CA-Inter New Course: Advanced Accounting

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CA-Inter New Course

Advanced Accounting
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CA- INTER NEW COURSE
ADVANCED ACCOUNTING
TOP 50 QUESTIONS
Q-1:- The financial position of X Ltd. and Y Ltd. as on 31stMarch, 2018 was as under:
X Ltd. (Rs) Y Ltd. (Rs)

Equity and Liabilities
Equity Shares of Rs10 each 30,00,000 9,00,000
9%Preference Shares of Rs100 each 3,00,000 -
10%Preference Shares of Rs100 each - 3,00,000
General Reserve 2,10,000 2,10,000
Retirement Gratuity Fund (long term) 1,50,000 60,000
Trade Payables 3,90,000 2,40,000
Total 40,50,000 17,10,000
Assets
Goodwill 1,50,000 75,000
Land & Buildings 9,00,000 3,00,000
Plant & Machinery 15,00,000 4,50,000
Inventories 7,50,000 5,25,000
Trade Receivables 6,00,000 3,00,000
Cash and Bank 1,50,000 60,000
Total 40,50,000 17,10,000
X Ltd. absorbs Y Ltd. on the following terms:
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(i) 10% Preference Shareholders are to be paid at 10% premium by issue of 9% Preference
Shares of X Ltd.
(ii) Goodwill of Y Ltd. on absorption is to be computed based on two times of average
profits of preceding three financial years (2016-17 : Rs 90,000; 2015-16 : Rs 78,000 and
2014-15: Rs 72,000). The profits of 2014 -15 included credit of an insurance claim of Rs
25,000 (fire occurred in 2013-14 and loss by fire Rs 30,000 was booked in Profit and Loss
Account of that year). In the year 2015 -16, there was an embezzlement of cash by an
employee amounting to Rs 10,000.
(iii) Land & Buildings are valued at Rs 5,00,000 and the Plant & Machinery at Rs 4,00,000.
(iv) Inventories are to be taken over at 10% less value and Provision for Doubtful Debts is to
be created @ 2.5%.
(v) There was an unrecorded current asset in the books of Y Ltd. whose fair value amounted
to Rs 15,000 and such asset was also taken over by X Ltd.
(vi) The trade payables of Y Ltd. included Rs 20,000 payable to X Ltd.
(vii) Equity Shareholders of Y Ltd. will be issued Equity Shares @ 5% premium.
You are required to
(i) Prepare Realisation A/c in the books of Y Ltd.

(ii) Show journal entries in the books of X Ltd.
(iii) Prepare the Balance Sheet of X Ltd. after absorption as at 31st March, 2018.
(20 Marks)
Q-2:- The following summarised Balance Sheets of H Ltd. and its subsidiary S Ltd. were prepared
as on 31st March, 2017:
H Ltd. (Rs) S Ltd. (Rs)

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Shareholders' Funds
Equity Share Capital (fully paid up shares of Rs10 each) 12,00,000 2,00,000
Reserves and Surplus
Profit and Loss Account 2,80,000 65,000
Current Liabilities
Total 22,37,000 5,43,000
Assets
Non-Current Assets
Fixed Assets
Machinery 6,40,000 1,80,000
Furniture 3,75,000 34,000
Non-Current Investments
Shares in S Ltd. -16,000 shares @ Rs20 each 3,20,000 -
Current Assets
Inventories 2,68,000 62,000
Cash and Bank 4,70,000 32,000
Total 22,37,000 5,43,000
H Ltd. acquired the 80% shares of S Ltd. on 1stApril, 2016. On the date of acquisition, General
Reserve and Profit Loss Account of S Ltd. stood at Rs50,000 and Rs30,000 respectively.
Machinery (book value Rs2,00,000) and Furniture (book value Rs40,000) of S Ltd. were revalued
at Rs3,00,000 and Rs30,000 respectively on 1stApril,2016 for the purpose of fixing the price of
its shares (rates of depreciation computed on the basis of useful lives : Machinery 10% and
Furniture 15%). Trade Payables of H Ltd. include Rs35,000 due to S Ltd. for goods supplied since
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the acquisition of the shares. These goods are charged at 10% above cost. The inventories of H
Ltd. includes goods costing Rs55,000 purchased from S Ltd.
You are required to prepare the Consolidated Balance Sheet as at 31 st March, 2017.
(20 marks)
Q-3:- The summarized Balance Sheet of SK Ltd. as on 31st March, 2018 is given below.
(Rs in '000)
Amount
Liabilities
Equity Shares of Rs 10 each 8%, 35,000
Cumulative Preference Shares of Rs100 each 17,500
6% Debentures of Rs 100 each 14,000
Sundry Creditors 17,500
Provision for taxation 350
Total 84,350
Assets
Fixed Assets 43,750
Investments (Market value Rs 3325 thousand) 3,500
Current Assets (Including Bank Balance) 35,000
Profit and Loss Account 2,100
Total 84,350
The following Scheme of Internal Reconstruction is approved and put into effect on 31st March,
2018.
(i) Investments are to be brought to their market value.

(ii) The Taxation Liability is settled at Rs 5,25,000 out of current Assets.
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(iii) The balance of Profit and Loss Account to be written off.
(iv) All the existing equity shares are reduced to Rs 4 each.
(v) All preference shares are reduced to Rs 60 each.
(vi) The rate of interest on debentures is increased to 9%. The Debenture holders surrender
their existing debentures of Rs 100 each and exchange them for fresh debentures of Rs
80 each. Each old debenture is exchanged for one new debenture.
(vii) Balance of Current Assets left after settlement of taxation liability are revalued at
Rs1,57,50,000.
(viii) Fixed Assets are written down to 80%.
(ix) One of the creditors of the Company for Rs 70,00,000 gives up 50% of his claim. He is
allotted 8,75,000 equity shares of Rs 4 each in full and final settlement of his claim.
Pass journal entries for the above transactions.
(10 marks)
Q-4:- M, N and O were Partners sharing Profits and Losses in the ratio of 5:3:2 respectively. The
Trial Balance of the Firm as on 31stMarch, 2020was the following:
Particulars Rs Rs
Machinery at Cost 2,00,000
Inventory 1,37,400
Trade receivables 1,24,000
Trade payables 1,69,400
Capital A/cs:
M 1,36,000
N 90,000
O 46,000
Drawing A/cs:
M 50,000
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N 46,000
O 34,000
Depreciation on Machinery 80,000
Profit for the year ended 31stMarch 2,48,600
Cash at Bank 1,78,600
7,70,000 7,70,000
Interest on Capital Accounts at 10% p.a. on the amount standing to the credit of Partners'
Capital Accounts at the beginning of the year, was not provided before preparing the above
Trial Balance. On the above date, they formed MNO Private Limited Company with an
Authorized Share Capital of 2,00,000 in shares of Rs10 each to be divided in different classes to
take over the business of Partnership firm.
You are given terms and conditions as under:
1) Machinery is to be transferred at Rs1,40,000.

2) Shares in the Company are to be issued to the partners, at par, in such numbers, and in
such classes as will give the partners, by reason of their shareholdings alone, the same
rights as regards interest on capital and the sharing of profit and losses as they had in
the partnership.
3) Before transferring the business, the partners wish to draw from the partnership profits
to such an extent that the bank balance is reduced to Rs1,00,000. For this purpose,
sufficient profits of the year are to be retained in profit-sharing ratio.
4) Assets and liabilities except Machinery and Bank, are to be transferred at their book
value as on the above date.
You are required to prepare:
(i) Statement showing the workings of the Number of Shares of each class to be issued by
the company, to each partner.
(ii) Capital Accounts showing all adjustments required to dissolve the Partnership.
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(iii) Balance Sheet of the Company immediately after acquiring the business of the
Partnership and Issuing of Shares.
(16 marks)
Q-5:- Equity capital is held by L, M, N and O in the proportion of 30:40:20:10. A, B, C and D hold
Preference share capital in the proportion of 40:30:10:20. If the paid up Equity Share capital of
the company is Rs 60 lakhs and Preference share capital is Rs 30 lakhs, find the voting rights of
shareholders (in percentage) in case of resolution of winding up of the company.
(5 marks)
Q-6:- Virat Ltd. furnishes the following summarized Balance Sheet as at 31st March, 2018:
Particulars Rs Rs
Equity and Liabilities :
(1)Shareholders Funds:
Share Capital 10,000, 12% Pref. Shares of Rs 100 each 10,00,000
fully paid up
1,00,000 Equity shares of Rs10 each fully paid up 10,00,000
Equity shares of Rs 10 each, Rs 8 paid up 4,00,000 24,00,000
(b)Reserve and Surplus
Profit & Loss A/c. (Dr. Balance) (3,50,000)
(2)Non-current Liabilities:
12% Debentures 15,00,000 15,00,000
Loan on Mortgage 4,50,000 19,50,000
(3)Current Liabilities:
Bank Overdraft 2,75,000
Trade Payables 7,30,000 10,05,000
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Total 50,05,000
Assets:
(1)Non-current Assets:
Fixed Assets - Land & Buildings 6,00,000
(2)Current Assets : Sundry Current Assets 44,05,000
Total 50,05,000
The mortgage loan was secured against the Land & Buildings. Debentures were secured by a
floating charge on all the assets of the company. The debenture holders appointed a Receiver.
The company being voluntarily wound up, a liquidator was also appointed. The Receiver was
entrusted with the task of realising the Land & Buildings which fetched Rs 7,50,000 . Receiver
also took charge of Sundry current assets of value Rs 30,00,000 and sold them for Rs 28,75,000.
The Bank overdraft was secured by a personal guarantee of the directors who discharged their
obligations in full from personal resources. The costs of the Receiver amounted to Rs 10,000
and his remuneration Rs 15,000.
The expenses of liquidator was Rs 17,500 and his remuneration was decided at 2% on the value
of the assets realised by him. The remaining assets were realised by liquidator for Rs 12,50,000.
Preference dividend was in arrear for 2 years. Articles of Association of the company provide
for payment of preference dividend arrears in priority to return of equity capital.
Prepare the accounts to be submitted by the Receiver and the Liquidator.
(10 marks)
Q-7:- Following is the summarized Balance Sheet of Super Ltd. as on 31 st March, 2018.
Liabilities In Rs
Share Capital
Equity Shares of Rs10 each fully paid up 17,00,000
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Reserves & Surplus
Revenue Reserve 23,50,000
Securities Premium 2,50,000
Profit & Loss Account 2,00,000
Infrastructure Development Reserve 1,50,000
Secured Loan
9% Debentures 22,50,000
Unsecured Loan 8,50,000
Current Maturities of Long term borrowings 15,50,000
93,00,000
Assets
Fixed Assets
Tangible Assets 58,50,000
Current Assets
Current Assets 34,50,000
93,00,000
Super Limited wants to buy back 35,000 equity shares ofRs10 each fully paid up on 1st April,
2018 at Rs30 per share.
Buy Back of shares is fully authorised by its articles and necessary resolutions have been passed
by the company towards this. The payment for buy back of shares will be made by the company
out of sufficient bank balance available as part of the Current Assets. Comment with
calculations, whether the Buy Back of shares by the company is within the provisions of the
Companies Act, 2013.
(10 marks)
Q-8:- Consider the following summarized Balance Sheets of subsidiary MNT Ltd.
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Liabilities 2017-18 2018-19
Amount in Rs Amount in Rs
Share Capital
Issued and subscribed 7500 Equity Shares of Rs100 each 7,50,000 7,50,000
Reserve and Surplus
Revenue Reserve 2,14,000 5,05,000
Securities Premium 72,000 2,07,000
Current Liabilities and Provisions
Bank Overdraft - 1,70,000
Provision for Taxation 2,62,000 4,30,000
15,88,000 23,08,000
Assets
Fixed Assets (Cost) 9,20,000 9,20,000
Less: Accumulated Depreciation (1,70,000) (2,82,500)
7,50,000 6,37,500
Investment at Cost - 5,30,000
Current Assets
Inventory 4,12,300 6,90,000
Trade Receivable 2,95,000 3,43,000
Prepaid expenses 78,000 65,000
Cash at Bank 52,700 42,500
15,88,000 23,08,000
Other Information:
1. MNT Ltd. is a subsidiary of LTC Ltd.

2. LTC Ltd. values inventory on FIFO basis, while MNT Ltd. used LIFO basis. To bring MNT
Ltd.'s inventories values in line with those of LTC Ltd., its value of inventory is required
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to be reduced byRs5,000 at the end of 2017-2018 and increased by Rs12,000 at the end
of 2018-2019. (Inventory of 2017-18 has been sold out during the year 2018-19)
3. MNT Ltd. deducts 2% from Trade Receivables as a general provision against doubtful
debts.
4. Prepaid expenses in MNT Ltd. include Sales Promotion expenditure carried forward of
Rs25 ,000 in 2017-18 and Rs12,500 in 2018-19 being part of initial Sales Promotion
expenditure ofRs37,500 in 2017-18, which is being written off over three years. Similar
nature of Sales Promotion expenditure of LTC Ltd. has been fully written off in 2017-18.
Restate the balance sheet of MNT Ltd. as on 31st March, 2019 after considering the above
information for the purpose of consolidation. Such restatement is necessary to make the
accounting policies adopted by LTC Ltd. and MNT Ltd. uniform.
(10 marks)
Q-9:- A Ltd. provides after sales warranty for two years to its customers. Based on past
experience, the company has the following policy for making provision for warranties on the
invoice amount, on the remaining balance warranty period.
Less than 1 year: 2% provision
More than 1 year: 3% provision
The company has raised invoices as under:
Invoice Date Amount (Rs)
11th Feb, 2017 60,000
25th Dec, 2017 40,0000
4th Oct, 2018 1,35,000
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Calculate the provision to be made for warranty under AS-29 as at 31st March, 2018 and 31st
March, 2019. Also compute amount to be debited to P & L account for the year ended 31 st
March, 2019.
(5 marks)
Q-10:- Following information is supplied by K Ltd.:
Number of shares outstanding prior to right issue -2,50,000 shares.
Right issue -two new share for each 5 outstanding shares (i.e.1,00,000 new shares)
Right issue price –Rs 98
Last date of exercising rights -30-06-2018.
Fair value of one equity share immediately prior to exercise of right on30-06-2018 isRs102.
Net Profit to equity shareholders:
2017-2018 –Rs 50,00,000
2018-2019- Rs 75,00,000
You are required to calculate the basic earnings per share as per AS-20 Earnings per Share.
(5 marks)
Q-11:- n 1st April, 2018, XYZ Ltd., offered 150 shares to each of its 750 employees at Rs60 per
share. The employees are given a year to accept the offer. The shares issued under the plan
shall be subject to lock-in period on transfer for three years from the grant date. The market
price of shares of the company on the grant date is Rs72 per share. Due to post-vesting
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restrictions on transfer, the fair value of shares issued under the plan is estimated at Rs67 per
share.
On 31st March, 2019, 600 employees accepted the offer and paid Rs 60per share purchased.
Nominal value of each share is Rs10.
You are required to record the issue of shares in the books of the XYZ Ltd., under the aforesaid
plan.
(5 marks)
Q-12:- A non-banking finance company provides the extract of its balance sheet as given below:
Equity and Liabilities Amount Assets Amount

Rsin 000 Rsin 000
Paid-up equity capital 400 Leased out assets 3,200
Free reserves 2,000 Investment:
Loans 1,600 In shares of subsidiaries and group
Deposits 1,600 companies 400
In debentures of subsidiaries and
group Companies 400
Cash and bank balances 800
Deferred expenditure 800
5,600 5,600
You are required to compute 'Net owned Fund' of this NBFC as per Non-Banking Financial
Company -Systemically Important Non-Deposit taking Company and Deposit taking Company
(Reserve Bank) Directions, 2016.
(5 marks)
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Q-13:- GTI Ltd. negotiates with Bharat Oil Corporation Ltd. (BOCL), for construction of “Retail
Petrol & Diesel Outlet Stations”. Based on proposals submitted to different Regional Offices of
BOCL, the final approval for one outlet each in Region X, Region Y, Region Z is awarded to GT I
Ltd. A single agreement is entered into between two. T he agreement lays down values for each
of the three outlets i.e. Rs102 lacs, Rs150 lacs, Rs130 lacs for Region X, Region Y, Region Z
respectively. Agreement also lays down completion time for each Region.
Comment whether GT I Ltd. will treat it as single contract or three separate contracts with
reference to AS-7?
(5 marks)
Q-14:- The Board of Directors decided on 31.3.2019to increase the sale price of certain items
retrospectively from 1stJanuary, 2019. In view of this price revision with effect from 1st January
2019, the company has to receive Rs 15 lakhs from its customers in respect of sales made from
1st January, 2019to 31st March, 2019. Accountant cannot make up his mind whether to include
Rs 15 lakhs in the sales for 2018-2019. Advise.
(5 marks)
Q-15:- The following is the Balance Sheet of M/s. Pratham and Kaushal as on 31st March, 2019:
Liabilities Rs Assets Rs
Capital Accounts: Machinery 54,000
Pratham 50,000 Furniture 5,000
Kaushal 30,000 Investments (non-trading) 50,000
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Reserves 20,000 Stock 20,000
Loan Account of Kaushal 15,000 Debtors 21,000
Creditors 40,000 Cash 5,000
1,55,000 1,55,000
It was agreed that Mr. Rohan 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) Pratham & Kaushal share the profits in the ratio 3 : 2.

(b) Pratham was receiving salary of Rs 750 p.m. from the very inception of the firm in
2012in addition to share of profit.
(c) The future profit ratio between Pratham, Kaushal & Rohan will be 2:1:1. Pratham will
not get any salary after the admission of Rohan.
(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. 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 Pratham. 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.
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(f) The partners had drawn each Rs 1,000 p.m. 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 Kaushal’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 31st March, 2020 and the
Balance Sheet of the Company on 1st April, 2020.
(20 marks)
Q-16:- Alpha Ltd. is under the process of liquidation. Liquidator is entitled to receive
remuneration at 2% on the assets realized, 3% on the amount distributed to Preferential
Creditors and 3% on the payment made to Unsecured Creditors. The assets were realized for Rs
37,50,000 against which payment was made as follows:
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Liquidation Expenses Rs 37,500
Secured Creditors Rs 15,00,000
Preferential Creditors Rs 1,12,500
The amount due to Unsecured Creditors was Rs 22,50,000.
You are asked to calculate the total Remuneration payable to Liquidator. Calculation shall be
made to the nearest multiple of a rupee.
(5 marks)
Q-17:- A fire, on 2nd April, 2020, completely destroyed a manufacturing plant of Omega Ltd.
whose financial year ended on 31st March, 2020, the financial statements were approved by
their approving authority on 15th June, 2020. It was expected that the loss of Rs 10 million
would be fully covered by the insurance company. How will you disclose it in the financial
statements of Omega Ltd. for the year ended 31st March, 2020.
(5 marks)
Q-18:- Som Ltd. agreed to takeover Dove Ltd. on 1st April, 2020. The terms and conditions of
takeover were as follows:
(i) Som Ltd. issued 56,000 equity shares of Rs100 each at a premium of Rs10 per share to
the equity shareholders of Dove Ltd.
(ii) Cash payment of Rs 1,00,000 was made to equity shareholders of Dove Ltd.
(iii) 20,000 fully paid preference shares of Rs 70 each issued at par to discharge the
preference shareholders of Dove Ltd.
You are required to calculate the amount of purchase consideration as per the provisions of AS
14.
(5 marks)
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Q-19:- Classify the following into either operating or finance lease:
(i) If Present value (PV) of Minimum lease payment (MLP) = "X" ; Fair value of the asset is
"Y" and X=Y.
(ii) Economic life of the asset is 7 years, lease term is 6.5 years, but asset is not acquired at
the end of the lease term;
(iii) Economic life of the asset is 6 years, lease term is 2 years, but the asset is of special
nature and has been procured only for use of the lessee.
(5 marks)
Q-20:- The following data is provided to you:
Subsidiary % Cost Date of acquisition Consolidation Date

Company shares
owned
1.1.2018 31.12.2018
Case Share Profit & Share Profit &
Capital Loss Capital Loss
Account Account
Rs Rs Rs Rs Rs
Case1 A 90% 1,40,000 1,00,000 50,000 1,00,000 70,000
Case2 B 85% 1,04,000 1,00,000 30,000 1,00,000 20,000
Case3 C 80% 56,000 50,000 20,000 50,000 20,000
Case4 D 100% 1,00,000 50,000 40,000 50,000 55,000
Determine in each case:
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1. Minority interest at the date of acquisition and at the date of consolidation.
2. Goodwill or Capital Reserve.
(5 marks)
Q-21:- A liquidator is entitled to receive remuneration at 5% of the assets realized and 8% of

the amount distributed among the unsecured creditors. The assets realized Rs 13,75,000.
Payment was made from realised amount as follows:
Liquidation expenses 13,000

Preferential creditors (treated as unsecured creditors) 88,500
Secured creditors 1,00,000
You are required to calculate remuneration payable to the liquidator.
(5 marks)
Q-22:- The following information pertains to Z Limited as on 31st March, 2019:
Amount in Rs
Share Capital:
5,00,000 Equity shares of Rs10 each fully paid up 50,00,000
9%, 20,000 Preference shares of Rs100 each fully paid up 20,00,000
Reserves and Surplus:
Profit and Loss Account (14,60,000)
Non-Current Liabilities:
10% Secured Debentures 16,00,000
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Current Liabilities:
Interest due on Debentures 1,60,000
Trade Payables 5,00,000
Loan from Directors 1,00,000
Bank Overdraft 1,00,000
Provision for Tax 1,00,000
Non-Current Assets:
(a)Property, Plant and Equipment:
Land & Buildings 30,00,000
Plant & Machinery 12,50,000
Furniture & Fixtures 2,50,000
(b) Intangible Assets:
Goodwill 11,00,000
Patents 5,00,000
Current Assets:
Trade Investments 5,00,000
Trade receivable 5,00,000
Inventory 10,00,000
Note: Preference dividend is in arrears for last 2 years.
Mr. Y holds 60% of debentures and Mr. Z holds 40% of debentures. Moreover Rs 1,00,000 and
Rs 60,000 were also payable to Mr. Y and Mr. Z respectively as trade payable.
The following scheme of reconstruction has been agreed upon and duly approved.
(i) All the equity shares to be converted into fully paid equity shares of Rs 5.00 each.
(ii) The Preference shares be reduced to Rs 50 each and the preference shareholders
agreed to forego their arrears of preference dividends, in consideration of which 9%
preference shares are to be converted into 10% preference shares.
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(iii) Mr. Y and Mr. Z agreed to cancel 50% each of their respective total debt including
interest on debentures. Mr. Y and Mr. Z also agreed to pay Rs 1,00,000 and Rs 60,000
respectively in cash and to receive new 12% debentures for the balance amount.
(iv) Persons relating to trade payables, other than Mr. Y and Mr. Z also agreed to forgo their
50% claims.
(v) Directors also waived 60% of their loans and accepted equity shares for the balance.
(vi) Capital commitments of Rs 3.00 lacs were cancelled on payment of Rs 15,000 as penalty.
(vii) Directors refunded Rs 1,00,000 of the fees previously received by them.
(viii) Reconstruction expenses paid Rs 15,000.
(ix) The taxation liability of the company was settled for Rs 75,000 and was paid
immediately.
(x) The Assets were revalued as under:
Land and Building 32,00,000

Plant and Machinery 6,00,000
Inventory 7,50,000
Trade Receivables 4,00,000
Furniture and Fixtures 1,50,000
Trade Investments 4,50,000
You are required to pass journal entries for all the above -mentioned transactions including
amounts of Goodwill, Patents, Loss in Profit and Loss account to be written off. Also prepare
Bank Account and Reconstruction A/c.
(20 marks)
Q-23:- While closing its books of account on 31st March, 2017 a Non-Banking Finance Company
has its advances classified as follows:
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Rs in lakhs
Standard assets 16,800
Sub-standard assets 1,340
Secured portions of doubtful debts:
−upto one year 320
−one year to three years 90
−more than three years 30
Unsecured portions of doubtful debts 97
Loss assets 48
Calculate the amount of provision, which must be made against the Advances as per
(i) the Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking

Company (Reserve Bank) Directions, 2016; and
(ii) Non-Banking Financial Company - Systemically Important Non-Deposit taking Company
and Deposit taking Company (Reserve Bank) Directions, 2016.
(8 marks)
Q-24:- X Ltd. and Y Ltd. give the following information of assets, equity and liabilities as on 31st
March, 2018:
X Ltd. (Rs) Y Ltd. (Rs)

Equity Shares of Rs10 each 30,00,000 9,00,000
9% Preference Shares of Rs100 each 3,00,000 -
10% Preference Shares of Rs100 each - 3,00,000
Retirement Gratuity Fund (long term) 1,50,000 60,000
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Assets
Goodwill 1,50,000 75,000
Land & Buildings 9,00,000 3,00,000
Plant & Machinery 15,00,000 4,50,000
Inventories 7,50,000 5,25,000
Cash and Bank 1,50,000 60,000
X Ltd. absorbs Y Ltd. on the following terms:
(i) 10% Preference Shareholders are to be paid at 10% premium by issue of 9% Preference
Shares of X Ltd.
(ii) Goodwill of Y Ltd. on absorption is to be computed based on two times of average
profits of preceding three financial years (2016-17 : Rs 90,000; 2015-16 : Rs78,000 and
2014-15: Rs 72,000). The profits of 2014 -15 included credit of an insurance claim of Rs
25,000 (fire occurred in 2013-14 and loss by fire Rs30,000 was booked in Profit and Loss
Account of that year). In the year 2015 -16, there was an embezzlement of cash by an
employee amounting to Rs 10,000.
(iii) Land & Buildings are valued at Rs 5,00,000 and the Plant & Machinery at Rs 4,00,000.
(iv) Inventories are to be taken over at 10% less value and Provision for Doubtful Debts is to
be created @ 2.5%.
(v) There was an unrecorded current asset in the books of Y Ltd. whose fair value amounted
to Rs 15,000 and such asset was also taken over by X Ltd.
(vi) The trade payables of Y Ltd. included Rs 20,000 payable to X Ltd.
(vii) Equity Shareholders of Y Ltd. will be issued Equity Shares @ 5% premium.
You are required to:
(i) Prepare Realization A/c in the books of Y Ltd.
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(ii) Show journal entries in the books of X Ltd.
(iii) Prepare the Balance Sheet of X Ltd. after absorption as at 31st March, 2018.
(15 marks)
Q-25:- On 1st April, 2019, a company offered 100 shares to each of its 400 employees at Rs 25
per share. The employees are given a month to accept the shares. The shares issued under the
plan shall be subject to lock-in to transfer for three years from the grant date i.e. 30th, April
2019. The market price of shares of the company on the grant date is Rs 30 per share. Due to
post-vesting restrictions on transfer, the fair value of shares issued under the plan is estimated
at Rs 28 per share.
Up to 30th April, 2019, 50% of employees accepted the offer and paid Rs 25 per share
purchased. Nominal value of each share is Rs 10. You are required to record the issue of shares
in the books of the company under the aforesaid plan.
(5 marks)
Q-26:- The following is an extract from the trial balance of Novel Bank Limited as on 31 st March
2019:
Rebate on bills discounted as on 1st April 2018 Rs 78,566 (Cr. bal)
Discount Received Rs 1,60,572 (Cr. bal)
An analysis of bills discounted is as follows:
Amount Rs Due Date

2,90,0000 01 June 2019
8,75,0000 8 June 2019
5,65,000 21 June 2019
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8,12,0000 01 July 2019
6,50,000 05 July 2019
Find out the amount of discount to be credited to Profit and Loss Account for the year ending
on 31st March, 2019 and pass the necessary journal entries. The rate of discount shall be taken
at 10% per annum.
(5 marks)
Q-27:- Astha Bank has the following Capital Funds and Assets as at 31stMarch, 2020:
Rsin crores
Capital Funds:
Equity Share Capital 600.00
Statutory Reserve 470.00
Profit and Loss Account (Dr. Balance) 30.00
Capital Reserve (out of which Rs25 crores were due to revaluation of assets 130.00
and balance due to sale of assets)
Assets:
Balance with other banks 15.00
Cash balance with RBI 35.50
Claim on Banks 52.50
Other Investments 70.00
Loans and Advances:
(i) Guaranteed by Government 22.50
(ii) Guaranteed by PSUs of Central Government 110.00
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(iii) Other 9,365.00
Premises, furniture and fixtures 92.50
Leased assets 40.00
Off-Balance Sheet items:
(i) Acceptances, endorsements and letters of credit 1,100.00
(ii) Guarantees and other obligations 6,200.00
(i) Segregate the capital funds into Tier I and Tier II capitals; and
(ii) Find out the risk-adjusted assets.
(10 marks)
Q-28:- The following was the summarized balance sheet of Bhoomi Ltd. as on 31 st March, 2020:
Equity & liability Rs Assets Rs

(in lakhs) (in lakhs)
Authorised Capital: Property, plant and equipment
Investments 1,12,000
Equity shares of Rs10 each 80,000 Cash at Bank 24,000
Issued Capital Trade Receivables 13,200
Equity Shares of Rs10 each Fully 64,000 66,000
Paid up
10% Redeemable Preference
Shares of 10 each, Fully Paid Up 20,000
Reserves & Surplus:
Capital Redemption Reserve 8,000
Securities Premium 6,400
General Reserve 48,000
Profit & Loss Account 2,400
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9% Debentures 40,000
Trade Payables 26,400
2,15,200 2,15,200
On 1st April,2020the Company redeemed all its Preference Shares at a Premium of 10% and
bought back 25% of its Equity Shares at Rs20 per Share. In order to make Cash available, the
Company sold all the Investments for Rs25,000 Lakhs and raised a Bank Loan amounting to
Rs16,000 lakh on the Security of the Company's Plant.
Give the necessary Journal Entries considering that the buy back is authorised by the articles of
company and necessary resolution is passed by the company for this. The amount of Securities
premium may be utilized to the maximum extent allowed by law.
(8 marks)
Q-29:- From the following information, prepare Profit and Loss A/c of KC Bank for the year
ended 31st March, 20X1:
Items Rs 000
Interest on cash credit 18,20
Interest on overdraft 7,50
Interest on term loans 15,40
Income on investments 8,40
Interest on balance with RBI 1,50
Commission on remittances and transfer 75
Commission on letters of credit 1,18
Commission on government business 82
Profit on sale of land and building 27
Loss on exchange transactions 52
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Interest paid on deposit 27,20
Auditors’ fees and allowances 1,20
Directors’ fees and allowances 2,50
Advertisements 1,80
Salaries, allowances and bonus to employees 12,40
Payment to Provident Fund 2,80
Printing and stationery 1,40
Repairs and maintenance 50
Postage, telegrams, telephones 80
Other Information:
(i) Interest on NPA is as follows
Earned (Rs ’000) Collected (Rs ’000)

Cash credit 8,20 4,00
Overdraft 450 1,00
Term Loans 750 2,50
(ii)Classification of Non Performing Advances (’000 Rs)
Standard 30,00
Sub-standard 11,20
Doubtful assets not covered by security 200
Doubtful assets covered by security for one year 50
Loss Assets 2,00
(iii) Investments 27,50
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Bank should not keep more than 25% of its investment as ‘held-for-maturity’ investment. The
market value of its rest 75% investment is Rs 19,75,000 as on 31-3-20X1.
(15 marks)
Q-30:- Following transactions are disclosed as on 31st March, 2018:
(i) Mr. Sumit, a relative of Managing Director, received remuneration of Rs 2,10,000 for his
services in the company for the period from 1st April, 2017 to 30th June, 2017. He left
the service on 1st July, 2017. Should the relative be identified as a related party as on
closing date i.e. on 31-3-2018 for the purpose of AS-18.
(ii) Goods sold amounting to Rs 50 lakhs to associate company during the 1st quarter ended
on 30th June, 2017. After that related party relationship ceased to exist. However,
goods were supplied as was supplied to any other ordinary customer. Decide whether
transactions of the entire year have to be disclosed as related party transactions.
(5 marks)
Q-31:- Q-31:- A Ltd. acquired 70% of equity shares of B Ltd. on 1.4.2010 at cost of Rs. 10,00,000
when B Ltd. had an equity share capital of Rs. 10,00,000 and reserves and surplus of Rs. 80,000.
In the four consecutive years, B Ltd. fared badly and suffered losses of Rs. 2,50,000, Rs.
4,00,000, Rs. 5,00,000 and Rs. 1,20,000 respectively. Thereafter in 2014-15, B Ltd. experienced
turnaround and registered an annual profit of Rs. 50,000. In the next two years i.e. 2015-16 and
2016-17, B Ltd. recorded annual profits of Rs. 1,00,000 and Rs. 1,50,000 respectively. Show the
minority interests and cost of control at the end of each year for the purpose of consolidation.
(12 marks)
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Q-32:- The following were the summarized Balance Sheets of P Ltd. and V Ltd. as at 31-3-20X1:
Liabilities P Ltd. V Ltd.

(Rs. in lakhs) (Rs. in lakhs)
Equity Share Capital (Fully paid shares of Rs. 10 each) 15,000 6,000
Securities Premium 3,000 -
Foreign Project Reserve - 310
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.

Land and Buildings 6,000 -
Plant and Machinery 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 20X1, P Ltd. 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
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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.
Details of trade receivables and trade payables as under:
Assets P Ltd. V Ltd.

Trade payables
Bills Payable 120 -
Creditors 1,080 463
1,200 463
Trade receivables
Debtors 2,120 1,020
Bills Receivable - 80
2,120 1,100
Expenses of amalgamation amounting to Rs. 1 lakh were borne by P Ltd.
(i) Prepare journal entries in the books of P Ltd. and

(ii) Prepare P Ltd.’s Balance Sheet immediately after the merger considering that the cost of
issue of debentures shown in the balance sheet of the V Ltd. company is not transferred
to the P Ltd. company.
(15 marks)
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Q-33:- Z Limited came up with an issue of 60,00,000 equity shares of Rs. 10 each at par.
15,00,000 shares were issued to the promoters and the balance offered to the public was
underwritten by three underwriters D, E and F - equally with firm underwriting of 1,40,000
shares each, Subscriptions totalled 38,91,000 shares including the marked forms which were:
D 12,75,000 shares
E 13,50,000 shares
F 10,50,000 shares
The underwriters had applied for the number of shares covered by firm underwriting. The
amounts payable on application and allotment were Rs. 2.50 and Rs. 2.00 respectively. The
agreed commission was 5%.
You are required to give journal entries for –
(a) The allotment of shares to the underwriters

(b) The commission due to each of them and
(c) The net cash paid and or received
Note: Unmarked applications are to be credited to underwriters equally. Benefit of firm

underwriting is given to individual underwriter
(10 marks)
Q-34:- K Ltd. launched a project for producing product X in October, 2016. The Company
incurred Rs. 40 lakhs towards Research and Development expenses upto 31st March, 2018. Due
to prevailing market conditions, the Management came to conclusion that the product cannot
be manufactured and sold in the market for the next 10 years. The Management hence wants
to defer the expenditure write off to future years. Advise the Company as per the applicable
Accounting Standard.
(5 marks)
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Q-35:- X Ltd. is a company engaged in manufacture and sale of industrial and FMCG products.
One of their division also deals in Leasing of properties -Mobile Towers. The accountant showed
the rent arising from the leasing of such properties as other income in the Statement of Profit
and Loss.
Comment whether the classification of the rent income made by the accountant is correct or
not in light of Schedule III to the Companies Act, 2013.
(5 marks)
Q-36:- Explain the criterion of income recognition in the case of Non Banking Financial
Companies.
(5 marks)
Q-37:- M/s XYZ Ltd. has three segments namely X, Y, Z. The total Assets of the Company are Rs
10.00 crores. Segment X has Rs2.00 crores, segment Y has Rs 3.00 crores and segment Z has Rs
5.00 crores. Deferred tax assets included in the assets of each segments are X- Rs 0.50 crores,
Y— Rs 0.40 crores and Z— Rs 0.30 crores. The accountant contends that all the three segments
are reportable segments. Comment.
(5 marks)
Q-38:- The following particulars are stated in the Balance Sheet of PQR Ltd. as on31.03.2018:
(Rs in lakh)
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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 purposes in 10.00
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)
Q-39:- What are the disclosure and presentation requirements of AS 24 for discontinuing
operations?
(5 marks)
Q-40:- Explain whether the following will constitute a change in accounting policy or not as per
AS 5.
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(i) Introduction of a formal retirement gratuity scheme by an employer in place of ad hoc
ex-gratia payments to employees on retirement.
(ii) Management decided to pay pension to those employees who have retired after
completing 5 years of service in the organization. Such employees will get pension of Rs
20,000 per month. Earlier there was no such scheme of pension in the organization.
(5 marks)
Q-41:- The following particulars in respect of stock options granted by a company are available:
Grant date April 1, 2016

Number of employees covered 50
Number of options granted per employee 1,000
Fair value of option per share on grant date (Rs) 9
The options will vest to employees serving continuously for 3 years from vesting date, provided
the share price is Rs65or above at the end of 2018-19.
The estimates of number of employees satisfying the condition of continuous employment

were 48 on 31/03/17, 47 on 31/03/18. T he number of employees actually satisfying the
condition of continuous employment was 45.
The share price at the end of 2018-19was Rs68
You are required to compute expenses to be recognised in each year in the books of the
company.
(8 marks)
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Q-42:-Distinguish between Amalgamation, Absorption and External Reconstruction of
Company.
(5 marks)
Q-43:- Describe the different types of marine losses
(5 marks)
Q-44:- Peoples Financiers Ltd. is an NBFC providing Hire Purchase Solutions for acquiring
consumer durables. The following information is extracted from its books for the year ended
31st March, 2017:
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 For 24 months 102.00 2,410.00
Machine
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.
(8 marks)
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Q-45:- E, F, G and H hold Equity Capital in Alpha Co. in the proportion of 30:30:20:20. S, T,U and
V hold preference share capital in the proportion of 40:30:10:20. If the paid up capital of the
company is Rs 120 Lakh and Preference share capital is Rs 60 Lakh, You are required to
calculate their voting rights in case of resolution of winding up of the company.
(5 marks)
Q-46:- 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 Rs60 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 5 0 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.
(5 marks)
Q-47:- Perrotte Ltd. (a non-listed company) has the following Capital Structure as on
31.03.20X1:
The Shareholders of Perrotte Ltd., on the recommendation of their Board of Directors, have
approved on 12.09.20X1 a proposal to buy back the maximum permissible number of Equity
shares considering the large surplus funds available at the disposal of the company.
The prevailing market value of the company’s shares is Rs 25 per share and in order to induce
the existing shareholders to offer their shares for buy back, it was decided to offer a price of
20% over market.
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You are also informed that the Infrastructure Development Reserve is created to satisfy
Income-tax Act requirements.
You are required to compute the maximum number of shares that can be bought back in the
light of the above information and also under a situation where the loan funds of the company
were either Rs 1,200 crores or Rs 1,500 crores.
Assuming that the entire buy back is completed by 09.12.20X1, show the accounting entries in
the company’s books in each situation.
(5 marks)
Q-48:- P and Q were carrying on business sharing profits and losses equally. The firm’s Balance
Sheet as at 31.12.20X1 was:
Capital Accounts: Plant 1,60,000
P 1,50,000 Building 48,000
Q 1,30,000 2,80,000 Debtors 75,000
Sundry Creditors 80,000 Stock 70,000
Bank Overdraft 45,000 Joint Life Policy 6,000
Profit & Loss A/c 30,000
Drawings Account:
P 9,000
Q 7,000 16,000
4,05,000 4,05,000
The operations of the business were carried on till 30.06.20X2. P and Q both withdrew in equal
amount half the amount of profit made during the current period of six months after charging
depreciation at 10% per annum on plant and after writing off 5% on building.
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During the current period of six months, creditors were reduced by Rs 20,000 and bank
overdraft by Rs 5,000.
The joint life policy was surrendered for Rs 6,000 before 30th June 20X2. Stock was valued at Rs
84,000 and debtors at Rs 68,000 on 30th June 20X2. The other items remained the same as at
31.12.20X1.
On 30.06.20X2, the firm sold its business to PQ Ltd. The value of goodwill was estimated at Rs
1,30,000 and the remaining assets were valued on the basis of the balance sheet as on
30.06.20X2.
PQ Ltd. paid the purchase consideration in equity shares of Rs 10 each.
You are required to prepare:
(a) Balance sheet of the firm as at 30.06.20X2,

(b) Realisation account,
(c) Partners' Capital Accounts showing the final settlement between them.
(15 marks)
Q-49:- The following is the Balance Sheet of Confidence Builders Ltd., as at 30th Sept. 2016:
Liabilities Rs Asset Rs
Share Capital Land and Buildings 1,20,000
Issued : 11% Pref. Shares of Rs 10 Sundry Current Assets 3,95,000
each 1,00,000 Profit and Loss Account 38,500
10,000 equity shares of Rs 10 each, Debenture Issue
fully paid up 1,00,000 expenses not written off 2,000
5,000 equity shares of Rs 10 each, Rs
7.50 per 37,500
share paid up
13% Debentures 1,50,000
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Mortgage Loan 80,000
Bank Overdraft 30,000
Creditors for Trade 32,000
Income-tax arrears :
(assessment concluded in July 2012)
Assessment year 2014-2015 21,000
Assessment year 2015-2016 5,000
26,000
5,55,500 5,55,500
Mortgage loan was secured against land and buildings. Debentures were secured by a floating
charge on all the other assets. The company was unable to meet the payments and therefore
the debenture holders appointed a Receiver for the Debenture holders brought the land and
buildings to auction and realised Rs 1,50,000. He also took charge of Sundry assets of value of
Rs 2,40,000 and realised Rs 2,00,000. The Bank Overdraft was secured by a personal guarantee
of two of the Directors of the Company and on the Bank raising a demand, the Directors paid
off the due from their personal resources. Costs incurred by the Receiver were Rs 2,000 and by
the Liquidator Rs 2,800. The Receiver was not entitled to any remuneration but the liquidator
was to receive 3% fee on the value of assets realised by him. Preference shareholders had not
been paid dividend for period after 30th September 2014 and interest for the last half year was
due to the debenture holders. Rest of the assets were realised at Rs 1,00,000.
Prepare the accounts to be submitted by the Receiver and Liquidator.
(15 marks)
Q-50:- New Era Publications publishes a monthly magazine on 15thof every month. It sells
advertising space in the magazine to advertisers on the terms of 80% sale value payable in
advance and the balance within 30 days of the release of the publication. The sale of space for
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the March 2020 issue was made in February 2020. The magazine was published on its
scheduled date. It received Rs2,40,000 on 10.3.2020 and Rs60,000 on 10.4.2020 for the March,
2020 issue.
Discuss in the context of AS 9 the amount of revenue to be recognized and the treatment of the
amount received from advertisers for the year ending 31.3.2020. What will be the treatment if
the publication is delayed till 2.4.2020?
(5 marks)
SUGGESTED ANSWERS/ HINTS
A-1:-
In the Books of Y Ltd
Realisation Account
Liabilities Rs Asset Rs
To Sundry Assets : By Retirement 60,000
Goodwill 75,000 Gratuity Fund
Land & Building 3,00,000 By Trade payables 2,40,000
Plant & Machinery 4,50,000 By X Ltd. 15,90,000
Inventory 5,25,000 (Purchase Consideration)
Bank 60,000 17,10,000
To Preference Shareholders 30,000
(Premium on Redemption)
To Equity Shareholders 1,50,000
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(Profit on Realisation)
18,90,000 18,90,000
In the Books of X Ltd
Journal Entries
Dr. Cr.
Rs Rs
Business Purchase A/c Dr. 15,90,000
To Liquidators of Y Ltd. Account 15,90,000
(Being business of Y Ltd. taken over)
Goodwill Account Dr. 1,50,000
Land & Building Account Dr. 5,00,000
Plant & Machinery Account Dr. 4,00,000
Inventory Account Dr. 4,72,500
Trade receivables Account Dr. 3,00,000
Bank Account Dr. 60,000
Unrecorded assets Account Dr. 15,000
To Retirement Gratuity Fund Account 60,000
To Trade payables Account 2,40,000
To Provision for Doubtful Debts Account 7,500
To Business Purchase A/c 15,90,000
(Being Assets and Liabilities taken over as per agreed
valuation).
Liquidators of Y Ltd. A/c Dr. 15,90,000
To 9% Preference Share Capital A/c 3,30,000
To Equity Share Capital A/c 12,00,000
To Securities Premium A/c 60,000
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(Being Purchase Consideration satisfied as above).
Balance Sheet of X Ltd. (after absorption)
as at 31st March, 2018
Particulars Notes Rs
1 Shareholders' funds
A Share capital 1 48,30,000
B Reserves and Surplus 2 2,70,000
2 Non-current liabilities
A Long-term provisions 3 2,10,000
3 Current liabilities
A Trade Payables 4 46,10,000
B Short term provision 5 7,500
Total 59,27,500
Assets
1 Non-current assets
A Fixed assets
Tangible assets 6 33,00,000
Intangible assets 7 3,00,000
2 Current assets
A Inventories 8 12,00,500
B Trade receivables 9 8,80,000
C Other current Assets 10 15,000
D Cash and cash equivalents 11 2,10,000
Total 59,27,500
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Notes to accounts
Rs
1 Share Capital
Equity share capital
4,20,000 Equity Shares of Rs10 each fully paid(Out of above 1,20,000 Equity 42,00,000
Shares were issued in consideration other than for cash)
Preference share capital
6,300 9% Preference Shares of Rs100 each (Out of above 3,300 Preference
Shares were issued in consideration other than for cash) 6,30,000
Total 48,30,000
2 Reserves and Surplus
General Reserve 2,10,000
Total 2,70,000
3 Long-term provisions
Retirement Gratuity fund 2,10,000
4 Trade payables
(3,90,000 + 2,40,000 -20,000*) 6,10,000
* Mutual Owings eliminated.
5 Short term Provisions
Provision for Doubtful Debts 7,500
6 Tangible assets
Total 33,00,000
7 Intangible assets
Goodwill (1,50,000 +1,50,000) 3,00,000
8 Inventories
GMTESTSERIES.COM®
(7,50,000 + 4,72,500) 12,22,500
9 Trade receivables
(6,00,000 + 3,00,000-20,000) 8,80,000
10 Other current Assets 15,000
11 Cash and cash equivalents
(1,50,000 +60,000) 2,10,000
Working Notes:
1. Computation of goodwill
Profit of 2016-17 90,000

Profit of 2015-16 adjusted Rs78,000 + 10,000) 88,000
Profit of2014-15 adjusted (Rs72,000 –25,000) 47,000
2,25,000
Average profit 75,000
Goodwill to be valued at 2 times of average profits = Rs75,000 x 2=Rs1,50,000
2.
Purchase Consideration: Rs
Goodwill 1,50,000
Land & Building 5,00,000
Inventory 4,72,500
Unrecorded assets 15,000
Cash at Bank 60,000
18,97,500
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Less: Liabilities:
Retirement Gratuity 60,000
Provision for doubtful debts 7,500 (3,07,500)
Net Assets/ Purchase Consideration 15,90,000
To be satisfied as under:
10% Preference Shareholders of Y Ltd. 3,00,000
Add: 10% Premium 30,000
9% Preference Shares of X Ltd. 3,30,000
Equity Shareholders of Y Ltd. to be satisfied by issue of 1,20,000
equity Shares of X Ltd. at 5% Premium 12,60,000
Total 15,90,000
A-2:- Consolidated Balance Sheet of H Ltd. and its Subsidiary S Ltd.
as at 31st March, 2017
Particulars Note No. Rs.

I. Equity and Liabilities
(1)Shareholder's Funds
(a)Share Capital(1,20,000 equity shares of Rs10 each) 12,00,000
(b)Reserves and Surplus 1 8,16,200
(2)Minority Interest (W.N.4)
(3)Current Liabilities 99,300
(a)Trade Payables 2 4,10,000
Total 25,25,500
II. Assets
(1)Non-current assets
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(a)Fixed assets
(i)Tangible assets 3 13,10,500
(ii)Intangible assets 4 24,000
(b)Current assets
(i)Inventories 5 3,25,000
(ii)Trade Receivables 6 6,70,000
(iii)Cash at Bank 7 1,96,000
Total 25,25,500
Notes to Accounts
Rs.
1. Reserves and Surplus
General Reserves 4,35,000
Add: 80% share of S Ltd.’s post-acquisition
reserves (W.N.3) 84,000 5,19,000
Profit and Loss Account 2,80,000
Add: 80% share of S Ltd.’s post-acquisition 21,200
profits (W.N.3)
Less: Unrealised gain (4,000) 17,200 2,97,200
8,16,200
2. Trade Payables
H Ltd. 3,22,000
S Ltd. 1,23,000
Less: Mutual transaction (35,000) 4,10,000
3. Tangible Assets
Machinery 6,40,000
H. Ltd
S Ltd 2,00,000
GMTESTSERIES.COM®
Add: Appreciation 1,00,000
3,00,000
Less: Depreciation (30,000) 2,70,000 9,10,000
Furniture
H. Ltd. 3,75,000
S Ltd. 40,000
Less: Decrease in value (10,000)
30,000
Less: Depreciation (4,500) 25,500 4,00,500
13,10,500
4. Intangible assets
Goodwill [WN 5] 24,000
5. Inventories
H Ltd. 2,68,000
S Ltd. 62,000 3,30,000
Less: Inventory reserve (5,000)
3,25,000
6. Trade Receivables
H. Ltd. 4,70,000
S Ltd. 2,35,000
7,05,000
Less: Mutual transaction (35,000)
6,70,000
7. Cash and Bank
H. Ltd. 1,64,000
S Ltd. 32,000 1,96,000
Working Notes:
GMTESTSERIES.COM®
1. Profit or loss on revaluation of assets in the books of S Ltd. and their book values as on
1.4.2016
Rs.
Machinery
Revaluation as on 1.4.2016 3,00,000
Less: Book value as on 1.4.2016 (2,00,000)
Profit on revaluation 1,00,000
Furniture
Revaluation as on 1.4.2016 30,000
Less: Book value as on 1.4.2016 (40,000)
Loss on revaluation (10,000)
2. Calculation of short/excess depreciation
Machinery Furniture
Upward/ (Downward) Revaluation (W.N. 4) 1,00,000 (10,000)
Rate of depreciation 10% p.a. 10% p.a. 15% p.a.
Difference [(short)/excess (10,000) (1,500)
3. Analysis of reserves and profits of S Ltd. as on 31.03.2017
Pre-acquisition Post-acquisition
profit upto profits(1.4.2016 –31.3.2017)
1.4.2016
(Capital profits) General Profit and
Reserve loss account
General reserve as on 31.3.2017 50,000 1,05,000
Profit and loss account as on 31.3.2017 30,000 35,000
GMTESTSERIES.COM®
Upward Revaluation of machinery as on 1,00,000
1.4.2016
Downward Revaluation of Furniture as on (10,000)
1.4.2016
Short depreciation on machinery (W.N. 5) (10,000)
Excess depreciation on furniture (W.N. 5) 1,500
Total 1,70,000 1,05,000 26,500
4. Minority Interest
Rs.
Paid-up value of (2,00,000 x 20%) 40,000
Add: 20% share of pre-acquisition profits and reserves
[(20% of (50,000 + 30,000)] 16,000
20% share of profit on revaluation 18,000
20% share of post-acquisition reserves 21,000
20% share of post-acquisition profit 5,300
1,00300
Less: Unrealised Profit on Inventory
(55,000 x 10/110)* x 20% (1,000)
99,300
* considered that Rs55,000 is cost to H Ltd. Alternative solution considering it as cost to S Ltd. is
also possible
5. Cost of Control or Goodwill
Cost of Investment 3,20,000

Less: Paid-up value of 80% shares 1,60,000
GMTESTSERIES.COM®
80%share of pre-acquisition profits and reserves
(Rs64,000 + Rs72,000)
Cost of control or Goodwill 1,36,000 (2,96,000)
24,000
A-3:- Journal Entries in the books of SK Ltd.
Rs ‘000 Rs ‘000
(I) Equity share capital (Rs10) A/c Dr. 35,000
To Equity Share Capital (Rs 4) A/c 14,000
To Capital Reduction A/c 21,000
(Being conversion of equity share capital of Rs 10 each
into Rs 4 each as per reconstruction scheme)
(II) 8% Cumulative Preference Share capital (Rs 100) A/c Dr. 17,500
To 8% Cumulative Preference Share Capital (Rs 60) A/c 10,500
(Being conversion of 6% cumulative preference shares
capital of Rs 100 each intoRs60 each as per
reconstruction scheme)
(III) 6% Debentures (Rs100) A/c Dr. 14,000
To 9% Debentures (Rs 8 0) A/c 11,200
(Being 9% debentures of Rs80 each issued to existing 6%
debenture holders. The balance transferred to capital
reduction account as per reconstruction scheme)
(IV) Sundry Creditors A/c Dr. 7,000
To Equity Share Capital (Rs4) A/c 3,500
GMTESTSERIES.COM®
(Being a creditor of Rs70,00,000 agreed to surrender his
claim by 50% and was allotted 8,75,000equity shares of
Rs4 each in full settlement of his dues as per
reconstruction scheme)
(V) Provision for Taxation A/c Dr. 350
Capital Reduction A/c Dr. 175
To Liability for Taxation A/c 525
(Being conversion of the provision for taxation into
liability for taxation for settlement of the amount due)
(VI) Liability for Taxation A/c Dr. 525
To Current Assets (Bank A/c) 525
(Being the payment of tax liability)
(VII) Capital Reduction A/c Dr. 34,125
To P & L A/c 2,100
To Fixed Assets A/c 8,750
To Current Assets A/c 18,725
To Investments A/c 175
To Capital Reserve A/c (Bal. fig.) 4,375
(Being amount of Capital Reduction utilized in writing off
P & L A/c (Dr.) Balance, Fixed Assets, Current Assets,
Investments and the Balance transferred to Capital
Reserve)
Working Note:
Capital Reduction Account
To Liability for taxation A/c 175 By Equity share capital 21,000
GMTESTSERIES.COM®
To P & L A/c 2,100 By 8% Cumulative preferences 7,000
To Fixed Assets 8,750 Share capital
To Current assets 18,725 By 6% Debentures 2,800
To Investment 175 By Sundry creditors 3,500
To Capital Reserve (Bal. fig.) 4,375
34,300 34,300
A-4:- (i) Number of Shares to be issued to Partners
Assets: Machinery Rs1,40,000 + Inventory Rs1,37,400 + Trade 5,01,400

ReceivableRs1,24,000 + Bank Rs1,00,000
Less: Liabilities taken over (1,69,400)
Net Assets taken over (Purchase Consideration) 3,32,000
Classes of Shares to be issued: M N O Total

10% Preference Shares of Rs10 1,36,000 90,000 46,000 2,72,000
each (to retain rights as to Interest
on Capital)
Balance in Equity Shares of Rs10 30,000 18,000 12,000 60,000
each
(3,32,000 -2,72,000) (issued in _____ ______ ______ ______
profit sharing ratio
1,66,000 1,08,000 58,000 3,32,000
GMTESTSERIES.COM®
(ii) Partners’ Capital Accounts
Particulars M N O Particulars M N O
To Drawings 50,000 46,000 34,000 By balance 1,36,000 90,000 46,000
b/d
To 10% 1,36,000 90,000 46,000 By Interest 13,600 9,000 4,600
Preference share on Capital
capital
To Equity Shares 30,000 18,000 12,000 By profit for 1,10,700 66,420 44,280
the year
5:3:2(W.N.
1)
To Bank – 54,300 17,420 6,880 By 10,000 6,000 4,000
Additional Machinery*
Drawings(W.N. A/c
2)
2,70,300 1,71,420 98,880 2,70,300 1,71,420 98,880
* Gain on Transfer of Machinery = Rs 1,40,000 – (Rs 2,00,000-Rs 80,000) = Rs 20,000 in 5:3:2

ratio.
(iii) Balance sheet of MNO Ltd. as on 31st March, 2020 (after Takeover of Firm)
Note no. Rs.

(I) Equity and Liabilities:
(1)Shareholders Funds
Share Capital 1 13,32,000
(2) Current Liabilities
Trade Payables 1,69,400
GMTESTSERIES.COM®
Total 5,01,400
(II) Assets(1)
Non-Current Assets
Property, plant and equipment –Machinery 1,40,000
(2)Current Assets:
(a)Inventories 1,37,400
(b)Trade Receivables 1,24,000
(c)Cash and Cash Equivalents 1,00,000
Total 5,01,400
Notes to Accounts
Particulars Rs
1. Share capital
Authorized shares capital 20,00,000
Issued, Subscribed & paid up
6,000 Equity Shares of Rs10 each 60,000
27,20010% Preference Shares capital of Rs10 each 2,72,000
(All above shares issued for consideration other than cash, in takeover of 3,32,000
partnership firm)
Working Notes:
1. Profit & Loss Appropriation Account for the year ended 31st March, 2020
Particulars Rs Rs Particulars Rs
To Interest on Capital: By Net Profit (given) 2,48,600
M [Rs1,36,000 x 10%] 13,600
N [Rs90,000 x 10%] 9,000
GMTESTSERIES.COM®
O [Rs46,000 x 10% 4,600 27,200
To Profits transferred
to Capital in profit
sharing ratio 5:3:2
M 1,10,700
N 66,420
O 44,280 2,21,400
2,48,600 2,48,600
2. Statement showing Additional Drawings in Cash
(a) Funds available for Drawings
Total Drawing of Partners (given) 1,30,000

Add: Further Funds available for Drawings (1,78,600-1,00,000) 78,600
2,08,600
Less: Interest on Capital (27,200)
Amount available for Drawings 1,81,400
(b) Ascertainment of Additional Drawings
Particulars M N O
As per above statement Rs1,81,400 (in profit sharing 90,700 54,420 36,280
ratio)
Add: Interest 13,600 9,000 4,600
1,04,300 63,420 40,880
Less: Already drawn (50,000) (46,000) (34,000)
Additional Drawings 54,300 17,420 6,880
GMTESTSERIES.COM®
A-5:- L, M, N and O hold Equity capital is held by in the proportion of 30:40:20:10 and A, B, C
and D hold preference share capital in the proportion of 40:30:10:20. As the paid up equity
share capital of the company is Rs60 Lakhs and Preference share capital is Rs 30 Lakh (2:1), then
relative weights in the voting right of equity shareholders and preference shareholders will be
2/3 and 1/3.
The respective voting right of various shareholders will be
L = 2/3X30/100 = 3/15 = 20%
M = 2/3X40/100 = 4/15 = 26.67%
N = 2/3X20/100 = 2/15 = 13.33%
O = 2/3X10/100 = 1/15 = 6.67%
A = 1/3X40/100 = 4/30 = 13.33%
B = 1/3X30/100 = 3/30 = 10%
C = 1/3X10/100 = 1/30 = 3.33%
D = 1/3X20/100 = 2/30 = 6.67%
A-6:-
Receiver’s Receipts and Payments Account
Rs. Rs
Sundry Assets realized 28,75,000 Costs of the Receiver 10,000
Surplus received from Remuneration to Receiver 15,000
Mortgage Debentures holders Principal* 15,00,000
Sale Proceeds of land and Surplus transferred
GMTESTSERIES.COM®
building 7,50,000 to the Liquidator 16,50,000
Less: Applied to
Discharge of
mortgage loan (4,50,000) 3,00,000
31,75,000 31,75,000
Note: * Assumed that interest on debentures has already been paid before winding up
proceedings.
Liquidator’s Final Statement of Account
Rs. Rs
Surplus received from 16,50,000 Cost of Liquidation (legal exp.) 17,500
Receiver Remuneration to Liquidator 25,000
Assets Realized 12,50,000 (12,50,000 x 2%)
Calls on partly paid Unsecured Creditors:
Shareholders: for Trade 7,30,000
Directors for payment of Bank O/D 2,75,000
Preferential Shareholders:
Capital 10,00,000
Arrears of Preference Dividends 2,40,000
Equity shareholders:
Return of money to contributors to
holders
1,00,000 shares at Rs4.75 4,75,000
50,000 shares at Rs2.75 1,37,500
29,00,000 29,00,000
GMTESTSERIES.COM®
Working Note:
Amount to be paid or received from Equity shareholders Rs.

Total Equity share capital paid up 14,00,000
Less: Surplus before call from Equity Shares (29,00,000 — 22,87,500) (6,12,500)
Loss to be borne by 1,50,000 shares 7,87,500
Loss per share = (7,87,500/ 1,50,000 shares) 5.25
Hence, Refund to Equity shareholders of 1,00,000 shares of Rs 10 fully paid up 4.75
Refund to Equity shareholders of 50,000 shares of Rs 8 paid up 2.75
A-7:- Determination of maximum no. of shares that can be bought back as per the Companies
Act, 2013
1. Shares Outstanding Test
Particulars (Shares)
Number of shares outstanding 1,70,000
25% of the shares outstanding 42,500
2. Resources Test: Maximum permitted limit 25% of Equity paid up capital + Free Reserves
Particulars
Paid up capital (Rs) 17,00,000
Free reserves (Rs) (23,50,000 + 2,50,000 + 2,00,000) 28,00,000
Shareholders’ funds (Rs) 45,00,000
25% of Shareholders fund (Rs) 11,25,000
Buy back price per share Rs30
Number of shares that can be bought back (shares) 37,500
Actual Number of shares proposed for buy back 35,000
GMTESTSERIES.COM®
3. Debt Equity Ratio Test: Loans cannot be in excess of twice the Equity Shareholder’s Funds
post Buy Back
Particulars Rs.
(a) Loan funds (Rs) (22,50,000+8,50,000+15,50,000) 46,50,000
(b) Minimum equity to be maintained after buy back in the ratio of 2:1
(Rs) (a/2) 23,25,000
(c) Present equity/shareholders fund (Rs) 45,00,000
(d) Future equity/shareholders fund (Rs) (see W.N.) (45,00,000 –5,43,750) 39,56,250
(e) Maximum permitted buyback of Equity (Rs) [(d) –(b)] 16,31,250
(f) Maximum number of shares that can be bought back @ Rs30 per 54,375 shares
(g) share 35,000 Shares
Actual Buy Back Proposed
Summary statement determining the maximum
number of shares to be bought back
Particulars Number of Shares

Shares Outstanding Test 42,500
Resources Test 37,500
Debt Equity Ratio Test 54,375
Maximum number of shares that can be bought back [least of the 37,500
above]
Company qualifies all tests for buy-back of shares and it can buy back maximum 37,500 shares
on 1st April, 2018.
GMTESTSERIES.COM®
However, company wants to buy-back only 35,000 equity shares @ Rs30. T herefore, buy-back
of 35,000 shares, as desired by the company is within the provisions of the Companies Act,
2013.
Working Note:
Amount transferred to CRR and maximum equity to be bought back will be calculated by
simultaneous equation method.
Suppose amount transferred to CRR account is ‘x’ and maximum permitted buy-back of equity
is ‘y’.
Then (45,00,000 –x) –23,25,000 = y (1)
(𝑦/30×10)= x Or3x = y (2)
by solving the above equation, we get
x = Rs 5,43,750
y = Rs 16,31,250
A-8:-
Restated Balance Sheet of MNT Ltd.
as at 31stDecember, 2019
Particulars Note No. (Rs)

I. Equity and Liabilities
(1)Shareholder's Funds
(a)Share Capital 7,50,000
(b)Reserves and Surplus 1 7,18,500
(2)Current Liabilities
GMTESTSERIES.COM®
(a)Short term borrowings 2 21,70,000
(b)Trade Payables 2,46,000
(c)Short-term provision 3
Total 23,14,500
II. Assets
(1)Non-current assets
(a)Property, Plant & Equipment 4 6,37,500
(b)Non-current Investment 5,30,000
(2)Current assets
(a)Inventories (6,90,000 +12,000) 5 7,02,000
(b)Trade Receivables (3,43,000x100/98) 3,50,000
(c)Cash & Cash Equivalents 42,500
(d)Other current assets 6 52,500
Total 23,14,500
Notes to Accounts
Rs
1. Reserves and Surplus
Revenue Reserve (refer W.N.) 5,11,500
Securities Premium 2,07,000 7,18,500
2. Short term borrowings
Bank overdraft 1,70,000
3. Short-term provision
Provision for taxation 4,30,000
4. Property, Plant and Equipment
Cost 9,20,000
Less: Depreciation to date (2,82,500) 6,37,500
5. Inventories 6,90,000
GMTESTSERIES.COM®
Increase in value as per FIFO 1,200 7,02,000
6. Other current assets
Prepaid expenses (After adjusting sales promotion 52,500
expenses to be written off each year) (65,000 -12,500)
Working Note:
Adjusted revenue reserves of MNT Ltd.:
Rs Rs
Revenue reserves as given 5,05,000
Add: Provision for doubtful debts [3,43,000 X 2/98) 7,000
Add: Increase in value of inventory 12,000 19,000
5,24,000
Less: Sales Promotion expenditure to be written off (12,500)
Adjusted revenue reserve 5,11,500
A-9:- Provision to be made for warranty under AS 29 ‘Provisions, Contingent Liabilities and
Contingent Assets’
As at 31st March, 2018 = Rs 60,000 x .02 + Rs 40,000 x .03
= Rs 1,200 + Rs 1,200 = Rs 2,400
As at 31st March, 2019 = Rs 40,000 x .02 + Rs 1,35,000 x .03
= Rs 800 + Rs 4,050 = Rs4,850
Amount debited to Profit and Loss Account for year ended 31st March, 2019
Rs
GMTESTSERIES.COM®
Balance of provision required as on 31.03.2019 4,850
Less: Opening Balance as on 1.4.2018 (2,400)
Amount debited to profit and loss account 2,450
Note: No provision will be made on 31st March, 2019 in respect of sales amounting Rs 60,000
made on 11th February, 2017 as the warranty period of 2 years has already expired.
A-10:- Fair value of shares immediately prior to exercise of rights + Total amount received from
exercise / Number of shares outstanding prior to exercise + Number of shares issued in the
exercise
102 x 2,50,000 Shares + 98 x 1,00,000 shares/ 3,50,000 shares
Theoretical ex-rights fair value per share = Rs100.86
Computation of adjustment factor:
Fair value per share prior to exercise of rights/Theoretical ex - rights value per share
= 102/100.86 = 1.01
Computation of earnings per share:
EPS for the year 2017-18 as originally reported: Rs50,00,000/2,50,000 shares = Rs20
EPS for the year 2017-18 restated for rights issue: =Rs50,00,000/ (2,50,000 shares x 1.01)=
Rs19.80
EPS for the year 2018-19 including effects of rights issue:
EPS = 75,00,000/3,25,625* = Rs23.03 *
[(2,50,000 x 1.01 x 3/12) + (3,50,000 x 9/12)] =63,125 + 2,62,500 = 3,25,625 shares
GMTESTSERIES.COM®
Note: Financial year (ended 31st March) is considered as accounting year while giving the above
answer.
A-11:- Fair value of an option = Rs67(considered on grant date)–Rs60 = Rs7
Number of shares issued = 600 employees x 150 shares/employee = 90,000 shares
Fair value of ESOP = 90,000 shares x Rs7 = Rs6,30,000Vesting period = 1 year
Expenses recognized in 2018-19 = Rs6,30,000
Date Particulars Rs Rs
31.03.2019 Bank (90,000 shares x Rs60) Dr. 54,00,000
Employees stock compensation expense A/c Dr 6,30,000
To Share Capital (90,000 shares x Rs10) 9,00,000
To Securities Premium (90,000shares x Rs57) 51,30,000
(Being option accepted by 600 employees & payment
made @ Rs60 per share)
Profit & Loss A/c Dr. 6,30,000
To Employees stock compensation expense A/c 6,30,000
(Being Employees stock compensation expense
transferred to Profit & Loss A/c)
A-12:- Statement showing computation of 'Net Owned Fund'
Rsin 000
Paid up Equity Capital 400 400
Free Reserves 2,000
2,400
GMTESTSERIES.COM®
Less: Deferred expenditure(800) (800)
A 1,600
Investments
In shares of subsidiaries and group companies 400
In debentures of subsidiaries and group companies 400
B 800
10% of A 160
Excess of Investment over 10% of A (800-160) C 640
Net Owned Fund [(A) -(C)] (1,600-640) 960
A-13:- As per AS 7 ‘Construction Contracts’, when a contract covers number of assets, the
construction of each asset should be treated as a separate construction contract when:
(a) separate proposals have been submitted for each asset;

(b) each asset has been subject to separate negotiation and the contractor and customer
have been able to accept or reject that part of the contract relating to each asset; and
(c) the costs and revenues of each asset can be identified.
In the given case, each outlet is submitted as a separate proposal to different Zonal Offices,
which can be separately negotiated, and costs and revenues thereof can be separately
identified. Hence, each asset will be treated as a “single contract” even if there is one single
agreement for contracts.
Therefore, three separate contract accounts must be recorded and maintained in the books of
GTI Ltd. For each contract, principles of revenue and cost recognition must be applied
separately and net income will be determined for each asset as per AS 7.
GMTESTSERIES.COM®
A-14:- Price revision was effected during the current accounting period 2018-2019. As a result,
the company stands to receive Rs15 lakhs from its customers in respect of sales made from 1st
January, 2019to 31st March, 2019.If the company is able to assess the ultimate collection with
reasonable certainty, then additional revenue arising out of the said price revision may be
recognised in 2018-2019videpara 10 of AS 9.
A-15:-
M/s Pratham, Kaushal and Rohan
Profit and Loss Account for the year ending on 31st March, 2020
Rs Rs
To Depreciation on Machinery 6,000 By Trading Profit 50,000
To Depreciation on furniture 500 By Interest on Investment 5,000
To Interest on Kaushal’s loan 900
To Net Profit to:
Pratham’s Capital A/c 23,800
Kaushal’s Capital A/c 11,900
Rohan’s Capital A/c 11,900
55,000 55,000
Balance Sheet of the Karma Pvt. Ltd. as on 1st April, 2020
Notes No. Rs
I Equity and Liabilities
Shareholders’ funds
Share capital 1,41,600
Current liabilities
Short term borrowings 1 15,900
GMTESTSERIES.COM®
Trade payables 20,000
Total 1,77,500
II Assets
Non-current assets
Property, plant & Equipment 2 63,500
Non-current investments 50,000
Current assets
Inventories 15,000
Trade receivables 30,000
Cash and cash equivalents 19,000
Total 1,77,500
Notes to Accounts
Rs
1.Short term borrowings
Loan from Kaushal 15,900
2.PPE
Machinery 54,000
Furniture 9,500 63,500
Working Notes:
1. Calculation of goodwill
2014-15 2015-16 2016-17 2017-18 2018-19

Rs Rs Rs Rs Rs
Profits/(Loss) 25,000 12,500 (2,500) 35,000 30,000
GMTESTSERIES.COM®
Adjustment for
extraneous profit of
2014-15 and abnormal (40,000) - 20,000 ____ ___
loss of 2016-17
(15,000) 12,500 17,500 35,000 30,000
Add: Salary of Pratham 9,000 9,000 9,000 9,000 9,000
(750 x12)
(6,000) 21,500 26,500 44,000 39,000
Less: Interest on non- (5,000) (5,000) (5,000) (5,000) (5,000)
trading investment
(11,000) 16,500 21,500 39,000 34,000
Total Profit from 2015- 1,11,000
16 to 2018-19
Less: Loss for 2014-15 (11,000)
(1,00,000)
Average Profit 20,000
Goodwill equal to 3 60,000
years’ purchase
Contribution from 15,000
Rohan for ¼ share
2. Calculation of sacrificing ratio of Partners Pratham and Kaushal on admission of Rohan
Old share New Sacrificing share Gaining share

share
Pratham 3/5 1/2 3/5-1/2=6-5/10 = 1/10
Kaushal 2/5 1/4 2/5- 1/4 = 8-5/20 =3 /20
Rohan 1/4 1/4
GMTESTSERIES.COM®
3. Goodwill adjustment entry through Partners’ capital accounts (in their sacrificing ratio of
2:3)
Rs Rs
Rohan’ s capital A/c Dr. 15,000
To Pratham’s capital A/c 6,000
To Kaushal’ s capital A/c 9,000
(R ohan’s share in goodwill adjusted through Pratham and
Kaushal)
4. Partners’ Capital Accounts
Pratham Kaushal Rohan Pratham Kaushal Rohan

Rs. Rs. Rs. Rs. Rs. Rs.
To Drawings 12,000 12,000 12,000 By Balance b/d 50,000 30,000
(1,000 x 12)
To Pratham 6,000 By General 12,000 8,000
Reserve
To Kaushal 9,000 By Rohan 6,000 9,000
To Balance 79,800 46,900 14,900 By Bank 30,000
c/d (15,000 +
15,000)
By Profit & 23,800 11,900 11,900
Loss A/c
91,800 58,900 41,900 91,800 58,900 41,900
5. Balance Sheet of the firm as on 31st March, 2020
GMTESTSERIES.COM®
Pratham’s Capital 79,800 Machinery 60,000
Kaushal’s Capital 46,900 Less: Depreciation (6,000) 54,000
Rohan’s Capital 14,900 1,41,600 Furniture 10,000
Less: Depreciation (500) 9,500
Kaushal’s Loan 15,000 Investments 50,000
Add: Interest due 900 15,900 Stock-in-trade 15,000
Creditors 20,000 Debtors 30,000
Cash (W.N.6) 19,000
1,77,500 1,77,500
6. Cash balance as on 31.3.2020
Rs Rs
Cash trading profit 50,000
Add: Investment Interest 5,000
Add: Decrease in Stock Balance 5,000
60,000
Less: Increase in Debtors 9,000
Less: Decrease in Creditors 20,000 (29,000)
31,000
Add: Opening cash balance 5,000
Add: Cash brought in by Rohan 30,000 35,000
66,000
Less: Drawings (12,000 +12,000 +12,000) 36,000
Less: Additions to Machine (60,000 -54,000) 6,000
Furniture (10,000 -5,000) 5,000 (47,000)
Closing cash balance 19,000
7. Distribution of shares – Conversion into Company
GMTESTSERIES.COM®
Rs
Capital: Pratham 79,800
Kaushal 46,900
Rohan 14,900
Share Capital 1,41,600
Distribution of shares:
Pratham (1/2) 70,800
Kaushal (1/4) 35,400
Rohan (1/4) 35,400
Pratham and Kaushal should withdraw capital of Rs 9,000 (Rs 79,800 – Rs 70,800) and Rs11,500
(Rs 46,900 – Rs 35,400) respectively and Rohan should subscribe shares of Rs 20,500 (Rs35,400
– Rs 14,900).
A-16:-
Calculation of Total Remuneration payable to Liquidator
Amount in Rs
2% on Assets realised 37,50,000 x 2% 75,000
3% on payment made to Preferential creditors 1,12,500 x 3% 3,375
3% on payment made to Unsecured creditors (Refer W.N) 58,882
Total Remuneration payable to Liquidator 1,37,257
Working Note:
Liquidator’s remuneration on payment to unsecured creditors
GMTESTSERIES.COM®
Cash available for unsecured creditors after all payments including liquidation expenses,
payment to secured creditors, preferential creditors & liquidator’s remuneration
= Rs 37,50,000 – Rs 37,500 – Rs 15,00,000 – Rs 1,12,500 – Rs 75,000 – Rs 3,375= Rs 20,21,625.
Liquidator’s remuneration = 3/103 x Rs 20,21,625= Rs 58,882
A-17:- The event is a non-adjusting event since it occurred after the year-end and does not
relate to the conditions existing at the year-end. However, it is necessary to consider the
validity of the going concern assumption having regard to the extent of insurance cover. Also,
since it is said that the loss would be fully recovered by the insurance company, the fact should
be disclosed by way of a note to the financial statements.
A-18:- As per AS 14, ‘Accounting for Amalgamations’ consideration for the amalgamation
means the aggregate of shares and other securities issued and payment made in form of cash
or other assets by the transferee company to the shareholders of the transferor company.
(i) Computation of Purchase Consideration:
Rs.
(a) Preference Shares: 14,00,000
20,000 Preference shares in Som Ltd. @ Rs 70 per share
(b) Cash 1,00,000
(c) Equity shares: 56,000 equity shares in Som Ltd. @ Rs 110 per share 61,60,000
76,60,000
A-19:-
GMTESTSERIES.COM®
(i) The lease is a finance lease if X = Y, or if X substantially equals Y.
(ii) The lease will be classified as a finance lease, since a substantial portion of the life of
the asset is covered by the lease term.
(iii) Since the asset is procured only for the use of lessee, it is a finance lease.
A-20:- (1) Minority Interest= Equity attributable to minorities
Equity is the residual interest in the assets of an enterprise after deducting all its liabilities i.e. in
this case it should be equal to Share Capital + Profit & Loss A/c.
Minority % Shares Minority interest as Minority interest as

Owned at the date of at the date of
acquisition consolidation
[E] [E] x [A + B] Rs [E] X [C + D] Rs
Case 1 [100-90] 10% 15,000 17,000
Case 2 [100-85] 15% 19,500 18,000
Case 3 [100-80] 20% 14,000 14,000
Case 4 [100-100] NIL NIL NIL
A = Share capital on 1.1.2018
B = Profit & loss account balance on 1.1.2018
C = Share capital on 31.12.2018
D = Profit & loss account balance on 1.1.201
(2) Calculation of Goodwill or Capital Reserve
Shareholding Cost Total Parent’s Goodwill Capital

Equity Portion of Reserve
GMTESTSERIES.COM®
equity
% [F] [G] [A] + [B] = [F]x [H] Rs[G] –[H] Rs [H] –[G]
[H]
Case 1 90% 1,40,000 1,50,000 1,35,000 5,000 __
Case 2 85% 1,04,000 1,30,000 1,10,500 ____ 6,500
Case3 80% 56,000 70,000 56,000 NIL NIL
Case 4 100% 1,00,000 90,000 90,000 10,000 ___
A-21:- Calculation of Total Remuneration payable to Liquidator
Amount in Rs
5% on Assets realised(13,75,000 x 5%) 68,750

8% on payment made to Unsecured creditors 7,080
(Refer W.N)
Total Remuneration payable to Liquidator 75,830
Working Note:
Liquidator’s remuneration on payment to unsecured creditors
=Cash available for unsecured creditors after all payments including liquidation expenses,
payment to secured creditors and liquidator’s remuneration
Total amount realized Rs Rs 13,75,000

Less: Liquidation expenses paid (13,000)
Payment to secured creditors (1,00,000)
Liquidator’s remuneration on
assets realized 68,750) Rs1,81,750
GMTESTSERIES.COM®
Rs. 11,93,250
Sufficient amount is available for preference creditors (treated as unsecured creditors)

therefore Liquidator’s remuneration on payment to unsecured creditors = 8% x Rs88,500 =
Rs7,080
Note: Since the amount of unsecured creditors (other than preferential creditors) is not given in
the question, the above solution is based on the assumption that there are no unsecured
creditors (other than preferential creditors who are treated as unsecured creditors).
A-22:-
Journal Entries in the Books of Z Ltd.
Dr. Cr.
Rs. Rs.
1. Equity Share Capital (Rs10 each) A/c Dr. 50,00,000
To Equity Share Capital (Rs5 each) A/c 25,00,000
To Reconstruction A/c 25,00,000
(Being conversion of 5,00,000 equity shares of Rs10 each
fully paid into same number of fully paid equity shares of
Rs5 each as per scheme of reconstruction.)
2. 9% Preference Share Capital (Rs100 each) A/c Dr. 20,00,000
To 10% Preference Share Capital (Rs50 each) A/c 10,00,000
(Being conversion of 9% preference share of Rs100 each
into same number of 10% preference share of Rs50 each
and claims of preference dividends settled as per scheme
of reconstruction.)
GMTESTSERIES.COM®
3. 10% Secured Debentures A/c Dr. 9,60,000
Trade payables A/c Dr. 1,00,000
Interest on Debentures Outstanding A/c Dr. 96,000
Bank A/c Dr. 1,00,000
To 12% Debentures A/c 6,78,000
(Being Rs11,56,000 due to Y (including trade payables)
cancelled and 12% debentures allotted for the amount
after waving 50% as per scheme of reconstruction.)
4. 10% Secured Debentures A/cDr. 6,40,000
Trade Payables 60,000
Interest on debentures outstanding A/c 64,000
Bank A/c 60,000
To 12% debentures A/c 4,42,000
(Being Rs7,64,000 due to Z (including trade payables)
cancelled and 12% debentures allotted for the amount
after waving 50% as per scheme of reconstruction.)
5. Trade payables A/c Dr. 1,70,000
(Being remaining trade payables sacrificed 50% of their
claim.)
6. Directors' Loan A/c Dr. 1,00,000
To Equity Share Capital (Rs5) A/c 40,000
To Reconstruction A/c 60,000
(Being Directors' loan claim settled by issuing 12,000 equity
shares of Rs5 each as per scheme of reconstruction.)
7. Reconstruction A/c Dr. 15,000
To Bank A/c 15,000
GMTESTSERIES.COM®
(Being payment made towards penalty of 5% for
cancellation of capital commitments of Rs3 Lakhs.)
8. Bank A/c Dr. 1,00,000
(Being refund of fees by directors credited to
reconstruction A/c.)
9. Reconstruction A/c Dr. 15,000
To Bank A/c 15,000
(Being payment of reconstruction expenses.)
10. Provision for Tax A/c Dr. 1,00,000
To Bank A/c 75,000
To Reconstruction A/c 25,000
(Being payment of tax liability in full settlement against
provision for tax)
11. Land and Building A/c Dr. 2,00,000
(Being appreciation in value of Land & Building recorded)
12. Reconstruction A/c Dr. 49,85,000
To Goodwill A/c 11,00,000
To Patent A/c 5,00,000
To Profit and Loss A/c 14,60,000
To Plant and Machinery A/c 6,50,000
To Furniture & Fixture A/c 1,00,000
To Trade Investment A/c50,000 50,000
To Inventory A/c 2,50,000
To Trade Receivables A/c 1,00,000
To Capital Reserve (bal. fig.) 7,75,000
(Being writing off of losses and reduction in the value of
assets as per scheme of reconstruction, balance of
GMTESTSERIES.COM®
reconstruction A/c transfer to Capital Reserve.)
Bank Account
Rs. Rs.
To Reconstruction (Y) 1,00,000 By Balance b/d 1,00,000
To Reconstruction(Z) 60,000 By Reconstruction A/c 15,000
To Reconstruction A/c(refund 1,00,000 (capital commitment penalty
of earlier fees by directors) paid)
By Reconstruction A/c 15,000
(reconstruction expenses paid)
By Provision for tax A/c 75,000
(tax paid)
By Balance c/d 55,000
2,60,000 2,60,000
Reconstruction Account
Rs. Rs.
To Bank (penalty) 15,000 By Equity Share Capital A/c 25,00,000
To Bank 15,000 By 9% Pref. Share Capital A/c 10,00,000
(reconstruction expenses) By Mr. Y (Settlement) 5,78,000
To Goodwill 11,00,000 By Mr. Z (Settlement) 3,82,000
To Patent 5,00,000 By Trade Payables A/c 1,70,000
To P & L A/c 14,60,000 By Director’s loan 60,000
To P & M 6,50,000 By Bank 1,00,000
To Furniture and Fixtures 1,00,000 By Provision for tax 25,000
To Trade investment 50,000 By Land and Building 2,00,000
To Inventory 2,50,000
GMTESTSERIES.COM®
To Trade Receivables 1,00,000
To Capital Reserve (bal. fig.) 7,75,000
50,15,000 50,15,000
A-23:- Calculation of provision required on advances as on 31st March, 2017 as per the Non-
Banking Financial Company – Non-Systemically Important Non-Deposit taking Company
(Reserve Bank) Directions, 2016.
Amount Percentage of Provision
Rs in lakhs provision Rs in lakhs
Standard assets 16,800 0.25 42.00
Sub-standard assets 1,340 10 134.00
Secured portions of doubtful debts
 upto one year 320 20 64.00
 one year to three years 90 30 27.00
 more than three years 30 50 15.00
Unsecured portions of doubtful debts 97 100 97.00
Loss assets 48 100 48.00
427.00
Calculation of provision required on advances as on 31st March, 2017 as per the Non-Banking
Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking
Company (Reserve Bank) Directions, 2016
Amount Percentage of Provision

Rs in lakhs provision Rs in lakhs
GMTESTSERIES.COM®
Standard assets 16,800 0.35 58.80
Sub-standard assets 1,340 10 134.00
Secured portions of doubtful debts
 upto one year 320 20 64.00
 one year to three years 90 30 27.00
 more than three years 30 50 15.00
Unsecured portions of doubtful debts 97 100 97.00
Loss assets 48 100 48.00
443.80
A-24:-
In the Books of Y Ltd. Realization Account
Rs Rs
To Sundry Assets: By Retirement Gratuity 60,000
Fund
Goodwill 75,000
Land & Building 3,00,000 By Trade payables 2,40,000
Plant & Machinery 4,50,000 By X Ltd. (Purchase 15,90,000
Inventory 5,25,000 Consideration)
Bank 60,000 17,10,000
To Preference Shareholders 30,000
(Premium on
Redemption)
GMTESTSERIES.COM®
To Equity Shareholders
(Profit on Realization) 1,50,000 ____ _
18,90,000 18,90,000
In the Books of X Ltd
Journal Entries
Dr. Cr.
Rs Rs
Business Purchase A/c Dr. 15,90,000
To Liquidators of Y Ltd. Account 15,90,000
(Being business of Y Ltd. taken over)
Goodwill Account Dr. 1,50,000

Land & Building Account Dr. 5,00,000
Plant & Machinery Account Dr. 4,00,000
Inventory Account Dr. 4,72,500
Trade receivables Account Dr. 3,00,000
Bank Account Dr. 60,000
Unrecorded assets Account Dr. 15,000
To Retirement Gratuity Fund Account 60,000
To Trade payables Account 2,40,000
To Provision for Doubtful Debts Account 7,500
To Business Purchase A/c 15,90,000
GMTESTSERIES.COM®
(Being Assets and Liabilities taken over as per agreed
valuation).
Liquidators of Y Ltd. A/c Dr. 15,90,000
To 9% Preference Share Capital A/c 3,30,000
To Equity Share Capital A/c 12,00,000
To Securities Premium A/c 60,000
(Being Purchase Consideration satisfied as above)
Balance Sheet of X Ltd. (after absorption) as
at 31st March, 2018
Particulars Notes Rs
A Share capital 1 48,30,000
B Reserves and Surplus 2 2,70,000
A Long-term provisions 3 2,10,000
A Trade Payables 4 6,10,000
B Short term provision 5 7,500
Total 59,27,500
Assets
Property, Plant and Equipment 6 33,00,000

Intangible assets 7 3,00,000
2 Current assets
GMTESTSERIES.COM®
A Inventories 8 12,22,500
B Trade receivables 9 8,80,000
C Other current Assets 10 15,000
D Cash and cash equivalents 11 2,10,000
Total 59,27,500
Notes to accounts
Rs
1 Share Capital
Equity share capital
4,20,000 Equity Shares of Rs 10 each fully paid (Out of above 42,00,000
1,20,000 Equity Shares were issued at 5% premium in
consideration other than for cash)
Preference share capital 6,300 9% Preference Shares of Rs 100 each (Out 6,30,000
of above 3,300 Preference Shares were issued in consideration other
than for cash)
Total 48,30,000
General Reserve 2,10,000
Total 2,70,000
3 Long-term provisions 2,10,000
Retirement Gratuity fund
4 Trade payables
(3,90,000 + 2,40,000 - 20,000*) 6,10,000
* Mutual Owings eliminated.
5 Short term Provisions 7,500
GMTESTSERIES.COM®
Provision for Doubtful Debts
6 Property, Plant and Equipment

Total 33,00,000
7 Intangible assets 3,00,000
Goodwill (1,50,000 +1,50,000)
8 Inventories (7,50,000 + 4,72,500) 12,22,500

9 Trade receivables (6,00,000 + 3,00,000 - 20,000) 8,80,000
10 Other current Assets 15,000
11 Cash and cash equivalents (1,50,000 +60,000) 2,10,000
Working Notes:
1. Computation of goodwill
Profit of 2016-17 90,000

Profit of 2015-16 adjusted (Rs 78,000 + 10,000) 88,000
Profit of 2014-15 adjusted (Rs 72,000 – 25,000) 47,000
2,25,000
Average profit 75,000
Goodwill to be valued at 2 times of average profits = Rs 75,000 x 2 = Rs 1,50,000
Purchase Consideration: Rs
Goodwill 1,50,000
Land & Building 5,00,000
GMTESTSERIES.COM®
Inventory 4,72,500

Unrecorded assets 15,000
Cash at Bank 60,000

Less: Liabilities: 18,97,500
Retirement Gratuity 60,000
Provision for doubtful debts 7,500 (3,07,500)
Net Assets/ Purchase Consideration 15,90,000
To be satisfied as under:
10% Preference Shareholders of Y Ltd. 3,00,000
Add: 10% Premium 30,000

9% Preference Shares of X Ltd. 3,30,000
Equity Shareholders of Y Ltd. to be satisfied by issue of 1,20,000 equity Shares 12,60,000

of X Ltd. at 5% Premium
Total 15,90,000
A-25:- Fair value of an option = Rs 28
Difference between Fair value and Issue Price =Rs 28 – Rs 25 = 3.
Number of employees accepting the offer = 400 employees x 50% = 200 employees
Employee Compensation Expenses recognized in 2019-20 =20,000 shares x Rs 3 = Rs 60,000
Securities Premium A/c = Rs 28 – 10 = Rs 18 per share = 20,000 x 18 = Rs 3,60,000
GMTESTSERIES.COM®
Journal Entry
Date Rs Rs
30.04.2019 Bank (20,000 shares x Rs25) Dr. 5,00,000
Employees compensation expense A/c Dr. 60,000
To Share Capital 2,00,000
To Securities Premium 3,60,000
(Being stock purchase option accepted by 200
employees for 100 shares each at Rs25 per share
on a Fair Value of Rs 28 per share)
Note: Employees compensation expenses amounting Rs 60,000 will ultimately be charged to

profit & loss account.
A-26:- The amount of rebate on bills discounted as on 31st March, 2019 the period which has
not been expired upto that day will be calculated as follows:
Discount on Rs 2,90,000 for 62 days @ 10% 4,926

Total 71,723
Note: The due date of the bills discounted is included in the number of days above.
The amount of discount to be credited to the profit and loss account will be:
GMTESTSERIES.COM®
Rs
Transfer from rebate on bills discounted as on 1.4. 2018 78,566
Add: Discount received during the year 1,60,572
2,39,138
Less: Rebate on bills discounted as on 31.03. 2019(as above) (71,723)
1,67,415
Journal Entries
Rs Rs
Rebate on bills discounted A/c Dr. 78,566
To Discount on bills A/c 78,566
(Transfer of opening unexpired discount on 31.03. 2018)
Discount on bills A/c Dr. 71,723
To Rebate on bills discounted 71,723
(Unexpired discount on 31.03. 2019 taken into account)
Discount on Bills A/c 1,67,415
To P & L A/c 1,67,415
(Discount earned in the year, transferred to P&L A/c)
A-27:-
(i) Capital Funds –
Tier I : Rs in crore
Equity Share Capital 600
Statutory Reserve 470
Capital Reserve (arising out of sale of assets) 105
GMTESTSERIES.COM®
Less: Profit & Loss (Dr. bal.) (30)
1,145
Capital Funds - Tier II :
Capital Reserve (arising out of revaluation of assets) 25
Less: Discount to the extent of 55% (13.75)
11.25
(ii) Risk Adjusted Assets
Funded Risk Assets Rs in crore Percentage weight Amount Rs in crore

Cash Balance with RBI 35.50 0 -
Balances with other Banks 15 20 3
Claims on banks 52.50 20 10.50
Other Investments 70 100 70
Loans and Advances:
(i) guaranteed by government 22.50 0 -
(ii) guaranteed by PSUs 110 0 -
(iii) Others 9,365 100 9,365
Premises, furniture and fixtures 92.50 100 92.50
Leased Assets 40 100 40
9,581
A-28:-
Journal entries In the books of Bhoomi Ltd.
Dr Cr
Rs in Lakhs
GMTESTSERIES.COM®
1 Bank A/c 25,000
To Investments A/c 24,000
To Profit and Loss A/c 1,000
(Being Investments sold and, profit being credited to Profit and
Loss Account)
2 10% Redeemable Preference Share Capital A/c 20,000
Premium payable on Redemption of Preference Shares A/c 2,000
To Preference Shareholders A/c 22,000
(Being amount payable on redemption of Preference shares, at a
Premium of 10%)
3 Securities Premium A/c 2,000
To Premium payable on Redemption of Preference Shares A/c 2,000
(Being Securities Premium utilized to provide Premium on
Redemption of Preference Shares)
4 Equity Share Capital A/c 16,000
Premium payable on Buyback A/c 16,000
To Equity Share buyback A/c 32,000
(Being the amount due on buy-back)
5 Securities Premium A/c (6,400 –2,000) 4,400
General Reserve A/c (balancing figure) 11,600 16,000
To Premium payable on Buyback A/c
(Being premium on buyback provided first out of Securities
Premium and the balance out of General Reserves.)
6 Bank A/c 16,000
To Bank Loan A/c 16,000
(Being Loan taken from Bank to finance Buyback)
7 Preference Shareholders A/c 22,000
Equity Shares buy back A/c 32,000
To Bank A/c 54,000
GMTESTSERIES.COM®
(Being payment made to Preference Shareholders and Equity
Shareholders)
8 General Reserve Account 36,000
To Capital Redemption Reserve Account 36,000
(Being amount transferred to Capital Redemption Reserve
Account to the extent of face value of preference shares
redeemed and equity Shares bought back) (20,000 + 16,000)
A-29:-
KC Bank
Profit and Loss Account
For the year ended 31st March, 20X1
Particulars Schedule (Rs ’000’)
Year ended
31-3-20X1
I Income
Interest earned 13 38,30
Other income 14 2,50
40,80
II Expenditure
Interest expended 15 27,20
Operating expenses 16 23,40
Provisions and Contingencies 6,80
57,40
GMTESTSERIES.COM®
III Profit/Loss (16,60)
IV Appropriations Nil
Schedule 13 - Interest Earned
Year ended 31-3-20X1
(Rs ’000’)
I Interest/discount on advances/bills
Interest on cash credit Rs (18,20-420) 14,00
Interest on overdraft Rs (750-350) 4,00
Interest on term loans Rs (15,40-500) 10,40 28,40
II Income on investments 8,40
III Interest on Balance with RBI 1,50
38,30
Interest on NPA is recognised on cash basis, hence excess reduced
Schedule 14 - Other Income
Year ended 31-3-20X1
(Rs ’000’)
I Commission, Exchange and Brokerage
Commission on remittances and transfer 75
Commission on letter of credit 1,18
Commission on Government business 82 2,75
II Profit on sale of Land and Building 27
GMTESTSERIES.COM®
III Loss on Exchange Transactions (52)
2,50
Schedule 15 - Interest Expended
Year ended
31-3-20X1
I Interest on Deposits 27,20
Schedule 16 - Operating Expenses
Year Ended
31-3-20X1
I Payment and provision for employees
Salaries, allowances and bonus 12,40
Provident Fund Contribution 2,80 15,20
II Printing and Stationery 1,40
III Advertisement and publicity 1,80
IV Directors’ fees, allowances and expenses 2,50
V Auditors’ fees and expenses 1,20
VI Postage, telegrams, telephones etc. 80
VII Repairs and maintenance 50
23,40
Working Note
GMTESTSERIES.COM®
Provisions and contingencies (Rs ’000)
Provision for NPA :
Standard 3,000 × 0.40% 12
Sub-standard 1,120 × 15%* 1,68
Doubtful not covered by security 200 × 100% 2,00
Doubtful covered by security for one year 50 × 25% 12.5
Loss Assets 200 × 100% 2,00
592.5
Depreciation on current investments
Cost (75% of 27,50) 2,062.50
Less : Market value (1,975.00) 87.5
680.00
Note: 25% of the total investments are held to maturity. In the case of Held to Maturity
investments the valuation is done at cost and these are not marked to market value
generally. Hence, depreciation on investments has been calculated only on other investments
which can either be Held for Trading (HFT) or Available for Sale (AFS)
A-30:-
i) According to AS 18 ‘Related Party Disclosures’, parties are considered to be related if at any

time during the reporting period, one party has the ability to control the other party or
exercise significant influence over the other party in making financial and/or operating
decisions.
Hence, Mr. Sumit a relative of key management personnel should be identified as related
party as at the closing date i.e. on 31.3.2018 as he received remuneration forhis services in
the company from1st April, 2017 to 30th June, 2017and this period comes under the
reporting period.
ii) As per provision of AS 18, the transactions only for the period in which related party
relationships exist need to be reported
GMTESTSERIES.COM®
Hence, transactions of the entity with its associate company for the first quarter ending
30.06.2017 only are required to be disclosed as related party transactions. Transactions of
the entire year need not be disclosed as related party transactions and transactions for the
period (after 1st July) in which related party relationship did not exist need not be reported.
Hence transaction of sale of goods with the associate company for first quarter ending 30th
June, 2017 for Rs 50 Lakhs only are required to be disclosed as related party transaction on
31.3.18
A-31: The losses applicable to the minority in a consolidated subsidiary may exceed the
minority interest in the equity of the subsidiary. The excess, and any further losses applicable to
the minority, are adjusted against the majority interest except to the extent that the minority
has a binding obligation to, and is able to, make good the losses. If the subsidiary subsequently
reports profits, all such profits are allocated to the majority interest until the minority's share of
losses previously absorbed by the majority has been recovered. Accordingly, the minority
interests will be computed as follows:
Year Profit/(Loss) Minority Additional Minority's Share Cost of

Interest Consolidate of losses borne by Contro
(30%) d P & L (Dr.) A l
Cr. Ltd.
Rs. Balance
At the time 3,24,000 -

of (W.N.)
acquisition
in 2010
2010-11 (2,50,000) (75,000) (1,75,000) 2,44,000

(W.N.)
GMTESTSERIES.COM®
Balance 2,49,000
2011-12 (4,00,000) (1,20,000) (2,80,000) 2,44,000
Balance 1,29,000
2012-13 (5,00,000) (1,50,000) (3,50,000) 2,44,000
(21,000)
Loss of minority 21,000 (21,000) 21,000 21,000
borne by Holding
Co.
Balance Nil (3,71,000)
2013-14 (1,20,000) (36,000) (84,000) 2,44,000
Loss of minority
borne by Holding 36,000 36,000 57,000
(36,000)
Co.
Balance Nil (1,20,000)
2014-15 50,000 15,000 35,000 2,44,000

Profit share of (15,000) 15,000 (15,000) 42,000
minority adjusted
against losses of
minority absorbed
by Holding Co.
Balance Nil 50,000
2015-16 1,00,000 30,000 70,000
Profit share of (30,000) 30,000 (30,000) 12,000 2,44,000
minority adjusted
against losses of
minority absorbed
by Holding Co.
GMTESTSERIES.COM®
Balance Nil 100,000
2016-17 1,50,000 45,000 1,05,000 (12,000) Nil 2,44,000
(12,000) 12,000
Balance 33,000 1,17,000
Working Note:
Share of Holding Co. Minority Interest
100% 70% 30%
(Rs.) (Rs.) (Rs.)
Share Capital 10,00,000 7,00,000 3,00,000
Reserve 80,000 56,000 24,000
7,56,000 3,24,000
Less: Cost of investment (10,00,000)
Goodwill 2,44,000
A-32:-
Books of P Ltd
Journal Entries
Dr Cr
(Rs. in Lacs) (Rs. in Lacs)
Business Purchase A/c 9,000
To Liquidator of V Ltd. 9,000
(Being business of V Ltd. taken over for consideration
settled as per agreement)
Plant and Machinery 5,000
Furniture & Fittings 1,700
GMTESTSERIES.COM®
Inventory 4,041
Debtors 1,020
Cash at Bank 609
Bills Receivable 80
To Foreign Project Reserve 310
To General Reserve (3,200 - 3,000) 200
To Profit and Loss A/c (825 – 50*) 775
To Liability for 12% Debentures 1,000
To Creditors 463
To Provisions 702
To Business Purchase 9,000
(Being assets & liabilities taken over from V Ltd.)
Liquidator of V Ltd. A/c 9,000
To Equity Share Capital A/c 9,000
(Purchase consideration discharged in the form of equity
shares)
Profit & loss A/c 1
To Bank A/c 1
(Liquidation expenses paid by P Ltd.)
Liability for 12% Debentures A/c 1,000
To 13% Debentures A/c 1,000
(12% debentures discharged by issue of 13% debentures)
Bills Payable A/c 80
To Bills Receivable A/c 80
(Cancellation of mutual owing on account of bills)
Balance Sheet of P Ltd. as at 1st April, 20X1 (after merger)
Particulars Notes Rs. (in lakhs)

GMTESTSERIES.COM®
A. Share capital 1 24,000
B. Reserves and Surplus 2 16,654
A. Long-term borrowings 3 1,000
A. Trade Payables (1,543 + 40) 1,583
B. Short-term provisions 2,532
Total 45,769
Assets
A. Fixed assets 4 29,004
Tangible assets
2 Current assets
A. Inventories 11,903
B. Trade receivables 3,140
C. Cash and cash equivalents 1,722
Total 45,769
Notes to accounts
1 Share Capital
Equity share capital Authorized, issued, subscribed and paid up 24,000
24 crores equity shares of Rs. 10 each (Of the above shares, 9 crores
shares have been issued for consideration other than cash)
Total 24,000
GMTESTSERIES.COM®
General Reserve 9,700
Foreign Project Reserve 310
Profit and Loss Account 3,644
Total 16,654
3 Long-term borrowings
Secured
13% Debentures 1,000
4 Tangible assets
Land & Buildings 6,000
Plant & Machinery 19,000
Furniture & Fittings 4,004
Total 29,004
Working Note:
Computation of purchase consideration
The purchase consideration was discharged in the form of three equity shares of P Ltd. for
every two equity shares held in V Ltd.
Purchase consideration = Rs. 6,000 lacs × 3/2 = Rs. 9,000 lacs.
* Cost of issue of debenture adjusted against P & L Account of V Ltd.
A-33:-
Z Ltd.
Journal Entries
GMTESTSERIES.COM®
Dr Cr
Bank A/c 10,50,000
To Share Application A/c 10,50,000
(Application money received on firm applications for 140,000
shares each @ Rs. 2.50 per share from D, E & F)
D 2,80,000
E 2,80,000
F 11,30,500
Share Application A/c 10,50,000
To Share Capital A/c 27,40,500
(Allotment of shares to underwriters - 1,40,000 to D; 1,40,000
to E and 3,29,000 to F; application and allotment money
credited to share capital)
Underwriting Commission A/c 22,50,000
To D 7,50,000
To E 7,50,000
To F 7,50,000
(Amount of underwriting commission payable to D, E and F @
5% on the amount of shares underwritten.)
Bank A/c 3,80,500
To F 3,80,500
(Amount received from F on shares allotted less underwriting
commission)
D 4,70,000
E 4,70,000
To Bank A/c 9,40,000
(Amount paid to D & E in final settlement of underwriting
commission due less amount payable on shares allotted
payable by them.)
GMTESTSERIES.COM®
Working Notes:
(1) Calculation of Liability of Underwriters
D E F
Gross Liability (No. of shares) 15,00,000 15,00,000 15,00,000
Less: Marked Applications (excluding firm
underwriting) (12,75,000) (13,50,000) (10,50,000)
2,25,000 1,50,000 4,50,000
Less: Unmarked Applications (equally) (72,000) (72,000) (72,000)
1,53,000 78,000 3,78,000
Less: Firm Underwriting (1,40,000) (1,40,000) (1,40,000)
13,000 (62,000) 2,38,000
Surplus of E distributed between D & F equally
(31,000) 62,000 (31,000)
(18,000) - 2,07,000
Surplus of D allocated to F totally 18,000 — (18,000)
Net Liability, excluding Firm Underwriting - - 1,89,000
Add: Firm underwriting 1,40,000 1,40,000 1,40,000
Total liability of underwriters 1,40,000 1,40,000 3,29,000
(2) Calculation of Amounts Payable by Underwriters
Liability(No. of shares) 1,40,000 1,40,000 3,29,000
Amount payable @ Rs. 4.50 per share 6,30,000 6,30,000 14,80,500

Less: Amount paid on Firm Applications of 1,40,000
each @ Rs. 2.50* (3,50,000) (3,50,000) (3,50,000)
Balance payable 2,80,000 2,80,000 11,30,500
GMTESTSERIES.COM®
Underwriting Commission Receivable 7,50,000 7,50,000 7,50,000
Amount Paid 4,70,000 4,70,000 —
Amount received by the Co. — — 3,80,500
A-34:- As per provisions of AS 26 “Intangible Assets”, expenditure on research should be

recognized as an expense when it is incurred. An intangible asset arising from development (or
from the development phase of an internal project) should be recognized if, and only if, an
enterprise can demonstrate all of the conditions specified in para 44 of the standard. An
intangible asset (arising from development) should be derecognized when no future economic
benefits are expected from its use according to para 87 of the standard. Thus, the manager
cannot defer the expenditure write off to future years in the given case. Hence, the expenses
amounting Rs. 40 lakhs incurred on the research and development project has to be written off
in the current year ending 31st March, 2018.
A-35:- As per para 4 of the‘ General Instructions for preparation of Statement of Profit and Loss’
given in the Schedule III to the Companies Act, 2013, ‘other income’ does not include operating
income.
The term “Revenue from operations” has not been defined under Schedule III to the Companies
Act 2013. However, as per Guidance Note on Schedule III to the Companies Act 2013 this would
include revenue arising from a company’s operating activities i.e. either its principal or ancillary
revenue-generating activities. Whether a particular income constitutes “Revenue from
operations” or “other income” is to be decided based on the facts of each case and detailed
understanding of the company’s activities. The classification of income would also depend on
the purpose for which the particular asset is acquired or held.
As per the information given in the question, X Ltd is a group engaged in manufacture and sale
of industrial and FMCG products and its one of the division deals in leasing of properties-Mobile
GMTESTSERIES.COM®
Towers. Since its one division is continuously engaged in leasing of properties, it shall be
considered as its principal or ancillary revenue-generating activities. Therefore, the rent arising
from such leasing shall be shown under the head “Revenue from operations” and not as “Other
Income”.
Hence the presentation of rent arising from the leasing of such properties as “other income” in
the statement of Profit and Loss is not correct. It should be shown under the head “Revenue
from operations”
A-36:- Income Recognition in case of NBFC

1) The income recognition shall be based on recognised accounting principles
2) Income including interest/ discount or any other charges on NPA shall be recognised only
when it is actually realised. Any such income recognised before the asset became non-
performing and remaining unrealized shall be reversed
3) In respect of hire purchase assets, where instilments are overdue for more than 12 months,
income shall be recognised only when hire charges are actually received. Any such income
taken to the credit of profit and loss account before the asset became nonperforming and
remaining unrealized, shall be reversed.
4) In respect of lease assets, where lease rentals are overdue for more than 12 months, the
income shall be recognised only when lease rentals are actually received. The net lease
rentals* taken to the credit of profit and loss account before the asset became non-
performing and remaining unrealized shall be reversed.
*‘Net lease rentals’ mean gross lease rentals as adjusted by the lease adjustment account
debited/credited to the profit and loss account and as reduced by depreciation at the rate
applicable under Schedule XIV of the Companies Act, 1956 (1 of 1956)/ 2013.
A-37:- According to AS 17 “Segment reporting”, segment assets do not include income tax
assets. Therefore, the revised total assets are Rs8.8 crores [Rs 10 crores – (Rs0.5 + Rs0.4 +
Rs0.3)]. Segment X holds total assets of Rs1.5 crores (Rs 2 crores – Rs 0.5 crores); Segment Y
holds Rs2.6 crores (Rs3 crores – Rs0.4 crores); and Segment Z holds Rs4.7 crores (Rs5 crores –
GMTESTSERIES.COM®
Rs0.3 crores). Thus all the three segments hold more than 10% of the total assets, all segments
are reportable segments.
A-38:- Impact of various items in terms of AS 22 deferred tax liability/deferred tax asset
Transactions Analysis Nature of Effect Amount
difference
Difference in Generally, written down Responding Reversal Rs (80-70) lakh
depreciation value method of timing difference of DTL ×30% = Rs 3
depreciation is adopted lakh
under IT Act which leads to
higher depreciation in
earlier years of useful life of
the asset in comparison to
later years.
Disallowances, Tax payable for the earlier Responding Reversal Rs 10 lakh
as per IT Act, year was higher on this timing difference of DTA ×30% = Rs 3
of earlier account. lakh
years
Donation to Not an allowable Permanent Not Not applicable
private trusts expenditure under IT Act. difference applicable
A-39:- An enterprise should include the following information relating to a discontinuing

operation in its financial statements beginning with the financial statements for the period in
which the initial disclosure event (as defined in paragraph 15) occurs:
a) a description of the discontinuing operation(s);
GMTESTSERIES.COM®
b) the business or geographical segment(s) in which it is reported as per AS 17, Segment
Reporting
c) the date and nature of the initial disclosure event
d) the date or period in which the discontinuance is expected to be completed if known or
determinable;
e) the carrying amounts, as of the balance sheet date, of the total assets to be disposed of and
the total liabilities to be settled;
f) the amounts of revenue and expenses in respect of the ordinary activities attributable to
the discontinuing operation during the current financial reporting period;
g) the amount of pre-tax profit or loss from ordinary activities attributable to the discontinuing
operation during the current financial reporting period, and the income tax expense related
thereto; and
h) The amounts of net cash flows attributable to the operating, investing, and financing
activities of the discontinuing operation during the current financial reporting period.
A-40:- As per AS 5 ‘Net Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies’, the adoption of an accounting policy for events or transactions that differ
in substance from previously occurring events or transactions, will not be considered as a
change in accounting policy.
i) Accordingly, introduction of a formal retirement gratuity scheme by an employer in place of
ad hoc ex-gratia payments to employees on retirement is not a change in an accounting
policy.
ii) Similarly, the adoption of a new accounting policy for events or transactions which did not
occur previously or that were immaterial will not be treated as a change in an accounting
policy
GMTESTSERIES.COM®
A-41:- T he vesting of options is subject to satisfaction of two conditions viz. service condition of
continuous employment for 3 years and market condition that the share price at the end of
2018-19is not less than Rs 65.T he company should recognize value of option over 3-year
vesting period from 2016-17to 2018-19.
Year 2016-17
Fair value of option per share = Rs 9
Number of shares expected to vest under the scheme = 48 × 1,000 = 48,000
Fair value = 48,000 × Rs 9 = Rs 4,32,000
Expected vesting period = 3 years
Value of option recognised as expense in 2016-17= Rs4,32,000 /3 = Rs 1,44,000
Year 2017-18
Number of shares expected to vest under the scheme = 47 × 1,000 = 47,000
Fair value = 47,000 × Rs9 = Rs4,23,000
Expected vesting period = 3 years
Cumulative value of option to recognize as expense in 2016-17and 2017-18
= (Rs 4,23,000/ 3) × 2 = Rs 2,82,000
Value of option recognised as expense in 2016-17= Rs 1,44,000
Value of option recognised as expense in 2017-18
= Rs 2,82,000 –Rs1,44,000 = Rs 1,38,000
Year 2018-19
Number of shares actually vested under the scheme = 45 × 1,000 = 45,000
Fair value = 45,000 × Rs 9 = Rs 4,05,000
Vesting period = 3 years
Cumulative value of option to recognize as expense in 2016-17, 2017-18 and 2018-19= Rs
4,05,000
Value of option recognised as expense in 2016-17and 2017-18= Rs 2,82,000
Value of option recognised as expense in 2018-19= Rs 4,05,000 –Rs 2,82,000 = Rs 1,23,000
GMTESTSERIES.COM®
A-42:- Difference between Amalgamation, Absorption and External Reconstruction
Basis Amalgamation Absorption External Reconstruction
Meaning Two or more companies In this case, an In this case, a newly
are wound up and a new existing company formed company takes
company is formed to takes over the over the business of an
take over their business. business of one or existing company.
more existing
companies.
Minimum number At least three companies At least two Only two companies are
of Companies are involved. companies are involved.
involved involved
Number of new Only one resultant No new resultant Only one resultant
resultant company is formed. Two company is company is formed.
companies companies are wound up formed Under this case a newly
to form a single resultant formed company takes
company. over the business of an
existing company.
Objective Amalgamation is done to Absorption is done External reconstruction
cut competition and reap to cut competition is done to reorganize
the economies in large and reap the the financial structure of
scale. economies in large the company.
scale
Example A Ltd. and B Ltd. A Ltd. takes over B Ltd. is formed to take
amalgamate to form C the business of over the business of an
Ltd. another existing existing company A Ltd.
company B Ltd.
GMTESTSERIES.COM®
A-43:- Marine losses may be broadly of two types –
i) Total Loss: When the subject matter of insurance, i.e., cargo, ship, freight etc. is totally lost,
it is known as a ‘total loss’. Total loss is also of two types:
a) Actual Total Loss-When the subject-matter of insurance is absolutely destroyed or totally
lost to the insured, it is known as actual total loss.
b) Constructive Total Loss-When the subject matter is not actually totally lost but is lost for
all practical purposes e.g., where the ship or cargo is reasonably abandoned and taken as
lost or expenses to be incurred for saving the cargo or the ship are expected to be more
than the value thereof, it is known as constructive total loss.
ii) Partial Loss: When only a part of the subject matter is lost, it is known as partial loss. This
loss may also be of two types as discussed below
a) General Average Loss-Such a loss is caused by extraordinary voluntary sacrifice made or
expenditure incurred with the objective of protecting the interests of all owners in a
voyage. An example of this type of loss is when the ship has run aground and part of the
cargo is to be jettisoned to lighten the ship to save it as well as the cargo from total loss.
b) Particular Average Loss-It is a partial loss of the subject matter of insurance caused by a
peril against which it is insured but which is not a general average loss.
A-44:- On the basis of the information given, in respect of hire purchase and leased assets,
additional provision shall be made as under:
(Rs in crore)
a) Where hire charges are overdue upto 12 Nil -
GMTESTSERIES.COM®
months
b) Where hire charges are overdue for more 10% of the net book value10% x 241
than 12 months but upto 24 months 2,410
c) Where hire charges are overdue for more 40 percent of the net book value 512
than 24 months but upto 36 months 40% x 1,280
d) Where hire charges or lease rentals are 70 percent of the net book 452.90
overdue for more than 36 months but value70% x 647
upto 48 months
Total 1,205.90
A-45:- E, F, G and H hold Equity capital is held by in the proportion of 30:30:20:20 and S,T,U and
V hold preference share capital in the proportion of 40:30:10:20. As the paid up equity share
capital of the company is Rs 120 Lakhs and Preference share capital is Rs 60 Lakhs (ratio of 2:1),
then relative weights in the voting right of equity shareholders and preference shareholders will
be 2/3 and 1/3. The respective voting right of various shareholders will be:
E = 2/3X30/100 = 3/15
F = 2/3X30/100 = 3/15
G = 2/3X20/100 = 2/15
H = 2/3X20/100 = 2/15
S = 1/3X40/100 = 2/15
T = 1/3X30/100 = 1/10
U = 1/3X10/100 = 1/30
V = 1/3X20/100 = 1/15
GMTESTSERIES.COM®
A-46:- Fair value of an option = Rs 56 – Rs 50 = Rs 6
Fair value of ESOP = 40,000 shares x Rs 6 = Rs 2,40,000
Vesting period = 1 month
Expenses recognized in 20X1 – X2 = Rs 2,40,000
Date Particulars Rs Rs
31.03.20X1 Bank (40,000 shares x Rs50) 20,00,000
Employees stock compensation expense A/c 2,40,000
To Share Capital (40,000 shares x Rs10) 4,00,000
To Securities Premium (40,000shares xRs46) 18,40,000
(Being option accepted by 400 employees & payment
made @ Rs 56 share)
Profit & Loss A/c 2,40,000
To Employees stock compensation expense A/c 2,40,000
(Being Employees stock compensation expense
transferred to Profit & Loss A/c)
A-47:- Statement determining the maximum number of shares to be bought back
Number of shares
Particulars When loan fund is
GMTESTSERIES.COM®
Rs 1,800 Rs 1,200 Rs 1,500
crores crores crores
Shares Outstanding Test (W.N.1) 8.25 8.25 8.25
Resources Test (W.N.2) 6.25 6.25 6.25
Debt Equity Ratio Test (W.N.3) Nil 3.75 Nil
Maximum number of shares that can be bought
back [least of the above] Nil 3.75 Nil
Journal Entries for the Buy Back
(Applicable only when loan fund is Rs 1,200 crores)

Rs in crores
Debit Credit
(a) Equity share buy back account Dr. 112.5
To Bank account 112.5
(Being buy back of 3.75 crores equity shares of Rs 10
each @ Rs 30 per share)
(b) Equity share capital account Dr. 37.5
Securities premium account Dr. 75
To Equity share buy back account 112.5
(Being cancellation of shares bought back)
(c) General reserve account Dr. 37.5
To Capital redemption reserve account 37.5
(Being transfer of free reserves to capital
redemption reserve to the extent of nominal value
of share capital bought back out of redeemed
through free reserves)
GMTESTSERIES.COM®
Working Notes:
1. Shares Outstanding Test

Particulars (Shares in crores)
Number of shares outstanding 33

25% of the shares outstanding 8.25
2. Resources Test
Particulars
Paid up capital (Rsin crores) 330
Free reserves (Rsin crores) 420
Shareholders’ funds (Rsin crores) 750
25% of Shareholders fund (Rs in crores) Rs 187.5 crores
Buy back price per share Rs 30
Number of shares that can be bought back (shares in crores) 6.25 crores shares
3. Debt Equity Ratio Test

Particulars When loan fund is
Rs 1,800 crores Rs1,200 crores Rs1,500 crores
(a) Loan funds (Rs in crores) 1,800 1,200 1,500

(b) Minimum equity to be maintained 900 600 750
after buy back in the ratio of 2:1 (Rs in
crores)
(c) Present equity shareholders fund (Rs in 750 750 750
crores)
(d) Future equity shareholder fund (Rsin N.A. 712.5 N.A.
crores) (See Note 2) (750-37.5)
GMTESTSERIES.COM®
(e) Maximum permitted buy back of Equity Nil 112.5 (by Nil
(Rs in crores) [(d) – (b)] (See simultaneous
Note 2) equation)
(f) Maximum number of shares that can 3.75 (by
be bought back @ Rs 30 per share simultaneou
Nil Nil
(shares in crores) (See Note 2) s equation)
Note:
1. Under Situations 1 & 3 the company does not qualify for buy back of shares as per the
provisions of the Companies Act, 2013.
2. As per section 68 of the Companies Act, 2013, the ratio of debt owed by the company
should not be more than twice the capital and its free reserve after such buy-back. In the
question, it is stated that the company has surplus funds to dispose of therefore; it is
presumed that buy- back is out of free reserves or securities premium and hence a sum
equal to the nominal value of the share bought back shall be transferred to Capital
Redemption Reserve (CRR). Utilization of CRR is restricted to issuance of fully paid-up
bonus shares only. It means CRR is not available for distribution as dividend. Hence, CRR
is not a free reserve. Therefore, for calculation of future equity i.e share capital and free
reserves, amount transferred to CRR on buyback has to be excluded from present equity.
Amount transferred to CRR and maximum equity to be bought back will be calculated by
simultaneous equation method.
Suppose amount equivalent to nominal value of bought back shares transferred to CRR
account is ‘x’ and maximum permitted buy-back of equity is ‘y’
Then Equation 1: (Present equity – Nominal value of buy-back transfer to CRR) – Minimum
equity to be maintained= Maximum permissible buy-back of equity
(750 –x)-600 = y (1)
Since 150 – x = y
GMTESTSERIES.COM®
= Nominal value of the shares bought –back to be transferred to CRR
[Here (30 = 25% x 120]
Or 3x = y (2)
By solving the above two equations we get
x = Rs 37.5 crores
y = Rs 112.5 crores
A-48:-
(a) Balance sheet of the firm as at 30.06.20X2

Capital Accounts: Plant :
P's Capital 1,33,800 Opening Balance 1,60,000
Q's Capital 1,15,800 Less: Depreciation @ 10% 8,000 1,52,000

Creditors 60,000 Building:
Bank Overdraft 40,000 Opening Balance 48,000
Less: Written-off @ 5% 2,400 45,600
Debtors 68,000
Stock 84,000
Total 3,49,600 Total 3,49,600
(b) Realization Account
GMTESTSERIES.COM®
Particulars Amount Particulars Amount
To Sundry Assets: By Creditors 60,000
Plant 1,52,000 By Bank Overdraft 40,000
Building 45,600
Stock 84,000 By PQ Limited A/c 3,79,600
Debtors 68,000 (working note 2)
To Profit:
P's Capital A/c 65,000
Q's Capital A/c 65,000
4,79,600 4,79,600
(c) Partner's Capital Accounts

Date Particulars P (Rs) Q (Rs) Date Particulars P (Rs) Q (Rs)
01.01.X2 To Profit & Loss 15,000 15,000 1.1.X2 By Balance b/d 1,50,000 1,30,000
A/c
01.01.X2 To Drawing A/c 9,000 7,000 30.06.X2 By Profit (W. N. 15,600 15,600
1)
30.06.X2 To Drawing A/c 7,800 7,800
(W. N.1)
30.06.X2 To Balance c/d 1,33,800 1,15,800
Total 1,65,600 1,45,600 Total 1,65,600 1,45,600
30.06.X2 By Balance b/d 1,33,800 1,15,800

1,98,800 180,800
30.06.X2 To Shares in PQ 30.06.X2 By Realization A/c 65,000 65,000
Limited (Profit)
1,98,800 1,80,800 1,98,800 1,80,800
GMTESTSERIES.COM®
Working Notes
(1) Ascertainment of profit for the period of 6 Months ended 30.06.20X2
Amount
(Rs)
Closing Assets:
Stock 84,000
Debtors 68,000
Plant Less Depreciation 1,52,000
Building Less Written off 45,600
Total 3,49,600
Less: Closing Liabilities: 1,00,000
Creditors 60,000
Bank Overdraft 40,000
Closing Net Assets 2,49,600

Less: Opening adjusted Capitals
P (Rs1,50,000 – Rs15,000 – Rs9,000) 1,26,000
Q (Rs1,30,000 – Rs15,000 – Rs7,000) 1,08,000 2,34,000
Profit Net of drawings 15,600
Actual Profit for Six Months before drawings(half of profit) = 15,600 x 2 31,200
Combined Drawing during six months (half of profit) 15,600
(2) Ascertainment of purchase consideration
Rs
Closing Net Assets (As above) 2,49,600
Add: Goodwill 1,30,000
Total Purchase Consideration 3,79,600
GMTESTSERIES.COM®
A-49:- Receiver’s Receipts and Payments Account
Rs Rs
Sundry Assets realised 2,00,000 Costs of the Receiver 2,000
Surplus received from Preferential payments

mortgage
Creditors paid Taxes - 26,000

raised within 12 months
Sale Proceeds of land and 1,50,000

building
Less: Applied to discharge of (80,000) 70,000 Debentures holders 1,50,000

mortgage loan Principal
Interest for half year 9,750 1,59,750
Surplus transferred to 82,250

the Liquidator
2,70,000 2,70,000
Liquidator’s Final Statement of Account
Rs Rs
Surplus received from Cost of Liquidation 2,800
Receiver 82,250 Remuneration to Liquidator 3,000
(1,00,000 x 3%)
GMTESTSERIES.COM®
Assets Realised 1,00,000
Calls on Contributories : 10,850 Unsecured Creditors :
On holder of 5,000 at the rate of for Trade 32,000

Rs 2.17 per shares
Directors for payment of Bank 30,000 62,000

O/D
Preferential Shareholders:
Principal 1,00,000
Arrears of
Dividends 22,000 1,22,000
Equity shareholder :
Return of money to 3,300

contributors to holders of
10,000 shares at 33 paise
each
1,93,100 1,93,100
Working Note:
Call from party paid shares
Deficit before call from Equity Shares (1,82,250 — 1,89,800) =7,550
Notional call on 5,000 shares @ Rs 2.50 each 12,500
Net balance after notional call (a) 4,950
No. of shares deemed fully paid (b) 15,000
Refund on fully paid shares 4950/15,000 = 33p
Calls on party paid share (2.50 — 0.33) = Rs 2.17
GMTESTSERIES.COM®
A-50:- As per AS 9 ‘Revenue Recognition’, in a transaction involving the rendering of services,
performance should be measured either under the completed service contract method or
under the proportionate completion method as the service is performed, whichever relates the
revenue to the work accomplished. In the given case, income accrues when the related
advertisement appears before public. The advertisement service would be considered as
performed on the day the advertisement is published and hence revenue is recognized on that
date. In this case, 15.03.2020is the date of publication of the magazine Hence, Rs 3,00,000 (Rs
2,40,000 + Rs 60,000) is recognized as income in March, 2020. The terms of payment are not
relevant for considering the date on which revenue is to be recognized. Since, the revenue of Rs
3,00,000 will be recognised in the March, 2020, Rs 60,000 will be treated as amount due from
advertisers as on 31.03.2020 and Rs 2,40,000 will be treated as payment received against the
sale. However, if the publication is delayed till 02.04.2020 revenue recognition will also be
delayed till the advertisements get published in the magazine. In that case revenue of Rs
3,00,000 will be recognized in the year ended 31.03.2020 after the magazine is published on
02.04.2020. The amount received from sale of advertising space on 10.03.2020 of Rs 2,40,000
will be considered as an advance from advertisers as on 31.03.2020.
GMTESTSERIES.COM®

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GMTESTSERIES.

CA-Inter New Course

Online Test Series for CA, CS & CMA Exams

X Ltd. (Rs) Y Ltd. (Rs)

X Ltd. absorbs Y Ltd. on the following terms:

You are required to

(i) Prepare Realisation A/c in the books of Y Ltd.

H Ltd. (Rs) S Ltd. (Rs)

(i) Investments are to be brought to their market value.

Pass journal entries for the above transactions.

You are given terms and conditions as under:

1) Machinery is to be transferred at Rs1,40,000.

You are required to prepare:

Prepare the accounts to be submitted by the Receiver and the Liquidator.

1. MNT Ltd. is a subsidiary of LTC Ltd.

Less than 1 year: 2% provision

More than 1 year: 3% provision

The company has raised invoices as under:

Invoice Date Amount (Rs)

11th Feb, 2017 60,000

25th Dec, 2017 40,0000

4th Oct, 2018 1,35,000

Q-10:- Following information is supplied by K Ltd.:

Number of shares outstanding prior to right issue -2,50,000 shares.

Right issue price –Rs 98

Last date of exercising rights -30-06-2018.

Net Profit to equity shareholders:

2017-2018 –Rs 50,00,000

Equity and Liabilities Amount Assets Amount

The following further information is furnished:

(a) Pratham & Kaushal share the profits in the ratio 3 : 2.

Secured Creditors Rs 15,00,000

Preferential Creditors Rs 1,12,500

The amount due to Unsecured Creditors was Rs 22,50,000.

Q-20:- The following data is provided to you:

Subsidiary % Cost Date of acquisition Consolidation Date

Determine in each case:

Q-21:- A liquidator is entitled to receive remuneration at 5% of the assets realized and 8% of

Liquidation expenses 13,000

You are required to calculate remuneration payable to the liquidator.

Q-22:- The following information pertains to Z Limited as on 31st March, 2019:

Note: Preference dividend is in arrears for last 2 years.

Land and Building 32,00,000

(i) the Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking

X Ltd. (Rs) Y Ltd. (Rs)

X Ltd. absorbs Y Ltd. on the following terms:

You are required to:

(i) Prepare Realization A/c in the books of Y Ltd.

Rebate on bills discounted as on 1st April 2018 Rs 78,566 (Cr. bal)

Discount Received Rs 1,60,572 (Cr. bal)

An analysis of bills discounted is as follows:

Amount Rs Due Date

You are required to:

Equity & liability Rs Assets Rs

(i) Interest on NPA is as follows

Earned (Rs ’000) Collected (Rs ’000)

(ii)Classification of Non Performing Advances (’000 Rs)

(iii) Investments 27,50

Q-30:- Following transactions are disclosed as on 31st March, 2018:

Liabilities P Ltd. V Ltd.

Assets P Ltd. V Ltd.

All the bills receivable held by V Ltd. were P Ltd.’s acceptances.

Details of trade receivables and trade payables as under: