CA–INTERMEDIATE GI-ROUND-I

CA – INTERMEDIATE - Test Series - 2023/I : Test Paper 1 MARKS : 100

HOURS : 3.00
ACCOUNTING – GROUP -1
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Q1) [5 marks Each]
A] Suraj Limited provides you the following information:
(i) It received a Government Grant @40% towards the acquisition of Machinery worth ` 25 Crores.
(ii) It received a Capital Subsidy of ` 150 Lakhs from Government for setting up a Plant costing ` 300 Lakhs
in a notified backward region.
(iii) It received ` 50 Lakhs from Government for setting up a project for supply of arsenic free water in a notified
area.
(iv) It received ` 5 Lakhs from the Local Authority for providing Corona Vaccine free of charge to its employees
and their families.
(v) It also received a performance award of ` 500 Lakhs from Government with a condition of major renovation
in the Power Plant within 3 years. Suraj Limited incurred 90% of amount towards Capital expenditure and
balance for Revenue Expenditure.
State, how you will treat the above in the books of Suraj Limited.

B] Joy Ltd. purchased 20,000 kilograms of Raw Material @ ` 20 per kilogram during the year 2020-21. They have
furnished you with the following further information for the year ended 31st March, 2021:
Particulars Units Amount (`)
Opening Inventory:
Finished Goods 2,000 1,00,000
Raw Materials 2,200 44,000
Direct Labour 3,06,000
Fixed Overheads 3,00,000
Sales 20,000 11,20,000
Closing Inventory:
Finished Goods 2,400
Raw Materials 1,800
The plant has a capacity to produce 30,000 units of finished product per annum. However, the actual production of
finished products during the year 2020-21 was 20,400 units. Due to a fall in the market demand, the price of the
finished goods in which the raw material has been utilized is expected to be sold @ ` 40 per unit. The replacement
cost of the raw material was ` 19 per kilogram.
You are required to ascertain the value of closing inventory as at 31st March, 2021 as per AS 2.

C] (a) An enterprise has constructed a complex piece of equipment (qualifying asset) that is to be installed on the
production line of a manufacturing plant. The equipment has been constructed over a period of 15 months. However,
on installation, certain calibrations are required to achieve the desired level of production before it is finally
commissioned. This process is expected to take approximately 2 months during which test runs will be made. Should
the borrowing costs attributable to borrowings pertaining to the 2 months test run period be capitalized?

(b) Should capitalization of borrowing costs be continued when the qualifying asset has been constructed but
marketing activities to sell the asset are still in progress?

D] Karan Enterprises having its Head Office in Mangalore, Karnataka has a branch in Greenville, USA. Following is
the trial balance of Branch as at 31 -3-2019:
Particulars Amount ($) Amount ($)
Dr. Cr.
Fixed assets 8,000
Opening inventory 800
Cash 700
Goods received from Head Office 2,800
Sales
Purchases 11,800 24,050
Expenses 1,800
Remittance to head office 2,450
Head office account 4,300
28,350 28,350
CA–INTERMEDIATE GI-ROUND-I

(i) Fixed assets were purchased on 1st April, 2015.

(ii) Depreciation at 10% p.a. is to be charged on fixed assets on straight line method. ·
(iii) Closing inventory at branch is $ 700 as on 31-3-2019.
(iv) Goods received from Head Office (HO) were recorded at ` 1,85,500 in HO books.
(v) Remittances to HO were recorded at ` 1,62,000 in HO books.
(vi) HO account is recorded in HO books at ` 2,84,500.
(vii) Exchange rates of US Dollar at different dates can be taken as :
1-4-2015 ` 63
1-4-2018 ` 65 and
31-3-2019 ` 67
Prepare the trial balance after been converted into Indian rupees in accordance with AS-11.

Q2) [10 marks Each]

A] Mr. Harsh provides the following details relating to his holding in 10% debentures (face value of ` 100 each) of
Exe Ltd. held as current assets:
1.4.2018 opening balance - 12,500 debentures, cost ` 12,25,000
1.6.2018 purchased 9,000 debentures@ ` 98 each ex-interest
1.11.2018 purchased 12,000 debentures @ ` 115 each cum interest
31.1.2019 sold 13,500 debentures@ ` 110 each cum-interest
31.3.2019 Market value of debentures @ ` 115 each
Due dates of interest are 30th June and 31st December.
Brokerage at 1% is to be paid for each transaction. Mr. Harsh closes his books on 31.3.2019. Show investment
account as it would appear in his books assuming FIFO method is followed.

B] Archana Enterprises maintain their books of accounts under single entry system. The Balance-Sheet as on 31st
March, 2018 was as follows :
Liabilities Amount (`) Assets Amount (`)
Capital A/c 6,75,000 Furniture & fixtures 1,50,000
Trade creditors 7,57,500 Stock 9,15,000
Outstanding expenses 67,500 Trade debtors 3,12,000
Prepaid insurance 3,000
Cash in hand & at bank 1,20,000
15,00,000 15,00,000
The following was the summary of cash and bank book for the year ended 31st March, 2019:
Receipts Amount (`) Payments Amount (`)
Cash in hand & at Bank 1,20,000 Payment to trade 1,24,83,000
on 1st April, 2018 creditors
Cash sales 1,10,70,000 Sundry expenses paid 9,31,050
Receipts from trade 27,75,000 Drawings 3,60,000
debtors
Cash in hand & at
Bank on 31st March, 1,90,950
2019
1,39,65,000 1,39,65,000
Additional Information:
(i) Discount allowed to trade debtors and received from trade creditors amounted to ` 54,000 and `
42,500 respectively (for the year ended 31st March, 2019).
(ii) Annual fire insurance premium of ` 9,000 was paid every year on 1st August for the renewal of the
policy.
(iii) Furniture & fixtures were subject to depreciation @ 15% p.a. on diminishing balance method.
(iv) The following are the balances as on 31st March, 2019:
Stock ` 9,75,000
Trade debtors ` 3,43,000
Outstanding expenses ` 55,200
(v) Gross profit ratio of 10% on sales is maintained throughout the year.
You are required to prepare Trading and Profit & Loss account for the year ended 31st March, 2019, and Balance
Sheet as on that date.
CA–INTERMEDIATE GI-ROUND-I

Q3) [10 marks Each]

A] Following information was extracted from the books of S Ltd. for the year ended 31st March,2020 :
(1) Net profit before talking into account income tax and after talking into account the following items was `
30 lakhs;
(i) Depreciation on Property, Plant & Equipment ` 7,00,000
(ii) Discount on issue of debentures written off ` 45,000.
(iii) Interest on debentures paid ` 4,35,000
(iv) Investment of Book value ` 3,50,000 sold for ` 3,75,000.
(v) Interest received on Investments ` 70,000
(2) Income tax paid during the year ` 12,80,000
(3) Company issued 60,000 Equity Shares of ` 10 each at a premium of 20% on 10th April,2019.
(4) 20,000,9% Preference Shares of ` 100 each were redeemed on 31st March, 2020 at a premium of 5%
(5) Dividend paid during the year amounted to ` 11 Lakhs (including dividend distribution tax)
(6) A new Plant costing ` 7 Lakhs was purchased in part exchange of an old plant on 1st January,2020. The book
value of the old plant was ` 8 Lakhs but the vendor took over the old plant at a value of ` 6 Lakhs only. The
balance amount was paid to vendor through cheque on 30th March,2020.
(7) Company decided to value inventory at cost, whereas previously the practice was to value inventory at cost
less 10%. The inventory according to books on 31.03.2020 was ` 14,76,000.
The inventory on 31.03.2019 was correctly valued at ` 13,50,000.
(8) Current Assets and Current Liabilities in the beginning and at the end of year 2019-2020 were as:
As on 1st April,2019 As on 31st March,2020
(`) (`)
Inventory 13,50,000 14,76,000
Trade Receivables 3,27,000 3,13,200
Cash &Bank Balances 2,40,700 3,70,500
Trade Payables 2,84,700 2,87,300
Outstanding Expenses 97,000 1,01,400
You are required to prepare a Cash Flow Statement for the year ended 31st March, 2020 as per AS 3 (revised) using
the indirect method.

B] The firm, M/s K Creations has two Departments, Dyed fabric and Readymade garments. Readymade garments
are made by the firm itself. Both dyed fabric and readymade garments have independent market. Some of readymade
garment department's requirement is supplied by Dyed Fabric Department at its usual Selling Price.
From the following figures, prepare Departmental Trading and Profit & Loss Account for the year ended 31st March
2021.
Particulars Dyed Fabric Readymade
Department garments
department
Opening stock as on April 1, 2020 5,40,000 15,20,000
Purchases (excluding inter department transfers) 20,12,080 1,50,00,000
Sales (excluding inter department transfers) 31,06,000 3,12,50,000
Transfer to Readymade garment 5,00,000 -
Direct wages 3,00,000 67,30,000
Direct expenses 1,00,000 19,50,000
Plant and Equipment for dyeing/stitching 5,00,000 15,00,000
readymade garments (WDV as on April 1, 2020)
Rent and warehousing 4,50,000 12,00,000
Stock as on March 31st 2021 6,00,000 22,50,000
The following further information are available for necessary consideration:
(i) The Stock in Readymade garments department may be considered as consisting of 60% of dyed fabric
and 40% of Other Expenses.
(ii) The Dyed Fabric Department earned a Gross Profit @ 30% in 2019-2020.
(iii) On the plant and equipment, depreciation @ 20% p.a. to be provided.
(iv) The following expenses incurred for both the departments were not apportioned between the
departments `
(a) Salaries 2,70,000
(b) Advertisement expenses 90,000

(c) General expenses 8,00,000

Salaries in 1:2 ratio, Advertisement expenses in the turnover ratio and General expenses in 1:3 ratio are to be
apportioned between the Dyed Fabric Department and Readymade Department respectively.
CA–INTERMEDIATE GI-ROUND-I

Q4) [10 marks Each]

A] The following is the extract of Balance Sheet of Jupiter Ltd. as at 31st March 2021:
`
Equity and Liabilities
Authorized Capital:
40,000, 14% preference shares of ` 100 40,00,000
4,00,000 Equity shares of ` 100 each 4,00,00,000
4,40,00,000
Issued and Subscribed Capital:
30,000, 14% Preference Shares of `100 each, fully paid up 30,00,000
2,40,000 Equity Shares of `100 each, `80 paid-up 1,92,00,000
Share Suspense Account 40,00,000
Reserve & Surplus:
Capital reserves (60% is revaluation reserve) 5,00,000
Securities Premium 1,00,000
Secured loans:
15% Debentures 1,30,00,000
Unsecured loans:
Public deposits 7,40,000
Cash credit loan from IDBI (short term) 9,30,000
Current Liabilities:
Trade payables 6,90,000
Assets
Investment in Shares, debentures, etc. 1,50,00,000
Profit and Loss Account 30,50,000
Preliminary expenses not written off 1,10,000
Share Suspense Account represents application money received on shares, the allotment of which is not yet made.
Jupiter Ltd. has been incurring losses for the last few years. Jupiter Ltd. has only one whole-time director.
You are required to compute effective capital as per provisions of schedule V to the Companies Act, 2013. Would
your answer differ if Jupiter Ltd. is an investment company? Also calculate the amount of maximum remuneration
that can be paid if no special resolution is passed at the general meeting of the company in respect of payment for
a period not exceeding three years.

B] XYZ Ltd. is having inadequacy of profits in the year ending 31-03-2021 and it proposes to declare 10% dividend
out of General Reserves.
From the following particulars ascertain the amount that can be utilized from general reserves, according to the
Companies (Declaration of Dividend out of Reserves) Rules, 2014:
5,00,000 Equity Shares of ` 10 each fully paid up 50,00,000
General Reserves 25,00,000
Revaluation Reserves 6,50,000
Net profit for the year 1,42,500
Average rate of dividend during the last five years has been 12%.

Q5) [10 marks Each]

A] The following particulars relate to hire purchase transactions:
(i) Mita purchased three bikes from Nita on hire purchase basis, the cash price of each bike being ` 1,00,000
(ii) Mita charged depreciation @ 20% on written down value method.
(iii) Two bikes were seized by the Nita when second instalment was not paid at the end of the second year.
Nita valued the two bikes at cash price less 30% depreciation charged under written down valued method.
(iv) Nita spent ` 5,000 on repairs of the bikes and then sold them for a total amount of ` 85,000.
You are required to compute:
(i) Agreed value of two bikes taken back by Nita.
(ii) Book value of the bike left with Mita.
(iii) Profit or loss to Mita on two bikes taken back by Nita.
(iv) Profit or loss of bikes repossessed, when sold by Nita.
CA–INTERMEDIATE GI-ROUND-I

B] Mr. Prakash furnishes following information for his readymade garments business:
(i) Receipts and Payments during 2019-20:
Receipts Amount ` Payments Amount `
Bank Balance as on Payment to Sundry
1-4-2019 16,250 Creditors 3,43,000
Received from Sundry Salaries 75,000
Debtors 4,81,000
General Expenses 22,500
Cash sales 1,70,800 Rent and Taxes 11,800
Capital brought in the Drawings 96,000
Business during the year 50,000
Cash Purchases 1,22,750
Interest on Investment Balance at Bank on
Received 9,750 31-03-2020 36,600
Cash in hand on
31-03-2020 20,150
7,27,800 7,27,800
(ii) Particulars of other Assets and Liabilities are as follows:
1st April, 2019 31st March,
2020
(`) (`)
Machinery 85,000 85,000
Furniture 24,500 24,500
Trade Debtors 1,55,000 ?
Trade Creditors 60,200 ?
Stock 38,600 55,700
12% Investment 85,000 85,000
Outstanding Salaries 12,000 14,000
(iii) Additional information:
(1) 20% of Total sales and 20% of total purchases are in cash.
(2) Of the Debtors, a sum of ` 7,200 should be written off as Bad debt and further a provision for doubtful
debts is to be provided @2%.
(3) Provide depreciation @10% p.a. on Machinery and Furniture. You are required to prepare Trading and
Profit & Loss account for the year ended 31st March, 2020, and Balance Sheet as on that date.

Q6) Answer any 4: [5 marks Each]

A] Explain how financial capital is maintained at historical cost?
Kishore started a business on 1st April, 2019 with ` 15,00,000 represented by 75,000 units of `20 each. During
the financial year ending on 31st March, 2020, he sold the entire stock for ` 30 each. In order to maintain the
capital intact, calculate the maximum amount, which can be withdrawn by Kishore in the year 2019-20 if Financial
Capital is maintained at historical cost.

B] Give an analytical statement of distinction between an ordinary partnership firm and a limited liability partnership.

C] State whether the following statements are 'True' or 'False'. Also give reason for your answer.
(i) Certain fundamental accounting assumptions underline the preparation and presentation of financial
statements. They are usually specifically stated because their acceptance and use are not assumed.
(ii) If fundamental accounting assumptions are not followed in presentation and preparation of financial
statements, a specific disclosure is not required.
(iii) All significant accounting policies adopted in the preparation and presentation of financial statements
should form part of the financial statements.
(iv) Any change in an accounting policy, which has a material effect should be disclosed. Where the
amount by which any item in the financial statements is affected by such change is not ascertainable,
wholly or in part, the facts need not to be indicated
CA–INTERMEDIATE GI-ROUND-I

D]
The following information is provided by Exe Limited for 31st March,2022:
Particulars `
Net Profit before Income Tax and Managerial Remuneration, but after
Depreciation and Provision for Repairs 9,40,000
Depreciation provided in the Books 4,05,000
Provision for repairs for Machinery during the year Depreciation 35,000
Allowable under Schedule II
3,40,000
Actual Expenditure incurred on Repairs during the year Provision
25,000
for Income Tax
1,50,000
You are required to calculate the Managerial Remuneration for Exe Limited as on 31 st March, 2022 in the following
situations:
(i) There is only one Whole Time Director.
(ii) There are two Whole Time Directors.
(iii) There are two Whole Time Directors, a part time Director and a Manager.

E] Following is the extract of the Balance Sheet of K Ltd (listed company) as at 31st March, 2020
Authorized capital: `

3,00,000 Equity shares of ` 10 each 30,00,000

30,00,000
Issued and Subscribed capital:

2,00,000 Equity shares of ` 10 each, ` 8 paid up 16,00,000

Reserves and surplus:
General Reserve 3,60,000
Capital Redemption Reserve 1,20,000
Securities premium (not realised in cash) 75,000
Profit and Loss Account 6,00,000
On 1st April, 2020, the Company has made final call @ ` 2 each on 2,00,000 equity shares. The call money was
received by 25th April, 2020. Thereafter, the company decided to capitalize its reserves by way of bonus at the
rate of one share for every four shares held.
Show necessary entries in the books of the company and prepare the extract of the Balance Sheet immediately
after fav issue.

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