Shree Guru Kripa s Institute of Management

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1 Reg. No.. ACCOUNTING GROUP I Number of Printed Pages: 6 Time Allowed: 3Hrs Date: Maximum Marks: 100 Question 1 is compulsory (4 5 = 20 Marks). Answer any 5 from the remaining 6 (16 5 = 80 Marks) 1. (a)heramba Ltd gives you the following information for the year ended 31 st March 20X2: Sales for the year 48,00,000 (The Company sold goods for Cash only). 48,00,000 Cost of Goods Sold 75% of Sales Closing Inventory was higher than Opening Inventory by 50,000 Trade Creditors on X2 exceed the outstanding on X1 by 1,00,000 Tax paid during the year. 1,50,000 Amounts paid to Trade Creditors during the year 35,50,000 Administrative and Selling Expenses Paid 3,60,000 Cost of new Machinery acquired in December 20X1 6,00,000 Dividend paid during the year 1,20,000 Cash in hand and at Bank on X2 70,000 Cash in hand and at Bank on X1 50,000 Prepare Cash Flow Statement for the year ended X2. 1. (b)nidhi Ltd purchased Raw Materials at a basic price of 10,000 on which Excise Duty of 1,500 is paid. Cost of Inventory (of Raw Materials at this stage would be 11,500). The material is thereafter processed. For this purpose, Conversion Costs (Labour and Direct Overheads, and other Fixed Production Overheads) amounting to 1,800 are incurred. Excise Duty Liability on Finished Goods amounting 1,700 is being paid by the Company. The Company is entitled for a CENVAT credit of 1,500. Compute the value of Inventory. 1. (c)an item of Machinery was purchased on 1 st April 2012 for 2,00,000. The WDV Depreciation Rate applicable to the Machinery was 15%. The WDV of the Machinery on 31 st March 2014 was 1,44,500. On that date, the Enterprise decided to the change the method of depreciation from WDV to SLM, and write off the Book Value 1,44,500, over the remaining useful life of the machinery, i.e. 5 years. Out of the total useful life of 7 years, 2 years have already elapsed. Comment on whether the above accounting treatment is correct. If not, give the correct accounting treatment, with reasons 1

2 1. (d) An amount of 9,90,000 was incurred on a contract work upto 31 st March. Certificates have been received to date to the value of 12,00,000 against which 10,80,000 has been received in cash. The cost of work done but not certified amounted to 22,500. It is estimated that by spending an additional amount of 60,000 (including Provision for Contingencies) the work can be completed in all respects in another two months. The agreed Contract Price of the work is 12,50,000. Compute a conservative estimate of the profit to be taken to the P&L A/c as per AS (a) The Receipts and Payments Account, Income and Expenditure Account and additional information of a Sports Club for the year ended were as follows (12 Marks) Receipts and Payments Account for the year ending on Receipts Payments To Balance b/d To Entrance Fees To Entrance Fees To Subscription To Subscription ,000 10,000 1,00,000 6,000 1,50,000 By Secretary Salary By Printing & Stationery By Advertising By Fire Insurance By 12% Investments (Purchased on ) 10,000 26,000 16,000 12,000 2,00,000 To Subscription To Rent Received To Interest Received 4,000 24,000 6,000 By Furniture By Balance c/d 20,000 58,000 3,42,000 3,42,000 Income and Expenditure Account for the year ending on Expenditure Income To Secretary Salary To Printing and Stationery To Advertising To Audit Fees To Fire Insurance To Depreciation on Sports Equipment To Depreciation on Furniture To Surplus 15,000 22,000 16,000 5,000 10,000 90,000 5,000 1,38,000 By Entrance Fees By Subscription By Rent By Interest on Investments 1,05,000 1,56,000 28,000 12,000 3,01,000 3,01,000 Additional Information: The Assets and Liabilities as on include 1. Club Grounds & Pavilion 4,40,000, 2. Sports Equipment 2,50,000, 3. Furniture & Fixtures 40,000, 4. Subscription in Arrear 8, 000, 5. Subscription Received in Advance 2,,000 and 6. Creditors for Printing & Stationery 5,000. You are required to prepare the Balance Sheet of the Club as on (b) Outline the considerations for selection of Pre Packaged Accounting Software. (4 Marks) 2

3 3. E, F and G were Partners sharing Profits and Losses in the ratio of 5: :3:2 respectively. On 31 March 2013, the Balance Sheet of the Firm stood as follows (16 Marks) Capital and Liabilities Capital Accounts: Properties and Assetss Non Current Assets: Building 55,000 E 50,000 Furniture 25,000 F 40,000 Current Assets: Stock 42,000 G 28,000 1,18,,000 Debtors 20,000 Current Liabilities:Creditors Outstanding Expenses 33,,500 1,,700 Cash at Bank 11,200 1,53,,200 1,53,200 On 31 st March 2013, E decided to retire, and F and G decided to continue as equal Partners. Other terms were as follows (a) Building is appreciated by 20%, Furniture be depreciated by 10% and a Provision of 5% be created on Debtors. (b) Goodwill is valued at two year s purchase of profit for the latest accounting year. The Firm s Profit for the year ended 31 March 2013 was 25, 000. No Goodwill account is to be raised in the books of account. (c) Fresh Capital be introduced by F and G to the extent of 10,000 and 35,000 respectively. (d) Out of sum payable to Retiring Partnerr E, a sum of 45,0000 be paid immediately and the balance be transferred to his Loan Account bearing interest at 12% per annum. The loan is to be paid off by 31 st March One month after E s retirement, F and G agreed to admit E s son H as a Partner with one fourth share in Profit/Losses. E agreed that the balance in his Loan A/c be converted into H s Capital. E also agreed to foregoo one month s interest on his loan. It was also agreed that H will bring in his share of Goodwill throughh book adjustment, valued at the price on the date of E s retirement. No Goodwill Account is to be raised in the books. You are requested to pass necessary Journal Entries to give effect to above transactions, and prepare Partner s Capital Accounts. 4. (a)ananthu formed a Private Limited Company under the name of Ananthu (P) Ltd, to take over his existing business as from 1 st April, but the Company was not incorporated until 1 st July. No entries relating to transfer of the business were entered in the books, which were carried on withoutt a break until 31 st March of the next year. You are required to prepare Trading and Profit and Loss Account for the year ended 31 st March, apportioning the periods before and after incorporation and a Balance Sheet as on that date. Ignore Depreciation and Taxation. The following Trial Balance was extracted from the books as on 31 st March (end of the year). (12 Marks) Debit Credit Stock in Trade as at 1 st April (Opening Stock) Purchases and Sales Carriage Outwards Travellers Commission Office Salaries and Expenses 4,300 18, ,100 27,800 3

4 Rent and Rates Ananthu s Capital Account as at 1 st April (Opening Balance) Directors Fee Fixed Assets Current Liabilities Current Assets (other than Stock in Trade) Preliminary Expenses You are also given the following information: Stock as at 31 st March (end of the year) is 4,400. Purchase Consideration was agreed at 30,000, to be settled by issue of 3,000 Equity Shares of 10 each. The Gross Profit Margin is constant and the monthly sales in April, February and March are double the monthly sales for the remaining months of the year. Assume that Carriage Outwards and Travellers Commission vary in direct proportion to Sales. 4. (b) Calculate the Maximum Remuneration Payable to the Managingg Director for the year, based on Effectivee Capital of Natarajan Ltd, a Non Investment Company, from the information given below: (4 Marks) ( in 000 s) Profit for the year (calculated as per Sec.198) 3,000 Paid up Capital 18,000 Reserves & Surplus 7,200 Securities Premium 1,200 Long Term Loans 6,000 Investments 3,600 Preliminary Expenses nor written off 3,000 Remuneration paid to the Managing Director during the year The Balance Sheet of Malini Ltd as on 31 st March is given below: (16 Marks) Liabilities Assets 1,00,0000 Equity Shares of 10 each fully paid up 4,000, 8% Preference Shares of 100 each fully paid 10,00,0000 4,00,0000 Freehold Property Plant and Machinery 5,50,000 2,00,000 6% Debentures(secured by Freehold Property) Add: Arrear Interest Sundry Creditors Director s Loan 4,00,000 24,000 4,24,0000 1,01,0000 3,00,0000 Trade Investments (at cost) Sundry Debtors Stock in Trade Deferred Advertisement Exp 2,00,000 4,50,000 3,00,000 50,000 Profit and Loss Account 4,75,000 22,25, ,25,000 4 Debit 1,200 1,800 13,400 11, ,500 Credit 23,000 3,700 54,500

5 The Board of Directors of the Company decided upon the following Scheme of Reconstruction with the consent of respective Stakeholders: 1. Preference Shares are to be written down to 80 each and Equity Shares to 2 each. 2. Pref. Dividend in arrear for 3 years to be waived by 2/3 rd and for balance 1/3 rd, Equity Shares of 2 each to be allotted. 3. Debentureholders agreed to take one Freehold Property at its Book Value of 3,00,0000 in part payment of their holding. Balance Debentures to remain as liability of the Company. 4. Arrear Debenturee Interest to be paid in cash. 5. Remaining Freehold Property to be valued at 4,00, Investment sold out for 2,50, % of Directors Loan to be waived and for the balance, Equity Shares of 2 each to be allotted % of Sundry Debtors, 80% of Stock and 100% of Deferred Advertisement Expenses to be written off. 9. Company s Contractual Commitments amounting to 6,00,000 have been settled by paying 5% Penalty of Contract Value. Show the Journal Entries for giving effect to the Internal Reconstruction and draw the Balance Sheet of the Company after effecting the scheme. 6. (a) CCL wants to take up a Loss of Profit Policy. Turnover during the current year is expected to increase by 20%. The Company will avail Overdraft Facilities from its Bank at 15% interest to boost up the Sales. The average daily Overdraft Balance will be around 3 Lakh. All other Fixed Expensess will remain the same. The following details are available from previous year (4 Marks) Fixed Expenses: Salaries 3,30,000 Variable Expensess 24,00,000 Rent, Rates and Taxes 30,000 Miscellaneous Income 70,000 Travelling Expenses 50,000 Net Profit 4,20,000 Postage, Telegram, 60,000 Telephone Director s Fees 10,000 Audit Fees 20,000 Determine the amount to be taken for the Current Year. 6. (b)marutii has made following transactions during the financial year : (12 Marks) Date Purchases 24,000 12% Bonds of 100 each at 84 cum interest. Interest is payable on 30 th September and 31 st March every year Purchases 1,50,000 Equity Shares of 10 each in Alpha Limited for 25 each through a Broker, who charged Brokeragee at 2% Purchased 60,000 Equity Shares of 10 each in Beeta Limited for 44 each through a Broker, who charged Brokerage at 2% Alpha Limited made a Bonus Issue of two Shares for every three Shares held Sold 80,000 Shares in Alpha Limited for 22 each Received 15% Interim Dividend on Equity Shares of Alpha Limited Beeta Limited made a Rights Issue of one Equity Share for every four Shares held at 5 per Share. Maruti exercised his option for 40% of his entitlements and sold the balance rights in the market at 2.25 per Share. 5

6 Date Sold 15,000 12% Bonds at ex interest Received 18% Interim Dividend on Equity Shares of Beeta Limited. Interest on 12% Bonds was duly received on due dates. Prepare separate Investment Account for 12% Bonds, Equity Shares of Alpha Limited and Equity Shares of Beeta Limited in the books of Maruti for the year ended on 31 st March Answer any Four out of the following: (4 4=16) (a) A Ltd purchases a Plant on Hire Purchase Basis for 1,00,0000 and makes the payment in the following manner Down Payment 20, st Installment after 1 year 40,000, 2 nd Installment after 2 years 20,000, Last Installment after 3 years. The Cash Price of the Plant is 86,000. Calculate (a) Interest, and (b) Interest included in each Installment. (b) From the following information for the month of March, furnished by Harini& Co, prepare Debtors Account. Sales (included Cash Sales of 7,000) Collections from Debtors (Cash) Discount Allowed Bad Debts Written Off Cheques Received 68,000 57,000 2,000 1,500 10,000 ChequesDishonoured Return Inward Bad Debts Written Off now recovered Provision for Doubtful Debts Balance Outstanding on 2, ,200 20, (Receivables) (c) Arjun and Balram are Partners in a Firm and share Profits and Losses equally. Arjun has withdrawn the following sums during the half year ending 30 th June Date 15 th January 10 th February 5 th April 20 th May 18 th June 5,000 4,000 8,,000 10,000 9,000 Interest on Drawings is charged at 10% per annum. Find out the Average Due Date and compute the Interest on Drawings to be charged on 30 th June. (d) Virupaksh Ltd is engaged in manufacturing and supply of gear boxes to IA Ltd but 10% thereof is retained and paid after one year, if there is satisfactory performance of the parts supplied. Virupaksh Ltd accounts for only 90% of Invoice Values as sale at the time of supply, and balance 10% is accounted as sale in the year of receipt of payment. Comment (e) Mrida Ltd has purchased Plant and Machinery 3 years back for 45 Lakhs. A balance of 5 Lakhs is still payable to the Suppliers for the same. The Supplier waived off the balance amount during the current Financial Year. The Company treated it as Income and credited to P&L A/c of current Financial Year. Is this correct? 6