FORE School of Management, New Delhi

Post Graduate Diploma in Management (FMG-30, IMG-15, FM-04, BDA-02 & FPM-03)
Mid Term Examination Term- 1* (2021-2022)
Course Name: Financial Accounting

Time: 1 ½Hours Max Marks: 100

Instructions:
a. This question paper contains 4 pages
b. This question paper contains 3 case lets
c. Marks are indicated in the right hand parenthesis against each case let
d. Please arrange your answers to case lets and questions thereon in the
same order in the answer book in which they appear in this question
paper.
e. Attempt all case lets and answer all questions straight in bullet points
(Do not write the question).
f. Do not give any reasoning or show any calculations or workings
anywhere in any answer.
g. Answers should be rounded to 2 nearest decimal points wherever
required.
h. Answers given in pencil will not be evaluated.
i. State assumptions made, if any.
j. Possession and use of cell phone is prohibited.
k. Only Non-Programmable calculator can be used.
l. Be to the point in your responses.
__________________________________________________________________________________

Case Let (1): Trial balance of Avengers Ltd. (3*10= 30 Marks)

Below is the trial balance of Avengers Ltd. as on 31st March 2021.

(₹ in crores)
Particulars Debit (₹) Credit (₹)
Share Capital (4800000 shares of Rs. 100 Each) 48
Sales 250
Sales return 1.5
Purchase return 2
Accounts Payable 30
Cash on Hand 1.5
Cash at Bank 3
Purchases 110
Wages 39
Opening Inventory 6
Land 10
Buildings 80
 Machinery 30
Patents 15
Salaries 12
Sundry Expenses 6
Insurance 1
Accounts Receivables 15
Total 330 330

Further information:
1. Authorized Capital is ₹ 500,000,000 with a face value of ₹ 100 Per share.
2. Closing inventory as at 31/03/2020, ₹ 20 Crores.
3. Provision for Bad and doubtful receivables at 5% on debtors.
4. Outstanding salaries ₹ 5 Crores and outstanding wages ₹ 3 Crores.
5. Depreciation and Amortization @10% on depreciable assets.
6. Make a provision for income tax @ 30%.
7. Transfer 5% of profit after tax to general reserve.
8. The company proposed an Equity dividend of ₹ 11.5 per share.
9. Based on the above given information, you are required to give straight answers
of each question (given below) as per vertical format only.

i. Calculate the "Employee Benefit cost".

ii. How much is the value of “Non-current Liabilities” of the company?
iii. Calculate the cost of material consumed?
iv. At what amount the proposed dividend will be disclosed in Balance Sheet and
P&L account?
v. Calculate the Value of Net Block of PPE.
vi. Find the value of revenue from operations.
vii. Assume the company has Profit after taxes (PAT) of ₹ 75.25 Crores for the
given year. How much will be the EPS of the company in this case?
viii. Calculate the total amount of depreciation and amortization.
ix. Calculate the cost of material consumed if the purchase return increased by ₹ 10
Crores.
x. Calculate the employee benefits cost if outstanding salaries are increased by ₹ 5
Crores.

Case Let (2) – M&L India Ltd (7*5 each = 35 Marks)

M&L India Ltd is a well-known firm into the business of garments. The company’s
products include – jackets, jeans and formal wears for adults. The company started a
new product line focusing on teenagers’ casual wear in the year 2019. For the purpose,
a machine costing ₹90,00,000 was imported from Germany for designing. Bringing and
installation charges included additional ₹500,000. The physical life of the machinery is
6 years and the expected useful life is 5 years. The company expects a salvage value of
₹4,50,000 at the end of its life along with some additional removal costs of machinery
of ₹75000.
(a) Using the above information, find the remaining book value of machinery at the
end of first year as per SLM method?
At the starting of 3rd year, the company appraises the Fair Value of the machine to be
worth ₹1,05,00,000. The estimated residual value is ₹5,00,000. Using this new
information on revaluation, provide answers to the following questions assuming the
company follows SLM method:
(b) What will be the annual depreciation on revalued amount?
(c) How much amount will be carried into the revaluation reserve in the third year?
Where this amount will be reflected in the Balance Sheet?
(d) Identify the incremental accumulated depreciation at the end of 2nd year on
increase in revaluation.
(e) What will be the net book value of machinery in the 3rd year due to revaluation?
(f) What will be net book value in the last year of machinery?
(g) Assume the company sold the revalued machinery at the beginning of 5th year for
₹26,50,000. Determine the profit/loss on disposal and its treatment in the P&L
Account.

Case let 3(a). Marks Electronic Heaven Ltd. sells electronic merchandise, including
a personal computer offered for the first time in September, which retails for $695. Sales
of this personal computer for the next seven-month period (ending March 31st, 2021)
totaled $52,125. A statement indicating the amounts purchased, cost price paid and units
sold by Marks Electronic Heaven Ltd. is provided below:

Date Units purchased Cost per unit Units sold

10-Sep-20 12 $ 370.00
29-Sep-20 8
15-Oct-20 20 375
23-Oct-20 15
02-Nov-20 32 377
04-Dec-20 22
10-Dec-20 11 381
 28-Jan-21 14
03-Feb-21 10 390
15-Mar-21 16
Required
i) Show the gross profit for Marks Electronic Heaven Ltd. for a period of seven-
months using FIFO, weighted average and LIFO inventory methods. (12)
ii) Assume that during the period of seven-months ending March 2021, Marks
Electronic Heaven Ltd. spent $17,000 by way of operating expenses. What would
be the PBT (in percentage) on the sales of $52,125. (6)

Case let 3(b). As per Ind-AS 36 Safety N-95 Masks Limited is undergoing an
impairment review as on 31 March 2021, being its latest balance sheet date, for any
indication of impairment of its non-current assets. Inter-alia it has an item of plant with
the remaining useful life of three years having the net book value (NBV) of ₹23,95,000.
At the review, the management is of the opinion that the plant may not be fully exploited
to its full capacity due to low consumer demand for masks in future and thereby, not
generate adequate returns over its remaining useful life. Being so, it estimates the future
expected cash inflows and outflows occurring from the continuing use of the plant along
with cash inflows at the time of disposal of the plant as given below:
Estimated Estimated
Year
cash inflows (₹) cash outflows (₹)
2021-2022 9,90,000 2,35,000
2022-2023 8,95,000 2,15,000
2023-2024 7,75,000 2,70,000
Estimated residual value of the plant is ₹2,20,000.
Fair value of plant: ₹18,00,000; Costs to sell 2% of fair value.
Year (n) 1 2 3
PVF (12%,n) 0.8929 0.7972 0.7118

Required
(i) Determine the ‘value in use’ of the machine. A discount rate of 12% is
applicable to investments equivalent in risk to this plant. (8)
(ii) Determine the recoverable amount of the machine. (4)
(iii) Determine if the plant has impaired. If yes, to what extent? (3)
(iv) At what amount depreciation will be charged in future? (2)