CA INTERMEDIATE
SUBJECT- ADVANCE ACCOUNTS
Test Code – INP 2125
(Date :)
(Marks - 100)
TOPIC : FULL COURSE
QUESTION : 1(A)
A machine was given on 3 years operating lease by a dealer of the machine for equal annual
lease rentals to yield 30% profit margin on cost Rs. 1,50,000. Economic life of the machine is
5 years and output from the machine are estimated as 40,000 units, 50,000 units, 60,000
units, 80,000 units and 70,000 units consecutively for 5 years. Straight line depreciation in
proportion of output is considered appropriate.
You are required to compute: (i) Annual Lease Rent and (ii) Lease Rent income to be
recognized in each operating year.
(5 MARKS)
QUESTION : 1(B)
XYZ Ltd. operates its business into various segments. Its financial year ended on 31 st March,
2020 and the financial statements were approved by their approving authority on 15th
June, 2020. The following material events took place:
a. A major property was sold (it was included in the balance sheet at Rs. 25,00,000)
for which contracts had been exchanged on 15th March, 2020. The sale was
completed on 15th May, 2020 at a price of Rs. 26,50,000.
b. On 2nd April, 2020, a fire completely destroyed a manufacturing plant of the
entity. It was expected that the loss of Rs. 10 million would be fully covered by the
insurance company.
c. A claim for damage amounting to Rs. 8 million for breach of patent had been
received by the entity prior to the year-end. It is the director's opinion, backed by
legal advice that the claim will ultimately prove to be baseless. But it is still estimated
that it would involve a considerable expenditure on legal fees.
You are required to state with reasons, how each of the above items should be dealt with in
the financial statements of XYZ Ltd. for the year ended 31st March, 2020.
(5 MARKS)
QUESTION : 1(C)
The following particulars are stated in the Balance Sheet of PQR Ltd. as on 31.03.2018:
(Rs. in lakh)
Deferred Tax Liability (Cr.) 30.00
Deferred Tax Assets (Dr.) 15.00
The following transactions were reported during the year 2018 -2019:
i. Tax Rate 30%
(Rs. in lakh)
ii. Depreciation as per books 80.00
Depreciation for tax purposes 70.00
iii. Items disallowed in 2017-2018 and allowed for tax 10.00
purposes in 2018-2019.
iv. Donations to Private Trust made in 2018-2019. 10.00
There were no additions to Fixed Assets during the year.
You are required to show the impact of various items on Deferred Tax Assets and Deferred
Tax Liability as on 31.03.2019.
(5 MARKS)
QUESTION : 1(D)
The accountant of Parag Limited has furnished you with the following data related to its
Business Divisions:
(Rs. in Lacs)
Division A B C D Total
Segment Revenue 100 300 200 400 1,000
Segment Result 45 -70 80 -10 45
Segment Assets 39 51 48 12 150
You are requested to identify the reportable segments in accordance with the criteria laid
down in AS 17.
(5 MARKS)
QUESTION : 2(A)
Recover Ltd decided to reorganize its capital structure owing to accumulated losses and
adverse market condition. The Balance Sheet of the company as on 31 st March 2020 is as
follows-
Particulars Notes Rs.
Equity and Liabilities
1 Shareholders’ funds
A Share capital 1 3,50,000
B Reserves and surplus 2 (70,000)
2 Non-current liabilities
A Long-term borrowings 3 55,000
3 Current liabilities
A Trade Payables 80,000
B Short term Borrowings – Bank overdraft 90,000
5,05,000
Assets
1 Non-current assets
A Property, Plant Equipment 4 3,35,000
B Intangible assets 5 50,000
C Non-current investments 6 40,000
2 Current assets
A Inventories 30,000
B Trade receivables 50,000
5,05,000
Notes to accounts:
1 Share Capital Rs.
Equity share capital:
20,000 Equity Shares of Rs. 10 each 2,00,000
Preference share capital:
15,000 8% Cumulative Preference Shares of Rs. 10
each (preference dividend has been in arrears for 4 1,50,000
years)
3,50,000
2 Reserves and surplus
Securities premium 10,000
Profit and loss account (debit balance) (80,000)
(70,000)
3 Long-term borrowings
Secured
9% Debentures (secured on the freehold property 50,000
Accrued interest on 9% debentures 5,000
55,000
4 Property, Plant and Equipment
Freehold property 1,20,000
Leasehold property 85,000
Plant and machinery 1,30,000
3,35,000
5 Intangible assets
Goodwill 50,000
50,000
6 Non-current investments
Non-Trade investments at cost 40,000
40,000
Subsequent to approval by court of a scheme for the reduction of capital, the
following steps were taken:
i. The preference shares were reduced to Rs. 2.5 per share, and the equity shares to
Rs. 1 per share.
ii. One new equity share of Rs. 1 was issued for the arrears of preferred dividend for
past 4 years.
iii. The balance on Securities Premium Account was utilized and was transferred to
capital reduction account.
iv. The debenture holders took over the freehold property at an agreed figure of
Rs. 75,000 and paid the balance to the company after deducting the amount due
to them.
v. Plant and Machinery was written down to Rs. 1,00,000.
vi. Non-trade Investments were sold for Rs. 32,000.
vii. Goodwill and obsolete stock (included in the value of inventories) of Rs. 10,000
were written off.
viii. A contingent liability of which no provision had been made was settled at Rs. 7,000
and of this amount, Rs. 6,300 was recovered from the insurance.
You are required (a) to show the Journal Entries, necessary to record the above
transactions in the company’s books and (b) to prepare the Balance Sheet, after
completion of the scheme. (16 MARKS)
QUESTION : 2(B)
On 1st April, 20X1, a company offered 100 shares to each of its 500 employees at Rs. 50 per
share. The employees are given a year to accept the offer. The shares issued under the plan
shall be subject to lock – in on transfer for three years from the grant date. The market price
of shares of the company on the grant date is Rs. 60 per share. Due to post – vesting
restrictions on transfer, the fair value of shares issued under the plan is estimated at Rs. 56
per share.
On 31st March, 20X2, 400 employees accepted the offer and paid Rs. 50 per share
purchased. Nominal value of each share is Rs. 10.
Record the issue of share in the books of the company under the aforesaid plan.
(4 MARKS)
QUESTION : 3(A)
H Limited acquired 64000 Equity Shares of Rs. 10 each in S Ltd. as on 1st October, 2019.
The Balance Sheets of the two companies as on 31st March, 2020 were as under:
Particulars H Ltd. S Ltd.
(Rs.) (Rs.)
Equities and Liabilities:
Equity Share Capital: Shares of Rs. 10 each 20,00,000 8,00,000
General Reserve (1st April, 2019) 9,60,000 4,20,000
Profit & Loss Account 2,28,800 3,28,000
Preliminary Expenses (1st April, 2019) - (20,000)
Bank Overdraft 3,00,000 -
Bills Payable - 52,000
Trade Payables 1,66,400 80,000
Total 36,55,200 16,60,000
Assets:
Land and Building 7,20,000 7,60,000
Plant & Machinery 9,60,000 5,40,000
Investment in Equity Shares of S Ltd. 12,27,200 -
Inventories 4,56,000 1,68,000
Trade Receivables 1,76,000 1,60,000
Bills Receivable 59,200 -
Cash in Hand 56,800 32,000
Total 36,55,200 16,60,000
Additional Information:
(1) The Profit & Loss Account of S Ltd. showed credit balance of Rs. 1,20,000 on 1st April,
2019. S Ltd. paid a dividend of 10% out of the same on 1 st November, 2019 for the year
2018-19. The dividend was correctly accounted for by H Ltd.
(2) The Plant & Machinery of S Ltd. which stood at Rs. 6,00,000 on 1st April, 2019 was
considered worth Rs. 5,20,000 on the date of acquisition by H Ltd. S Ltd. charges
depreciation @ 10% per annum on Plant & Machinery.
Prepare consolidated Balance Sheet of H Ltd. and its subsidiary S Ltd. as on 31st March,
2020 as per Schedule III of the Companies Act, 2013.
(15 MARKS)
QUESTION :3 (B)
(i) Mr. Raj a relative of key management personnel received remuneration of
Rs. 2,50,000 for his services in the company for the period from 1.4.2020 to 30.6.2020.
On 1.7.2020, he left the service. Should the relative be identified as at the closing date
i.e. on 31.3.2021 for the purposes of AS 18?
(ii) X Ltd. sold goods to its associate Company during the 1st quarter ending 30.6.2020.
After that, the related party relationship ceased to exist. However, goods were
supplied as were supplied to any other ordinary customer. Decide whether
transactions of the entire year need disclosure as related party transaction.
(5 MARKS)
QUESTION : 4(A)
On 1st April, 2021, Bimal Ltd. take over the business of Vimal Ltd. and discharged purchase
consideration as follows:
(i) Issued 50,000 fully paid Equity shares of Rs. 10 each at a premium of Rs. 5 per share
to the equity shareholders of Vimal Ltd.
(ii) Cash payment of Rs. 50,000 was made to equity shareholders of Vimal Ltd.
(iii) Issued 2,000 fully paid 12% Preference shares of Rs. 100 each at par to discharge the
preference shareholders of Vimal Ltd.
(iv) Debentures of Vimal Ltd. (Rs.1,20,000) will be converted into equal number and
amount of 10% debentures of Bimal Ltd.
Calculate the amount of Purchase consideration as per AS 14 and pass Journal Entry relating
to discharge of purchase consideration in the books of Bimal Ltd.
(5 MARKS)
QUESTION : 4(B)
Amit, Sumit and Kumar are partners sharing profit and losses in the ratio 2:2:1. The
partners decided to dissolve the partnership on 31st March, 2020 when their Balance
Sheet was as under:
Liabilities Amount Assets Amount
Capital Accounts: Land & Building 1,35,000
Amit 55,200 Plant & Machinery 45,000
Sumit 55,200 Furniture 25,500
General Reserve 61,500 Investments 15,000
Kumar's Loan A/c 15,000 Book Debts 60,000
Loan from D 1,20,000 Less: Prov. for bad debts (6,000) 54,000
Trade Creditors 30,000 Stock 36,000
Bills Payable 12,000 Bank 13,500
Outstanding Salary 7,500 Capital Withdrawn:
Kumar 32,400
Total 3,56,400 Total 3,56,400
The following information is given to you:
(i) Realization expenses amounted to Rs. 18,000 out of which Rs. 3,000 was borne by
Amit.
(ii) A creditor agreed to takeover furniture of book value Rs. 12,000 at Rs. 10,800. The
rest of the creditors were paid off at a discount of 6.25%.
(iii) The other assets realized as follows:
Furniture - Remaining taken over by Kumar at 90% of book
value Stock - Realized 120% of book value
Book Debts - Rs. 12,000 of debts proved bad, remaining were fully
realized
Land & Building - Realized Rs.1,65,000
Investments - Taken over by Amit at 15% discount
(iv) For half of his loan, D accepted Plant & Machinery and Rs. 7,500 cash. The
remaining amount was paid at a discount of 10%.
(v) Bills payable were due on an average basis of one month after 31st March, 2020,
but they were paid immediately on 31st March @ 6% discount "per annum".
Prepare the Realization Account, Bank Account and Partners’ Capital Accounts in columnar
form in the books of Partnership firm.
(15 MARKS)
QUESTION : 5(A)
KG Limited furnishes the following Balance Sheet as at 31st March, 20X1 :
Particulars Notes Rs.
Equity and Liabilities
1 Shareholders’ funds
A Share Capital 1 1,200
B Reserves and Surplus 2 810
2 Non – current liabilities
Long term borrowings 3 750
3 Current Liabilities
A Trade Payables 745
B Other Current Liabilities 195
Total 3,700
Assets
1 Non – current assets
A Property, plant and equipment 4 2,026
B Non – current Investment 74
2 Current assets
A Inventories 600
B Trade receivables 260
C Cash and Cash equivalents 740
Total 3,700
Notes to accounts
No. Particulars Rs.
1 Share Capital
Authorized, issued and subscribed capital
Equity share capital (fully paid up shares of Rs. 10 each) 1,200
2 Reserve and surplus
Securities premium 175
General reserve 265
Capital redemption reserve 200
Profit and loss A/c. 170
Total 810
3 Long term borrowings
12% Debentures 750
4 Property, plant and equipment
Land and Building 1,800
Plant and machinery 226
Net carrying value 2,026
On 1st April, 20X1, the company announced the buy – back of 25% of its equity shares @ Rs.
15 per share. For this purpose, it sold all of its investments for Rs. 75 lakhs.
On 5th April, 20X1, the company achieved the target of buy – back. On 30th April, 20X1 the
company issued one fully paid up equity share of Rs. 10 by way of bonus for every four
equity shares held by the equity shareholders.
You are required to :
(1) Pass necessary journal entries for the above transactions
(2) Prepare Balance Sheet of KG Limited after bonus issue of the shares.
(16 MARKS)
QUESTION : 5(B)
State with reason whether the following cash credit accounts are NPA or not :
Case – 1 Case – 2
Sanctioned limit 60,00,000 45,00,000
Drawing power 56,00,000 42,00,000
Amount outstanding continuously 01 01 – X1 to 31- 03 – X1 48,00,000 30,00,000
Total interest debited for the above period 3,84,000 2,40,000
Total credits for the above period Nil 3,20,000
(4 MARKS)
QUESTION : 6(A)
The following is the Balance Sheet of M/s. R and S as on 31st March, 2019:
Equity and Liabilities Rs. Assets Rs.
Capital Accounts: Machinery 54,000
R 50,000 Furniture 5,000
S 30,000 Investments (non-trading) 50,000
Reserves 20,000 Stock 20,000
Loan Account of S 15,000 Debtors 21,000
Creditors 40,000 Cash 5,000
1,55,000 1,55,000
It was agreed that Mr. T is to be admitted for a fourth share in the future profits from
1st April, 2019. He is required to contribute cash towards goodwill and Rs. 15,000 towards
capital.
The following further information is furnished:
(a) R & S share the profits in the ratio 3 : 2.
(b) R was receiving salary of Rs. 750 per month from the very inception of the firm in
2012 in addition to share of profit.
(c) The future profit ratio between R, S & T will be 2:1:1. R will not get any salary after the
admission of T.
(d) It was agreed that the value of goodwill of the firm shall be determined on the basis
of 3 years’ purchase of the average profits from business of the last 5 years. Goodwill
was not to be raised in the books. The particulars of the profits are as under:
Year ended Profit/(Loss)
31st March, 2015 25,000
31st March, 2016 12,500
31st March, 2017 (2,500)
31st March, 2018 35,000
31st March, 2019 30,000
The above Profits and Losses are after charging the Salary of R. The Profit of the year
ended 31st March, 2015 included an extraneous profit of Rs. 40,000 and the loss
for the year ended 31st March, 2017 was on account of loss by strike to the
extent of Rs. 20,000.
(e) The cash trading profit for the year ended 31st March, 2020 was Rs. 50,000 before
depreciation.
(f) The partners had drawn each Rs. 1,000 per month as drawings.
(g) The value of other assets and liabilities as on 31st March, 2020 were as under:
Rs.
Machinery (before depreciation) 60,000
Furniture (before depreciation) 10,000
Investment 50,000
Stock 15,000
Debtors 30,000
Creditors 20,000
(h) Provide depreciation @ 10% on Machinery and @ 5% on Furniture on the closing
balance and interest is accumulated @ 6% on S’s loan. The loan along with interest
would be repaid within next 12 months.
(i) Investments (non -trading) are held from inception of the firm and interest is
received @ 10% p.a.
(j) The partners applied for conversion of the firm into Karma Ltd., a Private Limited
Company. Certificate was received on 1st April, 2020. They decided to convert Capital
Accounts of the partners into share capital in the ratio of 2:1:1 on the basis of a
total capital as on 31st March, 2020. If necessary, partners have to subscribe to fresh
capital or withdraw.
Prepare the Profit and Loss Account of the firm for the year ended 31 st March, 2020 and
the Balance Sheet of the Company as at 1st April, 2020.
(15 MARKS)
QUESTION : 6(B)
Peoples Financiers Ltd. is an NBFC providing Hire Purchase Solutions for acquiring consuer
durables. The following information is extracted from its books as at year end :
Asset Funded Interest Overdue but recognized in Net Book Value of
Profit & Loss Assets Outstanding
Period Overdue Interest Amount
(Rs. in crore) (Rs.in crore)
LCD Televisions Upto 12 months 480.00 20,123.00
Washing Machines For 24 months 102.00 2,410.00
Refrigerators For 30 months 50.50 1,280.00
Air Conditioners For 45 months 26.75 647.00
You are required to calculate the amount of provision to be made.
(5 MARKS)
