Electricity Companies
Question 1.
IPCC May 2010 ,
PE – II May 2005, May 2010
The Alpha Electricity Company Limited decided to replace one of its old plants with a
modern one with a larger capacity. The plant when installed in 1960 cost the company
Rs. 30 lakhs, the components of materials, labour and overheads being in the ratio of 3:2:1. It is ascertained that the costs of materials and labour have gone up by 25% and
50% respectively. The proportion of overheads to total costs is expected to remain the
Same as before.
The cost of the new plant as per improved design is Rs. 75 lakhs and in addition,
material recovered from the old plant of a value of Rs. 3,60,000 has been used in the
construction of the new plant. The old plant was scrapped and sold for Rs. 9, 00,000.
The Accounts of the company are maintained under Double Account system. Indicate
how much would be capitalized and the amount that would be charged to revenue. Show
the Ledger Accounts.
Question 2
IPCC May 2010
PE – II May 2005, May 2010
Alpha Electricity Company provides you the following information:
Rs. in lakhs
Fixed Assets (Original Cost) 200.00
Depreciation Reserve on Fixed Assets 50.00
Customers’ contribution towards fixed assets 1.00
Intangible Assets 6.00
Intangible Assets written off 1.00
Average of Current Assets 20.00
5% Contingency Reserve Investments 10.00
4½% Reserve Fund Investments 50.00
(a) Loan from Electricity Board 30.00
(b) Loan from Approved Institution 10.00
8% Debentures 20.00
Development Reserve 10.00
Security Deposit 55.00
Tariff and Dividend Control Reserve 4.00
Licensee’s A/c 1.00
Net profit before interest on Debentures for the year ended 31st March, 2008 ---- 7.90
Reserve Bank Rate 5%
You are required:
(a) Calculate Capital Base, Reasonable Return & Total Surplus if available.
(b) Prepare the Statement showing the Disposal of Profits
(c) Give the necessary journal entries, if any required.
Question 3
IPCC Nov 2009
PE – II Nov 2009
The following balance have been extracted at the end of March, 2009, from the books of
an electricity company:
Rs.
Share capital 2,00,00,000
Consumers’ deposit 80,00,000
Fixed assets 5,00,00,000
Tariffs and dividendscontrol reserve 20,00,000
Depreciation reserve onfixed assets 60,00,000
Development reserve 16,00,000
Reserve fund (invested in8% Government securities(at par) 1,20,00,000
12% debentures 40,00,000
Contingency reserve invested in 7% State loan 24,00,000
Loan from State Electricity Board 50,00,000
Amount (contributed by consumers towards cost of fixed asset) 4,00,000
Intangible assets 16,00,000
Current assets (monthly average) 30,00,000
The company earned a profit of Rs.56,00,000 (after tax) in 2008-2009. Show how the
profits have to be dealt with by the company assuming the bank rate was 10%.
All workings should form part of your answers.
Question 4
PE – II May 2006
Nasco Power Supply Company Ltd., had built a power station and the connecting lines during the
year 2000. The following particulars are furnished to you:
(1) In 2000, the company incurred an amount of Rs. 36 lacs towards purchase of machinery
items and Rs.4 lacs towards labour expenses.
(2) Extension and replacement was carried out to the power station in the year 2005 at a cost of
Rs.15 lacs, out of which materials worth Rs. 50,000 was used from existing stock for
replacement purpose. The extent of replacement was estimated at 20% of the original cost.
(3) The cost of materials and wages in 2005 have gone up by 25%.
(4) The old material discarded in the process of extension and replacement was of the value of
Rs.1.2 lac.
(5) Out of the above, material valued at Rs. 75,000 was used for extension purpose and the
balance (not used) was sold for Rs. 70,000.
You are required to show the journal entries in respect of the above transactions for the years
2000 and 2005. Workings should form part of your answers.
Question 5
PE – II Nov 2006
The Surya Gas Company rebuilt and re-equipped part of their works at a cost of Rs. 5 crores.
The part of the old works thus superseded cost Rs. 3 crores. The capacity of the new works is
double the capacity of the old works. Rs. 20 lakhs is realized by the sale of old materials, and old
materials worth Rs. 10 lakhs are used in the construction of new works and included in the total
cost of Rs. 5 crores mentioned above. The cost of labour and materials are 25% higher than
when the old works were built.
Journalise the transactions.
Question 6
PE – II May 2007
The following balances relate to NTPC Ltd. and pertains to the accounts for the year ended on
31st December, 2006:
(Rs.in lakhs)
Share Capital 200
Fixed Assets 400
Monthly Average of Current Assets 40
Reserve Fund (invested in 6% Govt. Securities Face Value Rs. 120 lakhs) 120
Contingencies Reserve (invested in 6% State Govt. Loans) 40
Loan from Electricity Board 60
Developments Reserve 20
10% Debentures 16
Depreciation Reserve on Fixed Assets 160
Security Deposits of Customers 150
Customers’ Contribution to main lines 4
Preliminary Expenses 10
Tariffs and Dividend Control Reserve 12
The company earned a post tax profit of Rs. 20.4 lakhs. Indicate the disposal of profit, bearing in mind the provisions of the Electricity (Supply) Act, 1948, assuming the Reserve Bank of
Question 7
PE – II Nov 2007
Power Electric Company decides to replace one of its old plant by an improved plant with larger
capacity. The cost of the new plant is Rs. 16,00,000.
Materials and Labour earlier and now are in the ratio of 4 : 6.
Original cost of the old plant is Rs. 3,00,000. Materials cost has gone up by 2ｽ times and Labour
cost by 3 times since then. Old materials worth Rs. 10,000 were used in the construction of the
new plant and Rs. 20,000 were realised from the sale of old materials.
Give the necessary Journal Entries for recording the above transactions.
Question 8
PE – II May 2008
Electric Supply Ltd. rebuilt and re-equipped one of their Mains at a Cash Cost of Rs. 40,00,000.
The old Mains thus superseded cost Rs. 15,00,000. The capacity of the new
of the old
Rs. 70,000 was realised from sale of old materials. Four old motors valued at Rs. 2,00,000
salvaged from the old
Show the Journal entries for recording the above transactions, if accounts are maintained under Double Account System.
Question 9
PE – II Nov 2008
The Gurgaon Electricity Company Limited decided to replace one of its old plants with a
modern one with a larger capacity. The plant when installed in the year 2000 cost the
company Rs. 24 lakhs, the components of materials, labour and overheads being in the
ratio of 5:3:2. It is ascertained that the costs of materials and labour have gone up by
40% and 80% respectively. The proportion of overheads to total costs is expected to
remain the same as before.
The cost of the new plant as per improved design is Rs. 60 lakhs and in addition,
material recovered from the old plant of a value of Rs. 2,40,000 has been used in the
construction of the new plant. The old plant was scrapped and sold for Rs. 7,50,000.
The accounts of the company are maintained under Double Account system. Indicate
how much would be capitalised and the amount that would be charged to revenue. Show
the Ledger Accounts.
Question 10
PE – II June 2009
X Electricity Company Limited decides to replace one of its old plants with a modern one
in April, 2008. The plant when installed in the year 2000, costed the company Rs.26
lakhs, the components of materials and labour being in the ratio of 7:3. It is ascertained
that the cost of labour and materials have risen by 30% and 25% respectively. The cost
of new plant is Rs.66 lakhs and in addition old materials worth Rs.92,000 are reused.
Old materials worth Rs.1,68,000 are sold. Under double account system compute the
following:
(i) The amount to be written off to Revenue A/c.
(ii) The amount to be capitalized.
(iii) Draw up the necessary Journal entries.
(iv) Draw up the Replacement Account.
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