REVISION TEST PAPER 3
PAPER – 1 : ACCOUNTING
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Working Notes should form part of the answer.
TOTAL HOURS: 3.00 TOTAL TMARKS:100
Answer the following:
- A had following assets. Calculate depreciation for the year ended 31st March, 2020 for each asset as per AS 10 (Revised):
- Machinerypurchased for Rs 10 lakhs on 1st April, 2015 and residual value after useful life of 5 years, based on 2015 prices is Rs 10
- Landfor Rs 50
- AMachinery is constructed for Rs 5,00,000 for its own use (useful life is 10 years).Construction is completed on 1st April, 2019, but the company does not begin using the machine until 31st March,
- Machinerypurchased on 1st 2017 for Rs 50,000 with useful life of 5 years and residual value is NIL. On 1st April, 2019, management decided to use this asset for further 2 years only.
- On1st April, 2016, Mac received a Government Grant of Rs 60 lakhs for acquisition of machinery costing Rs 300 lakhs. The grant was credited to the cost of the asset. The estimated useful life of the machinery is 10 years. The machinery is depreciated @ 10% on WDV basis. The company had to refund the grant in June 2019 due to non- compliance of certain conditions.
How the refund of the grant is dealt with in the books of Mac Ltd. assuming that the company did not charge any depreciation for the year 2019-20.
Pass necessary Journal Entries for the year 2019-20.
- ALimited invested in the shares of XYZ on 1st December, 2019 at a cost of Rs 50,000. Out of these shares, Rs 25,000 shares were purchased with an intention to hold for 6 months and Rs 25,000 shares were purchased with an intention to hold as long- term Investment.
A Limited also earlier purchased Gold of Rs 1,00,000 and Silver of Rs 30,00,000 on 1st April, 2019. Market value as on 31st March, 2020 of above investments are as follows:
Shares Rs 47,500 (Decline in the value of shares is temporary.) Gold Rs 1,80,000
Silver Rs 30,55,000
How above investments will be shown in the books of accounts of M/s A Limited for the year ended 31st March, 2020 as per the provisions of AS 13 (Revised)?
- On15th April, 2019 RBM obtained a Term Loan from the Bank for Rs 320 lakhs to beutilized as under:
|Rs (in lakhs)|
|Construction for factory shed||240|
|Purchase of Machinery||30|
|Purchase of Vehicles||12|
|Advance for tools/cranes etc.||8|
|Purchase of technical know how||6|
In March, 2020 construction of shed was completed and machinery was installed. Total interest charged by the bank for the year ending 31st March, 2020 was Rs 40 lakhs.
In the context of provisions of AS 16 ‘Borrowing Costs’, show the treatment of interest and also explain the nature of Assets. (4 Parts X 5 Marks = 20 Marks)
- Vijay& of Jaipur has a branch in Patna to which goods are sent @ 20% above cost. The branch makes both cash & credit sales. Branch expenses are paid direct from Head office and the branch has to remit all cash received into the bank account of Head office. Branch doesn’t maintain any books of accounts, but sends monthly returns to the head office.
Following further details are given for the year ended 31st March, 2020:
|Goods received from Head office at Invoice Price||8,40,000|
|Goods returned to Head office at Invoice Price||60,000|
|Cash sales for the year 2019-20||1,85,000|
|Credit Sales for the year 2019-20||6,25,000|
|Stock at Branch as on 01-04-2019 at Invoice price||72,000|
|Sundry Debtors at Patna branch as on 01-04-2019||96,000|
|Cash received from Debtors||4,38,000|
|Discount allowed to Debtors||7,500|
|Goods returned by customer at Patna Branch||14,000|
|Bad debts written off||5,500|
|Amount recovered from Bad debts previously written off as Bad||1,000|
|Rent, Rates & taxes at Branch||24,000|
|Salaries & wages at Branch||72,000|
|Office Expenses (at Branch)||9,200|
|Stock at Branch as on 31-03-2020 at cost price||1,25,000|
Prepare necessary ledger accounts in the books of Head office by following Stock and Debtors method and ascertain Branch profit.
- M/sRohan & Sons runs a business of Electrical goods on wholesale The books of accounts are closed on 31st March every year. The Balance Sheet as on 31st March, 2019 is as follows :
|Capital||12,50,000||Fixed Assets||6 50,000|
|Trade Creditors||1,90,000||Cash & Bank||1,95,000|
|Profit & Loss A/c||1,45,000|
The management estimates the purchase & sales for the year ended 31st March,2020 as under:
All Sales and Purchases are on credit basis. It was decided to invest Rs 1,50,000 in purchase of Fixed assets, which are depreciated @ 10% on book value. A Fixed Asset of book value as on 01.04.2019, Rs 60,000 was sold for Rs 56,000 on 31st March, 2020.
The time lag for payment to Trade Creditors for purchases is one month and receipt from Trade debtors for sales, is two months. The business earns a gross profit of 25% on turnover. The expenses against gross profit amounts to 15% of the turnover. The amount of depreciation is not included in these expenses.
Prepare Trading & profit & Loss Account for the year ending 31st March, 2020 and draft a Balance Sheet as at 31st March, 2020 assuming that creditors are all Trade creditors for purchases and debtors are all Trade debtors for sales and there is no other current asset and liability apart from stock and cash and bank balances.
Also, prepare Cash & Bank account and Fixed Assets account for the year ending 31st March, 2020. (10+10=20 Marks)
- On1st April, 2019 H had 30,000 equity shares of ABC Ltd. at book value of Rs 18 per share (Nominal value 10 per share). On 10th June, 2019, H purchased another 10,000 equity shares of the ABC ltd. at Rs 16 per share through a broker who charged 1.5% brokerage.
The directors of ABC Ltd. announced a bonus and a right issue. The terms of the issues were as follows:
- Bonusshares were declared at the rate of one equity share for every four shares held on 15th July,
- Rightshares were to be issued to the existing equity shareholders on 31st August, The company decides to issue one right share for every five equity shares held at 20% premium and the due date for payment will be 30th September, 2019. Shareholders were entitled to transfer their rights in full or in part.
- Nodividend was payable on these
Mr. H subscribed 60% of the rights entitlements and sold the remaining rights for consideration of Rs 5 per share.
Dividends for the year ending 31st March, 2019 was declared by ABC Ltd. at the rate of 20% and received by Mr. H on 31st October, 2019.
On 15th January, 2020 Mr. H sold half of his shareholdings at Rs 17.50 per share and brokerage was charged @1 %.
You are required to prepare Investment account in the books of Mr. H for the year ending 31st March, 2020, assuming the shares are valued at average cost.
- AFire occurred in the premises of M/s B & on 30th September, 2019. The firm had taken an insurance policy for Rs 1,20,000 which was subject to an average clause. Following particulars were ascertained from the available records for the period from 1st April, 2018 to 30th September, 2019:
|Stock at cost on 1-04-2018||2,11,000|
|Stock at cost on 31-03-2019||2,52,000|
|Purchases during 2018-19||6,55,000|
|Wages during 2018-19||82,000|
|Sales during 2018-19||8,60,000|
|Purchases from 01-04-2019 to 30-09-2019 (including purchase of||4,48,000|
|machinery costing Rs 58,000)|
|Wages from 01-04-2019 to 30-09-2019 (including wages for installation||85,000|
|of machinery costing Rs 7,000)|
|Sales from 01-04-2019 to 30-09-2019||6,02,000|
|Sale value of goods drawn by partners (1-4-19 to 30-9-19)||52,000|
|Cost of Goods sent to consignee on 18th September, 2019 lying unsold||44,800|
|Cost of Goods distributed as free samples(1-4-19 to 30-9-19)||8,500|
While valuing the Stock at 31st March, 2019, Rs 8,000 were written off in respect of a slow moving item, cost of which was Rs 12,000. A portion of these goods was sold at a loss of Rs 4,000 on the original cost of Rs 9,000. The remainder of the stock is estimated to beworth the original cost. The value of Goods salvaged was estimated at Rs 35,000.
You are required to ascertain the amount of claim to be lodged with the Insurance Company for the loss of stock. (10+10=20 Marks)
- Thefollowing figures have been extracted from the books of Manan Jo Limited for the year ended on 3.2020. You are required to prepare the Cash Flow statement as per AS 3 using indirect method.
- Netprofit before taking into account income tax and income from law suits but after taking into account the following items was Rs 30 lakhs :
- Depreciationon Property, Plant & Equipment Rs 50 lakhs.
- Discounton issue of Debentures written off Rs 45,000.
- Intereston Debentures paid Rs 5,25,000.
- Bookvalue of investments Rs 50 lakhs (Sale of Investments for Rs 4,80,000).
- Interestreceived on investments Rs 90,000.
- Compensationreceived Rs1,35,000 by the company in a suit
- lncometax paid during the year Rs 15,75,000.
- 22,500,10% preference shares of Rs 100 each were redeemed on 02-04-2019 at a premium of 5%.
- Furtherthe company issued 75,000 equity shares of Rs10 each at a premium of 20% on 3.2020 (Out of 75,000 equity shares, 25,000 equity shares were issued to a supplier of machinery)
- Dividendfor FY 2018-19 on preference shares were paid at the time of
- Dividendon Equity shares paid on 01.2020 for the year 2018-2019 Rs 7.50 lakh
- Netprofit before taking into account income tax and income from law suits but after taking into account the following items was Rs 30 lakhs :
(including dividend distribution tax) and interim dividend paid Rs 2.50 lakhs for the year 2019-2020.
- Landwas purchased on 4.2019 for Rs3,00,000 for which the company issued 22,000 equity shares of Rs 10 each at a premium of 20% to the land owner and balance in cash as consideration.
- Currentassets and current liabilities in the beginning and at the end of the years were as detailed below :
|As on 01.04.2019||As on 31.3.2020|
|Cash in hand||3,94,450||16,950|
- Sumit (an unlisted company other than AIFI, Banking company, NBFC and HFC) had 8,000, 9% debentures of Rs 100 each outstanding as on 1st April, 2019, redeemable on 31st March, 2020.
On 1st April, 2019, the following balances appeared in the books of accounts:
- Investmentin 1,000, 7% secured bonds of Rs 100 each, Rs 1,00,000.
- DebentureRedemption Reserve is Rs 50,000.
Interest on investments is received yearly at the end of financial year.
1,000 own debentures were purchased on 30th March, 2020 at an average price of
Rs 96.50 and cancelled on the same date.
On 31st March, 2020, the investments were realized at par and the debentures were redeemed. You are required to write up the following accounts for the year ended 31st March, 2020.
- DebentureRedemption Reserve
(4) Own Debentures Account. (10+10=20 Marks)
- On1st April, 2017, Nilesh acquired a Tractor on Hire purchase from Raj Ltd. The terms of contract were as follows:
- TheCash price of the Tractor was Rs 11,50,000.
(ii) Rs 2,50,000 were to be paid as down payment on the date of purchase.
- TheBalance was to be paid in annual instalments of Rs 3,00,000 plus interest at theend of the
- Interestchargeable on the outstanding balance was 8% a.
- Depreciation@ 10% a. is to be charged using straight line method.
Mr. Nilesh adopted the Interest Suspense method for recording his Hire purchase transactions.
You are required to :
Prepare the Tractor account, Interest Suspense account and Raj Ltd.’s account in the books of Mr. Nilesh for the period of hire purchase.
- TheBooks of Arpit shows the following Balances as on 31st December, 2019:
|6,00,000 Equity shares of Rs 10 each fully paid up||60,00,000|
|30,000, 10% Preference shares of Rs 100 each, Rs 80 paid up||24,00,000|
|Capital Redemption Reserve||18,00,000|
Under the terms of issue, the Preference Shares are redeemable on 31st March, 2020 at a premium of 10%. In order to finance the redemption, the Board of Directors decided to make a fresh issue of 1,50,000 Equity shares of Rs10 each at a premium of 20%, Rs 2 being payable on application, Rs 7 (including premium) on allotment and the balance on 1st January, 2021. The issue was fully subscribed and allotment made on 1st March, 2020. The money due on allotment was received by 20th March, 2020.
The preference shares were redeemed after fulfilling the necessary conditions of Section 55 of the Companies Act, 2013.
You are required to pass the necessary Journal Entries and also show how the relevant items will appear in the Balance Sheet of the company after the redemption carried out on 31st March, 2020. (8+12=20 Marks)
Answer any four of the following:
- DepartmentA sells goods to Department B at a profit of 20% on cost and to Department C at 50% on Department B sells goods to Department A and Department C at a profit of 15% and 10% on sales respectively. Department C sells goods to Department A and Department B at a profit of 10% and 5% on cost respectively.
Stock lying at different departments at the end of the year are as follows:
|Transfer from Department A|| |
|Transfer from Department B||15,200|
|Transfer from Department C||52,800||1,11,300|
Calculate Department wise unrealized profit on Stock.
- Whatare the qualitative characteristics of the Financial Statements which improve the usefulness of the information furnished therein?
- Followingis the draft Profit & Loss Account of X for the year ended 31st March, 2020:
|To Administrative Expenses||5,96,400||By Balance b/d||7,25,300|
|To Advertisement Expenses||1,10,500||By Balance from Trading A/c||42,53,650|
|To Sales Commission||1,05,550||By Subsidies received from||3,50,000|
|To Director’s fees||1,48,900|
|To Interest on Debentures||–56,000|
|To Depreciation on Fixed||5,78,530|
|To Provision for taxation||12,50,600|
|To General Reserve||5,50,000|
|To Investment Revaluation||25,800|
|To Balance c/d||16,01,090|
Depreciation on Fixed Assets as per Schedule II of the Companies Act, 2013 was Rs 6,51,750. You are required to calculate the maximum limits of the managerial remuneration as per Companies Act, 2013.
- Followingis the Balance Sheet of M/s. S Traders as on 31st March, 2019:
|11% Bank Loan||80,000||Closing stock||76,000|
|Profit & Loss A/c||56,000||Deferred Expenditure||24,000|
|Cash & Bank||65,000|
- Remaininglife of Fixed Assets is 6 years with even The net realizable value of Fixed Assets as on 31st March, 2020 is Rs 90,000.
- Firm’sSales & Purchases for the year ending 31st March, 2020 amounted to
Rs 7,80,000 and Rs 6,25,000 respectively.
- Thecost & net realizable value of the stock as on 31st March, 2020 was, Rs
60,000and Rs 66,000 respectively.
- Generalexpenses (including interest on Loan) for the year 2019-20 were Rs 53,800.
- Deferredexpenditure is normally amortised equally over 5 years starting from the Financial year 2018-19 e. Rs 6,000 per year.
- Debtorson 31st March, 2020 is Rs 65,000 of which Rs 5,000 is Collection of another Rs 10,000 debtors depends on successful re-installation of certain products supplied to the customer.
- ClosingTrade payable Rs 48,000, which is likely to·be settled at 5%
- Thereis a prepayment penalty of Rs 4,000 for Bank loan
- Cash& Bank balances as on 31st March, 2020 is Rs 1,65,200.
Prepare Profit & Loss Account for the year ended 31st March, 2020 and Balance Sheetas on 31st March, 2020 assuming the firm is not a going concern.
- Moon was incorporated on 1st August, 2019 to take over the running business of a partnership firm w.e.f. 1st April, 2019. The summarized Profit & Loss Account for the year ended 31st March, 2020 is as under:
|Less: Salaries||1,56,000|| |
|Rent, Rates & Taxes||72,000|
|Commission on sales||40,600|
|Interest on Debentures||36,000|
|Net Profit for the year||1,93,400|
Moon Ltd. initiated an advertising campaign which resulted in increase of monthly sales by 25% post incorporation.
You are required to prepare a statement showing the profit for the year between pre- incorporation and post-incorporation. Also, explain how these profits are to be treated in the accounts? (4 Parts X 4 Marks = 16 Marks)