F—P16(AFA)

Syllabus 2008
Time Allowed : 3 Hours Full Marks : 100
The figures in the margin on the right side indicate full marks.
PART A questions are compulsory. Attempt all of them.
PART B has seven questions. Attempt any five of them
Please: (1) Write answers to all Parts of a question together
(2) Open a new page for answer to a new question
(3) Attempt the required number of questions only.
(4) Indicate in the front page of the answer book the required question
attempted.
PART A (25 Marks)
Marks
1. (a) In each of the cases given below, one out of four alternatives is correct. 2x6=12
Indicate the correct answer ( = 1 mark) and give your workings/reasons
briefly (= 1 mark):
(i) GANGOTRI LTD. has provided depreciation as per Accounting records (0)

Rs.4 lakhs and as per Tax records Rs.7 lakh. Unamortised preliminary
expenses, as per tax record is Rs.5600. There is adequate evidence
of future profit efficiency. If the tax rate applicable to the company is
40%, what would be deferred Tax liability as per AS–22.
A. Rs.1,20,000;
B. Rs.1,17,760;
C. Rs.1,12,240;
D. None of (A), (B) and (C).
(ii) ANURAG LTD. purchased a Plant on 1.4.2008 for Rs.10,00,000. It (0)

provides depreciation @ 20% on W.D.V. during the year ended on

31.3.2010. What would be the carrying amount of Plant on
31.3.2010, if the company provided impairment loss on Plant for
Rs.1,00,000?
A. Rs.5,40,000;
B. Rs.6,40,000;
C. Rs.7,40,000
D. Insufficient Information.
(iii) VARTUAL LTD. acquired 1000 shares in ANKIT LTD. at a Cum–right (0)

price of Rs.250 per share. Ankit Ltd. offered right shares of one for
every two held at Rs.125 per share. After the right issue the share
price fell from Rs.250 to Rs.200 per share. If the rights were sold by
vartual Ltd. at Rs.70 per share, what would be the carrying cost of
investment in Ankit Ltd. after the sale of rights?
A. Rs.2,50,000;
B. Rs.2,15,000;
C. Rs.2,85,000;
D. None of (A), (B) and (C).
 (iv) The fair market values of Pension Plan assets of ASILEENA LTD. at (0)

the begining of year 2009–10 was Rs.7,00,000. The employer

contribution to the plan and Benefit payments made to retirer during
the year were Rs.1,00,000 and Rs.40,000 respectively. If the actual
return on pension Plan assets is Rs.50,000, what would be the Fair
market value of pension plan at end of year 2009–10 (As per–AS–
15)?
A. Rs.8,00,000;
B. Rs.8,10,000;
C. Rs.8,30,000;
D. Insufficient Information.
(v) On July 01,2009 GRENISON LTD. acquired 7000 Equity shares of (0)

NARMADA LTD. for consideration of Rs.8,00,000. The Share Capital of

NARMADA LTD. consists of 10,000 Equity shares of Rs.100 each.

The balances of General Reserve and Profit and Loss Account of

NARMADA LTD. are as under:

As on July 01, 2009 As on March 31, 2010

Rs. Rs.
General Reserve 1,70,000 2,00,000
Profit and Loss A/c 1,50,000 1,75,000

What will be the amount of Minority Interest to be shown in

Consolidated Balance Sheet as on March 31,2010:

A. Rs.3,07,500;
B. Rs.3,60,000;
C. Rs.4,12,500;
D. Insufficient information
(vi) The following data is extracted from the books of HYDER LTD. as on (0)

March 31,2010.
Paid up value of an Equity Share : Rs.10
Nominal value of an Equity Share : Rs.20
The Yield rate of return of the company : 15.75%

If the normal rate of return is 9%, what would be value of an Equity

Share of HYDER LTD.

A. Rs.20.00;
B. Rs.17.50;
C. Rs.15.75;
D. None of the above.
(b) Choose the most appropriate one from the stated options and write it 1x5=5
down (only indicate A, B, C, D as you think correct):
(i) According to AS–29, Restructuring Cost does not include: (1)

A. Cost of Sale or termination of line of business;

 B. Cost of retraining or relocating continuing staff;
C. Market Cost;
D. Both B and C above.
(ii) As per AS–26 when an intangible asset is required by issue of shares (1)

and other securities, the cost of intangible asset should be recorded

at:
A. Fair value of the intangible asset acquired;
B. Fair value of the shares and other securities issued;
C. A or B which is more evident;
D. None of (A), (B), (C).
(iii) ARKUTI LTD. has different distinguishable segments–One of them is (1)

engaged in providing an individual product and it is subject to risk

and returns. Such segment is known as:
A. Business Segment;
B. Reportable Segment;
C. Geographical Segment;
D. Primary Segment.
(iv) Under the purchase method of accounting the transferee company (1)

incorporates into its books (As per AS–14):

A. The Assets and liabilities of the transferor company;
The Assets, liabilities and statutory reserves of the transferor
B.
company;
The Assets, liabilities and non-statutory reserves of the
C.
transferor company;
D. The Assets, liabilities and reserves of the transferor company.
(v) The chairman of the Public accounts Committee is appointed from (1)

amongst the members of Lok Sabha elected to the Committee by–

A. President of India;
B. The speaker of Lok Sabha;
C. Prime Minister;
D. None of the above
(c) (i) Define ‘Firm Commitment’ relating to Hedge Accounting. 2x4=8 (0)

(ii) Explain the meaning and significance of going concern concept of (0)

accounting.
(iii) Securitisation is different from factoring. Comment. (0)

(iv) State briefly the disclosure requirements in Balance Sheet in respect (0)

of State level Value Added Tax (VAT).

PART B (75 Marks)

Marks
2. (a) Mr. RAJA enters into certain equity derivative instruments contracts on March 6 (0)

27, 2010. The initial margin on these contracts, calculated as per span, is Rs.
35,000. The margin for the subsequent days, calculated as per span is a
follows:

On 29th March, 2010 Rs.40,000

On 30th March, 2010 Rs.30,000

On 31st March, 2010 Rs.32,000

Show the journal entries for the Payment/Receipt of the initial margin and
disclosure requirement in the Balance Sheet.
(b) X Ltd. had issued debentures which had been guaranteed by the Government 3 (0)

of India both as to the repayment of the principal and interest. The company
disclosed the same as ‘secured loans’ in their balance sheet, Comment.
(c) The following are the Balance Sheets of Bat Ltd. and Ball Ltd. as on 6 (0)

31st March, 2010.

Bat Ltd. Ball Ltd.
Rs. Rs.
(in crores)
Sources of funds:
Share Capital:
Authorised 25 5
Issued and Subscribed:
Equity shares of Rs.10 each fully paid 12 5
Reserves and surplus 88 10
Shareholders funds 100 15
Unsecured loan from Bat Ltd. – 10
100 25
Funds employed:
Fixed assets: Cost 70 30
Less: Depreciation : 50 24
Written down value 20 6
Investments at cost:
30 lakhs equity shares of Rs.10 each of Ball Ltd. 3 –
Long–term loan to Ball 10 –
Current assets
Less: Current liabilities 100 34
33 67 15 19
100 25

On that day Bat Ltd. absorbed Ball Ltd. The members of Ball Ltd. are to get
one equity share of Bat Ltd. issued at a premium of Rs. 2 per share for every
five equity share held by them in Ball Ltd. The necessary approvals are
obtained.

You are asked to pass journal entries in the book of Bat Ltd. to give effect to
the above.
3. (a) A company purchased a plant for Rs.25 lakhs during the financial year 2009– 6 (0)

10 and installed it immediately. The price charged by the vendor included

excise duty (cenvat credit available) of Rs.2.50 lakhs. During this year, the
company also produced excisable goods on which excise duty chargeable is
 Rs.2.25 lakhs. Show the journal entries describing cenvat credit treatment
and at what amount should the plant be capitalised?
(b) An enterprise, which has neither more than one business segment nor more 3 (0)

than one geographical segment, is required to disclose segment information

as per AS 17. Comment.
(c) Following details are given for PHIMPEX LTD’s for the year ended March 31, 6 (0)

2010.
(Amount in Rs.
lakh)
Sales:
Food Products 5650
Plastic and Packaging 625
Health and Scientific 345
Others 162 6782
Expenses:
Food Products 3335
Plastic and Packaging 425
Health and Scientific 222
Others 200 4182
Other items:
General Corporate Expenses 562
Income from investments 132
Interest expenses 65
Identifiable Assets:
Food Products 7320
Plastic and Packaging 1320
Health and Scientific 1050
Others 665 10355
General Corporate Assets 722
Other information;
(i) Inter-Segment sales are as below:
Food Products 55
Plastic and Packaging 72
Health and Scientific 21
Others 7
(ii) Operational Profit includes Rs. 33 lakhs on
inter-segment sales.
(iii) Information about inter-segment expenses are
not made available.

Required:

Prepare a statement showing financial information about PHIMPEX LTD's

operations in different industry segment-keeping in view AS–17.
4. (a) SONEX LTD was incorporated on 1st April, 2010 to take over the running 7 (0)

business of Mr. Daga.

The purchase consideration was satisfied by allotment of:

15,000 equity shares of Rs.10 each issued at a premium of Rs.2 per

(i)
share,
12,000 10% redeemable preference shares of Rs.10 each at par,
(ii)
redeemable on 31.03.15.
 (iii) Rs.70,000 paid in Cash.

The company issued a prospectus for issuing 50000 equity shares of Rs.10
each at a premium of Rs.2 per share and 20000 10% redeemable preference
shares of Rs.10 each at par. The entire amount in respect of the issue was
received by 30th June, 2010 except final call of Rs.3 per share on 2500
shares issued to Mr. P, a Director. Underwriting commission @ 2.5% on
nominal value of equity shares and @ 3% on preference shares were paid to
a Merchant Banker.

The preliminary expenses were estimated at Rs.75,000 in the prospectus but

the actual expenses incurred was as under:

Rs.
Solicitor’s fee 10,000
Printing of memorandum 20,000 (Rs.10000 remaining unpaid)
Stamping and Registration 30,000
Advertisement expenses 28,000

The company purchased a plot of land for Rs.1,20,000. Further, it advanced

Rs.2,30,000 for construction of office building and Rs.3,50,000 to a supplier,
being 35% of contract price for supply of machinery. A part of the
investments taken over from Mr. Daga was sold for Rs.80,000 (Rs.5,000 in
excess of their book value).

Prepare a receipts and payments account and other relevant financial

information to be included in the statutory report pursuant to sec. 165 of the
Companies Act, 1956 in respect of SONEX LTD. made upto 30th June, 2010.
(b) The following is the Balance Sheet of DELTA LTD as on 31–03–2010 6 (0)

(Amount in Rs. lakh)

Liabilities Rs. Assets Rs.
Share Capital Fixed Assets 22.50
Equity shares of Rs.10 each 8.00 Non–Trade investments 4.50
Security Premium 1.50 Stock in Trade 5.80
Revenue Reserve 7.80 Sundry Debtors 4.20
Profit and Loss A/c 1.50 Cash at Bank 7.00
12% Debentures 20.00
Sundry Creditors 5.20
44.00 44.00

The company bought back 20,000 shares at Rs.30 each. The transaction in
respect of buy back was financed by sale of 4/5th of non trade investments
for Rs.6.20 lakhs.

Show important accounting entries in the books of the company to record

buy back and also show the balance sheet after buy back.
(c) How should deferred tax assets and deferred tax liabilities be disclosed in the 2 (0)

balance sheet of a company?

5. (a) The following information has been extracted from the Annual Report 2009– 6 (0)

10 of SITERAZE LTD.
 BALANCE SHEET AS ON MARCH 31
(Rs. in Million)
2009 2010
Sources of Fund:
Shareholders’ Funds:
Share Capital 350 350
Reserve and Surplus 13250 17450
Secured Loans – –
13600 17800
Application of Fund:
Fixed Assets (Gross Block) 4500 5750
Less: Depreciation 1800 2050
Net Block 2700 3700
Capital Work–in–Progress 1200 520
3900 4220
Investments 880 950
Deferred tax assets 105 120
Current Assets, Loans and Advances:
Sundry Debtors 3050 3400
Cash and Bank 6500 9000
Loans & Advances 2700 3100
12250 15500
Less: Current liabilities & Provisions
Liabilities 1135 1240
Provisions 2400 1750
3535 2990
Net Current Assets 8715 12510
Total 13600 17800

Profit and Loss Account for the year ended on March 31

2009 2010
(Rs.in Million)
Income:
Sales and Operational Income 15600 20250
Other Income 680 510
Total 16280 20760
Expenditure:
Product Development expenses 8800 11100
Gross Profit 7480 9660
General and Administrative expenses 1080 1280
Selling and Marketing expenses 730 920
Profit before Depreciation, Interest and taxes 5670 7460
Depreciation 540 450
Profit before Interest and taxes 5130 7010
Interest – –
Profit after Interest and depreciation 5130 7010
Provision for taxes 650 910
Profit after taxes 4480 6100

Other Information is available from the Annual Report for 2009–10.

 Beta variant
– 1.20
Return on Risk free
– 8%
Investment
– 7.5%
Equity Risk Premium

Required

Calculate the Economic Value Added of SITERAZE LTD for the year 2009–10.
(b) On 1st October, 2009, GREEN GARDEN LTD (Construction Company) 5 (0)

undertook a contract to construct a building for Rs.170 lakh: On 31st March,

2010 the company found that it had already spent Rs.129.98 lakh on the
construction. Prudent estimate of additional cost for completion was Rs.64.02
lakh.

Required:

What is the additional Provisions for foreseeable loss, which must be made in
the final accounts for the year ended 31st March, 2010 as per provisions of
AS–7?
(c) Discuss the provision of the constitution of India to safeguard the 4 (0)

Independence of the comptroller and Auditor General of India.

6. (a) AIR LTD, SEA LTD and RAIL LTD are members of a group. AIR LTD bought 8 (0)

70% of the shares of SEA LTD on October, 1,2008 and 30% of the shares of
RAIL LTD on 1st January, 2010. SEA LTD bought 60% of the shares of RAIL
LTD on October 1, 2009.
Profit and Loss Account
Balance as Profit/(Loss) Balance as Company
on for 2009–10 on Formed
1.4.2009 Rs. 31.3.2010
Rs. Rs.
AIR LTD 55,000 25,000 80,000 April 1, 2007
SEA LTD 20,000 (Dr.) 47,500 27,500 April 1, 2008
RAIL – 24,000 (Loss) 24,000 (Dr.) April 1, 2009
LTD

State how the Profit/(loss) will be reflected in the consolidated Balance

Sheet.
(b) State briefly the reporting requirements as to environmental statement in the 4 (0)

Directors’ Report of companies.

(c) The surplus arising from sale of investments was set off against a non- 3 (0)

recurring loss and was not disclosed separately. Comment.

7. Answer the following questions: 5x3=15
(a) XY Ltd. was making provisions for non-moving stocks based on issues for the (0)

last 12 months upto 31.3.2009. Based on technical evaluation, the company

wants to make provisions during the year 2009–10.

Total value of stock–Rs. 150 lakhs.

Provisions required based on 12 months issue Rs.4.0 lakhs

Provisions required based on technical evaluation Rs.3.20 lakhs.

 Does this amount to change in accounting Policy? Can the company change
the method of provision?
(b) PQ Ltd. has been including interests in the valuation of closing stock. In the (0)

accounting year 2009–10 the management of the company decided to follow

AS–2 and accordingly interests have been excluded from the valuation of
closing stock. This has resulted in decrease in profits by Rs.250,000.

Is a disclosure necessary? If so, draft the same.

(c) AB Ltd. has set up its business in a designated backward area which entitles (0)

the company to receive from the Govt. of India a subsidy of 25% of the cost
of investment. Having fulfilled all the conditions under the scheme, the
company in its investment of Rs.80 crores in capital assets, received Rs.20
crores from the Govt. in February, 2010 in the accounting period 2009–10.
The company wants to treat this receipt as an item of revenue and thereby
reduce the losses in P. & L. A/c for the year ended 31.3.2010.

Do you think the treatment is justified? Answer with reference to relevant

A.S.
8. (a) Discuss some key differences between IFRS, US GAAP and IGAAP related to 5 (0)

(i) Extra ordinary events;

(ii) Dividends on ordinary equity shares.
(b) The following is an extract from the cash flow statement of VENTEX LTD 6 (0)

prepared for the year ended March 31, 2010.

Particulars (Rs. in lakh)
Net Profit 600
Add: Sale of Investment 700
Depreciation of Assets 110
Issue of Preference shares 90
Loan raised 45
Decrease in stock 120
1665.0
Less: Purchase of Fixed Assets 650
Decrease in Creditors 60
Decrease in Debtors 80
Exchange Gain 80
Profit on Sale of Investments 120.0
Redemption of Debentures 57.0
Dividend Paid 14.0
Interest Paid 9.45 1070.45
594.55
Add: Opening Cash & Cash equivalent 123.41
Closing Cash & Cash equivalent 717.96

Required:

Redraft and reconstruct the cash flow statement of VENTEX LTD in proper
order for the year ended March 31, 2010 in accordance with AS-3 (Revised)
using indirect method.
(c) MS KRITIKA furnishes the following information about all option at the 4 (0)

Balance Sheet date (31.3.2010):

Securities PN MO TS
Details of Option bought:
Premium paid 15000 7500 7500
Premium prevailing on Balance sheet date 22500 3750 6000
Details of Option Sold:
Premium received 7500 22500 7500
Premium prevailing on Balance sheet date 18750 15000 11250

Required:

Determine the amount of provision to be made in the books of Account of Ms

Kritika.