Reg. No _________________		
Total No. of Questions – 6	Total No. of Printed Pages – 6	
	ACII – IP – 03	
Time Allowed: 3 Hrs	Total Marks – 100	

Answer ALL Questions

Wherever appropriate, suitable assumptions should be made by the candidates

All working notes should form part of your answer.

1(i)	2 Marks

Goods worth Rs.5,00,000 were destroyed due to flood in September, 2006. A claim was lodged with Insurance Company. But no entry was passed in the books for Insurance Claim in the Financial Year 2006 – 07. In March, 2008, the claim was passed and the Company received a payment of Rs.3,50,000 against the claim. Explain the treatment of such receipt in final accounts for the year ended 31st March, 2008 and pass Journal Entries.

1(ii)	2 Marks

Briefly indicate the items which are included in the expression “Borrowing Cost” as per AS – 16.

1(iii)	2 Marks

Sterling Ltd., purchased a Plant for US $20,000 on 31st Dec, 07 payable after 4 months. The Company entered into a Forward Contract for 4 months @ Rs.48.85 per dollar. On 31st Dec, 2007, the Exchange Rate was Rs.47.50 per dollar. How will you recognize the Profit / Loss on Forward Contract in the books of Sterling Ltd. for the year ended 31st March, 2008?

1(iv)	2 Marks

Find out the Income to be recognized in the case of X Bank Ltd, for the year ended 31st March, 2009 – Rs. In Lakhs

	Performing Assets	Non Performing Assets	
Particulars	Interest Accrued	Interest	Interest Accrued	Interest	
		Received		Received	
Term Loans	240	160	150	10	
Cash Credits and	1500	1240	300	24	
Overdraft					
1(v)				2 Marks	

An Earthquake destroyed a major Warehouse of ACO Ltd, on 20.5.2009. The Accounting Year of the Company ended on 31.3.2009. The accounts were approved on 30.6.2009. The loss from earthquake is estimated at Rs.30 Lakhs. State with reasons, whether the loss due to Earthquake is an Adjusting or Non – Adjusting event, and how the fact of loss is to be disclosed by the Company.

1

Shree Guru Kripa’s Institute of Management

1(vi)	2 Marks

X Co. Ltd. having Share Capital of Rs.50 Lakhs divided into the Equity Shares of Rs.10 each was taken over by Y Co. Ltd. X Co. Ltd. has General Reserve of Rs.10,00,000 and Profit and Loss account Cr. Rs.5,00,000. Y Co. Ltd. Issued 11 Equity Shares of Rs.10 each for every 10 shares of X Co. Ltd. How the Journal Entries would be passed in the books of Y Co. Ltd for the Shares issued under the pooling of Interests Method of Amalgamation.

1(vii) 2 Marks Goods are transferred from Department P to Department Q at a price 50% above cost. If Closing Stock of Department Q is Rs.27,000, compute the amount of Stock Reserve.

1(viii) 2 Marks X Ltd. received a Revenue Grant of Rs.10 Crores during 2006 – 07 from Government for welfare activities to be carried on by the Company for its employees. The Grant prescribed the conditions for utilization. However during the year 2008 – 09, it was found that the prescribed conditions were not fulfilled and the grant should be refunded to the Government. State how this matter will have to be dealt with in the Financial Statements of X Ltd, for the year ended 2008 – 09.

1(ix) 2 Marks ABC Ltd, developed a know–how by incurring expenditure of Rs.20 lakhs. The know-how was used by the Company from 1.4.2002. The useful life of the asset is 10 years from the year of commencement of its use. The Company has not amortised the Asset till 31.3.2009. Pass Journal entry to give effect to the value of know-how as per AS – 26 for the year ended 31.3.2009.

1(x) 2 Marks P, N and T are equal Partners. They decided to change their Profit Sharing Ratio into 5:4:3. They raised the Goodwill in the books to they extent of Rs.2,40,000 and it is to be written off immediately. Show Journal entries with narration to be passed for raising the Goodwill and for its subsequent Write–Off.

Q.No. 2	16 Marks

XYZ & Co. is a Partnership Firm consisting of Mr. X, Mr. Y and Mr. Z who share profits and losses in the ratio of 2 : 2 : 1 and ABC Ltd. is a Company doing similar business –

Following is the Balance Sheet of the Firm and that of the Company as at 31.3.2009 –
Liabilities	XYZ &	ABC Ltd	Assets	XYZ &	ABC Ltd	
	Co.			Co.		
Equity Share Capital		20,00,000	Plant & Machinery	5,00,000	16,00,000	
(Equity Shares of Rs.10			Furniture & Fixtures	50,000	2,25,000	
Each)						
Partners Capital:			Stock in Trade	2,00,000	8,50,000	
X	2,00,000		Sundry Debtors	2,00,000	8,25,000	
Y	3,00,000		Cash at Bank	10,000	4,00,000	
Z	1,00,000		Cash in Hand	40,000	1,00,000	
General Reserve	1,00,000	7,00,000				
Sundry Creditors	3,00,000	13,00,000				
Total	10,00,000	40,00,000	Total	10,00,000	40,00,000	

It was decided that the Firm XYZ & Co. be dissolved and all the Assets (except Cash in Hand and Cash at Bank) and all the Liabilities of the Firm be taken over by ABC Ltd. by issuing 50,000 Shares of Rs.10 each at a premium of Rs. 2 per Share.

ACII – IP – 03	2

Advanced Accounting Grp II

Partners of XYZ & Co. agreed to divide the Shares issued by ABC Ltd. in the Profit Sharing Ratio and bring necessary Cash for settlement of their Capital. The Creditors of XYZ & Co. includes Rs.1,00,000 payable to ABC Ltd. An Unrecorded Liability of Rs.25,000 of XYZ & Co. must also be taken over by ABC Ltd.

Prepare – (a) Realisation Account, Partners Capital Account and Cash in Hand/Bank Account in the books of ABC & Co. (b) Pass Journal Entries in the book of ABC Ltd, for acquisition of XYZ & Co. and draw the Balance Sheet after the takeover.

Q.No. 3	16 Marks

The Balance Sheet of Dee Limited on 31st March, 2009 was as follows:

Liabilities	Amt (Rs.)	Assets		Amt (Rs.)	
Share Capital:		Fixed  Assets  (at  cost  less	8,00,000	
		depreciation)			
Authorised Capital 50,000 Equity Shares of	5,00,000	Debenture	Redemption	2,00,000	
Rs.10 each		Investments			
Issued and Subscribed Capital: 25000 Equity	2,50,000	Cash Balance		2,50,000	
Shares of Rs.10 Fully Paid Up					
Reserves and Surplus:		Other Current Assets	10,00,000	
General Reserve	2,75,000				
Profit & Loss A/c	1,00,000				
Debenture Redemption Reserve	2,50,000				
Secured Loans:					
12% Convertible Debentures (5,000 Deb. of	5,00,000				
Rs.100 each)					
Other Secured Loans	2,50,000				
Current Liabilities and Provisions	6,00,000				
Proposed Dividend	25,000				
Total	22,50,000	Total		22,50,000	

At the General meeting it was resolved to –

1.	Pay Proposed Dividend of 10% in cash. 

2.	Give existing Shareholders, the option to purchase one share of Rs.10 each at Rs.15 for every five shares held. This option was taken up by all the Shareholders. 

3.	Redeem the Debentures at a premium of 5% and also confer option to the Debenture holders to convert 50% of their holding into Equity Shares at a predetermined price of Rs.15 Per Share and balance payment to be made in Cash. 

Holders of 3,000 Debentures opted to get their Debentures redeemed in cash only while the rest opted for getting the same converted into Equity Shares as per the terms of issue. Debenture Redemption Investments realized Rs.1,80,000 on Sales.

You are required to redraft the Balance Sheet after giving effects to the Right Issue and Redemption of Debentures. Also show the calculations in respect of no. of Equity Shares issued and Cash Payment.

ACII – IP – 03	3

Shree Guru Kripa’s Institute of Management

Q.No.4	16 Marks

Pawan & Co. of Delhi has Branch at Jaipur. Goods are invoiced to the Branch at cost plus 25%. The Branch is instructed to deposit everyday in the Head office account with the Bank. All the expenses are paid through Cheque by the Head Office except Petty Cash Expenses which are paid by the Branch. From the following information, prepare Branch Account in the books of H.O –

Particulars	Rs.	
		
Stock on 01.04.2008 (Invoice Price)	1,64,000	
Stock on 31.03.2009 (Invoice Price)	1,92,000	
Sundry Debtors on 01.04.2008	63,400	
Sundry Debtors on 31.03.2009	84,300	
Furnitures and Fixtures as on 01.04.2008	46,800	
Cash Sales	8,02,600	
Credit Sales	7,44,200	
Goods Invoiced to Branch by Head Office	12,56,000	
Expenses paid by Head Office	2,64,000	
Petty Expenses paid by Branch	20,900	
Furniture acquired by the Branch on 01.10.2008 (payment was made by the Branch from	5,000	
Cash Sales and collection from Debtors)		
Depreciation to be provided on Branch Furniture and Fixtures @10% on WDV Basis		
		
Q.No.5(a)	8 Marks	

From the following information, you are required to prepare Profit and Loss A/c of Zee Bank Ltd., for the year ending 31st Mar, 09 –

Particulars	Rs.	Particulars	Rs.	
Interest and Discount	44,00,000	Interest Expended	13,60,000	
Other Income	1,25,000	Operating expenses	13,31,000	
Income on Investments	5,000	Interest on Balance with RBI	25,000	
Additional information –				

(a)	Rebate on Bills Discounted to be provided for Rs.15,000 

(b)	Classification of Advances – 
	Particulars	Rs.	
	Standard Assets	25,00,000	
	Sub – Standard Assets	5,60,000	
	Doubtful Assets not covered by Security	2,55,000	
	Doubtful Assets covered by Security		
	For 1 Year	25,000	
	For 2 Years	50,000	
	For 3 Years	1,00,000	
	For 4 Years	75,000	
	Loss Assets	1,00,000	
(c) Make Tax Provision at 35%		
(d) Profit and Loss A/c (Cr.) Rs.40,000		

ACII – IP – 03	4

Advanced Accounting Grp II

Q.No. 5(b)	8 Marks

Dee Limited furnishes the following Balance Sheet as at 31st March 2008 –

Liabilities	Rs. ‘000	Rs. ‘000		
				
Authorised Capital		30,00		
Issued and Subscribed Capital:				
				
2,50,000 Equity Shares Of Rs.10 each fully paid up	25,00			
2,000, 10% Preference Shares of Rs.100 each (Issued 2 Months	2,00	27,00		
back for the purpose of Buy Back)				
Reserves and Surplus:				
				
Capital Reserve	10,00			
Revenue reserve	30,00			
Securities premium	22,00			
Profit and Loss A/c	35,00	97,00		
Current Liabilities and Provisions		14,00		

Total		1,38,00		
				
Assets				
Fixed Assets		93,00		
Investments		30,00		
Current Assets, Loans and Advances (including Cash and Bank Balance)		15,00		
				
Total		1,38,00		

The Company passed a resolution to buy back 20% of its Equity Capital at Rs.50 per share. For this purpose, it sold all of its investments for Rs.22,00,000. You are required to pass necessary journal entries and prepare the Balance Sheet.

Q.No.6 Answer the Following		
(a) Write short notes on Double Account System	4 Marks	
(b)	4 Marks	

Axe Limited began Construction of a New Plant on 1st April, 2008 and obtained a Special Loan of Rs.4,00,000 to Finance the Construction of the Plant. The rate of interest on loan was 10%. The expenditure that were made on the project of Plant were – (a) On 1st April, 2008 – Rs.5,00,000; (b) 1st August, 2008 – Rs.12,00,000; (c) 1st January, 2009 – Rs.2,00,000. The Company’s other Outstanding Non–Specific Loan was Rs.23,00,000 at an Interest Rate of 12%. The Construction of the Plant completed on 31st March, 2009. You are required to – (a) Calculate the amount of interest to be capitalized as per the provisions of AS – 16 “Borrowing Cost”; (b) Pass a journal entry for capitalizing the cost and the borrowing cost in respect of the Plant.

ACII – IP – 03	5

Shree Guru Kripa’s Institute of Management

(c)	4 Marks

Compute Basic Earning Per Share from the following information –

Date	Particulars	No. of Shares	
1st April, 08	Balance at the beginning of the year	1,500	
1st August, 08	Issue of Shares for Cash	600	
31st March, 09	Buy Back of Shares	500	

Net Profit for the year ended 31st March, 2009 was Rs.2,75,000

(d)	4 Marks

‘X’ Limited issued 1,00,000 Equity Shares of Rs.10 each at par. The entire issue was underwritten as follows (1) A – 60,000 Shares (Firm Underwriting 8,000 Shares); (2) B – 30,000 Shares (Firm Underwriting 10,000 Shares); (3) C – 10,000 Shares (Firm Underwriting 2,000 Shares). Total Applications including Firm Underwriting were for 80,000 Shares. The Marked Applications were as follows – A – 20,000 Shares, B – 14,000 Shares, C – 6,000 Shares. The Underwriting Contract provides that credit for Unmarked Applications be given to the underwriters in proportion of the Shares Underwritten. Determine the Liability of each Underwriter.

ACII – IP – 03	6