CA Final Question Exam Group I
Advanced Accounting November 2004
This Paper has 12 answerable questions with 0 answered.
Total No. of Questions— 6]
Time Allowed : 3 Hours
Maximum Marks : 100
Answers to questions are to be given only in English except in the cases 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.
Answer all Questions
Working notes should form part of the answer.
Wherever applicable, suitable assumptions should be made by the candidate.
1. The following are the summarised Balance Sheets of PD co. Ltd. and SD co. Ltd. as on 31.3.2004 :
Liabilities PD Co. Ltd.
Rs. SD Co. Ltd.
Issued and Subscribed Capital
Equity shares of Rs. 10 each fully paid
Profit and Loss Account
Assets PD Co. Ltd.
Rs. SD Co. Ltd.
Land and Buildings
Plant and Machinery
PD Ltd. acquired 80% shares of SD Ltd. on 30.9.2003 at a cost of Rs. 18,10,000. On 1.10.03 SD Ltd. declared and paid dividend on Equity shares. PD Ltd. appropriately adjust its share of dividend in Investment Account.
On 1.4.03, the Capital Reserve and Profit and Loss Account stood in the books of SD Ltd. at Rs. 50,000 and Rs. 2,75,000 respectively.
Land and Buildings standing in the books of SD Ltd. at Rs. 16,00,000 on 1.4.03, revalued at Rs. 20,00,000 on 1.10.93, Furniture, which stood in the books at Rs. 2,00,000 on 1.4.03 revalued at Rs. 1,50,000 on 1.10.03. In both the cases the effects have not yet been given in the books.
SD Ltd. bought an item of machinery from PD Ltd. on hire–purchase basis. The following are the balances in respect of this machinery in the books on 31.03.04 :
Instalment not due
Hire–purchase stock reserve 20,000
The above items stood included under appropriate heads in Balance Sheet.
Prepare a Consolidated Balance Sheet of PD Ltd. and its subsidiary SD Ltd. as at 31.03.2004, complying with the requirements of AS—21.
2. The following is the Profit and Loss Account of Galaxy Ltd. for the year ended 31.3.04. Prepare a Gross Value Added Statement of Galaxy Ltd. and show also the reconciliation between Gross Value added and profit before taxation :
Profit and Loss Account for the year ended 31.3.2004
(Rs. in lakhs)
Production and operational expenses
Profit before taxes
provision for taxes
profit after tax
Balance as per last Balance Sheet
Transferred to General Reserve
Surplus carried to Balance Sheet
(a) Production and Operational expenses : Rs.
Consumption of Raw materials
Consumption of stores
Salaries, wages, Gratuities etc. (Admn.)
Cess and Local taxes
Other manufacturing expenses 293
(b) Administration expenses include salaries, commission to Directors Rs. 9.00 lakhs. Provision for doubtful debts Rs. 6.30.
Interest on loan from ICICI Bank for working capital
Interest on loan from ICICI Bank for fixed loan
Interest on loan from IFCI for fixed loan
Interest on Debentures 9
(d) The charges for taxation include a transfer of Rs. 3.00 lakhs to the credit of Deferred Tax Account.
(e) Cess and Local taxes include Excise Duty, which is equal to 10% of cost of bought–in material.
3. The Capital Structure of M/s XYZ Ltd., on 31st March, 2003 was as follows :
Equity Capital 18,000 Shares of Rs. 100 each
12% Preference Capital 5,000 Shares of Rs. 100 each
12% Secured Debentures
Profit earned before Interest and Taxes during the year
Tax Rate 18,00,000
Generally the return on equity shares of this type of Industry is 15%.
Subjected to :
(c) The profit after tax covers Fixed Interest and Fixed Dividends at least 4 times;
The Debt Equity ratio is at least2;
Yield on shares is calculated at 60% of distributed Profits and 10% of undistributed Profits;
The Company has been paying regularly an Equity dividend of 15%.
The risk premium for Dividends is generally assumed at 1%.
Find out the value of Equity shares of the Company.
4. (a) X Co. Ltd. supplied the following information. You are required to compute the basic earning per share :
No. of shares outstanding prior to Right Issue
Fair rate of one Equity share immediately prior to exercise right on 31.3.03 :
: Year 2002 : Rs.20,00,000
year 2003 : Rs.30,00,000
One new share for each four outstanding i.e., 2,50,000 shares.
Right Issue Price – Rs. 20
Last Date if exercise rights – 31.3.2003.
(b) A Ltd. Leased a machinery to B Ltd. on the following terms :
(Rs. in Lakhs)
Fair value of the machinery
Lease Rental per annum
Guaranteed Residual value
Expected Residual value
Internal Rate of Return 20.00
Depreciation is provided on Straight line method @ 10% per annum. Ascertain unearned financial Income and necessary entries may be passed in the books of the Lessee in the First year.
(c) The following particulars are stated in the Balance sheet of M/s Exe Ltd. as on 31.3.2003 :
(Rs. in Lakhs)
Deferred Tax Liability (Cr.)
Deferred Tax Assets (Dr.) 20.00
The following transactions were reported during the year 2003–04 :
(vi) Tax Rate
Depreciation – As per Book
Depreciation – for Tax purposes
There were no addition to Fixed Assets during the year.
Items disallowed in 2002–03 and allowed for Tax Purposes
Interest to Financial Institutions to accounted in the
Books on accrual basis, but actual payment was made
Donations to private Trusts made in 2003–04
share issue expenses allowed under 35(D) of the I.T. Act,
1961 for the year 2003–04 (1/10th of Rs.50.00 lakhs
incurred in 1999–2000) 50%
(vii) Repairs to Plant and Machinery Rs. 100.00 lakhs was spread over the period 2003–04 and 2004–05 equally in the books. However the entire expenditure was allowed for Income–tax purposes.
Indicate clearly the impact of above items in terms of Deferred Tax liability/Deferred Tax Assets and the balances of Deferred Tax Liability/Deferred Tax Asset as on 31.03.2004.
5. (a) From the following details of Loan Fund of Kanpur Institute of Technology for the year 2003–2004, you are required to prepare a statement showing changes in the Loan Fund Balance :
Fund balance as on 1.4.03
Grants from the Government and Society
Grants from Revenue Fund
Other transfer from Unrestricted Fund
Interest on Loan
Refund of Granters
Bad Debts written off
Administration and collection costs 25,00,000
(b) Mr. Investor buys a stock option of ABC Co. Ltd. in July, 2003 with a strike price on 30.7.2003 Rs. 250 to be expired on 30.8.04. The premium is Rs. 20 per unit and the market lot is 100. The margin to be paid is Rs. 120 per unit.
Show the accounting treatment in the books of Buyer when :
(i) the option is settled by delivery of the asset, and
(ii) the option is settled in cash and the Index price is Rs. 260 per unit.
6. Write short notes on the following: 4×4=16
(a) “Non–Performing Assets” as per NBSC Prudential Norms (RBI) directions. (0)
(b) Some Key differences between IAS, USGAAP and Indian As with respect to
(i) Fixed Assets
(ii) Changes in Accounting Policy and Prior period items.
(c) Environmental Accounting. (0)
(d) Advantages and disadvantages of setting of Accounting standards. (0)