here are the 2010 november ipcc solved papers...................
Resham
(Carpe Diem !!!)
(6535 Points)
Replied 30 November 2010
dinesh chandila
(practesh)
(21 Points)
Replied 01 February 2011
Solved Answer Accounts CA IPCC May. 2010 1
Qn.1 (i) A and B are partners in a firm sharing profits and losses in the ratio of 3:2. Their capitals are Rs.
60,000 and Rs. 40,000 respectively. They admit C as a new partner who will get 1/6th share in the profit of
the firm. C brings in Rs. 25,000 as his capital. Find out the amount of goodwill on the basis of the above
information.
(ii) From the following, calculate the cash price of the asset :
Rs.
Hire purchase price of the asset 50,000
Down payment 10,000
Four annual instalments at the end of each year 10,000
Rate of Interest 5% p.a.
(iii) Mr. X purchased 1,000, 6% Government Bonds of Rs. 100 each on 31st January, 2009 at Rs. 95 each.
Interest is payable on 30th June and 31st December. The price quoted is cum interest. Journalise the
transaction.
(iv) Swaminathan owed to Subramanium the following sums :
Rs. 5,000 on 20th January, 2009
Rs. 8,000 on 3rd March, 2009
Rs. 6,000 on 5th April, 2009
Rs. 11,000 on 30th April, 2009
Ascertain the average due date.
(v) A company acquired a machine on 1.4.2006 for Rs. 5,00,000. The company charged depreciation upto
2008-09 on straight line basis with estimated working life of 10 years and scrap value of Rs. 50,000. From
2009-10, the company decided to change depreciation method at 20% on reducing balance method.
Compute the amount of depreciation to be debited to Profits and Loss A/c for the year 2009-10.
(vi) An unquoted long-term investment is carried in the books at cost of Rs. 2 lac. The published accounts of
unlisted company received in May, 2009 showed that the company has incurred cash losses with decline
market share and the long-term investment may not fetch more than Rs. 20,000. How you will deal with it
in the financial statement of investing company for the year ended 31.3.2009.
(vii) In the absence of a partnership deed, what will be your decision in disputes amongst partners regarding
the following matters :
(a) Profit sharing ratio;
(b) Interest rate at which interest is to be allowed to a partner on loan given to the firm by a partner.
(viii) According to Accounting Standard-9, when revenue from sales should be recognised ?
(ix) In January, 2010 a firm took an insurance policy for Rs. 60 lakhs to insure goods in its godown against
fire subject to average clause. On 7th March, 2010 a fire broke out destroying goods costing Rs. 44
lakhs. Stock in the godown was estimated at Rs. 80 lakhs. Compute the amount of insurance claim.
(x) On 1st April, 2009 a car company sold to Arya Bros., a motor car on hire-purchase basis. The total hirepurchase
price was Rs. 4,60,000 with down payment of Rs. 1,60,000. Balance amount was to be paid in
three annual instalments of Rs. 1,00,000 each. The first instalment payable on 31st March, 2010. The
cash price of the car was Rs. 4,00,000.
How will Arya Bros, account for interest over three accounting years assuming books of accounts are
closed on 31st March every year.
Ans. 1 (i) Rs.
Capital of A = 60000
” of B = 40000
Total Capital of A & B 100000
5
Share of A & B after admission of C = -----
6
Rs.
6
∴ Total capital of A, B & C = 100000 x ---- = 120000
5
Less : Capital of A & B = 100000
----------
Capital of C = 20000
Amount brought by C = 25000
∴ Amount of Goodwill = 5000
Calculation of cash price of the asset
Solved Answer Accounts CA IPCC May. 2010 2
Ans. 1. (ii)
Particulars Total Interest Principal
Instalment
5
Less : Interest 10000 x -----
105
Add : 3rd Instalment
5
Less : Interest 15238 x -----
105
Add : 2nd Instalment
5
Less : Interest 28594 x ----
105
Add : 1st Instalment
5
Less : Interest 37232 x ----
105
Add : Cash down
Cash price =
10000
476
9524
10000
19524
930
18594
10000
28594
1362
27232
10000
37232
1773
35459
10000
45459
476
930
1362
1773
--
4541
9524
9070
8638
8227
10000
45459
Ans. 1 (iii) Journal Entry in the Books of X
Investment in 6% Govt. Bonds a/c ----------- Dr. 94500
Interest on 6% Govt. Bonds a/c ---------- Dr. 500
To Bank a/c 95000
(Being purchase of 1000 6% govt. Bonds at Rs.95 each cum interest,
interest, for one month transferred to interest a/c)
W.N. (1) Calculation of Interest
Face value of debentures purchased = 100000
Interest rate = 6% p.a.
Period of Interest = 1 month
1
Interest Amount = 100000 x 6% x ---- = 500 /-
12
Ans. 1 (iv) Calculation of Average due date
20.1.2009
3.3.2009
5.4.2009
30.4.2009
Σ Amount =
5000/-
8000/-
6000/-
11000/-
30000
0
42
75
100
Σ Amt. x No. of days =
0
336000
450000
1100000
1886000
Calculation of No. of days
Due date Jan. Feb. March April Total
20.1.2009
3.3.2009
5.4.2009
30.4.2009
0
11
11
11
--
28
28
28
--
3
31
31
--
--
5
30
0
42
75
100
Σ Amount x No. of days
Average No. of Days = ------------------------------
Σ Amount
1886000
= ---------- = 62.866 days
30000 or 63 days
Average Due Date = Base date + 63 days
= 20.1.2009 + 63 days
= 24.3.2009
Solved Answer Accounts CA IPCC May. 2010 3
Ans. 1 (v) (A) Calculation of Book value of machine as on 1.4.09
as per SLM –
Original cost of the machine as on 1.4.2006 500000
Less : Scrap Value = 50000
Depreciable Amount = 450000
Useful life 10 years
Depreciation pee annum 45000
Depreciation for the period 1.4.06 to 1.4.09
45000 /- p.a. x 3 years = 135000
∴ Book Value of the Machine as on 1.4.09
(500000 - 135000) 365000
(B) Calculation of Book value of Machine as on 1.4.09
As per WDV method –
Original cost of the machine as on 1.4.06 500000
Less : Depreciation @ 20% for the period 2006-07 100000
---------
400000
Less : Depreciation @ 20% for the period 2007 – 08 80000
320000
Less : Depreciation @ 20% for the period 2008 – 09 64000
Book value of the machine as on 1.4.09 256000
Solution
Amount to be debited to P & L A/c (A – B) = 109000
Ans.1 (vi) As per AS – 13, long term investments are to be valued at cost. But if there is a permanent decline in
the value of long term investments, they are to be valued at a lower figure.
As per information given in the question, it seems that there is permanent decline in the value of long term
investments. Therefore the value of investments will be as follows -
Cost of investment = Rs. 200000
Less : Depreciation = Rs. 180000
Rs. 20000
Ans. 1(vii) In the absence of partnership deed, provisions of partnership act, 1932 will be applicable
(a) Profit sharing ratio : Profit sharing ratio will be equal among all the partners.
(b) Interest on loan : Interest @ 6% p.a. on loan given by the partner to the firm will be allowed.
Ans. 1 (viii) As per AS 9, a key criteria for determining when to recognise revenue from a transaction involving
sale of goods is that seller has transferred involving sale of goods is that seller has transferred property in goods
to buyer for a consideration. However, sometimes, significant risk is not transferred at the time of transfer of
property. In such situation, the revenue should be recognized at the time when significant risk is transferred.
Ans. 1 (ix) When average clause will apply, then
Policy Amount x Loss of Stock
Insurance claim = --------------------------------------
Value of Stock in the godown
60,00,000 x 44,00,000
= ---------------------------
80,00,000
= 33,00,000 /-
Ans. 1 (x) In the books of Arya Brothers, Calculation of Interest over three years --
H.P. Price = 460000
Cash price of the car = 400000
Total Interest = 60000
Calculation of ratio in which total interest will be apportioned : -
H.P. price of Car 460000
Less : Cash down payment 160000
Solved Answer Accounts CA IPCC May. 2010 4
Amount utilized during 1st year 300000
Less : 1st Instalment 100000
Amount utilized during 2nd year 200000
Less : 2nd instalment 100000
Amount utilized during 3rd year 100000
Ratio = 3 : 2 : 1
Therefore, 3
Interest for the year ended 31.3.10 = 60000 x -----
6
= 30000
2
Interest for the year ended 31.3.11 = 60000 x ----
6
= 20000
1
Interest for the year ended 31.3.12 = 60000 x ---
6
= 10000
Qn. 2 The books of account of Ruk Ruk Maan of Mumbai showed the following figures : [ 16 marks ]
31.3.2008 31.3.2009
Rs. Rs.
Furniture & Fixtures 2,60,000 2,34,000
Stock 2,45,000 3,20,000
Debtors 1,25,000 ?
Cash in hand & Bank 1,10,000 ?
Creditors 1,35,000 1,90,000
Bills Payable 70,000 80,000
Outstanding Salaries 19,000 20,000
An analysis of the cash book revealed the following :
Rs.
Cash sales 16,20,000
Collection from debtors 10,58,000
Discount allowed to debtors 20,000
Cash purchases 6,15,000
Payment to Creditors 9,73,000
Discount received from creditors 32,000
Payment for bills payable 4,30,000
Drawings for domestic expenses 1,20,000
Salaries paid 2,36,000
Rent paid 1,32,000
Sundry trade expenses 81,000
Depreciation is provided on furniture & fixtures @ 10% p.a. on diminishing balance method. Ruk Ruk Maan
maintains a steady gross profit rate of 25% on sales.
You are required to prepare trading and profit and loss account for the year ended 31st March, 2009 and Balance
Sheet as on that date.
Ans. 2. In the books of Ruk Ruk Maan
Trading Profit & Loss Account for the year ended on 31.3.2009
Expenditure Amount Income Amount
To Opening Stock
” Purchases
Cash 6,15,000
Credit 15,00,000
” Gross Profit (B/f)
To Discount allowed
” Salary paid 2,36,000
2,45,000
21,15,000
6,80,000
3040000
20,000
By Sales
Cash 16,20,000
Credit (w.n.2) 11,00,000
” Closing Stock
By Gross Profit
” Discount received
27,20,000
3,20,000
30,40,000
6,80,000
32,000
Solved Answer Accounts CA IPCC May. 2010 5
Add : Closing o/s 20,000
Less : Opening o/s 19,000
” Rent
” Sundry trade Exps.
” Depreciation on F & F
” Net Profit (B/f)
2,37,000
1,32,000
81,000
26,000
2,16,000
7,12,000 7,12,000
Cash A/c
Receipts Amount Payments Amount
To Balance b/d
” Sales
” Debtors A/c
1,10,000
16,20,000
10,58,000
27,88,000
By Purchases
” Creditors
” Bills payable
” Drawings
” Salary
” Rent
” Sundry trade exps.
” Balance c/d
6,15,000
9,73,000
4,30,000
1,20,000
2,36,000
1,32,000
81,000
2,01,000
27,88,000
W.N. (1)
Memorandum Balance Sheet of Ruk Ruk Maan as on 31.3.08
Liabilities Amount Assets Amount
Capital A/c (B/f)
Current Liabilities
Creditors
Bills Payable
Outstanding Salaries
5,16,000
1,35,000
70,000
19,000
7,40,000
Fixed Assets
Furniture & Fixture
Current Assets
Stock
Debtors
Cash & Bank Balance
2,60,000
2,45,000
1,25,000
1,10,000
7,40,000
W.N. (2)
Calculation of Sales
COGS = Op. Stock + Purchases – Clo. Stock
= 245000 + 21,15,000 - 3,20,000
= 20,40,000 /-
G. P. ratio = 25% on Sales
100
∴ Sales = 20,40,000/- x ----------
100 – 25
= 27,20,000 /-
Cash Sales = 16,20,000 /-
∴ Credit Sales = 11,00,000 /-
Creditors A/c
Particulars Amount Particulars Amount
To Cash A/c
” Discount received
” B/P A/c
” Balance c/d
973000
32000
440000
190000
1635000
By Balance b/d
” Purchases (B/f)
135000
1500000
1635000
Debtors A/c
Particulars Amount Particulars Amount
To Balance b/d 125000 By Cash a/c 1058000
Solved Answer Accounts CA IPCC May. 2010 6
” Sales A/c (W.N. 2) 1100000
1225000
” Discount allowed
” Balance c/d
20000
147000
1225000
Bills Payable A/c
Particulars Amount Particulars Amount
To Cash A/c
To Balance c/d
430000
80000
510000
By Balance b/d
” Creditors (B/f)
70000
440000
510000
Balance Sheet of Ruk Ruk Maan as on 31.3.2009
Liabilities Amount Assets Amount
Capital Account
Opening Balance (W.N. 1)
Add : Net Profit
Less : Drawings
Current Liabilities
o/s Salaries
B/P
Creditors
516000
216000
120000
6,12,000
20000
80000
190000
902000
Fixed Assets
Furniture & Fittings 260000
Less : Depreciation @ 10% 26000
Current Assets
Stock
Debtors
Cash & Bank Balance
234000
320000
147000
201000
902000
Qn 3. The Balance Sheet of Reckless Ltd. as on 31st March, 2008 is as follows : [ Marks 16 ]
Assets Rs.
Freehold Premises 2,20,000
Machinery 1,77,000
Furniture & Fittings 90,800
Stock 3,87,400
Sundry Debtors 80,000
Less : Provision for Bad Debts 4,000 76,000
Cash in Hand 2,300
Cash at bank 1,56,500
Bills Receivable 15,000
11,25,000
Liabilities
60,000 Equity Shares of Rs. 10 each 6,00,000
Prior Incorporation profit 21,000
Contingency Reserve 1,35,000
Profit & Loss Appropriation Account 1,26,000
Acceptances 20,000
Creditors 1,13,000
Provision for Income-tax 1,10,000
------------
11,25,000
------------
Careful Ltd. decided to take over Reckless Ltd. from 31st March, 2008 with the following assets at value noted
against them :
Bills Receivable 15,000
Freehold Premises 4,00,000
Furniture and Fittings 80,000
Machinery 1,60,000
Stock 3,45,000
1/4 of the consideration was satisfied by the allotment of fully paid preference share of Rs. 100 each at par which
carried 13% dividend on cumulative basis. The balance was paid in the form of Careful Ltd.'s equity shares of Rs.
10 each, Rs. 8 paid up.
Solved Answer Accounts CA IPCC May. 2010 7
Sundry Debtors realised Rs. 79,500. Acceptances were settled for Rs. 19,000. Income-tax authorities fixed the
taxation liability at Rs. 1,11,600. Creditors were finally settled with the cash remaining after meeting liquidation
expense amounting to Rs. 4,000.
You are required to :
(i) Calculate the number of equity shares and preference shares to be allotted by Careful Ltd. in discharge of
consideration.
(ii) Prepare the important ledger accounts in the books of Reckless Ltd.; and
(iii) Pass Journal entries in the books of Careful Ltd. with narration.
Ans. 3 (i) Calculation of No. of equity shares & pref. shares to be allotted by careful Ltd.
Particulars Amount
Bills Receivable 15,000
Freehold premises 4,00,000
Furniture & Fittings 80,000
Machinery 1,60,000
Stock 3,45,000
-----------
Net Assets taken over 10,00,000
Discharge of Purchase consideration
(a) Issue of 13% accumulative Pref. Shares
¼ of Rs. 10,00,000 = 2,50,000
(b) Balance in the form of equity shares of Rs.10 each Rs. 8 paid up 7,50,000
7,50,000
----------- = 93,750 Shares -----------
8 10,00,000
No. of Shares
250000
(a) 13% cum. Pref. shares --------- = 2500
100
(b) Equity share capital 93750
Rs. 10 each FV., Rs.8 paid up --------
Ans. (ii) In the books of Reckless Ltd. Realisation A/c
Particulars Amount Particulars Amount
To Freehold Premises
” Machinery
” Furniture & Fittings
” Stock
” Sundry Debtors
” Bills Receivables
” Cash a/c
Acceptances
I. Tax
Creditors [Refer Cash A/c]
Liquidations Exps.
” Equity Share holders a/c (B/f)
2,20,000
177000
90800
387400
80000
15000
19000
111600
103700
4000
118000
1326500
By Pro. for Bad debts
” Acceptances
” Creditors
” Pro. for I. tax
” Careful Ltd.
(P.c)
” Cash A/c
Debtors
4000
20000
113000
110000
1000000
79500
1326500
Equity Shareholders a/c
Particulars Amount Particulars Amount
To 13% Pref. Shares of Careful Ltd.
” Equity Shares of careful Ltd.
250000
750000
1000000
By Equity Share capital
” Prior incorporation
” Contingency reserve profit **
” P & L app. a/c
” Realisation a/c
600000
21000
135000
126000
118000
1000000
Solved Answer Accounts CA IPCC May. 2010 8
Cash in Hand A/c
Particulars Amount Particulars Amount
To Balance b/d
” Bank A/c
” Realisation
2300
156500
79500
238300
By Realisation A/c
Acceptances
Income tax
Liquidation exps.
Creditors
19000
111600
4000
103700
238300
Careful Ltd.
Particulars Amount Particulars Amount
To Realisation 1000000
1000000
By 13% Pref. Shares of careful Ltd.
” Equity Shares of careful Ltd.
250000
750000
1000000
Ans. (iii) Journal Entries in the books of careful Ltd.
Date Particulars LF Amount Amount
Bills Receivable -------- Dr. 15000
Freehold Premises ------- Dr. 400000
Furniture & Fitting ------- Dr. 80000
Machinery ------ Dr. 160000
Stock ------ Dr. 345000
To Liquidator of Reckless Ltd. 1000000
(Being various assets taken over from reckless Ltd. for a consideration of Rs. 1000000)
Liquidator of Reckless Ltd. ----- Dr. 1000000
To 13% Cum. Pref. Share capital 250000
” Equity share capital 750000
(Being purchase consideration discharged in the form of Rs.2,50,000
13% cum. Pref. of Rs.100 each of par and 93750 equity shares of Rs.10 each Rs. 8 paid up)
4. (a) Easilife Ltd. has a hire-purchase department which fixes hire-purchase price by adding 40% to the cost of
the goods. The following additional information is provided to you : [ 10 marks ]
Rs.
On 1st April, 2009 :
Goods out on hire-purchase (at hire-purchase price) 2,10,000
Instalments due 14,000
Transactions during the year :
Hire-purchase price of goods sold 9,80,000
Instalments received 8,12,000
Value of goods repossessed due to defaults
(hire-purchase instalments unpaid Rs. 5,600) 7,800
On 31st March, 2010 :
Goods out on hire-purchase (at hire-purchase price) 3,78,000
You are required to prepare Hire-purchase Trading Account, ascertaining the profit made by the
department during the year ended 31st March, 2010.
(b) Gamma Investment Company hold 1,000, 15% debentures of Rs. 100 each in 6 Beta Industries Ltd. as on
April 1, 2009 at a cost of Rs. 1,05,000. Interest is payable on June, 30 and December, 31 each year.[6 m]
On May 1, 2009, 500 debentures are purchased cum-interest at Rs. 53,500. On November 1, 2009 600
debentures are sold ex-interest at Rs. 57,300. On November 30, 2009, 400 debentures are purchased exinterest
at Rs. 38,400. On December 31, 2009, 400 debentures are sold cum-interest for Rs. 55,000.
Prepare the investment account showing value of holdings on March 31, 2010 at cost, using FIFO method.
Ans. 4 (a) Hire purchase trading account of eagilife Ltd. for the year ended 31.3.2010
Particulars Amount Particulars Amount
To balance b/d
Instalment not due 150000
By Cash A/c
” Goods repossessed a/c
812000
7800
Solved Answer Accounts CA IPCC May. 2010 9
100
2,10,000 x ------
140
Instalment due but not received
” Cost of goods sold on
Hire Purchase
100
980000 x -----
140
” P & L A/c (B/f)
14000
700000
234200
1098200
(valuation)
” Balance c/d.
Instt. Not yet due
100
378000 x -----
140
Instt. due but not received
W.N. (1)
270000
8400
1098200
W.N. (1) Calculation of Clo. Instt. Due but not received
Opening instalment not due 210000
Add : Goods sold on H.P. 980000
1190000
Less : Closing instalment not due 378000
812000
Less : Cash received 812000
Add : Instt. not received on goods repossessed 5600
817600
Less : Op. Instt. Unpaid 14000 803600
Closing Instt. due but not received 8400
Ans. 4 (b) In the books of Gamma investment company
Investment account for the period April – March 2010 by using FIFO Method
Date Particulars Face
Value
Interest Cost Date Particulars Face
Value
Intt. Cost
1.4.09 To Balance.
b/d
100000 3750 105000 30.6.09 By Bank -- 11250 --
1.5.09 To Bank a/c 50000 2500 51000 1.11.09 By Bank 60000 3000 57300
30.11.09 To Bank a/c 40000 2500 38400 1.11.09 By P & L a/c -- -- 5700
31.12.09 To P & L a/c -- -- 13000 31.12.09 By Bank a/c -- 9750 --
31.3.10 To P& L a/c -- 18625 -- 31.12.09 By Bank a/c 40000 -- 55000
---------- ---------- --------- 31.3.10 By Bal. c/d 90000 3375 89400
190000 27375 207400 190000 27375 207400
W.N. (1)
Calculation of interest on 15% Debentures
Date Particulars Face
Value
Period of
Interest
Rate of
Interest
Interest
Amount
1.4.09 Interest accrued on opening balance 100000 3 months 15% pa. 3750
1.5.09 Interest on purchase of debenture 50000 4 months 15% pa. 2500
30.6.09 Interest received on holding 90000 6 months 15% pa. 11250
1.11.09 Interest on sale of debenture 60000 4 months 15% pa. 3000
30.11.09 Interest on purchase of debenture 40000 5 months 15% pa. 2500
31.12.09 Interest received on holdings 40000 6 months 15% pa. 9750
31.3.10 Interest accrued on closing balance 90000 3 months 15% pa. 3375
Note : - It is assumed that interest has been received first on 31.12.09 & after that debentures of Rs.40000 FV
have been sold.
W.N. (2) Calculation of cost of debenture purchased on
1.5.2009
Total amount paid 53500/-
Less : Interest (w.n. 1) 2500/-
Cost = 51000/-
---------
Solved Answer Accounts CA IPCC May. 2010 10
W.N. (3) Calculation of Profit / Loss on sale of debentures on 1.11.09
Sale proceeds 57300/-
Less : Cost of FIFO basis
105000
--------- x 60000 = 63000/-
100000 ---------
Loss on sale 5700/-
W.N. (4) Calculation of profit / loss on sale of debentures on 31.12.09
Sale proceeds 85000/-
Less : Cost on FIFO basis
105000
--------- x 40000 = 42000/-
100000 --------
Profit on sale = 13000/-
Qn. 5. (a) On the basis of the following informations, prepare Income and Expenditure Account for the year
ended 31st March, 2010 : [ 8 marks ]
Receipts and Payments Account for the year ended 31st March, 2010
Receipts Rs. Payments Rs.
To Cash in hand (opening) 1,300 By Salaries 2,58,000
To Cash at Bank (opening) 3,850 By Rent 71,500
To Subscripttions 4,94,700 By Printing & Stationery 3,870
To Interest on 8% Govt. Bonds 4,000 By Conveyance 10,600
To Bank Interest 160 By Scooter purchased 50,000
By 8% Govt. Bonds 1,00,000
By Cash in hand (closing) 840
By Cash at Bank (closing) 9,200
----------- ----------
5,04,010 5,04,010
.
(i) Salaries paid includes Rs. 6,000 paid in advance for April, 2010. Monthly salaries paid were Rs. 21,000.
(ii) Outstanding rent on 31st March, 2009 and 31st March, 2010 amounted to Rs. 5,500 and Rs. 6,000
respectively.
(iii) Stock of printing and stationery material on 31st March, 2009 was Rs. 340; it was Rs. 365 on 31st March,
2010.
(iv) Scooter was purchased on 1st October, 2009. Depreciation @ 20% per annum is to be provided on it.
(v) Investments were made on 1st April, 2009.
(vi) Subscripttions due but riot received on 31st March, 2009 and 31st March, 2010 totalled Rs, 14,000 and
Rs. 12,800 respectively. On 31st March, 2010 subscripttions amounting to Rs. 700 had been received in
advance for April, 2010.
(b) The following particulars relate to Bee Ltd. for the year ended 31st March, 2010 : [ 8 marks ]
(i) Furniture of book value of Rs. 15,500 was disposed off for Rs. 12,000.
(ii) Machinery costing Rs. 3,10,000 was purchased and Rs. 20,000 were spent on its erection.
(iii) Fully paid 8% preference shares of the face value of Rs. 10,00,000 were redeemed at a premium of 3%.
In this connection 60,000 equity shares of Rs. 10 each were issued at. a premium of Rs. 2 per share. The
entire money being received with applications.
(iv) Dividend was paid as follows :
On 8% preference shares Rs. 40,000
On equity shares for the year 2009-10 Rs. 1,10,000
(v) Total sales were Rs. 32,00,000 out of which cash sales were Rs. 11,50,000.
(vi) Total purchases were Rs. 8,00,000 including cash purchase of Rs. 60,000.
(vii) Total expenses were Rs. 12,40,000.
(viii) Taxes paid including dividend tax of Rs. 22,500 were Rs. 3,30,000.
(ix) Cash and cash equivalents as on 31st March, 2010 were Rs. 1,25,000.
You are requested to prepare Cash Flow Statement as per AS-3 for the year ended 31st March, 2010 after
taking into consideration the following also :
On 31st March, 2009 On 31st March, 2010
Rs. Rs.
Sundry debtors 1,50,000 1,47,000
Sundry creditors 78,000 83,000
Unpaid expenses 63,000 55,000
Solved Answer Accounts CA IPCC May. 2010 11
Ans. 5 (a) Income & Expenditure account for the year ended 31.3.10
Expenditure Amount Income Amount
To Salaries
Paid 258000
Closing advance 6000
” Rent
Paid 71500
+ Closing o/s 6000
- Opening o/s 5500
” Printing & Stationery 3870
Less : Clo. Stock of P&S 365
Add : Op. stock of P&S 340
” Conveyance
” Depreciation on scooter
(50000 x 20% x 6/12)
” Surplus (B/f)
252000
72000
3845
10600
5000
157515
500960
By Subscripttions
Received 494700
+ Closing o/s 12800
- Opening o/s 14000
- Closing advance 700
” Interest on 8% Govt. Bonds
Received 4000
Accrued 4000
” Bank interest
492800
8000
160
500960
Ans. 5 (b) Bee Ltd.
W.N. (1) Sundry Debtors a/c
To Balance b/d
” Sales (Credit)
[3200000 – 1150000]
150000
2050000
2200000
By Cash a/c (B/f)
” Balance c/d
2053000
147000
2200000
Sundry Creditors a/c
To Cash a/c (B/f)
” Balance c/d
735000
83000
818000
By Balance b/d
” purchases (credit)
(800000 – 60000)
78000
740000
818000
Unpaid Expenses a/c
To Cash a/c
” Balance c/d
1248000
55000
1303000
By Balance b/d
” Expenses a/c
63000
1240000
1303000
Cashflow Statements for the year ended 31.3.2010
A. Cashflow from operating activities
Cash sales 1150000
Collection from debtors 2053000
3203000
Less : Payments
Cash purchases 60000
Payment to creditors 735000
Expenses paid 1248000 2043000
Cash generated from operations 1160000
Less : Income Taxes paid 307500 852500
(320000 – 22500)
B. Cashflow from investing activities
Sale of Furniture 12000
Purchase of machinery (330000) (318000)
C. Cashflow from financing activities
Redemption of preference shares
[ 1000000 + (1000000 x 3%) ] (1030000)
Issue of equity shares
(60000 Shares x 12% each) 720000
Solved Answer Accounts CA IPCC May. 2010 12
Dividend paid
Preference 40000
Equity 110000 (150000)
Dividend distribution tax paid (22500) (482500)
------------
Net increase in cash & cash equivalents 52000
Closing cash & cash equivalents 125000
Opening cash & cash equivalents 73000
Qn. 6. Answer the following : [ 4 x 4 = 16 marks ]
(a) Weak Ltd. acquired the fixed assets of Rs. 100 lakhs on which it received the grant of Rs. 10 lakhs. What
will be the cost of the fixed assets as per AS-12 and how it will be disclosed in the financial statements.
(b) During the current year 2009-10 M/s L & C Ltd. made the following expenditure relating to its plant and
machinery :
Rs.
General repairs 4,00,000
Repairing of Electric Motors 1,00,000
Partial Replacement of parts of Machinery 50,000
Substantial improvements to the electrical wiring system
which will increase efficiency of the plant and machinery 10,00,000
What amount should be capitalised according to AS-10 ?
(c) What are the advantages of pre-packaged accounting software ?
(d) Raw materials inventory of a company includes certain material purchased at Rs. 100 per kg. The price
of the material is on decline and replacement cost of the inventory at the year end is Rs. 75 per kg. It is
possible to convert the material into finished product at conversion cost of Rs. 125.
Decide whether to make the product or not to make the product, if selling price is (i) Rs. 175 and (ii) Rs.
225. Also find out the value of inventory in each case.
Ans. 6 (a) Under ASIL, where the grant relates to a specific fixed assets, the company can follow any of the
following accounting methods, as illustrated below –
Particulars Asset Cost reduction method Deferred income method
1. Original cost of machinery
2. Scrap value of ”
3. Specific Grant received
4. Cost (1) – (2) – (3)
Rs. 100 lacs
NIL
Rs.10 lacs
[Reduced from cost]
Rs. 90 lacs
Rs.100 lacs
NIL
Rs.10 lacs
[Treated as deferred income]
Rs. 100 lacs
Note : (1) Rs. 90 lacs will be written off over the useful life of fixed assets.
Note : (2) The balance in deferred income a/c shall be shown in balance sheet separately after reserve & surplus
but before secured loan with a descripttion as deferred government grants.
Ans. 6 (b) As per As 10, expenditure on improvements / repairs that increases the future benefits from the
existing asset beyond its previously assessed standard of performance is capitalized other expenditures should be
charged to the P & L account.
The following is the break up of revenue & capital expenditure in this case –
Particulars Reasons / Explanations Total Revenue Exp. Capital Exp.
(a) General Repairs
(b) Repairing of Electric
Motors
(c) Partial Replacement of
parts of Machinery
Maintenance of assets rather than
increase in future benefits
Maintenance of assets rather than
increase in future benefits
Replacement of defective parts,
does not lead to increase in
future benefits.
400000
100000
50000
400000
100000
50000
NIL
NIL
NIL
Solved Answer Accounts CA IPCC May. 2010 13
(d) Substantial
improvement to the
electrical wiring system
which will increase
efficiency
Improvement in asset
functionality, which will create
benefits of enduring nature
1000000 NIL 1000000
Ans. 6 (c) ADVANTAGES OF PRE-PACKAGED ACCOUNTING SOFTWARE :
1. Easy to install: The CD or floppy disk is to be inserted and the setup file should be run to complete the
installation. Certain old DOS based accounting softwares required some settings to be added in the system
configuration file and the system batch file. These instructions are generally provided in the user manuals.
2. Relatively inexpensive: These packages are sold at very cheap prices nowadays.
3. Easy to use: Mostly menu driven with help options. Further the user manual provides most of the solutions
to problems that the user may face while using the software.
4. Backup procedure is simple: Housekeeping section provides a menu for backup. The backup can be taken
on floppy disk or CD or harddisk.
5. Certain flexibility of report formats provided by some of the softwares: This allows the user to make the
invoice, challan, GRNs look the way they want.
6. Very effective for small and medium size businesses: Most of their functional areas are covered by these
standardised packages.
Ans. 6 (d) If Raw Material is sold without conversion into finished product
Cost of Raw Material per k.g. 100/-
Less : Replacement cost per k.g. 75/-
Loss per kg. 25/-
If Raw Material is converted & than sold
Particulars case 1 case 2
Selling Price of Finished product 175/- 225/-
Less : Raw material cost 100/-
Conversion cost 125/- 225/- 225/-
Loss per k.g. 50/- NIL
Decision
Case 1 Raw Material should be sold without conversion
Case 2 Conversion of Raw material into finished goods is beneficial.
Value of Inventory : Generally Raw Materials held for use in production process are valued at cost or NRV
whichever is lower. But if the finished goods are expected to be sold at or above cost, then Raw Material can be
valued at cost.
Case 1 : - In this case the NRV of finished goods is also declined Raw Material should be valued at NRV i.e. Rs.75
per k.g.
Case 2 : In this case the NRV of finished goods is equal to cost ∴We can value Raw Material at cost i.e. Rs.100
per kg.
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