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)
1.

(Maximum marks: 100)

(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

10th

2 months
3 months

4,000
3,000

5th April, 2015

20th April, 2015

2 months
1 months

2,000
3,750

10th May, 2015

2 months

5,000

March, 2015
March, 2015

(4 x 5 = 20 Marks)
1

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2.

The following is the summarized Balance Sheet of Amar Ltd. as at 31st March, 2015:
Liabilities
8,000 equity shares of Rs. 100
each
10% debentures
Loan from Amar
Trade payables
General Reserve

Rs. Assets
8,00,000 Building
4,00,000
1,60,000
3,20,000
80,000

17,60,000

Machinery
Inventory
Trade receivables
Bank
Goodwill
Share issue Expenses

Rs.
3,40,000
6,40,000
2,20,000
2,60,000
1,36,000
1,30,000
34,000
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 years 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
Rs.

Capital:

Amount
Rs.

Land & Buildings

74,000

60,000

Investments

10,000

40,000

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suspense

37,800

40,000 1,40,000 Life

Policy (at
surrender value):

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Creditors

25,800

2,500

General Reserve

8,000

2,500

Investment
Fluctuation Reserve

2,400

C
Stock

1,000
20,000

Debtors
Less: Provision for
doubtful debts
Cash
&
balance

20,000
(1,600)

bank

1,76,200

18,400
10,000
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 years purchase of the average profits of the past five
years.
(vi) Cs 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

90,000 Equity Shares of Rs.10 each

2,00,000

9,00,000 Investments
1,00,000
10,00,000 Current Assets and
Loans and Advances

Issued, Subscribed and Paid-up

Capital

Inventory

10,000 10% Redeemable Preference

Shares of Rs. 10 each

Trade receivables
1,00,000 Cash
and
Bank
Balances

10,000 Equity Shares of Rs. 10 each

1,00,000

(A)

Reserves and Surplus

25,000
50,000

2,00,000

General Reserve
Securities Premium

1,20,000
70,000

Profit and Loss A/c

(B)

18,500
2,08,500

Current Liabilities and Provisions (C)

11,500

Total

45,000

(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 companys operation:
1.
2.
3.
4.
5.

The preference dividend for the year ended 31.3. 2015 was paid.
Except cash and bank balances other current assets and current liabilities as
on 31.3. 2015, was the same as on 31.3.2014.
The company redeemed the preference shares at a premium of 10%.
The company issued bonus shares in the ratio of one share for every equity
share held as on 31.3.2015.
To meet the cash requirements of redemption, the company sold investments.
4

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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
Oct.1

Rs.
Balance due to Good by Happy

3,000

Oct 18 Goods sold by Good to Happy

Nov. 16 Goods sold by Happy to Good (invoice dated November, 26)

2,500
4,000

Dec.7

3,500

Goods sold by Happy to Good (invoice dated December, 17)

2015

Rs.

Jan. 3
Feb. 4

Promissory note given by Good to Happy, at three months

Cash paid by Good to Happy

5,000
1,000

Mar. 21
Mar.28

Goods sold by Good to Happy

Goods sold by Happy to Good (invoice dated April, 8)

4,300
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.

Bank Overdraft
Outstanding Expenses
Salaries
Rent

4,270

8,000
6,000

Bills Payable
Trade Creditors

96,000
24,300

14,000

Mobile Phone
Stock

8,000
89,500

22,500
52,500

Trade Debtors
Bills Receivable

55,000
15,000

Unexpired Insurance
1,97,430

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Rs.

Furniture
Computer

Capital
(balancing figure)

Assets

Stock of Stationery

2,400
200

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
Cash Sales
Trade Debtors
Bills Receivable

Rs. Payments
5,09,800 Trade Creditors
1,51,900 Bills Payable
65,000 Salaries

Rs.
3,06,000
80,000
99,000

Rent

72,000

Insurance Premium
Stationery

10,000
1,500

Mobile Phone Expenses

Drawings

9,000
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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Stock at cost on 1.1.2014

Stock at cost on 31.12.2014
Purchases less returns during 2014
Sales less return during 2014
Purchases less returns during 1.1.2015 to 19.5.2015
Sales less returns during 1.1.2015 to 19.5.2015

Rs.
36,750
39,800
1,99,000
2,43,500
81,000
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
1.10.2014

100 Debentures purchased ex-interest at Rs. 98

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 Companys 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.

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(4 x 4 =16 Marks)