INTERMEDIATE (IPC) ROUP I - PAPER3 wAY 2014 Roll No. OST ACCOUNTING Total No, of Questions &¢FINANCIAL MANAGEMENT se printed Pages - 24 Time Allowed - 3 Hours Maximum Marks ~ 100 LTC-H Answers are to be given only in English except in the case of candidates who have opted for Hindi Medium. [f a candidate has not opted for Hindi medium, his / her answers in Hindi will not be valued. Question No. 1 is compulsory. Answer any five questions from the remaining six questions. Working notes should form part of the answers. Marks 1. Answer the following ; 45 (a) SHA Limited provides the following trading results : Year Sale Profit 2012-13 £25,00,000 10% of Sale 2013-14 %20,00,000 8% of Sale You are required to calculate : (i) Fixed Cost (ii) Break Even Point Gil) Amount of profit if sale is € 30,00,000 (iv) Sale, when desired profit is € 4,75,000 () Margin of Safety at a profit of & 2,70,000 LICH PTO.@ LTC-H Marks {b) A manufacturing company has disclosed net loss of & 48,700 as per their cost accounting records for the year ended 31 March, 2014. However their financial accounting reconds disclosed net profit of © 35,400 for the same period. A scrutiny of data of both the sets of books of accounts revealed the following informations : z (i) Factory overheads under absorbed 30,500 (ii) Administrative overheads over absorbed 65,000 (ii) Depreciation charged in financial accounts 2.25,000 (iv) Depreciation charged in cost accounts 2,70,000 (x) Lacome-tax provision 52.400 (vi). Transfer fee (credited in financial accounts) 40.200 (vii) Obsolescence loss charged in financial accounts 20,100 (viii) Notional rent of own premises charged in cost $4,000 accounts (ix) Vaiue of opening stock : (@) in cost accounts 1,38,000 (&) in financial accounts 4,15,000 (Value of closing stock : {a) in cost accounts 1,22,000 (} in financial accounts 1,12,500 Prepare a Memorandum Reconciliation Account by taking costing loss as base. LTC-Hte) (d) Q) LTC-H Marks NOOR Limited provides the following information for the year ending 31" March, 2014: Equity Share Capital 2 25,00,000 Closing Stock 7 6,00,000 Stock Tumover Ratio Stimes Gross Profit Ratio 15% Net Profit / Sale 20% Net Profit / Capital 1 ‘You are required ta prepare : Trading and Profit & Loss Account for the year ending 31" March, 2014. The following details are provided by the GPS Limited : z Equity Share Capital 65,00,000 12% Preference Share Capital 12,00,000 15% Redeemable Debentures 20,00.000 10% Convertible Debentures 8,00,000 The cost of equity capital for the company is 16.30% and Income Tax rate for the company is 30%. You are required to calculate the Weighted Average Cost of Capital CWACC) of the company. LICH PTO.2 aw LTC-H Marks (@) A company manufactures a product trom a rw material, which is purchased al 80 per kg. The company incurs 4 handling cost of ¢ 370) pins freight of & 380 per order. The incremental carrying cost of inventory of raw material 1s % 0.25 per kg per month. In addition, the cost of working capital finance on the investment in inventory of ratw material is © 12 per kg per annum. The annual production of the product is 1,00,000 units and 2.5 onits are obtained from one kg. of raw material. Required : G) Calculate the economic ordez quantity of raw materials. Gi) Advise, how frequently company should erder for procurement be placed. (iii) If the company proposes to rationalize placement ef orders on quarcerly basis, what percentage of discount ia the price of raw materials should be negotiated ? Assume 360 uays in a year, (6) A company had the following Balance Sheet 2s on 31° Murch, 2014: 8 z eG Liabilities (mj Assets | Gn : crores) | crores | Equity Share Capital oo (60 lakh shares of FS , 12s cach) | Reserves and Surplus 1 738 15% Debentures 16 Current Liabil 4 tot 20 LE The additional information piven is as under : Fixed cost per annum (excluding interest) % 4 crores Variable operating cost ratio 65% ‘Total assets turnover ralio 25 Income Tax rate 30% LTC-H@ @) LICH Marks Required : Calculate the following and comment : i) Barings Per Share (ii) Operating Leverage iii) Financial Leverage (iv) Combined Leverage M J PYt. Lid. produces a product “SKY” which passes through two _g. Processes, viz. Process-A and Process-B. The details for the year ending 31 March, 2014 are as follows ; Process-A Process -B 40,000 Units introduced at acost of | -3,60,000. = Material Consumed 3 2,42,000 2,25,000 Direct Wages *-% 2,58,000 1,90,000 Manufacturing Expenses 7 1,96,000 —1,23,720 Output in Units 37,000 27,000 Normal Wastage of Input 5% 10% Scrap Value (per unit) 15 20 Selling Price (per unit) R37 6 Additional Information : (a) 80% of the output of Process-A, was passed an 10 the next process and the balance was sold. The entire output of Process-B was sod. (©) Indirect expenses for the year was & 4,48,080. (©) [tis assumed that Process-A and Process-B are not responsibility centre. Required : () Prepare Process-A and Process-B Account. (i) Prepare Profit & Loss Account showing the net profit /nct loss for the year. LIC-H P.T.O.(b) @ ia) LTC-H Marks FH Hospital is considering to purchase a CT-Scan machine, Presently 8 the hospital is outsourcing the CT-Scan Machine and is eaming commission of & 15,000 per month (net of tax). The following details are given regarding the machine : z Cost of CT-Sean machine 415.00,000 Operating cost per annum (excluding —2,25,000 Depreciation) Expected revenue per annum 7,90,000 Salvage value of the machine (after 5 3,00,000 years) Expected life of the machine 5 years ‘Assuming tax rate @ 30%, whether it would be profitable for the hospital to purchase the machine ? Give your recommendation under : (i) Net Present Value Method, and (ii) Profitability Index Method. PV factors at 12% are given below : Year 1 2 3 4 5 PV factor 0.893 0.797 0.712 0.636 0.567 XYZ.Co. Ltd. provides the following information = 8 Standard Actual Production 4,000 Units 3,800 Units ‘Working Days 20 21 Fixed Overhead % 40,000 239,000 Variable Overhead © 12,000 = 12,000 ‘You are required to calculate following overhead variances : (@) Variable Overhead Variance (b) Fixed Overhead Variances () Expenditure Variance (ii) Volume Variance LTC-Ha LICH Marks ‘The Balance Sheets of Z Ltd. as on 31" March, 2013 and 31" March, 2014 are as under : ‘Liabilidles 2013 2014 | Assets | 2013 2014 z z z z Equity share | 15,00,000 | 20,00,000 | Goodwill | 5.75,000! 4,50.000 | capital 12% Land & Redeemable Building | 10,00,000 | 8,50,000' pref. share cap. | 7,50,000 | 5.00,000 | ! General i | Plant 4,00,000 | 10,00,000 Reserve 2,00,000 | 3,50,000 i Profit & Loss Debtors | 8,00,000 | 12,60,000 | Ale 1,50,000) 240,000 j Creditors. | 2.75.00 4,15.000| Stock 4,85,000 | 4,35,000 Outstanding Marketable Expenses | 1,00,000! — 80,000 | Securities : 75,000] 50.000 Provision for, Cash and Tax | 2,060,000 | 2,50,000 | Bank 50,000] 40,000 Proposed Dividend 2,10,000 | 2,50,000 33,85,000 | 40,85,000 33,85,000 | 40.35,000: 4 _ Lo LIC-H P.T.O.f) (b) &) (da) 8) LTC-H M Additional Information : (i) Depreciation charged on Plant and Land & Buildings during the year was % 50,000 and @ 1,00,000 respectively. (ii) Income-Tax T 4,75,000 was paid during the year 2013-14. (ii) An Interim Dividend of © 1,00,000 has been paid in 2013-14, Prepare Cash Flow Statement. ‘Distinguish between cost control and cost reduction. axA =16 Explain the following : @ Explicit costs (ii) Engineered costs Discuss emerging issues affecting the future role of Chief Financial Officer (CFO). State the main features of Global Depositary Receipts (GDRs) and American Depositary Receipts (ADRs). LIC-H6 @ amy LTC Marks M/s ABID Constructions undertook a contract at u price of €17.00 8 Jacs, The relevant data for the year ended 31° March, 2014 are as onder: Material issued at site Direct Wages paid Site office cost Material return to store Work certified Work uncertified Progress Payment Received Prepaid site office cost as on 34-03-2014 Direct wages outstandiag as on 31-03-2014 Materia) at site as on 21-03-2014 Additional Information : tai (bt tc) A plant wes purchased for the contract at % 8,00,000 on 01-12-2013 (000) 7700 3300 550 175 12650 228 10120 50 100 110 Depreciation @ 15% per annum is to be charged. Material which cost & 1.30.000 was destroyed by fire. LTC-H PTO.(10) LTC-H Marks Prepare : (Contract Account for the year ended 31 March, 2014 and compute the profit to be taken to the Profit & Loss Account Gi) Account of Contractee. Gi) Profit & Loss Account showing the relevant items. (iv) Balance Sheet showing the relevant items. (b) Black Limited has furnished the following cost sheet: 8 ti Per Unit Raw Material 98 Direct Labour 53 Factory Overhead 38 (Includes depreciation of % 15 per unit at budgeted level of activity) Total Cost 239 Profit 43 Selling Price 282 LTC-Hay LTC-H Marks Additional Information : @ Average raw muterial in stock 3 weeks (i) Average work-in-progress 2 weeks (9 Of completion with respect to Material - 75% Labour & Overhead — 70%) (iii) Finished goods in stock 4 weeks Gv) Credit allowed to debtors 2b weeks (¥) Credit allowed by creditors at weeks (vi). Time lag in payments of labour 2 weeks (vii) Time lag in payments of Sactery veces overheads (viii) Company sells. 25% of the output against cash (ix) Cash in hand and bank is desired to be maintained % 2 000 (x) Provision for contingencies is requited @ 4% of working capital fequirement including that provision. ‘You may assume tal production is carried on evenly throughout the year and labour and factory overheads accrue similarly. ‘You are required to prepare a statement showing estimate of working capital needed to finance a budgeted activity level of 104000 units of prodnction. Finished stock, debtors and overhead are taken at cash cost, LTC-H P.T.O.(12) Lic-H Marks Answer any four of the following = aa (a) Distinguish between allocation and apportionment of cost. =16 (b) Describe the salient features of budget manual. (©) Explain the following = (i) Concentration Banking (ii) Lock Box System (@) Comment on ihe Debt Service Coverage Ratio, (e) @ Name any four financial instruments, ‘which arc related to imemational financial market. (ii) State the unit of cost for the followings : (1) Transport (2) Power @ Hotel (4) Hospital LTC-Haa LICH (Hindi Version) a Theafirat st orem Pre fit eer get, wet Hae Sac ast AE oF “ag whremeit Fre Fest aera sat aa &, fe first sare Far &, ah sae feat fet vt seal aria set A we tem 1 art t 1 ew wet oa Feral ote eet ore alfire vant femaforat (Working Notes) TOC & wa EF TET | Marks feather & sae Stine; aS (2) Cara fs, Frese sare ators wef waa: aw fost are 2012-13 ©25,00,000 Fawr eT 10% 213-14 7 20,00,000 fama #1 8% cart avira & fie frcateafias a moran aoe @ fereerr Gi) eae By Giiy TOT AH TR, He fer Z 30.00.00 F ivy Paena, =f aifer rr & 4,75,000 () 2 2,70,000 oma Ten St ST LIC-H PTO.aa) LTC-H Marks (0) er rath wert > 31 art 2014 BY wars OS er ad flee ATA Phen vat arene oe F 45,700 a eh wef at 1 rata ert & fee rar weaat 3 set araratty 35.400 ss I efATT Ber FY eet con qerat at aia & gore Protein qaart ora wi z {Bes Heater scare safer 30,509 Gy oR servi eraPre sche 65,000 Gi) feet ara A ater ren we 2.28.00 Giv) carer rat A are TEN TT 2.70,900 () SPEC aT AT 52,400 (i) Beara ype (acta Beet A oem 10.200 (vii) FTAETT (obsolescence) WR fait vrat G am Rie TT 20.700 (iti) BRR OR Sr A ad feet ore Sat Fat fr $4,000 Ta oxy orien eee TPT: @) Areca t 1,38.006 tb) fader eet 115,000 &) ara eet Pa (a) carmel 122.000 tb) fata tai a 112.500 ama Seal at a St SMT OFT BT OTA TAP GET (Memorandum Reconciliation Account) Ame AE | LIC-H(15) LIC-H Marks je) FORT and 2018 ear a aret oe & fore Priston Tend RA at ¢ Tae ote sh 2 25,00,000 afr vette 8 600,000 TA AAT STAT Siar BRT ATA SEIT 25% wear ; fae 20% Bea | ist ; amma arte & fis 31 art 2014 Ht mart Fa ae & fore caraiew a oA. fr arn dar afar 1 Ce) hers fer. are Freeferfiarr fercremn wet Qa: z amet sit tt 65,00,000 12% yelfier aie fet 12,00,000 15% siete Fa 20,00,000 10% vicars sersa 8.00.00 sport at wat Ba wt cara 16.30% & mer Beh & fore sree at ae 30% €1 are arte & Fa earch Bh it Bt softer sited eres ST TORT aS A @) Ue eer feel aq ar sees ect Et wee Oat arm @ Fife att F fast & a0 mafer fase oat xO ae fer ore & ser wh sar ered Aw ater wereg arts & 370 var GME FT 380 Usa Feed Ae a Raat at ante ses arma % 0.25 afer Rem afer ane & 1 eety afar, wed are at weed Fare oc eration Spa at feet cma & 12 fet faa ot at ey BI TART TATE 100,000 THT € ser car fm A wed aT GT 25 caret are st ar F LTC-H P.T.O.) 16 LICH Mark: afin & @ Bea we Bi snieE sneM AAT (Economic Order Quantity) at TT SRT | @ gma Shag fis sort ex age Swed oe aT ae tq one Hive mI Giiy Re Sm rt rere ae ie ae ahr eT nett ah wed TT at ptaa 1 Reed aftera Ge oe arti aT eT ? ea a W360 fee et areca aif facet apmrft ar 3) Ut 2014 a Hane EF art ae ar sofere Pegy Pera wT Te ~ = | cfs | cmt) wert mtr | waa ae Gat ; Tea ane : i 50 ara aa wed T 10 A 5 ee ; 12.5 | aaa oe arf I jp Taeetaat 75 | 359% aT | wi: : arg, sia a | : i L 2m | al Sao SATA FE WEES SI TE Rem ore wre (Unt I TER lang afeadagter sfeerert orm area 65% Fe wate angie gut 28 ARCA 30% wif & : (iat ater at (Eamings Per Share) (ii) Fer ataGH (Operating Leverege) Gi) fareita ettatst (Financial Leverage) (iv) Bape stat (Combined Leverage) LIC-Ha a uy LTGE Marks wr a at far sere sky” ar Peer sect et at Warrat t erp es g wisret — A aa sfapar — B31 HI 2016 sr Ts eA ae ay fare Beer freaaat : View a wieT-B 40.000 FANG PERT aIPTT 3.60.00 - roa aT 7 2,42,000 % 2,25,000 eer ET F2SRWOO 7 1,90,000 fata oe 71.96.0002 1,23.720 ‘searget (genet Ah 37.000 27,000 aT art 5% 10% wer ofa wa) tis 20 fama ape caf tare) 37 z61 sfitan art - fa) UBRAT — AA 80% Sones RET Wom ar eeaafes fara Ter & ce ara ai ara fea aan & i nfrer - @ ar ane Seas ra fem ATE (>) We SST aT F 4,498,080 7 1 (©) 78 st err sitar fe fer — 4 ae nie — Bore be E arian & : GS — 4 aren cen wiser — Bsr dae SRA Gi) Th ype erage a veins ee aE oT rer Aare ST | LYC-H P.T.O.(is) LIC-A Marks () Ue Ue ee oe CTs ei oe ee eo TE iar og ama to sere 3 we CTS anita at ongeat fier & fred arte © 15,000 where cextrasT ora een 1 nails A aaa brerfeafige frror faa: z creer atin tare 15,00,000 ‘ofecerers FT (aft ae) (RT I BTEHD) 2,25,000 ‘peenfere ste (RPT ay 7,90,000 ai or ores = Ghat ate aearQ 3,00,000 rete ar secfera Hia . sat wae OH Re 30% HIRT EE aT Hh ST wT HEAT aeeTETT fea ve aT? Proafetinn & arevia are aeahe Stare @ yea yea vel et Gi) ereRe Revie wa | aR HRT wee 12% Bh ge ae Freraa wt It 2 3 4 3 WaATT ETE 0.893 0.797 0.712 0.636 0.567 (a) XYZ & fa. 3 Preteen quart wert ate: sera artes ‘ TORT 4,000 eared 3,800 Serge arte fe 20 2 fer sefcerr % 40,000 F 39,000 aieadaetter saat % 12,000 2 12.000 LICHuy LTC-H Marks freseirs softer fercot a rrorar wear antat artis (a) Weadaniin softers fray (o) Ree soe Pract @® safer Gi) AGT (volume) fereT tb) 2 fe, 431 Are 2013 oer 31 aes 2014 wt atte fag fa E & 1 . aieet 2013 2014 | weft | 2015 2014 z z z z -axet ait fe} 1 15,00,000 | 20,00,000 | wr | 5,75,000 |} 4,50,000 12% vee aft 10,00,000 | 8,50,000 atirere aie Fh] 7,50,000| 5,00,000 | 777 WRT TTT — | 2.00.00; 350,000 | Wa 4,00,000 | 10,00,000 mae ae 1,50,000| 2,40,000 re 8.00,000 | 12,60,000 | rer 2 275.000} 4.15.00 | ter 485,000 | 4.35.00 ern aT 1,00,000 | 80,000 | Fret ater 1 ferret 75,000) 50,000 we fee] 2,00,000) 2.50,000 | tee et 50,000| 40,000 sents amar | 2,10,000| 2.50,000 33,85,000 | 40,85,000 33,835,000 | 40,85,000 LIC-H P.O.@) by © a) 20) LICH Marks afetcen qed : (Rea rer of ee a aE & Ah EM; F 50,000 TAT T 1,00,000 SA ET TAT (iy FE 2013-14 HAF 175,000 1 ARTE TTA Pra TAT | Gi) 2013-14 FT 100,000 Fr areher erate Fear aT eae wae faery dare fare anne Fran a atera ae oe ee TT 4x4 =16 Preafetttee care SAT @ Berm Gi) Pifras art ayea facta aired (Chief Financial Officer) 1 ste fT SH nfas Be aaa are fargsit (Emerging Issues) Ht Facern SAT | Tatas favifned wife GORs) a1 aaa Pectived sift (ADRs) FS prereit eet eae ARTE | LTC-H6 @) a LIC-H Marks ted anfag egaera 5 © 171.00 re Aea a ee Se fa 31 A 014g Brae FH are at a eae Paar Pitan & & *000) ware oe Pifie it 7700 wera TEL I PTT 3300 weet rater Bh AMT 550 Se ase a a aT 175 wetter eRe 12650 seafira ar 25 edna eT BET 10120 UR Bree IGT ea (31-03.2014 $0 WRT WRT ARG (31-03-2014 Bh 100 ‘Breit WE APT (31-03-2014 Fy 110 attra qe G@) 01-12.2013 Bt oH fae ww aaa T 8,00,000 i ama a we fare 7 1 (o) 15% Bina ater ad ere arr (co) Aaah fareet arra € 130,000 a, aS ae a Hr LTC-H P.T.O,en LIC-H Marks dare aitfare : 31 FE 2014 wh were BA are aE fre Se eT er aT Tara 8 Fare AA act TA TTT G) Bara a4T Gi) Weaker eet at aatia EE OTHE ETT Gy) Weathre Tet at aati ge sate Past (oy whe fr, 3 Preifteze ert a efi fart teat yee weet AA 98 RT 9 53 ERE TORT 88 eterna Bade Ga We le Head T 15 wT TTC ea 239 a a 282 LTC-HQh LTC-H Marks afatoet ered @) Bist stra sero 3 Be (i) sta Fraime art (wap) 2 wee Cyt a fires; arn — 75% Ud aaftera — 70%) Gil) Rhee ay Pie are 4a si at 1 @) TRENT at arp ee ay ene ©) Sei t aps ae shaoe (i) sR pert asic 2 ae Qi) PREP she & rea yaar daar (viii) FTE gear aT 250% FRE TIM fare aret & | (i) Berea rer fed atti te © 225,000 Ge) sfareronei (contingencies) & font arifira ara — mera at aint re WC rive ot ae 494, Fe Monee Ps ee a as faci en Ue Ute Set Were ae ee Ra eT Uf FY LOROO Taree serze Seer ere fer Re er Go ar ame we ye Freees tha wife | fie we, Der eer ache RT SIRE a APT STEER LTC-H P.T.O.(24) LICH Marks frafaie 8 & fet ore & ane sia; aa fe) are care ae eres aT Ae IRE HPA 16 (bi waetqaa & fafere eet at ere ating | (eh @ @) Rreferfiag et omen afr : () BRR (Concentration) &f81 Gi) BRR are ET enter eae org Te feoroht SAAT a aarigte Sate arare @ wean Rees are facts aver TT aT | Gay Protatign & fag cara a gard at ere aif: w @) GB) a ‘WaT (Transport) aR (Power) Brect (Hotel) SARATTIEA (Hospital) LTC-H