Solved Ans. Accounts_5 CA IPCC Nov.



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Ipcc_Nov.10 Solved Ans. Accounts_5 Ipcc_Nov.10

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Solved Ans Prepared by : C.A Arvind Kumar Jain and Team Members
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Dr.000 nominal value purchased for Rs.09 Investment in own debenture a/c ---------. To Debenture holder (Intt.100 Loss Assets 3.01 Debenture holder (Interest) a/c -------.800 for three years 900 for more than three years 1.000 x 8% x ---. To Bank (2) 1.09 Debenture holder (Interest) a/c -----------.000 x 8% x --. (b) On 1st September Rs.250 cum interest.000 29.4.250 12000 8800 3200 (3) 30.000 .3. Assets Classification (in Lakh) Standard 10.Dr.Dr.9.000 nominal value purchased for Rs.) a/c To Interest on own debenture a/c 1 (i) Interest own debenture = 80. 1 (i) (1) 1. The following purchases were made during the financial year 2009-10 and cancellation made on 31st March 2010 : (a) On 1st April Rs. 1. The company has power to purchase its own debentures in the open market for cancellation thereof. To Debenture holder (Interest) a/c To Interest on own debenture 31. 3.50.9.Dr.000 in earlier year on which interest is payable half yearly on 31st March and 30th September.9. To Bank 8800 8800 12000 8800 3200 8800 8800 (ii) From the following information of details of advances of Zenith Bank Ltd. Ans.= 3200/2 (2) Debenture holder Interest = 12000 – 3200 = 8800/(4) 30. Interest on own debenture a/c --------------.Solved Ans.Dr. Answer the following questions : [ 4 x 5 = 20 marks ] (i) Rama Limited issued 8% Debentures of Rs.09 Debenture Interest a/c --------------.400 Doubtful: for one year 3.30. Accounts_5 CA IPCC Nov. To Bank ( Calculation of cost ) Purchase cost (-) Interest 5 ( 30.10 Debenture Interest a/c -------------.Dr.450.. Interest on own debenture a/c ---------.000 Sub-Standard 6.09 Investment in own debenture a/c --------------. To Bank (5) 31. 49.200 for two years 1. calculate the amount of provisions to be made in Profit and Loss Account for the year ended on 31 -3-2010 : Rs. Show the Journal Entries (without narrations) for the transactions held in the year 2009-10.250 1. ex-interest.30.Dr.Dr. 2010 2 Qn.) 12 49450 NIL 49450 29250 1000 20250 30.3.00.

230 3 (iii) While preparing its final accounts for the year ended 31st March 2010.Average Rate .” Give examples of areas in which different accounting policies may be adopted by enterprise. (iv) “Recognizing the need to harmonize the diverse accounting policies and practices. Profit and Loss Account). there are many areas. Inventories ..WDV Method • Conversion or translation of foreign currency item : . 1 (ii) Particulars Standard Sub-standard Doubtful : For one year For two years For three years For more than three years Loss assets Amount 10. a company made a provision for bad-debts @ 4% of its total debtors (as per trend follows from the previous years). In April 2010 the debtor become a bankrupt. profit and loss account is disclosed as accounting policies. 3. 1 (iii) As per AS-4 “Events occurring after the Balance Sheet date” but before the date of finalization of the balance sheet.000 6. Ans.Straight Line Method . Depreciation on revalued amount of fixed assets is adjusted by transferring the equivalent amount from revaluation reserve.40% 10% 20% 30% 30% 100% 100% (Rs. accounting standards are framed. the circumstances of which were existing on the balance sheet date must be adjusted in accounts. 31-3-2010 Hence company should provide for full loss arising out of insolvency of the debtors for the year ended 31-3-2010.100 3.00. where more than one method can be followed for accounting which methods have been followed in preparation of Balance Sheet.Weighted Average . Can the company provide for the full loss arising out of insolvency of the debtor in the final accounts for the year ended 31st March 2010.FIFO .Standard Cost . Examples of Accounting Policies Depreciation . At the time of preparation of financial statements (i. 2010 Ans. Hence accounting policies contains the information about the method adopted for the preparation of financial statement.000 6.000 had suffered heavy loss due to an earthquake. 1 (iv) Accounting policies refer to specific accounting principles and the method of applying those principles adopted by the enterprise in preparation and presentation of the financial statements.e.Retail Method • Valuation of Investment • Treatment of Retirement Benefits • Valuation of Fixed Assets • Treatment of Contingent Liabilities There are many areas other than aforesaid.100 3. Balance Sheet.200 1. the loss was not covered by any insurance policy. circumstances were existing on the balance sheet date and event of April (declaration of insolvency) only confirm the circumstances existing on the date of balance sheet i. 1956 as amended. in lakh) Amount 40 640 640 540 270 1. which have more than one method of accounting treatment such as: • Methods of Depreciation : .Solved Ans.e.400 3.000 Provision 0.Depreciation on fixed assets has been provided for on straight-line method at the rates prescribed under Schedule XIV to the Companies Act. Accounts_5 CA IPCC Nov. Ans.800 900 1.TT buying rate • Valuation of inventories : . In the instant case. In the first week of March 2010 a debtor for Rs. Statements of accounting policies are part of financial statement.

000 Cash 24. Frauds committed by C during the year were found out and it was decided to dissolve the partnership on 31st March 2010 when their Balance Sheet was as under : Liabilities Capital A B C D General reserve Trade creditors Bills payable Amount (Rs. B.5. (ii) Investments costing Rs.600 Stock Investment 4.Solved Ans. 2 To Building To Stock A/c To Investment (29.900 and the funds transferred to his personal account.000 – 5.000 3.20.06. The rest of the creditors were paid off at a discount of 2%.8.500 By Bills payable 23.000.400 were sold by C at Rs. Accounts_5 CA IPCC Nov.000 42. (iv) The other assets realised as follows : Building 105% of book value Stock Rs. whichever islpwer.000 2.000 23.29.000 20. C and D are sharing profits and losses in the ratio 5: 5: 4: 2. 400. This sale was omitted from the firm's books.300) To Cash Creditors Bills Payable Dissolution Expenses To A 171 B 171 C 137 D 69 Realisation A/c 1.7.000 Stock 90. (iii) A creditor agreed to take over investments of the book value of Rs.000 Investments .500 29.Debtors 35.29.000 C 47. b/d By General Reserve .000 33. (vi) The expenses of dissolution amounted to Rs.4. Ans. 4.900 Debtors [ 16 marks ] 47.000 Following information is given to you : (i) A cheque for Rs. 2010 • 4 • Inventories are valued at lower of cost and net realizable value.) 1.176 548 3. 2.000 By Creditors 85.400) To Debtors (42.78. For raw materials the cost is determined on FIFO method.000 20.06.000 3.676 Partner’s Capital A/c B C 15000 4300 D A 90000 7500 B 90000 7500 C 6000 3.000 – 4. cost of conversion and other cost including appropriate production overhead incurred in bringing such inventories to their present location.300 received from debtor was not recorded in the books and was misappropriated by C.5. Prepare the necessary Ledger Accounts.26. Qn.500 1. Finished goods and raw materials are valued at cost or net realisable value.000 14.700 By Cash 37. 4.600 By Profit on Sale of investment 37.4.000 Amount (Rs.676 D 3500 3000 To Balance B/d To Debtors A/c A - By Bal.20.000 Investments The rest of investments were sold at a profit of Rs.800 Debtors The rest of the debtors were realised at a discount of 12% (v) The bills payable were settled at a discount of Rs.000 85.900 (vii) It was found out that realisation from C's private assets would only be Rs.400 at Rs. A.828 Building 19.000 78. The cost comprises of cost of purchase.500 15.400.) Assets Building 90.

531 90.Dr. 20 . To Preference Shareholders A/c (Being Amount payable to preference shareholder made due) Securities Premium A/c ---------------------To Premium on redemption A/c (Being premium on redemption written off) Revenue Reserves A/c -------------------Dr.100 each fully paid Capital Reserves Revenue Reserves Share Premium 10% Debentures Current Liabilities Amount Assets Fixed assets less depreciation 100 Investments at cost Current assets 20 8 50 60 4 70 312 (i) (ii) (Rs. to the employees at Rs.000 Bills payable A/c 78.678 [ 16 marks ] Qn. which appeared as a part of the current assets.2. Accounts_5 CA IPCC Nov.2010.600 4.000 equity stock options outstanding on the above mentioned date. These debentures were cancelled on 1st April 2010.000 Dissolution Expenses A/c 23. (iii) Included in it's investment were “investments in own debentures” costing Rs. 2010 : Liabilities Share Capital Equity Shares of Rs.000 2. The payment for the above were made out of huge bank balances.286 2. 9% Preference Shares A/c ------------------------.676 st 37. (v) Pass the Journal Entries to record the above. It also bought back 3 lakhs equity shares of Rs.828 19.10 each fully paid 9% Redeemable Preference Shares of Rs.531 35. 3 (i) Journal Entries in Books of Extra Ltd. (This was included under Current liabilities). Premium on Redemption -----------------------.900 90. Ans. in lakh) Amount 50 120 142 312 The company redeemed the preference shares at a premium of 10% on 1st April 2010. Extra Ltd. 20 2 22 2 2 (ii) (iii) Dr. (iv) The company had shares. 2010 To To To To Investment A/c Realisation A/c C’s Cap. 3.00.2010 employees exercised their options for 50. A/c -171 171 4000 137 7140 7140 2783 27200 5 69 97671 97671 38069 To Balance b/d To Realisation A/c Building A/c Stock A/c Stock A/c Investment A/c Debtors A/c To C’s capital A/c Cash A/c 14.20 when the market price was Rs.30.2 lakhs (face value Rs.20 lakhs).500 By Realisation A/c Creditors A/c 1. A/c B’s Cap. On 1.26. 10 each at Rs. furnishes you with the following Balance Sheet as on 31 March.176 By D’s Capital A/c 4.78.Dr. 30 per share. (vi) Prepare Balance Sheet as at 01.000 By A’s Capital A/c 33. A/c Cash 7140 90531 97671 7140 90531 97671 5400 2500 27200 2783 35286 38069 By By By By By Cash Realisation A’s Cap. A/c D’s Cap.Solved Ans.176 By B’s Capital A/c 33.04.

R created out of revenue reserve) Dr. 22 22 30 60 90 60 60 30 30 20 6 (v) (vi) (vii) (viii) (ix) (x) Equity shareholder A/c -------------Dr.R.500 Transfer from Department S 21.20) Capital Redemption Reserve Securities Premium (60 – 2 – 60 + 10) 10% Debentures (4 – 2. Rs. (a) Department R sells goods to Department S at a profit of 25% on cost and Department T at 10% profit on cost. R Deptt.000 7.500 16. Transfer from Department R 22.000 shares) Balance Sheet as on 1.20 To Investment in own debenture A/c To Capital Reserve A/c (Being Investment in own debentures cancelled) Cash A/c ------------------Dr.000 Stock lying at different departments at the end of the year are as under: Deptt.000 Transfer from Department T 9. Department R 54.500 Find out the correct departmental profits after charging Manager's commission. Department Managers are entitled to 10% commission on net profit subject to unrealised profit on departmental sales being eliminated. 2.000 18. 90 To Current Assets A/c (Being Equity Shareholders paid off) 10% Debenture A/c ------------------Dr.80 65 208 90 2.30 per share) Share Premium a/c -------------Dr. To Premium on buy back of share a/c (Being premium on buy back of share wet ten off) Revenue Reserves a/c --------------To Capital Redemption Reserve (Being C.10 each fully paid (100 – 30 + 5) Capital Reserves (8 + 0.20 50 8 1. Accounts_5 CA IPCC Nov.20) Current Liabilities (70 – 5) Fixed Assets less depreciation Investment at cost (120 – 2) Current Assets (142 – 22 – 90 + 10) 50 118 40 208 Qn 4.20 5 10 Equity Shares of Rs. Department S sells goods to R and T at a profit of 15% and 20% on sales respectively. 2010 To Capital Redemption Reserve (Being CRR created out of revenue reserve) (iv) Preference Shareholders A/c ----------------.2010 75 8. Rs. 5 To Equity Share Capital A/c To Securities premium a/c (Being employee exercised options for 50. T Rs.04.Dr. To Equity Shareholders A/c (Being Equity Shares are bought back @ Rs.500 27. Premium on buy back of share -------------Dr. 10 Current liabilities A/c ------------------Dr. Departmental profits after charging Manager's commission.000 Department Department S T 40.Solved Ans. [ 8 marks ] .00 0. but before adjustment of unrealised profit are as under : Rs. S Deptt. To Current Assets A/c (Being amount paid to preference shareholders) Equity Share Capital A/c --------------Dr. Department T charges 20% and 25% profit on cost to Department R and S respectively.

00.31.000 2.01.000 6.2009 Receivable .000 27000 ------.2010 Ans.000) 3.2010 Paid Payable-01.000 87.500 -------.) 125 7 T 27.) Direct Business Premium : Received Receivable .000 (Rs.000 95.000 (4500) 25 (22500 x ---.000 3.) 125 39000 3900 35100 From T 24900 2490 22410 Less : Manager Commission 10% on Profit Correct Profit 5535 49815 (b) From the following information of Reliable Marine Insurance Ltd.54.000 4.000 32.03.000 69.000 36.000 3.000 40.2010 Received Receivable . Accounts_5 CA IPCC Nov.000 6.) 110 (3600) (18000 x 20%) Profit after charging managerial commission but before adjustment of unrealized profit Add : Manager Commission Less Unrealised Profit From R From S (31500) (21000 x 15%) (1500) 20 (9000 x ---.04.Solved Ans.000 Computation of Net premium received Direct Business (1500) 10 ( 16500 x ----. 4 (a) Calculation of Correct Department Profit R 54.000 (36.x 10 90 45.000 15.09.000 Claims : Paid Payable-01. 2010 Ans.000 -Re-insurance 7.03.000 5.00.000 -------.2009 Payable-31.000 18.04.000 89.39.000) 32.x 10 90 60.01.000 12.) 120 55350 (1500) 25 (7500 x ---.2009 Receivable- Payable-31.77.) Reinsurance 7.38.000 S 40.000 (4. for the year ending 31st March 2010 find out the (i) Net premiums earned (ii) Net claims incurred [ 8 marks ] (Rs.000 27.52.000 7.000 Particulars Premium Received (-) Opening Premium receivable (+) Closing premium receivable Premium received (a) Premium paid .500 4. 4 (b) 88.01.000 6.x 10 90 30.500 40.03.

000 -Re-insurance (1.000 (89.000 Bank Balance 8.000 and workmen's profit sharing fund at 10% premium.000 shares x Rs.000 .00.000 (40. decided to absorb the business of Y Ltd.000 51.000 equity share of Rs.000 8.00.000 7.000 ----------------------1.10 each fully paid at Rs. as at 31st March 2010 : Liabilities Share Capital Issued & paid up : 2.000 -----------------------------------69.00.11) 11.4 per equity share in cash.000 X Ltd. Rs.00. Following is the Balance Sheet of Y Ltd. (2.000 Building Plant and machinery 10. Ans.00. 5.00.000) 12.51.000 Shares x Rs.00.000 8 (27. 5 Computation of Purchase Consideration Equity Shares of X Ltd.000 69. and a payment of Rs. (ii) Issue of equity share of Rs. 2010 (-) Opening premium payable (+) Closing premium payable Premium paid Net premium received (a) – (b) ---87.000 Current Assets Stock Sundry debtors 6. 10 each fully paid up Reserves & Surplus General reserve Profit & Loss A/c Current Liabilities Creditors Workmen's profit sharing fund Rs.00.06. 8 per share paid up 1. Exp.000 (b) Direct Business 69.000 -----------------------3.000 6.38.000) 95.06. in liew of Equity shares of Y Ltd.000 [ 16 marks ] Rs.00.. at the respective book value of assets and trade liabilities except Building which was valued at Rs.00.Solved Ans.000 (15.60. and opening Journal Entries in the books of X Ltd. Cash = = = 27.50.52. Calculate the purchase consideration.000 and Plant & Machinery at Rs.. share and every equity share of Y Ltd. Accounts_5 CA IPCC Nov.000) 18. 4.11) 10.00.000 2.000 6.000 1.00. 40.000 (b) Computation of Net Claims incurred Particulars Claims paid (-) Opening Claims Payable (+) Closing Claims Payable Claims Paid (a) Claims received (-) Opening claims receivable (+) Closing claims receivable Claims Received Net Claims incurred (a) – (b) Qn.000 51.00.000 Misc.50..11 per share for every pref.01. in liew of Preference Shares of Y Ltd.000) 38. The purchase consideration was payable as follows : (i) Payment of liquidation expenses Rs. show the necessary ledger accounts in the books of Y Ltd.00.54. Equity Shares of X Ltd.000 7.10.000 9. shares of Rs..000. 10 each.000 (10%) pref.99. Assets Fixed Assets Goodwill 20.000 5.000 Preliminary Expense

00.000 5. Find out the risk adjusted asset and risk weighted assets ratio.000 Sundry debtors 6.00.000 Qn.00.000 To Equity Share Capital A/c To Securities premium A/c To Cash A/c (Being consideration due to Y Ltd.00.000 7.000 11.00 Capital Reserve (of which Rs. Goodwill A/c ------------.000 By General Reserve 10. satisfied by issue of Equity Shares and payment of cash) 35.000 Equity Share Capital A/c 10.50.000 37.000 By Profit & Loss A/c By Realisation A/c 39. Sundry Debtors A/c ---------. Bank Balance A/c ---------.000 10% Preference Share Capital A/c 11.4) ------------------------------46.00.00 Statutory Reserve 270.50.000 To Preliminary Expense To Equity Shares in X Ltd.000 3.00.000 10.000 By Working profit sharing fund Building 13.60.Dr.60. Building A/c ----------------.00.000 3. [ 8 marks ] Rs.000 By B/d By Realisation A/c 11. (Balance figure) To Workmen’s profit Sharing fund A/c To Creditors A/c To Liquidator of Y Ltd.000 4.50.000 By Balance b/d 27.000 55.000 Premium on redemption of preference shares 3.50. (a) A Commercial Bank has the following capital funds and assets.000 5.00.00 .00.000 8.90. Realisation A/c Goodwill 8.000 To Equity Shares of X Ltd.000 By Creditors 7.000 6.Dr. Plant & Machinery A/c --------. taken over) Goodwill A/c ---------Dr. ------------------------------- 9 Purchase Consideration To To To To To To To To In Books of Y Ltd.000 4.Solved Ans.000 In books of X Ltd.00.000 1.50.000 20. A/c (Being Assets & Liabilities of Y Ltd.00. Segregate the capital funds into Tier I and Tier II capitals. To Cash A/c (Being liquidation Expenses paid) 12.Dr.00.90.000 Stock 9.00.000 Equity Shares capital 55.Dr.00.000 9.000 48. Accounts_5 CA IPCC Nov.00.20. 2010 (2. 6.50.000 48. 48. 10.000 3.Dr. (Purchase consideration) Plant & Machinery 7.Dr. (in crores) Equity Share Capital 500.000 6. A/c -----.50.000 By X Ltd.90.000 Shares x Rs.000 Bank Balance 1. To Cash Liquidator of Y Ltd. Stock A/c --------.16 crores were due to revaluation of assets and the balance due to sale of capital asset) 78.

[ 8 marks ] Ans.00.675.00 78.00 18.00. The plant when installed in 2000 cost the company Rs.00 10 Tier II – Capital Capital Reserve (Due to Revaluation of Assets) 16.800. 90.x 100 11.Solved Ans. 90. in crores) 10. endorsement and letters of credit Capital adequacy ratio Or Risk weighted assets ratio (b) 7.000/Ratio of material.50 (i) Guaranteed by govt.00 Premises.50 = 7. goods worth Rs.000 have been used in the construction of the new plant.00 4800. 12.000 Labour = 27.00 16. furniture and fixtures Off-Balance Sheet items : (i) Guarantee and other obligations (ii) Acceptances.60 800.00 (a) 832.00.80. labour and overheads being in the ratio 5:3:2.000. Draw the necessary Ledger Accounts.00 Balance with other banks Loans & Advances 16. labour and overheads has changed to 10:9:6.00.00 (ii) Others 78.00 800.6 -5. 2010 Assets : Cash balance with RBI Balance with other banks Other investments Loans and advances : (i) Guaranteed by the Government (ii) Others Premises.675.000 and in addition.00 10.19. endorsements and letter of credit Ans.00 270.675. The old plant was scrapped and sold for Rs.00.356. labour & overheads are 5 : 3 : 2 ∴ Material = 45.00 – 16.00. 5.50 5.00 Less : 55% discount 8. 2. The proportion of material.39 % (b) The Super Electricity Company maintains accounts under the Double Accounts System. furniture & fixtures Off balance sheet items (i) Guarantee and other obligations (ii) Acceptances.356. (a) Tier I . Accounts_5 CA IPCC Nov. the components of materials.00 11.00 100 100 = 839.00 78.20 Percentage weight 0 20 0 100 100 Risk weight assets -3. in Crores) 500.000.00 62.Capital Share Capital Statutory Reserve Capital Reserve (78.000 Calculation of Current cost .00) (Rs.60. Find out the amount to be capitalised and also the amount to be charged to revenue.00 36. It is ascertained that the costs of materials has gone up by 200% and the cost of labour has gone up by 300%.00 4800.00 Cash Balance with RBI 18.00 4. The cost of the new plant is Rs.20 839.60 800. 6 (b) Old cost = Rs.000 Overheads = 18.20 ----------.80 Capital fund (a) + (b) Calculation of Risk Adjusted Assets Assets Amounts (Rs.00 5756. It decides to replace one of its old plant with a technologically advanced plant with a larger capacity.

x 6 19 Calculation of Total new cost Cash cost Old materials used Amount Charged to Revenue Current cost (-) Old material used (-) Old material sold = = = = 45.684 11 2.e.316 Expenses incurred at the branch 45.80.684 12.000 Answer any four of the followings : [ 4 x 4 = 16 marks ] (a) Following is the information of the Jammu branch of Best Ltd. (2) The sale price is cost plus 50%.000 By Opening Stock reserve Sales during the year As per our opinion there is some mistake in the question itself.000 To Bank To Plant 2.60.73. (3) Other informations: Rs. To Closing stock reserve 220000 x ----60.000 39.684 Note : In the present case.00.00.000 1. Branch A/c 12.684 = --------------3.000 1. current cost of old plant exceeds total cost of new plant which seems to be incorrect.000 Goods sent during the year 11.000 12. Stock as on 01-04-2009 2.00.000 To Balance b/d To Replacement Replacement A/c 19.00.08. Accounts_5 CA IPCC Nov. Qn.784 62.73.19. 2010 Material Add : Increase by 200% Labour Add : Increase by 300% Overheads 1352 + 108 loan -------------------.000 20 120 360000 x ---By Goods sent to branch A/c 183333 120 20 Loading i.55. 7.00.20. 1) 3.000 17.000 To Opening Stock 2.000 12.80. 11.000 By Closing stock (W.000 102.86.684 3.667 To Goods sent to branch A/c To Branch expenses (given) 20 45. New Delhi for the year ending 31st March 2010 from the following : (1) Goods are invoiced to the branch at cost plus 20%.88.000 2.19..684 Plant A/c 90. But we have solved the question as per information provided in the question.000 Ascertain (i) the profit earned by the branch during the year (ii) branch stock reserve in respect of unrealized profit.684 By Bank By Plant By Revenue .92.60.000 By Sales 19.20.000 By Replacement By Balance c/d 39.Solved Ans.00.684 3.000 17.000 2.000 12.000 81.000 x ----To Net profit c/d 120 3.000 76.35.60.

000 Hence.60. 30. Calculate basic E.000 equity shares on April.00. Accounts_5 CA IPCC Nov. 30.00. The average fair value per share during 2009-10 was Rs.000 shares) Rs.000 Rs. Net Profit made by branch during the year = Rs.000 Shares Rs.000 Diluted Earning per share -Number of shares under options Number of shares that would have been issued at fair value 15 2. and diluted E. 3 crores : Rs.000 /(ii) Closing stock at branch at invoice price (W.000 .20. 7 (b) Net profit for the year 2009 Weighted average number of shares outstanding during year 2009 Basic Earning per share 30. 1) = 3.000 during the year 2009-10.000 : Rs. The company has given share option to its employees of 2.000 Therefore.00. 3.000 shares Rs.00.32 crores to be utilized as under : (i) Construction of sealink across two cities : (work was held up totally for a month during the year due to high water levels) (ii) Purchase of equipments and machineries (iii) Working capital (iv) Purchase of vehicles (v) Advance for tools/cranes etc.+ 20% 150 Closing stock at branch at invoice price 2. Branch stock reserve is respect of Unrealised profit 20 = 3.00.5 12.000 ---------------12.Solved Ans.80.P.S. 80. 25 crores : Rs.00.00. Ans. had (vi) Purchase of technical know-how (vii) Total interest charged by the bank for the year ending 31st March 2010 : Show the treatment of interest by Amazing Construction Ltd. obtained a loan of Rs. 2009.00.N.000 12.000 11. 1 crores : Rs.000 12 ------------3. 2.00.000 x -----.20.00.00.P.000 : Rs. 50. 2.000 9.60.000 x ---25 Weighted number of Equity shares Adjusted earning Diluted Earnings per share Rs.00.000 equity shares at option price of Rs. 50.000 ------------12.000 120 (b) Ram Ltd. 30.00. 2010 Working Note 1) Computation of Closing Stock at branch at invoice price Opening stock at invoice price Add : Goods sent to branch at invoice price Less : Invoice price of Goods Sold 100 12. shares (1. 2 crores : Rs. 1.000 2.000 x ---. : Rs.= 60. The company earned a profit of Rs.34 (c) On 1st April 2009 Amazing Construction Ltd.

2010 13 Ans.The realistic expectation that there will be sufficient future revenues to cover cost. construction or production of qualifying asset.000. Rs. asset acquired must be qualifying asset and borrowing cost should be directly attributable to the acquisition.Identification of cost incurred . Ans.80 lakh x 25 cr. 6. Rs.00 ----------18. 6. Rs. = Rs.Availability of product for use or sale .000. which meets asset recognition criteria and other criteria as listed above.000 being the salaries of 5 employees at Rs. Purchase of vehicles Purchase of technical know-how Rs. construction or production of qualifying asset. 36.00 -----------(e) M Ltd. (i) Wages of 15 man of Rs. Rs.00 1. for 4 month (iii) Income tax deducted out of salaries (iv) Computation payable to an employee .5.100 p. Rs. cost of internal project also to be expensed as incurred unless they meet asset recognition criteria. Ans.Probability of external market or . Therefore. 3. Find the amount of Preferential Creditors.000. borrowing cost attributable to the construction of the sealink should only be capitalized which will be equal to Rs.000. in addition it is estimated that the company would have to pay Rs. Accounts_5 CA IPCC Nov.000 includes Rs. If development expenses generate the intangible.000. following is the accounting treatment of research and development cost :Research Cost: As per this standard Research Cost be expensed as and when incurred.000.5 lakhs The balance of Rs.m. The management hence wants to defer the expenditure write off to future years.Technical feasibility of the product . Rs.000 on account of wages of 15 men at Rs. Hence. 32 cr.9. The intangible asset arising from research should not be recorded as an asset and therefore the research cost of internal project shall be treated as an expense in financial statement Development Expenses: The development expenses. Rent for godown for the last six months amounting to Rs. 300 p.Solved Ans.000 and Directors fees Rs. before recognizing these costs as assets the following points should be demonstrated: . In other words. 2008. the intangible assets generated from development expenses are capitalized but what will be the amount at which these intangible assets are recognized? As per this Standard intangible asset shall be recognized at cost.5 lakhs (80 lakhs – 62.00 6. In the question Rs. Income-tax deducted out of salaries of employees Rs.32 crores borrowed as loan was utilized for – 25 crores 3 crores 2 crores 0. launched a project for producing product A in Nov. 7 (e) As per – 26 “Intangible Assets”. 7 (d) Calculation of Preferential Creditors Construction of equipments and machineries Purchase of equipments and machineries Working capital Advances for tools / cranes etc.500. The company incurred Rs.300 per month for the previous 6 months. 7 (c) As per AS-16 borrowing cost (interest) should be capitalised if borrowing cost is directly attributable to the acquisition. as the market conditions are unfavourable the cost incurred on Research & Development shall be expensed in current year. in other words the cost of research cannot be capitalized. for 4 month (ii) Salaries of 5 employees Rs.1.25 crores is a qualifying asset as per AS16. 17. which was contingent liability not accepted by the company and not included in above said creditors figure.m.50 crores 0. Advise the company as per the applicable Accounting Standard.5 lakhs) should be expensed and debited to profit & loss A/c (d) A company went into liquidation whose creditors are Rs.00 5.000 as compensation to an employee for injuries suffered by him. 62.30 lakhs towards Research and Development expenses upto 31st March 2010. other five payments are not for the qualifying asset.100 per month for 4 months immediately before the date of winding up. Due to unfavourable market conditions the management feels that it is not possible to manufacture and sold the product in the market for next so many years.50 crores 1 crores 32 crores Out of these 6 payments only construction of a sealink across two cities of Rs.