Roll No………

Total No. of Questions — 7] [Total No. of Printed Pages — 12

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, his
answers in Hindi will not be valued.
Q.No. 1 is compulsory.
Attempt any five questions from the remaining six questions.
Marks
1. (a) Albert Finance Ltd. has made the following investments. 5 (0)

(i) Purchased the following equity shares from stock exchange on 1st June,
2009.
Cost
Rs.
1,80,000
Scrip X
50,000
Scrip Y
1,70,000
Scrip Z
4,00,000

(ii) Purchased gold of Rs.3,00,000 on 1st April, 2006.

(iii) Invested in mutual funds at a cost of Rs.6,00,000 on 31st March, 2009.
st
(iv) Purchased government securities at a cost of Rs.5,00,000 on 1 April,
2009.

How will you treat these investments as per applicable AS in the books of the
company for the year ended on 31st March, 2010, if the values of these
investments are as follows :

Shares Rs. Rs.

Scrip X 1,90,000
Scrip Y 40,000
Scrip Z 70,000 3,00,000
Gold 5,00,000
Mutual funds 4,50,000
Government 7,00,000
securities

Also explain is it possible to off–set depreciation in investment in mutual

funds against appreciation of the value of investment in government
securities.?
(b) A Ltd. purchased fixed assets costing Rs.2,544 lakhs on 1st April, 2009 and 5 (0)

the same was fully financed by foreign currency loan in U.S. Dollars,
repayable in four equal annual instalments. Exchange rate at the time of
purchase was 1 US Dollar = Rs.42.40. The first instalment was paid on
31st March, 2009 when 1 US Dollar fetched Rs.45.40. The entire loss on
exchange was included in cost of goods sold of normal business operations.
A. Ltd. provides depreciation on their fixed assets at 20% on WDV basis.
 Show the correct accounting treatment with reference to relevant accounting
standards.
(c) State the treatment of the following items with reference to Indian 5 (0)

Accounting Standards (AS) and International Financial Reporting Standards

(FFRS) :
(i) Impairment of assets
(ii) Business combinations
(d) The Chief Accountant of ANZ ltd , gives the following data regarding its six 5 (0)

segments:
Rs. in Lakhs
Particulars M N O P Q R Total
Segment Assets 40 80 30 20 20 10 200
Segment Results 50 190 10 10 –10 30 –100
Segment Revenue 300 620 80 60 80 60 1200

The Chief Accountant is of the opinion that segments ‘M’ and ‘N’ alone should
be reported. Is he justified in his view ? Discuss
2. The summarized B/S. of the following three companies are given below 16 (0)

Rs. in Lakhs
A. B. C.
Ltd. Ltd. Ltd.

Liabilities as on 31st March,

2009
Equity shares (Rs.10 each fully paid up) 60 48 40
7 1/2% Cum. Pref. Shares (Rs.100 each fully 15 12 10
paid) 120 – –
Capital reserve on revaluation of land, 25 15 10
buildings and machinery 25 – –
General Reserve 153 71 52
8% 2,500 Mortgage Debenture Bonds of
Rs.1,000 each – – 12
Secured loans and advances from banks 15 – –
Unsecured loans : 18 12 3
(i) From B Ltd.
(ii) From C Ltd. 9 – –
(iii) Deposits from public 314 125 72
Current liabilities and provisions
(i) Inter–company balances
(ii) Other liabilities and provisions
Total 754 283 199
Assets:
Fixed Assets (Net) 272 104 42
Investments (at cost)
2,50,000 Equity Shares of B Ltd. 25 – –
80,000 Equity Shares of C Ltd. 8 – –
1,60,000 Equity Shares of C Ltd. – 20 –
10,000 Cumulative Pref. Shares of A Ltd. – – 10
1,500 Mortgage Debentures of A Ltd. – – 14
 Current assets 353 123 112
Profit and Loss Account 96 36 21
Total 754 283 199

A Ltd. subscribed for the shares of B Ltd. & C Ltd. at par at the time of first
(i)
issue of shares by the latter companies.
(ii) B Ltd. subscribed for 80,000 shares of C Ltd. at par at the time of first issue
and latter acquired by purchase in the market 80,000 shares of C Ltd. at
Rs.15 each when reserves and surplus of C Ltd. stood at Rs.5 lakhs.
(iii) Current Assets of B Ltd. & C Ltd. included Rs.4 lakhs and Rs.6 lakhs
respectively being the current accounts balance against A Ltd. These
accounts remained unreconciled.
(iv) Preference dividends were in arrears for
(a) 8 years in the case of A Ltd. and
(b) 4 years in the case of other two companies.

Prepare the Consolidated Balance Sheet for the year as on 31st March, 2009.
3. Libra Ltd. has two divisions A and B and their respective shares of various Assets 16 (0)

and Liabilities in the company’s Balance Sheet as on 31st March, 2009 are given
below :
Rs. in Lakhs
A B
Fixed Assets Total
division division
Cost 650 340
Less: Depreciation 225 160
Written down value 425 180 605
Investments 115
Current Assets 350 430
Less: Current Liabilities 185 210
Net Current Assets 165 220 385
1,105
Financed by:
Loan Funds 400
Own funds:
Equity share capital–shares of Rs.10 300
each 405
Reserve and Surplus 1,105

Division B has been invariably suffering losses. The company sold this division B
along with its assets and liabilities to a newly formed company. Zee Ltd, which
was incorporated with an authorized capital of Rs.800 lakhs divided into shares of
Rs.10 each. Zee Ltd. allotted to Libra Ltd’s shareholders its two fully paid equity
shares of Rs.10 each at par for every fully paid equity shares of Rs.10 each held
in Libra Ltd. as discharge of consideration for the division taken over.

Zee Ltd. recorded in its books the fixed assets at Rs.280 lakhs, current assets at
Rs.320 lakhs and liabilities at the same value at which they appeared in the
books of Libra Ltd.

On 1st April, 2009 Libra Ltd. sold all its investments for Rs.135 lakhs and
redeemed debentures liability of Rs.150 lakhs at par, which was included in loan
 funds. The cash transaction being recorded in the Bank Account pertaining to A
division.

You are required to:

(i) Show Journal Entries in the Books of Libra Ltd.

(ii) Prepare Libra Ltd’s Balance Sheet immediately after the Demerger and
(iii) Initial Balance Sheet of Zee Ltd.
4. The Balance Sheet of Bird Ltd. as on 31st March, 2009 is given below: 16 (0)

Liabilities Rs. Rs. Assets Rs.

Share Capital: Fixed Assets:
Equity shares of 6,00,000 Goodwill 40,000
Rs.10 each Machinery 3,00,000
Less: Calls in 20,000 5,80,000 Freehold 4,50,000
arrear properties 1,00,000
(Rs.2 for final 3,00,000 Vehicles 50,000
call) Furniture 2,00,000
7% Preference 3,50,000 Investments
Shares of 1,50,000 Current Assets: 2,50,000
Rs.10 each Stock–in–Trade 4,00,000
fully paid 3,00,000 Sundry Debtors 60,000
Reserve and 2,00,000 Cash at Bank 30,000
surplus: Preliminary
General expenses
Reserve
Profit and Loss
Account
Current Liabilities
Sundry
creditors
Bank Loan
18,80,000 18,80,000

Additional Information:

(i) On 1–4–2006 a new furniture costing Rs.20.000 was purchased and

wrongly charged to revenue. No rectification has yet been made tor above.
Depreciation charged on furniture is @ 10% on reducing system.
(ii) Fixed Assets are worth 15% above their actual Book Value.
(iii) Stock is overvalued by Rs.50,000 and 10% Debtors are doubtful.
(iv) Of the investments, 10% is in Trade and the balance Non–Trade. Trade
investments are to be valued at 10% below cost. A uniform rate of dividend
of 10% is earned on all investments.
(v) For the purpose of valuation of shares, goodwill is to be considered on the
basis of 2 years’ purchase of super profits based on average profit of last 3
years. Profits are as follows :
Rs.
2006–07 2,50,000
2007–08 2,80,000
 2008–09 3,30,000
(vi) In a similar business normal return on capital employed is 20%.
You are required to value each fully paid and partly–paid equity share,
assuming tax rate of 50%.

5. (a) S Ltd. is considering buying the business of R Ltd., the final accounts of which 10 (0)

for the last 3 years were as follows :

Profit and Loss Accounts for the 3 years ended Dec.31st

(Figures in Rs.)
2007 2008 2009
Sales 2,00,000 1,90,000 2,24,000
Material consumed 1,00,000 95,000 1,12,000
Business expenses 80,000 80,000 82,000
Depreciation 12,000 13,000 14,000
Net profit 8,000 2,000 16,000

Balance Sheets as at 31st Dec.

(Figures in Rs.)
2006 2007 2008 2009
Fixed Assets 1,00,000 1,20,000 1,40,000 1,80,000
(at cost) less 70,000 82,000 95,000 1,09,000
Depreciation
30,000 38,000 45,000 71,000
Stock in trade 16,000 17,000 18,500 21,000
Sundry Debtors 21,000 24,000 26,000 28,000
Cash in hand and at 32,000 11,000 28,000 13,200
bank 1,000 500 2,000 1,000
Prepaid expenses
1,00,000 90,500 1,19,500 1,34,200
Equity capital 50,000 50,000 70,000 70,000
Share premium – – 5,000 5,000
General Reserve 16,000 24,000 26,000 42,000
Debentures 20,000 – – –
Sundry Creditors 11,000 13,000 14,000 14,000
Accrued Expenses 3,000 3,500 4,500 32,000
1,00,000 90,500 1,19,500 1,34,200

S Ltd. wishes the offer to be based upon trading cash flows rather than book
profits. By trading cash flow is meant cash received from debtors less cash
paid to creditors and for business expenses (excluding depreciation),
together with an allowance for average annual expenditure on fixed assets of
Rs.15,000 per year.
 The actual expenditure on fixed assets is to be ignored, as is any cash
received or paid out on the issue or redemption of shares or debentures.

S Ltd. wishes the trading cash flow to be calculated for each of the years
2007, 2008 and 2009 and for these to be combined using weighting of 20%
for 2007, 30% for 2008 and 50% for 2009 to give an average annual trading
cash flow.

S Ltd. considers that the average annual trading cash flow should show a
return of 10% on its investment.

You are required to calculate :

(a) the trading cash flow for each of the years 2007, 2008 & 2009,
(b) the weighted average annual trading cash flow
(c) the price which S Ltd. should offer for the business.
(b) From the following information of Steel India Ltd. tor the year ended 6 (0)

31st March, 2010, prepare their Social Balance Sheet as on that date.

A specialist has valued their human assets at Rs.828 lakhs.

Then 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.

6. (a) The following is the Profit and Loss Account of Murali Ltd., ior the year ended 10 (0)

31st March, 2010. Prepare a gross value added statement or Murali Ltd.
Profit and Loss Account for the year ended 31st March,
2010.
Rs. in Lakhs
Income 890
Sale 55
Other Income 945
Expenditure
Production and operational expenses (a) 641
Administrative expenses (factory) (b) 33
Interest (c) 29
Depreciation 17 720
Profit before tax 225
Provision for taxation 30
Profit after tax 195
Balance as per last Balance Sheet 10
205
Transferred to General Reserve 45
Dividend Paid 95
140
 65
Surplus carried to Balance Sheet 205

Notes:

Rs. in Lakhs
(a) Production and Operational Expenses
Consumption of Raw materials 293
Consumption of stores 59
Salaries, wages, gratuities etc., (Admn) 82
Cess and local taxes 98
Other manufacturing expenses 109
641
(b) Administration expenses include salaries,
commission to Directors Rs.9.00 lakhs.
Provision for doubtful debts Rs.6.30 lakhs
(c) Interest on loan from Bank for working capital 9
Interest on loan from Bank for fixed loan 10
Interest on loan from financial institution for
fixed loan 8
Interest on Debentures 2
29
(d) The charges for taxation include a transfer of Rs.3.00 lakhs to
the credit of Deferred tax account.
(e) Cess and local taxes include Excise Duty, which is equal to
10% of cost of bought–in materials.
(b) From the following in respect of loan funds of M/s Come together Foundation 6 (0)

for 2009–10, prepare a statement showing changes in fund balance during

the year.
Rs.
Private and Government grants 5,00,000
Loan fund matching grant from revenue 10,000
funds 1,00,000
Other transfer from unrestricted funds 15,000
Investment income 25,000
Interest on loans 20,000
Refunded to grantors 10,000
Loan cancellation and written off 15,000
Administrative and collection costs 20,15,000
Fund balance at the beginning of the
year
7. Attempt any four 4x4=16
(a) An airline is required by law to overhaul its aircraft once in every three years. (0)

A company which operates aircraft’s does not provide any provision as

required by law in its final account. Discuss with reference to relevant
Accounting Standard.
(b) A company purchased on April 1, 2010 a special purpose machinery for Rs.1 (0)

crore, and received Central Government subsidy for 25% of the price.
Effective life of the machinery is 8 years. Explain the accounting treatment
and quote the relevant AS.
(c) An intangible item is appearing in the Balance Sheet of A Ltd. at Rs.15 lakhs (0)

on 1–4–2010. The item was acquired for Rs.25 lakhs on 1–4–2008. The
enterprise has been following a policy of amortizing the intangible item over a
period of 5 years on straight line basis. Applying paragraph 63 of AS–26 the
enterprise determines the amortization period to be 8 years, being the best
estimate of its useful life, from the date when the item was available for use
i.e., April, 1, 2008. Comment.
(d) Certain Ltd., has signed at 31st Dec, 2009, the Balance Sheet date, a contract (0)

where the total revenue is estimated at Rs.15 crores and total cost is
estimated at Rs.20 crores. No work began on the contract. Is contractor
required to give any accounting effect for the year ended December,
31st 2009 in his accounts ?
(e) Can PT Ltd. a wire netting company, while valuing its finished stock at the (0)

year end include interest on Bank Overdraft as an element of cost, for the
reason that overdraft has been taken specifically for the purpose of financing
current assets like inventory and for meeting day to day working expenses ?