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OLD SCHEME

INTEGRATED PROFESSIONAL COURSE

PAPER 5: ADVANCED ACCOUNTING

Syllabus 70%

Question No. 1 is compulsory. Answer Any 5 of remaining 6 Questions.

All the workings shall form a part of your answers.

Total No of Questions - 7 Maximum Marks – 100

Q1. a. Priya Ltd. entered into an agreement to sell its immovable property included in the Balance Sheet
at ` 5 lakhs to another Company for ` 20 lakhs. The agreement to sell was concluded on 31
st
th
January but the sale deed was registered only on 30 April. The Company’s accounting year ended
st
on 31 March and the accounts for that period were considered and approved by the Board of
th st
Directors on 15 May. How will you treat the above in the accounts for the year ended 31 March?

Q1. b. Net profit for the current year Rs. 1,00,00,000

No. of equity shares outstanding 50,00,000
Basic earnings per share Rs. 2.00
No. of 12% convertible debentures of Rs. 100 each 1,00,000
Each debenture is convertible into 10 equity shares
Interest expense for the current year Rs. 12,00,000
Tax relating to interest expense (30%) Rs. 3,60,000

Compute Diluted Earnings Per Share as per AS 20.

Q1. c. State whether following statements are True Or False. Also give reasons to your answer.

i. As per AS 12, the Governments Grants received for acquisition of Fixed Assets should be compulsorily
reduced from cost of Fixed Assets.

ii. As per AS 16, Borrowing Costs incurred on all Fixed Assets should be capitalized.

iii. Liability of List B Contributories devolves upon their legal heirs, in event of death of that Contributory.

iv. As per AS 19, in Books of Lessor, the Asset given on lease should be shown as in Balance Sheet at
an amount equal to Fair Value of the Leased Asset or Present Value of Minimum Lease Payments,
whichever is lesser.

v. As per AS 26, there is no separate treatment for Research and Development Expenditure.

Q1. d. K Ltd. launched a project for producing product X in October, 2018. The Company incurred ` 40
st
lakhs towards Research and Development expenses upto 31 March, 2019. Due to prevailing market
conditions, the Management came to conclusion that the product cannot be manufactured and sold in the
 -: 2 :-

market for the next 10 years. The Management hence wants to defer the expenditure write off to future
years. You are required to advise the Company as per the applicable Accounting Standard.

(4 X 5 Marks)

Q2. a. From the given Information find the Total Capitalisation as per AS 16 :

Amount (Rs. Lacs)

Amount

Total expenditure incurred 100.00

[Note: Total expenditure has been assumed to be average expenditure]

Of which : 1.Specific borrowings @12 are 20.00

2.Funded by General borrowings – Capitalization rate 13.33 80.00

(Period 12 months in both cases)

Income from temporary investments against specific borrowings alone 0.50

(4 Marks)

Q2. b. How is software acquired for internal use accounted for under AS-26?
(4 Marks)

Q2. c. The following particulars are extracted from the (Trial Balance) Books of the M/s Commercial

Bank Ltd. for the year ending 31st March, 2019:

Rs.

(i) Interest and Discounts 1,96,62,400

(ii) Rebate on Bills Discounted (balance on 1.4.2018) 65,040

(iii) Bills Discounted and purchased 67,45,400

It is ascertained that proportionate discount not yet earned on the Bills Discounted which will

mature during 2019-2020 amounted to Rs. 92,760.

(i) Pass the necessary Journal entries with narration adjusting the above

And also show:

(ii) Rebate on Bills Discounted Account; and

(iii) Interest and Discount Account

in the ledger of the Bank.

 -: 3 :-

(iv) Comment on how the figure of Interest and Discounts Rs. 1,96,62,400 is greater than Bills Discounted
and purchased Rs. 67,45,400.

(8 Marks)

Q3. a. A company made a public issue of 1,25,000 equity shares of Rs. 100 each. Rs. 50 is payable on

application. The entire issue was underwritten by four parties – A, B, C and D in the proportion of

30%, 25%, 25% and 20% respectively. Under the terms agreed upon, a commission of 2% was

payable on the amounts underwritten.

A, B, C and D had also agreed on “firm” underwriting of 4,000, 6,000, Nil and 15,000 shares

respectively. The total subscriptions, excluding firm underwriting, including marked applications were for

90,000 shares. Marked applications received were as under:

A : 24,000 B : 12,000 C : 20,000 D : 24,000

Ascertain the liability of the individual underwriters. All workings should form part of your answer.

(10 Marks)

Q3. b. Explain Sale And Leaseback Transaction. Also state it’s accounting treatment in Financial
Statements Of Seller Lessee in case if it’s a Finance Lease.
(6 Marks)
st
Q4. a. Can Diluted EPS be greater than Basic EPS? As at 31 March 2019, Saranga Ltd. has income
from continuing ordinary operations of Rs. 2,40,000 a loss from discontinuing operations of Rs.
360,000 and accordingly a net Loss of Rs. 1,20,000. The Company has 1,000 Equity Shares and
200 Potential Equity Shares outstanding as at the end of the year. Compute Basic and Dilute
EPS?
(6 Marks)

Q4. b. Meena Ltd. is engaged in research on a new process design for its product. It had incurred an
st
expenditure of Rs. 265.37 lakhs on research upto 31 March 2018. The development of the process
st st
began on 1 April 2018 and the Development Phase Expenditure was Rs. 180 lakhs upto 31 March
2019. At what cost should the asset be recorded and what is its amortisation amount as per AS 26 :
Intangible Assets?
(8 Marks)

Q4. c. What is the difference between Depreciation and Amortisation?

(2 Marks)

Q5. a. Omega Limited has borrowed a sum of U S $ 10,00 ,000 a t the beginning of Financial Year 2018-
19 for its residential project at 4 %. The interest is payable at the end of the Financial Year. At the time of
st
availment exchange rate was Rs.56 per US $ and the rate as on 31 March, 2019 was Rs.62 per U S $ .
If Omega Limited borrowed the loan in India in Indian Rupee equivalent, the pricing of loan would have
been 10.50%.

(6 Marks)
 -: 4 :-

Q5. b. X Ltd. has a retail branch at Puri. Goods are sold at 60% profit on cost. The wholesale price is
cost plus 40%. Goods are invoiced from Delhi H.O. to branch at Puri at Wholesale price.

From the following particulars ascertain the profit made at H.O. and branch for the year ended

31st March 2019.

Particulars H.O. ` Branch `

Stock on 01.04.2018 7,00,000 ------

Purchase 42,00,000 ------

Goods sent to Branch (at invoice price) 15,12,000 ------

Sales 42,84,000 14,40,000

Stock on 31.03.2019 16,80,000 2,52,000

Expenses 80,000 40,000

Sales at H.O. are made only on wholesale basis and that at branch only to customers. Stock at H.O. is
valued at invoice price.

(10 Marks)

Q.6. a. On the condition of fulfilling certain conditions, Tanishq Exports Ltd. received a revenue grant
from the Government amounting to ` 112.50 lakhs during the accounting period 2017-18. The conditions
are to be fulfilled by the Company over a 5 year period. During the accounting year 2018-19, the entire
amount of ` 112.50 lakhs became refundable, as the conditions attached to it could not be fulfilled. The
Company had already recognised ` 22.50 lakhs in the Profit and Loss Account of the year 2017-18. The
Company wants to write-off ` 112.50 lakhs, being the grant refundable over a period of 5 years. Discuss
whether the above treatment is proper.
(5 Marks)

Q6. b. Define Provision and state when it should be recognised in Financial Statements as per AS 29 :
Provisions, Contingent Assets and Contingent Liabilities.
(5 Marks)
st
Q6. c. Ganesh Ltd. purchased special purpose machinery on 1 April of a Financial Year, for Rs.
25 lakhs. It received a Government Grant for 20% of the price. The machine has an effective life of 10
years. Advise the Company the two alternative accounting treatment as per AS 12.
(6 Marks)

Q7. a. X Co. Ltd. has two branch retail shops at Chandigarh and Ludhiana each with a separate
manager.

The ratio of gross profit to selling price is constant at each shop at 25% throughout the year.

Each branch manager is entitled to a commission of 10% of net profit earned by his branch, calculated
before charging his commission but subject to a deduction from such commission equal to 25% of any
ascertained deficiency of the branch stock.

All goods were supplied by the H.O. to these branches.

 -: 5 :-

From the information given below, calculate the commission due to each manager for the year:

Chandigarh Ludhiana
Rs. Rs.

Opening stock at cost 37,368 24,968

Goods to branches at cost 1,44,840 86,960
Drawing of commission on account by manager 1,200 800
Sales 1,80,640 1,17,120
Sundry expenses 24,560 18,040
Closing stock at selling price 61,664 31,904

(12 Marks)

Q7. b. Discuss the provision of AS – 26 in respect of recognition and initial measurement of an

Intangible Asset, if the Intangible Asset is acquired by way of :
i. Cash Payment
ii. Allotment of Shares / Securities
iii. Exchange Of Assets
(4 Marks)
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Please attach this page as last page of you answer sheet.

Name : __________________________________ Email Id : _______________________________

Mobile Number: _______________________ Subject : _______________________________

Exam: Please tick the appropriate

Foundation 50% 100A 100B

Intermediate 30% 70% 100A 100B

Final 50% 100A 100B

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