CA Inter Suggested answers for Advanced Accounting Subject
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CA Inter Suggested answers for Advanced Accounting Subject
CA Inter Dec 2021 Advanced accounting question paper:
ICAI CA Inter Dec 2021 Question 1 (a)
As per the provision of AS 4, you are required to state with reason whether the following transaction are adjusting event or non-adjusting event for the year ended 31.03.2021 in the books of NEW Ltd. (accounts of the company were approved by board of directors on 10.07.2021):
1. Equity Dividend for the year 2020-21 was declared at the rate of 7% on 15.05.2021:
2. On 05.03.2021, Rs. 53,000 cash was collected from a customer but not deposited by the cashier. This fraud was detected on 22.06.2021.
3. One Building got damaged due to occurrence of fire on 23.05.2021. Law was estimated to be Rs. 81,00,000.
ICAI CA Inter Dec 2021 Question 1 (b)
Given the following of Rainbow Ltd:
(i) On 15th November, goods worth Rs. 5,00,000 were sold on approval basis. The period of approval was 4 month after which they were considered sold. Buyer sent approval for 75% goods sold up to 31st January and no approval or disapproval received for the remaining goods till 31st March.
(ii) On 31st March, goods worth Rs. 2,40,000 were sold to Bright Ltd. but due to refurnishing of their show-room being underway, on their request, goods were delivered on 10th April.
(iii) Rainbow Ltd. supplied goods worth Rs. 6,00,000 to Shyam Ltd. and concurrently agrees to re-purchase the same goods on 14th April.
(iv) Dew Ltd. used certain assets of Rainbow Ltd. Rainbow Ltd. received Rs. 7.5 lakhs and Rs. 12 lakhs as interest and royalties respectively from Dew Ltd. during the year 2020-21.
(v) On 25th December goods of Rs. 4,00,000 were sent on consignment basis of which 40% of the goods unsold are lying with the consignee at the year on 31st March.
In each of the above cases, you are required to advise, with valid reasons, the amount to be recognized revenue under the provisions of AS. 9
ICAI CA Inter Dec 2021 Question 1 (c)
Surgical Ltd. is developing a new production process of surgical equipment. During the financial year ended 31st March, 2020 the total expenditure incurred on the process was Rs. 67 lakhs. The production process met the criteria for recognition as an intangible assets on 1st January,2020. Expenditure incurred till this date was Rs. 35 Lakhs.Further expenditure incurred on the process for the financial year ending 31st March, 2021 was Rs. 105 lakhs.
This includes estimates of future cash outflows and inflows.
Under the provisions of AS 26, you are required to ascertain:
(i) The expenditure to be charged to Profit and Loss Account for the year ended 31st March, 2020;
(ii) Carrying amount of the intangible asset as on 31st March, 2020;
(iii) Expenditure to be charged to profit and Loss Account for the year ended 31st March,2021;
(iv) Carrying amount of the intangible asset as on 31st March,2021
ICAI CA Inter Dec 2021 Question 1 (d)
Moon Limited is absorbed by Sun Limited; the consideration, being the takeover of liabilities, the payment of cost of absorption not exceeding Rs. 10,000 (actual cost Rs. 9,000); the payment of 9% Debentures of Rs. 50,000 at a premium of 20% through 8% debentures issued at a premium of 25% of face value; the payment of Rs. 18 per share in cash; allotment of two 11% preference shares of Rs. 10/- each and one equity share of Rs.10/- each at a premium of 30% fully paid for every three shares in Moon Limited respectively.
The number of shares of the vendor company is 1,50,000 of Rs. 10/- each fully paid. Calculate purchase consideration as per AS-14.
ICAI CA Inter Dec 2021 Question 2 (a) (i)
(i) Can preference shares be also issued with differential right? Explain in brief.
(ii) Explain the conditions under Companies (Share Capital and Debentures) Rules 2014, to deal with equity shares with differential right.
ICAI CA Inter Dec 2021 Question 2 (b)
Dark Ltd. and Fair Ltd. were amalgamated on and from 1st April, 2021. A new company bright Ltd. was formed to take over the business of the existing companies. The Balance Sheets of Dark Ltd. and Fair Ltd. as at 31st March, 2021 are given below:
ICAI CA Inter Dec 2021 Question 1 (a)
As per the provision of AS 4, you are required to state with reason whether the following transaction are adjusting event or non-adjusting event for the year ended 31.03.2021 in the books of NEW Ltd. (accounts of the company were approved by board of directors on 10.07.2021):
1. Equity Dividend for the year 2020-21 was declared at the rate of 7% on 15.05.2021:
2. On 05.03.2021, Rs. 53,000 cash was collected from a customer but not deposited by the cashier. This fraud was detected on 22.06.2021.
3. One Building got damaged due to occurrence of fire on 23.05.2021. Law was estimated to be Rs. 81,00,000.
ICAI CA Inter Dec 2021 Question 1 (b)
Given the following of Rainbow Ltd:
(i) On 15th November, goods worth Rs. 5,00,000 were sold on approval basis. The period of approval was 4 month after which they were considered sold. Buyer sent approval for 75% goods sold up to 31st January and no approval or disapproval received for the remaining goods till 31st March.
(ii) On 31st March, goods worth Rs. 2,40,000 were sold to Bright Ltd. but due to refurnishing of their show-room being underway, on their request, goods were delivered on 10th April.
(iii) Rainbow Ltd. supplied goods worth Rs. 6,00,000 to Shyam Ltd. and concurrently agrees to re-purchase the same goods on 14th April.
(iv) Dew Ltd. used certain assets of Rainbow Ltd. Rainbow Ltd. received Rs. 7.5 lakhs and Rs. 12 lakhs as interest and royalties respectively from Dew Ltd. during the year 2020-21.
(v) On 25th December goods of Rs. 4,00,000 were sent on consignment basis of which 40% of the goods unsold are lying with the consignee at the year on 31st March.
In each of the above cases, you are required to advise, with valid reasons, the amount to be recognized revenue under the provisions of AS. 9
ICAI CA Inter Dec 2021 Question 1 (c)
Surgical Ltd. is developing a new production process of surgical equipment. During the financial year ended 31st March, 2020 the total expenditure incurred on the process was Rs. 67 lakhs. The production process met the criteria for recognition as an intangible assets on 1st January,2020. Expenditure incurred till this date was Rs. 35 Lakhs.Further expenditure incurred on the process for the financial year ending 31st March, 2021 was Rs. 105 lakhs.
This includes estimates of future cash outflows and inflows.
Under the provisions of AS 26, you are required to ascertain:
(i) The expenditure to be charged to Profit and Loss Account for the year ended 31st March, 2020;
(ii) Carrying amount of the intangible asset as on 31st March, 2020;
(iii) Expenditure to be charged to profit and Loss Account for the year ended 31st March,2021;
(iv) Carrying amount of the intangible asset as on 31st March,2021
ICAI CA Inter Dec 2021 Question 1 (d)
Moon Limited is absorbed by Sun Limited; the consideration, being the takeover of liabilities, the payment of cost of absorption not exceeding Rs. 10,000 (actual cost Rs. 9,000); the payment of 9% Debentures of Rs. 50,000 at a premium of 20% through 8% debentures issued at a premium of 25% of face value; the payment of Rs. 18 per share in cash; allotment of two 11% preference shares of Rs. 10/- each and one equity share of Rs.10/- each at a premium of 30% fully paid for every three shares in Moon Limited respectively.
The number of shares of the vendor company is 1,50,000 of Rs. 10/- each fully paid. Calculate purchase consideration as per AS-14.
ICAI CA Inter Dec 2021 Question 2 (a) (i)
(i) Can preference shares be also issued with differential right? Explain in brief.
(ii) Explain the conditions under Companies (Share Capital and Debentures) Rules 2014, to deal with equity shares with differential right.
ICAI CA Inter Dec 2021 Question 2 (b)
Dark Ltd. and Fair Ltd. were amalgamated on and from 1st April, 2021. A new company bright Ltd. was formed to take over the business of the existing companies. The Balance Sheets of Dark Ltd. and Fair Ltd. as at 31st March, 2021 are given below:
| Particulars | Note No. | Dark Ltd. | Fair Ltd. | |
| I | Equity and Liabilities | |||
| (1) Shareholders’ Funds | ||||
| (a) Share Capital | 1 | 1,650 | 1,425 | |
| (b) Reserves and Surplus | 2 | 630 | 495 | |
| (2) Non-Current Liabilities | ||||
| Long Term Borrowings | ||||
| 10% Debentures of Rs. 100 each | 90 | 45 | ||
| (2) Current Liabilities | ||||
| Trade Payable | 630 | 285 | ||
| Total | 3,000 | 2,250 | ||
| II | Assets | |||
| (1) Non-Current Assets | ||||
| (a) Property, Plant and Equipment | 1,350 | 975 | ||
| (b) Non-Current Investments | 225 | 75 | ||
| (2) Current Assets | ||||
| (a) Inventories | 525 | 375 | ||
| (b) Trade Receivables | 450 | 525 | ||
| (c) Cash and Cash Equivalents | 450 | 300 | ||
| Total | 3,000 | 2,250 |
Notes to Accounts
| Dark Ltd. (Rs. in Lakhs) | Fair Ltd (Rs. in Lakhs) | ||
| 1. | Share Capital | ||
| Equity Shares of Rs. 100 each | 1,200 | 1,125 | |
| 14% Preference Shares of Rs. 100 each | 450 | 300 | |
| 1,650 | 1,425 | ||
| 2. | Reserves and Surplus | ||
| Revaluation Reserve | 225 | 150 | |
| General reserve | 255 | 225 | |
| Investment Allowance Reserve | 75 | 75 | |
| Profit and Loss Account | 75 | 45 | |
| 630 | 495 |
Additional Information:
(i) Bright Limited will issue 5 equity shares for each equity share of Dark Limited and 4 equity shares for each equity share of Fair Limited. The shares are to be issued @ Rs. 35 each having a face value of Rs. 10 per share.
(ii) Preference shareholders of the two companies are issued equivalent number of 16% preference shares of Bright Limited at a price of Rs. 160 per share (face value Rs. 100).
(iii) 10% Debenture holders of Dark Limited and Fair Limited are discharge by Bright Limited, issuing such number of its 16% Debentures of Rs. 100 each so as to maintain the same amount of interest.
(iv) Investment allowance reserve is to be maintained for 4 more years.
(v) Liquidation expenses are for Dark Limited Rs. 6,00,000 and for Fair Limited Rs. 3,00,000. It is decided that these expenses would be borne by Bright Limited.
(vi) All the assets and liabilities of Dark Limited are taken over at book value.
(vii) Authorized equity share capital of Bright Limited is Rs. 15,00,00,000 divided into equity shares of Rs. 10 each. After issuing required number of shares to the liquidators of Dark Limited and Fair Limited issued balance shares to public. The issue was fully subscribed.
You are required to prepare the Balance Sheet of Bright Limited as at 1st April 2021 after amalgamation has been carried out on the basis of Amalgamation in the nature of purchase.
ICAI CA Inter Dec 2021 Question 3 (a)
| Particulars | Moon Ltd. (Rs.) | Star Ltd. (Rs.) |
| Equity Share Capital | 20,000,000 | 6,000,000 |
| Finished Goods Inventory as on 01.01.2020 | 4,200,000 | 3,010,000 |
| Finished Goods Inventory as on 31.03.2021 | 8,575,000 | 3,762,500 |
| Dividend Income | 1,680,000 | 437,500 |
| Other non-operating Income | 350,000 | 105,000 |
| Raw material consumed | 13,930,000 | 4,725,000 |
| Selling and Distributed Expenses | 3,325,000 | 1,575,000 |
| Production Expenses | 3,150,000 | 1,400,000 |
| Loss in sale of investments | 262,500 | Nil |
| Sales and other operating income | 33,250,000 | 19,075,000 |
| Wages and Salaries | 13,300,000 | 2,450,000 |
| General and Administrative Expenses | 2,800,000 | 1,225,000 |
| Royalty Paid | Nil | 50,000 |
| Depreciation | 315,000 | 140,000 |
| Interest expense | 175,000 | 52,500 |
Other information:
· On 1st September, 2018 Moon Ltd. acquired 50,000 equity shares of Rs. 100 each fully paid up in Star Ltd.
· Star Ltd. paid a dividend of 10% for the year ended 31st March, 2020. The divided was correctly accounted for by Moon Ltd.
· Moon Ltd. sold goods of Rs. 17,50,000 to Star Ltd. at a profit of 20% on selling price. Inventory of Star Ltd. includes goods of Rs. 7,00,000 received from Moon Ltd
· Selling and Distribution expenses of Star Ltd. include Rs. 2,12,500 paid to Moon Ltd. as brokerage fees
· General and Administrative expenses of Moon Ltd. include Rs. 2,80,000 paid to Star Ltd. as consultancy fees.
· Star Ltd. used some resources of Moon Ltd. paid Rs. 50,000 to Moon Ltd. as royalty. Prepare consolidated statement of Profit and Loss of Moon Ltd. and its subsidiary Star Ltd. for the year ended 31.03.2021 as per schedule III of the Companies Act, 2013.
ICAI CA Inter Dec 2021 Question 3 (b)
GEM Ltd. is a NBFC providing Hire Purchase Solutions for acquiring consumer durable. The following information is extracted from its books for the year ended 31st March 2021.
| Rs. in lakhs | |
| Paid up Equity Capital | 2520 |
| Compulsory convertible preference shares | 1035 |
| Free Reserve | 243 |
| Share premium | 56 |
| Capital Reserve (Rs. 220 Lakhs surplus arising out of sale of Building) | 319 |
| Deferred revenue expenditure | 54 |
| Debenture issued | 702 |
| Cash & Bank Balances | 243 |
| Investments in debentures of subsidiaries | 171 |
| Investments in shares of other NBFC | 945 |
You are required to calculate Owned fund and Net Owned Fund and Net Owned Fund.
ICAI CA Inter Dec 2021 Question 4 (a)
TJM & Sons is a partnership firm consisting of T,J and M who shares profits and losses in the ratio of 2:2:1 and JEK Limited is another company doing similar business.
The firm (TJM & Sons) and the company (JEK Ltd) provide you the following ledger balance as on 31.03.2021:
| TJM & Sons (Rs.) | JEK Ltd. (Rs.) | |
| Debits Balances: | ||
| Plants & machinery | 7,50,000 | 24,00,000 |
| Furniture & Fixtures | 75,000 | 3,37,500 |
| Inventories | 3,00,000 | 12,75,000 |
| Trade receivables | 3,00,000 | 12,37,500 |
| Cash at Bank | 15,000 | 6,00,000 |
| Cash in hand | 60,000 | 1,50,000 |
| Credit Balances | ||
| Equity share capital: Equity shares of Rs. 10 each | 30,00,000 | |
| Partners Capitals | ||
| T | 3,00,000 | |
| J | 4,50,000 | |
| M | 1,50,000 | |
| General Reserve | 1,50,000 | 10,50,000 |
| Trade Payables | 4,50,000 | 19,50,000 |
On the balance sheet date, it was decided that the firm TJM & Sons be dissolved and all assets (except cash in hand and cash at bank) and all the liabilities of the firm be taken over by JEK Limited by issuing 75,000 shares of Rs. 10/- each at a premium of Rs. 4/- per share. Plant & Machinery and furniture & Fixtures are to be revalued at Rs. 8,50,000 and Rs. 1,00,000 respectively.
Partners of TJM & Sons agreed to divided the shares issued by JEK Limited in the profit sharing ratio and bring necessary cash for settlement of their capital.
The trade payable of TJM & Sons includes Rs. 1,50,000 payable to JEK Limited. An unrecorded liability of Rs. 37,500 of TJM & Sons must also be taken over by JEK Ltd.
You are required to prepare:
(i) Realization account, Partners’ capital account and cash in hand/ Bank account in the books of TJM & Sons.
(ii) Pass journal entries in the books of JEK Limited for acquisition of TJM & Sons.
ICAI CA Inter Dec 2021 Question 4 (b)
State the circumstances when Garner v/s Murray rule is not applicable.
ICAI CA Inter Dec 2021 Question 5 (a)
Mohan Ltd. furnishes the following summarized balance Sheet as on 31sr March 2021.
(i) Realization account, Partners’ capital account and cash in hand/ Bank account in the books of TJM & Sons.
(ii) Pass journal entries in the books of JEK Limited for acquisition of TJM & Sons.
ICAI CA Inter Dec 2021 Question 4 (b)
State the circumstances when Garner v/s Murray rule is not applicable.
ICAI CA Inter Dec 2021 Question 5 (a)
Mohan Ltd. furnishes the following summarized balance Sheet as on 31sr March 2021.
| Amount | |
| Equity and Liabilities: | |
| Shareholder’s fund | |
| Share Capital | |
| Equity Shares of Rs.10 each fully paid up | 780 |
| 6% Redeemable Preference shares of Rs. 50 each fully paid up | 240 |
| Reserves and Surplus | |
| Capital Reserves | 58 |
| General Reserves | 625 |
| Security Premium | 52 |
| Profit & Loss | 148 |
| Revaluation Reserve | 34 |
| Infrastructure Development Reserve | 16 |
| Non-current liabilities | |
| 7% Debentures | 268 |
| Unsecured Loans | 36 |
| Current Liabilities | 395 |
| 2652 | |
| Assets: | |
| Non-current Assets | 725 |
| Plant and Equipment less depreciation | 720 |
| Investment at cost | 1207 |
| Current Assets | 2652 |
Other information:
(1) The company redeemed preference shares at a premium of 10% on 1st April, 2021.
(2) It also offered buy back the maximum permissible number of equity shares of Rs. 10 each at Rs. 30 per share on 2nd April, 2021.
(3) The payment for the above was made out of available bank balance, which appeared as a part of the current assets.
(4) The company had investment in own debentures costing Rs. 60 lakhs (face value Rs. 75 lakhs). These debentures were cancelled on 2nd April, 2021.
(5) On 4th April, 2021 company issued one fully paid up equity share of Rs. 10 each by way of bonus for every five equity shares held by the shareholders.
You are required to:
(a) Calculate maximum possible number of equity shares that can be bought back as per Companies Act, 2013 and
(b) Record the Journal Entries for the above mentioned information.
(2) It also offered buy back the maximum permissible number of equity shares of Rs. 10 each at Rs. 30 per share on 2nd April, 2021.
(3) The payment for the above was made out of available bank balance, which appeared as a part of the current assets.
(4) The company had investment in own debentures costing Rs. 60 lakhs (face value Rs. 75 lakhs). These debentures were cancelled on 2nd April, 2021.
(5) On 4th April, 2021 company issued one fully paid up equity share of Rs. 10 each by way of bonus for every five equity shares held by the shareholders.
You are required to:
(a) Calculate maximum possible number of equity shares that can be bought back as per Companies Act, 2013 and
(b) Record the Journal Entries for the above mentioned information.
ICAI CA Inter Dec 2021 Question 5 (b)
From the following information, you are required to prepare profit and Loss Account of Popular Bank for the year ended 31st March, 2021.
From the following information, you are required to prepare profit and Loss Account of Popular Bank for the year ended 31st March, 2021.
| Particulars | Rs. |
| Interest on cash credit | 13,65,000 |
| Interest on overdraft | 5,62,500 |
| Interest on term loans | 11,55,000 |
| Income on investments | 6,30,000 |
| Interest on balance with RBI | 1,12,500 |
| Commission on remittances and transfer | 56,250 |
| Commission on letters of credit | 88,500 |
| Commission on government business | 61,500 |
| Profit on sale of land and building | 20,250 |
| Loss on exchange transactions | 39,000 |
| Interest paid on deposit | 20,40,000 |
| Auditor’s fees and allowances | 90,000 |
| Directors’ fees and allowances | 1,87,500 |
| Advertisements | 1,35,000 |
| Salaries, allowances and bonus to employees | 9,30,000 |
| Payment to Provident Fund | 2,10,000 |
| Printing and stationery | 1,05,000 |
| Repairs and maintenance | 37,500 |
| Postage, telegrams, telephones | 60,000 |
Other information:
(i) Interest on NPA is as follows:
| Earned (Rs.) | Collected (Rs.) | |
| Cash credit | 6,15,000 | 3,00,000 |
| Overdraft | 3,37,500 | 75,000 |
| Term loans | 5,62,500 | 1,87,500 |
(i)(ii) Classification of Non- Performing Advances
| Rs. | |
| Standard | 22,50,000 |
| Sub-standard | 8,40,000 |
| Doubtful assets not covered by security | 1,50,000 |
| Doubtful assets covered by security for one year | 37,500 |
| Loss Assets | 1,50,000 |
| (iii) Investment | 20,62,500 |
Bank should not keep more than 25% of its investment as ‘Held-to-Maturity’. The market value of its rest 75% investment is Rs. 14,81,250 as on 31st March, 2021.
ICAI CA Inter Dec 2021 Question 6 (a)
A liquidator is entitled to receive remuneration at 3% on the assets realized and 4% on the payment made to creditors and company’s bankers. The assets were realized for Rs. 80,00,000. All the assets of the company have been charged to the company’s bankers to whom the company owns Rs. 1,00,00,000. The company owes following amounts to others:
| Due to workers | 25,00,000 |
| Other Preferential | 20,00,000 |
| Unsecured creditors | 10,50,000 |
With reference to the provision of the Companies Act 2013, you are required to calculate the amount payable to
1. Workers
2. Other Preferential creditors
3. Unsecured creditors
4. Liquidators for remuneration and
5. Company’s banker’s
ICAI CA Inter Dec 2021 Question 6 (b)
P, Q, R and S hold equity capital in the proportion of 10:40:20:30. K, L, M and N hold preference share capital in the proportion of 20:10:40:30. If the paid up equity share capital of the company is Rs. 60 lakhs and Preference Share Capital is Rs. 30 lakhs, find their voting rights in case of resolution of winding up of the company.
ICAI CA Inter Dec 2021 Question 6 (c)
A machine was given on 3 years operating lease by a dealer of the machine for equal annual lease rentals to yield 30% profit margin on cost of Rs. 2,25,000. Economic life of the machine is 5 years and output from the machine is estimated as 60,000 units, 75,000 units, 90,000 units, 1,20,000 units and 1,05,000 units consecutively for 5 years. Straight line depreciation in proportion of output is considered appropriate. You are required to compute the following as per AS-19.
(i) Annual Lease Rent
(ii) Lease Rent income to be recognized in each operating year and
(iii) Depreciation for 3 years of lease
ICAI CA Inter Dec 2021 Question 6 (d)
“At the time of calculating diluted earnings per share, effect is given to all dilutive potential equity shares that are outstanding during the period.”
Comment and also calculate the basic and diluted earnings per share for the year 2020-21 from the following information:
| (i) | Net profit after tax for the year | 64,12,500 |
| (ii) | No. of equity shares outstanding | 15,00,000 |
| (iii) | No. of 9% convertible debentures of Rs. 100 issued on 1st July, 2020 | 75,000 |
| (iv) | Each debenture is convertible into 8 Equity Shares | |
| (v) | Tax relating to interest expenses | 35% |
ICAI CA Inter Dec 2021 Question 6 (e)
A Company grants 2,000 Employees Stock Options on 1st April, 2018 at Rs. 60 when the market price is Rs. 170. The vesting period is 2.5 years and the maximum exercise period is 1 year. 600 unvested options lapse on 01.05.2020. 1200 options are exercised on 30.06.2021. 200 vested option lapse at the end of the exercise period. You are required to pass necessary journal entries with narrations.
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