REVISION TEST PAPER – 4
INTERMEDIATE (NEW) : GROUP – I PAPER – 1: ACCOUNTING
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Wherever necessary suitable assumptions may be made and disclosed by way of a note.
Working Notes should form part of the answer.
(Time allowed: Three hours) (Maximum Marks: 100)
- (a)ABC Limited has started construction of an asset on 1st December, 2020, which continues till 31st March, 2021 (and is expected to go beyond a year). The entity has not taken any specific borrowings to finance the construction of the asset but has incurred finance costs on its general borrowings during the construction The directly attributable expenditure at the beginning
of the month on this asset was ` 10 lakh in December 2020 and ` 4 lakh in each of the months of
January to March 2021. At the beginning of the year, the entity had taken Inter Corporate Deposits of ` 20 lakh at 9% rate of interest and had an overdraft of ` 4 lakh, which increased to
` 8 lakh on 1st March, 2021. Interest was paid on the overdraft at 10% until 1st January, 2021 and then the rate was increased to 12%. You are required to calculate the annual capitalization rate for computation of borrowing cost in accordance with AS 16 ‘Borrowing Costs’.
- Inthe books of Rani , closing inventory as on 31.03.2020 amounts to ` 1,75,000 (valued on the basis of FIFO method). The Company decides to change from FIFO method to weighted
average method for ascertaining the costs of inventory from the year 2019-20. On the basis of weighted average method, closing inventory as on 31.03.2020 amounts to ` 1,59,000. Realizable value of the inventory as on 31.03.2020 amounts to ` 2,07 ,000. Discuss disclosure requirements of change in accounting policy as per AS 1.
- CaseworkerLimited received a specific grant of ` 6 crore for acquiring the plant of ` 30 crore during financial year 2015-2016 having useful life of 10 During the financial year 2020- 2021, due to non-compliance of conditions laid down for the grant of ` 6 crore, the company had
to refund the grant to the Government. What should be the treatment of the refund if grant was deducted from the cost of the plant during financial year 2015-2016? Assume depreciation is charged on fixed assets as per Straight Line Method.
- Arush is installing a new plant in its factory. It provides you the following information:
You are required to advise Arush Ltd. on the costs that can be capitalised for plant in accordance with AS 10 ‘Property, Plant and Equipment’. (4 Parts x 5 Marks= 20 Marks)
- (a)The following figures have been extracted from the books of Manan Limited for the year ended on 3.2020. You are required to prepare the Cash Flow statement as per AS 3 using indirect method.
Net profit beforetaking into account income tax and income from law suits but after taking into account the following items was ` 30 lakhs :
-
- Depreciationon Property, Plant & Equipment ` 50 lakhs.
- Discounton issue of Debentures written off ` 45,000.
- Intereston Debentures paid ` 5,25,000.
- Bookvalue of investments ` 50 lakhs (Sale of Investments for ` 4,80,000).
- Interestreceived on investments ` 90,000.
- Compensationreceived `1,35,000 by the company in a suit
- lncometax paid during the year ` 15,75,000.
- 22,500,10% preference shares of ` 100 each were redeemed on 02-04-2019 at a premium of 5%.
- Furtherthe company issued 75,000 equity shares of `10 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 ` 7.50 lakhs and interim dividend paid ` 2.50 lakhs for the year 2019-2020.
- Landwas purchased on 4.2019 for `3,00,000 for which the company issued 22,000 equity shares of ` 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 | |
| ` | ` | |
| Inventory | 18,00,000 | 19,77,000 |
| Trade receivables | 3,87,000 | 3,79,650 |
| Cash in hand | 3,94,450 | 16,950 |
| Trade payables | 3,16,500 | 3,16,950 |
| Outstanding expenses | 1,12,500 | 1,22,700 |
- Fromthe following information, prepare extract of Balance Sheet of A Limited along with notes making necessary compliance of Schedule III to the Companies Act, 2013:
| Amount (` ) | ||
| Loan Funds
(a) Secured Loans (b) Unsecured Loan – Short term from bank Other information is as under: Secured Loans Term Loans from: Banks |
18,12,000 2,25,000
8,95,000 |
| Others | 9,17,000 |
| 18,12,000 | |
| Current Maturities of long-term loan from Bank | 1,24,000 |
| Current Maturities of long- term loan from Others | 85,000 |
There was no interest accrued / due as at the end of the year. Current maturities of long-term loans amounting ` 2,09,000 is included in the value of secured loans of ` 18,12,000.
- Thefollowing information of Gaurav was obtained on 31st March, 2021:
|
Authorized capital: |
` |
| 90,000, 14% preference shares of ` 100 | 90,00,000 |
| 9,00,000 Equity shares of `100 each | 9,00,00,000 |
| 9,90,00,000 | |
| Issued and subscribed capital: | |
| 67,500, 14% preference shares of ` 100 each fully paid | 67,50,000 |
| 5,40,000 Equity shares of ` 100 each, ` 80 paid-up | 4,32,00,000 |
| Share suspense account | 90,00,000 |
| Reserves and surplus:
Capital reserves (` 6,75,000 is revaluation reserve) |
8,77,500 |
| Securities premium | 2,25,000 |
| Secured loans: | |
| 15% Debentures | 2,92,50,000 |
| Unsecured loans: | |
| Public deposits | 16,65,000 |
| Cash credit loan from SBI (short term) | 5,92,500 |
| Current Liabilities: | |
| Trade Payables | 15,52,500 |
| Assets: | |
| Investment in shares, debentures, etc. | 3,37,50,000 |
| Profit and Loss account (Dr. balance) | 68,62,500 |
| Share suspense account represents application money received on shares, | the allotment of |
which is not yet made. You are required to compute effective capital as per the provisions of Schedule V if Gaurav Ltd.is a non-investment company? (10+5+5 = 20 Marks)
- (a)The following is the Balance Sheet of Manish and Suresh as on 1st April, 2020:
| Equity and Liabilities | ` | Assets | ` |
| Capital Accounts: |
1,50,000 |
Building | 1,00,000 |
| Manish | Machinery | 65,000 | |
| Suresh | 75,000 | Stock | 40,000 |
| Creditors for goods | 30,000 | Debtors | 50,000 |
| Creditors for expenses | 25,000 | Bank | 25,000 |
| 2,80,000 | 2,80,000 |
They give you the following additional information:
- Creditors’Velocity 5 month & Debtors’ Velocity 2 months. Here velocity indicates the no. of times the creditors and debtors are turned over a year.
- Stocklevel is maintained uniformly in value throughout all over the
- Depreciationon machinery is charged @ 10%, Depreciation on building @ 5% in the current
- Costprice will go up 15% as compared to last year and also sales in the current year will increase by 25% in
- Rateof gross profit remains the
- BusinessExpenditures are ` 50,000 for the All expenditures are paid off in cash.
- Closingstock is to be valued on LIFO
- Allsales and purchases are on credit basis and there are no cash purchases and
You are required to prepare Trading, Profit and Loss Account, Trade Debtors Account and Trade Creditors Account for the year ending 31.03.2021.
- Passnecessary Journal entries in the books of an independent Branch of a Company, wherever required, to rectify or adjust the following:
- Branchincurred travelling expenses of ` 4,000 on behalf of other Branches, but not recorded in the books of
- Goodsdispatched by the Head office amounting to ` 8,000, but not received by the Branch till date of The Goods have been received subsequently.
- Provisionfor doubtful debts, whose accounts are kept by the Head Office, not provided earlier for ` 2,000.
(iv) Branch paid ` 2,000 as salary to a Head Office Manager, but the amount paid has been debited by the Branch to Salaries Account. (16+4 = 20 Marks)
- (a) Following is the Trial Balance of Mohan as on 31.03.2021:
| Particulars | Debit (`) | Credit (`) | |
| Capital Account Drawing Account Opening Stock
Purchases
Sales |
Department A Department B Department C Department A Department B Department C Department A Department B |
1,500 8,500 5,700 1,200 22,000 17,000 8,000 |
40,000
54,000 33,000 |
|
Sales Returns
Freight and Carriage
Furniture and fixtures Plant and Machinery Motor Vehicles Sundry Debtors Sundry Creditors Salaries Power and water Telephone charges Bad Debts Rent and taxes Insurance Wages
Printing and Stationerie s Advertising Bank Overdraft Cash in hand |
Department C
Department A Department B Department C Department A Department B Department C
Department A Department B Department C |
4,000 3,000 1,000 1,400 800 200 4,600 20,000 40,000 12,200
4,500 1,200 2,100 750 6,000 1,500 800 550 150 2,000
3,500
850 1,75,000 |
21,000
15,000
12,000 |
| 1,75,000 |
You are required to prepare Department Trading, Profit and Loss Account and the Balance Sheet taking into account the following adjustments:
- OutstandingWages: Department B- ` 150, Department C – `
- DepreciatePlant and Machinery and Motor Vehicles at the rate of 10%.
- EachDepartment shall share all expenses in proportion to their
- ClosingStock: Department A – ` 3,500, Department B – ` 2,000, Department C – ` 1,500.
(b) The Capital structure of a company BK Ltd. consists of 30,000 Equity Shares of ` 10 each fully paid up and 2,000 9% Redeemable Preference Shares of ` 100 each fully paid up as on 31.03.2020. the other particulars as at 31.03.2020 are as follows:
| Amount (`) | |
| General Reserve | 1,20,000 |
| Profit &Loss Account | 60,000 |
| Investment Allowance Reserve (not free for distribution as | 15,000 |
| dividend) | |
| Cash at bank | 1,95,000 |
Preference Shares are to be redeemed at a premium of 10%. For the purpose of redemption, the directors are empowered to make fresh issue of Equity Shares at par after utilizing the undistributed reserve & surplus, subject to the conditions that a sum of ` 40,000 shall be retained in General Reserve and which should not be utilized. Company also sold investment of 4500
Equity Shares in G Ltd., costing `45,000 at ` 9 per share.
You are required to pass Journal entries to give effect to the above arrangements.
(12 + 8 =20 Marks)
- (a)A Fire occurred in the premises of M/s B & on 30th September, 2019. The firm had taken an insurance policy for ` 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:
| Amount
(`) |
|
| Stock at cost on 1-04-2018 | 2,11,000 |
| Stock at cost on 31-03-2019 (after adjustment of written off amount in respect | 2,52,000 |
| of slow-moving item) | |
| 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 machinery | 4,48,000 |
| costing ` 58,000) | |
| Wages from 01-04-2019 to 30-09-2019 (including wages for installation of | 85,000 |
| machinery costing ` 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 with | 44,800 |
| them | |
| Cost of Goods distributed as free samples(1-4-19 to 30-9-19) | 8,500 |
While valuing the Stock at 31st March, 2019, ` 8,000 were written off in respect of a slow moving item, cost of which was ` 12,000. A portion of these goods was sold at a loss of ` 4,000 on the original cost of ` 9,000. The remainder of the stock is estimated to be worth the original cost. The value of Goods salvaged was estimated at ` 35,000.
You are required to ascertain the amount of claim to be lodged with the Insurance Company for the loss of stock.
(b) Alpha Ltd. purchased 5,000, 13.5% Debentures of Face Value of ` 100 each of Pergot Ltd. on 1st May 2020 @ ` 105 on cum interest basis. The interest on these instruments is payable on 31st & 30th of March & September respectively. On August 1st 2020 the company again purchased 2,500 of such debentures @ ` 102.50 each on cum interest basis. On October 1st, 2020 the company sold 2,000 Debentures @ ` 103 each on ex- interest basis. The market value of the debentures as at the close of the year was ` 106. You are required to prepare the Investment in Debentures Account in the books of Alpha Ltd. for the year ended 31st Dec. 2020 on Average Cost Basis. (12 + 8 = 20 Marks)
- (a)”Accounting Standards standardize diverse accounting policies with a view to eliminate the non- comparability of financial statements and improve the reliability of financial ” Discuss and explain the benefits of Accounting Standards.
OR
“Explain “monetary item” as per Accounting Standard 11. How are foreign currency monetary items to be recognized at each Balance Sheet date? Classify the following as monetary or non- monetary item:
- ShareCapital
- TradeReceivables
- Investments
- Fixed
- Thefollowing particulars relate to hire purchase transactions:
- Xpurchased three cars from Y on hire purchase basis, the cash price of each car being `
2,00,000.
- Thehire purchaser charged depreciation @ 20% on diminishing balance
- Twocars were seized by on hire vendor when second installment was not paid at the end of the second The hire vendor valued the two cars at cash price less 30% depreciation charged under it diminishing balance method.
- Thehire vendor spent ` 10,000 on repairs of the cars and then sold them for a total amount of ` 1,70,000.
You are required to compute:
- Agreedvalue of two cars taken back by the hire
- Bookvalue of car left with the hire
- Profitor loss to hire purchaser on two cars taken back by their hire
- Profitor loss of cars repossessed, when sold by the hire
- TheBusiness carried on by Kamal under the name “K” was taken over as a running business with effect from 1st April, 2020 by Sanjana , which was incorporated on 1st July, 2020. The same set of books was continued since there was no change in the type of business and the following particulars of profits for the year ended 31st March, 2021 were available.
| ` | ` | |
| Sales: Company period | 40,000 |
50,000 |
| Prior period | 10,000 | |
| Selling Expenses | 3,500 | |
| Preliminary Expenses written off | 1,200 | |
| Salaries | 3,600 | |
| Directors’ Fees | 1,200 | |
| Interest on Capital (Up to 30.6.2020) | 700 | |
| Depreciation | 2,800 | |
| Rent | 4,800 | |
| Purchases | 25,000 | |
| Carriage Inwards | 1,019 | 43,819 |
| Net Profit | 6,181 |
The purchase price (including carriage inwards) for the post-incorporation period had increased by 10 percent as compared to pre-incorporation period. No stocks were carried either at the beginning or at the end.
You are required to prepare a statement showing the amount of pre and post incorporation period profits stating the basis of allocation of expenses.
- ZBank has classified its total investment on 31-3-2021 into three categories (a) held to maturity
(b) available for sale (c) held for trading as per the RBI Guidelines. ‘Held to maturity’ investments are carried at acquisition cost less amortized amount. ‘Available for sale’ investments are carried at marked to market. ‘Held for trading’ investments are valued at weekly intervals at market rates. Net depreciation, if any, is charged to revenue and net appreciation, if any, is ignored. You are required to comment whether the policy of the bank is in accordance with AS 13?
. (4 Parts X 5 Marks = 20 Marks)
