DATE:20-11-24 CODE:INT-1120 MARKS:100

BATCH:INTERMEDIATE REV. JAN. 25 BOTH

CA INTERMEDIATE
ADVANCED ACCOUNTING
SYLLABUS:MODULE - II
DIVISION A (MCQ)
1. Identify the statement(s) which is/are incorrect.
(a) Storage costs which is a necessary part of the production process is included in inventory valuation.
(b) Administration overheads are never included in inventory valuation.
(c) Full amount of variable production overheads incurred are included in inventory valuation.
(d) Administration overheads are always included in inventory valuation.
2. On sale of an asset which was revalued upwards, what would be the treatment of Revaluation Reserve?
(a) The Revaluation Reserve is credited to P/L since the profit on sale of such asset is now realized.
(b) The Revaluation Reserve is credited to Retained Earnings as a movement in reserves without impacting the P/
L.
(c) No change in Revaluation Reserve since profit on sale of such asset is already impacting the P/L.
(d) The Revaluation Reserve is reduced from the asset value to compute profit or loss.
3. A machinery was purchased having an invoice price ` 1,18,000 (including GST ` 18,000) on 1 April 20X1. The GST
amount is available as input tax credit. The rate of depreciation is 10% on SLM basis. The depreciation for 20X2-X3
would be
(a) ` 10,000. (b) ` 11,800. (c) ` 9,000. (d) ` 10,500.
4. Current investments are carried at
(a) Fair value. (b) cost.
(c) Cost and fair value, whichever is less. (d) Cost and fair value, whichever is higher
5. A Ltd. acquired 2,000 equity shares of Omega Ltd. on cum-right basis at ` 75 per share. Subsequently, omega Ltd.
made a right issue of 1:1 at ` 60 per share, which was subscribed for by A. Total cost of investments at the year-end
will be `
(a) 2,70,000. (b) 1,50,000. (c) 1,20,000. (d) 1,70,000.
6. X Ltd is commencing a new construction project, which is to be financed by borrowing. The key dates are as follows:
(i) 15th May, 20X1: Loan interest relating to the project starts to be incurred
(ii) 2nd June, 20X1: Technical site planning commences
(iii) 19th June, 20X1: Expenditure on the project started to be incurred
(iv) 18th July, 20X1: Construction work commences
Identify the commencement date for capitalisation under AS 16.
(a) 15th May, 20X1. (b) 19th June, 20X1.
(c) 18th July, 20X1. (d) 2nd June, 20X1
7. AS 19 lays down 5 deterministic conditions to classify the lease as a finance lease. To classify the lease as an
operating lease – which statement is correct?
(a) Any 1 condition fails. (b) Majority of the 5 conditions fail.
(c) All 5 conditions fail. (d) Any 2 conditions fails.
8. Sun Limited has purchased a computer with various additional software. These are integral part of the computer.
Which of the following are true in the context of AS 26:
(a) Recognise Computer and software as tangible asset
(b) Recognise tangible and intangible separately
(c) Recognise computer and software as intangible asset
(d) Does not recognize the software as an asset.
9. Hexa Ltd developed a technology to enhance the battery life of mobile devices. Hexa has capitalised development
expenditure of ` 5,00,000. Hexa estimates the life of the technology developed to be 3 years but the company has
forecasted that 50% of sales will be in year 1, 35% in year 2 and 15% in year 3. What should be the amortisation charge
in the second year of the product’s life?
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 (a) ` 2,50,000 (b) ` 1,75,000 (c) ` 1,66,667 (d) ` 1,85,000
10. In case of Corporate assets in the Balance Sheet of an entity, the following is true:
(a) Apply Bottom up test if corporate assets cannot be allocated to CGU (cash generating unit) under review.
(b) Apply Top down test if corporate assets cannot be allocated to CGU (cash generating unit) under review.
(c) Apply both Bottom up test and Top down test if corporate assets cannot be allocated to CGU (cash generating
unit) under review.
(d) Apply either Bottom up test or Top down test if corporate assets cannot be allocated to CGU (cash generating
unit) under review.
11. In case of reversal of impairment loss, which statement is true:
(a) Goodwill written off can never be reversed.
(b) Goodwill written off can be reversed without any conditions to be met.
(c) Goodwill written off can be reversed only if certain conditions are met.
(d) Goodwill written off can be reversed.
12. The plans that are established by legislation to cover all enterprises and are operated by Governments include:
(a) Multi-Employer plans (b) State plans
(c) Insured Benefits (d) Employee benefit plan
13. Best estimates of the variable to determine the eventual cost of post-employment benefits is referred to as:
(a) Employer’s contribution (b) Actuarial assumptions
(c) Cost to Company (d) Employee’s contribution
14. X Co is a business that sells second hand cars. If a car develops a fault within 30 days of the sale, X Co will repair it free
of charge. At 1st March 20X1, X Co had made a provision for repairs of ` 25,000. At 31st March 20X1, X Co calculated
that the provision should be ` 20,000. What entry should be made for the provision in X Co's income statement for
the month 31st March 20X1?
(a) A charge of ` 5,000 (b) A credit of ` 5,000
(c) A charge of ` 20,000 (d) A credit of ` 25,000
15. Which of the following item does the statement below describe?
“A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within the entity’s control”
(a) A provision (b) A current liability
(c) A contingent liability (d) Deferred tax liability
16. Which of the following can be classified as an integral foreign operation?
(a) Branch office serving as an extension of the head office in terms of operations
(b) Independent subsidiary of the parent company
(c) Branch office independent of the head office in terms of operational decisions
(d) None of the above
17. Which of the following items should be converted to closing rate for the purposes of financial reporting?
(a) Items of Property, Plant and Equipment
(b) Inventory
(c) Trade Payables, Trade Receivables and Foreign Currency Borrowings
(d) All of the above
18. State which of the followings statements are correct:
(1) There are no pre-conditions required to recognize deferred tax liability,
(2) Deferred tax asset under all circumstances can only be created if and only if there is reasonable certainty that
future taxable income will arise.
(a) Both are correct. (b) Only (1) is correct.
(c) Only (2) is correct. (d) None of the statements are correct.
* FOR 19 TO 21
XY Ltd. agrees to construct a building on behalf of its client GH Ltd. on 1st April 20X1. The expected completion time
is 3 years. XY Ltd. incurred a cost of ` 30 lakh up to 31st March 20X2. It is expected that additional costs of ` 90 lakh.
Total contract value is ` 112 lakh. As at 31st March 20X2, XY Ltd. has billed GH Ltd. for ` 42 lakh as per the agreement.
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 Assume that the work is completed to the extent of 75% by the end of Year 2.
19. Revenue to be recognized by XY Ltd. for the year ended 31st March 20X2 is
(a) ` 28 lakh (b) ` 42 lakh (c) ` 30 lakh (d) ` 32 lakh
20. Total expense to be recognised in Year 1 is
(a) ` 30 lakh (b) ` 120 lakh (c) ` 38 lakh (d) ` 36 lakh
21. Revenue to be recognised for year 2 is
(a) ` 84 lakh (b) ` 42 lakh (c) ` 56 lakh (d) ` 28 lakh
22. The Accounting Club has 100 members who are required to pay an annual membership fee of ` 5,000 each. During
the current year, all members have paid the fee. However, 5 members have paid an amount of ` 10,000 each. Of
these, 3 members paid the current year’s fee and also the previous year’s dues. Remaining 2 members have paid
next years’ fee of ` 5,000 in advance.
Revenue from membership fee for the current year to be recognised will be:
(a) ` 5,25,000 (b) ` 5,10,000 (c) ` 5,00,000 (d) ` 5,15,000
23. FlixNet International offers a subscription fee model to allow the paid subscribers an annual viewing of movies,
sports events and other content. It allows users to register for free and have access to limited content for one month
without any charges. The customer has a right to cancel the subscription w ithin a m onth’s t ime but is r equired t o
pay for 1 y ear subscription fee after the free period. XY has subscribed for free viewing on 1st March 20X1. After 1
month, he has agreed to pay the annual membership and has paid ` 1,200 on 31st March 20X1 for the subscription
that is valid up to 31st of March 20X2.
Revenue that can be recognized by FlixNet for the year ended 31st March 20X2 is
(a) ` 100 (b) ` 1,200 (c) Nil (d) ` 1,100
24. State which statement is correct:
(a) In case of merger – All Reserves and surplus of vendor company are taken over by Purchasing company.
(b) In case of Purchase – None of the Reserves and surplus of vendor company are taken over by Purchasing
company.
(c) Both (a) and (b) are correct.
(d) Only (a) is correct.
25. State which statement is correct:
(a) In case of merger – We use pooling of interest method for accounting.
(b) In case of Purchase We use purchase method or pooling of interest method depending upon whether it is take
over at agreed values or book values.
(c) Both (a) and (b) are correct.
(d) Only (a) is correct.
26. State which statement is incorrect:
(a) In case of merger – We can issue either preference shares or equity shares to PSH.
(b) In case of Purchase – We can issue either preference shares or equity shares to PSH.
(c) In case of merger – We can issue only preference shares to PSH.
(d) none of the above.
27. In consolidated balance sheet, the share of the outsiders in the net assets of the subsidiary must be shown as
(a) Minority interest. (b) Capital reserve.
(c) Current liability. (d) Current assets.
28. Provision for Tax made by the subsidiary company will appear in the consolidated balance sheet as an item of
(a) Current liability. (b) Revenue profit.
(c) Capital profit. (d) Current assets.
29. X Ltd. has received a grant of ` 20 crore for purchase of a qualified machine costing ` 80 crore. X Ltd has a policy to
recognise the grant as a deduction from the cost of the asset. The expected remaining useful life of the machine is
10 years. Assume that there is no salvage value and the depreciation method is straight-line. The amount of annual
depreciation to be charged as an expense in Profit and Loss Statement will be:
(a) ` 10 crore (b) ` 6 crore (c) ` 2 crore (d) ` 8 crore
30. X Ltd has received a grant of ` 20 crore for purchase of a qualified machine costing ` 80 crore. X Ltd. has a policy to
recognise the grant as deferred income. The expected remaining useful life of the machine is 10 years.
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 Assume that there is no salvage value and the depreciation method is straight-line. The amount of other income to
be to be recognised in Profit and Loss Statement will be:
(a) ` 10 crore (b) ` 6 crore (c) ` 2 crore (d) ` 8 crore
(30 MARKS)
DIVISION B (DESCRIPTIVE)
Q-1.(a) A Ltd acquired 1,600 ordinary shares of `100 each of B Ltd on 1st July, 20X1. On 31st December, 20X1, the balance
sheets of the two companies were as given below:
Balance Sheet of A Ltd. and its subsidiary, B Ltd. as at 31st December, 20X1

Notes to Accounts

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 The Profit & Loss Account of B Ltd. showed a credit balance of `30,000 on 1st January, 20X1 out of which a dividend
of 10% was paid on 1st August, 20X1; A Ltd. credited the dividend received to its Profit & Loss Account. The Plant &
Machinery which stood at ` 1,50,000 on 1st January, 20X1 was considered as worth ` 1,80,000 on 1st July, 20X1; this
figure is to be considered while consolidating the Balance Sheets. The rate of depreciation on plant & machinery is
10% (computed on the basis of useful lives).
Prepare consolidated Balance Sheet as at 31st December, 20X1.
(10 MARKS)
Q-1.(b) Akshar Ltd. installed a new Plant (not a qualifying asset), at its production facility, and incurred the following costs:
ª% Cost of the Plant (as per supplier’s invoice): ` 30,00,000
ª% Initial delivery and handling costs: ` 1,00,000
ª% Cost of site preparation: ` 2,00,000
ª% Consultant fee for advice on acquisition of Plant: ` 50,000
ª% Interest charges paid to supplier against deferred credit: ` 1,00,000
ª% Estimate of Dismantling and Site Restoration costs: ` 50,000 after 10 years (Present Value is ` 30,000)
ª% Operating losses before commercial production: ` 40,000
The company identified motors installed in the Plant as a separate component and a cost of ` 5,00,000 (Purchase
Price) and other costs were allocated to them proportionately. The company estimates the useful life of the Plant
and those of the Motors as 10 years and 6 years respectively and SLM method of Depreciation is used.
At the end of Year 4, the company replaces the Motors installed in the Plant at a cost of ` 6,00,000 and estimated the
useful life of new motors to be 5 years. Also, the company revalued its entire class of Fixed Assets at the end of Year
4. The revalued amount of Plant as a whole is ` 25,00,000. At the end of Year 8, the company decides to retire the
Plant from active use and also disposed the Plant as a whole for ` 6,00,000.
There is no change in the Dismantling and Site Restoration liability during the period of use. You are required to
explain how the above transaction would be accounted in accordance with AS 10.
(4 MARKS)
Q-2.(a) B&P Ltd. availed a lease from N&L Ltd. The conditions of the lease terms are as under:
(i) Lease period is 3 years, in the beginning of the year 2009, for equipment costing ` 10,00,000 and has an expected
useful life of 5 years.
(ii) The Fair market value is also ` 10,00,000
(iii) The property reverts back to the lessor on termination of the lease.
(iv) The unguaranteed residual value is estimated at ` 1,00,000 at the end of the year 2011.
(v) 3 equal annual payments are made at the end of each year.
(vi) Consider IRR = 10%.
The present value off ` 1 due at the end of 3rd year at 10% rate of interest is ` 0.7513. The present value of annuity
of ` 1 due at the end of 3rd year at 10% IRR is ` 2.4868.
State whether the lease constitute finance lease and also calculate unearned finance income.
(5 MARKS)
Q-2.(b) A firm of contractors obtained a contract for construction of bridges across river Revathi. The following details are
available in the records kept for the year ended 31st March, 20X1.

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 The firm seeks your advice and assistance in the presentation of accounts keeping in view the requirements of AS 7
issued by your institute.
(5 MARKS)
Q-2.(c) ABC Company limited had an investment in Venture Capital amounting ` 10 Crores. Venture capital in turn had
invested in the below portfolio companies (New Start- ups) on behalf of ABC Limited:

During the FY 2019-2020, Venture Capital had sold their investment in Star Limited and realised an amount of ` 8
Crores on sale of shares of star Limited and entire proceeds of ` 8 Crores have been transferred by Venture Capital
to ABC Company Limited.
The accounts manager has received the following additional information from venture capital on 31.03.2020:
(1) 8 Crores has been deducted from the cost of investment and carrying amount of investment as at year end is 2
Crores.
(2) Company had to pay a capital gain tax @ 20% on the net sale consideration of ` 4 Crores.
(3) Due to COVID-19, the remaining start- ups (i.e. Oscar Limited, Zee Limited, and Sony Limited) are not performing
well and will soon wind up their operations. Venture capital is monitoring the situation and if required they will
provide an impairment loss in June 2020 Quarter.
You need to suggest the accounts manager what should be the correct accounting treatment as per AS 22 “Accounting
for Taxes on Income”.
(4 MARKS)
Q-3.(a) A plant was acquired 15 years ago at a cost of ` 5 crores. Its accumulated depreciation as at 31st March, 20X1 was `
4.15 crores. Depreciation estimated for the financial year 20X1-20X2 is ` 25 lakhs. Estimated Net Selling Price as on
31st March, 20X1 was ` 30 lakhs, which is expected to decline by 20 per cent by the end of the next financial year.
Its value in use has been computed at ` 35 lakhs as on 1st April, 20X1, which is expected to decrease by 30 per cent
by the end of the financial year.
(i) Assuming that other conditions for applicability of the impairment Accounting Standard are satisfied, what should
be the carrying amount of this plant as at 31st March, 20X2?
(ii) How much will be the amount of write off for the financial year ended 31st March, 20X2?
(iii) If the plant had been revalued ten years ago and the current revaluation reserves against this plant were to be ` 12
lakhs, how would you answer to questions (i) and (ii) above?
(iv) If the value in use was zero and the enterprise were required to incur a cost of ` 2 lakhs to dispose of the plant, what
would be your response to questions (i) and (ii) above?
(5 MARKS)
Q-3.(b) A business having the Head Office in Kolkata has a branch in UK. The following is the trial balance of Branch as at
31.03.20X4:

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• Closing stock at branch is £ 700 on 31.03.20X4.
• Depreciation @ 10% p.a. is to be charged on Machinery.
• Prepare the trial balance after been converted in Indian Rupees.
• Exchange rates of Pounds on different dates are as follow:
01.04.20X1– ` 61; 01.04.20X3– ` 63 & 31.03.20X4 – ` 67
(5 MARKS)
Q-3.(c) On 1st April, 2018, Tina Ltd. take over the business of Rina Ltd. and discharged purchase consideration as follows:
(i) Issued 50,000 fully paid Equity shares of ` 10 each at a premium of ` 5 per share to the equity shareholders of Rina
Ltd.
(ii) Cash payment of ` 50,000 was made to equity shareholders of Rina Ltd.
(iii) Issued 2,000 fully paid 12% Preference shares of ` 100 each at par to discharge the preference shareholders of Rina
Ltd.
(iv) Debentures of Rina Ltd. 20,000) will he converted into equal number and amount of 10% debentures of Tina Ltd.
Calculate the amount of Purchase consideration as per AS-14 and pass Journal Entry relating to discharge of purchase
consideration in the books of Tina Ltd.
(4 MARKS)
Q-4.(a) The following information is presented by Mr. Z (a stock broker), relating to his holding in 9% Central Government
Bonds.
Opening balance (nominal value) ` 1,20,000, Cost ` 1,18,000 (Nominal value of each unit is ` 100).
1.3.20X1 Purchased 200 units, ex-interest at ` 98.
1.7.20X1 Sold 500 units, ex-interest out of original holding at ` 100.
1.10.20X1 Purchased 150 units at ` 98, cum interest.
1.11.20X1 Sold 300 units, ex-interest at ` 99 out of original holdings.
Interest dates are 30th September and 31st March. Mr. Z closes his books every 31st December. Show the investment
account as it would appear in his books. Mr. Z follows FIFO method.
(5 MARKS)
Q-4.(b) The fair value of plan assets of Anupam Ltd. was ` 2,00,000 in respect of employee benefit pension plan as on 1st
April, 20X1. On 30th September, 20X1 the plan paid out benefits of ` 25,000 and received inward contributions of `
55,000. On 31st March, 20X2 the fair value of plan assets was ` 3,00,000. On 1st April, 20X1 the company made the
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 following estimates, based on its market studies and prevailing prices.

Calculate the expected and actual returns on plan assets as on 31st March, 20X2, as per AS 15.
(5 MARKS)
Q-4.(c) Swift Ltd. acquired a patent at a cost of ` 80,00,000 for a period of 5 years and the product life-cycle is also 5 years.
The company capitalized the cost and started amortizing the asset at ` 10,00,000 per annum. The company had
amortized the patent at 10,00,000 per annum in first two years on the basis of economic benefits derived from the
product manufactured under the patent. After two years it was found that the product life-cycle may continue for
another 5 years from then. The patent was renewable and Swift Ltd. got it renewed after expiry of five years. The net
cash flows from the product during these 5 years were expected to be ` 36,00,000, ` 46,00,000, ` 44,00,000, `
40,00,000 and ` 34,00,000. Find out the amortization cost of the patent for each of the years.
(4 MARKS)
Q-5.(a) Mr. Mehul gives the following information relating to items forming part ofinventory as on 31-3-20X1. His factory
produces Product X using Rawmaterial A.
(i) 600 units of Raw material A (purchased @ ` 120). Replacement cost ofraw material A as on 31-3-20X1 is ` 90 per unit.
(ii) 500 units of partly finished goods in the process of producing X and costincurred till date ` 260 per unit. These units
can be finished next year byincurring additional cost of ` 60 per unit.
(iii) 1500 units of finished Product X and total cost incurred ` 320 per unit.
Expected selling price of Product X is ` 300 per unit.
Determine how each item of inventory will be valued as on 31-3-20X1. Also calculate the value of total inventory as
on 31-3-20X1.
(5 MARKS)
Q-5.(b) For the year ended 31st March 20X1, KY Enterprises has entered into the following transactions.
On 31 March 20X1, KY supplied two machines to its customer ST. Both machines were accepted by ST on 31 March
20X1. Machine 1 was a machine that was routinely supplied by KY to many customers and the installation process
was very simple.
Machine 1 was installed on 2 April 20X1 by ST’s employees.
Machine 2 being more specialised in nature requires an installation process which is more complicated, requiring
significant assistance from KY. Machine 2 was installed between 2 and 5 April 20X1. Details of costs and sales prices
are as follows:
Machine 1 Machine 2
Sale Price 3,20,000 3,00,000
Cost of production 1,60,000 1,50,000
Installation fee nil 10,000
How should above transactions be recognized by KY Enterprises for the year ended 31st March 20X1?
(5 MARKS)
Q-5.(c) Rainbow Limited borrowed an amount of ` 150 crores on 1.4.20X1 for construction of boiler plant @ 11% p.a. The
plant is expected to be completed in 4 years. Since the weighted average cost of capital is 13% p.a., the accountant
of Rainbow Ltd. capitalized ` 19.50 crores for the accounting period ending on 31.3.20X2. Due to surplus fund out of
` 150 crores, income of ` 3.50 crores were earned and credited to profit and loss account. Comment on the above
treatment of accountant with reference to relevant accounting standard.
(4 MARKS)

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