Roll No………

Total No. of Questions— 6] [Total No. of Printed Pages—5

Time Allowed : 3 Hours Maximum Marks : 100
Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate
who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued.
Answer all Questions.
Working notes should form part of the answer.
Wherever necessary, suitable assumptions may be made by the candidate.
Marks

1. Astha Ltd. acquired 80% of both classes of shares in Birat Ltd. on 1.4.2007. The draft Balance Sheets of two 16 (0)
companies on 31st March, 2008 were as follows:

(Rs. in 000’s)
Astha Birat Astha Birat
Liabilities Assets
Ltd. Ltd. Ltd. Ltd.
Share Capital:
Equity shares of 3,000 600 Plant & machinery 2,060 600
Rs.10
each, full paid up – 400 Furniture & 600 540
14% Preference Fixtures
shares
of Rs.100 each, fully 1,900 40
paid up Investments
General reserve in equity shares of 1,920 —
1,600 720 Birat Ltd.
In preference 320 —
Profit and loss 300 320 shares 680 404
account of Birat Ltd. 560 316
Stock 660 220
Creditors Debtors
Cash at bank
6,800 2,080 6,800 2,080
Note:
Contingent liability – Astha Ltd.: Claim for damagees lodged by a contractor against the company pending in a law–
suit – Rs.1,55,000.
Additional Information:

(i) General reserve balance of Birat Ltd. was the same as on 1.4.2007.
(ii) The balance in Profit and Loss A/c of Birat Ltd. on 1.4.2007 was
Rs.3,20,000, out of which dividend of 16% p.a. on the Equity capital of
Rs.6,00,000 was paid for the year 2006–07.
(iii) The dividend in respect of preference shares of Birat Ltd. for the year
2007–08 was still payable as on 31.3.2008.
Astha Ltd. credited its Profit and Loss A/c for the dividend received by it
(iv)
from Birat Ltd. for the year 2006–07.
Sundry creditors of Astha Ltd. included an amount of Rs.1,20,000 for
(v) purchases from Birat Ltd., on which the later company made a loss of
Rs.10,000.
Half of the above goods were still with the closing stock of Astha Ltd. as at
(vi)
31.3.2008.
 (vii) At the time of acquisition by Astha Ltd., while determining the price to be
paid for the shares in Birat Ltd. it was considered that the value of plant
and machinery was to be increased by 25% and that of furniture and
fixtures reduced to 80%. There was no transaction of purchase or sale of
these assets during the year. The directors wish to give effect to these
revaluations in the consolidated balance sheet.
(viii) The directors of Astha Ltd. are of opinion that disclosure of its contingent
liability will seriously prejudice the company's position in dispute with the
contractor.
Prepare consolidated balance sheet as at 31st March, 2008, assuming the rate of depreciation charged as 25% p.a.
and 10% p.a. on plant and machinery and furniture and fixtures respectively. Workings should be part of the answer.
2. T. Ltd. and V. Ltd. propose to amalgamate. Their balance sheets as at 31st March, 2008 were as follows: 16 (0)

V Ltd. V Ltd.
Liabilities T Ltd. Rs. Assets T Ltd. Rs.
Rs. Rs.
Share Fixed assets
Capital: 15,00,000 6,00,000 Less: 12,00,000 3,00,000
Equity Depreciation
shares of 6,00,000 60,000
Rs. 10 Investments
each (face
General value of Rs.3 3,00,000 —
reserve 3,00,000 90,000 lakhs, 6% tax 6,00,000 3,90,000
3,00,000 1,50,000 free 5,10,00 1,80,000
G.P. notes)
Stock 90,000 30,000
Profit & Debtors
Loss A/c Cash and
Creditors bank
balances
27,00,000 9,00,000 27,00,000 9,00,000
Their net profits (after taxation) were as follows:

Year T Ltd. V Ltd.

2005–06 3,90,000 1,35,000
2006–07 3,75,000 1,20,000
2007–08 4,50,000 1,68,000
Normal trading profit may be considered as 15% on closing capital invested. Goodwill may be taken as 4 years’
purchase of average super profits. The stock of T. Ltd. and V. Ltd. are to be taken at Rs.6,12,000 and Rs.4,26,000
respectively for the purpose of amalgamation. W. Ltd. is formed for the purpose of amalgamation of two companies.
(a) Suggest a scheme of capitalization of W. Ltd. and ratio of exchange of shares; and
(b) Draft the opening balance sheet of W. Ltd.
3. (a) ABC Ltd. grants 1,000 employees stock options on 1.4.2004 at Rs.40, when the market price is Rs.160. The 10 (0)
vesting period is 2½ years and the maximum exercise period is one year. 300 unvested options lapse on
1.5.2006. 600 options are exercised on 30.6.2007. 100 vested options lapse at the end of the exercise period.
Pass Journal Entries giving suitable narrations.
(b) From the following data, compute the ‘Net Assets’ value of each category of equity shares of Smith Ltd.: 6 (0)
Shareholders funds

10,000 ’A’ Equity shares of Rs.100 each, fully paid

10,000 ‘B’ Equity shares of Rs.100 each, Rs.80 paid
10,000 ‘C’ Equity shares of Rs.100 each, Rs.50 paid
Retained Earnings Rs.9,00,000
4. (a) X Ltd. began construction of a new building on 1st January, 2007. It obtained Rs.1 lakh special loan to finance the 10 (0)
construction of the building on 1st January, 2007 at an interest rate of 10%. The company’s other outstanding two
non–specific loans were:

Amount Rs.
Rs.5,00,000 11%
Rs.9,00,000 13%
The expenditure that were made on the building project were as follows:

Rs.
January 2007 2,00,000
April 2007 2,50,000
July 2007 4,50,000
December 2007 1,20,000
Building was completed by 31st December, 2007. Following the principles prescribed in AS–16 ‘Borrowing Cost,’
calculate the amount of interest to be capitalized and pass one Journal Entry for capitalizing the cost and
borrowing cost in respect of the building.
(b) From the following information of Steel India Ltd. for the year ended 31st March, 2008, prepare their Social 6 (0)
Balance Sheet as on that date:
— A specialist has valued their human assets at Rs.828 lakhs.
— Their investments were classified as:

(Rs. in lakhs)
Residential Hospital School Welfare
Buildings 17.00 1.00 1.40 0.80
Equipments 2.80 1.00 1.00 —
— Water, electricity and gas supply systems totalled Rs.1 lakh.
— Their Net owned funds were Rs.26 lakhs.

5. (a) U.K. International Ltd. is developing a new production process. During the financial year ending 31st March, 2007, 5 (0)
the total expenditure incurred was Rs.50 lakhs. This process met the criteria for recognition as an intangible asset
on 1st December, 2006. Expenditure incurred till this date was Rs.22 lakhs. Further expenditure incurred on the
process for the financial year ending 31st March, 2008 was Rs.80 lakhs. As at 31st March, 2008, the recoverable
amount of know–how embodied in the process is estimated to be Rs.72 lakhs. This includes estimates of future
cash outflows as well as inflows.
You are required to calculate:

Amount to be charged to Profit and Loss A/c for the year ending
(i)
31st March, 2007 and carrying value of intangible as on that date.
Amount to be charged to Profit and Loss A/c and carrying value of
(ii)
intangible as on 31st March, 2008.
Ignore depreciation.
(b) Sky Hospital – a non–profit seeking entity receives medicines worth Rs.5,00,000 by way of donations from a 5 (0)
donor. During the year its issues of all medicines totals Rs.16,00,000. The closing inventory of donated medicines
is Rs.1,00,000. Show relevant summary Journal Entries in the books of the Hospital in respect of the above.
(c) Mini Ltd. took a factory premises on lease on 1.4.07 for Rs.2,00,000 per month. The lease is operating lease. 5 (0)
During March, 2008, Mini Ltd. relocates its operation to a new factory building. The lease on the old factory
premises continues to be live upto 31.12.2010. The lease cannot be cancelled and cannot be sub–let to another
user. The auditor insists that lease rent of balance 33 months upto 31.12.2010 should be provided in the accounts
for the year ending 31.3.2008. Mini Ltd. seeks your advice.
(d) A Cosmetic articles producing company provides the following information: 5 (0)

Cold Vanishing
Cream Cream
 January, 2006 – September, 2,00,000 2,00,000
2006 per month 1,00,000 3,00,000
October, 2006 – December, 2006 0 4,00,000
per month
January, 2007 – March, 2007 per
month
The company has enforced a gradual change in product–line on the basis of an overall plan. The Board of
Directors of the company has passed a resolution in March, 2006 to this effect. The company follows calendar
year as its accounting year. Should this be treated as a discontinuing operation? Give reasons in support of your
answer.
6. Answer the following questions: 6+5+5
(a) What are the advantages of preparation of Value Added (VA) statements? (0)

(b) How are capital expenditures not represented by any specific or tangible assets dealt in financial statements? (0)

(c) One of the important factors generally considered for awarding shields and plaques in India for ‘best presented (0)
accounts’ is that the information presented in the accounts make useful disclosures.

What are actually looked into in this regard?