CA IPCC Accounting Mock Test Series 2 - Oct 2015

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Test Series: October, 2015 MOCK TEST PAPER – 2

INTERMEDIATE (IPC) : GROUP – I PAPER – 1: ACCOUNTING

Question No. 1 is compulsory. Answer any five questions from the remaining six questions.

Wherever necessary suitable assumptions may be made and disclosed by way of a note. Working Notes should form part of the answer.

(Time allowed: three hours) (Maximum marks: 100)

1. (a) M/s. T Ltd. allotted 7,500 equity shares of Rs. 100 each fully paid up to L Ltd. in consideration for supply of a special machinery. The shares exchanged for machinery are quoted at National Stock Exchange (NSE) at Rs. 95 per share, at the time of transaction. In the absence of fair market value of the machinery acquired, show how the value of the machinery would be recorded in the books of T Ltd.?

(b) In the Trial Balance of M/s. Tiger Ltd. as on 31-3-2014, balance of machinery appears Rs. 5,60,000. The company follows rate of depreciation on machinery @ 10% p.a. on Written Down Value Method. On scrutiny it was found that a machine appearing in the books on1-4-2014 at Rs. 1,60,000 was disposed of on 30-9-2014 at Rs. 1,35,000 in part exchange of a new machine costing Rs. 1,50,000. You are required to calculate: (i) Total depreciation to be charged in the Profit and Loss Account. (ii) Loss on exchange of machine. (iii) Book value of machinery in the Balance Sheet as on 31.3.2015.

(c) List the conditions to be fulfilled as per Accounting Standard 14 for an amalgamation to be in the nature of merger, in the case of companies.

(d) Calculate average due date from the following informations:

Date of bill Term Amount (Rs.) 1st March, 2015 2 months 4,000 10th March, 2015 3 months 3,000 5th April, 2015 2 months 2,000 20th April, 2015 1 months 3,750 10th May, 2015 2 months 5,000

(4 x 5 = 20 Marks)

© The Institute of Chartered Accountants of India

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2. The following is the summarized Balance Sheet of Amar Ltd. as at 31st March, 2015: Liabilities Rs. Assets Rs. 8,000 equity shares of Rs. 100 each

8,00,000 Building 3,40,000

10% debentures 4,00,000 Machinery 6,40,000 Loan from Amar 1,60,000 Inventory 2,20,000 Trade payables 3,20,000 Trade receivables 2,60,000 General Reserve 80,000 Bank 1,36,000 Goodwill 1,30,000 Share issue Expenses 34,000 17,60,000 17,60,000

Bhel Ltd. agreed to absorb Amar Ltd. on the following terms and conditions: (1) Bhel Ltd. would take over all assets, except bank balance at their book values less

10%. Goodwill is to be valued at 4 year’s purchase of super profits, assuming that the normal rate of return be 8% on the combined amount of share capital and general reserve.

(2) Bhel Ltd. is to take over trade payables at book value. (3) The purchase consideration is to be paid in cash to the extent of Rs. 6,00,000 and

the balance in fully paid equity shares of Rs. 100 each at Rs. 125 per share. The average profit is Rs. 1,24,400. The liquidation expenses amounted to

Rs. 16,000. Bhel Ltd. sold prior to 31st March, 2015 goods costing Rs. 1,20,000 to Amar Ltd. for Rs. 1,60,000. Rs. 1,00,000 worth of goods are still in Inventory of Amar Ltd. on 31st March, 2015. Trade payables of Amar Ltd. include Rs. 40,000 still due to Bhel Ltd.

Show the necessary Ledger Accounts to close the books of Amar Ltd. and prepare the Balance Sheet of Bhel Ltd.as at 1st April, 2015 after the takeover. (16 Marks)

3. The Balance Sheet of A, B and C as at 31.12.2014 stood as follows:

Liabilities Amount Assets Amount Rs. Rs. Capital: Land & Buildings 74,000 A 60,000 Investments 10,000 B 40,000 Advertisement

suspense 37,800

C 40,000 1,40,000 Life Policy (at surrender value):


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Creditors 25,800 A 2,500 General Reserve 8,000 B 2,500 Investment Fluctuation Reserve

2,400

C Stock

1,000 20,000

Debtors 20,000 Less: Provision for

doubtful debts

(1,600)

18,400 Cash & bank

balance 10,000

1,76,200 1,76,200

C died on 31 March, 2015, due to this reason the following adjustments were agreed upon: (i) Land and Buildings be appreciated by 50%. (ii) Investment be valued at 6% less than the cost. (iii) All debtors (except 20% which are considered as doubtful) were good. (vi) Stock to be reduced to 94%. (v) Goodwill to be valued at 1 year’s purchase of the average profits of the past five

years. (vi) C’s share of profit to the date of death be calculated on the basis of average profits

of the three completed years immediately preceeding the year of death. The profits of the last five years are as follows:

Year Rs. 2010 23,000 2011 28,000 2012 18,000 2013 16,000 2014 20,000 1,05,000

The life policies have been shown at their surrender values representing 10% of the sum assured in each case. The annual premium of Rs.1,000 is payable every year on 1st August.

Give the necessary Journal Entries in the books of account and prepare the Balance Sheet of the reconstituted firm. (16 Marks)


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4. (a) The following is the summarized Balance Sheet of Amitabh Ltd. as at 31.3. 2014:

Liabilities Rs. Assets Rs. Share Capital Fixed Assets Authorised Gross Block 3,00,000 10,000 10% Redeemable Preference Less: Depreciation 1,00,000 Shares of Rs. 10 each 1,00,000 2,00,000 90,000 Equity Shares of Rs.10 each 9,00,000 Investments 1,00,000 10,00,000 Current Assets and

Loans and Advances

Issued, Subscribed and Paid-up Capital

Inventory 45,000

10,000 10% Redeemable Preference Trade receivables 25,000 Shares of Rs. 10 each 1,00,000 Cash and Bank

Balances 50,000

10,000 Equity Shares of Rs. 10 each 1,00,000 (A)

Reserves and Surplus 2,00,000

General Reserve 1,20,000 Securities Premium 70,000 Profit and Loss A/c 18,500

(B) 2,08,500 Current Liabilities and Provisions (C) 11,500

Total (A + B + C) 4,20,000 Total 4,20,000

For the year ended 31.3. 2015, the company made a net profit of Rs. 35,000 after providing Rs. 20,000 depreciation. The following additional information is available with regard to company’s operation: 1. The preference dividend for the year ended 31.3. 2015 was paid. 2. Except cash and bank balances other current assets and current liabilities as

on 31.3. 2015, was the same as on 31.3.2014. 3. The company redeemed the preference shares at a premium of 10%. 4. The company issued bonus shares in the ratio of one share for every equity

share held as on 31.3.2015. 5. To meet the cash requirements of redemption, the company sold investments.


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6. Investments were sold at 90% of cost on 31.3.2015. You are required to prepare necessary journal entries to record redemption and issue of bonus shares.

(b) The following are the transactions that took place between Good and Happy during the period from 1st October, 2014 to 31st March, 2015:

2014 Rs. Oct.1 Balance due to Good by Happy 3,000 Oct 18 Goods sold by Good to Happy 2,500 Nov. 16 Goods sold by Happy to Good (invoice dated November, 26) 4,000 Dec.7 Goods sold by Happy to Good (invoice dated December, 17) 3,500

2015 Rs. Jan. 3 Promissory note given by Good to Happy, at three months 5,000 Feb. 4 Cash paid by Good to Happy 1,000 Mar. 21 Goods sold by Good to Happy 4,300 Mar.28 Goods sold by Happy to Good (invoice dated April, 8) 2,700

Draw up an Account Current up to March 31st, 2015 to be rendered by Good to Happy, charging interest at 10% per annum. Interest is to be calculated to the nearest rupee.

(10+6 = 16 Marks) 5. A sole trader requests you to prepare his Trading and Profit & Loss Account for the year

ended 31st March, 2015 and Balance Sheet as at that date. He provides you the following information:

Statement of Affairs as at 31st March, 2014

Liabilities Rs. Assets Rs. Bank Overdraft 4,270 Furniture 96,000 Outstanding Expenses Computer 24,300

Salaries 8,000 Mobile Phone 8,000 Rent 6,000 14,000 Stock 89,500

Bills Payable 22,500 Trade Debtors 55,000 Trade Creditors 52,500 Bills Receivable 15,000 Capital Unexpired Insurance 2,400 (balancing figure) 1,97,430 Stock of Stationery 200


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Cash in Hand 300 Total 2,90,700 Total 2,90,700

He informs you that there has been no addition to or sale of Furniture, Computer and Mobile Phone during the accounting year 2014-15. The other assets and liabilities on 31st March, 2015 are as follows:

Rs. Stock 95,400 Trade Debtors 65,000 Bills Receivable 20,000 Unexpired Insurance 2,500 Stock of Stationery 250 Cash at Bank 18,000 Cash at Hand 7,230 Salaries Outstanding 8,300 Rent Outstanding 6,000 Bills Payable 26,500 Trade Creditors 76,000 He also provides you the following summary of his cash transactions:

Receipts Rs. Payments Rs. Cash Sales 5,09,800 Trade Creditors 3,06,000 Trade Debtors 1,51,900 Bills Payable 80,000 Bills Receivable 65,000 Salaries 99,000 Rent 72,000 Insurance Premium 10,000 Stationery 1,500 Mobile Phone Expenses 9,000 Drawings 1,20,000

It is found prudent to depreciate Furniture @ 5%, Computer @ 10% and Mobile Phone @ 25%. A provision for bad debts @ 5% on Trade Debtors is also considered desirable. (16 Marks)

6. (a) On 19th May, 2015, the premises of Shri Gupta were destroyed by fire, but sufficient records were saved, wherefrom the following particulars were ascertained:


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Rs. Stock at cost on 1.1.2014 36,750 Stock at cost on 31.12.2014 39,800 Purchases less returns during 2014 1,99,000 Sales less return during 2014 2,43,500 Purchases less returns during 1.1.2015 to 19.5.2015 81,000 Sales less returns during 1.1.2015 to 19.5.2015 1,15,600

In valuing the stock for the balance Sheet as at 31st December, 2014, Rs. 1,150 had been written off on certain stock which was a poor selling line having the cost Rs. 3,450. A portion of these goods were sold in March, 2015 at a loss of Rs. 125 on original cost of Rs. 1,725. The remainder of this stock was now estimated to be worth the original cost. Subject to the above exceptions, gross profit has remained at a uniform rate throughout. The stock salvaged was Rs. 2,900. Show the amount of the claim of stock destroyed by fire. Memorandum Trading Account to be prepared for the period from 1-1-2015 to 19-5-2015 for normal and abnormal items.

(b) Mr. Lion furnishes the following details relating to his holding in 8% Debentures (Rs. 100 each) of P Ltd., held as Current assets:

1.4.2014 Opening balance – Face value Rs. 1,20,000, Cost Rs. 1,18,000 1.7.2014 100 Debentures purchased ex-interest at Rs. 98 1.10.2014 Sold 200 Debentures ex-interest at Rs. 100 1.1.2015 Purchased 50 Debentures at Rs. 98 cum-interest 1.2.2015 Sold 200 Debentures ex-interest at Rs. 99

Due dates of interest are 30th September and 31st March. Mr. Lion closes his books on 31.3.2015. Brokerage at 1% is to be paid for each

transaction. Show Investment account as it would appear in his books. Assume FIFO method. Market value of 8% Debentures of P Limited on 31.3.2015 is Rs. 99.

(8 + 8 =16 Marks) 7. Answer any four of the following:

(a) “In business today, the accounts which were earlier maintained in a manual form are replaced with computerized accounts”. Explain the significance of computerized accounting system in modern time.

(b) “In determining the cost of inventories, it is appropriate to exclude certain costs and recognize them as expenses in the period in which they are incurred”. Provide examples of such costs as per AS 2 ‘Valuation of Inventories’.


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(c) The Board of Directors of X Ltd. decided on 31.3.2015 to increase sale price of certain items of goods sold retrospectively from 1st January, 2015. As a result of this decision the company has to receive Rs. 5 lakhs from its customers in respect of sales made from 1.1.2015 to 31.3.2015. But the Company’s Accountant was reluctant to make-up his mind. You are asked to offer your suggestion.

(d) What are the disclosure requirements of AS-7 (Revised)? (e) Intelligent Ltd., a non financial company has the following entries in its Bank

Account. It has sought your advice on the treatment of the same for preparing Cash Flow Statement. (i) Loans and Advances given to the following and interest earned on them: to its subsidiaries companies (ii) Investment made in subsidiary Smart Ltd. and dividend received (iii) Dividend paid for the year (iv) TDS on interest earned on advance given to suppliers (v) Insurance claim received against loss of fixed asset by fire

Discuss in the context of AS 3 Cash Flow Statement. (4 x 4 =16 Marks)


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CA IPCC Accounting Mock Test Series 2 - Oct 2015