Past Attempt Papers

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Past 3 Attempt Paper Analysis

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Past Attempt Papers

December 21
Section : A - MCQ 20x1 = 20 Marks

Q.1 SHEENA TASHIKA Ltd. made the following payments during the year ended 31st March 2021: Rs 60 lakhs to
acquire a Software, Rs 60 lakhs to acquire a Website for a period of 8 years,Rs 60 lakhs to acquire a Copy right for
a period of 15 years,Rs 60 lakhs to acquire Goodwill of a firm,Rs 60 lakhs to acquire Goodwill arising under
Amalgamation in the nature of Purchase ,Rs 60 lakhs to acquire a Patent for a period of 5 years.,Rs 60 lakhs to
acquire Stock Exchange Membership Rights, Rs 60 lakhs to the State Govt towards the cost of roads built in the
vicinity of the project for the purpose of carrying materials to the site. The roads so built is the property of State
Govt.,Rs 60 lakhs towards extensive special initial advertisement campaign for the new product.,Rs 60 lakhs to
develop a Drug to treat Cancer but AS 26 criteria for capitalization was not met., What is the Total Amortization
Cost to be charged to Profit & Loss A/c? Ans 1. Rs 233.5 lakhs 2. Rs 238 lakhs 3. Rs 246 lakhs 4. None of these
Amortisation of software 60/5 = 12

Amortisation of Website 60 / 5 = 12
Amortisation of Copyrights 60/ 10 = 6.00
Amortisation of goodwill of FIRM = 60 / 10 = 6
Amortisation of GW 60/5 = 12.00
Amortisation of Patents 60/5 = 12
= 60.00

Q.2 X Ltd. holds 51% of Y Ltd.,Y Ltd holds 51% of W Ltd.,Z Ltd holds 49% of W Ltd. The Related Parties as per AS-18 are:

Y holds 51% of W
X 51% of Y

Z holds 49% of W

Q.3 JIVATMA Ltd. purchased a plant for US $ 50,000 on 31st October, 2020 payable after 6 months. The company
entered into a forward contract for 6 months @ Rs 64.25 per Dollar. On 31st October, 2020 the exchange rate was
Rs 61.50 per Dollar. The profit or loss on forward contract for the year ended 31st March, 2021 is
$ 50,000 x 61.50
$ 50,000 x 64.25
$50,000 x 2.75 = 1,37,500

Q.4 Net Profits of JIV AATMA Ltd. for the years 2020-2021,2019-2020,2018-2019,2017- 2018,2016-2017 are Rs
25 crore,Rs 20 crore, Rs 15 crore,Rs 10 crore and Rs 5 crore respectively. During 2020-2021,the company
incurred Rs 7,00,000 and Rs 3,00,000 on free education and medical treatment of the employees of the company
and their families respectively under CSR projects. Calculate the short fall of expenditure on Corporate Social
Responsibility as per The Companies Act,2013.
25+20+15
3
= 20 Crores
2% of 20 = 40,00,000
Actual spent = 10,00,000

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Shortfall : 30,00,000

5.
On the basis of the information given, in respect of hire purchase and leased assets, additional provision shall be
made as under:
(Rs. in crore)
(a) Where hire charges are overdue Nil -
upto 12 months
(b) Where hire charges are overdue 10% of the net book value 241
for more than 12 months but upto 10% x 2,410
24 months
(c) Where hire charges are overdue 40 percent of the net book 512
for more than 24 months but upto value
36 months 40% x 1,280
(d) Where hire charges or lease 70 percent of the net book 452.90
rentals are overdue for more than value
36 months but upto 48 months 70% x 647
Total 1,205.90

6.
Year Net cash flow – Rs. In Amortisation ratio Amortisation amount
lakhs
1 200 200 / 800 = 0 .25 100
2 200 200 / 800 = 0.25 100
3 200 200 / 800 = 0.25 100
4 100 100 / 250 = 0 .40 Revised 40
5 100 100 / 250 = 0.40 Revised 40
6 50 50 / 250 = 0.20 Revised 20

7.
Computation:
(1) Theoretical ex-right fair value per share:
[(Rs 32 x 10,00,000) + (Rs 25 x 2,00,000)] / (10,00,000 + 2,00,000) i.e.
= 320,00,000 + 50,00,000 / 12,00,000 = Rs 30.83
(2) Adjustment factor:- fair value prior to exercise of rights/theoretical ex-right value. i.e. 32/30.83= 1.037
EPS as originally reported
Rs. 30.00,000/10,00,000 shares 3.00
EPS restated for right issue
Rs. 30,00,000/(10,00,000×Rs 1.037) 2.75

Rs. 30,00,000
--------------------------------------------------------------------------
(10,00,000× 1.037 x 3/12) + (12,00,000 × 9/12)

8. All of the above

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9.
Bharat Limited obtained a 14% loan from bank for Rs. 120 lakhs on 1st June , 2019 to be utilised as follows:
Construction of a buildings ( work was held up totally for 1 50 lakhs
month during the year due to heavy rains)
Purchase of machinery 40 lakhs
Working capital 20 lakhs
Advance for Purchase of Truck 10 lakhs
Construction of Building was completed on 1.8.2020 ( in my opinion this date should have been 31.12.20 or
onwards ) but was put to use on 01.10.2020. the machine was was installed on the same date. Delivery of the
truck was not received .
Pay Attention
Following lines were not given in the question:
During the year 2019-20 , the company had invested idle funds out its loan in Bank's fixed deposit and had earned
an interest of Rs. 2,00,000. The company repaid 50% of its loan on 31st March, 2020 and the balance on 31st Dec.
2020
Calculate the borrowing costs to be capitalised during the year 2018-19 and 2020-21.

Response: As per AS-16, borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset should be capitalized. A qualifying asset is an asset that necessarily takes a
substantial period of time (usually 12 months or more) to get ready for its intended use or sale. If an asset is
ready for its intended use or sale at the time of its acquisition then it is not treated as a qualifying asset for the
purposes of AS- 16.
Pay Attention
Following lines were not given in the question:
During the year 2019-20 , the company had invested idle funds out its loan in Bank's fixed deposit and had earned
an interest of Rs. 2,00,000. The company repaid 50% of its loan on 31st March, 2020 and the balance on 31st Dec.
2020
Calculate the borrowing costs to be capitalised during the year 2018-19 and 2020-21.

Total interest for the period 19-20

1.4.19 Loan taken on 31.3.20

1.6.19 50% Loan Repaid

In 19-20 entity has earned an interest of Rs. 2 lakhs also

31.12.20 31.3.21
1.4.20
Balance 50% repaid

Interest on borrowing for the period 1.6.19 till 31.3.20 = 120 lakhs x 14% x 10/12 = Rs. 14 lakhs
Less Interest Received on investment of idle funds : 2 lakhs
Eligible borrowing cost : 12 lakhs
Qualifying asset as per AS 16 = Rs. 50 lakhs ( building under construction till 31.3.19) = 12 x 50/ 120 lakhs = 5
lakhs
Since all other assets are not qualifying asset , interest related to them shall be debited to PL. Interest debited to
PL = total Interest for the 19-20 : 12

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Less Capitalised = 5 lakhs

=7
Interest computation for 20-21
Total Interest for the period 20-21
Remember : The company repaid 50% of its loan on 31st March, 2020 and the balance on 31st Dec. 2020
60 lakhs x 14% x 9/12 ( 1.4.20 till 31.12.20) = 6.30
So total interest for 20 -21 = 6.30
Since buildings got completed on the presumption it got completed on 31.12.20 or onwards
Interest capitalised on buildings will be = 6.30 x 50 / 120 = 2.625
Total Interest Capitalised : 19-20 = 5 lakhs & 2.625

10.
1,22,500x 35% = 42,875 DTL
54,300 x 35% = 19005 DTA
623500 x 35% = 2,18,225 DTA
7,84,500 x 35% = 2,74,575 DTA

11
Total cost incurred 500 + 105
Total cost of the project 500 + 105 + 495
% of the completion 605 / 1100 = 55%
Revenue to be recognised 1,050 crores x 55% = 577.50
Profit /Loss to be recognised 577.50 - 605 = (27.50)
Total Loss : 1,100 - 1050 = 50 less recognised 27.50 = Expected Loss 22.50

12
(i) Interest for the period = USD 12.50 × 5 % x Rs. 48/USD = Rs. 30
(ii) Increase in the liability towards the principal amount = USD 12.50 × (48-45) = Rs. 37.50
(iii) Interest that would have resulted if the loan was taken in Indian currency = USD 12.50 x 45 x 11% = Rs.
61.875
(iv) Difference between interest on local currency borrowing and foreign currency borrowing = Rs. 61.875 –
Rs. 30 = Rs. 31.875
increase in liability is towards principal amount is Rs. 37.50 out of 31.875 will be considered as borrowing cost
total borrowing cost will be : 30 + 31.875

13
Development phase expenditure amounting to Rs. 28 lacs meets assets recognition criteria.
The cost of internally generated asset would be lower of cost 28 + 90 lacs or RA 82 lacs
The difference 36 lacs will be amortized by the enterprise for the financial year 2020-21

14.

30% x 10 Ten cases x 90,000 = 270,000

10% x 10 Ten cases x 200,000 = 2,00,000
30% x 5 cases x 60,000 = 90,000
20% x 5 cases x 1,00,000 = 1,00,000
=6,60,000

15. Solution given in suggested correct

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16. Solution given in suggested correct

17. Solution given in suggested correct

18.
Cost = PV of MLP + PV of UGRV

Present value of unguaranteed Residual 80,000 x .7938 63,504

Value
Present value of lease Payments 6,00,000 – 63,504 5,36,496
(MLP + GRV)
Annual lease Payments = PV of lease 5,36,496 / 2.577 2,08,186
payments / P v of Annuity Factor
Gross investments = (MLP :i.e. Lease (2,08,186 x3 = 6,24,558 )+ 7,04,558
Payments + GRV) + UGRV UGRV 80,000
Less : PV of MLP + UGRV 6,00,000
Unearned finance income 1,04,558

18.
19.1.19 ---------------------------------- 19.1.20 ---------------------19.1.21---------------------------31.3.21

40,000 x 3% = 1,200
25,000 x 3% = 750
90,000 x 2% = 1,800

19. Solution given in suggested correct

Tax as per accounting profit : 15,00,000 x 30% = 4,50,000

Tax as per Income Tax profit : 1,50,000 x 30% = 45,000
Tax as per MAT : 8,75,000 x 7.5 % = 65,625
Tax expense = Current tax + Deferred tax
4,50,000 = 45,000 + Deferred tax
Therefore, Deferred Tax Liability as on 31.3.2021 = ` 4,50,000 – ` 45,0000 = ` 4,05,000
Amount of tax to be debited in Profit and Loss Account for the year 31.03.2021:
= Current tax + Deferred tax liability + Excess of MAT over current tax
= 45,000 + 4,05,000 + (65,625 – 45,000)
= 45,000 + 4,05,000 + 20,625 = 4,70,625

20.
Answer: Part 3

Section B - LAQ - SAQ

Q.1
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Property,Plant & Equipment appeared at Rs 50,00,000 in the Trial Balance of MALLYA co which is not a going
concern. Property,Plant & Equipment are subject to depreciation @10% on WDV basis. Realizable value of
Property,Plant & Equipment 80%. Realizable Expenses 5%. At what amount depreciation will be shown in the
Income Statement of MALLYA co.
Ans :- As Mallaya Co. is not a going concern, therefore Property. Plant & Equipment would be shown at Net
Realizable Value.
Realisable Value = Rs. 50,00,000 x 0.80 x less 50, 00 000 x 5% = 38,00,000
Depreciation charged = 50 lakhs - 38 lakhs = 12 lakhs

Q2
While finalizing the financial statements of the year ending 31/03/2021 the company finds that the stock sheets
of 31/03/2020 did not include two pages containing details of inventory worth Rs 10 lakhs. Comment.

Ans:- In this case, the stock sheet of 31/03/2020 (prior year) did not include two pages containing details of
inventory worth Rs. 10 lakhs which is the omission, and this omission was detected in the current period i.e.
31/03/2021. Therefore, it is a prior item as per AS – 5. It has resulted in understatement of profit of previous
period.

Q.3
On 1st April,2020, the Share Capital of S Ltd. consists of Rs 10 crore Equity Share Capital (Rs 10 each) and Rs 12
crore ,10% Preference Share Capital(Rs 100 each) (Convertible into Equity Shares of Rs 10 each).On 1st
July,2020,H Ltd. acquires 50 lac equity shares and 6.2 lac Preference Shares of S Ltd. State with reason whether S
Ltd. has become the subsidiary of H Ltd.
Ans:- S Ltd. has become the subsidiary of H Ltd because H Ltd. holds more than 50% of the total share capital of S
Ltd. (i.e. Rs. 5 crores + Rs. 6.2 crores).

Q.4
As at 31st March,2021,DEC Ltd has Equity Share Capital of Rs 475 lakh, Tangible Fixed Assets of Rs 325 lakh,
Statutory Reserves of Rs 25 lakh, and General Reserve of Rs 140 lakh, Current Liabilities of Rs 80 lakh, Current
Assets of Rs 425 lakh, Non- Current Liabilities of Rs 30 lakh,. 40% Statutory Reserves are to be maintained for 2
more years. The business of MAY Ltd. is taken over by JIWARAM Ltd.for Rs 600 lakh. The purchase consideration
is to be discharged by the issue of equity shares of Rs 100 each, Rs 80 paid up at a premium of Rs 800 per share.
The market value of an equity share of JIWARAM Ltd. at present is Rs 1000. Is there any need to open
Amalgamation Adjustment A/c in this case?
Ans:- There is no need to open Amalgamation Adjustment A/c in this case, since it is Amalgamation in the nature
of Merger and not purchase.

Q.5 A company is in a dispute involving allegation of infringement of patents by a competitor company who is
seeking damages of a huge sum of Rs 500 lakhs. The directors are of the opinion that the claim can be successfully
resisted by the company. How will you deal with this case?

Ans:- Since the directors of the company are of the opinion that the claim can be successfully resisted by the
company, therefore there will be no outflow of resources. The company will disclose the same as a contingent
liability by way of the following note: “Litigation is in the process against the company relating to a dispute with a
competitor who alleges that the company has infringed patents and is seeking damages of Rs. 500 lakhs. However,
the directors are of the opinion that the claim can be successfully resisted by the company.”

Q.6 Goodwill on the basis of Capitalisation of Super Profits Rs 5,00,000.Goodwill on the basis of Capitalisation of
Average Profits Rs 3,00,000.Goodwill on the basis of four years’ purchase of Super Profits Rs 2,00,000. Opening

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Capital Employed is 2/3rd of Closing Capital Employed. Calculate Goodwill of the firm at 3 years’ purchase of
Average Profits of the firm.

Ans:- Goodwill of the firm at 3 years’ Purchase of Average Profit of the firm = Rs. 4,50,000

Q.7
4,00,000 Equity Shares of Rs 10 each,Rs 8 paid up. 7,00,000 Equity Shares of Rs 5 each fully called up (Calls-in-
arrears @Rs 2 on 2,00,000 shares).3. 10,000 9% Preference Shares of Rs100 each fully paid up. Normal Rate of
Earnings—9%. Fair Value of an Equity Share (Rs 3 paid up) Rs 8.50.Difference between Yield Based Value and Net
Assets Value is Rs 1. Calculate Net Assets for Equity Shareholders and Expected FMP for Equity Shareholders.
Ans:- Net Assets for Equity Share Holders = Rs. 150 lakhs including uncalled amount and call–in– arrears or Net
Assets for Equity Share Holders = Rs. 138 lakhs excluding uncalled amount and call–in– arrears Expected Future
Maintainable Profit for Equity Shareholders = Rs. 17.01 lakhs

8.
A cosmetic article producing company provides the following information:
Cold cream Vanishing cream
Jan, 2020 - September, 2020 per month 5,00,000 5,00,000
October, 2020 - December, 2020 per month 2,50,000 7,50,000
Jan, 2020 - March, 2021 per month - 10,00,000
The company has enforced a gradual change in product-line on the basis of an overall plan. The BODs of the
company has passed a resolution in March, 2016 to this effect. The company follows calendar year as its
accounting year. Should it be treated as discontinuing operations?
Response – By gradually reducing the size of operations in the product line of Cold cream, the company has
increased its scale of operations in Vanishing cream. Such a change is a gradual or evolutionary, phasing out of a
product line or class of services and does not meet the definition criteria in AS - 24- namely disposing of
substantially in its entity a component of the enterprise. Discontinuing a product within an ongoing line of
business is not DO. Hence change over is not a discontinuing operation.
Q.9
On 1st April,2020, the Share Capital of S Ltd. consists of Rs 10 crore Equity Share Capital (Rs 10 each) and Rs 12
crore ,10% Preference Share Capital(Rs 100 each) (Convertible into Equity Shares of Rs 10 each).On 1st
July,2020,H Ltd. acquires 50 lac equity shares and 6.2 lac Preference Shares of S Ltd. with a view to their
subsequent disposal on 1st June,2021? State how will you deal with this case as per
AS 21. Ans:- If an Entity acquires control /stakes for the purpose of subsequent disposal in that case no
consolidation is required .

Q.10 P Ltd. has 60% voting right in Q Ltd. Q Ltd. has 20% voting right in R Ltd. Also, P Ltd. directly enjoys voting
right of 14% in R Ltd. R Ltd. is a listed company and regularly supplies goods to P Ltd. The management of R Ltd.
has not disclosed its relationship with P Ltd. How would you assess the situation from the viewpoint of AS 18 on
Related Party Disclosures?

Ans:-
In the present case, the control of P Ltd. in R Ltd. directly 14% and through Q Ltd. 12% does not go beyond 26%.
However, as per AS 18, significant influence may be exercised if investing party (P Ltd.) holds, directly or
indirectly through intermediaries, 20% or more of the voting power of the R Ltd.
As R Ltd. is a listed company and regularly supplies goods to P Ltd. therefore, related party disclosure, as per AS
18, is required.

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Q.11 Cashier of X Ltd. embezzled cash amounting to Rs 5,00,000 during March, 2021. However same comes to the
notice of Company management during April, 2021 only. Financial statements of the company are not approved
by the Board of Directors of the company. With the help of provisions of AS 4 “Contingencies and Event Occurring
after the Balance Sheet Date” decide, whether the embezzlement of cash should be adjusted in the books of
accounts for the ending March, 2021?

Ans :- The embezzlement of cash should be adjusted as per AS – 4 in the books of accounts for the ending March
2021 because though the theft, by the cashier Rs. 5,00,000 was detected after the balance sheet date (before
approval of financial statements) but it is additional information materially affecting the determination of the
cash amount relating to conditions existing at the balance sheet date.

Q.12
Y Ltd. purchased a machinery for Rs 80 lakhs. (Useful life 4 years and residual value Rs 16 lakhs) Government
grant received is Rs 32 lakhs. Refund of grant was made in the beginning of 3rd year. Calculate the Depreciation
for the 3rd year if the Grant is credited to Deferred Grant Account.
Ans :- Depreciation to be provided in 3rd Year = 16 Lakhs Depreciation in each year is calculated as 80 lakhs – 16
lakhs 4 Years

Q.13 Cashier of Y Ltd. embezzled cash amounting to Rs 5,00,000 during March, 2021. However the same comes to
the notice of Company only after approval of financial statements by the Board Directors of the company during
April, 2021 only. How will you deal with this case ?

Ans :- If embezzlement of cash comes to the notice of company management only after approval of financial
statements by the board of directors of the company, then its treatment shall be done as a Prior Period item as
per the provisions of AS 5. The nature and the amount of prior period items should be separately disclosed on the
Statement of Profit and Loss in a manner that its impact can be perceived in the next year. This being is also an
extraordinary item and as such disclosed separately.

Q - 14
The chief account of Jiwaram Confectioners Limited gives following data regarding its six segments

Segment M N O P Q R Total
S. Assets 100 50 20 10 10 10 800
S Results - 100 -280 160 20 -20 20 -600
S. Revenue 400 640 400 180 180 200 2,000
Identify which of them are reportable segments. You are being informed that A, B, C and E were the reportable
segments of last financial period.
Response:
A business segment or geographical segment should be identified as a reportable segment if:
(a) its revenue from sales to external customers and from transactions with other segments is 10 per cent or
more of the total revenue, external and internal, of all segments;
In this case total 10% of Total Revenue = 200
So this criteria is being satisfied by : M, N, O only
or
(b) its segment result, whether profit or loss, is 10 per cent or more of Higher figure of
(i) the combined result of all segments in profit, or
(ii) the combined result of all segments in loss, whichever is greater in absolute amount; or
Take total of Profits: 200
Take total of Loss: 400

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Higher amount is 400

*compute percentage on this figure
10% of 400 = 40
So this criteria is being satisfied by : M, N, O only
(c) its segment assets are 10 per cent or more of the total assets of all segments.
10% of 800 = 80
So this criteria is being satisfied by : M and N only

Q.15 The Cost of the Closing Stock was Rs 5,00,000. Realizable value 120%. Realizable Expenses 5%.At what
amount stock wil be shown in the Income Statement of Mallaya co which is not a going concern.

Ans:- Stock to be shown at Net Realizable Value since Mallaya Co. is not a going concern.
The Net Realizable Value of Stock is Rs. 5,00,000 x 1.20 x 0.95 = Rs. 5,70,000

Q.16 An airline is required by law to overhaul its aircraft once in every three years. A company which operates
aircrafts does not provide any provision as required by law in its final account. State with reason whether
there is any need for provision.

Ans:- No Present Obligation as per AS – 29 because it is a future obligation and the incurring of the expenditure
depends on the company’s decision to continue operating aircraft. However, a provision should be recognized
for the best estimate of any fines and penalties if the airline continues to operate aircraft for more than three
years.

Q.17 State the treatment of Rs 20 lakhs received from the Central Govt. as subsidy for setting up a Plant in
backward area. Cost of Plant Rs 100 lakhs.
Ans:- As per AS 12, Government grants of the nature of promoters’ contribution should be credited to capital
reserve and treated as a part of shareholders’ funds. In this case grant of Rs. 20 lakhs is in nature of
promoters’ contribution hence it should be credited to Capital Reserve which can neither be distributed as
divided nor considered as deferred income.

Q.18 X Ltd. purchased a machinery for Rs 80 lakhs. (Useful life 4 years and residual value Rs 16 lakhs)
Government grant received is Rs 32 lakhs. Refund of grant was made in the beginning of 3rd year. Calculate the
Depreciation for the 3rd year if the Grant is credited to Fixed Assets.
Ans:-
Depreciation to be provided in 3rd Year = 24 Lakhs

Q.19 State the treatment of Refund of grant of Rs 10 crores received from Government for employees welfare
activities due to non-fulfilment of prescribed the conditions

Ans:- As per AS 12, the amount refundable in respect of a government grant related to revenue is applied first
against any unamortised deferred credit remaining in respect of the grant. To the extent that the amount
refundable exceeds any such deferred credit, or where no deferred credit exists, the amount is charged
immediately to the Profit and Loss Statement as an extraordinary item as per AS-5. Hence, a Refund of the
grant of Rs. 10 crores should be charged to the Profit and Loss Account of the company as an extra-ordinary
item.

Q.20 Z Ltd. signed an agreement with its employees union for revision of wages in June, 2021. The wage revision
is with retrospective effect from 1.4.2019. The arrear wages upto 31.3.2021 amounts to Rs 50 lakhs. Arrear
wages for the period from 1.4.2021 to 30.6.2021 (being the date of agreement) amounts to Rs 10 lakhs.
Decide whether a separate disclosure of arrear wages is required. Ans:- Additional liability on account of
wages amounting to Rs. 60 lakhs (from 01/04/2019 to 30/06/2021) should be included in the current year’s
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wages. It may be mentioned that additional wages are expenses arising from the ordinary activities of the
company. Although abnormal in amount, such an expense does not qualify as an extraordinary item. Wages
payable for the current year (from 01/04/2019 to 31/03/2021) amounting to Rs. 50 lakhs is not a prior
period item hence need not be disclosed separately. This may be shown as current year wages.

Section C - LAQ - One LAQ

1.
On 1.4.2017 OM Ltd grants 50 options to each of its 2100 employees at Rs 70 when the Market price is Rs 110 .
The vesting date is 31st March,2020 and the exercise date is 31st March,2021. At the end of year 1,the company
found that 100 employees had left and estimated the expected annual forfeitures rate at 10%. Earning per Share
and Price - Earning Ratio were Rs 26 and 5 respectively. At the end of year 2,the company found that the actual
annual forfeitures rate was at 4% and re-estimated the expected annual forfeitures rate at 5%. Earning per Share
and Price - Earning Ratio were Rs 27.5 and 4 respectively. At the end of year 3,the company found that the actual
annual forfeitures rate was at 10%. Earning per Share and Price -Earning Ratio were Rs 18 and 5 respectively.
Only 1700 employees exercised their options on 31st March,2021. The face value of equity share is Rs 10 per
share. Calculate Expenses to be recognised in year 1 by Fair Value Method.
12 x 4 = 48 Marks ONE LAQ
Calculate Expenses to be recognised in year 2 by Fair Value Method.
Section C Calculate Expenses to be recognised in year 3 by Fair Value Method. Calculate Value of Options
Forfeited. (i) (ii) (iii) (iv) Answer: (i) (ii) (iii) (iv) Expenses to be recognised in the first year = Rs. 16,20,000
Expenses to be recognised in the Second year = 8,12,000 Expenses to be recognised in the Third year = e xpense
to be derecognised)
Rs. Value of Options Forfeited = Rs. 28,000

P/E Ratio is calculated by dividing the market price of a share by the earnings per share. For instance, the market
price of a share of the Company ABC is Rs 90 and the earnings per share are Rs 10. P/E = 90 / 9 = 10. Now, it can
be seen that the P/E ratio of ABC Ltd. is ten, which means that investors are willing to pay Rs 10 for every rupee
of company earnings.

Recognition and Calculation of ECE

End of Year 1 End of Year 2 End of Year 3
EEs in the beginning 2,100 2,100 2,100
Less: actually Left at the end (100) (180) (372)
of year (100 in first year and (100 +80 + 192
80* ) actually left t the
*2,100 - 100 = 2,000 end of the year )
x 4% that is 80 *2,100 - 100 - 80
=1920 x 10% that
is 192
Less: Expected to leave (380) (96) (0)
Expected to leave in next At the end of year Vesting period end
two years i,e , two, remaining EEs is reached now.
2,100 - 100 = 2,000 are = 2,100 - 100 - 80
X10 % = 200 = 1,920
+ 10% of 2,000-200 = 180 Now entity is of the
opinion that 5%
would leave .
So expected to leave
would be:
96

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Past Attempt Papers

1,620 1,824 1,728

x No. of Options per EE 50 x 50 x 50

X Fair Value of option ` 60 `x 40 ` x 20

Fair value is difference of Fair value is Fair value is
MP and Exercise Price . we difference of MP and difference of MP
have to find out MP at the Exercise Price . we and Exercise Price .
end of the year . we can find have to find out MP at we have to find out
it out by multiplying EPS the end of the year . MP at the end of the
with PE ratio and that we can find it out by year . we can find it
would be 26 x 5 = 130. multiplying EPS with out by multiplying
So FV will be 130 - 70 = 60 PE ratio and that EPS with PE ratio
would be 27.5 x 4 = and that would be
110. 18 x 5 = 90.
So FV will be 110 - 70 So FV will be 90 -
= 40 70 = 20
Total Rs.48,60,000 Rs.36,48,000 Rs. 17,28,000
Proportion 1/3 2/3 3/3
Cumulative Expenses Rs. 16,20,000 Rs.24,32,000 Rs.17,28,000
Previously Recognised Rs.0 Rs.16,20,000 Rs.24,32,000
Expenses recognised/ (de- Rs.16,20,000 Rs.8,12,000 (Rs.7,04,200)
recognised) in the current
year
Since options vested on 1,728 EEs while only 1,700 exercised it means options Forfeited = 28
And value shall be = 28 EEs x 50 options x FV 20 = Rs. 28,000

2.
Given below are the extracts from the balance sheets of A limited and B limited as on 31.03.2021:
Particulars .`
80,000 Equity shares of Rs. 10 each fully paid up 8,00,000
Reserves and surplus 1,00,000
Non - current Liability 1,00,000
Non - current Assets 7,00,000
Current Assets 3,00,000

The consideration was agreed to be paid as follows:

A payment in cash of Rs. 5 per share in B limited and
The issue of shares of Rs. 10 each in A limited on the basis of 2 Equity Shares (valued at Rs. 15) and one
Cumulative Preference share 9valued at Rs. 10) for every five shares held in B limited.
The whole of the share capital consists of shareholdings in exact multiple of five except the following holdings:
A 116
B 76
C 72
D 28
Other individual 8 (each member holding one share each
300
It was agreed that A limited will pay in cash for fractional shares equivalent at agreed value of shares in B limited.
Required : Prepare a Statement showing the purchase consideration receivable in shares and cash.

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1.
Analysis of Fractional Holdings
A 116 23 in multiples of 5 1
B 76 15 1
C 72 14 2
D 28 5 3
Others 8 8
15
Total shares : 80,000 - fractional shares 15 = 79,985
2. Statement showing the PC:
Equity Shareholders 79,985 79,985 x 2 x 15 4,79,910 ES
5
79,985 x 1 x 10 1,59,970 10% PS
5
79,985 x 5 3,99,925 Cash
Fractional shares 15 15 x 13 195
10,40,000

Section C - Two LAQ

Q1
Prithvi Limited Provides the following extracts of the balance sheets:
31.3.21 31.3.20
Equity share capital 9,10,000 5,00,000
General Reserve 2,10,000 2,50,000
Profit and loss a/c 6,61,500 (1,40,000)
Employees Stock option outstanding a/c 3,00,000 1,00,000
Security premium 50,000 -
Capital Redemption Reserve - 1,00,000
Capital Grant 8,00,000 Nil
Convertible Debentures into equity shares at 25% - 2,00,000
Trade Payables 1,05,000 1,00,000
Goodwill 15,000 -
Plant and machinery 7,65,000 5,00,000
Non-current Investments 35,000 50,000
Inventories 95,640 54,000
Trade Receivables 7,10,000 5,85,000
Provision for Doubtful debts (1,90,000) (1,50,000)
Voluntary Separation Payments 1,25,000 65,000
Cash and cash Equivalents 14,69,360 6,000
Advance Tax (including Rs. 1,500 being tax gain on sale of 11,500 -
Investments

Additional information:
a. Depreciation on P/M written off @ 15%, a fully depreciated machine costing Rs. 1,00,000 was also discarded.

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b. It was decided to value inventories at cost less 10%. However the closing stock on 31.03.21 was correctly
valued at cost.
c. on 31 March 2021, the business of Y limited was purchased for Rs. 60,000 payable in fully paid equity shares of
Rs. 10 each at a premium of 20%. The assets included inventories Rs. 26,640, Trade Receivables Rs. 10,000 and
Machine Rs. 18,360. In addition Trade payables of Rs. 15,000 were taken over.
d. Debtors of Rs. 2,30,000 were written off against the provision for doubtful debts a/c during the year.
Grant of Rs. 10,00,000 amortised in P&L. Compensation received in a suit filed by the company Rs. 90,000.
Voluntary separation payments Rs. 50,000 adjusted against General Reserve.
e. Dividend received amounted to Rs. 2,100 which included pre acquisition dividend of Rs. 600. Some investments
were sold at profit of 25% on cost.
Calculate:
Operating profit before working capital changes
Calculate cash flow from operating activities
Calculate cash flow from Investing activities
Calculate cash flow from financing activities

Three LAQ
Q - 1 Kindly watch You tube videos on Past Paper series related to Dec. 21. In class solution is done.

Four LAQ
Q - 1 Solved under You tube Important Question series -

Five LAQ

Q-1

60,000
1,50,000 x 80% 1,20,000
8,70,000 - 5% = 8,26,500
10,06,500

Revenue should be recognised notwithstanding that physical delivery has not been completed
Consignment sales- Revenue should not be recognised until the goods are sold to a third party
Sale on approval
Revenue should not be recognised until the goods have been formally accepted or time for rejection has elapsed
or where no time has been fixed, a reasonable time has elapsed.

Q. 2. Answer given is okay

Q.3
SB Advertisers is involved in media advertising business. It obtained right for the Football world cup tournament
to be held in May/ June 2021 for Rs. 1200 lakhs
The entity paid Rs. 500 lakhs on 31.3.2021 to secure the advertising rights and balance Rs. 300 lakhs was paid in
April 2021. By March 2021 they had procured advertisements for 75% of the available time for Rs. 1,500 lakhs
The advertiser (customer) paid 60% of the amount by that date. The balance 40% was received in April 2021.
The advertisement for balance 25% time was procured(sold) in April 2021 for Rs. 300 lakhs. The advertiser paid
the full amount while booking the advertisement. 25% of the advertisement time is expected to be available in
May 2021 and balance 75% in June 2021.
Calculate the profit or loss for the months of June 2021.

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Response:
As per AS-9, revenue from rendering services should be recognised only when services are performed. In the
given case, the service is advertisement.
The service is deemed to be completed when related advertisement appears before the public.
As the 25% of the services appeared in May 2021 – the entity should recognise Rs. 450 lakhs that is [1500 + 300]
x 25% in the month of May and in June 2021 it should recognise the balance that is 1,500 - 450 lakhs – 1050 lakhs
for 75% of service.

4. Solution given is fine and upto mark

5.
Theoretical

Six LAQ
Theoretical Section

Section D
Question covered under our Notes on AS 20

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Past Attempt Papers

December - 22

Section A
Kindly watch PPA analysis Series for this section's solution

Section B
2. a.

i. 1,00,000 shall be recognised as delivery was delayed due to buyer's request.

ii. 60% of 2,00,000 = 1,20,000
iii. 15.2.22 goods sent to Agni. Approval period ends 15.3.15. 75% of 3,00,000 = 2,25,000
Approval received on 10.3.15.
Revenue recognised 2,25,000 + 75,000 = 3,00,000
15.3.22 goods sent to Vayu. Approval period ends on 15.4.22.
60% of 4,00,000 = 2,40,000
40% Remaining : nothing will be recognised as revenue as approval period ends next
year.

iv. Total sales 5,00,000 + 1/4 = 6,25,000 Financing Transaction

v. In case of advertising revenue is recognised at a time when ads are released; as such 25%
of 1,200 i.e. 300 lakhs shall be recognised in March 22 and balance 900 lakhs in April 22

Revenue : 307,60,000 , Profit 1,07,60,000

b.
2019-20 44 lakhs incurred prior to 1.1.19 shall be expensed
Balance 100 - 44 = 56 lakhs shall be recognised as IA
2020-21 At the end of 31.3.21 IA shall be recognised at 56 + 400 = 456 lakhs

2021-22 As at 1.4.22 IA shall be recognised at Lower of Cost of Recoverable amount (value

in use)
Value in use = PV of Future CF
100 x 3.79 = 379
Cost 456 - Recoverable amount 379 = 77 lakhs shall be treated as Impairment
loss and debited to PL
Amount of amortisation = 379/5 = 75.80
Carrying amount as 31.3.22 = 379 - 75.80

c.
B Ltd. Acquired machinery on lease from A Ltd. on the following terms:
(Rs. in lakhs)
Fair value of the machinery 20.00
Lease term 5 years
Annual Lease Rental at the end of the year 5.00

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Guaranteed Residual value 1.00

Expected Residual value 2.00
Expected Rate of Return 15%
Pass necessary entries may be passed in the books of the Lessee in the First year. Also prepare the
balance sheet for the first year
Depreciation is provided on Straight line Method @10% per annum.
Response
Books of Lessee:
Calculation of present value of Minimum lease payments
Year Lease rentals in lacs Discount factor at 15% Discounted value
1 5 0.8696 4,34,800
2 5 0.7561 3,78,050
3 5 0.6575 3,28,750
4 5 0.5718 2,85,900
5 5+1=6 0.4972 2,98,320
17,25,820
Note:
It has been assumed that the lease rent is paid at the end of the year.
Present value of MLP is less than fair value of Rs. 20,00,000, so the leased asset and liability should be
recognized at Rs. 17,25,820 in the books of lessee (B Ltd)
Entries in the books of B Ltd. (lessee) in first year
1 Machinery (leased) A/c Dr. 17,25,820
To lease liability 17,25,820
2 Depreciation A/c Dr. 1,72,582
To Machinery A/c 1,72,582
3 Lease Liability A/c Dr. 2,41,127
(A Ltd.)
Finance Charge Dr. 2,58,873
To Bank 5,00,000
4 Profit & Loss A/c Dr. 4,31,455
To Depreciation A/c 1,72,582
To Finance Charges 2,58,873

Balance sheet :
NCL :
Long term borrowings : 17,25,820 - 2,41,= 14,84,693
Non - current Asset
PPE on lease : 17,25,820 - Dep. 1,72,582 = 15,53,238

Books of Lessor: A
Calculation of unearned finance income
Unearned finance income = Gross investment – PV of Gross Investment.
Year Lease rentals + GRV Discount factor Discounted value
+ UGRV Rs. in lacs

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1 5 0.8696 4,34,800
2 5 0.7561 3,78,050
3 5 0.6575 3,28,750
4 5 0.5718 2,85,900
5 5 + 1 +1 = 7 0.4972 3,48,040
27,00,000 17,75,540

Unearned Finance Income = Rs. (27,00,000 - 17,75,540) = Rs. 9,24,460

Entries in the books of A Ltd. (lessor) in first year

1 Lessee Dr. 17,75,540
To Asset on FL 17,75,540
2. Bank A/c Dr. 5,00,000
To Finance Income 2,66,320
To Lessee 2,33,680
4 Finance Income Dr. 2,66,320
To Profit & Loss A/c 2,66,320

Balance sheet :
Other Non - current Asset
Lease Receivable : 17,75,540 - 2,33,680 = 15,41,860

3.
a. Joint arrangements -
Objectives of Ind AS – 105
(a) Assets that meet in criteria to be classified as held for sale to be measured at the lower of carrying
amount and fair value less costs to sell, and depreciation on such assets to cease; and
(b) The results of discontinued operations are to be presented separately in the statement of profit and
loss.
b.

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II.C-20
Past Attempt Papers

Solution:
As per Institute
3. (b) Balance Sheet of XY Ltd. as at 31/03/2022 Particulars (Rs. in lakhs)
I. EQUITY AND LIABILITIES
(1) Shareholders‘ Funds
(a) Share Capital 42.88
(b) Reserves and Surplus 35.71
(2) Non-Current Liabilities[Long-term Borrowings] 2.40
(3) Current Liabilities 3.20
TOTAL 84.19
ASSETS
(1) Non-Current Assets
(a) Fixed Assets Property, Plant & Equipment 29.26
Intangible Assets (Goodwill) 0.89
(b) Non-Current Investments 10.42
(2) Current Assets 43.62
TOTAL 84.19

Correct Solution:
Explanation of Point No. ii.

X Y
12% debentures 2,00,000 1,00,000
Interest @ 12% 24,000 12,000
15% Debentures to maintain same 15 % of ? = 24,000 15 % of ? = 12,000
interest = Rs. 1,60,000 = Rs. 80,000

Explanation of Point No. iii.

X Y
8% PSC 1,00,000 2,00,000
20% Premium 20,000 40,000
10% Pref. shares 1,25,000 2,40,000
1,25,000 / 125 2,40,000/ 125

iv. To Know how many Payment by of Equity share capital we need to compute Purchase consideration:

X Y
GW 48,000 38,000
PPE BV + 10% 20,90,000 8,36,000
Non Current Investments 4,16,000 6,26,000
CA 8,26,000 5,40,000
Less
12% Debentures as per ii 1,60,000 80,000
CL 1,00,000 1,20,000
= PC 31,20,000 17,40,000
Less payment :
PSC :Step iii 1,20,000 2,40,000
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ESC 30,00,000 15,00,000

No of equity shares to be issued 30,00,000/ 15 15,00,000/ 15
2,00,000 shares of Rs 10 each 1,00,000 shares of Rs 10
8 paid issued @ Rs. 15 each 8 paid issued @ Rs.
15
Share Capital 2,00,000 x 8 = 16,00,000 1,00,000 x 8 = 8,00,000
Security Premium 2,00,000 x 7 = 14,00,000 1,00,000 x 7 = 7,00,000

Total Share Capital 5,00,000 x 10 = 50,00,000

Less issued 2,00,000 + 1,00,000 = 3,00,000
Remaining ; 2,00,000
Bank a/c 30,00,000
To Share Capital 20,00,000
To Security Premium 10,00,000

Balance sheet :

Equity and Liability Rs.

1.Shareholders' funds
Share Capital ESC: Authorised / Issued / Subscribed 44,00,000
10% PSC 1,20,000 + 2,40,000 3,60,000

Reserves and surplus Security Premium 31,00,000

P/L (1,000) (1,000)

2. Non Current Liability 15% Debentures 1,60,000 +80,000 2,40,000

3. CL 1,00,000 + 2,20,000 3,20,000

84,19,000
Assets
1. NCA
PPE 20,90,000 + 8,36,000 29,26,000
Intangible Assets: GW 48,000 + 38,000 +3,000 89,000
Non- current Investments 4,16,000 + 6,26,000 10,42,000

2. Current Assets 8,26,000 + 5,40,000 = 13,66,000 + 30,00,000 - 43,62,000

4,000
84,19,000

Liquidation expenses paid by Purchasing company shall be debited to Goodwill: GW a/c dr. to Cash
3,000
Inc. Expenses entry : PL to Cash 1,000

4. a. theory
b. Solution

Net Assets : Inventories 15,000 + Trade Receivables 10,000 + Machine 30,000 = 55,000
Less TP = 15,000
= 40,000
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Past Attempt Papers

Net Asset a/c Dr. 40,000

Goodwill a/c Dr. 20,000
To Vendors 60,000

Vendors a/c Dr. 60,000

To Share Capital (5,000 x 10) 50,000
To Security premium (5,000 x 2) 10,000

Equity Share Capital a/c

Equity share buy back 2,00,000 Bal b/d 6,00,000
Bank 1.5.21 2,00,000
Vendors 60,000
Balance c/d 9,50,000 Bank 2,90,000
11,50,000 11,50,000
Premium on Buy Back a/c
Equity share buy back 1,00,000 Security Premium 1,00,000

Equity share buy - back a/c

Bank a/c 3,00,000 ESC 2,00,000
Prem. On Buy Back 1,00,000

5% Pref. Share Capital a/c

To PSH 3,00,000 Bal b/d 4,00,000
Balance c/d 2,00,000 Bank a/c 1,000 x 100 1,00,000

5% Pref. Share Holder a/c

Bank a/c 3,15,000 PSC 3,00,000
Prem. On Red. 15,000

Premium on Redemption a/c

To PSH 15,000 Security Premium 15,000

General Reserve
PL 3,00,000 Bal b/d 4,40,000
Balance c/d 1,40,000

Security Premium a/c

Prem. On red. 15,000 Opening balance 20,000
Premium on buy back a/c 1,00,000 Bank 1.5.22 20,000 x 5 1,00,000
To Balance c/d - Bank 1,000 x 50 50,000
Vendors 10,000

CRR a/c

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P/L 1,00,000 Opening balance 1,50,000

To Balance c/d 50,000

ESOP O/S a/c

Opening balance 50,000
To Balance c/d 85,000 P/L 35,000

14% Debentures a/c

Opening balance 1,50,000
To Balance c/d 2,60,000 Bank 1.1.22 1,10,000
Interest on debentures Paid : 1,50,000 x 14% x 9/12 = 15,750
2,60,000 x 14% x 3/12 = 9,100

14% Bank Loan a/c

To bank : 1.1.22 10,000 Opening balance 50,000
To Balance c/d 40,000
Interest on BL Paid : 50,000 x 14% x 9/12 = 5,250
40,000 x 14% x 3/12 = 1,400

Trade Payable a/c

Opening balance 40,000
To Balance c/d 1,65,000 Share Capital 15,000
Increase in WC 1,00,000

O/S Interest a/c

Opening balance -
To Balance c/d 10,000 Increase in WC 10,000

Underwriting commission on equity shares issued 20,000 x 15 x 5% = 15,000

On Preference shares 1,000 x 150 x 5% = 7,500
Underwriting commission a/c
Balance b/d - P/L 17,500
To Bank a/c 17,500

O/S Underwriting Commission a/c

Opening balance -
To Balance c/d 5,000 Underwriting commission 5,000

Provision for Tax a/c

Bank 9,250 Opening balance 20,000
To Balance c/d 40,000 PL (32,250 - 3,000) 29,250

Tangible Fixed Asset a/c

Balance b/d 13,20,000 Bank 50,000
Share Capital 30,000 Loss 30,000

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Bank - 4,40,000 Acc. Dep. 40,000

Balance c/d 16,50,000
Discarded ( Dep.) 20,000
17,90,000 17,90,000

Accumulated Depreciation a/c

TFA 40,000 Balance b/d 3,00,000
TFA 20,000 PL 1,40,000
Balance c/d 3,80,000

Intangible Asset a/c - GW a/c

Balance b/d 10,000 P/L 9,000
Share Capital 20,000 Balance c/d 21,000

10% Current Investment a/c

Balance b/d 80,000 Bank : 80,000 + 20/80 1,00,000
To Bank 1.1.22 2,00,000
Profit on sale 20,000
Balance c/d 2,20,000
3,00,000 3,00,000
80,000 x 10% x 9/12 = 6,000
2,00,000 x 10% x 3/ 12 = 5,000
Interest Accrued a/c
Balance b/d -
Dec. in WC 2,000 Balance c/d 2,000
8% Fixed Deposit a/c
Balance b/d -
Cash and cash Equivalent 2,84,000 Balance c/d 2,84,000

Inventories a/c
Balance b/d 54,000
Share Capital 15,000
Decrease in WC 1,00,000 Balance c/d 1,69,000

Trade Receivable a/c

Balance b/d 6,43,000 Decrease In WC 40,000
Share Capital 10,000
Balance c/d 6,13,000

Dividend Paid
Bank -
PSC 5% of 4,00,000 20,000
ESC 35% of 6,00,000 2,10,000 PL 2,30,000

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Cost - Depreciation = WDV less SP

1,20,000 - 40,000 = 80,000 - 50,000 = loss 30,000
WDV 100 - Loss 37.50 = 62.50
? 50,000

50,000 x 100/62.50 = 80,000

1 - 1x 1/3 = WDV 2/3

WDV Cost
2/3 1
80,000 ?
80,000 x 1
2/3
80,000 x 1 x 3/2= 1,20,000
Investing - 5,07,750
Financing - 3,14,000
Cash closing 3,17000

Q. 5
a- Theory
b- Soution

1.Before bonus issue after bonus issue

5 7
? 42,000
42,000 x 5/7
30,000

2. Additional shares - 30,000 - 5,000 = 25,000

Bonus shares - 42,000 - 30,000 = 12,000

Notes:
1. Date of Acquisition: 01.07.2020
2. Holding Company Share: 30,000/50,000 x100 = 60%
3. Non-Controlling Interest (NCI): 20,000/50,000 x100 = 40%

3. Pre Acquisition dividend = 5,00,000 x 20% = 1,00,000

Interim dividend - 50,000

4. Analysis of profit (of S)

Amount
Closing Balance 80,500
Opening Balance 1,87,000 less Pre Acq.dividend 87,000
1,00,000
- 6,500

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+ Post Acquisition dividend +50,000

- Expenses borne by H on behalf of S - 10,000 x 9 -90,000
+ Abnormal loss Net 23,500 - 2,000 +21,500
+ Interest not yet credited by S 1,40,000
Total during the year Profits 1,15,000
Pre-Acquision Profits : 3/12 28,750 - 21,500 = 7,250
Post - Acquisition Profits : 9/12 86,250

5. Analysis of General Reserve of Subsidiary

Closing Balance 8,40,500

Opening Balance 7,80,500
EarnedTransfered during the year 60,000
Pre-Acquision Reserves : 3/12 15,000
Post - Acquisition Reserves : 9/12 45,000

6. Analysis Table
Amount Parent NCI
Equity on the DOA: ` ` `
A:a. Share Capital of S Limited 5,00,000
b. Bonus Issue 2,00,000
B. Other Equity:
i. Profit and loss in the beginning ` 87,000 + pre-Acq. 94,250
Portion ` 7,250
ii. Reserves in the beginning ` 7,80,500 + Pre-Acq. 5,95,500
Portion ` 15,000 Less Bonus Issue 2,00,000
Revaluation
L/B: 4,10,000
Rate of depreciation on L/B = 30,000 / 3,00,000 x
100 = 10%
Estimated value on the DOA 7,05,000
Less BV on the DOA 3,00,000 - Dep @ 10% on
3,00,000 for 2 Months 5,000 = 2,95,000
Upvaluation = 7,05,000 - 2,95,000 = 4,10,000
Additional depreciation of L/B for 10 months period :
7,05,000 x 10% x 10/12 = 58,750
Less 3,00,000 x 10% x 10/12 = 25,000 = 33,750
One months additional depreciation 3,375 (3,375)
F/F: Rate of depreciation on F/F = 30,000 / 3,00,000 (1,90,000)
x 100 = 10%
Estimated value on the DOA 1,05,000
Less BV on the DOA 3,00,000 - Dep @ 10% for 2
Months 5,000 = 2,95,000
De-valuation = 1,90,000

F/F :Reduction in depreciation for 10 months

105,000 x 10% x 10/12 = 8,750
Less 3,70,000 x 10% x 10/12 = 25,000

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Reduction in Depreciation = 16,250

For one month 16,250 x 1/10
1,625

16,08,000 9,64,800 6,43,200

B. Post Acquisition Other Equity Items / Changes in

Other Equity / Revenue profits :
i. Post acq. Profits 86,250 51,750 34,500
ii. Post Acquisition Reserve 45,000 27,000 18,000
iii. additional depreciation L/B for 9 months (30,375) (18,225) (12,150)

iv. Reduction in depreciation on F/F for 9 months 14,625 8,775 5,850

URP:

a. Goods sold by H to S = 3,00,000

Goods sold by S = 2,88,000
Remaining = 12,000
Profit = 1/6 of 12,000 = 2,000

Sale of Machine by S to H = 2,40,000

URP (Loss) 2,40,000 x 1/3 = 80,000

Depreciation charged by parent 2,40,000 x 10% x 3/12 = 6,000

Depreciation should have been charged : 1,60,000 x 10% x 3/12 = 4,000
Excess depreciation charged to be added back

7. GW /GOBP:
Fair value of Assets Acquired or Equity (on the
DOA) of Subsidiary Rs. 16,08,000

Minorities/NCI share in Fair value of Parent's share in Fair value of Assets

Assets Acquired or Equity (on the Acquired or Equity (on the DOA) of
DOA) of Subsidiary Rs. 6,43,200 Subsidiary Rs. 9,64,800

Consideration ( Investments at cost) = 4,60,000 - 60,000 = 4,00,000

Less Parent's share in Fair value of Assets Acquired or Equity (on the DOA) of
Subsidiary Rs. 9,64,800
= Gain on Bargain Purchase/ Capital Reserve = Rs. 5,05,800

8. NCI at Reporting date

NCI at acquisition 6,43,200
NCI share in Post acquisition PL 34,500
GR 18,000

II.C-28
Past Attempt Papers

Less additional depreciation (12,150)

Add Reduction in depreciation 5,850
Less share in Post acquisition dividend 50,000 x 40% (20,000)
Add: Share in Loss due to sale of machinery 80,000 x 32,000
40%
7,01,400

9. Consolidated P/L:
Balance as per balance sheet of Parent 2,60,000
+ Post acq. Share in PL 51,750
+ GR 27,000
Less additional depreciation (18,225)
Add Reduction in depreciation 8,775
Less share in Pre acquisition dividend 1,00,000 x 60% (60,000)
Less share in Post acquisition dividend 50,000 x 60% (30,000)
+ Share in Unrealised Loss due to sale of machinery 48,000
80,000 x 60%
- Excess Depreciation Provided on machinery (2,000)
3,20,000 x 10% x 3/12 less 2,40,000 x 10% x3/12
- URP on stock (2,000)
+ Expenses charged on behalf of S 90,000
3,73,300

MI : 7,00,600
CR : 5,01,950
CPL : 4,07,350

Q : 6. a

1. Profits before Tax

19-20 20-21 21-22
PAT given 24,00,000 36,00,000 30,00,000
+ Tax 16,00,000 24,00,000 20,00,000
PBT ( PAT / 1 - Tax 40,00,000 60,00,000 50,00,000
Rate)

2. Profits for Equity Shareholders

Average of Past Profits before Tax 40,00,000 + 60,00,000 + 50,00,000 50,00,000

3
Add: Interest on 60% of Debentures {40,00,000 x 60% } x 10% 2,40,000
Adjusted Profits 52,40,000
Less: Tax @ 30% 15,72,000
Profits for SH 36,68,000
Less: T/f toward Preference Dividend 20,00,000 x 12% 2,40,000

II.C -29
 Welkins Virtual World

Profits for ESH 34,28,000

3. Valuation of ES on yield basis:

Capitalised Value 34,28,000 3,42,80,000
10%
÷ No of ES 8,00,000
- Value of shares 42.85

4. Goodwill
Average Profits adjusted 34,28,000

Less Normal Profit : Capital employed x TFA 120,00,000 + Trade 11,60,000

NRR Investments 16,00,000 x 150%
24,00,000 + CA 52,00,000 -
24,00,000
Less Liab: 10% Debentures
(40,00,000 - 24,00,000) = 24,00,000
CL 20,00,000
Net Assets = 1,36,00,000
Less PSC = 20,00,000
Assets for Equity share holders
1,16,00,000
X10%
- Super profits 22,68,000
X years' of Purchase 3
68,04,000

C. Valuation of Shares on Net Assets basis

Assets for Equity Shares 1,16,00,000
+ Goodwill 68,04,000
Assets for ESH 1,84,04,000
÷
No. of Shares 8,00,000
IVS 23.0005
C. fair Value = 23.005 + 42.85 = 32.9275
2

Q. 6 - b
Analysis:
Beg. 1 year end 2nd year end 3rd year end 4th year End
01.07.18 31.3.19 31.3.20 31.3.21 Exercise date
31.03.22
9 months 21 months 33 months

Grant Date

II.C-30
Past Attempt Papers

No. of EEs :2,100

Options per EE = 100

Fair Value Rs. = 93 - 60 = 33 104 - 60 = 44 80 - 60 = 20

MP 200 - EP 60 = 140
Actual left 100 80 192
Exercised 1,700
Recognisation of Expenses/ liability
End of Year 1 End of Year 2 End of Year 3
EEs in the beginning 2,100 2,100 -100 2,100 - 100 - 80
Less: actually Left (100) (80) (192)
x No. of options per EE x 100 X100 x 100
x Fair Value of option x Rs.33 x Rs.44 x Rs.20
Rs.66,00,000 Rs.84,48,000 Rs. 34,56,000
Proportion 9/33 21/33 33/33
Cumulative Expenses Rs. 18,00,000 Rs.53,76,000 Rs.34,56,000
Previously Recognised Rs.0 Rs.18,00,000 Rs.53,76,000
Expenses recognised in the current Rs.18,00,000 Rs.35,76,000 Rs.(19,20,000)
year

II.C -31