposal was sent — the sale had not been concluded and title had not been transferred. Under AS-4, profits or gains arising after the balance sheet date should not be anticipated or recognised in the financial statements. The registration (legal completion of sale) occurred on 15th April 2021, after the balance sheet date, indicating a new condition arising after 31st March 2021. Therefore, the profit of ₹15 lakhs (₹45 lakhs – ₹30 lakhs) cannot be recognised in the financial year 2020-21. The event should be disclosed in the notes to accounts as a significant post-balance sheet event.

(iii) Business acquisition terms finalised by March 2021; financial resources arranged in April 2021:

This is a Non-Adjusting Event. While the terms and conditions were decided before 31st March 2021, the acquisition was not complete — the financial resources (₹50 lakhs) were arranged only in April 2021. The acquisition of business is a significant strategic event that does not reflect a condition existing at the balance sheet date (no funds were deployed, no assets acquired as at 31st March 2021). No adjustment is warranted in the 2020-21 financial statements. However, since this is a material event that could influence the decisions of users of the financial statements, it must be disclosed by way of notes, describing the nature and financial effect (₹50 lakhs investment committed).

(iv) Theft of ₹4 lakhs by cashier in March 2021, detected after Directors' approval of financial statements:

This is an Adjusting Event. The theft occurred in March 2021, i.e., before the balance sheet date of 31st March 2021. It represents a condition that existed at the balance sheet date — cash was misappropriated and the asset (cash) was already lost before the year-end. The fact that it was detected only after the Directors approved the financial statements does not change the underlying reality. Under AS-4, if an event after the balance sheet date provides evidence of a condition existing at the balance sheet date, the financial statements should be adjusted. Accordingly, the loss of ₹4 lakhs should be reflected in the financial statements for the year ended 31st March 2021. If the financial statements have already been approved, the Directors should consider whether it is necessary to revise and reissue the financial statements given the materiality of the amount.

AS-4 (Revised) — Contingencies and Events Occurring After the Balance Sheet Date, issued by ICAI
PLAN

Write it like this

Time target 9 min

1The skeleton

- Start each sub-part with a one-line verdict — write 'This is an Adjusting/Non-Adjusting Event' in the very first sentence, because examiners tick the classification before reading your reason.
- State the trigger date vs. balance sheet date explicitly — say '31st March 2021 is the balance sheet date; the event occurred on [date]' so the examiner sees your logic without hunting for it.
- Give the WHY in one crisp sentence — link the event to whether the condition existed AT the balance sheet date or arose AFTER it; this is the single test AS-4 applies and examiners want to see you apply it, not just state it.
- End each sub-part with the accounting consequence — 'no adjustment required, disclosure by way of notes' or 'financial statements should be adjusted to reflect the loss'; this is where the second half of your marks sit.
- Handle the theft (iv) differently — flag that detection after Directors' approval doesn't change the underlying reality, and mention whether the statements need revision; this nuance separates a 4/5 from a 5/5.

2Examiner-rewarded phrases

“the condition existed/did not exist at the balance sheet date”“no adjustment is required; however, disclosure should be made by way of notes to accounts”“provides additional evidence of conditions existing at the balance sheet date”

3Common trap

Don't fall for this

Most students mix up Non-Adjusting Events with Contingencies — they call the suit filing a 'Contingency' because it involves uncertainty, but AS-4 Contingencies are uncertain conditions existing AT the balance sheet date; if the suit was filed after 31st March, it's Non-Adjusting, full stop. Don't let the word 'uncertain' trick you into writing Contingency.

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Q.d 05 marks hard Leases / Service Arrangements ⚡ Try this Q →
Case: Khuahi Limited enter into an agreement with Mr. Happy for running a business for a fixed amount payable to him for every year. The contract states that the day-to-day management of the business will be handled by Mr. Happy, while all financial and operating policy decisions are taken by the Board of Directors of the Company. Mr. Happy does not own any voting power in Khuahi Limited.
Comment on the accounting treatment and recognition of this transaction.
CTTP

Worked Solution

✓ Verified

Nature of the Arrangement — Service Contract vs. Lease

The arrangement between Khuahi Limited and Mr. Happy must be examined to determine whether it constitutes a lease under AS 19 (Leases) or a service/management contract.

Key Features of the Arrangement:

(a) Khuahi Limited pays Mr. Happy a fixed annual amount for running the business.
(b) Day-to-day management is handled by Mr. Happy.
(c) All financial and operating policy decisions are taken by the Board of Directors of Khuahi Limited — i.e., Khuahi Limited retains strategic control.
(d) Mr. Happy holds no voting power in Khuahi Limited and is therefore not an owner.

Whether this is a Lease under AS 19:

As per AS 19 (Leases), a lease is an agreement whereby the lessor conveys to the lessee the right to use an asset for an agreed period in return for a payment or series of payments. For an arrangement to contain a lease (as clarified by Appendix A of AS 19, based on IFRIC 4), the following conditions must both be satisfied:
1. Fulfillment of the arrangement is dependent on the use of a specific asset.
2. The arrangement conveys the right to use that asset.

In the given case:
- There is no specific asset being transferred to or used exclusively by Mr. Happy.
- Khuahi Limited does not receive the right to use any asset belonging to Mr. Happy — rather, Mr. Happy operates Khuahi Limited's own business.
- The Board of Khuahi Limited retains control over all key financial and operating decisions, meaning the risks and rewards of the business remain with Khuahi Limited.
- Mr. Happy merely provides operational management services under the direction of the Board.

Therefore, this arrangement does not qualify as a lease under AS 19.

Accounting Treatment:

Since the arrangement is a service/management contract, the following accounting treatment applies:

1. The fixed annual amount payable to Mr. Happy should be recognized as a management fee expense (or service fee expense) in the Statement of Profit and Loss for the relevant accounting period on an accrual basis as per AS 1 (Disclosure of Accounting Policies).

2. No right-of-use asset or lease liability needs to be recognised, as this is not a lease arrangement.

3. If any amount remains unpaid at the year end, it should be shown as a current liability (accrued expenses) in the Balance Sheet.

4. Since Mr. Happy has no voting power in Khuahi Limited, there is no related party relationship that would otherwise require additional disclosures under AS 18 (Related Party Disclosures) — unless other conditions triggering relatedness exist.

Conclusion: The transaction between Khuahi Limited and Mr. Happy is in substance a service/management contract. The fixed annual payment to Mr. Happy must be expensed in the P&L account as management fees. It does not constitute a lease under AS 19, as there is no transfer of the right to use any specific asset, and strategic control of the business remains with Khuahi Limited's Board.

AS 19 - Leases (Appendix A - Determining whether an Arrangement contains a Lease)AS 1 - Disclosure of Accounting Policies (Accrual Basis)AS 18 - Related Party Disclosures
PLAN

Write it like this

Time target 9 min

1The skeleton

- Open with the diagnostic test — immediately state you're applying Appendix A of AS 19 (IFRIC 4) to check if the arrangement contains a lease; examiners award the first mark just for naming the right test.
- Run the two-condition checklist explicitly — write out both conditions (specific asset + right to use) as numbered points, then knock each one down with a fact from the case; this structure is what converts 'I know the concept' into full marks.
- Use the Board control fact as your knockout punch — point out that financial and operating policy decisions stay with Khuahi's Board; this is the single fact that kills the lease argument, so make it a standalone sentence, not a buried clause.
- State the conclusion in one crisp line before jumping to accounting treatment — 'This arrangement does not qualify as a lease under AS 19'; examiners scan for this conclusion and it acts as a bridge that earns the structure mark.
- Present accounting treatment as a numbered list — expense in P&L on accrual basis (cite AS 1), no ROU asset/liability, unpaid amount as current liability; three distinct points show you know the full treatment, not just one part of it.
- End with a one-line substance-over-form wrap-up — 'In substance, this is a service/management contract'; ICAI loves when you echo the accounting principle, it signals you understood the why, not just the what.

2Examiner-rewarded phrases

“the arrangement does not convey the right to use a specific asset”“fulfillment of the arrangement is not dependent on the use of a specific asset”“the fixed annual payment shall be recognised as an expense in the Statement of Profit and Loss on accrual basis”

3Common trap

Don't fall for this

Most students jump straight to 'it's not a lease' without actually running the Appendix A two-condition test — and that's where 2 marks silently disappear. The examiner isn't just checking your conclusion; they want to see you test both conditions explicitly, so if you skip the framework and go straight to the answer, you'll lose structure marks even if you're completely right.

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Q.1 14 marks very hard Auditing and Assurance - True/False Statements ⚡ Try this Q →
State with reasons whether the following statements are correct or incorrect. (Answer any seven)
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Q.1 05 marks medium Contract Costing ⚡ Try this Q →
The following data is provided for M/s. Raj Construction Co. (i) Contract Price - ₹ 85 Lakhs (ii) Materials issued - ₹ 21 Lakhs out of which Materials costing ₹ 4 Lakhs is still lying unused at the end of the period. (iii) Labour Expenses for workers engaged at site - ₹ 16 Lakhs (out of which ₹ 1 Lakh is still unpaid) (iv) Specific Contract Costs - ₹ 5 Lakhs
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Q.2 04 marks medium Auditor's Documentation and Planning ⚡ Try this Q →
Documentation of audit plan serves as a record of the planned nature, timing and extent of risk assessment procedures and planned audit procedures at the assertion level in response to the assessed risk. What all activities in the planning phase should form part of auditor's documentation? State with examples.
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Q.2 04 marks medium Test Checking Technique and Precautions ⚡ Try this Q →
CA B is appointed as an auditor of M/s. Divine Pharmacy, a wholesale medicines supplier. While auditing for the financial year 2020-21, CA B wants to use test checking technique. Advise CA B, what kind of precautions should be taken by him in this regard.
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Q.2 03 marks medium Limitations on Auditor's Ability to Detect Material Misstate ⚡ Try this Q →
In case of certain subject matters, limitations on the auditor's ability to detect material misstatements are particularly significant. Explain such assertion or subject matters.
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Q.2 03 marks medium Analytical Procedures and Investigation of Inconsistencies ⚡ Try this Q →
The statutory auditor of ABC Ltd., CA Raj identifies certain inconsistencies while applying analytical procedures to the financial statement data of ABC Ltd. With referent to SA 520 on "Analytical Procedures" how CA Raj shall investigate such differences?
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Q.3 04 marks medium Subsequent Events and Audit Procedures ⚡ Try this Q →
The auditor shall perform audit procedures designed to obtain sufficient appropriate audit evidence that all events occurring between the date of the financial statements and the date of the auditor's report, that require adjustment of, or disclosure in, the financial statements have been identified. With reference to SA 560, what are the audit procedures included in the auditor's risk assessment?
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Q.3 04 marks medium External Confirmations and Negative Confirmation Requests ⚡ Try this Q →
CA Rohit is appointed as an auditor of Grace Ltd., he wants to design a suitable Confirmations request letter for a few debtors of Grace Ltd. As a senior auditor of the firm, explain to him with reference to SA 505 "External Confirmation" all the conditions that should be present on the Negative Confirmation requests at the due care substantive audit procedure to address an assessed risk of material misstatement at the assertion level.
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Q.3 03 marks medium Risk Assessment Procedures - Observation and Inspection ⚡ Try this Q →
CA L is in the process of finalizing his Risk Assessment Procedures of Effulent Limited which include observation and inspection that may provide inquiries of management and others. Discuss few examples of audit procedures which include observation or inspection of the entity operations.
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Q.3 03 marks medium IT Controls and System Audit Considerations ⚡ Try this Q →
Forceful Limited is a company dealing in mobile spare parts and having its showroom in almost all the states in the country. For FY 2020-21, the company transferred its accounts from manual to computerized system (SAP). PQR & Co., Chartered Accountants have undertaken an interim audit and have been appointed as the system auditor. PQR & Co., at the end of the audit concludes that there are certain findings and exceptions in IT environment and IT controls of the company which needs to be assessed and reported. Mention those points of consideration.
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Q.3(a) 15 marks very hard Partnership Amalgamation ⚡ Try this Q →
Case: A Partnership firm C & Co. consists of partners P and Q, sharing Profits and Losses in the ratio of 4:1. The firm II & Co. consists of Partners O and R sharing Profits and Losses in the ratio of 3:2. On Partners O and R agreed to amalgamate both the firms and share a new firm CH & Co., wherein P, Q, R would be partners sharing Profit and Losses in the ratio of 3:2:1. The Balance Sheets of both the firms as on 31st March, 2021 were as follows: [Table showing Liabilities and Assets in ₹ in 000s for C & Co., H & Co., and CH & Co.]
You are required to prepare the Balance Sheet of the new firm CH & Co., and pass necessary Journal Entries to record the amalgamation of both firms.
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Q.4 04 marks medium Revenue Recognition and Audit Procedures for Sales ⚡ Try this Q →
CA "X" while conducting an audit of Joyful Ltd. found a considerable increase in sales as compared to the previous year. As doubts that fictitious sales have been recorded by the company to overstate its profitability. Discuss any four audit procedures to be undertaken by the auditor to ensure revenue from sales of goods and services performed during the period is not overstated?
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Q.4(a) 15 marks very hard Equity Share Buyback ⚡ Try this Q →
A company provides the following 2 possible Capital Structure as on 31st March, 2021: [Table showing Equity Share Capital, Reserves & Surplus (General Reserve, Securities Premium, Profit & Loss, Statutory Reserve), and Loan Funds with two situations] The company is planning to offer buy back of Equity Share at a price of ₹ 75 per equity share. You are required to calculate maximum permissible number of equity shares that can be bought back in both the situations as per Companies Act, 2013 and are also required to pass necessary Journal Entries in the situation where the buyback is possible.
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Q.5(b)(i) 00 marks easy Equity Shares with Differential Rights ⚡ Try this Q →
Explain the meaning of Equity Shares with Differential Rights. Whether Equity Shares with Differential Rights be also issued with differential rights?
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Q.5(b)(ii) 00 marks easy Voting Rights and Winding Up ⚡ Try this Q →
In Jaguar Limited A, B, C and D hold equity share capital in the proportion of 30:20:30:10 and M, N, O and P hold preference share capital in proportion of 40:20:30:10. You are required to calculate the voting rights in case of resolution of winding up of the company. If the paid up Equity Share Capital of the company is ₹ 100 Lakhs and Preference Share Capital of the company is ₹ 100 Lakhs.
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Q.6 05 marks medium Partnership Amalgamation, Goodwill Adjustment, Balance Sheet ⚡ Try this Q →
The following were the terms of amalgamation: (i) Goodwill of C & Co. was valued at ₹ 2,80,000 and the Goodwill of H & Co. was valued at ₹ 1,60,000. Goodwill account is not to be adjusted through the Capital accounts of the partners. (ii) Building, Machinery and Vehicles are to be taken over at ₹ 8,00,000, ₹ 2,40,000 and ₹ 3,00,000 respectively. (iii) Provision for doubtful debts at ₹ 20,000 in respect of C & Co. and ₹ 10,000 in respect of H & Co. are to be provided.
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Q.7 15 marks very hard Consolidation of Accounts, Trial Balance ⚡ Try this Q →
The Trial Balances of X Limited and Y Limited as on 31st March, 2021 were as under: Trial balance showing Equity Share capital (₹ 100 each), Preference share capital, Reserves, Debentures, Trade Payables/Receivables, Profit & Loss A/c balance, Purchases/Sales, Wages and Salaries, Debenture Interest, General Expenses, Preference share dividend, Inventory, Cash at Bank, Investment in Y Limited, and Fixed Assets with corresponding Debit and Credit values in ₹ 000 for both companies.
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Q.8 00 marks easy Consolidated Financial Statements, Goodwill Calculation, Bus ⚡ Try this Q →
Investment in Y Limited was acquired on 1st July, 2020 and consisted of 80% of Equity Share Capital and 50% of Preference Share Capital. After acquiring control of Y Limited, X Limited supplied to Y Limited goods at cost plus 25%, the total invoice value of such goods being ₹1,20,000, one-fourth of which goods were still lying in inventory at the end of the year. Depreciation to be charged @ 10% in X Limited and @ 15% in Y Limited on Fixed Assets.
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Q.12 12 marks very hard Banking, Provisions, P&L Account ⚡ Try this Q →
New Bank Limited: A customer to whom a sum of ₹5 Lakhs was advanced has become insolvent and it is expected that only 50% can be recovered from his estate. Make necessary provisions on Risk Assets: Standard (excluding above ₹5,00,000) ₹10,00,000; Sub-Standard (fully secured) ₹8,20,000; Doubtful assets covered by security for 1 year ₹40,000; Loss assets ₹1,00,000. Provide ₹6,50,000 for Income Tax. The directors desire to declare 10% dividend. 25% of profit is to be transferred to Reserve Fund. Rebate on Bills discounted on 31.03.2020 was ₹20,000 and ₹15,000 on 31.03.2021. You are required to prepare Profit & Loss A/c of New Bank Limited for the year ended 31.03.2021.
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Q.13 20 marks very hard Deferred Tax Assets, Deferred Tax Liability, Timing Differen ⚡ Try this Q →
Deep Limited has the following particulars in the Balance Sheet as on 31st March, 2020: Deferred Tax Liability (Cr.) ₹28.00 Lakhs; Deferred Tax Assets (Dr.) ₹14.00 Lakhs. The following transactions were reported during the year 2020-2021: (i) Depreciation as per books was ₹70 Lakhs whereas Depreciation for Tax purposes was ₹42 Lakhs. There were no additions to Fixed Assets during the year. (ii) Expenses disallowed in 2019-20 and allowed for tax purposes in 2020-21 were ₹14 Lakhs. (iii) Share issue expenses allowed under section 35(D) of the Income Tax Act, 1961 for the year 2020-21 (1/10th of ₹70.00 lakhs incurred in 2019-20). (iv) Repairs to Plant and Machinery were made during the year for ₹1,40,000 Lakhs and was spread over the period 2020-21 and 2021-22 equally in the books. However, the entire expenditure was allowed for income-tax purposes in the year 2020-21. Tax Rate to be taken at 40%. You are required to show the impact of above items on Deferred Tax Assets and Deferred Tax Liability as on 31st March, 2021.
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Q.14(c) 00 marks easy Revenue Recognition with Right of Return ⚡ Try this Q →
A Limited sells goods with unlimited right of return to its customers. The following pattern has been observed in the Return of Sales: Between 0-1 month: 6%; Between 1-2 months: 7%; Between 2-3 months: 8%. The Company has made Sales of ₹ 36 Lakhs in the month of January, ₹ 48 Lakhs in the month of February and of ₹ 60 Lakhs in the month of March. The Total Sales for the Financial Year have been ₹ 400 Lakhs. The Cost of Sales was ₹ 320 Lakhs. You are required to recognise the amount of Provision to be made and Revenue to be recognised as on 31st March.
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Q.15(d) 00 marks easy Share-based Payments - Employee Stock Options ⚡ Try this Q →
At the beginning of the year 1, Harmony Limited grants 600 options to each of its 1000 employees. The contractual life of option granted is 6 yrs. Other relevant information is as follows: Vesting Period: 3 years; Exercise period: 3 years; Expected Life: 5 years; Exercise Price: ₹ 100; Market Price: ₹ 100; Expected Forfeitures per year: 3%. The option granted vest according to a graded schedule of 25% at the end of the year 1, 25% at the end of the year 2 and the remaining 50% at the end of the year 3. You are required to calculate total compensation expenses for the options expected to vest and cost and cumulative cost to be recognized at the end of all three years assuming that expected forfeiture rate does not change during the vesting period when the intrinsic value of the options at the grant date is ₹ 7 per options.
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Q.16 00 marks hard Reconstruction scheme, Journal Entries, EDT ⚡ Try this Q →
Case: (i) The shareholders to receive in lieu of their present holding at 750,000 shares of ₹ 10 each, the following: – New fully paid ₹ 10 Equity Shares equal to 3/5th of their holding. – Fully paid ₹ 10 Preference Shares to the extent of 2/5th of the above new equity shares. – 7% Debentures of ₹ 250,000. (ii) Goodwill which stood at ₹ 270,000 is to be completely written off. (iii) Plant & Machinery to be reduced by ₹ 1,00,000, Furniture to be reduced by ₹ 88,000 and Building to be appreciated by ₹ 1,50,000. (iv) Investment of ₹ 600,000 to be brought down to its existing market price of ₹ 1,80,000.…
Sapra Limited has laid down the following terms upon the sanction of the reconstruction scheme by the court. You are required to show the necessary Journal Entries in the books of Sapra Limited of the above reconstruction scheme considering that balance in General Reserve is utilized to write off the losses.
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