ACCOUNTING

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ACN04

INTERMEDIATE (NEW) : GROUP – I

PAPER – 1: ACCOUNTING

Roll No…

Total No. of Questions: 6

Maximum Mark: 100
Time Allowed: 3 Hours
Question No. 1 is compulsory.

Answer any four questions from the remaining five questions.

Wherever necessary suitable assumptions may be made and disclosed by way of a note.

Working Notes should form part of the answer.

(a) ITC Ltd. purchased machinery for Rs. 80 lakhs. (Useful life 4 years and residual value Rs. 8
lakhs). Government grant received is Rs. 32 lakhs. Show the Journal Entry to be passed at the
time of refund of grant and the value of the fixed assets in the third year and the amount of
depreciation for remaining two years, if the grant is credited to Deferred Grant A/c.

(b) Omega Ltd., has a normal wastage of 4% in the production process. During the year 2016 -17,
the Company used 12,000 MT of raw material costing Rs. 150 per MT. At the end of the year
630 MT of wastage was ascertained in stock. The accountant wants to know how this wastage
is to be treated in the books.

You are required to compute the amount of normal and abnormal loss and treatment thereof in
line with AS 2 “Valuation of inventories”.

(c) (i) Classify the following items as monetary or non-monetary item:

Share Capital
Trade Receivables
Investment in Equity shares
Fixed Assets.
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(ii) Exchange Rate per $

Goods purchased on 1.1.2019 for US $ 15,000 Rs. 75
Exchange rate on 31.3.2019 Rs. 74
Date of actual payment 7.7.2019 Rs. 73

You are required to ascertain the loss/gain for financial years 2018-19 and 2019- 20, also give
their treatment as per AS 11.

(d) A Limited is engaged in manufacturing of Chemical Y for which Raw Material X is required.
The company provides you following information for the year ended 31st March,2020.

Per
unit
Raw Material X
Cost price 380
Unloading Charges 20
Freight Inward 40
Replacement cost 300
Chemical Y
Material consumed 440
Direct Labour 120
Variable Overheads 80

Additional Information:

a. Total fixed overhead for the year was 4, 00,000on normal capacity of 20,000 units.

b. Closing balance of Raw Material X was 1,000 units and Chemical Y was 2,400units.

You are required to calculate the total value of closing stock of Raw Material X and Chemical

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Y according to AS 2, when

(i) Net realizable value of Chemical Y is 800 per unit

(ii) Net realizable value of Chemical Y is 600 per unit

(4*5=20 Marks)

You are required to prepare a Balance Sheet as at 31st March 2020, as per Schedule III of the
Companies Act, 2013, from the following information of Cipla Ltd .:

Particulars Amount Particulars Amount

() ()
Term Loans 40,00,000 Investments
(Secured) 9,00,000
(Non- current)
Trade payables 45,80,000 Profit for the 32,00,000
year
Other advances 14,88,000 Trade 49,00,000
receivables
Cash and Bank 38,40,000 Miscellaneous 2,32,000
Balances Expenses
Staff Advances 2,20,000 Loan from other 8,00,000
parties
Provision for
Provision for 10,20,000 80,000
Doubtf
Taxation
ul Debts
Securities 19,00,000
Premium
Loose Tools 2,00,000 Stores 16,00,000
General Reserve 62,00,000 Fixed Assets 2,26,00,00
(WDV) 0
Capital Work-in- 8,00,000 Finished Goods 30,00,000
progress
Additional Information:-

1. Share Capital consist of-

(a) 1,20,000 Equity Shares of 100 each fully paid up.

(b) 40,000, 10% Redeemable Preference Shares of 100 each fully paid up.

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2. The company declared dividend @ 5% of equity share capital. The dividend distribution tax
rate is 17.304%. (15% CDT, surcharge 12%, Education Cess 2% and SHEC @ 1%)

3. Depreciate Assets by 20, 00,000.

(20 Marks)

(a) Following is the incomplete information of Jyotishikha Traders:

The following balances are available as on 31.03.2019 and 31.03.2020.

Balances 31.03.2019 31.03.2020

Land and Building 5,00,000 5,00,000
Plant and Machinery 2,20,000 3,30,000
Office equipment 1,05,000 85,000
Debtors (before charging for ? 2,25,000
Bad debts)
Creditors for purchases 95,000 ?
Creditors for office expenses 20,000 15,000
Stock ? 65,000
Long term loan from SBI @ 1,60,000 100,000
12%.
Bank 25,000 ?

Other Information In
Collection from debtors 9,25,000
Payment to creditors for purchases 5,25,000
Payment of office expenses (excluding interest 42,000
on loan)
Salary paid 32,000
Selling expenses 15,000
Cash sales 2,50,000
Credit sales (80% of total sales)
Credit purchases 5,40,000
Cash purchases (40% of total purchases)
GP Margin at cost plus 25%
Discount Allowed 5,500
Discount Received 4,500
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Bad debts (2% of closing debtors)

Depreciation to be provided as follows:
Land and Building 5%
Plant and Machinery 10%
Office Equipment 15%
Other adjustments:

(i) On 01.10.19 they sold machine having Book Value 40,000 (as on 31.03.2019) at a loss of
15,000. New machine was purchased on01.01.2020.

(ii) Office equipment was sold at its book value on01.04.2019.

(iii) Loan was partly repaid on 31.03.20 together with interest for the year.

You are required to prepare Trading, Profit & Loss Account and Balance Sheet as on 31.03.2020.

(b) The following balances were extracted from the books of M/s Division. You are required to

prepare Departmental Trading Account and Profit and Loss account for the year ended 31st
December, 2020after adjusting the unrealized department profits if any.

Deptt. Deptt.
A B
₹ ₹
Opening Stock 50,000 40,000
Purchases 6,50,000 9,10,000
Sales 10,00,000 15,00,000
General expenses incurred for both the departments were ₹1,25,000 and you are also supplied with
the following information: (a) Closing stock of Department A ₹1,00,000 including goods from
Department B for ₹20,000 at cost of Department A. (b) Closing stock of Department B ₹2,00,000
including goods from Department A for ₹30,000 at cost to Department B. (c) Opening stock of
Department A and Department B include goods of the value of ₹10,000 and ₹15,000 taken from
Department B and Department A respectively at cost to transferee departments.(d)The rate of
gross profit is uniform from year to year.

(12+8=20 Marks)

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(a) Akash Ltd. had 4000 equity share of X Limited, at a book value of ₹15 per share (face value

of ₹10 each) on 1st April 2016. On 1stSeptember 2016, Akash Ltd. Acquired 1,000 equity
shares of Limited at a premium of ₹4 per share. X Limited announced a bonus and right issue
for existing shareholders.

The terms of bonus and right issue were -

(1) Bonus was declared, at the rate of two equity shares for every five equity shares held on 30th
September,2016.

(2) Right shares are to be issued to the existing shareholders on 1 st December, 2016. The
company issued two right shares for every seven shares held at 25% premium. No dividend.
Was payable on these shares. The whole sum being payable by 31 st December, 2016.

(3) Existing shareholders were entitled to transfer their right to outsiders, either wholly or impart.
(4) Akash Ltd. exercised its option under the issue for 50% of its entitlements and sold the
remaining rights for ₹8 per share.

(5) Dividend for the year ended 31st March 2016, at the rate of 20% was declared by the

company and received by Akash Ltd., on 20th January2017.

(6) On 1st February 2017, Akash Ltd., sold half of its share holdings at a premium of ₹4 per
share.

(7) The market price of share on 31.03.2017 was ₹13 per share.

You are required to prepare the Investment Account of Akash Ltd. For the year ended
31stMarch, 2017 and determine the value of share held on that date assuming the investment
as current investment.

(b) A fire occurred in the premises of M/s Bright on 25th May, 2020. As a result of fire, sales

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were adversely affected up to 30th September, 2020. The firm had taken Loss of profit policy
(with an average clause) for ₹ 3,50,000 having indemnity period of 5 months. There is an
upward trend of 10% in sales.

The firm incurred an additional expenditure of ₹ 30,000 to maintain the sales. There was a saving of
₹5,000 in the insured standing charges.

Actual turnover from 25th May, 2020 to 30th ₹ 1,75,000

September, 2020
Turnover from 25th May, 2019 to 30th ₹ 6,00,000
September, 2019
Net profit for last financial year ₹ 2,00,000
Insured standing charges for the last financial ₹ 1,75,000
year
Total standing charges for the last financial year ₹ 3,00,000
Turnover for the last financial year ₹ 15,00,000
Turnover for one year from 25th May, 2019 to ₹ 14,00,000
24th May, 2020
You are required to calculate the loss of profit claim amount, assuming that entire sales during the
interrupted period were due to additional expenses.

(10+ 10 = 20Marks)

(a) The capital structure of a AP Ltd. consists of 20,000 Equity Shares of 10 each fully paid up and
1,000 8% Redeemable Preference Shares of 100 each fully paid up (issued on 1.4.20X1).

Undistributed reserve and surplus stood as: General Reserve 80,000; Profit and Loss Account
20,000; Investment Allowance Reserve out of which 5,000, (not free for distribution as dividend)
10,000; Cash at bank amounted to 98,000. Preference shares are to be redeemed at a Premium of
10% and for the purpose of redemption, the directors are empowered to make fresh issue of
Equity Shares at par after utilizing the undistributed reserve and surplus, subject to the conditions
that a sum of 20,000 shall be retained in general reserve and which should not be utilized.

PassJournalEntriestogiveeffecttotheabovearrangementsandalsoshowhowtherelevant items will

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appear in the Balance Sheet of the company after the redemption carried out.

(b) Prepare Cash Flow Statement of Tom& Jerry Ltd. for the year ended 31st March, 2020, in
accordance with AS-3 (Revised) from the following Summary Cash Account:

Summary Cash Account

₹ in '000 ₹ in'000
Balance as on 01.04.2017 210
Receipts from Customers 16,596
Sale of Investments (Cost ₹90,000) 102
Issue of Shares 1,800
Sale of Fixed Assets 768
19,476
Payment to Suppliers 12,204
Purchase of Investments 78
Purchase of Fixed Assets 1,380 ,
Wages & Salaries 414
Selling & Administration Exp. 690
Payment of Income Tax 1,458
Payment of Dividends 480
Repayment of Bank Loan 1,500
Interest paid on Bank Loan 300 (18,504)
Balance as on 31.03.2018 972

(12+8=20 Marks)

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(a) Aman started a business on 1st April 20X1 with 24, 00,000 represented by 1, 20,000 units of 20

each. During the financial year ending on 31st March, 20X2, he sold the entire stock for 30each.
In order to maintain the capital intact, calculate the maximum amount, which can be withdrawn
by Aman in the year 20X1-X2 if Financial Capital is maintained at historical cost.

OR

Hello Ltd. purchased goods at the cost of 20 lakhs in October. Till the end of the financial year,
75% of the stocks were sold. The Company wants to disclose closing stock at 5 lakhs. The
expected sale value is 5.5 lakhs and a commission at 10% on sale is payable to the agent. You are
required to ascertain the value of closing stock?

(b) Explain the conditions when a company should issue new equity shares for redemption of the
preference shares. Also discuss the advantages and disadvantages of redemption of preference
shares by issue of equity shares.

(c) On January 1, 20X1 Kasturi Ltd. acquired a Pick-up Van on hire purchase from Shorya Ltd.
The terms of the contract were as follows:

(a) The cash price of the van was ₹25,000.

(b) ₹10,000 were to be paid on signing of the contract.

(c) The balance was to be paid in annual installments of ₹5,000 plus interest.

(d) Interest chargeable on the outstanding balance was 6%p.a.

(e) Depreciationat10%p.a.istobewritten-offusingthestraight-linemethod.

You are required to show the Van account & Shorya Ltd. account in the books of Kasturi Ltd. from
January 1, 20X1 to December 31,20X3.

(d) What is Consequential loss policy and what items are generally covered by such policy.

(4*5 Marks=20 Marks)

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