MTP_ Intermediate _Syllabus 2012_Dec2016_Set 2
Paper 12- Company Accounts & Audit
Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1
MTP_ Intermediate _Syllabus 2012_Dec2016_Set 2
Paper 12- Company Accounts & Audit
Full Marks: 100 Time allowed: 3 hours
Section – A
1. Answer the following questions 5 x 2 = 10
(a) X Ltd., decides to redeem 650, 15% preference shares of ` 100 each at 10% premium. It
has General Reserve of ` 45,500 and securities premium of ` 1,000. The new equity shares
of ` 10 each are to be issued at 25% premium for the purpose of redemption of
preference shares. calculate the minimum number of equity shares to be issued by X Ltd.
(b) Delhi Company, incorporated on 1st April, 2013, took over running business form 1 st
January, 2013. The company prepares its first final accounts on 31 st December 2013. From
the following information, you are required to calculate the sale ratio of pre-
incorporation and post-incorporation periods.
(i) Sales of January, 2013 to December, 2013 ` 4,80,000.
(ii) The sales for the month of January twice of the average sales; for the month of
February equal to average sales, sales for fourth months May to August – ¼ of the
average of each month; and sales for October and November three times the
average sales.
(c) Write a short note as define contribution plan.
(d) What is the meaning of cash & cash equalent?
(e) Green India Ltd. has five segments namely T,P,R,S & U. The total assets of the company
are ` 22 cores, segment T has ` 4 cores., segment P has ` 6 crores., segment R has ` 3
crores, S has ` 5.5 crores and U ` 3.5 crores, defereed tax assets included in the assets
each segments are T- ` 1.50 crores; P- ` 1.29 crores; R- ` 1.10 crores; S- ` 2.25 crores & U-
`1.35 crores. The accountant contended that all the five segments are reportable
segments. Comments?
2. Matching the following 5x1=5
1. Long term liability A. Preliminary expenses
2. Fictitious asset B. Historical cost
3. Unearned income C. Debenture
4. Asset required D. Liability
5. Accumulated depreciation E. Asset
3. Answer the following 5 x 2 = 10
(a) Write a short note on tax audit.
(b) Differences between auditing & Accounting.
(c) Define audit sampling.
(d) Write a short note on statutory report.
(e) Briefly explain audit programs.
Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 2
MTP_ Intermediate _Syllabus 2012_Dec2016_Set 2
Section – B
Answer any three of the following 15 x 3 = 45
4.(a) KG Limited furnishes the following summarized Balance sheet ass at 31 st March, 2013
Liabilities (` In lakhs) Assets (` In lakhs)
Equity share capital 1,200 Machinery 1,800
(fully paid up shares of ` 10 Furniture 226
each)
Securities premium 175 Investment 74
General reserve 265 Inventory 600
Capital redemption reserve 200 Trade receivables 260
Profit & los A/c 170 Cash at bank 740
12% debnetures 750
Trade payables 745
Other current liabilities 195
3,700 3,700
On 1st April, 2013, the company announced the buy-back of 25% of its equity shares @ `15
per share. For this purpose, it sold all of its investments for ` 75 lakhs.
On 5th April, 2013 the company achieved the target of buy back. On 30 th April, 2013 the
company issued one fully paid up equity share of ` 10 by way of bonus for every four equity
shares held by the equity share holders.
You are required to:
(i) Pass necessary journal entries for the above transactions.
(ii) Prepare balance sheet of KG Limited after bonus issue of the shares. 10
(b) Viva Ltd. received a specific grant of ` 30 lakhs for acquiring the plant of ` 150 lakhs during
2007-08 having useful life of 10 years. The grant received was credited to deferred income in
the balance sheet. During 210-11, due to non-compliance of conditions laid down for the
grant, the company had to refund the whole grant to the Government. Balance in the
deferred income on that date was ` 21 lakhs and written down value of plant was ` 105
lakhs.
(i) What should be the treatment of the refund of the grant and the effect on cost of the
fixed asset and the amount of depreciation to be charged during the year 2010-11 in
profit and loss account?
(ii) What should be the treatment of the refund, if grant was deducted from the cost of the
plant during 2007-08 assuming plant account showed the balance of ` 84 lakhs as on
1.4.2010? 5
5.(a) On 1st April, 2012 in MK Ltd.’s ledger 9% debentures appeared with a opening balance of
` 50,00,000 divided into 50,000 fully paid debentures of ` 100 each issued at par.
Interest on debentures was paid half-yearly on 30th September and 31st March every year.
On 31.5.2012, the company purchased 8,00 debentures of its own @ `98 (ex-interest) per
debenture.
On 31.12.2012 it cancelled 5,000 debentures out of 8,000 debentures acquired on 31.5.2012.
On 31.1.2013 it resold 2,000 of its own debentures in the market @ `101 (ex-interest) per
debenture
You are required to prepare:
(i) Own debentures account;
(ii) Interest on debentures account; and
(iii) Interest on own debentures account. 8
(b) Write about finance lease and operating lease. 7
Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 3
MTP_ Intermediate _Syllabus 2012_Dec2016_Set 2
6. (a) The summarized Balance Sheet of Full Stop Limited as on 31 st March 2013, being the date of
voluntary winding up is as under:
Liabilities ` Assets `
Share capital: Land & building 5,20,000
5,000, 10% Cumulative Plant & machinery 7,80,000
Preference shares of ` 100 Inventory in trade 3,25,000
Each fully paid up 5,00,000 Book debts 10,25,000
Equity share capital: Profit & loss account 5,50,000
5,000 equity shares of ` 100
Each ` 60 per share called 3,00,000
And paid up
5,000 equity shares of `100 2,50,000
Each `50 per share called up and
paid up
Securities premium 7,50,000
10% debentures 2,10,000
Preferential creditors 1,05,000
Bank overdraft 4,85,000
Trade creditors 6,00,000
32,00,000 32,00,000
Preference dividend is in arrears for three years. By 31-03-2013, the assets realized were as
follows:
`
Land & building 6,20,000
Inventory in trade 3,10,000
Plant & machinery 7,10,000
Book debts 6,60,000
Expenses of liquidation are ` 86,000. The remuneration of the liquidator is 2% of the realization
of assets. Income tax payable on liquidation is ` 67,000. Assuming that the final payments
were made on 31-03-2013, prepare the liquidator’s statement of account. 9
(b) Gemini Ltd. came up with public issue of 30,00,000 equity shares of `10 each at `15 per share.
A,B and C took underwriting of the issue in 3:2:1 ratio.
Applications were received for 27,00,000 shares.
The marked applications were received as under:
A 8,00,000 shares
B 7,00,000 shares
C 60,00,00 shares
Commission payable to underwriters is at 5% on the face value of shares.
(i) Compute the liability of each underwriter as regards the numbers of shares to be taken
up.
(ii) Pass journal entries in the books of Gemini Ltd. to record the transactions relating to
underwriters. 6
7. (a) The balance sheet of bad luck Co. Ltd. As at 31.03.2015 is:
Liabilities ` Assets `
1,00,000 equity shares of ` 10 each 10,00,000 Goodwill 2,00,000
Fully paid-up Other Assets 9,00,000
Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 4
MTP_ Intermediate _Syllabus 2012_Dec2016_Set 2
10% 4,000 debentures of ` 100 4,00,000 Profit & loss A/c 5,00,000
each
Interest on debentures 40,000
Sundry creditors 16,00,000 16,00,000
For the purpose of reconstruction of the company, necessary resolutions are passed on the
following lines:
(i) The equity shares are to be sub-divided into shares of ` 1 each and each shareholder
shall surrender 60% of his holding.
(ii) Out of the surrendered shares, 60,000 shares will be converted to 8% preference shares
of ` 10 each.
(iii) Debentures holders will reduce their total claims by ` 1,40,000 and in considerations,
the debenture holders are to get the entire preference share capital converted from
shares surrendered.
(iv) Creditors claims are to be reduced to the extent of ` 1,00,000 and in consideration they
are to receive equity shares of Rs. 1 each amounting to ` 40,000 from the shares
surrendered.
(v) Goodwill and profit and loss A/c (Dr.) are to be written – off completely.
(vi) The remaining surrendered shares shall be cancelled.
You are required to give the journal entries. 6
(b) The following were the summarized balance sheets of P Ltd. and V Ltd. as at 31 st March 2012:
Liabilities P Ltd. V Ltd.
(` in lakhs) (` in lakhs)
Equity share capital (Fully paid shares of `10 each) 15,000 6,00
Securities premium 3,000 6,000
Foreign project reserve - -
General Reserve 9,500 3,200
Profit and loss account 2,870 825
12% Debentures - 1,000
Trade payables 1,200 463
Provisions 1,830 702
33,400 12,500
Assets P Ltd. V Ltd.
(` in lakhs) (` in lakhs)
Land and Buildings 6,000 -
Plant and Machienry 14,000 5,000
Furniture, fixtures and fittings 2,304 1,700
Inventory 7,862 4,041
Trade receivables 2,120 1,100
Cash at bank 1,114 609
Cost of issue of debentures - 50
33,400 12,500
All the bills receivable held by V Ltd. were P Ltd’s acceptances.
On 1st April 2012, took over V Ltd. in an amalgamation in the nature of merger. It was agreed
that in discharge of consideration for the business P ltd. would allot three fully paid equity
shares of Rs. 10 each at par for every two shares held in V Ltd. it was also agreed that 12%
debentures in V Ltd. would be converted into 13% debentures in P Ltd. of the same amount
and denomination.
Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 5
MTP_ Intermediate _Syllabus 2012_Dec2016_Set 2
Details of trade receivables and trade payables as under:
P Ltd V Ltd.
(` in lakhs) (` in lakhs)
Trade payables 120 -
Bills payable 1,080 463
Creditors 1,200 463
Trade receivables
Trade receivables 2,210 1,020
Bills receivable - 80
2,210 1,100
Expenses of amalgamation amounting to ` 1 lakhs were borne by P Ltd.
You are required to:
(i) Pass journal entries in the books of P Ltd. and
(ii) Prepare P Ltd.’s balance sheet immediately after the merger. 9
Section – C
Answer any two Questions
8. (a) What are the differences between internal control, internal check and internal audit? 9
(b) Write about audit risk. 6
9. (a) What is the procedure of audit of commercial account? 8
(b) What is the role of cost auditor in the company? 7
10. (a) What is India’s response to auditors needs? 7
(b)How audit is conducted for inter corporate laws and investments? 8
Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 6
