CA INTER

ACCOUNTANCY

LECTURE SUPPRORT MODULE

PREFACE

Dear Friends,

At the outset letme congratulate you for having taken up this challenging

and promising professional career.

It gives me immense pleasure in presenting this workbook on Accountancy.

The aim is to impart expert knowledge on various topics which are of

current importance world over.

This book is intended primarily for students who are preparing for CA

Intermediate Accountancy . The work book basically confines to classroom

discussions. The author is indebted to all the standard works on the various

aspects of the subject.

I gratefully acknowledge the support of all my friends and well-wishers in

helping me bring out this workbook

CA Ajith Rohith G - B.com, ACA

Kochi

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It is indeed worthwhile to attend to ARG classes.

Areas of Concentration:

! Financial Reporting

! Financial Management

! Cost Accounting

ABSORB REFRESH RETRIEVE

INDEX

Sl No Chapter Page No

1 Branch Accounts 1-14

2 Departmental Accounts 15-21

3 Liquidation of Companies 22-29

4 Amalgamation 30-44

5 Insurance Claims 45-52

6 Consolidation of Financial Statements 53-59

7 Valuation of Goodwill 60-65

8 Banking Companies 66-70

9 Insurance Companies 71-77

10 Mutual Fund 78-82

11 NBFC 83-86

HAPPY LEARNING EXPERIENCE

LECTURE SUPPORT KITCA IPCC - ADVANCED ACCOUNTING

ARG CLASSES

BRANCH ACCOUNTS

DEPENDENT BRANCHES

1) A HO in Bombay has a branch in Ahmadabad to which goods are invoiced by

the head office at a cost plus 25%. All the cash received by the branch is

daily remitted to the HO. All expenses are paid from Bombay. From the

following information show how the Branch account will appear in the HO

books.

(entries are to be made at invoice price)

Particulars Rs Rs

Stock On July, 2013 (At Invoice Price) 12,500

Debtors On 1st July, 2013 12,000

Goods Invoiced From Bombay 40,000

Remittances To Bombay:

Cash Sales 16,000

Cash Received From Debtors 29,500 45,500

Goods Returned To The Head Office 2,400

Cheques Received From Bombay:

Wages & Salaries 11,000

Rent, Rates Etc… 3,000

Sundry Expenses 510 14,510

Stock On 31st December, 2013 (Invoice Price) 15,000

Debtors On 31st December,2013 22,500

2) X Ltd. Madurai started a Branch in Delhi on 1st April 2013 to which goods

were send at 20 % above cost. The branch makes both credit and cash sales.

Branch expenses are met from branch cash and balance money remitted to

HO. The branch does not maintain double entry book of accounts and

necessary accounts relating to branch are maintained in the HO.

Following information are given for the year ended 31st March 2014.

Particulars Rs

Cost Of Goods Sent To Branch 50,000

Goods Received By Branch Till 31st March 2014 At Invoice Price 54,000

Credit Sales For The Year 58,000

Debtors As On 31.3.2014 20,800

Bad Debts And Discount Written Off 200

Cash Remitted To Head Office 43,000

Cash In Hand At Branch On 31.3.2014 2,000

Cash Remitted By Head Office To Branch During The Year 3,000

Closing Stock At Branch At Invoice Price 6,000

Expenses Incurred At Branch 12,000

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Show the necessary ledger accounts in thebooks of the HO and determine

the Profit &Loss of the branch for the year ended 31st March 2014.

3) Sellwell Ltd. has 2 brances in Cochin and Bangalore. During the year ended

31st March 2014 goods have been invoiced to Cochin branch at 20% above

cost and to Bangalore branch at 25% above cost. The branches does not

maintain complete books of accounts but the following figures are available

for the year ended 31st March 2014.

Particulars Cochin Bangalore

Opening Stock At Invoice Price 10,000 10,000

Goods Sent To Branch At Cost 50,000 40,000

Amount Remitted By Branch 80,000 80,000

Amount Remitted By Head Office 15,000 15,000

Goods Returned By Branch At Invoice Price 3,000 ---

Cash As On 1.4.2013 2,000 1,000

Cash As On 31.3.2014 1,000 500

Goods Returned By Customers At Branch At Selling

Price 5,000 4,000

Expenses At Branch In Cash 9,000 3,000

All sales at the branches are for cash. During the year Cochin branch

purchased Fixed Assets worth Rs.4,000 and this amount is included in the

figure of branch expenses. Cochin branch transferred to the Bangalore

branch stock costing Rs.5,000 during the year. The Bangalore branch

remitted Rs. 2,000 to the Cochin branch also during the year.

There was a closing stock of Rs.24,000 valued at invoice price at Cochin

branch . There was no closing stock at Bangalore branch. The branch stock

adjustment account in the HO books showed the following position as on 1st

April 2013.

For Cochin Rs. 2,500 (Cr) Bangalore Rs. 2,000 (Cr).

Prepare branch stock accounts, branch stock adjustment accounts, goods

send to branch accounts, branch cash and branch profit & loss account in

the HO books. Ignore depreciation.

4) Bengal trading company with its HO in Kolkata, invoiced goods to its branch

at Mumbai, at 20% less than the catalogue price which is cost plus 50%,

with instructions that cash sales were to be made at invoice price and the

credit sales at catalogue price less discount at 15% on prompt payment.

From the following particulars prepare a branch Trading and Profit & Loss

account for the year ended 31.3.2014:

Particulars Rs

Stock On 1st April, 2013 (Invoice Price) 12,000

Debtors On 1st April, 2013 10,000

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Goods Received From Head Office At Invoice Price 1,32,000

Sales (Cash) 46,000

Sales (Credit) 1,00,000

Cash Realised From Debtors 85,635

Discount Allowed To Debtors 13,365

Expenses At Branch 6,000

Remittance To Head Office 1,20,000

Debtors On 31st March,2014 11,000

Cash In Hand On 31st March 2014 5,635

Stock On 31st March,2014 At Invoice Price 15,000

It was further reported that a part of stock at the branch was lost by fire

(not covered by insurance) during the year whose value is to be ascertained;

and a provision should be made for discount to be allowed to debtors as on

31.3.2014, on the basis of the year’s trend of prompt payment.

Normal and Abnormal Losses

5) Goods are sent to branch at 25% profit on cost. Prepare necessary accounts
in head office books:

Particulars Rs

Opening Stock At Branch At Cost To Branch 10,000

Goods Sent To Branch At Invoice Price 40,000

Loss In Transit At Invoice Price 5,000

Pilferage At Invoice Price 2,000

Loss by Theft At Invoice Price 1,000

Closing Stock At Cost To Branch 12,000

Sales 60,000

Expenses 8,000

Rs.3,000 was recovered from the insurance company against loss in transit.

6) Paper product has a HO in Cochin and a branch in Mumbai. The following

information has been extracted from the HO books of accounts as at

31.3.2014:

Information relating to branch:

Rs. In '000

Particulars Opening Closing

Branch Bank (Positive Balances) 3 12

Branch Debtors 66 81

Branch Stock (At Transfer Price) 75 90

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Transactions during the year:

Particulars Rs. In '000

Bad Debts 15

Branch General Expenses (Paid From Branch Bank Account) 42

Cash Received From Credit Customers And Banked 390

Cash Sales Banked 120

Cash Transferred From Branch To Head Office 459

Credit Sales 437

Discounts Allowed To Credit Customers 9

Goods Returned By Credit Customers 8

Goods Returned By Branch At Transfer Price 30

Goods Sent To Branch At Transfer Price 600

Information relating to HO:

Opening stock Rs. 1.8 lakhs and closing stock Rs. 2.2 lakhs

Transactions during the year:

Particulars Rs. In '000

Bad Debts Written Off 24

Cash Sales 1,500

Credit Sales 2,000

Discount Allowed To Credit Customers 29

General Expenses 410

Goods Returned By Credit Customers 40

Purchases 2,780

Additional information:

1. Most of the accounting records relating to a branch are kept by the HO

in its own books of accounts.

2. All purchases are made by the HO, and goods are invoiced to the

branch at selling price, ie, at cost price plus 50%

Required:

a. Write up the following ledger accounts for the year ended 31.3.2014,

being careful to bring down any balances as at that date.

1. Branch stock account

2. Goods send to Branch account

3. Branch stock adjustment account

4. Branch debtors account

5. Branch bank account

b. Compile paper products Trading and Profit & Loss account for the year

ended 31st March 2014.

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ARG CLASSES

INDEPENDENT BRANCHES

7) ALimited company has its HO at Delhi and a branch in Mumbai where a

separate set of books is used. The following are the TB extracted on 31st

December 2013

Head Office Trail Balance

Particulars Rs Rs

Share Capital (Authorised:10,000 Equity

Shares Of Rs.100, Issued: 8,000 Shares) 8,00,000

Profit & Loss Account 1.1.13 25,310

Interim Dividend Paid- August 2013 30,000

General Reserve 1,00,000

Fixed Assets 5,30,000

Stock 2,22,470

Debtors And Creditors 50,500 21,900

Profits For 2013 82,200

Cash Balance 62,730

Branch Current Account 1,33,710

Total 10,29,410 10,29,410

Branch Trail Balance

Fixed Assets 95,000

Profits For 2013 31,700

Stock 50,460

Debtors And Creditors 19,100 10,400

Cash Balances 6,550

Head Office Current Account 1,29,010

Total 1,71,110 1,71,110

The difference between the balances of the current accounts in the two sets

of books is accounted for as follows.

a. Cash remitted by the branch on 31st December 2013 but received by

the HO on 1st January 2014 Rs. 3,000.

b. Stock stolen in transit from HO and charged to branch by HO but not

credited to HO in the branch books as the branch manager declined to

admit any liability ( not covered by insurance) Rs. 1,700

Give the branch current account in HO books after incorporating branch TB

through journal. Also prepare the Company’s Balance Sheet as on 31st

December 2013.

8) A trader commences business on 1st January 2013 at a HO and one branch.

Purchaseswere made exclusively at HO where the goods were processed

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before sale. There was no loss or wastage. Only processed goods received
form HO where handled by the branch, and these were charged to the

branch at processed cost plus 10%. At sales whether by HO or branch , were

at uniform gross profit of 25% on the respective cost.

The following TB as on 31st December 2013 was extracted from the books.

Head Office Branch

Particulars Debit Credit Debit Credit

Capital 2,20,000

Drawings 25,000

Purchases 19,93,350

Cost Of Processing 34,650

Sales 14,20,000 6,40,000

Goods Sent To Branch 6,51,200 6,40,200

Selling Expenses 2,24,000 27,000

Debtors & Creditors 2,30,000 5,83,350 92,000 2,400

Branch/Head Office Current

Account 2,05,550 1,50,800

Balance At Bank 1,62,000 34,000

Total 28,74,550 28,74,550 7,93,200 7,93,200

The following information is relevant.

1. Goods charged by HO to branch in December 2013 at Rs. 11,000, were

not received by the branch until January 2014, a remittance of Rs.

43,750 from the branch to the HO in December 2013. The necessary

adjustments in respect of these items are to be made in HO books

2. Stock taking at branch disclosed shortage of Rs. 5,000 (at Selling price).

3. Cost of unprocessed goods at HO as on 31st December 2013 was Rs.

1,80,000.

You are required to prepare in columnar form profit & loss account and

balance sheet of the HO, branch and business as a whole.

9) AB & Co. commenced a business on 1st January 2012 with a HO and one

branch, on 31st December 2013 goods are purchased by HO and are

normally packed immediately but on 31st December 2013 goods

costingRs.2,500remained unpacked. The cost of packing materials

amounted to 1% of selling price and there was no loss or wastage. Only

packed goods are send to the branch and are charged at selling price less

10%.

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The following TB on 31st December 2013 where extracted before adjusting

the above.

Head Office Branch

Particulars Debit Credit Debit Credit

Capital 20,000

Drawings 5,000

Purchases 2,00,000

Goods From Head Office 54,000

Packing Materials 3,000

Sales 1,60,000 50,000

Packed Goods Sent To Branches 56,700

Selling Expenses 18,000 1,900

Debtors 10,500 2,100

Creditors 13,300 2,500

Current Accounts:

Head Offices 6,000

Branches 9,500

Bank 4,000 500

It is ascertained that

1. Sales by HO were at auniform gross profit after charging packing

materials of 20% on a fixed selling price. All branch sales were at fixed

selling prices. Goods invoiced and despatched by HO to branch in

December 2013 for Rs.2,700 were not received until January 2014.

2. A remittance of Rs. 800 from a branch in December 2013 to HO was

not received in 2013. Branch stock taking disclosed a shortage of

goods of a selling value of Rs. 250. Branch stock of a selling value of

Rs. 1,000 had been damaged necessitating their value for stock

purposes, being reduced by Rs. 545 below invoiced price to the

branch. HO agreed to allow the branch a credit of Rs. 160 against

these goods. Apart from this all stocks are to be valued at cost.

Prepare trading and profit & loss accounts and balance sheet for whole

business in columnar form.

10) X,Y Company of Kolkata has a branch at Delhi. Goods sold at Delhi are

supplied from Calcutta but no charge is made in the books as between the

branch and HO. On 31st March 2013 the branch balance sheet after closing

books was as follows.

Liabilities Rs Assets Rs

Creditors Balances 40,000 Debtors Balances 2,00,000

Head Office 1,68,000 Cash At Bank 8,000

2,08,000 2,08,000

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For the six months ending with September 2013 the following transactions
took place at Delhi branch:

Sales 2,40,000

Purchases 48,000

Wages Paid 20,000

Salaries (Inclusive Rs.2,000) 4,000

General Expenses 1,600

Fire Insurance Paid For 1 Year 3,200

Manager Salary For 9 Months 7,200

Cash Collections From Debtors 1,60,000

Discount Allowed 8,000

Discount Earned 1,200

Cash Paid To Creditors 60,000

Cash Sent To Bank 80,000

Building Account (Further Payments To Contractors) 4,000

Cash In Hand 1,600

Cash At Bank 28,000

Set out the HO accounts in the Delhi books as on 30th September 2013 to
show the entries after the books are closed and also the branch balance

sheet as on the same date assuming it to be made-up on the same lines as

on 31stMarch 2013. Also give closing Journal entries.

11) HO passes at the end of each month to adjust the position arising out of

inter branch transactions. From the following information make the entry in

the books of HO to adjust the same

a. Mumbai.

(1) Received goods Rs. 6,000 from Kolkata, Rs. 4,000 from Patna.

(2) Send goods to Patna for Rs. 10,000 and KolkataRs. 8,000.

(3) Received a bills receivable from Patna for Rs. 6,000

(4) Send acceptance for Rs. 4,000 to Kolkata and Rs. 2,000 to Patna.

b. Patna Branch ( apart from the above)

(1) Received goodsRs. 10,000 from Kolkata and Rs. 4,000 from

Mumbai.

(2) Cash send - Rs. 2000 to Kolkata,Rs. 6000 to Mumbai.

c. Kolkata Branch ( apart from the above)

(1) Send goods to PatnaRs. 6,000

(2) Paid bills payable - Rs. 4,000 to Patna, Rs. 4,000 cash to Patna.

FOREIGN BRANCH

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12) An Indian Company has an Integral Foreign operation at Washington. Its

Trial Balance as at 30th September 2012 is as follows:

Particulars Amount In US $

Dr Cr

Plant & Machinery (Cost) 1,20,000

Furniture And Fixtures 8,000

Stock -01/10/2011 56,000

Purchases/ Sales 2,40,000 4,16,000

Goods Received From HO 80,000

Wages 2,000

Carriage Inward 1,000

Salaries 6,000

Rent, Rates And Taxes 2,000

Insurance 1,000

Trade Expense 1,000

HO Account 1,14,000

Debtors/Creditors 24,000 17,000

Cash At Bank 5,000

Cash In Hand 1,000

Total US$ 5,47,000 5,47,000

The following further informations are available:

1) Wages outstanding - $ 1,000

2) Depreciate Plant and Machinery & Furniture and Fixtures @ 10% Per

annum

3) The HO send goods to branch for Rs. 39,40,000.

4) The HO shows an amount of Rs. 43,00,000 due from branch.

5) Stock on 30th September 2012 - $ 52,000

6) There were no in-transit items either at the start or at the end of the year.

7) On 1st September 2010, when the Fixed Assets were purchased, the rate of

exchange was 1$ =Rs38 ; 1st October 1$ = Rs39 ; 30th September

20121$ = Rs 41; Average rate during the year was 1$ = Rs 40.

You are asked to prepare:

a) TB incorporating adjustments given under 1 to 4 above converting

Dollars into Rupees;

b) Trading and P&L account for the year ended 30th September 2012 and

Balance Sheet as on that date depicting the profitability and net

position of the Branch as would appear in India for the purpose of

incorporating in the main balance Sheet.

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13) The US branch of Delhi export house sent the following TB as on 31st

December 2013:

Particulars Amount In $

Dr Cr

Fixed Assets 17,500

18% Loan (For Acquisition Of Fixed Assets) 13,000

Depreciation 2,500

Stock On 01/01/2013 8,200

Goods Received From HO 58,800

Sales 1,05,200

Salaries And Wages 15,200

Interest 2,880

Cash At Bank 1,700

Debtors 21,200

HO Account 9,780

Total 1,27,980 1,27,980

Fixed assets were purchased on 1st January 2011 when $1 = Rs 25.50, life

was estimated to be 10 years.

Exchange Rates

Avg Of 2011 1$ = Rs 25.70

Closing 2011 1$ = Rs 26.10

Avg Of 2012 1$ = Rs 26.20

Closing 2012 1$ = Rs 26.40

Avg Of 2013 1$ = Rs 36.50

Closing 2013 1$ = Rs 42.20

In the HO books US branch account appeared as follows:

Particulars Amount Particulars Amount

To Balance d/d 1,84,800 By Bank 20,44,730

To Goods 21,46,200 By Balance c/d 4,12,716

To P&L account (Exchange gain) 1,26,446

24,57,446 24,57,446

Closing Stock - $ 2,400.

You are required to show

a) Branch TB in Rupee Terms

b) Branch P&L account

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c) Adjustment entries to incorporate branch balances in the HO Books

14) The Washington Branch of XYZ Ltd Mumbai sent the following TB as on 31st

December 2007:

Amount in $

Particulars

Dr Cr

HO Account 22,800

Sales 84,000

Debtors and Creditors 4,800 3,400

Machinery 24,000

Cash at bank 1,200

Opening Stock 11,200

Goods from HO 64,000

Expenses 5,000

Total 1,10,200 1,10,200

In the books of HO, Branch Account stood as follows:

Washington Branch Account

Particulars Amount Particulars Amount

To balance d/d 8,10,000 By cash 28,76,000

To Goods Send 29,26,000 By Balance c/d 8,60,000

37,36,000 37,36,000

Goods are sent to the branch at cost plus 10% and the branch sell goods at

invoice price plus 25%. Machinery were acquired on 31st January 2002 when

1$ was Rs. 40

Exchange rates on various dates were

1st January 2007 $1 = Rs. 46

31st December 2007 $1 = Rs. 48

Average $1 = Rs. 47

Machinery is depreciated at 10% and the branch manager is entitled to a

commission of 5% on the profits of the branch

Prepare Branch Final Accounts.

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15) An Indian Company Moon Start Ltd has a branch in Verginia (USA). The
branch is a non intergral operation of the Indian Company. The TB of the

branch as at 31st March 2012 is as follows:

Amount in $
Particulars

Dr Cr

Office Equipments 48,000

Furniture and Fittings 3,200

Stock Opening 22,400

Purchases 96,000

Sales 1,66,400

Goods from HO 32,000

Salaries 3,200

Carriage in 400

Ren rates and taxes 800

Insurance 400

Trade expenses 400

HO Account 45,600

Sundry Debtors 9,600

Sundry Creditors 6,800

Cash at Bank 2,000

Cash in Hand 400

Total 2,18,800 2,18,800

The following further informations are given:

a) Salaries outstanding $ 400

b) Depreciate Office Equipment and Furniture&Fittings at 10% p.a at

WDV.

c) The HO send goods to branch for Rs. 15,80,000

d) The HO shown an amount of Rs. 20,50,000 due from branch

e) Stock on 31st March 2012 - $ 21,500

f) There were no transit itmes either at start or at the end of the year.

g) On April 1 2010 when the Fixed Assets were acquired the rate of
exchange was $1 – Rs. 43. On 1st April 2011 rate and 31st March

2012 was Rs. 47 per $1 and Rs. 50 per $1 respectively. Avg Rate Rs.

45 per $1.

Prepare

a) Trial balance incorporating adjustments given converting dollars into

Rupees

b) Final Accounts of the Branch

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Foreign Head Office

16) Carlin &Co. has HO at New York and branch at Mumbai. Mumbai branch

furnishes you with its TB as on 31st March 2012 and the additional

information given thereafter:

Amount In Rs. ('000)

Particulars
Dr Cr

Stock On 01/04/2011 300

Purchases / Sales 800 1,200

Debtors/ Creditors 400 300

Bills Of Exchange 120 240

Wages And Salaries 560

Rent Rates And Taxes 360

Sundry Charges 160

Computers 240

Cash At Bank 420

New York Office Account 1,620

Total 3,360 3,360

Additional information:

a) Computers were acquired from a remittance of US $ 6,000 received from

New York HO and paid to the suppliers. Depreciated computers @ 60%

for the year.

b) Unsold stock of Mumbai branch was worth Rs. 4,20,000 on 31st March

2012

c) The rates of exchange may be taken as follows

Exchange rates

01-04-2011 1$ = Rs 40.00

31-03-2012 1$ = Rs 42.00

Average 1$ = Rs 41.00

Conversion in US $ shall be made upto 2 decimal accuracy

You are asked to prepare in US $ the revenue statement for the year ended

31st March 2012 and the Balance Sheet as on that date of Mumbai Branch

as would appear in the books of New York HO of Carlin & Co.

You are informed that Mumbai Branch account showed a debit balance of

US$ 39,609.18 on 31st March 2012 in New York books and there were no

items pending reconciliation.

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ARG CLASSES LOGIC SCHOOL OF MANAGEMENT

DEPARTMENTAL ACCOUNTS

Distribution of common cost of purchases

1) The following purchases were made by a business house having 3

departments

Dept A 1000 units

Dept B 2000 units At a total cost of Rs 1,00,000

Dept C 2400 units !

Stocks on 1st January were

Dept A 120 units

Dept B 80 units

Dept C 152 units

Sales details were:

Dept A 1,020 units at Rs. 20.00 each

Dept B 1,920 units at Rs. 22.50 each

Dept C 2,496 units at Rs. 25.00 each! ! ! ! !

The rate of gross profit is the same in each case. Prepare Departmental

Trading account.

Departmental transfers - One way transfer

2) Complex Ltd had 3 departments A, B and C. Following information is

available.

Particulars A B C

(Rs) (Rs) (Rs)

Opening stock 3,000 4,000 6,000

Consumption of direct Materials 8,000 12,000 ---

Wages 5,000 10,000 ---

Closing Stock 4,000 14,000 8,000

Sales --- --- 34,000

Stocks of each department are valued at cost to the department concerned.

Stocks of A department are transferred to B at a margin of 50% above

departmental cost. Stocks of B department are transferred to C department at

a margin of 10% above department cost.

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ARG CLASSES LOGIC SCHOOL OF MANAGEMENT

Particulars Amount

Salaries 2,000

Printing & Stationery 1,000

Rent 6,000

Interest Paid 4,000

Depreciation 3,000

Allocate expenses in the ratio of departmental Gross Profits. Opening Figures

of reserves for unrealised profits on departmental stocks were:

! Dept B Rs 1,000

Dept C Rs 2,000! ! ! !

Prepare departmental trading Profit and Loss Account

Inter departmental Transfers - Mutual

3) X ltd has 2 departments A & B. From the following particulars prepare the

consolidated Trading and Departmental Trading Account for the year ending

31st March 2016

Particulars Dept A Dept B

(Rs) (Rs)

Opening Stock ( Cost) 20,000 12,000

Purchases 92,000 68,000

Sales 1,40,000 1,12,000

Wages 12,000 8,000

Carriage 2,000 2,000

Closing stock

Purchases Goods 4,500 6,000

Finished Goods 24,000 14,000

Purchased Goods transferred

By B to A 10,000

By A to B 8,000

Finished Goods transferred

By B to A 40,000

By A to B 35,000

Return of Finished Goods

By B to A 7,000

By A to B 10,000

You are informed that purchased goods have been transferred mutually at

their respective departmental purchase cost and finished goods at

departmental market price and that 20% of finished stock (Closing) at each

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ARG CLASSES LOGIC SCHOOL OF MANAGEMENT

department represented finished goods received from the other department.

Inter Departmental Transfers, stock reserve and managerial

remuneration based on realised profits

4) M/s. B & Co. had 4 departments A, B, C & D. Each department being

managed by a manager whose commission was 10 % of the respective

departmental profits, subject to a minimum of Rs 6,000 in each case.

International transfers took place at a loaded price as follows:

From Dept A to Dept B 10 % Above Cost

Yas
!

From Dept A to Dept D 20 % Above Cost Moc

Ysl 465

From
From
Dept
Dept
C to Dept D 20 % Above Cost
C to Dept B 20 % Above Cost !
Yai
! !
s
! !

Ys 46

For the year ended 31/03/2012 the firm had already prepared and closed the

departmental accounts. It was discovered that the closing stocks of

departments had included inter deparmentally prepared goods at loaded price

instead of cost price. From the following data prepare a new statement:

Eee Eee

Particulars
Profit/(Loss)
Dept A
(38,000)10h0
Dept B
50,400
Dept C
72,000 PRO
Dept D
1,08,000

Inter Transfer included at 70,000 4,800

loaded price in the

departmental stock

(Rs 22000 from ( Rs 3600 from

Dept Ai &Rs Dept C i&Rs

48000 from 1200 from Dept

Dept C) A)

ORA A 2200 200

upp c 4800 16 800

12W 22 360 46 860

220

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Impact of omission of inter - departmental transfers

5) Goods and services of the 3 Departments A, B, & C are also mutually utilised

by them as and when required. Whereas goods are charged at 20 % profit on

cost, services utilised are recovered at cost. Show how departmental profits

shall be effected assuming the following facts:

Particulars Dept A Dept B Dept C

Goods and services

supplied(at cost) by:

10,000(Service 6,000 ( Service

Department A Nil Rs 2,000) Rs 1,000)

Department B Nil Nil 5,000 ( Service

Rs 1,000)

Department C 8,000(Service :Nil) 6,000(Service Nil

Rs 1,000)

Note: Try the question on the assumption that the amount indicated is

inclusive of the services rendered. What would be the effect in the profit of

individual department when the services rendered amount is excluded in the

figures given?

Abnormal Losses, missing figures and unique valuation:

6) Q Ltd purchases shoes from a number of manufacturers and sells these

through a chain of three shops. All book keeping records are kept at head

office. Stock is transferred from head office to the branches at final selling

price. The company sets Selling Price at Cost plus 10 %.

The following figures relate to the year ended 31st October 2016

Particulars Shop 1 Shop 2 Shop 3

Opening stock (SP) 22,000 25,300 19,800

GSTB 2,64,000 3,03,600 2,37,600

Sales 2,70,000 3,04,000 2,34,400

Closing Stock (SP) 20,250 16,120 25,040

ridesmono

perfect

The opening and closing stock figures were arrived at by means of physical

stock count conducted by professional stock - takers. Shop 2 suffered a flood

during September 2016. Immediately afterwards, all of the undamaged stock

in the shop was transferred to Shop 1 and 3, where it was treated as normal

trading stock. None of the branch managers kept proper records of the

quantities transferred. The manager of shop 2 also disposed of a large amount

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16120

damage
LECTURE SUPPORT KIT CA IPCC - ADVANCED ACCOUNTING

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of stock, which was so badly damaged as to be unsaleable. Again, no detailed

records were kept.

In accordance with their instructions, the stock - takers valued all stocks as if

they were in perfect condition. They did, however, set damaged stocks to one

side. The manager of Shop 2 has examined the stocks identified as damaged

0
and has suggested that stocks valued at Rs 5,500 be sold as flood damaged at
0
25% of their normal selling price. The suggestion has been agreed by HO.

The shops are designed so that theft is unlikely to be a problem. Head Office

is confident that losses due to shop lifting and staff fraud can be estimated at

approximately Rs 200 per shop per annum valued at selling price.

Requirements

Calculate the estimated cost of stock transferred from shop 2 to shop 1 and

shop 3 after flood and also estimated cost of the stock which was scrapped by

the manager of shop 2.

Prepare trading accounts to show the gross profit of each shop for the year.

Memorandum Stock and Mark up Accounts

7) Pioneer Ltd., a retail store has two departments for each of which a

memorandum stock account and memorandum mark - up account are kept.

All goods supplied to each department are debited to memorandum stock

account of the department at cost plus a mark-up, which together represent

normal selling price, to which account the sales of the department are

credited. The mark-up is credited to the department mark-up account. If the

-

selling price of any goods is reduced below the normal selling price, the

reduction (mark-down) is entered in stock account and in the mark-up

account. The mark up for the department A is 33 1/3 % of cost, and for

department B is 50% of cost. The following figures, relating to the year 2016

have been taken from the books:

Dept A DeptB

Particulars Dept A Dept B

Stock as on 1st January at cost - 12,300 17,400

Purchases 81,600 94,800

Sales 1,05,000 1,40,000

435

Yj Yas k

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The stock of Department A on 1st January included goods which cost Rs

2700, the selling price of which had been marked down by Rs 250. These

goods were sold during 2016 at reduced prices. Goods purchased in 2016, at

cost of Rs 1,440 for department A, were later in the year transferred to

0 a
department B and sold for Rs 2,160.The cost and sales proceeds are included
respectively in the purchases of department A and the sales of department B,

given above, but no entries for the transfer have been made in the books.

Some items of goods purchased in 2016 were marked down as follows:

Cost Mark down

Department A 4,860 430

Department B 10,000 2,000

With the exception of certain items in stock in department B at the end of the

year, which cost Rs 5,000 and were marked down by Rs 1,000, all goods

marked down in 2016 were sold during the year at the reduced prices. At the

stock taking on 31st Dec 2016 it was found that the goods which cost Rs 120

were missing from Department A and it was decided to regard this amount as

irrecoverable and to show the loss separately in the profit and loss account.

For the purpose of the annual accounts, the closing stock of both the

departments is to be valued at cost.

You are required to prepare in columnar form for each department for the

year 2016

1) Trading Account

2) Memorandum Stock Account

3) Memorandum Mark-up Account

margin

8) Xltd has a factory with two manufacturing departments X & Y. Part of the

output of department X is transferred to department Y for further processing

and the balance is directly transferred to selling department. The entire

production of department Y is directly transferred to selling department. Inter

departmental stock transfer are made as follows:

Dept X to dept Y at 33 1/3 % over departmental Cost

Dept X to SellingDept at 50 % over departmental Cost

Dept Y to SellingDept at 25 % over departmental Cost

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Dept X Dept Y Selling Dept

units amount units amount units amount

Opening FG 60 60,000 20 40,000 50 1,28,000

Raw materials consumed --- 1,82,000 --- 20,000 --- ---

Labour Charges --- 70,000 --- 32,000 --- ---

Sales --- --- --- --- 120 4,80,000

Closing FG 40 --- 50 --- 60 ---

Out of the total transfer by department X , 30 units were transferred to selling

department, while remaining to department Y. The per unit material and

labour consumption in X department on production to be transferred directly

to selling department is 300 % of labour and material consumption on units

transferred to Y department. General Administration expenses Rs 80,000.

Prepare Departmental and General Profit and Loss Account for the year.

Q9) Department X sells goods to department Y at a profit of 25 % on cost and to

Q
O
department Z at 10 % profit on cost. Department Y sells goods to X and Z at a
O O

O
profit of 15 % and 20 % on sales reapectively. Department Z charges 20% and
O

25 % profit on cost to department X and department Y respectively. PBcia

co

Carn
Department managers are entitled to 10 % commission on net profit after

eliminating unrealised profit on departmental sales being eliminated. PAC

Departmental profits after charging Managers commission , but before

adjusting unrealised profit are as under.

x y Y4c YgS

Amount 2 Koc _Yas

Department X 36,000 Wip AC

Department Y
Department Z
27,000
18,000
y X IEC Foos

Y z a Todos

Stocks lying at different department at the end of the year are as under

Dept X Dept Y Dept Z

4

300,100

400 Transfer from X

Transfer from Y
---
14,000
15,000
--- Ms
11,000
12,000 Ya 21001M

HSD Transfer from Z 6,000

x 1005,000 --- xzqw

200 no X 2,85
2 5 10011W

qo2
Find out the correct departmental profit after charging Managers commission.

ooc

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LIQUIDATION OF COMPANIES
def 3425

1) X Ltd. was ordered to be wound up on 31st March 2011 on which date its

summarised Balance Sheet was as follows.

Liabilities ` Assets `

10,000 Shares Of Rs. 100 Each 10,00,000 Goodwill 1,00,000

5% Debentures 1,60,000 Buildings 3,50,000

Interest Accrued (Secured By Plant 5,50,000

4,000

Floating Charge On All Assets) Fixtures 23,000

Bank Overdraft (Secured By Stock 38,000

25,000

Hypothecation Of Stock) Debtors 25,000

Trade Payables 36,000 Cash 500 ad

!! P &L Account 1,38,500

Total 12,25,000 Total 12,25,000

The amounts estimated to be realised are: Goodwill Rs. 1000. Building Rs. 3

lakh, Plant Rs. 5.25 Lakh, Fixtures Rs. 10,000, Stock Rs. 31,000, Debtors Rs.

20,000.

Creditors included Rs. 6000 on account of wages of 15 men at Rs. 100 per

month for 4 months immediately before the date of winding up. Rs. 9000

being the salaries of 5 employees at Rs. 300 per month for the previous 6

months, rent for Godown for the last 6 months amounting to Rs. 3000,

income tax deducted out of salaries of employees Rs. 1000 and directors fee

Rs. 500. Disc C

3 years ago, a debit balance in the profit & loss accounts was Rs. 77,925 and

since that date the accounts of the Company have shown the following

figures:

Particulars 31.3.2009 31.3.2010 31.3.2011

Gross Profit
Wages And Salaries
0
65,000
40,500
45,000
36,000
40,000
34,400

Electricity & Water Taxes 5,750 6,380 5,260

Debenture Interest 8,000 8,000 8,000

Bad Debts 8,540 7,600 6,700

Depreciation 6,700 --- ---

Director's Fees 1,000 1,000 1,000

Miscellaneous Expenses 10,500 7,265 7,980

In addition it is estimated that the Company would have to pay Rs. 5000 as

compensation to an employee for injuries suffered by him which was

contingent liability not accepted by the company.

Tybeag

I Te

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Prepare the statement of affairs and the deficiency account in form 57 of the
Company (court) rules 1959.

2) From the following information, prepare a statement of affairs and deficiency

accounts for submission to the official liquidator of the Equipment Ltd, which

went to liquidation on December 31, 2012:

Particulars ` `

3000 Equity Shares of 100 each Rs. 80 paid up 2,40,000

6% 1000 Pref. capital of Rs.100 fully called up 1,00,000

Less : Calls in arrears 5,000 95,000

5% Deb having a floating charge on the assets.

1,00,000
(Interest paid upto June 30, 2012)

Mortgage on Land and Building 80,000

Trade Creditors 2,65,500

Owing for Salary 20,000

Secretary Salary (@ 500 per month) 3,000

Managing Directors Salary ( @ 1500 per month) 6,000

Assets Estimated RV Book Value

Land and Building 1,30,000 1,20,000

Plant 1,30,000 2,00,000

Tools 4,000 20,000

Patents 30,000 50,000

Stock 74,000 87,000

Investment Charged against Bank Overdraft-

1,70,000 1,80,000
Rs 1,90,000

On 31st December, 2007 the balance sheet of the Company showed a general

reserve of Rs. 40,000 accompanied by a debit balance of Rs. 25,000 in the

profit & loss accounts.

In 2008, the Company made a profit of Rs. 40,000 and declared a dividend of

10% on equity shares. The Company suffered a total loss of Rs. 1,09,000

besides loss of stock due to fire of Rs. 40,000 during 2009, 2010 and 2011.

For 2012 accounts were not made.

The cost of winding up is expected to be Rs. 15,000.

3) X Company Ltd went into voluntary liquidation on 1st April, 2011. The

following balances are extracted from its books on that date:

Liabilities ` Assets `

9 24000 Eq Shares @ 10 each

Debentures ( Secured by
2,40,000 Machinery
1,50,000 Lease Hold Properties
90,000
1,20,000

DE !"#"$%&'#()'%&'#*+#"!",#-!).# /012#45#

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Floating Charge)
B
Bank Overdraft
Creditors
54,000 Stock
60,000 Debtors 1,50,000
AO
3,000

AO

E Investments
cash
18,000
3,000

P&L account 1,20,000

Total 5,04,000 Total 5,04,000

The following assets are valued as under:

Bro

Particulars ` H
Machinery 1,80,000

Lease Hold Properties 2,18,000
9000 Happy

Stock 6,000 9800 Happy

Debtors 1,40,000
300 Happy

Investments 12,000 sad I 000

sad
600gsad

The bank overdraft is secured by deposit of title deeds of lease hold

properties. There were preferential creditors amounts to Rs. 3000 which were

not included in creditors Rs. 60,000.

c H
Prepare a statement of affairs to be submitted to the meeting of members/

creditors.

5200 S yzp.WS

4) Insol Ltd is to be liquidated. Their summarised balance sheet as on 30th

September,2012 appears as under:

Liabilities ` Assets `

us

the Equity Share Capital (Rs10 Each)
Secured Debentures(On
25,00,000 Land & Building
Other Fixed Assets
5,00,000
20,00,000
B

10,00,000 A

B E Land&Building) Current Assets 45,00,000
A
Unsecured Loans 20,00,000 P &L A/C 20,00,000

E E

E e Creditors
Total
35,00,000
90,00,000 Total 90,00,000 T

Contingent Liabilities Are: H

For Bills Discounted 1,00,000

For Excise Duty Demands 1,50,000

EE sad o
On Investigation, it is found that the contingent liabilities are certain to

devolve and that the assets are likely to be realised as follows:

Sfo Particulars `

Land & Building
Other Fixed Assets
1,00,000
18,00,000
sad 4h

sad 2h

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sad lol

Current Assets 35,00,000

Ans Def
385000 K

Taking the above information into account, prepare a statement of affairs.

5) Prakash processors Ltd went into voluntary liquidation on 31st December

2010 when their balance sheet read as follows:

Liabilities ` paid Assets `

Equity Share Capital (Rs100,60paid Land &

4,50,000 2,50,000

Up) Est
7500
Equity Share Capita (Rs.100,75paid
Building
Plant &

1,87,500 6,25,000

Up)
ES2 2500
10% Cum. Pref. Capital Of Rs.100 5,00,000
Machinery
Patents 1,00,000

Stock 1,37,500
15% Debentures Secured By Floating

2,50,000 Trade
Charge 2,75,000

Receivable

Interest O/S On Debentures 37,500 Cash & Bank 75,000

Creditors 3,18,750 P &L A/C 2,81,250

Total 17,43,750 Total 17,43,750

Preference dividends were in arrears for 2 years and the creditors included

preferential creditors of Rs. 38,000.

The assets realised as follows:

Land & building Rs. 3,00,000, Machinery and Plant Rs. 5,00,000, Patents Rs.

75,000, Stock Rs. 1,50,000, Trade receivables Rs. 2,00,000.

The expenses on liquidation amounted to Rs. 27,250. The liquidator is

entitled to a commission of 3% on assets realised except cash. Assuming that

the final payments including those on debentures are made on 30th June

2011. Show the liquidator’ statement of affairs statement of account.

6) In a liquidation which commenced on April 2, 2011 certain creditors could not

receive payments out of the realisation of assets and out of contributions from

“A” list contributories. The following are the details of certain transfers, which

took place in 2010 and 2011:

No. Of shares Date of Creditors

Shareholders

transferred at the date ceasing to be Remaining Unpaid

of ceasing to be member member & Outstanding

1,500
X 1.03.2010 4,000

A 1,000 1.05.2010 6,000

B 1,500 1.07.2010 7,500

C 300 1.11.2010 8,000

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D 200 1.02.2011 9,500

All the shares were Rs. 10 each, Rs. 6 paid up ignoring expenses of and

remuneration to Liquidators etc, show the amount to be realised from the

various persons listed above.

7) A Company went into voluntary liquidation on 31st December, 2013, when the

following balance sheet was prepared:

Liabilities
19,500 Shares of Rs 10 paid up NII `
1,95,000
Assets
Goodwill
`
50,000

Lease Hold

Sundry Creditors 48,000

Properties

Preferential 24,200 Plant & Machinery 65,500

2
Partly Secured 55,310 Stock 56,800
4 3500 2
f

Unsecured 99,790 S. Debtors 64,820

Bank Overdraft unsecured 12,000 Cash 21 2,600

2030Total

P&L account
3,86,300 Total ignore3,86,300
98,580

def

The liquidator realised the assets as follows:

Particulars `

Lease Hold Properties which was used in the first instance

to pay the partly secured creditors

o
35,000

Plant & Machinery 51,000

Stock 39,000

S. Debtors 58,000

The expenses of liquidation amounted to Rs. 1500 and the liquidator’s

remuneration was agreed at 2% on the all assets realised (excluding cash) and

2.5% on the amount paid to the unsecured creditors.

z 1 2 35

You are required to prepare the liquidator’s final accounts showing the

distribution.

2.5 9 11

8) Break Ltd went into voluntary Liquidation on 31st March 2011. The Balance

v in its books on that date were:

Liabilities ` Assets `

5000 6% PSC Rs 100 each fully paid up 5,00,000 Land 50,000

2500 ESC of Rs 100 each 75 Paid up 1,87,500 Building 2,00,000

!"#"$%&'#()'%&'#*+#"!",#-!).# /012#48#

PD azzearD 3000 X 2 60000

LECTURE SUPPORT KITCA IPCC - ADVANCED ACCOUNTING

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7500 ESC of Rs 100 each 60 Paid up 4,50,000 Plant & Machinery 6,25,000

5% Debenture ( Flaoting Charge) 2,50,000 Stock 1,37,500

10 2

Interest due on Debentures 12,500 Debtors 2,75,000

40
Unsecures creditors 2,00,000 Cash at bank 75,000

11

Bank Overdraft
4 1,00,000

IT payable - Due within 12 months 12,500 Profit & Loss a/c 4,10,000

Salaries and wages due for 4 Months

Total
9 60,000
17,72,500 Total
ignore 17,72,500

5 2 5

The liquidator is entitled to a remuneration of 5% on assets realised except

cash and 1% on the amount distributed to unsecured creditors other than

preferential creditors.

1 Cll

Bank overdraft is secured by deposit of title deed of land and building which

realised Rs 3 Lakhs. Other assets realised the following sums:

Particulars Amount

Plant and Machinery 5,00,000

Stock 1,50,000

Sundry Debtors 2,00,000

8
Expense of liquidation amounted to Rs. 27,250. Prepare liquidators final

statement of account. Liquidator realised all assets on 1st April 2011 and

discharged his obligation on the same date. Dividend on preference shares

were in arrears for 2 years.

9) A) Before paying the creditors totalling Rs 3,04,000 the liquidators of a

Company were left with Rs 1,25,000. The shares of the company were as

follows:

1) 3,000 9% Preference Shares of Rs 100 each, Rs 80 paid up.

2) 2,000 equity shares of Rs 100 each ,Rs 60 Paid.

3) 3,000 equity Shares of Rs. 100 each, Rs. 75 paid up.

B) In a Company where the shares are as mentioned above, the liquidator is

left with Rs. 2,20,000 after paying of creditors. What will be the call n shares.

10) Calculate call on shares in following cases.

i) Balance left over with liquidator Rs. 5,00,000 . Capital structure of

Company :
- 2,000 Equity Shares of Rs. 100 each ,Rs. 90 paid up.

- 6,000 Equity Shares of Rs. 150 each, Rs. 120 paid up.

- 1,000 Preference Shares of Rs. 50 each, Rs. 40 paid up.

ii) Balance left over with liquidator Rs. 6,60,000. Capital Structure of

Company :

- 2,500 Equity Shares of Rs. 100 each ,Rs. 60 paid up.

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- 3,000 Equity Shares of Rs. 50 each, Rs. 40 paid up.

- 7,500 Equity Shares of Rs. 150 each, Rs. 30 paid up.

11) The Balance Sheet of Asco ltd as on 31st March 2013:

Liabilities ` Assets `

1000 6% PSC Rs. 100 each fully paid up 1,00,000 Machinery 1,90,000

2000 ESC of Rs. 100 each Fully Paid up 2,00,000 Furniture 10,000

2000 ESC of Rs. 100 each 75 Paid up 1,50,000 Stock 1,20,000

f
Bank Loan ( Secured on Stock) 1,00,000 Debtors 2,40,000

creditors 3,50,000 Cash at bank 50,000

Income tax payable 10,000 P & L a/c 3,00,000

party Total 9,10,000 Total 9,10,000

The Company went into liquidation on 1st April 2013. The Assets were realised

as follows:

Particulars Amount

Machinery 1,66,000

Furniture 8,000

Stock 1,10,000

Debtors 2,30,000

Expense of Liquidation 4,000

The liquidator are entitled to a commission at 2% on amount paid to

unsecured creditors except preferential creditors. Calls on partly paid shares

were made but the amount due on 200 shares were found to be irrecoverable.

Prepare liquidator’s statement of account.

NOIFI.co oox25
NY

12) The following particulars relate to a Limited Company which has gone into

voluntary liquidation. You are required to prepare the Liquidators Statement

of Account allowing for his remuneration @ 2.5% on all assets realised

excluding call money received and 2% on the amount paid to unsecured

creditors including preferential creditors:

- 10,000 Preferential Shares of Rs. 100 each,fully paid up.

- 50,000 Equity Shares of Rs. 100 each, fully paid up.

- 30,000 Equity Shares of Rs. 10 each, Rs. 8 paid up.Assets

realised Rs. 20,00,000 excluding the amount realised by sale of

securities held by partly Secured Creditors.

Particulars Amount

Preferential Creditors 50,000

Unsecured Creditors 18,00,000

Party Secured, Creditors ( Assets realised Rs 3,20,000) 3,50,000

Debentures holders having floating charge on all assets of the

6,00,000
company

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Expense of Liquidation 10,000

A call of Rs. 2 per share on the partly paid Equity Shares was duly received

except in case of one shareholder owning 1,000 shares. Also calculate the

percentage of amount paid to the unsecured creditors to the total unsecured

creditors.

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AMALGAMATION

1) The position of two companies are as follows:

Liabilities A Ltd B Ltd Assets A Ltd B Ltd

Fixed Assets

Issued Capital: 5000She 70000Sh 3,00,000 5,00,000

Shares Of
5,00,000 7,00,000 Debtors And

Rs.10 Each
Stock 3,50,000 1,00,000

5% Debentures 1,00,000
_ Cash At Bank
_ 1,00,000

Creditors 3,00,000 2,00,000 P &L A/C 1,50,000

_

Goodwill

P &L A/C _ 1,50,000 1,00,000 3,50,000

Total 9,00,000 10,50,000 Total 9,00,000 10,50,000

B Ltd agreed to absorb A ltd, upon the following terms:

a. The shares in A Ltd. are to be considered as worth Rs.6 each (of which

the share holders are to be paid one quarter in cash and the balance in

shares in B Ltd.) and the shares in B Ltd at Rs.12.50 each.

b. The debenture holders in A Ltd. agreed to take Rs.95 of 7% debentures

in B Ltd., for every Rs.100 of 5% debentures held in A Ltd.

c. A Ltd is to be wound up.

Show the journal entries necessary to record the above in the books of both the

companies and draw up a balance sheet showing the position of B Ltd after the

amalgamation. Costs come to Rs.6000 which was paid by B Ltd.

2) The Indo-gulf company Ltd sells its business to the continental company Ltd, as

on 31.12.03 on which date its balance sheet was as under:

` `
Liabilities Assets

Paid Up Capital: Shares Freehold Property 1,50,000

2,00,000

Of Rs.100 Each Goodwill 50,000

Debentures 1,00,000 Plant & Tools 83,000

Creditors 30,000 Stock 35,000

Reserve Fund 50,000 Debtors 27,500

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P &L A/C 20,000 Cash At Bank 50,000

Bills Receivable 4,500

Total 4,00,000 Total 4,00,000

The continental company Ltd agreed to take over the assets (exclusive of cash @

bank and goodwill) at 10% less than the book value, to pay Rs.75000 for goodwill,
and to take over the debentures.

The purchase consideration was to be discharged by the allotment to the Indo-

gulf Ltd. of 1500 shares of Rs.100 each at a premium of Rs.10 per share and the

balance in cash. The cost of the liquidation amounts to Rs.3000. show the

necessary journal entries in the books of continental company Ltd.

3) A Ltd. agreed to acquire the business of B Ltd as on 31.12.2003. on that date

9 balance sheet of B Ltd was summarized as follows:

Liabilities ` Assets `

Goodwill
Share Capital Of Rs.10 Each 3,00,000 50,000

General Reserve 85,000 Plant & Machinery 3,20,000

P &L A/C 55,000 Stock 84,000

6% Debentures 50,000 Debtors 18,000

Creditors 10,000 Cash At Bank 28,000

Total 5,00,000 Total 5,00,000

The debenture holders agreed to receive such 7% debentures issued as 96 each

as would discharge the debentures in B Ltd, at a premium of 20%. The share

holders in B Ltd were to receive Rs.2.50 in cash per share and three shares in A

Ltd. for every two shares in held. The shares in A Ltd. being considered as worth

Rs.12.5 each. There were fractions equaling 50 shares for which cash was paid.

The plant includes land & building. The directors of A Ltd considered the various

assets to be valued as under:

Land Rs. 1,00,000

Building Rs. 2,50,000

Plant Rs. 3,50,000

Stock Rs. 80,000

Debtors Rs. 18,000

The cost of liquidation of B Ltd ultimately was Rs.5000. due to a technical hitch,

the transaction could be completed only on 1st July 2004. Till that date B Ltd

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carried on trading which resulted in a profit of Rs. 20000 (subjected to interest)

after providing Rs.15000 as depreciation. On 30th June 2004, the stock was

Rs.90000. debtors were Rs.25000 and creditors were Rs.15000. there was no

addition to or deletion from the fixed assets. It was agreed that the profit should

belongs to A Ltd.

You are required as on July 1, 2004 to:

a. Prepare realization a/c and the share holders a/c in the ledger of B Ltd.

b. Give journal entries in the books of A Ltd.

4) A Ltd and B Ltd were amalgamated on and from 1st April 2003. A new company C

if Ltd was formed to take over the business of the existing companies. The balance
sheet of A Ltd and B Ltd as on 31st March 2003 as given below:

` In '000

Liabilities A Ltd B Ltd Assets A Ltd B Ltd

Land &
Equity Share Of Rs.100 850 725

Building 460 275

14% Pref. Shares Of Plant & 325

175

Rs.100 320 Machinery 210

Revaluation Reserve 125 80 Investment 75 50

General Reserve 240 160 Stock 325 269

Invst. Allowance Reserve

50 30 Debtors 305 270

P &L A/C 75 52 Bills Receivable 25 NIL

13% Debentures Of

Rs.100 50 28 Cash At Bank 385 251

Public Deposits 25 NIL

Sundry Creditors 145 75

Bills Payable 20 NIL

Total 1900 1,325 Total 1900 1,325

Other information:

1. 13% debenture holders of A Ltd and B Ltd are discharged by C Ltd by

issuing such number of its 15% debentures of Rs.100 each so as to

maintain the same amount of interest.

2. Preference share holders of the two companies are issued equivalent

number of 15 % preference shares of C Ltd at a price of Rs.125 each (face

value Rs.100)

3. C Ltd will issue 4 equity shares for each equity shares of A Ltd and 3 equity

shares for each equity shares of B Ltd. the shares are to be issued at Rs.35

each, having a face value of rs.10 per share.

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4. Investment allowance reserve is to be maintained for two more years.

You are required to prepare and present the balance sheet of C Ltd as on

1.4.2003. After the amalgamation have been carried out on the basis of the

following assumption:

a. Amalgamation in the nature of merger.

b. Amalgamation in the nature of purchase.

O
5) The abridged balance sheet of V Ltd as at 31st march 2003 is as under:

Liabilities V Ltd Assets V Ltd

Equity Share Of Rs.10 2,40,000 Goodwill 5,000

14%Cum. Pref. Shares Of Rs.10 50,000 Fixed Assets 2,57,000

8% Debentures 1,00,000 Stock 50,000

Interest Accrued On Debentures 8,000 Debtors 60,000

Sundry Creditors 1,00,000 Cash At Bank 1,000

Preliminary Expenses 15,000

P &L A/C 1,10,000

Total 4,98,000 Total 4,98,000

The following scheme is passed and sanctioned by the court:

I. A new company P Ltd is formed with Rs.300000 divided into 30000 equity

shares of Rs.10 each.

II. The new company will acquire the assets and liabilities of V Ltd on the

following terms:

a. Old company’s debentures are paid by similar debentures in new

company and for outstanding accrued interest, shares of equal amount

are issued at par.

b. The creditors are paid for every Rs.100 - Rs.16 in cash and 10 shares

are issued at par.

c. Preference share holders are to get equal number of equity shares at

par. For arrears of dividend amounting to Rs.12000, 5 shares are

issued at par for each Rs.100 in full satisfaction.

d. Equity share holders are issued one share at par for 3 shares held.

e. Expenses Rs.8000 are to be borne by the new company.

III. Current assets are to be taken at book value (except stock which is to be

reduced by Rs.3000). Goodwill to be eliminated, balance of purchase

consideration being attributable to fixed assts.

IV. Remaining shares of the new company are issued at par and fully paid up.

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You are required to show:

a. In the old company’s books:

1. New company’s a/c.

2. Realization and reconstruction (combined) a/c and equity share

holder’s a/c.

b. In the new company’s books:

1. Bank a/c

2. Summarized balance sheet.

6) Sham Ltd balance sheet as on 31.3.2002 is as follows:

Liabilities ` Assets `

equity share of Rs.10 1,50,000 fixed assets 1,00,000

9% debentures 1,00,000 current assets 2,00,000

current liabilities 50,000

Total 3,00,000 Total 3,00,000

Ram Ltd agreed to take over Sham Ltd. on the following terms:

1. New company will issue necessary equity shares to old company’s share

v holders.

2. 10,000, 11% debentures of Rs.10 each were issued at Rs.12 each for 9%

debenture holders.

3. Current liabilities were also taken over

Calculate purchase consideration assuming intrinsic value of old and new

company are Rs.20 and Rs.15 per share respectively.

O
7) Balance sheet of Ram Ltd and Shyam Ltd is given as on 31.3.2002:

Liabilities Ram Ltd ShyamLtd Assets Ram Ltd ShyamLtd

Equity Share Of Fixed Assets

Rs.10 1,00,000 50,000 80,000 70,000

Reserves &

Surplus 10,000 20,000 Debtors 30,000 40,000

Debentures 20,000 40,000 Stock 20,000 10,000

Creditors 10,000 _ Cash 10,000 5,000

Share Premium _ 15,000

Total 1,40,000 1,25,000 Total 1,40,000 1,25,000

Ram Ltd took over Shyam Ltd on the following conditions:

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1. That necessary share would be issued to old share holders in accordance

with intrinsic value of shares.

2. That fixed assets have market value of Rs.75000 and Rs.80000

respectively, debtors are good, stock is shown at cost price whose gross

realizable value is Rs.25000 and Rs.12000 respectively.

3. Debentures of Shyam Ltd were to be issued equivalent debentures at a

premium of 10%.

Calculate purchase consideration.

0
8) Y Ltd decided to absorb X Ltd. the balance sheet of X Ltd is as follows:

Liabilities ` Assets `

Equity share of Rs.100 3,00,000 Sundry Net Assets 2,90,000

Preference shares 60,000 P & L a/c 70,000

Total 3,60,000 Total 3,60,000

Y Ltd agreed to take over the net assets of X Ltd. an equity share in X Ltd , for

purpose of absorption, is valued at Rs.70. Y Ltd agrees to pay Rs.60,000 in cash

for payment to Preference share holders and the balance in the form of its equity

shares valued at Rs. 120 each.

Calculate purchase consideration.

9) Exe Ltd is absorbed by Wye Ltd. given below are the balance sheets of the two

companies prepared after revaluation of their assets on a uniform basis:

Liabilities Exe Ltd Wye Ltd Assets Exe Ltd Wye Ltd

Authorised Capital: Of Rs150 Of Rs75 Sundry Fixed

Face Value Each each Assets 16,85,000 43,57,500

Equity Share Cash In

Capital 13,50,000 45,00,000 Hand 3,500 27,500

Paid Up Capital: Rs135

Paid Up Value each Rs 75 each

Equity Share

Capital Paid Up 12,15,000 30,00,000

General Reserve 4,03,500 12,85,000

P & L A/C 15,000 35,000

Creditors 55,000 65,000

Total 16,88,500 43,85,000 Total 16,88,500 43,85,000

The holder of every 3 shares in Exe Ltd was to receive 5 shares in the Wye Ltd
plus as much cash as is necessary to adjust the rights of share holders of both

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the companies in accordance with the intrinsic value of shares as per the

respective balance sheets.

Pass necessary journal entries in the books of Wye Ltd and prepare balance sheet

giving effect to the above scheme of absorption. Entries are to be made at par

value only.

10) Exe Ltd was wound up on 31.3.2004 and its balance sheet as on that date was

given below:

Liabilities ` Assets `

Equity Share Of Rs.10 12,00,000 Sundry Fixed Assets 9,64,000

Profit Prior To Incorporation 42,000 Stock 7,75,000

Contingency Reserve 2,70,000 Debtors 1,60,000

P & L A/C 2,52,000 (-)Provision 8,000 1,52,000

Bills Payable 40,000 Bills Receivable 30,000

Creditors 2,26,000 Cash At Bank 3,29,000

Provision For Income Tax 2,20,000

Total 22,50,000 Total 22,50,000

Wye Ltd took over the following assets at values are shown below:

Fixed assets Rs. 12,80,000, stock Rs.7,70,000 and bills receivable Rs.30,000.

Purchase consideration was settled by Wye Ltd as under:

Rs.5,10,000 of the consideration was settled by allotment of fully paid 10%

preference shares of Rs.100 each. The balance is settled by issuing equity shares

of Rs.10 each at Rs.8 per share paid up.

Sundry debtors realized Rs.150000. bills payable was settled for Rs.38,000.

income tax authorities fixed the taxation liability at Rs.2,22,000.

Creditors were finally settled with the cash remaining after meeting liquidation

expenses amounting to Rs.8,000.

You are required to :

1. Calculate the number of equity shares and preference shares to be allotted

by Wye Ltd in discharge of purchase consideration.

2. Prepare the realization a/c, cash/bank a/c, Equity share holders a/c,and

Wye Ltd a/c in the books of Exe Ltd.

3. Pass journal entries in the books of Wye Ltd.

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O
11) Y Ltd acquires the businesses of Z Ltd whose balance sheet on 31.12.1996 is as
under:

Liabilities ` Assets `

Equity Share Of Rs.100 8,00,000 Goodwill 2,00,000

6% Pref. Capital Of Rs.100 4,00,000 Land & Building 4,00,000

Capital Reserve 1,00,000 Plant & Machinery 6,00,000

P &L A/C 50,000 Patents 50,000

6% Debentures 2,00,000 Stock Ee 1,50,000

Interest O/S On Debentures 12,000 Debtors 1,80,000

Workmen Compensation Fund 8,000 UnderWriting

(Expected Liability Rs.5000) Commission 40,000

Creditors 1,20,000 Cash At Bank 70,000

Total 16,90,000 Total 16,90,000

Y Ltd was to take over the overall assets (except cash) and liabilities (except for

interest due on debentures) and to pay the following amounts:

! Rs.200,000 7% debentures (Rs.100 each) in Y Ltd for the existing

debentures in Z Ltd; for the purpose each debentures of Y Ltd is to be

treated as worth Rs.105.

! For each preference share in Z Ltd Rs.10 in cash and one 9% preference

share of Rs.100 each in Y Ltd.

! For each equity share in Z Ltd Rs.20 in cash and one equity share in Y Ltd
to the extent of Rs.100 each having the market value of Rs.140.

! Expenses of liquidation of Z Ltd are to be reimbursed by Y Ltd to the extent

of Rs.10,000. actual expenses amounts to Rs.12,500.

Y Ltd valued land & building at Rs.550,000, plant & machinery at Rs.650,000,

and patents at Rs.20,000.

Prepare the balance sheet of the new company.

12) The financial position of two companies Hari Ltd and Vayu Ltdas on 31.3.2002

was as under:

Liabilities Hari Ltd Vayu Ltd Assets Hari Ltd Vayu Ltd

Equity Share Capital Of

10,00,000 Goodwill
Rs.10 3,00,000 50,000 25,000

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9% Pref. Shares Of
1,00,000 _ Building

Rs.100 3,00,000 1,00,000

10% Pref. Shares Of

_ Machinery

Rs.100 1,00,000 5,00,000 1,50,000

General Reserve 1,00,000 Stock

80,000 2,50,000 1,75,000

Retirement Gratuity

50,000 Debtors
Fund 20,000 2,00,000 1,00,000

Cash At
Creditors 1,30,000

80,000 Bank 50,000 20,000

Preliminary
30,000 10,000

Expenses

Total 13,80,000 5,80,000 Total 13,80,000 5,80,000

Hari Ltd absorbs Vayu Ltd on the following terms:

! 10% preference share holders are to be paid at 10% premium by issue of

9% preference shares of Hari Ltd.

! Goodwill of Vayu Ltd is valued at Rs.50000, building are valued at

Rs.150000, and the machinery at Rs.160000.

! Stock to be taken over at 10% less value and reserve on bad and doubtful

debts to be created at 7.5%.

! Equity share holders of Vayu Ltd will be issued equity shares at Rs.10.50

each.

Prepare necessary ledger a/c to close the books of Vayu Ltd and show the

acquisition entries in the books of Hari Ltd. also draft the balance sheet after

absorption as at 31.3.2002.

13) The followings are the balance sheets of X Ltd and Y Ltd:

X Ltd Y Ltd X Ltd Y Ltd

Liabilities Rs'000 Rs'000 Assets Rs'000 Rs'000

Equity Share Capital Of Land &

Rs.10 5,000 3,000 Building 2,500 1,550

14% Pref. Shares Of Plant &

Rs.100 2,200 1,700 Machinery 3,250 1,700

Furniture &

General Reserve 500 250 Fixtures 575 350

Export Profit Reserve 300 200 Investments 700 500

Investment Allowance

Reserve _ 100 Stock 1,250 950

P &L A/C 750 500 Debtors 900 1,030

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13% Debentures Of

Rs.100 500 350 Cash & Bank 725 520

Creditors 450 350

Other Current

Liabilities 200 150

Total 9,900 6,600 Total 9,900 6,600

X Ltd take over Y Ltd on 1.4.1995. X Ltd discharge the purchase consideration as
follows:

" Issued 350000 equity shares of Rs.10 each at par to the equity share

holders of Y Ltd.

" Issued 15% preference shares of Rs.100 each to discharge the preference

share holders of Y Ltd at 10% premium.

The debentures of Y Ltd will be converted into equivalent number of debentures of

X Ltd. the statutory reserves of Y Ltd are to be maintained for 2 more years.

Show the balance sheet of X Ltd after amalgamation on the assumption that

a. The amalgamation is in the nature of merger.

b. The amalgamation is in the nature of purchase.

14) The following were the balance sheet of P Ltd and V Ltd as on 31.3.2002:

P Ltd V Ltd P Ltd V Ltd

Rs. In Rs. In Rs. In Rs. In

Liabilities Lakhs Lakhs Assets Lakhs Lakhs

Equity Share Capital

Of Rs.10 15,000 6,000 Land & Building 6,000 _

Securities Premium 3,000 _

Plant & Machinery 14,000 5,000

Foreign Project
Reserve _ Furniture &
310 Fixtures 2,304 1,700

General Reserve 9,500 3,200 Stock 7,862 4,041

P &L A/C 2,870 825 Debtors 2,120 1,020

12% Debentures _ 1,000 Cash & Bank 1,114 609

Bills Payable 120 _

Bills Receivable _ 80

Cost Of Issue Of

Creditors 1,080 463 Debentures _ 50

Sundry Provisions 1,830 702

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Total 33,400 12,500 Total 33,400 12,500

All the bills receivable held by V Ltd were P Ltd’s acceptances.

On 1st April, 2002 P Ltd took over V Ltd in an amalgamation in the nature of

merger. It was agreed that in discharge of the consideration for the business. P

Ltd would allot three fully paid equity shares of Rs.10 each at par for every two

shares held in V Ltd. it was also agreed that 12% debentures in V Ltd would be

converted into 13% debentures in P Ltd of the same amount and denomination.

Expenses on amalgamation amounting to Rs.1,00,000 were borne by P Ltd.

You are required to prepare:

a. Pass journal entries in the books of P Ltd and

b. Prepare P Ltd’s balance sheet immediately after the merger.

15) Super Express Ltd and Fast Express Ltd were in company business. They decided

to form a new company named Super Fast Ltd. the balance sheet of both the

companies were as under:

Liabilities SE Ltd FE Ltd Assets SE Ltd FE Ltd

Equity Shares Of Rs.

100 Each 20,00,000 10,00,000 Goodwill --- 1,00,000

Provident Fund 1,00,000 --- Building 10,00,000 6,00,000

Employees Profit

Sharing Account --- 60,000 Machinery 4,00,000 5,00,000

Sundry Creditors 60,000 40,000 Stock 3,00,000 40,000

Sundry

Reserve Account --- 1,00,000 Debtors 2,40,000 40,000

Cash At

Surplus --- 1,00,000 Bank 2,20,000 10,000

Cash In

Insurance Reserve 1,00,000 --- Hand 1,00,000 10,000

Total 22,60,000 13,00,000 Total 22,60,000 13,00,000

The assets and liabilities of both the companies were taken over by the new

company at their book values. The companies were allotted equity shares of

Rs.100 each in lieu of purchase consideration.

Prepare opening balance sheet of Super Fast Ltd.

16) The balance sheet as on 31.3.2002 of X Ltd and Y Ltd are as under:

Liabilities X Ltd Y Ltd Assets X Ltd Y Ltd

Equity Shares

(100) 60,00,000 20,00,000 Goodwill !"""! 4,00,000

General Reserve 8,00,000 1,00,000 Buildings 20,00,000 ---

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P &L Account 4,80,000 1,40,000 Machineries 26,00,000 16,80,000

Capital Reserve --- 2,00,000 Furniture 40,000 20,000

12% Debentures --- 12,00,000 Stock 16,00,000 7,20,000

Sundry

Creditors 9,60,000 3,80,000 Debtors 9,20,000 7,20,000

! Cash In Hand 2,80,000 20,000

Cash At Bank 8,00,000 1,60,000

Expenditure

On New --- 3,00,000

Project

Total 82,40,000 40,20,000 Total 82,40,000 40,20,000

Y Ltd was absorbed by X Ltd on 1st April 2002 on the following terms:

a) Fixed assets other than goodwill to be valued at Rs.20,00,000 including

Rs.24,000 for furniture.

b) Stock to be reduced by Rs.80,000 and debtors by 5%.

c) X Ltd to assume liabilities to discharge the 12% debentures by issue of 11%

debentures of the same value.

d) The new project is to be valued at Rs.380,000

e) The share holders of Y Ltd to receive cash payment of Rs.30 per share plus

4 equity shares in X Ltd for every 5 shares held in Y ltd.

f) Both the companies to declare and pay dividend of 6% prior to absorption.

g) Expenses of liquidation of Y Ltd are to be reimbursed by X Ltd Rs.24,000.

Draft journal entries recording the scheme in the books of Y Ltd. and prepare the

balance sheet of X Ltd after absorption assuming that X Ltd’s authorized capital

has been increased to Rs.80,00,000.

17) K Ltd and L Ltd amalgamate to form a new company LK Ltd. the financial

position of these two companies are as follows:

Liabilities K Ltd L Ltd Assets K Ltd L Ltd

Equity Shares
Goodwill

(100) 8,00,000 3,00,000 80,000 ---

7% Pref. Land &

Shares(100) 4,00,000 3,00,000 Building 4,50,000 3,00,000

5% Debentures 2,00,000 --- Plant & 6,20,000 5,00,000

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Machinery

General Furniture

Reserve --- 1,00,000 & Fittings 60,000 20,000

Sundry

P &L Account
4,31,375 97,175 Debtors 2,75,000 1,75,000

Stock &
Creditors

1,00,000 2,10,000 Stores 2,25,000 1,40,000

Cash At
Secured Loan

--- 2,00,000 Bank 1,20,000 55,000

Cash In

!! !! ! Hand 41,375 17,175

Pre.

Expenses 60000 ---

Total 19,31,375 12,07,175 Total 19,31,375 12,07,175

The terms of amalgamation are as under:

# A. The assumption of liabilities of both the companies.

B. issue of 5 preference shares of Rs.20 each in LK Ltd at Rs.18 paid up at

a premium of Rs.4 per share for each preference share held in both the

companies.

C. issue of 6 equity shares of Rs.20 each in LK Ltd at Rs.18 paid up at a

premium of Rs.4 per share for each equity shares held in both the

companies. In addition, necessary cash should be paid to the equity share

holders of both the companies as is required to adjust the rights of share

holders of both the companies in accordance with the intrinsic value of

shares of both the companies.

D. issue of such amount of fully paid 6% debentures in LK Ltd as is

sufficient to discharge the 5% debentures in K Ltd.

# A)The assets and liabilities are to be taken at book values except stock and

debtors for which provisions at 2% and 2.5% respectively to be raised.

B)The sundry debtors of K Ltd include Rs.20000 due from L Ltd.

The LK Ltd is to issue 15000 new equity shares of Rs.20 each, Rs.18 paid up at a

premium of Rs.4 per share so as to have sufficient working capital. Prepare ledger

accounts in the books of K Ltd and L Ltd to close their books.

18) Balance sheet of V Ltd as on 313.2002:

Liabilities ` Assets `

Equity Shares Of Rs. 10 Each 1,50,000 Goodwill 20,000

15% Pref. Shares 50,000 Land & Building 2,20,000

Capital Redemption Reserve 30,000 Patents 15,000

Dividend Equalisation Fund 10,000 Motor Car 25,000

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Insurance Fund 40,000 Investments 30,000

Workmen Compensation Fund 30,000 Stock 75,000

10% Debentures 1,00,000 Insurance Policy 50,000

Creditors 60,000 Debtors 45,000

Outstanding Wages 10,000 Cash 35,000

Proposed Dividend 15,000 Discount On Shares 5,000

Provision For Tax 25,000 !!

Total 520000 Total 520000

Contingent liability Rs.10000. it was agreed by P Ltd to take over V Ltd as on

31.3.2002 on the following terms:

1. P Ltd took over V Ltd and it was agreed to pay Rs.2 in cash per share and

issue 4 shares for every 6 held valued at Rs.12 each.While 30 shares are
found fractional which was discharged at Rs.10.

2. Preference share holders are issued 10% new preference shares in such

quantity so as to maintain their dividend.

3. Patents are valued 25% lesser while investments are valued at 80%.

4. Insurance policy was taken over by P Ltd at its surrender value of Rs.30.ooo
5. Contingent liability was agreed to be taken over by P Ltd which is estimated
l

Rs.7000.

6. Liability against workmen compensation fund is Rs.10000.

7. Share holders holding 600 shares dissented and its was agreed to pay them

Rs.13 in cash.

8. Liquidation expenses amounted to Rs.5000.

Close the books of V Ltd. journalize in P Ltd and show the new balance sheet of P

Ltd.

222000

can
EEE

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INSURANCE CLAIMS

Section A: Loss of Stock

1) On 12th June, 2006 fire occurred in the premises of N.R. Patel, a paper merchant.

Most of the stocks were destroyed, cost of stock salvaged being Rs. 11,200. In

addition, some stock was salvaged in a damaged condition and its value in that

condition was agreed at Rs. 10,500. From the books of account, the following

particulars were available:

1. His stock at the close of accounts on December 31, 2005 was valued at Rs.

83,500.

2. His purchases from 1-1-2006 to 12-6-2006 amounted to Rs. 1,12,000 and

his sales during that period amounted to Rs. 1,54,000.

On the basis of his accounts for the past three years it appears that he earns on

an average a gross profit of 30% of sales.

Patel has insured his stock for Rs. 60,000. Computer the amount of the claim.

2) On 20th July 1991, the go down and business premises of a merchant were

affected by fire and from accounting records salvaged, the following information is

made available to you:

Stock of goods at cost on 1st April, 1990 1,00,000

Stock of goods at 10% lower than cost as on 31st March, 1991 1,08,000

Purchases of goods for the year from 1st April, 1990 to 31st March 1991 4,20,000

Sales for the same period 6,00,000

Purchases less returns for the period from 1st April 1991 to 20th July 1991 1,40,000

Sales less returns for the above period 3,10,000

Sales upto 20th July 1991 included Rs. 40,000 for which goods had not been

dispatched. Purchase upto 20th July 1991 did not include Rs. 20000 for which

purchase invoices had not been received from suppliers, through goods have been

received at the go down.

Goods salvaged from the accident were worth Rs. 12,000 and these were handed

over to the insured.

Ascertain the value of the claim for loss of goods/stock which could be preferred

on the insurer.

3) On 30th June 1996, accidental fire destroyed a major part of, the stock in the go

down of Jay Associates. Stock costing Rs. 30,000 could be salvaged but not their

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stores ledger. A fire insurance policy was in force under which the sum insured

was Rs. 3,50,000. From available records, the following information was

retrieved:

(i) Total of sales invoices during the period April-June amounted to Rs.

30,20,000. An analysis showed that goods of the value of Rs. 3,00,000 had

been returned by the customers before the date of the fire.

(ii) Opening stock on 1-4-96 was Rs. 2,20,000 including stocks of value of Rs.

20,000 being lower of cost and net value subsequently realized.

(iii) Purchase between 1-4-96 and 30.6.96 were Rs. 21,00,000.

(iv) Normal gross profit rate was 331/3% on sales.

(v) A sum of Rs. 30,000 was incurred by way of fire fighting expenses on the

day of the fire.

Prepare a statement showing the insurance claim recoverable.

4) On 1st April 2006 the stock of Shri Ramesh was destroyed by fire but sufficient

records were saved from which following particulars were ascertained:

Stock at cost - 1st January 2005 73,500

Stock at cost - 31st December 2005 79,600

Purchases - year ended 31st December 2005 3,98,000

Sales - year ended 31st December 2005 4,87,000

Purchases 1-1-2006 to 31-3-2006 1,62,000

Sales - 1-1-2006 to 31-3-2006 2,31,200

In valuing the stock for the Balance Sheet at 31st December 2005 Rs. 2,300 had

been written off on certain stock which was a poor selling line having the cost Rs.

6,900. A portion of these goods were sold in March 2006 at loss of Rs. 250 on

original cost of Rs. 3,450. The remainder of this stock was now estimated to be

worth its original cost. Subjected to the above expection, gross profit had

remained at a uniform rate throughout the year.

The value of stock salvaged was Rs. 5800. The policy was for Rs. 50,000 and was

subjected to the average clause. Work out the amount of the claim of loss by fire.

5) A fire occurred on 1st October 1981 in the premises of X Co. Ltd. from the

following figures, calculate the amount of claim to be lodged with the insurance

company for loss of stock:

Stock at cost - 1st January 1980 90,000

Stock at cost - 1st January 1981 70,000

Purchases during 1980 4,00,000

Purchase from 1.1.1980 to 30.09.1981 6,00,000

Sales during 1980 6,00,000

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LECTURE SUPPORT KIT CA IPCC GROUP 1- ACCOUNTING

ARG CLASSES

Sales from 1st January 1981 to 30.09.1981 8,80,000

You are informed that:

1. In 1981 the cost of purchases have risen by 20% above the levels

2. In 1981 the selling prices have gone up by 10% over the levels prevailing in

1980.

3. Salvage value is Rs. 5,000.

6) On 2.6.2007 the stock of Mr. Black was destroyed by fire. However, following

particulars were furnished from the records saved:

Stock at cost - 1.4.2006 1,35,000

Stock at 90% of cost on 31.3.2007 1,62,000

Purchases for the year ended 31.3.2007 6,45,000

Sales for the year ended 31.3.2007 9,00,000

Purchase from 1.4.2007 to 2.6.2007 2,25,000

Sales from 1.4.2007 to 2.6.2007 4,80,000

Purchase upto 2.6.2007 includes a machinery acquired for Rs. 15,000. Purchases

upto 2.6.2007 does not include goods worth Rs. 30,000 received from suppliers,

but invoice not received upto the date of fire. These goods have remained in the

go down at the time of fire.

Value of stock salvaged from fire Rs. 22,500 and this has been handed over to the

insurance company.

The insurance policy if for Rs. 1,20,000 and it is subject to average clause.

Ascertain the amount of claim for loss of stock.

7) On 11.11.2007 the premises of Rocky Ltd. was destroyed by fire.

The following information made available:

Rs.

Stock as on 1.4.2006 3,75,000

Purchase from 1.4.2006 to 31.3.2007 5,20,000

Sales from 1.4.2006 to 31.3.2007 8,55,000

Stock as on 31.3.2007 2,00,000

Purchase from 1.4.2007 to

11.11.2007 3,41,000

Sales from 1.4.2007 to 11.11.2007 4,35,500

In valuing the stock on 31.3.2007, due to damage 50% of the value of the stock

which originally cost Rs. 22,000 was written off.

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LECTURE SUPPORT KIT CA IPCC GROUP 1- ACCOUNTING

ARG CLASSES

In June 2007 about 50% of this stock was sold for Rs. 5,500 and the balance of

obsolete stock is expected to realize the same price (i.e. 50% of the original cost).

The gross profit ratio is to be assumed as uniform in respect of other sales. Stock

salvaged from fire amounts to Rs. 11,500.

Section B: Loss of Profit

Examples:

1. Date of Fire 1.05.2013

Affected period 3 months.

Sales during 1.5.2013 to 1.8.2013 - Rs. 70,000

Sales during 1.5.2012 to 1.8.2012 - Rs. 3,00,000

Trend 10% growing

GP ratio 20%

2. Date of Fire 1.11.2013

Year 07-08 sales 5,00,000 (evenly accrued)

Sales 1.11.2013 to 1.02.2014 - Rs. 20,000 (Indemnity period)

Trend 10% declining

GP ratio 20%

3. Date of Fire 1.10.2013

Affected/Indemnity period 3 months

Actual sales during 3 months - Rs. 50,000

Sales in previous year those 3 months - Rs. 1,20,000

Trend in sales 10% growing

GP ratio 20%

Trend in GP -2%

Annual adjusted turnover 5 lakhs

Uninsured standing charges - Rs. 10,000

Additional expenses - Rs. 30,000

4. Sales 1.4.2012 to 30.6.2012 - Rs. 1,00,000

Sales 1.4.2013 to 30.6.2013 - Rs. 25,000

Sales 1.4.2012 to 1.4.2013 - Rs. 5,20,000

Net profit for year 2012 - Rs. 20,000

Standing charges Rs. 12,000 (30% insured)

Savings in insured standing charges Rs. 1000

Additional expenses - Rs. 6000

Sales of 1.1.2012 to 31.12.2012 (previous year) - Rs. 4,50,000

Trend - GP - 2% growing

Sales 5% growing
Policy amount - Rs. 1,00,000

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LECTURE SUPPORT KIT CA IPCC GROUP 1- ACCOUNTING

ARG CLASSES

Trend analysis

5. Sales of previous year Sales current year

Q1 - Rs. 2,50,000 Q1 - Rs. 2,75,000

Q2 - Rs. 2,50,000 Q2 - Rs. 20,000(indemnity period)

Q3 - Rs. 2,50,000

Q4 - Rs. 2,50,000

Calculate:

a. Annual turnover

b. Adjusted annual turnover

c. Short sales

8) Following details are available:-

Sales Rs.

1.03.2000 to 31.12.2000 6,00,000

1.03.2001 to 30.06.2000 2,00,000

1.01.2001 to 1.03.2001 4,00,000

1.03.2001 to 30.06.2001 (affected period) 12,000

Trend growing 10% in volume. Find short sales AT and AAT.

9) Following details are available:-

Rs.

Sale of last year 5,00,000

Net profit last year 40,000

insured standing charges 60,000

Sales during period of dislocation 20,000

Corresponding Sales in previous year 80,000

Annual Turnover 6,00,000

Additional Expenses 5,000

Total Standing Charges 90,000

Saving in uninsured standing charges 4,000

policy amount 50,000

Calculate Claim.

10) Following details are available:-

Rs.

Sales: 1.1.2000 to 31.12.2000 10,00,000

1.1.2001 to 30.06.2001 6,00,000

1.7.2001 to 31.10.2001 (affected period) 1,20,000

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LECTURE SUPPORT KIT CA IPCC GROUP 1- ACCOUNTING

ARG CLASSES

1.7.2000 to 31.10.2000 4,00,000

1.1.2000 to 30.6.2000 4,50,000

Additional expenses 10,000

Insured standing charges 20,000

Uninsured standing charges 30,000

Policy amount 2,00,000

Net Profit of year 2000 1,00,000

Decline in G.P. ratio due to increase costs 2%

Find out claim in fire occurred on 1.7.2001 till 31.10.2001.

11) A loss of Profit policy was taken for Rs 80,000. Fire occurred on 15th March 2008.

Indemnity period was for 3 months. Net profit for 2007 year ending on 31st

December was Rs 56,000 and standing charges (all insured) amounts to Rs

49,600. Determine insurance claim from the following details available from

quarterly sales tax returns:

Sales 2005 2006 2007 2008

Q1 1,20,000 1,30,000 1,42,000 1,30,000

Q2 80,000 90,000 1,00,000 40,000

Q3 1,00,000 1,10,000 1,20,000 1,00,000

Q4 1,36,000 1,50,000 1,66,000 1,60,000

Sales from 16th March 2007 to 31st March 2007 were Rs 28,000.

Sales from 16th March 2008 to 31stMarch 2008 were Nil.

Sales from 16th June 2007 to 30th June 2007 were Rs 24,000.

Sales from 16th June 2008 to 30th June 2008 were Rs 6,000.

Comprehensive Questions

12) S & M Ltd. gives the following Trading and Profit and Loss Account for year ended

31st December, 2012:

Trading and Profit and Loss Account

for the year ended 31st December 2005

Dr. Cr.

Rs. Rs.

To Opening Stock 50,000 By Sales 8,00,000

To Purchase 3,00,000 By Closing Stock 70,000

To wages (Rs. 20,000 for

Skilled labour) 1,60,000

To Manufacture Expenses 1,20,000

To Gross Profit 2,40,000

!"#"$%&'#()'%&'#*+#"!",#-!).# /012#7<#

LECTURE SUPPORT KIT CA IPCC GROUP 1- ACCOUNTING

ARG CLASSES

8,70,000 8,70,000

To Office Administrative

Expenses 60,000 By Gross Profit 2,40,000

To Advertising 20,000

To Selling Expenses (Fixed) 40,000

To Commission on Sales 48,000

To Carriage outward 16,000

To Net Profit 56,000

2,40,000 2,40,000

The company had taken out policies both against loss of stock and against loss of

profit, the amounts being Rs. 80,000 and Rs. 1,72,000. A fire occurred on 1st

May, 2013 and as a result of which sales were seriously affected for a period of 4

months. You are given the following further information:

a) Purchase wages and other manufacturing expenses for the first 4 months

of 2006 were Rs. 1,00,000, Rs. 50,000 and Rs. 36,000 respectively.

b) Sales for the same period were Rs. 2,40,000

c) Other sales figures were as follows:

From 1st Jan 2012 to 30th April 2012 Rs.3,00,000

From 1 May 2012 to 31 August 2012 Rs. 3,60,000

st st

From 1st May 2013 to 31st August 2013 Rs. 60,000

d) Due to rise in wages, gross profit during 2013 was expected to decline by

2% on sales.

e) Additional expenses incurred during the period after fire amounted to Rs.

1,40,000. The amount of the policy included Rs. 1,20,000 for expenses

leaving Rs. 20,000 uncovered. Ascertain the claim for stock and for less of

profit.

All workings should form part of your answer.

13) Sony Ltd’s trading and profit and loss account for the year ended 31st December

2012 were as follows:

Trading and Profit and Loss Account

for the year ended 31st December 2012

Dr. Cr.

Rs. Rs.

To Opening Stock 20,000 By Sales 10,00,000

To Purchase 6,50,000 By Closing Stock 90,000

To Manufacture Expenses 1,70,000

To Gross Profit 2,50,000

!"#"$%&'#()'%&'#*+#"!",#-!).# /012#73#

LECTURE SUPPORT KIT CA IPCC GROUP 1- ACCOUNTING

ARG CLASSES

10,90,000 10,90,000

To Office Administrative 80,000 By Gross Profit 2,50,000

Expenses

To Selling Expenses 20,000

To Finance Charges 1,00,000

To Net Profit 50,000

2,50,000 2,50,000

The company had taken out a fire policy for Rs. 3,00,000 and a loss of profits

policy for Rs. 1,00,000 having an indemnity period of 6 months. A fire occurred

on 1.4.2013 at the premises and the entire stock was gutted with nil salvage

value. The net quarter sales i.e. 1.4.2013 to 30.6.2013 was severely affected. The

following are the other information.

Rs.

Sales: 1.1.2013 to 31.03.2013 2,50,000

Purchase: 1.1.2013 to 31.03.2013 3,00,000

Manufacturing expenses: 01.01.2013 to 31.3.2013 70,000

Sales: 1.4.2013 to 30.6.2013 87,500

Standing charges insured 50,000

Actual expenses incurred after fier 60,000

The general trend of the industry shows an increase of sales by 15% and

decreases in GP by 5% due to increased cost.

Ascertain the claim for stock and loss of profit.

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ARG CLASSESCA INTER – ADVANCED ACCOUNTS

LECTURE SUPPORT KIT

CHAPTER 1

PART A - AS 21 CONSOLIDATED FINANCIAL STATEMENTS

Basic Concepts

1) From the Balance Sheet given below prepare a consolidated Balance Sheet of H

Ltd and S Ltd. Shares were acquired on 1st July 2012.

If

Balance Sheet of H Ltd as on 31stDecember 2012

Liabilities Amount Assets Amount

15,000 Shares of Rs 10 1,50,000 Fixed Assets 1,40,000

General Reserve 20,000 Current Assets 58,000

Investment:

Profit & Loss A/c 30,000

- 2,000 shares of Rs 10/- in S
27,000

Ltd

Creditors 25,000

Total 2,25,000 Total 2,25,000

Balance Sheet of S Ltd as on 31st December2012

Liabilities Amount Assets Amount

30,000 Fixed Assets 40,000

3,000 Shares of Rs 10

Profit & Loss A/c Current Assets 10,000

Balance as on 1st Jan 2012 - 4,500

Add: Net Profit for the year - 6,000 10,500

Creditors 9,500

Total 50,000 Total 50,000

2) The Balance Sheet of H Ltd and its subsidiary S Ltd on 31st March 2013 were as

under.

Liabilities H Ltd S Ltd Assets H Ltd S Ltd

Equity Shares of

Rs 10 fully paid
20,00,000
BIS Hb s
5,00,000
BD
Land & Building 6,00,000

General Reserve

P&L Account:
3,00,000
3
1,00,000 Plant& Machinery
Bls
Furniture& Fixtures
20,00,000
90,000 1,00,000

4,00,000 399
numbucine Btl
6,50,000y
Opening Balance 2,00,000 30,000 Shares in S

Ltd at cost

Profit for the year 5,00,000 2,50,000 Stock

Bb 4,00,000 7,50,000
BB

Bills Payable
Creditors
1,50,000
Bb 3,00,000 3,00,000
Debtors
Bb 1,00,000 2,80,000
15,000
Bb

Bb
Cash in Hand
Bb 10,000
Bb

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ARG CLASSESCA INTER – ADVANCED ACCOUNTS

LECTURE SUPPORT KIT

Bank Overdraft
BIS2,00,000 Cash at Bank
BIS 1,05,000 BS

Bills Receivable
BY
1,00,000
BS
Total 38,50,000 13,50,000 Total 38,50,000 13,50,000

All the 30,000 shares in S Ltd were acquired by H Ltd on 1st October 2012.Bills 100W
receivable held by S Ltd are all accepted by H Ltd. Included in debtors of S Ltd is a MO

BR
sum of Rs 60,000 owing by H ltd in respect of goods supplied by S Ltd. BP

6000
DDICD

Stock of Rs 7,50,000 held by S Ltd consists of Rs 60,000 goods purchased from H

Ltd, who had charged profit at 25% on cost. URP Downstream 10

12000 6 125

BISto fire in the godown

During June 2012 goods costing Rs 6000 were destroyed due

of S Ltd against which the insurer paid only Rs 2,000.

At 4000 Number line

3 Pk
You are required to prepare a consolidated Balance Sheet of H Ltd as at 31 st

March 2013.

3) The Balance Sheet of H Ltd and S Ltd as at 31st March 2013 were as under

Liabilities H Ltd S Ltd Assets H Ltd S Ltd

Equity Shares of Rs
10
9,00,000 3,00,000 Fixed Assets BIS
9,00,000 4,00,000 BIS

General Reserve
BIS 445 Ha

6 5,00,000 30,000
3 Investment
Sundry
6,00,000 Nil

P&L Account:
6 6,00,000 32,00,000 Debtors
Bls1,60,000 90,000 Bls

Sundry Creditors 1,00,000 1,70,000 Inventory 2,10,000

Bls2,30,000
1,20,000
Bls

Bls Bls Cash & Bank

Bls
90,000
Bls
Total 21,00,000 7,00,000 Total 21,00,000 7,00,000

Ha I

2g
H Ltd has acquired 75% of S Ltd shares at Rs 6,00,000 on 1st July 2012. S Ltd
had an opening balance of Rs 1,00,000 in profit and loss account from which it

paid dividend for 2011-12 at 20% on 3oth September 2012. The dividend received

by H Ltd is included in its Profit and Loss account.

Rectification Ha G

Inventory of H Ltd includes Rs 20,000 out of purchases made from S Ltd on which

margin of 25% was charged on cost.

H C 100

Prepare consolidated Balance Sheet as at 31st March 2013. N P ZS

S 125

S 3 PlcPost

Blsamento

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ARG CLASSESCA INTER – ADVANCED ACCOUNTS

LECTURE SUPPORT KIT

4) Shown below is the balance sheet of X Ltd and Y Ltd as on 31-03-13

Liabilities X Ltd Y Ltd Assets X Ltd Y Ltd

Share Capital 1,00,00,000 30,00,000 Goodwill 20,00,000 4,40,000

General Reserve 24,00,000 5,00,000 Land & Building 24,00,000 10,00,000

Plant &

Profit & Loss a/c 12,90,000 4,40,000 52,00,000 19,00,000

Machinery

Bills Payable 1,50,000 - Investments 28,80,000 -

S.Creditors 33,50,000 8,00,000 Stock 14,00,000 5,00,000

Debtors 24,00,000 5,60,000

B/R -
OF
1,00,000

Bank 9,10,000 2,40,000

r
Total 1,71,90,000 47,40,000 Total 1,71,90,000 47,40,000

Additional Information:

a) Investments consist of 2,40,000 shares of Rs.10 each fully paid in Y

Ltd, which were acquired on 1st July 2012.

b) Land &Building and Plant &Machinery of Y Ltd on revaluation on 1st

July 2012 come to Rs.11,60,000 and Rs.20,40,000 respectively which

should be taken into account. (No depreciation provided).

c) Stock includes goods which cost X Ltd Rs.480000 but were received

from Y Ltd. Its cost being Rs.4,41,600.

d) Debtors include Loan of Rs.60,000 to Y Ltd.

e) Bill Receivable all accepted by X Ltd were for Rs.1,50,000 of which bills

for Rs.50,000 had been discounted but not matured.

O f) Cash and bank balance of Rs.2,40,000 were arrived at after sending a

cheque for Rs.60,000 to repay the loan from X Ltd which however had
not yet been received by X Ltd by 31-03-13.

g) Capital of X Ltd consist of 20,000 6% preference shares of Rs.100 each

and balance equity shares of Rs.10each. Capital of Y Ltd consists of

ordinary shares of Rs.10 each.

h) General reserve of Y Ltd was Rs.4,00,000 on 1st April 2012.

i) Sundry Creditors include Rs.3,20,000 due to Y Ltd for goods supplied.

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ARG CLASSESCA INTER – ADVANCED ACCOUNTS

LECTURE SUPPORT KIT

j) Details of Profit and Loss Account are:

PARTICULARS X Ltd Y Ltd

1st April 2012 400000 1,20,000

Profit for the year 950,000 3,20,000

13,50,000 4,40,000

13,50,000 4,40,000

Less:Interim Dividend On Preference Shares 60,000 Nil

12,90,000 4,40,000

Prepare Consolidated Balance Sheet.

5) On 31.03.2013 the Balance Sheet of H Ltd and its subsidiary S Ltd stood as

follows.

Liabilities H Ltd S Ltd Assets H Ltd S Ltd

Equity Shares of Rs 10 w12,000

v 4,800 Land & Building 2,718 e - w

General Reserve
y 2,784 u1,380 Plant & Machinery 4,905 4,900

P&L Account
43915 2,715 U1,620 Furniture& Fittings 1,845 586

Bills Payable 372 160 Investment 3,000 -

W v
Sundry Creditors 1,461 854 Stock 3,949 1,956

1,363

Provision for Taxation

r 855 U394 Debtors 2,600
Proposed Dividend 1,200 - Cash & Bank 1,490 204

v
Bills Receivable 360 199

Sundry Advances 520 -

Total 21,387 9,208 Total 21,387 9,208

Additional informations:

a) H Ltd purchased 180 lakhs shares in S Ltd on 1.4.2012 when the balance of

general reserve and profit and loss account of S Ltd stood at Rs 3,000 lakhs

and Rs 1,200 Lakhs respectively.

b) On 4.7.2012 S ltd declared a dividend of 20% for the year ended 31.03.2012

and H Ltd credited the dividend received to its profit and loss account. sectification

c) On 1.1.2013 S Ltd issued 3 fully paid up shares for every 5 shares held as

bonus shares out of the balance in General reserve as on 31.03.2012 NL

d) On 31.03.2013 all the Bills payable in S Ltd Balance Sheet were acceptances in

favour of H Ltd. But on that date H Ltd held only Rs 45 lakhs of these

acceptances in hand, the rest having been endorsed in favour of creditors.

e) On 31.03.2013 S Ltd stock includes goods which it had purchased for Rs 100

Lakhs from H Ltd which made a profit of 25% on cost.

C 100

Prepare consolidated Balance Sheet. P 25

20L f S 125

I BIS

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ARG CLASSESCA INTER – ADVANCED ACCOUNTS

LECTURE SUPPORT KIT

No line Ha I

6) P Ltd acquired 12,000 shares in F Ltd for Rs.1,70,000 on 2012. The 1stApril

balance sheets of the two companies on 31st December 2012 were as follows:

Liabilities P Ltd F Ltd Assets P Ltd F Ltd

Share Capital

Bls 4151mL Goodwill

DIS 3,00,000
Bb70,000
Lds

(Rs.10/-each) 10,00,000 3,00,000

General Reserve-

3
(opening) 4,20,000 50,000 Land and Building 4,00,000 1,00,000

Profit &Loss a/c

Loan from F
Ltd(including
2,60,000

57,500
85,000 Plant and Machinery

Investments
5,00,000

1,70,000
3 1,00,000

interest) Bb s 7ha

Sundry Creditors 1,82,500

BBQs 80,000
42,000 Stock 2,00,000
Bb 3,00,000 40,000
Bb

Bills Payable 60,000 Book Debts

Cash and Bank Bb 80,000
85,000
62,000
Bb

Bills Receivables 50,000 30,000

Bl

Loan to P Ltd. 50,000

!! !! !! !! !!

Total 20,00,000 537,000 Total 20,00,000 5,37,000

3909 3909 Number line

I

On January 1, 2012 the General Reserve and Profit and Loss a/c of F Ltd stood as

l
Rs.1,50,000 and 40,000 out of which a dividend of 15% on the capital of

D
Rs.2,00,000 was paid on June 2012. At the same time, a bonus issue of one share
(fully paid) for every two shares held, was also made out of General Reserve. Bills Nga

payable of F Ltd. Represents bill issued in favour of P Ltd. of which the company

still held Rs.40,000 of the bills accepted by F Ltd. The entire closing stock of F Ltd. CIO

represents goods supplied by P Ltd. at cost plus 20%. p 2

upp 6667 t

P Ltd and F Ltd agreed that for services rendered P Ltd. should charge
fzg S R

Rs.500/month from F Ltd. entries for this were not made when the accounts were

drawn up. The loan to P Ltd. was made by F Ltd. on Jan 1, 2012.

Prepare consolidated balance sheet of the two companies as on 31.12.2012.

7) On 1st Jan 2010, A Ltd acquired 8000 shares of Rs.10 each of B Ltd at

o Rs.90,000. The respective Balance Sheet as on 31.12.2012 are given below.

o

Liabilities A Ltd B Ltd Assets A Ltd B Ltd

Share Capital

(Rs.10/-each) 1,00,000 1,00,000 Fixed Assets 60,000 1,10,000

General Reserve 40,000 26,000 Investments 1,00,000 15,000

Profit &Loss a/c 36,000 35,000 Sundry Debtors 25,000 20,000

Sundry

Creditors 71,000 48,000 Stock 30,000 40,000

2M

!"#"$%&'#()'%&'#*+#"!",#-!).# /012#79#

b EDL Dz311320

9 417 lol 127 151



ARG CLASSESCA INTER – ADVANCED ACCOUNTS

LECTURE SUPPORT KIT

Bank 32,000 24,000

Total 2,47,000 2,09,000 Total 2,47,000 2,09,000

FI Post

Additional Information:

39h10

a. At the time of acquiring shares of B Ltd. had Rs.24,000 in Reserve and

Rs.15,000 in Profit and Loss a/c.

b. B Ltd paid 10% dividend in 2010, 12% in 2011, 15% in 2012 for 2009,

2010 and 2011 respectively. All dividends received have been credited to

Profit and Loss a/c of A Ltd.

c. Proposed Dividend of both the companies for 2012 is 10%.

d. One bonus share for 5 fully paid shares held has been declared by B Ltd.
ignore

out of the pre acquisition reserve on 31st Dec.2012. No effect has been

NL given to that in the above accounts.

e. On 1st Jan.2010, Building of B Ltd. which stood in the books at Rs1.5

Lakhs was revalued at Rs.1,60,000 but no adjustment has been made in

the books. Depreciation has been charged @ 10%p.a. on reducing balance

method.

c f. In 2012 a ltd. purchased from B Ltd goods for Rs.10, 000 on which B Ltd.

pro made a profit of 20% on sales,25%of such goods are lying unsold on

5100 31.12.2012.
uRP 500 upstream

Prepare Consolidated Balance sheet as on 31.12.2012. 3 post t

Blsstoctt
co

8) Balance Sheet of H Ltd and S Ltd as at 31.12.2012 is given below.

Rs in 000's
Liabilities H Ltd S Ltd Assets H Ltd S Ltd
Equity Share Capital
Rs 10 each
Securities Premium
T 500
20
240
14
Goodwill
Building
30
100
20
100
General Reserve 100 160 Machinery 400 244
P&L Account 90 60 Investment in Shares
8% Debentures 200 100 - 19200 shares of S Ltd 150
Trade Creditors 80 40 Investment in Debentures
c
Outstanding expenses 30 15 - In S Ltd FV 40,000 45
- In H Ltd FV 20,000 22
Sundry Debtors 150 100
Stock 100 100
Cash and bank 20 10
Preliminary Expense
t 10 5
Outstanding Income 15 28
Total 1020 629 Total 1020 629

Bls
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 ori
Bi
ARG CLASSESCA INTER – ADVANCED ACCOUNTS
LECTURE SUPPORT KIT
Rif
fewY total
1) When shares were acquired, S Ltd had Rs 2.2 lakhs in General Reserve and Rs
10,000 in securities premium, Rs 30,000 (Dr) in P&L Account. Number
2) Two years after the date of acquisition bonus shares at 1 to 1 were B I
issued
acted
out
acted
of general reserve.
I acted Reacted
3) One year after bonus, right shares were issued at 10% premium at 1 for 5 held
and H Ltd purchased all the shares offered to it. Number
4) H Ltd received Rs 19,200 dividend for the last year and 9,600 interim dividend
in the current year ie 3 years after the right issue.
5) For the current year 15% dividend (including interim) has been proposed by S
Ltd and 10% by H Ltd but no effect has yet been given in the accounts.
6) On the same day referred in (5) above, bonus dividend has been declared at 1
to 2 but no effect has yet been given. e

T.ua
7) 50% of shares originally purchased in S Ltd were paid for to the shareholders

age
inqn
of S Ltd by 5000 shares of H Ltd issued at 10% premium.
8) Debenture interest of both companies falls due on 31st December, but
payments are made 2 or 3 days after.

Prepare Consolidated Balance sheet as at 31.12.2012.

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previous
to bepassed with aspectantin Bootsof
entry Has

Inv15oa
TO ESC 75000
SP 7500 6
COI Cash 6250C
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VALUATION OF GOODWILL
outofsyllabi
TYPE I - CALCULATION OF FUTURE PROFITS ON PAST BASIS

1) ABC Ltd gives the following information about past profits

Year Profits ('000)

2009 21,70
2010 22,50
2011 23,70
2012 24,50
2013 21,10

On scrutiny it is found that,

a) Upto 2011, ABC Ltd followed FIFO method of finished stock valuation there
after LIFO method.
b) Upto 2012, it followed SLM depreciation and thereafter adopted WDV method.

Given below the details of Stock Valuation

(Rs in '000)
Year Opening Stock Closing Stock
FIFO LIFO FIFO LIFO
2009 4000 3980 4600 4120
2010 4600 4120 4920 4790
2011 4920 4790 3890 3910
2012 3890 3910 4200 3850
2013 4200 3850 4500 4310

Straight line and WDV depreciation were as follows:

(Rs in '000)
Year Straight Line WDV
2009 1210 1700
2010 1415 1810
2011 1500 1925
2012 1670 1960
2013 1800 1940

Determine the FMP that can be used for valuation of Goodwill.

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TYPE II - CALCULATION OF FUTURE PROFITS ON PROJECTION METHOD

2) Y is interested in purchasing the business of X for which he is willing to pay a

goodwill amount equal to four years purchase of maintainable profits for the year
ending 31.03.2014 to 31.03.2017.

The revenue statement for the year ended on 31.03.2010 to 31.03.2013 were
as under.

Revenue Statements
Particulars 2009-10 2010-11 2011-12 2012-13
Sales 5,00,000 7,00,000 9,00,000 11,00,000
COGS 3,50,000 4,90,000 6,30,000 7,70,000
GP 1,50,000 2,10,000 2,70,000 3,30,000
Overheads 1,00,000 1,40,000 1,80,000 2,20,000
NP 50,000 70,000 90,000 1,10,000

The following further information is given;

a) Sales will increase by 25% each year.
b) COGS will decline by 10% each year as compared to the earlier years.
c) Overheads will increase by 2% as compared to the earlier years.

Find out the value of Goodwill. Ignore taxation

TYPE III - CALCULATION OF AVERAGE CAPITAL EMPLOYED

3) Calculate the average capital employed of ABC Ltd from its BalanceSheet as
at 31/03/2013.

Rs in Lakhs
Liabilities Amount Assets Amount
Share Capital Fixed Assets
Equity shares of Rs 10 each 50.00 Land and Building 25.00
9% Pref Shares fully paid 10.00 Plant and Machinery 80.25
Furniture and Fittings 5.50
Reserves and surplus Vehicles 5.00
General reserves 12.00 Investments 10.00
Profit and Loss 20.00
Current Assets
Secured Loans Stock 6.75
16% Debentures 5.00 Sundry Debtors 4.90
16% Term Loan 18.00 Cash and Bank 10.40
Cash Credit 13.30 Preliminary Expense 0.50

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Curr Liab & Prov

Sundry Creditors 2.70
Provision for taxation 6.40
Proposed Dividend on:
Equity Shares 10.00
Preference Shares 0.90
TOTAL 148.30 148.30

Non trade investments were 20% of total investments

Balance as on 01/04/2012 to the following accounts were:
- Profit and Loss account Rs 8.70 lakhs
- General Reserves Rs 6.50 Lakhs.

TYPE IV - CALCULATION OF GOODWILL

4) Negotiation is going on for transfer of A Ltd on the basis of the Balance Sheet
and the additional information as given below;

Balance Sheet of A Ltd as on 31st March 2013

Liabilities Amount Assets Amount
Share Capital Fixed Assets
Equity shares of Rs 10 each 10,00,000.00 Goodwill 1,00,000.00
fully paid Land and Building 3,00,000.00
Plant and Machinery 8,00,000.00
Investments 1,00,000.00
Reserves and surplus
Current Assets
Profit and Loss 4,00,000.00 Stock 2,00,000.00
Sundry Debtors 1,50,000.00
Current Liabilities Cash 50,000.00
Sundry Creditors 3,00,000.00
TOTAL 17,00,000.00 TOTAL 17,00,000.00

*Profit before tax for 2012-13 amounted to Rs 6,00,000 including Rs 10,000 as

interest on investment. However an additional amount of Rs 50,000 p.a shall be
required to be spent for smooth running of the business.
*Market Values of Land & Building and Plant & Machinery are estimated at Rs
9,00,000 and 10,00,000 respectively. In order to match the above figures further
depreciation to the extent of Rs 40,000 should be taken into consideration.
Income tax rate may be taken at 50%. Return on capital at the rate of 20 % before
tax may be considered normal for this business at the present stage.
*For the purpose of determining the rate of return profit for this year after the
aforesaid adjustments may be taken as expected average profit. Similarly average
trading capital employed is also to be considered on the basis of position in this
year.
*It has been agreed that 4 years purchase of super profit shall be taken as the
value of goodwill for the purpose of the deal.

You are requested to calculate the value of goodwill of the company.

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5) The following Balance Sheet of X Ltd. is given:

X Ltd.
Balance Sheet as on 31st March, 2013
Liabilities Amount Assets Amount
Share Capital Fixed Assets
5000 Eq shares of Rs 10
each 50,00,000.00 Goodwill 4,00,000.00
fully paid Land and Building 32,00,000.00
Plant and Machinery 28,00,000.00
Reserves and surplus
Profit and Loss 21,20,000.00 Current Assets
Stock 32,00,000.00
Current Liabilities Sundry Debtors 20,00,000.00
BOD 18,60,000.00
Sundry Creditors 21,10,000.00
Provision for taxation 5,10,000.00
TOTAL 1,16,00,000.00 TOTAL 1,16,00,000.00

In 1994 when the company commenced operation the paid up capital was same.
TheLoss/Profit for each of the last 5 years was – years 2008-2009 – Loss (Rs.
5,50,000);2009-2010 Rs. 9,82,000; 2010-2011 Rs. 11,70,000; 2011-2012 Rs.
14,50,000; 2012-2013 Rs. 17,00,000;

Although income-tax has so far been paid @ 40% and the above profits have
beenarrived at on the basis of such tax rate, it has been decided that with effect
from the year2013-2014 the Income-tax rate of 45% should be taken into
consideration. 10% dividend in 2009-2010 and 2010-2011 and 15% dividend in
2011-2012 and 2012-2013 have beenpaid. Market price of shares of the company
on 31st March, 2005 is Rs. 125. With effect from 1st April, 2013 Managing
Director’s remuneration has been approved by theGovernment to be Rs. 8,00,000
in place of Rs. 6,00,000. The company has been able tosecure a contract for
supply of materials at advantageous prices. The advantage hasbeen valued at Rs.
4,00,000 per annum for the next five years.

Ascertain goodwill at 3 year’s purchase of super profit (for calculation of

futuremaintainable profit weighted average is to be taken).

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6) ABC Ltd gives you its Balance Sheet and some other business information.
You are asked to value its goodwill.

Balance Sheet
(Rs in '000)
Liabilities 31-03-2011 31-03-2012 31-03-2013
Share Capital 500 600 700
General Reserve 100 150 150
Profit & Loss 100 150 -
12% Debentures 400 600 700
Bank Overdraft 200 250 300
Sundry Creditors 100 200 400
Provision for taxation 100 50 -
Proposed Dividend 75 120 -
Total 1575 2120 2250

Assets
Sundry Fixed Assets
Gross 1500 1700 1900
Less : Depreciation 400 500 650
Net 1100 1200 1250
Inventory 250 450 500
Sundry Debtors 200 350 400
Cash 25 120 100
Total 1575 2120 2250

The company is going to sell its losing division for Rs 5,00,000. This division
causes a cash loss to the extent of Rs 1,00,000 in 2012-13. And it will buy a
running factory for Rs 7,00,000. The new addition is expected to produce 20 %
return before charging depreciation and interest. Excess cash needed is partly
financed by fresh issued of shares of Rs 1 lakh at par and balance by way of loan
@ 16% pa from nationalized bank.

The company decided to calculate goodwill on the basis of present value of excess
cash earnings for the 5 years. Use 10% disount rate. Goodwill may be calculated
by taking cash return on capital employed. For this purpose weighted average
cash return may be computed for the years 2011-12, 2012-13, 2013-14, whereas
capital employed on 31/03/2013 may be taken up with suitable changes for
replacements. Normally expected cash return is 4%.

(PVF of Re 1 @ 10% for 5 years is 3.7908)

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7) Given below is the Balance Sheet of XYZ Ltd as on 31December 2012.

(Rs in '000)
Liabilities Amount Assets Amount Amount
Share Capital 7,50 Sundry Fixed Assets 7,50
Less: Accumulated
General reserves 1,50 Depreciation 2,50 5,00
18% Term Loan 4,00
Sundry Creditors 2,17 Investment:
Provision for taxation 4 - Trade 45
(net of advance tax)
Proposed Dividend 2,25 - Non Trade 1,50 1,95

Current Assets
Stock 225
Sundry Debtors
- Foreign Currency
($1= Rs 41.10) 4,11
- Others 1,50 5,61
Cash and Bank 2,65
Total 17,46 Total 17,46

Other Information:

Year end exchange rate was $1= Rs 42.20. Non Trade investment earned 32%
Gross. Current year depreciation was Rs 50,000. Current Cost of sundry Fixed
Assets as on 01/01/2012 was determined as Rs 8,00,000. Also the current
cost of opening stock was assessed as Rs 1,90,000 (historic cost being Rs
1,38,000) and current cost of closing stock was assessed as Rs 2,42,000.
Market value of trade investments that were quoted was Rs 60,000 as on
31/12/2012. Foreign currency debtors were receivable in dollars.

Industry average rate of return (on current cost value of capital employed) is
20% on long term fund and 24% on equity fund. General Reserves balance on
01/01/2012 was Rs 40,000. Tax rate for 2012 was 52%. Expected future tax
rate 45%.

Determine the value of Goodwill of XYZ Ltd and also show the leverage effect
on goodwill.

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BANKING COMPANIES

INCOME RECOGNITION

1) Find out the income to be recognised at Good Bank Ltd. for the year ended
31st March 2013 in respect of interest on advances (Rs. In lakhs) as detailed
below.

RBI PRUDENTIAL - PROVISIONING NORMS

2) From the following information find out the amount of provision to be shown
in the profit & loss accounts of AG Bank.

Assets ` (lakhs)
Standard 5,000
Substandard 4,000
Doubtful:
for 1 Year 800
for 3 Years 600
for more than 3 Years 200
Loss Assets 1,000

3) From the following information of Grade Bank Ltd. comput provisions to be

made in the profit and loss accounts. ( PCC November 2008)

Assets ` (lakhs)
Standard 20,000
Substandard 16,000
Doubtful:
for 1 Year ( Secured) 6,000
for 3 Years ( Secured) 4,000
for more than 3 Years
2,000
secured by mortgage of Plant and Machinery Rs.600

Non recoverable Assets 1,500

4) Compute provisions from the following information.

Particulars ` (lakhs)
Outstanding Balance 4
ECGC Cover 50%
Period for which the advance has More than 3 yrs remained doubtful. (As on
remained doubtful 31 March 2012)

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Value of Security held 1.5

5) Compute provisions from the following information.

Particulars ` (lakhs)
Outstanding Balance 4
ECGC Cover 50%
Period for which the advance has More than 3 yrs remained doubtful.
remained doubtful (As on 31 March 2012)
Value of Security held ( realisable value
only 80%) 1.5

6) In KR Bank the doubtful assets ( More than 3 yrs ) as on 31st March 2012 is
Rs. 1000 lakhs. The value of security (including DICGC 100% cover of Rs. 100
Lakhs) is ascertained at Rs. 500 lakhs. How much provision must be made in
the books of the Bank towards doubtful assets?

7) A loan outstanding of Rs. 50 Lakh has DICGC cover. The loan guaranteed by
DICGC is assigned a risk weight of 50%. What is the value of risk adjusted
asset?

8) Axis Bank Ltd. had extended the following credit lines to a small scale
industry which had not paid any interest since March 2005.

` (lakhs)
Particulars Term loan Export Credit
Outstanding Balance ( 31/03/2011) 70 60
DICGC/ECGC Cover 50% 40%
Securities held 30 25
Realisable value of securities 20 15

REBATE ON BILLS DISCOUNTED

9) The following is ian extract from TB of OB Bank as on 31st March 2012.

Particulars ` `
Bills discounted 12,64,000 ---
Rebate on bills discounted not due on 31/03/2011 --- 22,160
Discount Received --- 1,05,708

An analysis of the bills discounted is as follows.

Sl No. Due Date 2012 ` Rate of Discount

i Jun-05 1,40,000 14%
ii Jun-12 4,36,000 14%

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iii Jun-25 2,82,000 14%

iv Jul-06 4,06,000 16%
Calculate on rebate on bills discounted as on 31 March 2012 and show
st

necessary journal entries.

10) On 31st March 2011, Uncertain Bank had a balance of Rs. 9 Crores in rebate
on bills discounted accounts. During the year ended 31st March 2012
Uncertain Bank discounted bills of exchange of Rs. 4000 crores charging
interest at 18% per annum the average period of discount being for 73 days.
Of these bills of exchange of Rs. 600 crores were due for realisation from the
acceptors/ customers after 31st March 2012, the average period outstanding
after 31st March 2012 being 365 days.

Uncertain Bank ask you to pass journal entries and to show the ledger
accounts pertaining to

1. Discounting on bills of exchange and

2. Rebate on bills discounted

11) The following information available in the books of Ex Bank Ltd. as on 31st
March 2012.

Particulars `
Bills discounted 1,37,05,000
Rebate on bills discounted (as on 1/4/2011) 2,21,600
Discount Received 10,56,650

Details of bills discounted are as follows.

Value of bill Due Date 2012 Rate of Discount

18,25,000 Jun-05 12%
50,00,000 Jun-12 12%
28,20,000 Jun-25 14%
40,60,000 Jul-06 16%

Calculate the rebate on bills discounted as on 31st March 2012 and give
necessary journal entries.

12) As on 31st December 2011 the books of P Bank include among others the
following net balances.

Particulars `
Bills discounted and purchased 3,20,000
Rebate on bills discounted (as on 1/1/2011) 46,00,000
Discount Received 3,15,47,000
Bills for collection 12,00,000

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Throughout 2011 the banks rate for discounting has been 18% and the rate
of commission on bills for collection 4%.

On investigation and analysis the average due date for the bills discounted
and purchased in calculated is 15th February 2012 and taht for bills for
collection is 15th January 2012.

Show the calculation of the discount for the year 2012. Show also the journal
entries to adjust the abovr mentioned accounts.

BILLS FOR COLLECTION

13) On 1st April 2011 bills for collection was Rs. 7,00,000. During 2011/12 bill
received for collection amounts to Rs. 64,50,000. Bills collected were Rs.
47,00,000. Bill dishonoured were Rs. 5,50,000. Prepare bills for collection (
Assets) and bills for collection (Liabilities) accounts.

ACCEPTANCES AND ENDORSEMENTS AND OTHER OBLIGATION.

14) From the following information prepare AEOO accounts as would appear in
the general ledger.

On 1st April 2011 acceptances not yet satisfied stood at Rs. 22.30 lakh. Out of
which Rs. 20 lakhs were subsequently paid off by clents and Bank had to
honour the rest. A scrutiny of the acceptance register ( for transactions during
the year) revealed the following.

Clients acceptances / guarantees remarks.

Sl No. Particulars `
A Bank honoured on 10/06/2011 10,00,000
B Party paid off on 30/09/2011 12,00,000
Party failed to pay and Bank had to honour on
C 5,00,000
30/11/2011
D Not satisfied upto 31/03/2012 8,00,000
E Not satisfied upto 31/03/2012 5,00,000
F Not satisfied upto 31/03/2012 2,70,000
Total 42,70,000

15) From the following information prepare AEOO accounts as would appear in
the general ledger.

On 1st April 2011 acceptances, endorsements not yet satisfied amounted to

Rs. 14.5 lakh. During the year under question, acceptances, endorsements,
guarantees etc.., amounted Rs. 44 lakhs. Bank honoured acceptances to the
extent of Rs. 25 lakhs and clients paid off Rs. 10 lakhs against the guaranteed
liability. Clients failed to pay Rs. 1,00,000 which the Bank had to pay.

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16) The following information are extracted from the TB as on 31.3.2012:

Particulars ` Dr ` Cr
Bills discounted and purchased 4,00,000 ---
Rebate on bills discounted --- 20,000
Interest and Discount --- 98,00,000

It is ascertained that the proportionate discount not yet earned for bills to
mature in 2011-2012 amounts to Rs. 14000. Prepare ledger accounts.

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FINANCIAL STATEMENTS OF INSURANCE COMPANIES

PART A: GENERAL INSURANCE COMPANIES

1) Domestic Assurance Co. Ltd. received Rs. 5,90,000 as premium on new policies
and Rs. 1,20,000 as renewal premium. The company received Rs. 90000 towards
reinsurance accepted and paid Rs. 70000 towards reinsurance ceded. How much
will be credited to Revenue Account towards premium?

2) Fire Insurance Co. provides you the following information:

Re-insurance
Particulars Direct (Rs.)
(Rs.)
Premium Received 2300000 360000
Premium Received on 1.4.2012 124000 14000
Premium Received on 31.3.2013 168000 17000
Premium Paid 230000
Premium Payable 1.4.2012 19000
Premium Payable on 31.3.2013 31000

Required: How will you show the above items in the ‘Revenue’ Account for the
year ended 31st March 2013.

3) Fire Insurance Co. provides you the following information:

Direct Business Reinsurance Reinsurance

(Rs.) accepted (Rs.) ceded (Rs.)
Claims Paid 10,80,000 5,40,000
Claims Payable on 1.4.2012 1,00,000 50,000
Claims Payable on 31.3.2013 2,00,000 1,00,000
Claims Received 2,70,000
Claims Receivable on 1.4.2012 20,000
Claims Receivable on 31.3.2013 50,000
Expenses in Connection with 12,000 6,000
Settlement of Claims Surveyor's
charges
Legal Expenses 8,000 4,000

Required: How will you show the above in the Revenue Account for the year
ended 31st March 2013.

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 LECTURE SUPPORT KIT CA IPCC - ADVANCED ACCOUNTING
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4) From the following information as on 31st March, 2011, prepare the Revenue
Accounting of Sagar Bhima Co. Ltd. engaged in Marine Insurance Business:

Particulars Direct Business Re-insurance

i. Premium:
Received 24,00,000 3,60,000
Receivable - 1st April 2012 1,20,000 21,000
- 31st March 2013 1,80,000 28,000
Premium paid 2,40,000
Payable - 1st April 2012 20,000
- 31st March 2013 42,000
ii. Claims:
Paid 16,50,000 1,25,000
Payable - 1st April 2012 95,000 13,000
- 31st March 2013 1,75,000 22,000
Received - 1st April 2012 1,00,000
- 31st March 2013 9,000
iii. Commission: 12,000
On Insurance accepted 1,50,000 11,000
On insurance ceded 14,000

Other expenses and income:

Salaries - Rs. 260000, Rent, Rates and Taxes - Rs. 18000; Printing and
Stationary - Rs. 23000; Indian Income Tax paid - Rs. 240000; Interest, Dividend
and Rent received (net) - Rs. 91000; Income Tax deducted at source - Rs. 24500;
Legal Expenses (Inclusive of Rs. 20000 in connection with the settlement of
claims) - Rs. 60000; Bad Debts - Rs. 5000; Double Income Tax refund - Rs.
12000; Profit on Sale of Motor car Rs. 5000.

Balance of fund on 1st April, 2012 was Rs. 2650000 including Additional Reserves
of Rs. 325000. Additional Reserve has to be maintained at 5% of net premium of
the year.

5) From the following figures appearing in the books of Fire Insurance division of a
General Insurance Company, show the amount of claim as it would appear in the
Revenue Account for the Year ended 31st March 2011:

Direct Business Reinsurance

(Rs.) (Rs.)

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Claims Paid 46,70,000 7,00,000

Claims Payable on 1.4.2012 7,63,000 87,000
Claims Payable on 31.3.2013 8,12,000 53,000
Claims Received 2,30,000
Claims Receivable on 1.4.2012 65,000
Claims Receivable on 31.3.2013 1,13,000
Expenses of Management
(includes Rs. 35,000 Surveyor's
2,30,000
fee and Rs. 45,000 Legal
expenses for settlement of claims)

6) Prepare the Fire Insurance Revenue A/c as per IRDA regulation for the year
ended 31st March, 2011 from the following details:

Rs.
Claims paid 4,90,000
Legal expenses regarding claims 10,000
Premiums received 13,00,000
Re-insurance premium paid 1,00,000
Commission 3,00,000
Expenses of management 2,00,000
Provision against unexpired risk on 1st April 2010 5,50,000
Claims unpaid on 1st April 2010 50,000
Claims unpaid on 31st March 2011 80,000

7) From the following information furnished to you by Ayushman Insurance Co.

Ltd., you are required to pass Journal entries relating to unexpired risk reserve
and show in columnar form “unexpired Ricks Reserve Account” for 2011.

a) On 31.12.2012, it had reserve for unexpired risks amounting to Rs. 40

crores. It comprised of 15 crores in respect of marine insurance business,
Rs. 20 crores in respect of fire insurance business and Rs 5 crores in
respect of miscellaneous insurance business.

b) Ayushman Insurance Co. Ltd. Creates reserves at 100% of net premium

income in respect of marine insurance policies and at 50% of net premium
income in respect of fire and miscellaneous income policies.

c) During 2011, the following business was conducted:

(Rs. in Crores)
Marine Fire Miscellaneous
Premium collected from:
(a) Insured in respect of policies issued 18 43 12

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(b) Other insurance companies in

respect of risks undertaken 7 5 4
Premium paid/payable to other
insurance companies on business
ceded 6.7 4.3 7

8) Sunlife General Insurance Co. submits the following information for the year
ended 31st March 2010:

Direct Business Reinsurance

Particulars
(Rs.) (Rs.)

Premium received 65,75,000 9,50,000

Premium paid 4,75,000
Claims paid during the year 42,50,000 5,00,000
Claims payable 1st April 12 6,25,000 87,000
31st March 13 7,18,000 60,000
Claims received 3,25,000
Claims receivable 1st April 12 65,000
31st March 13 1,10,000
Expenses of management 2,30,000
Commission
On insurance accepted 1,50,000 11,000
On insurance ceded 14,000

The following additional information is also available:

(1) Expenses of management include Rs. 35,000 surveyor’s fee and Rs. 45,000
legal expenses for settlement of claims.

(2) Reserve for unexpired risk is to be maintained @ 40%. The balance of

reserve for unexpired risk as on 1.4.12 was Rs. 24,50,000.

You are required to prepare the Revenue Account for the year ended 31st March
2013.

9) From the following balance extracted from the books of Prefect General Insurance
Co. Ltd. as on 31.3.2013, you are required to prepare Revenue Accounts in
respect of Fire and marine Insurance business for the year ended 31.3.2013 to
and a Profit and Loss Account for the same period:

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Rs. Rs.
Director's Fee 80,000 Interest received 19,000
Dividend received 1,00,000 Fixed Assets (1.4.2012) 90,000
Provision for
Income tax paid during
Taxation 85,000 60,000
the year
(as on 1.4.2012)

Fire (Rs.) Marine (Rs.)

Outstanding Claims on 1.4.2012 28,000 7,000
Claims paid 1,00,000 80,000
Reserve for Unexpired Risk on 1.4.2012 2,00,000 1,40,000
Premium Received 4,50,000 3,30,000
Agent's Commission 40,000 20,000
Expenses of Management 60,000 45,000
Re-insurance Premium (Dr.) 25,000 15,000

The following additional points are also to be taken into account:

a) Depreciation on Fixed Assets to be provided at 10% p.a.

b) Interest accrued on investments Rs. 10,000

c) Closing provision for taxation on 31.3.2013 to be mainted at Rs. 1,24,138.

d) Claims outstanding on 31.3.2013 were Fire Insurance Rs. 10,000; Marine

Insurance Rs. 15,000.

e) Premium outstanding on 31.3.2013 were Fire Insurance Rs. 30,000;

Marine Insurance Rs. 20,000.

f) Reserve for unexpired risk to be maintained at 50% and 100% of net

premiums in respect of Fire and Marine Insurance respectively.

g) Expenses of Management due on 31.3.2013 were Rs. 10,000 for Fire

Insurance and Rs. 5,000 in respect of marine Insurance.

PART B: LIFE INSURANCE COMPANIES

10) The following balances are extracted from the books of Life Insurance
Corporations:

Rs. in
Lakhs
Life Insurance Fund (as on 31.3.2012) 1,600

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Net Liabilities as per valuation 1,200

Interim Bond Paid 150

You are required to show:

a) The valuation Balance Sheet as on 31.03.2012.

b) The distribution statement.

11) You are asked to:

I) Prepare the Valuation Balance Sheet of G Ltd., a Life Insurance Company;

II) Compute the Net Profit for the Inter-valuation period;

III) Calculate the bonus to be paid to policy holders by preparing a statement;

and

IV) Pass the journal entries from the details given by G Ltd.

Relevant Details are provided as under:

a) The Life Insurance Fund as on 31st March 2012 amounted to Rs.

55,00,000.

b) Its actuarial Valuation on 31st March, 2003 disclosed a net liability of Rs.
44,00,000 on all their policies and annuity contracts.

c) The surplus brought forward from the previous valuation was Rs. 3,00,000.

d) An interim bonus of Rs. 1,00,000 was paid to the policy holders during the
inter - valuation period.

e) The company wants to write down the investments from Rs. 31,80,000 to
Rs. 30,00,000 if the valuation revealed a surplus. There was an Investment
Fluctuation Reserve amounting to Rs. 1,30,000.

f) A provision for taxation for Rs. 1,00,000 is to be made.

g) The directors of the company proposed to carry forward Rs. 3,50,000 as

General Reserve.

h) The company declares a reversionary bonus @ Rs. 15 per Rs. 1,000 and
given the policy holders the option to get the bonus in cash @ Rs. 6 per Rs.

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1,000. The total business in force was Rs. 9 crores. One third of the policy
holders in value decided to get the bonus in cash.

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MUTUAL FUNDS

1) Prudential XYZ Mutual Funds have introduced a scheme ‘ABC Premier’. Its
major details are as follows:
Scheme Name : ABC Premier
Scheme Size : Rs.1,00,00,00,000 (Rupees one hundred crores)
Face value of units : Rs. 20
Investments : in shares
Market value of Shares :Rs.1,50,00,00,000 (Rupees One hundred and
fifty crores)

Compute the net assets value per unit of ABC Premier. Is there an appreciation of
the value invested in units of ABC Premier?

2) Amigo Mutual Fund Ltd. is a SEBI Registered mutual fund.The Company follows
the practice of valuing its investments on “mark to market basis”. For the
financial year ended March, 2009 the investments which were acquired at a cost
of Rs.109 crores were reflected in the Balance Sheet at Rs.89 crore. The company
insists that the depreciation in value of the investments need not be disclosed
separately in its financial statements since its investment valuation policy is
disclosed as part of its accounting policies.Discuss the validity of this argument.

3) Investors Mutual Fund is registered with SEBI and having its registered office at
Pune.The fund is in the process of finalizing the annual statement of accounts of
one of its Open ended Mutual Fund Schemes.From the information furnished
below you are required to prepare a statement showing the movement of unit
holders’ funds for the financial year ended 31st March, 2009.

Rs.’000
Opening Balance of net assets 12,00,000
Net Income for the year (Audited) 85,000
850200 units issued during 2008-09 96,500
752300 units redeemed during 2008-09 71,320
The par value per unit is Rs100

4) Calculate the NAV of a Mutual Fund scheme from the information given below
Beginning of the year :
Number of Units outstanding 1 Crore of Rs. 10 each
Investments at Cost Rs. 10 Crores (Market Value Rs. 16 Crores)
Outstanding Liabilities Rs. 5 Crore
Other Information -
1. Another 20 Lakh units were sold during the year at Rs. 24.

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2. No additional investments were made during the year and as at the year-end,
50%of the Investments at year beginning were quoted at 80% of the book value.
3. 10% of the Investments had witnessed a permanent fall of 10% below cost.
4. The balance investments were quoted at Rs. 13.60 Crores.
5..Outstanding liabilities towards Custodian Charges, Salaries and Commission
etc.applicable to the Scheme were Rs. 1 Crore.

5) ABC Mutual Funds have introduced a scheme ‘Prima Fund’. Its major details are:
Scheme size Rs. 100 crores
Face value Rs. 20
Investments in quoted shares having market value Rs. 200 crores.
Compute the NAV per unit of the fund. Is there any appreciation in units of fund?

6) A Mutual Fund company raised funds on 01.04.2011 by issuing 10 lakhs units @

Rs. 17.50 per unit. Out of this Fund, Rs. 160 lakhs invested in several capital
market instruments. The initial expenses amount to Rs. 9 lakhs. During June,
2011, the company sold certain securities worth Rs. 100 lakhs for Rs. 125 lakhs
and it bought certain securities for Rs. 90lakhs. The Fund Management expenses
amounting to Rs. 5 lakhs per month. The dividendearned was Rs. 3 lakhs. 80% of
the realised earnings were distributed among the unitholders. The market value of
the portfolio was Rs. 175 lakhs. Determine Net Asset value (NAV) per unit as on
30.06.2011.

7) On 1st April, 2011, Fair Return Mutual Fund has the following assets and
prices at 3.00 p.m.
Shares of No. of shares Market price per share
(Rs.)
P Ltd. 5000 19.70
Q Ltd. 25000 482.60
R Ltd. 5000 264.40
S Ltd. 50000 674.90
T Ltd. 15000 25.90
No. of units of fund 4,00,000 units
Calculate:
(a) NAV of the Fund.
(b) Assuming Mr. Mohan, send a cheque of Rs. 25,00,000 to the Fund on 1st
April, 2011 and Fund Manager purchases 9,000 shares of R Ltd. and balance
is held in bank. What will be the new position of the fund?
(c) Now suppose on 2nd April 2011, at 3.00 p.m. the market price of
shares is as follows:

Shares Rs.
P Ltd. 20.30
Q Ltd. 513.70
R Ltd. 290.80

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S Ltd. 671.90
T Ltd. 44.20

Calculate the new NAV?

a

8) Sparrow Holdings is a SEBI Registered Mutual Fund which made its maiden N.F.O
(New Fund Offer) on 10th April, 2010 Rs. 10 face value per unit. Subscription was
received for 90 lakhs units. An underwriting arrangement was also entered into
with Affinity Capital Markets Ltd., that agreed to underwrite the entire NFO of 100
lakh units on a commission of 1.5%. Out of the monies received Rs. 892.50 lakhs
was invested in various capital market instruments. The marketing expenses for the
N.F.O amounted to Rs. 11.25 lakhs. During the financial year ended March 2011
the Fund sold securities having cost of Rs.127.25 lakh (FV Rs. 54.36 lakhs) for Rs.
141.25 lakhs. The fund in turn purchased securities for Rs.130 lakhs. The
management expenses of the fund are regulated by SEBI stipulations which state
that the same shall not exceed 0.25% of the average funds invested during the
year. The actual amount spent towards management expenses was Rs.2.47 lakhs
of which Rs. 47,000 was in arrear. The dividends earned on the investments held
amounted to Rs. 2.51 lakhs of which a sum of Rs.25,000 is yet to be collected. The
fund distributed 80% of realized earnings. The closing market value of the portfolio
was Rs. 1120.23 lakhs

You are required to determine the closing per unit NAV of the fund.

9) On 1.4.2008, a mutual fund scheme had 18 lakh units of face value of Rs.10
each was outstanding. The scheme earned Rs.162 lakhs in 2008-09, out of which
Rs.90 lakhs was earned in the first half of the year. On 30.9.2008, 2 lakh units
were sold at a “NAV” of Rs.70.
Pass Journal entries for sale of units and distribution of dividend at the end of
2008-09.

10) On 1st April 2010, a mutual fund scheme had 9 lakh units, face value of Rs. 10
each outstanding. The scheme earned Rs. 81 lakhs in 2010-11 out of which Rs.
45 lakhs was earned in first half year. 1 lakh units were sold on 30th September,
2010 at NAV Rs. 60.Show important accounting entries for sale of units and
distribution of dividend at the end of 2010-11.

11) Calculate the NAV of a mutual fund from the following information:On 1-4-2009

Outstanding units 1 crore of Rs. 10 each = Rs. 10 crores(Market Value Rs. 16

crores)

Outstanding liabilities Rs. 5 crores.

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Other information:

(i) 20 lakhs units were sold during the year at Rs. 24 per unit.

(ii) No additional investments were made during the year and as at the year end
50% of the investments held at the beginning of the year were quoted at 80%
of book value.

(iii) 10% of the investments have declined permanently 10% below cost.

(iv) At the year end 31-3-10 outstanding liabilities were Rs. 1 crore.

(v) Remaining investments (assets) were quoted at Rs. 13 crores.

12) The investment portfolio of a mutual fund scheme includes 5,000 shares of X Ltd.
and 4,000 shares of Y Ltd. acquired on 31-12-2010. The cost of X Ltd.’s shares is
Rs. 40 while that of Y Ltd.’s shares is Rs. 60. The market value of these shares at
the end of 2010-11 were Rs. 38 and Rs. 64 respectively. On 30-06-2011, shares
of both the companies were disposed off realizing Rs. 37 per X Ltd. shares and
Rs. 67 per Y Ltd. shares. Show important accounting entries in the books of the
fund for the accounting years 2010-11 and 2011-12.

13) Ramesh Goyal has invested in three mutual funds. From the details given below,
find out effective yield on per annum basis in respect of each of the schemes to
Ramesh Goyal upto 31-03-2012.

Mutual Fund X Y Z
Date of Investment 1-12-2011 1-1-2012 1-3-2012
Amount of investment (Rs.) 1,00,000 2,00,000 1,00,000
NAV at the date of investment (Rs.) 10.50 10.00 10.00
Dividend received upto 31-3-2012 1,900 3,000 Nil
(Rs.) 10.40 10.10 9.80
( )

14) Black Rock Mutual Fund has invested in 2,00,000 shares of Profit Ltd. No
quotation is available for last thirty days prior to the valuation date. The P/E
ratio of a comparable company, which is regularly traded, is 12. Earning per
share of Profit Ltd. is Rs. 20. The Net Asset Value of Profit Ltd. is Rs. 160 and the
comparable company is Rs. 200. The current market price of comparable equity
share is Rs. 240. A policy is taken to give 40% weightage to net assets value and
to reduce from comparable P/E ratio for relatively less liquidity of Profit Ltd.
stock.

Required:

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(a) Explain whether the investment in Profit Ltd. will be classified as trade
investment, or 'non-trade investment' giving the reason for the stand
taken by you.
(b) What do you think, to be the appropriate criteria for selection of
comparable stock?
(c) How much discounting should be made from comparable P/E ratio for
valuing investment in non- traded scrip?
(d) What should be the value of 2,00,000 equity shares of Profit Ltd.?

15) Calculate the NAV of a Mutual Fund Scheme from the information given below:At
the beginning of the year:
Number of units outstanding 1 Crore units of Rs. 10 each
Investment at cost Rs. 10 crores (Market Value Rs. 16 crores)
Outstanding Liabilities Rs. 5 crores

Other Information:

(1) Additional 20 lakhs units were sold during the year at Rs. 24.

(2) No additional investments were made during the year and as at the year end,
50% of the investment at year beginning were quoted at 80% of the book
value.

(3) 10% of the investments had witnessed a permanent fall of 10% below cost.

(4) The balance investments were quoted at Rs. 13.60 crores.

(5) Outstanding liabilities towards custodian charges, salaries and

commissionetc. applicable to the scheme were 1 crore.

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NON BANKING FINANCE COMPANY

1) Usha Finance Ltd. is a non-banking finance company. It makes available to you

the costs andmarket price of various investments held by it.

Rs in Lakhs
Equity Shares: Cost Market Price
Scrip A 40.00 40.80
Scrip B 21.00 16.00
Scrip C 40.00 24.00
Scrip D 40.00 80.00
Scrip E 60.00 70.00
201.00 230.80
Mutual Funds
MF1 26.00 16.00
MF2 20.00 14.00
MF3 4.00 6.00
50.00 36.00
Govt Securities
GV 1 40.00 44.00
GV 2 50.00 48.00
90.00 92.0

a) Can the company adjust depreciation of a particular item of investment within a

category?
b) What should be the value of investments?
c) Is it possible to offset depreciation in investment of mutual funds against
appreciation of value of investments in Equity Shares and Government
Securities?

2) XYZ Finance Ltd. is a non-banking finance company. It makes available to you the
costs and market price of various investments held by it:

Rs in Lakhs
Equity Shares: Cost Market Price
Scrip A 40.00 40.80
Scrip B 21.00 16.00
Scrip C 40.00 24.00
Scrip D 40.00 80.00
Scrip E 60.00 70.00
Scrip F. 50.00 60.00
Scrip G 20.00 4.00

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271.00 294.80
Mutual Funds
MF1 26.00 16.00
MF2 20.00 14.00
MF3 4.00 6.00
50.00 36.00
Govt Securities
GV 1 40.00 44.00
GV 2 50.00 48.00
90.00 92.00

a) Can the company adjust depreciation of a particular item of investment within

a category?
b) What should be the value of investments?
c) Is it possible to offset depreciation in investment of mutual funds against
appreciation of value of investments in Equity Shares and Government
Securities?

3) While closing its books of account on 31st March,2005 a Non-Banking

FinanceCompany has its advances classified as follows:
Rs.in lakhs
Standard assets…………………………………………………………16,800
Sub-standard assets…………………………………………………….1,340
Secured positions of doubtful debts:
! upto one year……………………………………………………………320
! one year to three years…………………………………………………90
! more than three years………………………………………………… 30
Unsecured portions of doubtful debts………………………………….97
Loss assets……………………………………………………………………48
Calculate the amount of provision, which must be made against the Advances.

4) Anischit Finance Ltd. is a non-banking finance company. It makes available to

you the costs and market price of various investments held by it as on 31.3.2008:

Rs in Lakhs
Equity Shares: Cost Market Price
Scrip A 60.00 61.20
Scrip B 31.50 24.00
Scrip C 60.00 36.00
Scrip D 60.00 120.00
Scrip E 90.00 105.00
Scrip F 75.00 90.00

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Scrip G 30.00 6.00

406.50 442.20
Mutual Funds
MF1 39.00 24.00
MF2 30.00 21.00
MF3 6.00 9.00
75.00 54.00
Govt Securities
GV 1 60.00 66.00
GV 2 75.00 72.00
135.00 138.0

(a) Can the company adjust depreciation of a particular item of investment

within a category?

(b) What should be the value of investments as on 31.3.2008?

(c) Is it possible to off-set depreciation in investment in mutual funds

against appreciation of the value of investment in equity shares and government
securities?

5) Mahindra Finance Ltd is a non banking finance company. The extracts of its
Balance Sheet is given below.

Liabilities Amount Assets Amount

ESC 100 Leased Out Asset Investment 800
Free Reserves 500 Inv in Shares of Susidiaries 100
Loans 400 Inv in Deb of Subsidiaries 100
Deposits 400 Cash and bank 200
Deferred Revenue Expenditure 200
1,400 1,400

You are required to compute Tier I capital of Mahindra Finance Ltd according to
NBFC prudential norms (RBI) directions 2007.

6) Peoples Financiers Ltd. is an NBFC providing Hire Purchase Solutions for

acquiring consumer durables. The following information is extracted from its books
for the year ended 31st March, 2014:

Interest Overdue but recognized in

Asset Funded Profit & loss Net Book Value of

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Period Overdue Interest Amount Assets outstanding

(Rs. in crore) (Rs. in crore)
LCD Televisions Upto 12 months 480.00 20,123.00
Washing Machines For 24 months 102.00 2,410.00
Refrigerators For 30 months 50.50 1,280.00
Air Conditioners For 45 months 26.75 647.00

You are required to calculate the amount of provision to be made.

7) Provider Ltd. is a non-banking finance company who accepts public deposit and
also deal in hire purchase business. It provides you with the following information
regarding major hire purchase deals as on 31.3.2009:

Few machines were sold on hire purchase basis. The hire purchase price was set
as Rs. 100 lakhs as against the cash price of Rs. 80 lakhs. The amount was
payable as:

(i) Rs. 20 lakhs down payment and balance in 5 equal instalments. The hire vendor
collected 1st instalment as on 31.3.2010 but could not collect the second
instalment, which was due on 31.3.2011. The company was finalizing accounts for
the year 31.3.2011. Till 15.5.2011, the date on which the Board of Directors signed
the accounts, the second instalment was not collected. Presume I.R.R. to be
10.42%.

Required:
(i) What should be the principal outstanding as on 1.4.2010? Should
thecompany recognise financial charge for the year 2010-11 as income?
(ii) What should be the net book value of assets as on 31.3.2011 so far as
Provider Ltd. is concerned as per NBFC prudential norms requirement for
provisioning?
(iii) What should be the amount of provision to be made as per prudential norms
for NBFC laid down by RBI?

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