INTER CA – MAY 2018

1 INTER CA MAY 2018 PAPER 1: ACCOUNTINGB ranch : MULTIPLE date :Page | 1 Note: Question 1 is compulsory. Attempt any five from the 1 (5 marks each)A) Vinayak Chemicals Ltd, a Government Company, is engaged in production of fertilizers and variousnitrogenous chemicals. As per Company s accounting policy, expenses incurred upto` 25,000 relating tofuture period are expensed in the current Statutory Auditors of the Company, opine that the company has not compiled with AS 1 and theprovisions of Companies Act, 2013, which prescribes accrual basis of accounting. Does the aforesaidaccounting policy of the Company violate the provisions of AS 1 and the provisions of Companies Act,2013?B) HP is a leading distributor of Petrol. A detail Inventory of Petrol in hand is taken when the books are closed atthe end of each month. At the end of the month, the following information is available:Sales -` 47, 25,000, General Overheads Cost -` 1, 25,000, Inventory at beginning 1, 00,000 Litres at` 15per Litre.

2 Purchases : (a) June 1 Two Litres at ; (b) June 30 One Lakh Litres at ; (c) Closing Lakh Litres. Compute the following by the FIFO as per AS 2:(a) Value of Inventory on June 30. (b) Amount of Cost of goods sold for June. (c) Profit /Loss for the month )Entity A, which operates a major chain of Supermarkets, has acquired a new store location. The new locationrequires significant Renovation Expenditure. Management expects that the renovations will last for 3 monthsduring which the Supermarket will be closed. Management has prepared the budget for this period includingexpenditure related to Construction and Re-Modeling Costs, Salaries of staff who will be preparing the Storebefore its opening and related Utilities Costs. What will be the treatment of such expenditures?D)A Fixed Asset is purchased for` 20 Lakhs, Government Grant received towards it is` 8 Lakhs. Residual Valueis` 4 Lakhs and useful life is 4 years.

3 Assume SLM Depreciation. Asset is shown net of Grant. After 1 year,Grant becomes refundable to the extent of` 5 Lakhs due to non compliance with conditions. Pass 2 (16 marks)P and Q are Partners of P & Co. sharing Profit and Losses in the Ratio of 3:1, and Q and R are Partners of R &Co. sharing Profits and Losses in the ratio of 2:1. On 31st March 2015, they decide to amalgamate and form anew Firm M/s PQR & Co wherein P, Q and R would be Partners sharing Profits and Losses in the Ratio of3:2:1. The Balance Sheets of the two Firms on the above date are as under:LiabilitiesP & & & & :Fixed Assets:P2,50,000-Buildings50,00060,000Q1 ,80,0002,20,000 Plant & Machinery1,60,0001,70,000R-1,20,000 Office Equipment50,00046,000 Reserves60,0001,50,000 Current Assets:Sundry Creditors1,30,0001,36,000 Stock-in-Trade1,20,0001,40,000 Due to P & ,00,000 Sundry Debtors1,60,0002,00,000 Bank Overdraft80,000-Bank Balance40,0001,00,000 Cash in Hand20,00010,000 Due to R & ,00,000-Total7,00,0007,26,000 Total7,00,0007,26,000 The amalgamated Firm took over the business on the following terms:(a) Building of P & Co.

4 Was valued at` 1, 50,000.(b) Plant & Machinery of P & Co. was valued at` 2, 75,000 and that of R & Co. at` 2, 50, | 2(c) All Stocks in Trade is to be appreciated by 20%.(d) Goodwill of P & Co. was valued at` 1, 20,000 and of R & Co. at` 60,000, but the same will not appearin the books of PQR & Co.(e) Partners of New Firm will bring the necessary cash to pay other Partners to adjust their Capitalsaccording to the Profit Sharing Ratio.(f) Provisions for Doubtful Debts has to be carried forward at` 15,000 in respect of Debtors of P & Co,and` 30,000 in respect of Debtors of R & are required to prepare the Balance Sheet of New Firm and Capital Accounts of the Partners in the Booksof Old 3 (16 marks)A Sole Trader requests you to prepare his Trading and Profit & Loss Account for the year ended 31st Marchand Balance Sheet as on that date . He provides you the following information -Statement of Affairs as at 1st April (Opening)Capital and Liabilities`Properties and Assets`Bank Over Draft4,270 Furniture96,000 Outstanding ExpensesComputer24,300 Salaries8,000 Mobile Phone8,000 Rent6,00014,000 Stock89,500 Bills Payable22,500 Trade Debtors55,000 Trade Creditors52,500 Bills Receivable15,000 Capital(Balancing Figure)1,97,430 Unexpired Insurance2,400 Stock of Stationery200 Cash in Hand300 Total2,90,700 Total2,90,700He informs you that there has been no addition to or sale of Furniture, Computer and Mobile Phone during theAccounting Year.

5 The other Assets and Liabilities on 31st March are as follows Particulars`Particulars`Particulars`Stoc k95,400 Stock of Stationery250 Rent Outstanding6,000 Trade Debtors65,000 Cash at Bank18,000 Bills Payable26,500 Bills Receivable20,000 Cash in Hand7,230 Trade Creditors76,000 Unexpired Insurance2,500 Salaries Outstanding8,300He also provides to you the following summary of his Cash transactions Receipts`Payments`Cash Sales5,09,800 Trade Creditors3,06,000 Trade Debtors1,51,900 Bills Payable80,000 Bills Receivable65,000 Salaries99,000 Rent72,000 InsurancePremium10,000 Stationery1,500 Mobile Phone Expenses9,000 Drawings1,20,000It is found prudent to depreciate Furniture at 5%, Computer at 10% and Mobile Phone at 25%. A Provision for BadDebts at 5% on Trade Debtors is also considered 4 (8 marks each)A) Jyothi Associates entered in to a Financial Lease Agreement on with Futura Leasing Company Ltdfor lease of a Car.

6 The price of the Car was`2, 00,000 and the Quarterly Lease Rentals were agreed at`90 Per Thousand payable at the beginning of every Associates kept up their payments but by they approached and obtained the consent ofthe Leasing Company for treating the arrangement as one of Hire Purchase from the beginning on thefollowing terms: Period 3 years Quarterly Hire -`30,000 payable at the beginning of the | 3It was agreed that the Lease Rentals paid will be treated as Hire Monies and that the balance due will be settled by Jyothi Associates on that date with interest at 18% on various instalmentsdue during the year. The rate of depreciation on the Car is 25%.Prepare and show the following accounts in the books of Jyothi Associates for the year 2017 2018 : (a)Futura Leasing Company Ltd, and (b) Interet Suspense ) M/s Shyam Udyog, a Retail Store, has two Departments X and Department Y for each of which Stock Accountand Memorandum Mark-Up Account are kept.

7 All the goods supplied to each Departments are debited tothe Stock Account at Cost plus Mark-Up, which together make up the Selling Price of the goods, and in theaccount the Sale Proceeds of the goods are credited. The amount of Mark Up is credited to theDepartmental Mark-Up Account. If the Selling Proice of any goods is reduced below its Normal Selling Price,the reduction Marked Down is adjusted both in the Stock Account and the Departmental Mark UpAccount. The rate of Mark Up for X Department is 33-1/3%of the cost and for Y Department it is 50% ofthe following figures have been taken from the books of the year ended March X (`)Dept. Y (`)Stock on April1stat CostPurchasesSales3,15,00022,77,00028,68 ,0005,58,00028,02,00037,50,000 (1) The Stock of Department X on 1st April 2015 included goods the Selling Price of which had beenmarked down by`37,800.

8 These goods were sold the year at the reduced prices.(2) Certain Stock of the value of`2,07,000 purchased from the Department X, was later in the yeartransferred to Department Y, and sold for`3,10,500. As a result, though cost of the goods is includedin Department X, the Sale Proceeds have been credited to the Department Y.(3) During the year 2015 2016, to promote the goods, they were marked down as followsCost(`)Marked Down(`)Department XDepartment Y1,68,0003,00,00010,80060,000 All the Goods Marked Down, were sold expect of Department Y of the value of`1,50,000 markeddown by`30,000.(4) At the time of stock taking on 31st Match 2016, it was discovered that Cloth of Department X of thecost of` 11,700 was missing and it was decided that the amount be written are required to prepare for both the Departments for the year ended 31st March, 2016 (a) The Memoramdum Stock Account, and (b) The Memorandum Mark Up 5 (8 marks each)A)Krishnan Traders Ltd sends Goods to its Chennai Branch at Cost plus 25%.

9 The following particulars areavailable in respect of the Branch for the year ended 31st March Particulars`Opening StockGoods Sent to Branch (Invoice Price)Loss In Transit (Invoice Price)Pilferage (Invoice Price)SalesExpensesClosing StockRecovered from Insurance Company against Loss in Transit80,00012,00,00015,0006,00012,19,0 0060,00040,00010,000 Show Ledger Account in the HO Books for (1) Branch Stock Account, (2) Goods Sent TO Branch Account, (3)Branch Adjustment Account, and (4) Branch Proift & Loss Account .Page | 4B)Following is the extract from the Balance Sheet of Krishna Ltd as at 31st March Particulars`Authorised Capital:50,000,10% Preference Shares of` 10 each5,00,000 2,00,000 Equity Shares of` 10 each20,00,000 Issued and Subscribed Capital: 40,000 10% Preference Shares of` 10 each fully paid4,00,0001,80,000 Equity Shares of`10 each, of which` paid up13,50,000 Reserves and Surplus:General Reserve2,40,000 Capital Reserve1,50,000 Securities Premium50,000 Profit andLoss Account4,00,000On 1st April, the Company made a Final Call at` each on 1,80,000 Equity Shares.

10 The call money wasreceived by 30th April. Thereafter, the Company decided to capitalize its Reserves by issuing Bonus Shares atthe rate of one share for every three shares held. Securities Premium of` 50,000 includes a Premium of`20,000 for Shares issued to Vendor for purchase of a special machinery. Capital Reserve includes` 60,000being profit on exchange of Plant and necessary Journal Entries in the books of the Company and prepare the extract of the Balance Sheetafter Bonus Issues. Necessary assumptions, if any, should form part of your 6 (8 marks each)A) On 1st April 2017, in Mani Ltd s Ledger 9% Debentures appeared with a Opening Balance of` 50,00,000divided into fully paid Debentures of` 100 each issued at on Debentures was paid half yearly on 30th of September and 31st March every , the Company purchased 8,000 Debentures of its own at` 98 (ex-interest) , it cancelled 5,000 Debentures out of 8,000 Debentures acquired on , it resold 2,000 of its Own Debentures in the Market at` 101 (ex-interest) : Own Debentures Account, Interest on Debentures Account, and Interest on Own Debentures ) Roshani & Reshma working in Partnership, registered a Joint Stock Company under the name of Happy Ltd onMay 31s1 2017, to takeover their existing business.