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MOCK TEST FOR MAY 2012 EXAM VIDHYA SAGAR CAREER INSTITUTE LIMITED Total No. of Questions: - 7 Time Allowed: - 3 Hours Total No. of Printed Pages - 8 Maximum Marks: 100 IPCC PAPER (Advanced Accounting) Answers to questions are to be given only in English except in the case of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued. Question no. 1 is compulsory. Attempt any five questions from the remaining six questions. Wherever required, suitable assumptions may be made by the candidate and stated clearly in the answer. Working notes should form part of the answer. QUESTION 1. (A) What will be the treatment of the following in the final statement of accounts for the year ended 31st March, 2011 of a limited company? On 15th April, 2011 due to destruction of the factory by fire, Ajay one of the company's debtors, declared himself insolvent. He owed Rs. 2, 00,000 to the company. (Marks: 5) (B) Answer the following: Exchange Rate per $ Goods purchased on 1-1-2011 of US$ 10,000 Rs. 45 Exchange rate on 31-3-2011 Rs. 44 Date of actual payment 7-7-2011 Rs. 43 (Marks: 5) Ascertain the loss/gain for financial years 2010-11 and 2011-12, also give their treatment as per AS 11. (C) From the following information relating to Akshay Ltd. calculate Diluted Earnings Per Share as per As 20: Net Profit for the current year Number of equity shares outstanding Basic earnings per share Number of 11% convertible debentures of Rs. 100 each Rs. 2,00,00,000 40,00,000 Rs. 5.00 50,000 (Each debentures is convertible into 8 equity shares) Interest expense for the current year Rs. 5,50,000 Tax saving due to interest expenses Rs. 1,65,000 (Marks: 5) (D) From the following information find out the amount of provisions to be shows in the Profit and Loss Account of Katrina Commercial Bank: Assets Rs. ( in lakhs) Standard 4,000 Sub-standard 2,000 Doubtful up to one year 900 Doubtful more than 1 year but up to three years 400 1|Page Doubtful more than three years 300 Loss Assets 500 (Marks: 5) QUESTION 2. The Balance Sheet of Saif Limited as on 31st March, 2011 was as follows: Liabilities Amount Assets Amount (Rs.) 5,00,000 Equity Shares of Rs. 10 each fully paid 50,00,000 Goodwill 9% 20,000 Preference shares of Rs. 100 each fully paid Rs. 20,00,000 Patent 10% First Debentures 10% Second Debentures Debentures Outstanding Interest 10,00,000 5,00,000 6,00,000 Land & Building 30,00,000 10,00,000 Plant and Machinery 10,00,000 1,60,000 Furniture and Fixtures 2,00,000 Trade Creditors 5,00,000 Computers 3,00,000 Directors' Loan 1,00,000 Trade Investment 5,00,000 Bank O/D 1,00,000 Debtors 5,00,000 40,000 Stock 10,00,000 Outstanding Liabilities Provision for Tax 1,00,000 Discount on Debentures issue of . Profit and Loss Account 96,00,000 1,00,000 15,00,000 96,00,000 Note: Preference dividend is in arrears for last three years. A holds 10% first debentures for Rs. 4,00,000 and 10% second debentures for Rs. 6,00,000. He is also creditors for Rs. 1,00,000. B holds 10% first debentures for Rs. 2,00,000 and 10% second debentures for Rs. 4,00,000 and is also creditors for Rs. 50,000. The following scheme of reconstruction has been agreed upon and duly approved by the court. i. All the equity shares be converted into fully paid equity shares of Rs. 5 each. 2|Page ii. The preference shares be reduced to Rs. 50 each and the preference shareholders agree to forego their arrears of preference dividends in consideration of which 9% preference shares are to be converted into 10% preference shares. iii. Mr. 'A is to cancel Rs. 6,00,000 of his total debt including interest on debentures and to pay Rs. 1 lakh to the company and to receive new 12% debentures for the Balance amount. iv. Mr. 'B' is to cancel Rs. 3,00,000 of his total debt including interest on debentures and to accept new 12% debentures for the balance amount. v. Trade creditors (other than A and B) agreed to forego 50% of their claim. vi. Directors to accept settlement of their loans as to 60% thereof by allotment of equity shares and balance being waived. vii. There were capital commitments totaling Rs. 3,00,000. These contracts are to be cancelled on payment of 5% of the contract price as a penalty. viii. The Directors refund Rs. 1,10,000 of the fees previously received by them. ix. Reconstruction expenses paid Rs. 10,000. x. The taxation liability of the company is settled at Rs. 80,000 and the same is paid immediately. xi. The assets are revalued as under : Rs. Land and Building 28,00,000 Plant & Machinery 4,00,000 Stock 7,00,000 Debentures 3,00,000 Computers 1,80,000 Furniture and Fixtures 1,00,000 Trade Investment 4,00,000 Pass Journal entries for all the above mentioned transactions including amounts to be written off of Goodwill, Patents, Loss in Profit & Loss Account and Discount and issue of debentures. Prepare Bank Account and working of allocation of Interest on Debentures between A and B. (Marks: 16) QUESTION 3. (A) Prepare the Fire Insurance Revenue A/c of Vidya insurance Ltd. as per IRDA regulations for the year ended 31st March, 2012 from the following details: Rs. Claims paid Legal expenses regarding claims Premiums received Re-insurance premium paid 4,90,000 10,000 13,00,000 1,00,000 3|Page Commission 3,00,000 Expenses of Management 2,00,000 Provision against unexpired risk on 1st April, 2011 5,50,000 Claims unpaid on 1st April, 2011 50,000 Claims unpaid on 31st March, 2012 80,000 (Marks: 8) (B) Mallika Electric Supply Ltd. rebuilt and re-equipped one of their Mains at a Cash Cost of Rs. 40,00,000. The old Mains cost is Rs. 15,00,000 when it was installed. The capacity of the new Main is double that the old Main. Rs. 70,000 was realized from sale of old materials. Four old motors valued at Rs. 2,00,000 salvaged from the old Main were used in the reconstruction. The cost of Labour and Materials is respectively 30% and 25% higher now than when the old Main was built. The proportion of Labour to Materials in the Main then and now is 2 : 3. Show the Journal entries for recording the above transactions, if accounts are maintained under Double Account System. (Marks: 8) QUESTION 4. (A) Ashin Ltd. has 3 departments A, B, C. The following information is provided: A(Rs.) B (Rs.) C (Rs.) Opening Stock 3,000 4,000 6,000 Consumption of direct materials 8,000 12,000 Wages 5,000 10,000 Closing Stock 4,000 14,000 8,000 Sales 34,000 Stock of each department is valued at cost to the department concerned. Stocks of A department are transferred to B at a margin of 50% above department cost. Stocks, of B department are transferred to C department at a margin of 10% above departmental cost. Other expenses were: Rs. Salaries 2,000 Printing & Stationery 1,000 Rent 6,000 Interest Paid 4,000 Depreciation 3,000 Allocate expenses in the ratio of departmental gross profit. Opening figures of reserves for unrealized profits on departmental stock were: 4|Page Department B Rs. 1,000 Department C Rs. 2,000 Prepare Departmental Trading and Profit & Loss Accounts for the year ending March 31, 2012. (B) (Marks: 12) What will be the treatment of the following in the final statement of account for the year ended 31st March, 2011 of a limited company? It was found that an item of stock costing Rs. 50,000 had been included twice in the stock sheet as on 31st March 2009. (Marks: 4) QUESTION 5. (A) Deepika company Ltd. has a branch at Washington. Its Trial balance as at 30th September, 2011 is as follows: Plant and Machinery Furniture and Fixtures Stock Oct. 1, 2010 Purchases Sales Goods from Indian Co. (H.O.) Wages Carriage Inward Rent, Rates and Taxes Salaries Insurance Trade Expenses Head Office A/c Trade Debtors Trade Creditors Cash at Bank Cash in hand Dr. US$ 1,20,000 8,000 56,000 2,40,000 80,000 2,000 1,000 2,000 6,000 1,000 1,000 24,000 5,000 1,000 5,47,000 Cr. US$ 4,16,000 1,14,000 17,000 5,47,000 The following further information is given: 1. Wages outstanding - $1,000. 2. Depreciate Plant and Machinery and Furniture and Fixtures @ 10% p.a. 3. The Head Office sent goods to Branch for Rs. 39,40,000. 4. The Head Office shown can amount of Rs. 43,00,000 due from Branch. 5. Stock on 30th September, 2011 - $ 52,000. 6. There were no in transit items either at the start or at the end of the year. On October 1, 2010, the rate was Rs. 39 to one $. On September 30, 2011, the rate was Rs. 41 to one $. 5|Page Average rate during the year was Rs. 40 to one $. You are asked to prepare : (a) Trial balance incorporating adjustments given under 1 to 4 above, converting dollars into rupees; (b)Trading and profit and Loss account for the year ended 30th September, 2011 and Balance Sheet as on that date depicting the profitability and net position of the branch as would appear in India for the purpose of incorporating in the main balance sheet. (Marks: 10) (B) On 31st March, 2011 Kareena Bank Ltd. had a balance of Rs. 9 crores in "rebate on bills discounted" account. During the year ended 31st March, 2012, Kareena Bank Ltd. discounted bills of exchange of Rs. 4,000 crores charging interest at 18% per annum, the average period of discount being for 73 days. Of these bills of exchange of Rs. 600 crores were due for realization from the acceptor/customers after 31st March, 2012, the average period outstanding after 31st March, 2012 being 36.5 days. Kareena Bank Ltd. asks you to pass journal entries and show the ledger accounts pertaining to: (i) Discounting of bills of exchange and (ii) Rebate on bills discounted. (Marks: 6) QUESTION 6. Bipasha Associated Ltd. has issued 10,000 12% debentures of Rs. 100 each on 1.1.2008. These debentures are redeemable after 3 years at a premium of Rs. 5 per debenture. Interest is payable annually. 1. On October 1, 2009, it buys 1,500 debentures from the market at Rs. 98 per debenture. These are sold away on June 30, 2010 at Rs. 105 per debenture. 2. On January 1, 2010, it buys 1,000 debentures at Rs. 104 per debenture from the open market. These are cancelled on April 1, 2010. 3. On October 1, 2010 it buys 2,000 debentures at Rs. 106 per debenture form the open market. These debentures along with debentures are redeemed on 31st December, 2010. Prepare the relevant Ledger Accounts for each year ended 31st December showing the above transactions assuming that all quotations are ex interest. Workings should form part of your answer. (Marks: 16) QUESTION 7. (A) Jodi Breaker Limited went into voluntary liquidation on 31.03.2011. The balances in its books on that date were: Liabilities Amount (Rs.) Assets Amount (Rs) Share Capital : Land Authorized and Subscribed: Building 2,00,000 5,00,000 Plant and Machinery 6,25,000 5,000 6% Preference Shares of Rs. 100 each fully paid up 50,000 6|Page 2,500 Equity Shares of Rs. 100 each Rs. 75 paid up 1,87,500 Stock 1,37,500 7,500 Equity Shares of R.s 100 each Rs. 60 Paid up 4,50,000 Sundry Debtors 2,75,000 5% Debentures (secured by a floating charge on all assets ) 2,50,000 Cash at Bank Interest due on Debentures 75,000 12,500 Profit and Loss A/c Bank Overdraft 1,00,000 Unsecured Creditors 4,10,000 2,00,000 Taxes due to Government within 12 months 12,500 Salaries and wages due for 4 months for workers 60,000 . 17,72,500 17,72,500 The liquidator is entitled to a remuneration of 5% on all assets realized except cash and 1% on the amount distributed to Unsecured Creditors other than preferential Creditors. Bank Overdraft is secured by deposit of title deed of land and building which realized Rs. 3,00,000. Other assets realized the following sums: Rs. Plant and Machinery 5,00,000 Stock 1,50,000 Sundry Debtors 2,00,000 Expenses liquidators final statement of account. Liquidator realized all assets on 1-4-2011 and discharged his obligation on the same date. Dividend on preference shares were in arrears for two years. (Marks: 10) (B) Aamir, Shahrukh and Salmaan are partners sharing profits and losses in the ratio of 5 : 3 : 2. Their capitals were Rs. 9,600 ; Rs. 6,000 and Rs. 8,400 respectively. After paying creditors, the liabilities and assets of the firm were Rs. Liability for interest on Loans from : Rs. Investments 1,000 7|Page Spouses of Partners 2,000 Furniture 2,000 Partners 1,000 Machinery 1,200 Stock 4,000 The assets realized in full in the order in which they are listed above : Shahrukh is insolvent. You are required to Prepare a statement showing the distribution of cash as cash as and when available applying maximum possible loss procedure. (Marks: 6) 8|Page 9|Page

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