Mock Test Paper - Series I: July, 2024

Date of Paper: 29th July, 2024

Time of Paper: 2 P.M. to 5 P.M.

INTERMEDIATE COURSE: GROUP - I

PAPER – 1 : ADVANCED ACCOUNTING
Time Allowed – 3 Hours Maximum Marks – 100
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Case Scenario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
PART I – Case Scenario based MCQs (30 Marks)
Part I is compulsory.
Case Scenario
1. Super Ltd., a manufacturing company, has the following summarized Balance
Sheet as of March 31, 2024:
Equity Shares of ` 10 each fully paid up: ` 17,00,000
Reserves & Surplus:
Revenue Reserve: ` 23,50,000
Securities Premium: ` 2,50,000
Profit & Loss Account: ` 2,00,000
Infrastructure Development Reserve: ` 1,50,000
Secured Loan:
9% Debentures: ` 38,00,000
Unsecured Loan: ` 8,50,000
Property, Plant & Equipment: ` 58,50,000
Current Assets: ` 34,50,000
Super Ltd. plans to buy back 35,000 equity shares of ` 10 each fully paid up
on April 1, 2024, at ` 30 per share. The buyback is authorized by its articles,
and necessary resolutions have been passed. The payment for the buyback
will be made using the company's bank balance, which is part of its current
assets.
Answer the following questions based on the above information:
(a) As per The Companies Act, 2013 under Section 68 (2) the buy-back of
shares in any financial year must not exceed
i 20% of its total paid-up capital and free reserves
ii 25% of its total paid-up capital and free reserves
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 iii 25% of its total paid-up capital
iv 20% of its total paid-up capital
(b) How many shares can Super Ltd. buy back according to the Shares
Outstanding Test?
(i) 35,000 shares
(ii) 42,500 shares
(iii) 37,500 shares
(iv) 54,375 shares
(c) What is the maximum number of shares that can be bought back
according to the Resources Test?
(i) 35,000 shares
(ii) 42,500 shares
(iii) 37,500 shares
(iv) 54,375 shares
(d) According to the Debt Equity Ratio Test, what is the maximum number
of shares that can be bought back?
(i) 35,000 shares
(ii) 42,500 shares
(iii) 37,500 shares
(iv) 54,375 shares
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks]
2. Venus Limited received a parcel of land at no cost from the government for
the purpose of developing a factory in an outlying area. The land is valued at
` 75 lakhs, while the nominal value is ` 10 lakhs. Additionally, the company
received a government grant of ` 30 lakhs, which represents 25% of the total
investment needed for the factory development. Furthermore, the company
received ` 15 lakhs with the stipulation that it be used to purchase machinery.
There is no expectation from the government for the repayment of these
grants.
Answer the following questions based on the above information:
(a) The land received from Government, free of cost should be presented
at:
(i) ` 75 Lakhs
(ii) ` 30 Lakhs
(iii) ` 10 Lakhs
(iv) ` 45 Lakhs
(b) As per AS 12, how the Government Grant of ` 30 Lakhs should be
presented:
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 (i) It should be recognised in the profit and loss statement as per the
related cost.
(ii) It will be treated as capital reserve.
(iii) It will be treated as deferred income.
(iv) It will not be recognised in the financial statements.
(c) As per AS 12, how the Government Grant of ` 15 Lakhs with a condition
to purchase machinery may be presented as:
(i) Capital Reserve
(ii) Shareholders Fund
(iii) Deferred Income
(iv) Income in statement of profit and loss as received.
(d) Which of the above grants are required to be recognised in the statement
of profit and loss on a systematic and rational basis over the useful life
of the asset:
(i) Land received as Grant
(ii) Government Grant of ` 30 Lakhs
(iii) Government Grant of ` 15 Lakhs with a condition to purchase
machinery
(iv) Noe of the above
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks]
3. Axis limited is a manufacturing company. It purchased a machinery costing
` 10 Lakhs in April 2023. It paid ` 4 lakhs upfront and paid the remaining
` 6,00,000 as deferred payment by paying instalment of ` 1,05,000 for the
next 6 months. During the year, the Company sold a land which was classified
as its ‘property, plant and equipment’ for ` 25,00,000 and paid ` 1,00,000 as
income tax as long term capital gain on such sale. During the year, the
Company also received income tax refund along with interest.
(a) As per the requirements of AS 3, ‘Cash Flow Statements’, how the
amount for purchase of machinery should be presented:
(i) ` 10 lakhs as ‘Cash flows from Investing Activities’ and ` 30,000
will simply be booked in profit and loss with no presentation if Cash
Flow Statement.
(ii) ` 10.30 lakhs as ‘Cash flows from Investing Activities’ as entire
amount is spend on purchase of machinery.
(iii) ` 10 lakhs as ‘Cash flows from Investing Activities’ and ` 30,000 as
‘Cash flows from Financing Activities’.
(iv) ` 10.30 lakhs as ‘Cash flows from Financing Activities’ as the
machinery has been purchased on finance.

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 (b) At what amount, the machinery should be recognised in the financial
statements:
(i) ` 400,000
(ii) ` 10,30,000
(iii) ` 600,000
(iv) ` 10,00,000
(c) How should the income tax paid on sale of land should be disclosed in
the Cash Flows Statement:
(i) Cash flows from Operating Activities
(ii) Cash flows from Investing Activities
(iii) Cash flows from Financing Activities
(iv) No disclosure in Cash Flow Statement
(d) How should the interest on income tax refunds should be disclosed in
the Cash Flows Statement:
(i) Cash flows from Operating Activities
(ii) Cash flows from Investing Activities
(iii) Cash flows from Financing Activities
(iv) No disclosure in Cash Flow Statement
Multiple Choice Questions [4 MCQs of 2 Marks each: Total8 Marks]
4. Gyan Ltd. borrowed ` 10 crore for construction of a plant at the rate of 10%
per annum (interest paid annually ` 1 crore). The construction was being
carried on and out of the borrowings, ` 4 crore was temporarily placed in a
fixed deposit at the rate of 6% per annum (interest earned ` 24 lakh). At the
year end, how much cost of borrowing Gyan Limited will capitalise?
(a) Interest paid on ` 10 crore i.e. ` 1 crore
(b) Interest paid on ` 6 crore as only this amount was utilized i.e. ` 60 Lakh.
(c) Interest paid less income on temporary investment i.e. ` 76 lakh
(d) Nothing will be capitalised. (2 Marks)
5. Cost of current investment acquired was ` 1,00,000 but the fair value was
` 80,000. The Investment was recorded at ` 80,000. Now the fair value of
Investment is Rs 1,20,000. At what value should it be recorded and how much
gain will be credited to profit and loss account.
(a) No change is required and it will continue at ` 80,000
(b) Current investment will be recorded at ` 1,00,000 and gain of ` 20,000
will be credited to profit and loss account.
(c) Current investment will be recorded at ` 1,20,000 and gain of ` 40,000
will be credited to profit and loss account.

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 (d) Current investment will be recorded at ` 1,20,000 but no gain will be
credited to profit and loss account. (2 Marks)
6. In determining the cost of inventories, it is appropriate to exclude certain costs
and recognise them as expenses in the period in which they are incurred.
Which of the following is not an examples of such costs:
(a) Abnormal amounts of wasted materials, labour, or other production
costs;
(b) Storage costs, unless the production process requires such storage;
(c) Raw Material cost
(d) Selling and distribution costs. (2 Marks)

PART II – Descriptive Questions (70 Marks)

Question No.1 is compulsory
Answer any four questions from the remaining five questions.
Wherever necessary, suitable assumptions may be made and indicated in answer
by the candidates. Working Notes should form part of the answer.
1. (a) On 15th June, 2024, Y limited wants to re-classify its investments in
accordance with AS 13 (revised). Decide and state the amount of
transfer, based on the following information:
(1) A portion of long term investments purchased on 1st March, 2023
are to be re-classified as current investments. The original cost of
these investments was ` 14 lakhs but had been written down by
` 2 lakhs (to recognise 'other than temporary' decline in value). The
market value of these investments on 15th June, 2024 was ` 11
lakhs.
(2) Another portion of long term investments purchased on
15th January, 2023 are to be re-classified as current investments.
The original cost of these investments was ` 7 lakhs but had been
written down to ` 5 lakhs (to recognize 'other than temporary'
decline in value). The fair value of these investments on 15th June,
2024 was ` 4.5 lakhs.
(3) A portion of current investments purchased on 15th March, 2024 for
` 7 lakhs are to be re-classified as long term investments, as the
company has decided to retain them. The market value of these
investments on 31st March, 2024 was ` 6 lakhs and fair value on
15th June 2024 was ` 8.5 lakhs.
(4) Another portion of current investments purchased on 7th December,
2023 for ` 4 lakhs are to be re-classified as long term investments.
The market value of these investments was:
on 31st March, 2024 ` 3.5 lakhs
on 15th June, 2024 ` 3.8 lakhs (7 Marks)
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 (b) The financial statements of PQ Ltd. for the year 2023-24 approved by
the Board of Directors on 15th July, 2024. The following information was
provided:
(i) A suit against the company's advertisement was filed by a party on
20th April, 2024, claiming damages of ` 25 lakhs.
(ii) The terms and conditions for acquisition of business of another
company have been decided by March, 2024. But the financial
resources were arranged in April, 2024 and amount invested was
` 50 lakhs.
(iii) Theft of cash of ` 5 lakhs by the cashier on 31st March, 2024 but
was detected on 16th July, 2024.
(iv) Company sent a proposal to sell an immovable property for ` 40
lakhs in March, 2024. The book value of the property was ` 30 lakhs
on 31st March, 2024. However, the deed was registered on
15th April, 2024.
(v) A, major fire has damaged the assets in a factory on 5th April, 2024.
However, the assets are fully insured.
With reference to AS-4 "Contingencies and events occurring after the
balance sheet date", state whether the above mentioned events will be
treated as contingencies, adjusting events or non-adjusting events
occurring after the balance sheet date. (7 Marks)
2. From the following particulars furnished by the Prashant Ltd., prepare the
Balance Sheet as at 31st March, 2024 as required by Schedule III of the
Companies Act, 2013:
Particulars Debit (`) Credit (`)
Equity share capital (face value of ` 10 each) 15,00,000
Calls-in-arrears 5,000
Land 5,50,000
Building 4,85,000
Plant & machinery 5,60,000
General reserve 2,70,000
Loan from State Financial Corporation 2,10,000
Inventories 3,15,000
Provision for taxation 72,000
Trade receivables 2,95,000
Short-term loans & advances 58,500
Profit & loss account 1,06,800
Cash in hand 37,300
Cash at bank 2,85,000
Unsecured loans 1,65,000

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 Trade payables 2,67,000
Total 25,90,800 25,90,800
The following additional information is also provided:
(1) 10,000 equity shares were issued for consideration other than cash.
(2) Trade receivables of ` 55,000 are due for more than six months.
(3) The cost of building and plant & machinery is ` 5,50,000 and ` 6,25,000
respectively.
(4) The loan from State Financial Corporation is secured by hypothecation
of plant & machinery. The balance of ` 2,10,000 in this account is
inclusive of ` 10,000 for interest accrued but not due.
(5) Balance at Bank included ` 15,000 with Aakash Bank Ltd., which is not
a scheduled bank. (14 Marks)
3. (a) The following information was provided by PQR Ltd. for the year ended
31st March, 2024 :
(1) Gross Profit Ratio was 25% for the year, which amounts to
` 3,75,000.
(2) Company sold goods for cash only.
(3) Opening inventory was lesser than closing inventory by ` 25,000.
(4) Wages paid during the year ` 5,55,000.
(5) Office expenses paid during the year ` 35,000.
(6) Selling expenses paid during the year ` 15,000.
(7) Dividend paid during the year ` 40,000.
(8) Bank Loan repaid during the year ` 2,05,000 (included interest
` 5,000)
(9) Trade Payables on 31st March, 2023 were ` 50,000 and on
31st March, 2024 were ` 35,000.
(10) Amount paid to Trade payables during the year ` 6,10,000
(11) Income Tax paid during the year amounts to ` 55,000
(Provision for taxation as on 31st March, 2024 ` 30,000)·
(12) Investments of ` 8,20,000 sold during the year at a profit of
` 20,000.
(13) Depreciation on furniture amounts to ` 40,000.
(14) Depreciation on other PPE amounts to ` 20,000.
(15) Plant and Machinery purchased on 15th November, 2023 for
` 3,50,000.
(16) On 31st March, 2024 ` 2,00,000, 7% Debentures were issued at
face value in an exchange for a plant.

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 (17) Cash and Cash equivalents on 31st March, 2023 ` 2,25,000.
(i) Prepare cash flow statement for the year ended 31st March, 2024,
using direct method.
(ii) Calculate cash flow from operating activities, using indirect method.
(10 Marks)
(b) Wow Ltd. agreed to takeover Wonder Ltd. on 1st April, 2024. The terms
and conditions of takeover were as follows:
(i) Wow Ltd. issued 56,000 equity shares of ` 100 each at a premium
of ` 15 per share to the equity shareholders of Wonder Ltd.
(ii) Cash payment of ` 39,000 was made to equity shareholders of
Wonder Ltd.
(iii) 24,000 fully paid preference shares of ` 50 each issued at par to
discharge the preference shareholders of Wonder Ltd.
(iv) The 8% Debentures of Wonder Ltd. (` 78,000) converted into
equivalent value of 9% debentures in Wow Ltd.
(v) The actual cost of liquidation of Wonder Ltd. was ` 23,000.
Liquidation cost is to be reimbursed by Wow Ltd. to the extent of
` 15,000.
You are required to:
(1) Calculate the amount of purchase consideration as per the
provisions of AS 14 and
(2) Pass Journal Entry relating to discharge of purchase consideration
in books of Wow Ltd. (4 Marks)
4. The following are the summarized Balance Sheet of VT Ltd. and MG Ltd. as
on 31st March, 2024:
Particulars VT Ltd. (`) MG Ltd. (`)
Equity and Liabilities
Equity Shares of ` 10 each 12,00,000 6,00,000
10% Preference Shares of ` 100 each 4,00,000 2,00,000
Reserve and Surplus 6,00,000 4,00,000
12% Debentures 4,00,000 3,00,000
Trade Payables 5,00,000 3,00,000
Total 31,00,000 18,00,000
Assets
PPE 14,00,000 5,00,000
Investment 1,60,000 1,60,000
Inventory 4,80,000 6,40,000
Trade Receivables 8,40,000 4,20,000
Cash at Bank 2,20,000 80,000
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 Total 31,00,000 18,00,000
Details of Trade receivables and trade payables are as under:
VT Ltd. (`) MG Ltd. (`)
Trade Receivable
Debtors 7,20,000 3,80,000
Bills Receivable 1,20,000 40,000
8,40,000 4,20,000
Trade Payables
Sundry Creditors 4,40,000 2,50,000
Bills Payable 60,000 50,000
5,00,000 3,00,000
PPE of both the companies are to be revalued at 15% above book value.
Inventory in Trade and Debtors are taken over at 5% lesser than their book
value.
Both the companies are to pay 10% equity dividend, Preference dividend
having been already paid.
After the above transactions are given effect to, VT Ltd. will absorb MG Ltd.
on the following terms:
(i) VT Ltd. will issue 16 Equity Shares of ` 10 each at par against 12 Shares
of MG Ltd.
(ii) 10% Preference Shareholders of MG Ltd. will be paid at 10% discount
by issue of 10% Preference Shares of ` 100 each, at par, in VT. Ltd.
(iii) 12% Debenture holders of MG Ltd. are to be paid at 8% premium, by
12% Debentures in VT Ltd., issued at a discount of 10%.
(iv) ` 60,000 is to be paid by VT Ltd. to MG Ltd. for Liquidation expenses.
(v) Sundry Debtors of MG Ltd. includes ` 20,000 due from VT Ltd.
You are required to prepare :
(1) Journal entries in the books of VT Ltd.
(2) Statement of consideration payable by VT Ltd. (14 Marks)
5. From the following information of Kedar Ltd. and its subsidiary Vijay Ltd. at
31st March, 2024, prepare a consolidated balance sheet as at that date,
having regard to the following:
(i) Reserves and Profit and Loss Account of Vijay Ltd. stood at ` 62,500
and ` 37,500 respectively on the date of acquisition of its 80% shares by
Kedar Ltd. on 1st April, 2023.
(ii) Machinery (Book-value ` 2,50,000) and Furniture (Book value ` 50,000)
of Vijay Ltd. were revalued at ` 3,75,000 and ` 37,500 respectively on
1st April, 2023 for the purpose of fixing the price of its shares. [Rates of
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 depreciation computed on the basis of useful lives: Machinery 10%,
Furniture 15%.]
Kedar Ltd. and VIJAY Ltd. give the following information as on
31st March, 2024
Kedar Ltd. VIJAY Ltd.
(`) (`)
Equity and Liabilities: Shareholders’ funds
Share Capital: Shares of ` 100 each 15,00,000 2,50,000
Reserves 5,00,000 1,87,500
Profit and Loss Account 2,50,000 62,500
Trade Payables 3,75,000 1,42,500
PPE
Machinery 7,50,000 2,25,000
Furniture 3,75,000 42,500
Other non-current assets 11,00,000 3,75,000
Non-current Investments
Shares in Vijay Ltd.:2,000 shares at `
4,00,000 —
200 each

(14 Marks)
6. (a) Distinguish between Amalgamation, Absorption and External
Reconstruction of Company. (4 Marks)
Or
Summarised Balance Sheet of Cloth Trader as on 31.03.2023 is given
below:
Liabilities Amount Assets Amount
(`) (`)
Proprietor's Capital 3,00,000 Fixed Assets 3,60,000
Profit & Loss Account 1,25,000 Closing Stock 1,50,000
10% Loan Account 2,10,000 Sundry Debtors 1,00,000
Sundry Creditors 50,000 Deferred Expenses 50,000
Cash & Bank 25,000
6,85,000 6,85,000

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 Additional Information is as follows :
(1) The remaining life of fixed assets is 8 years. The pattern of use of
the asset is even. The net realisable value of fixed assets on
31.03.2024 was ` 3,25,000.
(2) Purchases and Sales in 2023-24 amounted to ` 22,50,000 and
` 27,50,000 respectively.
(3) The cost and net realizable value of stock on 31.03.2024 were
` 2,00,000 and ` 2,50,000 respectively.
(4) Expenses for the year amounted to ` 78,000.
(5) Deferred Expenses are amortized equally over 5 years.
(6) Sundry Debtors on 31.03.2024 are ` 1,50,000 of which ` 5,000 is
doubtful. Collection of another ` 25,000 depends on successful
re-installation of certain product supplied to the customer;
(7) Closing Sundry Creditors are ` 75,000, likely to be settled at 10%
discount.
(8) Cash balance as on 31.03.2024 is ` 4,22,000.
(9) There is an early repayment penalty for the loan of ` 25,000.
You are required to prepare Profit & Loss Account for the year 2023-24
(Not assuming going concern). (4 Marks)
(b) Synergy Ltd., is in engineering industry. The company received an
actuarial valuation for the first time for its pension scheme which
revealed a surplus of ` 6 lakhs. It wants to spread the same over the
next 2 years by reducing the annual contribution to ` 2 lakhs instead of
` 5 lakhs. The average remaining life of the employee is estimated to
be 6 years.
You are required to advise the company. (4 Marks)
(c) Karan Enterprises having its Head Office in Mangalore, Karnataka has a
branch in Greenville, USA. Following is the trial balance of Branch as at
31-3-2024:
Particulars Amount ($) Amount ($)
Dr. Cr.
Fixed assets 8,000
Opening inventory 800
Cash 700
Goods received from Head Office 2,800
Sales 24,050
Purchases 11,800
Expenses 1,800
Remittance to head office 2,450
Head office account 4,300
28,350 28,350
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(i) Fixed assets were purchased on 1st April, 2020.
(ii) Depreciation at 10% p.a. is to be charged on fixed assets on
straight line method. ·
(iii) Closing inventory at branch is $ 700 as on 31-3-2024.
(iv) Goods received from Head Office (HO) were recorded at ` 1,85,500
in HO books.
(v) Remittances to HO were recorded at ` 1,62,000 in HO books.
(vi) HO account is recorded in HO books at ` 2,84,500.
(vii) Exchange rates of US Dollar at different dates can be taken as :
1-4-2020 ` 63
1-4-2023 ` 65 and
31-3-2024 ` 67
Prepare the trial balance after been converted into Indian rupees in
accordance with AS-11. (6 Marks)

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