DSS- 24-25, PLA Shopping complex, Hisar.

Mob: 9896685777
ADM. NO.………………… Attempt : MAY-2024
Time Allowed – 3 Hours Maximum Marks - 100
CA-INTERMEDIATE
COURSE GROUP-I
[PAPER-1]
ADVANCED ACCOUNTING
PIC/CA-INTER/MAY24/FT-2

Important Information.
1. The question paper comprises of two parts, Part I and II.
2. Part- I comprises Multiple choice questions [MCQ’s] [compulsory]
3. Part-II comprises questions which require Descriptive Type Answers.
4. Part-II] Question No. 1 is compulsory.
From Part –II Candidates are also required to answer any FOUR Questions from the remaining
FIVE questions . In Case , any candidate answers extra question(s)/sub- question(s) over and
above the required number., then only the requisite number of questions first answered in the
answer book shall be valued and subsequent extra question(s) answered shall be ignored .
Working notes should form part of respective answers
Whenever necessary, candidates are permitted to make suitable assumptions which should be
disclosed by way of a note

PART-I (Multiple Choice Questions)(30 Marks)

Part-I is Compulsory

Q1 On 1st April, 2022, Shubham Limited purchased some land for Rs. 30 lakhs for the purpose of constructing
a new factory. This cost of 30 lakhs included legal cost of Rs. 2 lakhs incurred for the purpose of acquisition
of this land. Construction work could start on 1st May, 2022 and Shubham Limited provides you the details
of the following costs incurred in relation to its construction:
Rs.
Preparation and levelling of the land 80,000
Employment costs of the construction workers (per 29,000
month)
Purchase of materials for the construction 21,24,000
Cost of relocating employees to new factory for work 60,000
Costs of inauguration ceremony on 1st January, 2023 80,000
Overhead costs incurred directly on the construction of 25,000
the factory (per month)
General overhead costs allocated to construction project by the
Manager is Rs. 30,000. However, as per company’s normal overhead
allocation policy, it should be Rs. 24,000. The auditor of the company
has support documentation for the cost of Rs. 15,000 only) and raised
objection for the balance amount.
The construction of the factory was completed on 31st December, 2022 and production could begin on 1
st February, 2023. The overall useful life of the factory building was estimated at 40 years from the date of
completion. However, it was estimated that the roof will need to be replaced 20 years after the date of
completion and that the cost of replacing the roof at current prices would be 25% of the total cost of the

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 building.
The construction of the factory was partly financed by a loan of Rs. 28 lakhs borrowed on 1st April, 2022.
The loan was taken at an annual rate of interest of 9%. During the period when the loan proceeds had been
fully utilized to finance the construction, Shubham Limited received investment income of Rs. 25,000 on
the temporary investment of the proceeds.
You are required to assume that all of the net finance costs to be allocated to the cost of factory (not
land) and interest cost to be capitalized based on nine months’ period.
Based on the information given in the above scenario, answer the following multiple choice questions:
(i) Which of the following cost (incurred directly on construction) will be capitalized to the cost of factory
building?
(a) Rs. 2,00,000 incurred as legal cost
(b) Rs. 60,000 – costs of relocating employees
(c) Rs. 80,000 costs of inauguration ceremony
(d) Rs. 24,000 – allocated general overhead cost

(ii) What amount of employment cost of construction workers will be capitalized to the cost of factory
building?
(a) Rs. 2,90,000
(b) Rs. 3,48,000
(c) Rs. 2,32,000
(d) Rs. 29,000

(iii) What is the amount of net borrowing cost capitalized to the cost of the factory?
(a) Rs. 1,89,000
(b) Rs. 1,68,000
(c) Rs. 1,44,000
(d) Rs. 1,64,000

(iv) What will be the carrying amount (i.e. value after charging depreciation) of the factory in the Balance
Sheet of Shubham Limited as at 31st March, 2023?
(a) Rs. 30,00,000
(b) Rs. 57,78,125
(c) Rs. 27,78,125
(d) Rs. 58,00,000

[MTP /4×2]

Q2 Mars Ltd. is a manufacturing enterprise which is starting a new manufacturing plant at X Village. It has
commenced construction of the plant on April 1, 2023 and has incurred following expenses:
 It has acquired land for installing Plant for Rs. 50,00,000
 It incurred Rs. 35,00,000 for material and direct labour cost for developing the Plant.
 The Company incurred Rs. 10,00,000 for head office expenses at New Delhi which included rent,
employee cost and maintenance expenditure.
 The Company borrowed Rs. 25,00,000 for construction work of Plant @12% per annum on April 1,
2023. Director finance of the Company incurred travel and meeting expenses amounting to Rs.
5,00,000 during the year for arranging this loan.
 On November 1, 2023, the construction activities of the plant were interrupted as the local people
along with the activists have raised issues relating to environmental impact of plant being constructed.
Due to agitation the construction activities came to standstill for 3 months.
 With the help of Government and NGOs, the agitation was over by February28, 2024 and the work
resumed. However, to balance the impact on environment, government ordered the company to install
certain devices for which the Company had to incur Rs. 6,00,000 in March 2024.
 The rate of depreciation on Plant is 10%.
Based on the above information, answer the following questions.

(i) Which of the following expenses cannot be included in the cost of plant:

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 (a) Cost of Land
(b) Construction material and labour cost
(c) Head office expenses
(d) Borrowing cost

(ii) How much amount of borrowing cost can be capitalised with the plant:
(a) Rs. 300,000
(b) Rs. 2,00,000
(c) Rs. 7,00,000
(d) Rs. 6,00,000

(iii) The total cost of plant as on march 31, 2024 will be:
(a) Rs. 85,00,000
(b) Rs. 98,00,000
(c) Rs. 93,00,000
(d) Rs. 95,00,000

(iv) The amount of depreciation to be charged for the year end March 31, 2024
(a) Rs. 4,30,000
(b) Rs. 9,30,000
(c) Rs. 9,80,000
(d) Nil

[MTP /4×2]

Q3 Kumar Ltd., a privately-held company, operates in the manufacturing industry. Founded in 2008, the
company has steadily grown its operations and established a strong presence in the market. As of 31st
March, 2023, the company's capital structure reflects a blend of equity and debt financing.
Capital Structure Overview:
 Equity Share Capital: The company has a total of Rs. 30,00,000 invested in equity shares, each valued
at Rs. 10 and fully paid.
 Reserves & Surplus: Kumar Ltd. has accumulated reserves and surplus totaling Rs.49,00,000,
comprising contributions from various sources including General Reserve (Rs. 32,50,000), Security
Premium Account (Rs. 6,00,000), Profit & Loss Account (Rs. 4,30,000), and Revaluation Reserve (Rs.
6,20,000).
 Loan Funds: The company has acquired loan funds amounting to Rs. 42,00,000 to support its
operational and growth initiatives.
Buy-Back Decision:
Considering its financial position and market conditions, Kumar Ltd. has decided to initiate a share buy-
back program. The company intends to repurchase its shares at a price of Rs.30 per share
In accordance with financial regulations and internal policies, Kumar Ltd. aims to assess the maximum
number of shares it can repurchase while maintaining a prudent debt-equity ratio. By utilizing the Debt
Equity Ratio Test, the company seeks to strike a balance between its equity base and debt obligations.
Based on the above information, answer the following question

(i) What is the minimum equity Kumar Ltd. needs to maintain after buy-back, according to the Debt Equity
Ratio Test?
(a) Rs. 12,95,000
(b) Rs. 21,00,000
(c) Rs. 32,50,000
(d) Rs. 6,00,000

(ii) What is the maximum permitted buy-back of equity for Kumar Ltd.?
(a) Rs. 38,85,000

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 (b) Rs. 42,00,000
(c) Rs. 12,95,000
(d) Rs. 59,85,000

(iii) How many shares of Kumar Ltd. can be bought back at Rs. 30 per share according to the Debt Equity
Ratio Test?
(a) 43,000
(b) 1,29,500
(c) 2,00,000
(d) 78,000
[MTP /3×2]
Q4 Sahil Ltd agreed to sell its factory located in Assam to Kali Ltd on 4.12.2023. It entered into a sale deed
(transferring all significant risks and rewards of ownership) on 1.2.2024. But the transaction was
registered with the registrar on 30.5.2024 When should the sale and gain be recognized?
(a) Both sale and gain should be recognized as on the balance sheet date i.e. 31.3.2024.
(b) Both sale and gain should be recognized on 30.5.2024.
(c) The sale should be recognized as on balance sheet date but gain should be recognized on 30.5.2024.
(d) Both sale and gain should be recognized on 4.12.2023.
[MTP /2Marks]
Q5 All of the following costs are excluded while computing value of inventories except?
(a) Selling and Distribution costs
(b) Allocated fixed production overheads based on normal capacity.
(c) Abnormal wastage
(d) Storage costs (which is necessary part of the production process)
[MTP /2 Marks]

Q6 According to AS-18 Related Party Disclosures, which ONE of the following is not a related party of Skyline
Limited?
(a) A shareholder of Skyline Limited owning 30% of the ordinary share capital
(b) An entity providing banking facilities to Skyline Limited in the normal course of business
(c) An associate of Skyline Limited
(d) Key management personnel of Skyline Limited
[MTP/2 Marks]

Q7 Extraordinary items are income or expenses

(a) That arise from events clearly distinct from the ordinary activities of the enterprise.
(b) That are not expected to recur frequently or regularly.
(c) Both (a) and (b).
(d) None of the three.

[MTP /2 Marks]

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 PART-II (Descriptive Questions)(70 Marks)
Question No. 1 is compulsory.
Candidates are also required to answer any FOUR questions from the remaining Five Questions

Q1.(A) [SMNS9]A Ltd. has borrowed USD 10,000 in foreign currency on April 1, 20X1 at 5% p.a. annual interest
and acquired a depreciable asset. The exchange rates are as under:
01-04-20X1 1US$ = Rs. 48.00
31-03-20X2 1US$ = Rs. 51.00
You are required to pass the journal entries in the following cases:
(i) Option under Para 46A is not availed.
(ii) Option under Para 46A is availed.
(iii) The loan was taken to finance the operations of the entity (and not to produce a depreciable asset).
In all cases, assume interest accured on 31st Mach, 20X2 is paid on the same date.
[5Marks]

(B) Give your observation under each of the following independent situations.
A. Bharat Ltd sold the goods to its Associate Company for the 1st Quarter ending 30th June .After that the Related
Parties Relationship ceased to exit. However goods were supplied as was supplied to any other ordinary
customer. Decide whether transaction of the entire year has to be disclosed as Related Party Transaction.
B. A holding company entered into business transaction valuing Rs 100 crores with its subsidiary during a FY. The
holding company divested its holding its subsidiary before 31st March & as such no Related Party Relationship
exited at the end of the year. Should holding company disclose the relationship & related transactions in its
annual accounts?
C. Rajan is a Director of Aruna Ltd and Bhanu Ltd .On 30th June Rajan resigned from directorship of Bhanu ltd
.Aruna Ltd sold goods to Bhanu Ltd during the entire year at the same price and conditions as to any other
customer. Arun Ltd discloses only the sales for the first quarter ending30th June as Related party transaction.
Comment.
[5Marks]
(C) Innovative Garments Manufacturing Company Limited invested in the shares of another company on 1st
October, 2022 at a cost of Rs. 2,50,000. It also earlier purchased Gold of Rs. 4,00,000 and Silver of Rs.
2,00,000 on 1st March, 2020. Market value as on 31st March, 202 of above investments are as follows:
Rs.
Shares 2,25,000
Gold 6,00,000
Silver 3,50,000
How above investments will be shown in the books of accounts of Innovative Garments Manufacturing
Company Limited for the year ending 31st March, 2023 as per the provisions of Accounting Standard 13
"Accounting for Investments"?

[/MTP /4Marks

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Q2. [Exclusive(C15.3L)] CANGH Ltd. Commenced business on 1.4.20X1 with the head office at Calicut and
branch at Tiruchur. All goods were purchased by head office and normally packed immediately, but on
31.3.20X2, goods costing Rs. 5,000 remained unpacked. Only the packed goods were sent to the branch
which was charged at selling price less 10%. The following information is furnished to you as on 31st March
20X2, from the Head Office and Branch office books:
Particulars H.O. (Rs.) Branch (Rs.)
Capital Account 40,000 ---
Drawing by Proprietor 10,000 ---
Purchases 4,00,000 ---
Packing materials bought 6,000 ---
Sales 3,20,000 1,00,000
Despatch of goods to branch 1,13,400 ---
Selling expenses 16,000 800
Clerk’s salary , wages etc 20,000 3,000
Sundry Debtors 28,000 4,200
Sundry Creditors 26,600 5,000
Head Office Current A\c --- 12,000
Branch Office Current A\c 19,000 ---
Bank Balances 2,000 ---
Goods received from Head Office --- 1,08,000
Information:
(a) Sales by head office were a uniform gross profit, after charging packing materials, of 20% on the fixed
selling price;
(b) Sales at Branch were at fixed selling price;
(c) Goods invoiced and dispatched by head office to branch in March , 20X2 for Rs. 5,400 were received in the
branch only on 10th April.
(d) Stock of packing materials on hand as on 31st March, 20X2 was valued at Rs. 1,000.
(e) Remittance of Rs. 1,600 from the branch to the head office was in transit on 31.3.20X2.
(f) Rs. 2,000 worth of stock at selling price was damaged at the branch. For valuing stock, this was reduced by
Rs. 1,090 below the invoice cost to the branch. It was decided that the head office and branch would share
equally the loss occasioned by this and also the deficit in stock, ascertained on actual stock taking at the
branch of goods at selling price of Rs. 500.
Required: Prepare the Profit and Loss Account of the tiruchur and Calicut Office and also a Balance
sheet as at 31.3.20X2 of the business. [CA]
[14 Marks]
Q3. (A) From the following information provided by XYZ Limited you are required to compute the closing
inventory:
Raw Material P
Closing balance 600 units Rs. per unit
Cost price including GST 250
Input tax credit available 20
Freight inward 30
Handling charges 15
Replacement cost 180
Finished goods Q
Closing balance 1500 units Rs. per unit
Material consumed 250
Direct labour 70
Direct overhead 30
Total fixed overhead for the year was Rs. 3,00,000 on a normal capacity of 30,000 units while actual
production has been of 25,000 units.

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Calculate the value of closing stock, when
(i) Net realizable value of the finished good Q is Rs. 450 per unit.
(ii) Net Realizable value of the Finished Good Q is Rs. 340 per unit.
[MTP][4 Marks]

(B). On the basis of the following information prepare a Cash Flow Statement for the year ended 31st
March, 2021 (Using direct method):
(i) Total sales for the year were Rs. 597 crores out of which cash sales amounted toRs. 393 crores.
(ii) Receipts from credit customers during the year, totalled Rs. 201 crores.
(iii) Purchases for the year amounted to Rs. 330 crores out of which credit purchases were 80%.
Balance in creditors as on
1.4.2020 Rs. 126 crores
31.3.2021 Rs. 138 crores
(iv) Suppliers of other consumables and services were paid Rs. 28.5 crores in cash.
(v) Employees of the enterprises were paid 30 crores in cash.
(vi) Fully paid preference shares of the face value of Rs. 48 crores were redeemed. Equity shares of the
face value of Rs. 30 crores were allotted as fully paid up at premium of 20%.
(vii) Debentures of Rs. 30 crores at a premium of 10% were redeemed. Debenture holders were issued
equity shares in lieu of their debentures.
(viii) Rs. 39 crores were paid by way of income tax.
(ix) A new machinery costing Rs. 15 was purchased.
(x) Investment costing Rs. 27 cores were sold at a loss of Rs. 3 crores.
(xi) Dividends totalling Rs. 22.5 crores was also paid.
(xii) Debenture interest amounting Rs. 3 crore was paid.
(xiii) On 31st March 2020, Balance with Bank and Cash on hand totalled Rs. 3 crores.
[RTP-NOV-2021/5][M-10]

Q4. (A) The Balance Sheets of Anand Ltd. and Dany Ltd., as on 31st December, 2000 were as follows:
Liabilities Anand Ltd. Dany Ltd. Assets Anand Ltd. Dany Ltd.
Equity Shares of 3,00,000 2,00,000 Fixed Assets
Rs. 10 each (other than goodwill) 2,50,000 1,75,000
Reserve 75,000 50,000 Stock in trade 47,500 37,500
Profit & Loss A/c 37,500 30,000 Debtors 70,000 50,000
Sundry Creditors 18,750 15,000 Cash and Bank 58,750 30,000
Preliminary Exp. 5,000 2,500
4,31,250 2,95,000 4,31,250 2,95,000
Anand Ltd. took over and absorbed Dany Ltd., as on 1st July, 2001. No Balance Sheet of Dany Ltd., were prepared on
the date of take over. But the following information is made available to you:
(i) In the six months ended 30th June, 2001, Dany Ltd., made net profits of Rs. 30,000 after providing for
depreciation at 10% per annum on fixed assets.
(ii) Anand Ltd., during that period had made net profits of Rs. 72,500 after providing for depreciation at 10%
per annum on the fixed assets
(iii) Both the companies had distributed dividends of l0% on 1st April, 2001.
(iv) Goodwill of Dany Ltd., on the date of take over, was estimated at Rs. 12,500 and it was agreed that the
stocks of Dany Ltd., would be appreciated by Rs. 7,500 on the date of take over.
(v) Anand Ltd. to issue shares at par to shareholders of Dany Ltd., on the basis of the intrinsic value of its shares
on the date of take over.
Draft the Balance Sheet of Anand Ltd. after absorption.
[INTER/MTP1/AUG18/3(a)][M-15][ICAI/JULY 21/5(A)-Similar/10Marks]

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(B) Accountants of Poornima Ltd. showed a net profit of ₹ 7,20,000 for the third quarter of 20X1 after
incorporating the following:
(i) Bad debts of ₹40,000 incurred during the quarter. 50% of the bad debts have been deferred to the next
quarter.
(ii) Extra ordinary loss of ₹35,000 incurred during the quarter has been fully recognized in this quarter.
(iii) Additional depreciation of ₹45,000 resulting from the change in the method of charge of depreciation
assuming that ₹ 45,000 is the charge for the 3rd quarter only.
Ascertain the correct quarterly income
[4 Marks]

Q5. (A) Following transactions of Meeta took place during the financial year 2020 -21:
1st April, 2020 Purchased 4,500 8% bonds of Rs. 100 each at Rs. 80.50 cum-interest. Interest
is payable on 1st November and 1st May.
1st May, 2020 Received half year’s interest on 8% bonds.
10 July, 2020 Purchased 6,000 equity shares of Rs. 10 each in Kamal Limited for Rs. 44 each
through a broker, who charged brokerage @ 2%.
1st October 2020 Sold 1,125 8% bonds at Rs. 81 Ex-interest.
1st November, 2020 Received half year’s interest on 8% bonds.
15th January, 2021 Received 18% interim dividend on equity shares of Kamal Limited.
15th March, 2021 Kamal Limited made a rights issue of one equity share for every four Equity
shares held at Rs. 5 per share. Meeta exercised the option for 40% of her
entitlements and sold the balance rights in the market at Rs. 2.25 per share.
Prepare separate investment account for 8% bonds and equity shares of Kamal Limited in the books of Meeta for
the year ended on 31st March, 2021. Assume that the average cost method is followed.
[RTP-NOV-21/9(A)][M-10]

(B) A company has a scheme for payment of settlement allowance to retiring employees. Under the scheme,
retiring employees are entitled to reimbursement of certain travel expenses for class they are entitled to as per
company rule and to a lump-sum payment to cover expenses on food and stay during the travel. Alternatively,
employees can claim a lump sum amount equal to one month pay last drawn.
The company’s contentions in this matter are:
(i) Settlement allowance does not depend upon the length of service of employee. It is restricted to
employee’s eligibility under the Travel rule of the company or where option for lump-sum payment is
exercised, equal to the last pay drawn
(ii) Since it is not related to the length of service of the employees, it is accounted for on claim basis.
State whether the contentions of the company are correct as per relevant Accounting Standard. Give
reasons in support of your answer.]
[M-4]

Q 6(A) “One of the characteristics of financial statements is neutrality”- Do you agree with this statement?
Or
(A) Opening Balance Sheet of Mr. Amit is showing the aggregate value of assets, liabilities and equity Rs. 16
lakh, Rs. 6 lakh and Rs. 10 lakh respectively. During accounting period, Mr. Amit has the following
transactions:
1 Earned 10% dividend on 4,000 equity shares held of Rs. 100 each
2 Paid Rs. 1,00,000 to creditors for settlement of Rs. 1,40,000
3 Rent of the premises is outstanding Rs. 20,000
4 Mr. A withdrew Rs. 18,000 for his personal use.
You are required to show the effect of above transactions on Balance Sheet in the form of Assets –
Liabilities Equity after each transaction.
[MTP /][M-4]

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Q 6(B) C Ltd. had Rs. 5,00,000 authorized capital on 31-12-2021 divided into shares of Rs. 100 each out of which
4,000 shares were issued and fully paid up. In June 2022 the Company decided to convert the issued
shares into stock. But in June, 2023 the Company re-converted the stock into shares of Rs. 10 each, fully
paid up.
Pass entries and show how Share Capital will appear in Notes to Balance Sheet as on 31-12-2022 and 31-
12-2023.
[MTP-/[M-4]
Q6(C) Alfa of Chennai has a branch at Mumbai to which goods are sent @ 20% above cost. The branch makes
both cash and credit sales. Branch expenses are met partly from H.O. and partly by the branch. The
statement of expenses incurred by the branch every month is sent to head office for recording.
Following further details are given for the year ended 31st December, 2023:
Rs.
Cost of goods sent to Branch at cost 2,00,000
Goods received by Branch till 31-12-2023 at invoice price 2,20,000
Credit Sales for the year @ invoice price 1,65,000
Cash Sales for the year @ invoice price 59,000
Cash Remitted to head office 2,22,500
Expenses paid by H.O. 12,000
Bad Debts written off 750
Balances as on 1-1-2023 31-12-2023
Rs. Rs.
Stock 25,000 (Cost) 28,000 (invoice price)
Debtors 32,750 26,000
Cash in Hand 5,000 2,500
You are required to prepare Branch stock account and branch debtor account in the books of the head
office for the year ended 31st December, 2023.

[MTP/ M-6]

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