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CA Intermediate (Nov. 2019)

GROUP I – PAPER 1
ACCOUNTANCY
(Series – 2)

Batch Date

Total No. of Questions: 6 Total No. of Printed Pages - 7

Time Allowed: - 3 Hours Maximum Marks: 100

Question No. 1 is compulsory.

Attempt any four questions out of the remaining five questions.
Working notes should from part of the answer.

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VIDYA SAGAR CAREER INSTITUTE LIMITED

Mobile: 93514 – 68666 * Phone: 7821821250 / 51 / 52 / 53 / 54
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VIDYA SAGAR CAREER INSTITUTE LIMITED

Mobile: 93514 – 68666 * Phone: 7821821250 / 51 / 52 / 53 / 54
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1(a) Pellets India Ltd. intends to set up a steel pellet plant. The company has acquired a 5
dilapidated factory having area of 5000 acres at a cost of ` 50,000 per acre. The company
has incurred ` 1,02,00,000 on demolishing the old factory building thereon. A sum of `
57,75,525 (including 5% sales tax) was realized from sale of material salvaged from the site.
The company also incurred stamp duty and registration charges of 5% of land value, paid
legal and consultancy charges ` 5,00,000 for land acquisition and incurred `1,50,000 on
title guarantee insurance. You are required to compute the value of land acquired.

(b) X Limited has sold its building for ` 50 lakhs to the purchaser who has paid the full price. 5
Company has given possession to the purchaser. The book value of the building is ` 35
lakhs. As at 31st March, 2013, documentation and legal formalities are pending. The
company has not recorded the sale. It has shown the amount received as advance. Do you
agree with this accounting treatment done by X Ltd.? If not, then suggest the correct
accounting treatment in this regard.

(c) Anil Pharma Ltd. ordered 16,000 kg of certain material at Rs. 160 per unit. The purchase 5
price includes excise duty Rs. 10 per kg in respect of which full CENVAT credit is admissible.
Freight incurred amounted to Rs. 1,40,160. Normal transit loss is 2%. The company actually
received 15,500 kg and consumed 13,600 kg of material. Compute cost of inventory under
AS 2 and amount of abnormal loss.

(d) G Ltd. began construction of a new building on 1st January, 2014. It obtained ` 2 lakh special 5
loan to finance the construction of the building on 1st January, 2014 at an interest rate of
11%. The company’s other outstanding two non-specific loans were:
Amount Rate of Interest
` 3,00,000 12%
` 7,00,000 14%

The expenditures that were made on the building project were as follows:

`
January 2014 1,60,000
May 2014 2,70,000
August 2014 4,20,000
December 2014 1,50,000

Building was completed by 31st December, 2014. Following the principles prescribed in AS
16 ‘Borrowing Cost,’ calculate the amount of interest to be capitalized and pass one Journal
Entry for capitalizing the cost and borrowing cost in respect of the building.

2(a) Shyam purchased from Rang Ltd. a colour T.V set on 1st October, 2011 on the hire purchase 10
system. The cash price of the T.V set was Rs. 15,000. Term of payment were Rs. 1,150 down
payment and half yearly installments of Rs. 4,000 each, over two year. The first installment
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was to be paid on 31st March, 2012. Rate of interest was 12% p.a. Shyam could not pay the
second installment due on 30th September, 2012 and as a consequence, Rang Ltd.
repossessed the T.V set after fulfilling legal formalities. Prepare Shyam's Account and Goods
Repossessed Account in Rang Ltd.'s books. Assume that he estimated value of the T.V set at
the time of repossession war Rs. 12,000 and after an expenditure of Rs. 850 on repairs and
repacking, the company resold it on 6th December, 2012 for cash to one of its employees at a
special discount of 10% on cash price i.e. for 13,500.
Rand Ltd. closes its books of accounts every year on 31st March.

(b) If Ltd. has three departments and submits the following information for the year ending on 10
31st March, 2014:

L M N Total
Purchases (units) 12,000 24,000 28,800 (`)
Purchases (Amount) 12,00,000
Sales (Units) 12,240 23,040 29,952
Selling Price ( ` per unit) 40 45 50
Closing Stock (Units) 1,200 1,920 72

You are required to prepare departmental trading account of If Ltd., assuming that the rate
of profit on sales is uniform in each case.

3 (a) The following information relates to the business of Mr. Shiv Kumar, who requests you to 16
prepare a Trading and Profit & Loss Account for the year ended 31st March, 2009 and a
Balance Sheet as on that date:
A. Balance as on 31st Balance as on 31st
March, 2008 March, 2009
Rs. Rs.
Building 3,20,000 3,60,000
Furniture 60,000 68,000
Motor Car 80,000 80,000
Stock -- 40,000
Bills payable 28,000 16,000
Cash and Bank Balance 1,80,000 1,04,000
Sundry Debtors 1,60,000 --
Bills receivable 32,000 28,000
Sunday Creditors 1,20,000 --
B. Cash transactions during the year included the following besides certain other
items.
----------------------------------------------------------------------------------------------------------
Rs. Rs.
----------------------------------------------------------------------------------------------------------
Sale of old papers and Cash purchase 48,000
Miscellaneous Income 20,000 Payment to creditors 1,84,000
Miscellaneous Trade Exp. Cash sales 80,000
(Including salaries etc.) 80,000
Collection from debtors 2,00,000
--------------------------------------------------------------------------------------------------------

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C. Other information:
(i) Bills receivable drawn during the year amount to Rs. 20,000 and Bills payable
accepted Rs. 16,000.
(ii) Some items of old furniture, whose written down value on 31st March, 2008 was
Rs. 20,000 was sold on 30th September, 2008 for Rs. 8,000.Depreciation is to be
provided on Building and Furniture @ 10% p.a. and on Motorcar @ 20% p.a.
Depreciation on sale of furniture to be provided for 6 months and for additions to
Building for whole year.
(iii) Of the Debtors, a sum of Rs. 8,000 should be written off as Bad Debt and a reserve
for doubtful debts is to be provided @ 2%.
(iv) Mr. Shivkumar has been maintaining a steady gross profit rate of 30% on turnover.
(v) Outstanding salary on 31st March, 2008 was Rs. 8,000 and on 31st March, 2009
was Rs. 10,000 on 31st March, 2008. Profit and Loss Account had a credit balance of
Rs. 40,000.
(vi) 20% of total sales and total purchases are to be treated as for cash.
(vii) Additions in Furniture Account took place in the beginning of the year and there
was no opening provision for doubtful debts.

(b) Sidharatha Trading Co. Ltd. has an Authorised Capital of ` 16,00,000 divided into: 5
20,000 6% Preference Shares of ` 10 each;
40,000 7% Preference Shares of ` 10 each; and
30,000 Equity Shares of ` 10 each.
On 1st January, 2011, the whole of the two classes of preference shares and 30,000 equity
shares stood in the books as fully paid. The securities premium account as on that date
showed a balance` of 40,000. The balance of profit was ` 64,000. On 1st July, 2011 it was
decided to redeem the whole of 6% preference shares at a premium of` 1 per share and for
this specific purpose, the company issued for cash 16,000 equity shares of ` 10 each at a
premium of ` 2 per share, payable full on allotment. All the above shares were taken up. The
cost of issue of shares amounted to ` 6,000. On 1st October, 2011, the company issued to all
equity shareholders one bonus share of ` 10 fully paid for each five held. It is the intention
of the directors that minimum reduction should be made in revenue reserve account which
stood at ` 2,50,000. Give necessary journal entries.
4 Ram, Rahim and Auntony were in partnership sharing profits and losses in the ratio of ½, 20
1/3 and 1/6 respectively. They decided to dissolve the partnership firm on 31.03.2009.
When the Balance Sheet of the firm appeared as under:

Liabilities Rs. Assets Rs.

Sundry Creditors 5,67,000 Goodwill A/c 4,56,300
Bank overdraft 6,06,450 Plant and Machinery 6,07,500
Joint Life Policy Reserve 2,65,500 Furniture 64,650
Loan from Mrs. Ram 1,50,000 Stock 2,36,700
Capital Accounts: Sundry Debtors 5,34,000
Ram 4,20,000 Joint Life Policy 2,65,500
Rahim 2,25,000 Commission receivable 1,40,550
Auntony 1,20,000 7,65,000 Cash in hand 48,750
23,53,950 23,53,950

The following details are relevant for dissolution:

(i) The Joint life policy was surrendered for Rs. 2,32,500
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(ii) Ram took over goodwill and plant and machinery for Rs. 9,00,000
(iii) Ram also agreed to discharge bank overdraft and loan from Mrs. Ram
(iv) Furniture and stocks were divided equally between Ram and Rahim at an agreed
valuation of Rs. 3,60,000
(v) Sundry debtors were assigned to firm’s creditors in full satisfaction of their claims.
(vi) A bill discounted was subsequently returned dishonored and proved valueless Rs.
30,750 (including Rs. 500 noting changes)
(vii) Ram paid the expenses of dissolution amounting to Rs. 18000
(viii) Auntony agreed to receive Rs. 1,50,000 in full satisfaction of his rights, title and
interest in the firm.
You are required to show the accounts relating to closing of books, on dissolution of the
firm

5(a) The following transactions Mr. Malamaal took place during the year ended 31st March, 2010: 10

1st April Purchased Rs. 12,00,000 8% bonds @ Rs. 80.5 cum-interest.

Interest is payable on 1st November and 1st May.
12th April Purchased 1,00,000 equity shares of Rs. 10 each in X Ltd. for Rs.
40,00,000.
1st May Received half year's interest on 8% bonds.

15th May X Ltd. made a bonus issue of three equity shares for every two held.
Malamaal sold 1,25,000 bonus shares @ Rs. 20 each.
1st October Sold Rs. 3,00,000 8% bonds @ Rs. 81 ex-interest.

1st November Received half year's bond interest.

1st December Received 18% Interim dividend on equity shares in X Ltd.

Prepare the relevant investment accounts in the books of Mr. Malamaal for the year ended
31st March, 2010.
(b) From the following particulars, you are required to calculate the amount of claim for 10
Buildwell Ltd., whose business premises was partly destroyed by fire:
Sum insured (from 31st December 2011) ` 4,00,000
Period of indemnity 12 months
Date of damage 1st January, 2012
Date on which disruption of business ceased 31st October, 2012
The subject matter of the policy was gross profit but only net profit and insured standing
charges are included.
The books of account revealed:
(a) The gross profit for the financial year 2011 was ` 3,60,000.
(b) The actual turnover for financial year 2011 was ` 12,00,000 which was also the
turnover in this case.
(c) The turnover for the period 1st January to 31st October, in the year preceding the loss,
was ` 10,00,000.
During dislocation of the position, it was learnt that in November- December 2011, there has
been an upward trend in business done (compared with the figure of the previous years)
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and it was stated that had the loss not occurred, the trading results for 2012 would have
been better than those of the previous years.
The Insurance company official appointed to assess the loss accepted this view and
adjustments were made to the pre-damaged figures to bring them up to the estimated
amounts which would have resulted in 2012.
The pre-damaged figures together with agreed adjustments were:

Period Pre-damaged Adjustment to be Adjusted standard

figures added turnover
` ` `
January 90,000 10,000 1,00,000
Feb. to October 9,10,000 50,000 9,60,000
November to December 2,00,000 10,000 2,10,000

12,00,000 70,000 12,70,000

Gross Profit 3,60,000 46,400 4,06,400

Rate of Gross Profit 30% (actual for 2011), 32% (adjusted for 2012).
Increased cost of working amounted to ` 1,80,000.
There was a clause in the policy relating to savings in insured standard charges
during the indemnity period and this amounted to ` 28,000.
Standing Charges not covered by insurance amounted to ` 20,000 p.a. The
annual turnover for January was nil and for the period February to October
2012 ` 8,00,000

(Attempt any Four)

6(a) From the following information of Aplha Ltd. calculate the management remuneration 5
payable to the managing director of the company at the rate of 5% of the profits assuming
that there is only one managing director in the company.

Rs.
Net Profit 4,00,000
Net Profit is calculated after considering the following
Depreciation 1,00,000
Tax provision 6,20,000
Director's fees 16,000
Bonus 88,000
Profit on sale of fixed assets
(original cost: Rs. 40,000 written down value : Rs. 22,000) 31,000
Managing Director's remuneration paid 60,000

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Other information:
Depreciation allowable under Section 123 to the Companies Act, 2013 70,000
Bonus liability as per the Payment of Bonus Act, 1965 40,000

(b) Rangeela Limited was incorporated on August 1, 2008. It had acquired a running business of 5
RGV & Co. with effect from April 1, 2008. During the year 2008-09, the total sales were Rs.
36,00,000. The sales per month in the first half year were monthly half of what they were in
the later half year. The net profit of the company, Rs. 2,00,000 was worked out after charging
the following expenses:
Rs.
i) Depreciation 1,08,000
ii) Tax Audit Fees 15,000
iii) Directors’ Fees 50,000
iv) Preliminary expenses 12,000
v) Office expenses 78,000
vi) Selling Expenses 72,000
vii) Interest to vendors up to August 31, 2008 5,000

Please ascertain pre-incorporation and post-incorporation profit for the year ended
31st March, 2009 by preparing statement of profit or loss.

(c) State under which head the following accounts should be classified in Balance Sheet, as per 5
Schedule III of the Companies Act, 2013:
(i) Share application money received in excess of issued share capital.
(ii) Share option outstanding account.
(iii) Unpaid matured debenture and interest accrued thereon.
(iv) Uncalled liability on shares and other partly paid investments.
(v) Calls unpaid.
(vi) Intangible Assets under development.
(vii) Money received against share warrant.
(viii) Cash equivalents.

(d) Noida Toll Bridge Corporation Ltd. (an infrastructure Company) issued 100 lakhs 10% 5
Debentures of Rs. 100 each on 1st April, 2013 due for redemption on 31st March, 2014 at
10% Premium. How much minimum amount should be credited to Debenture Redemption
Reserve as per the MCA Clarification? Also state the amount required to be
deposited/invested in the year of redemption. Record necessary entries for redemption of
debentures.

(e) Explain in brief, the alternative measurement bases, for determining the value at 5
which an element can be recognized in the Balance Sheet or Statement of Profit and Loss.

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