IPCC ACCOUNTS GROUP II Marks - 100 1. (a) On 1st April 2004, Sundaram Ltd received a Government Grant of Rs.

. 300 Lakhs for acquisition of a Machinery costing Rs. 1,500 Lakhs. The grant was credited to the cost of the Asset. The life of the Machinery is 5 years. The Machinery is depreciated at 20% on WDV basis. The Company had to refund the Grant in May 2007 due to non-fulfilment of certain conditions. How you would deal with the refund of Grant? Particulars Rs. Lakhs Less: Original Cost of the Machinery 1,500 Government Grant [Reduced from Cost] (300) Less: Depreciable Cost as on 1.4.2004 1,200 Depreciation for 2004-05 [Rs. 1,200 x 20%] (240) WDV on 1.4.2005 960 Less: Depreciation for 2005-06 [Rs. 960 x 20%] (192) WDV on 1.4.2006 768 Less: Depreciation for 2006-07 [Rs. 768 x 20%] (154) WDV on 1.4.2007 614 Add: Refundable Government Grant 300 Revised Book Value of Machinery 914 Balance Useful Life 2 Years Depreciation to be provided for the next 2 Years [Rs. 914 2 Years] 457 (b) A Company deals in petroleum products. The sale price of petrol is fixed by the Government. After the Balance Sheet date, but before the finalization of the Companys accounts, the Government unexpectedly increased the price retrospectively. Can the Company account for additional revenue at the close of the year? Discuss. [F (A/c)-N 06] (c) At the beginning of a financial year, a Company issued 1,20,000 Equity Shares of Rs. 100 each, Rs. 50 per Share was called up on that date which was paid by all Shareholders. The remaining Rs. 50 was called up on 1st Sept. All Shareholders paid the sum in September, except on Shareholder having 24,000 Shares. The Net Profit for the relevant financial year is Rs. 2,64,000 after dividend on Preference Shares and Dividend Distribution Tax of Rs. 64,000. Compute basic EPS for the year as per AS 20. [P (A/c)-M 05] (d) An Intangible Asset appears in Balance Sheet of Meenakshi Ltd at Rs. 16 Lakhs as on 31 st March 2007. The asset was acquired for Rs. 40 Lakhs in April 1994. The Company has been amortising the asset value as on Straight Line basis. The policy is to amortise for 20 years. Do you advice the Company to amortise the entire asset value in the books of the Company as on 31st March 2007?000

2.

P and Q have been carrying on same business independently. Due to competition in the market, they decided to amalgamate and form a new company called PQ Ltd. Following is the Balance Sheet of P and Q as at 31.3.2007: P Rs. 7,75,000 6,23,500 Q Assets Rs. 8,55,000 Plant & machinery 5,57,600 Building Current assets 14,12,600 P Rs. 4,85,000 7,50,000 1,63,500 13,98,500 Q Rs. 6,14,000 6,40,000 1,58,600 14,12,600

Liabilities Capital Current liabilities

13,98,500 the additional information: (i) The authorised capital of the new company will be Rs.25,00,000 divided into 1,00,000 equity shares of Rs.25 each. (ii) Liabilities of P includes Rs.50,000 due to Q for the purchases made. Q made a profit of 20% on sale to P. (iii) P has goods purchased from Q, cost to him Rs.10,000. This is included in the Current asset of P as at 31st March, 2007. (iv) The assets of P and Q are to be revalued as under:

Fol lo wi ng are

P Q Rs. Rs. Plant and machinery 5,25,000 6,75,000 Building 7,75,000 6,48,000 (v) The purchase consideration is to be discharged as under: (a) Issue 24,000 equity shares of Rs. 25 each fully paid up in the proportion of their profitability in the preceding 2 years. (b) Profits for the preceding 2 years are given below: P Q Rs. Rs. 1st year 2,62,800 2,75,125 IInd year 2,12,200 2,49,875 Total 4,75,000 5,25,000 (c) Issue 12% preference shares of Rs.10 each fully paid up at par to provide income equivalent to 8% return on capital employed in the business as on 31.3.2007 after revaluation of assets of P and Q respectively. You are required to: (i) Compute the amount of equity and preference shares issued to P and Q. (ii) Prepare the Balance Sheet of P & Q Ltd. immediately after amalgamation. 3. (a) Heaven Life insurance Co. furnishes you the following information: Life Insurance Fund on 31.3.2008 52,00,000 Net liability on 31.3.2008 as per actuarial valuation 40,00,000 Interim bonus paid to policyholders during inter valuation period 3,00,000 You are required to prepare: i. Valuation Balance Sheet ii. Statement of net profit for the valuation period; and

iii. Amount due to the policy holders. (b) Bidisha Bank Ltd. Had extended the following credit lines to a Small Scale Industry which had not paid any interest since March, 1995. Term Loan Export Credit Balance outstanding on 31.3.2001 Rs.70 Lakhs Rs.60 Lakhs DICGC/ECGC Cover 50% 40% Securities held Rs.30 lakhs Rs.25 lakhs Realizable value of securities Rs.20 Lakhs Rs.15 Lakhs Compute the necessary provisions to be made for the year ended 31st March, 2001 Q4. Gopal & Co has 2 departments A & B. Department A sells goods to Department B at normal selling prices. From the following particulars prepare Departmental Trading & Profit & Loss Account for the year ended 31st March & also ascertain the Net Profit to be transferred to Balance Sheet. Particulars A B Opening Stock 1,00,000 Nil Purchases 23,00,000 2,00,000 Goods from Department A -7,00,000 Wages 1,00,000 1,60,000 Travelling Expenses 10,000 1,40,000 Closing stock at cost to the Deartment 5,00,000 1,80,000 Sales 23,00,000 15,00,000 Printing & Stationery 20,000 16,000 The following expenses incurred for the both departments were not apportioned between the department: Particulars Amount Salaries 2,70,000 Advertisement Expenses 90,000 General Expenses 8,00,000 Depreciation should be charged at 25% on the machinery value of Rs. 48,000. Advertisement Expenses are to be apportioned in the turnover ratio, Salaries in 2:1 ratio & Depreciation in 3:1 between Departments A & B. General Expenses are to be apportioned in 3:1 ratio. Q5. (a) A company made a public issue of 1,25,000 equity shares of Rs.100 each, Rs.50 payable on application. The entire issue was underwritten by four parties A, B, C and D in the proportion of 30%, 25%, 25% and 20% respectively. Under the terms agreed upon, a commission of 2% was payable on the amounts underwritten. A, B, C and D had also agreed on firm underwriting of 4,000, 6,000, Nil and 15,000 shares respectively. The total subscriptions, excluding firm underwriting, including marked applications were for 90,000 shares. marked applications received were as under: A 24,000 B 20,000 C 12,000 D 24,000 Ascertain the liability of the individual underwriter. (b) The summarized Balance Sheet of Mathew Limited as on 31-3-2001, being the date of voluntary winding up in as under:

Liabilities Share Capital: 12% Cumulative preference shares 10,000 shares of Rs.100 each fully paid up 5,000 Equity shares of Rs.100 each Rs.60 per share called and paid up 5,000 Equity shares of Rs.100 each Rs.50 per share called and paid up Paid up Share Capital 15% Debentures Preferential Creditors Bank Overdraft Trade Creditors

Rs. 10,00,000

Assets Land and Building Plant & Machinery

Rs. 3,86,000 8,21,000

3,00,000 2,50,000

Stock in Trade Book Debts

1,84,000 13,37,000

15,50,000 Profit and Loss Account 3,72,000 4,00,000 1,05,000 3,03,000 7,42,000 31,00,000 31,00,000 Preference dividend is in arrears for two years. By 31-3-2002 the assets realized were as follows: Rs. Land and Building 9,84,000 Stock in Trade 1,63,000 Plant and Machinery 7,12,000 Book Debts 11,91,000 Expenses of liquidation is Rs.54,000. The remuneration of the liquidator is 3 per cent of the realization. Income-tax payable on liquidation is Rs.44,500. Assuming that the final payments are made on 31-3-2002, prepare the Liquidators Final Statement if Account. Prepare the liquidators Financial statement of accounts. Q6. A, B, C and D had been carrying on business in partnership sharing profits and losses in the ratio of 3:1:1:1, They decide to dissolve the partnership on the basis of the following Balance Sheet as on 30.4.2004: Liabilities Rs. Rs. Assets Rs. Rs. Capital A/c: Premises 1,20,000 -A 1,00,000 1,60,000 Furniture 40,000 -B 60,000 56,000 Stock 1,00,000 General Reserve 14,000 Debtors 40,000 Capital Reserve 20,000 Cash 8,000 Sundry Creditors 80,000 Capital Overdrawn Mortage Loan -C 10,000 -D 12,000 22,000 Total 3,30,000 Total 3,30,000 1. The Assets realized as under: (a) Debtors Rs. 24,000; (b) Stock-in-Trade Rs. 60,000; (c) Furniture- Rs. 16,000; and (d) Premises Rs. 90,000. 2. Expenses of dissolution amounted to Rs. 4,000. Further creditors of R.s 12,000 had to be met. 3. General Reserve unlike Capital Reserve was built up by appropriation of profits. You are required to draw up the Realisation A/c, Partners Capital A/c and the Cash A/c assuming that C became insolvent and nothing was realized from his private estate. Apply the principles laid down in Garner vs Murray.