Accounts Group 2 test Answers

                                                       Accounts Group 2 test Answers

Answer 1

Liquidator’s Statement of Account

		`			`
To	Assets Realised	10,00,000	By   Liquidator’s remuneration 2.5% on 11,60,000 2% on 25,000 2% on 6,56,373 (W.N.3) By Liquidation Expenses By Debenture holders having a floating charge on all assets By Preferential creditors By Unsecured creditors
To	Receipt of call money			29,000
	on 14,500equity shares @ 2 per share	29,000		500 13,127	42,627
					5,000
					3,00,000
					25,000 6,56,373
		10,29,000			10,29,000

Percentage of amount paid to unsecured creditors to total unsecured creditors

                                                                                    = 6, 56,373 ×100 = 71.73%

                                                                                               9, 15,000

Working Notes:

1.      Unsecured portion in partly secured creditors=` 1, 75,000 -` 1, 60,000 = ` 15,000

2.      Total unsecured creditors = 9,00,000 + 15,000 (W.N.1) = ` 9,15,000

3.      Liquidator’s remuneration on payment to unsecured creditors

Cash available for unsecured creditors after all payments including payment to preferential creditors & liquidator’s remuneration on it = ` 6,69,500

Liquidator’s remuneration on unsecured creditors = ` 6,69,500 x 2/102 ` 13,127 or on ` 6,56,373 x 2/100 = ` 13,127

Total assets realised = ` 10,00,000 + ` 1,60,000 = ` 11,60,000.

Answer 2

Liquidator’s Final Statement of Receipts and Payments A/c

	`	`		`
To Cash in hand To Assets realised: Fixed assets Inventory (1,10,000 – 1,00,000) Book debts To Cash - proceeds of call on 1,800 equity shares @ ` 15		40,000	By Liquidator’s remuneration	5,000
			and expenses
	1,68,000		By Trade Payables	3,50,000
			By Preference shareholders	1,00,000
	10,000		By  Equity  shareholders   @
	2,30,000	4,08,000	` 10 on 2,000 shares	20,000
		27,000
		4,75,000		4,75,000

Working Note:

Return per equity share

	`
Cash available before paying preference shareholders  (` 4,48,000 – ` 3,55,000)	93,000
Add: Notional calls 1,800 shares (2,000-200) × ` 25	45,000
	1,38,000
Less: Preference share capital	(1,00,000)
Available for equity shareholders	38,000
Return per share=      ` 38,000           =10
3,800 (4,000 -- 200)
and Loss per Equity Share ` (100-10) = ` 90

              Calls to be made @ ` 15 per share (` 90-75) on 1,800 shares

Answer 3

Centura Bank Limited

Profit and Loss account for the year ended 31st March, 2014

		Schedule No.	Year ended 31.3.2014
			Rs.
I.	Income
	Interest earned	13	74,03,000
	Other income	14	9,10,000
II.	Expenditure		83,13,000
	Interest expended	15	40,74,000
	Operating expenses	16	9,10,000
	Provisions and contingencies (W.N.2)		26,00,000
III.	Profit		75,84,000
	Net profit for the year		7,29,000
	Profit brought forward		-
IV.	Appropriations		7,29,000
	Transfer to Statutory Reserve		1,82,250
	Proposed  dividend		2,00,000
	Balance carried over to balance sheet		3,46,750
			7,29,000

Schedule 13 – Interest earned

	Rs.
Interest and discount earned (W.N.1)	74,03,000
	74,03,000

Schedule 14 - Other Income

	Rs.
Commission, exchange and brokerage	3,80,000
Profit on sale of investment	4,00,000
Rent	1,30,000
	9,10,000

Schedule 15-Interest Expended

	Rs.
Interest paid on deposits	40,74,000
	40,74,000

Schedule 16-Operating Expenses

	Rs.
Payment and provisions for employees	4,00,000
Rent and taxes paid	1,80,000
Depreciation on bank’s property	60,000
Directors’ fees and allowances	60,000
Auditors’ fees	10,000
Law charges	80,000
Postage and Telegrams	1,20,000
	9,10,000

Working Notes:

			Rs.
1.	Calculation of interest earned
	Interest and discount received		74,11,000
	Add: Rebate on bills discounted as on 31st March, 2013		24,000
			74,35,000
2.	Less: Rebate on bills discounted as on 31st March,2014		(32,000)
	Provisions and Contingencies		74,03,000
	Provision for doubtful debts:
	Doubtful debts due to insolvency of a customer (50% of Rs. 20 lakhs)	10,00,000
	Provision for other debts	3,00,000	13,00,000
	Provision for income tax		13,00,000
			26,00,000

Answer 4

(i)Calculation of Rebate on bills discounted

S.No.	Amount (` )	Due date 2013	Unexpired portion	Rate of discount	Rebate on bill discounted `
(i)	7,50,000	April 8	8 days	12%	1,972
(ii)	3,00,000	May 5	35 days	14%	4,028
(iii)	4,40,000	June 12	73 days	14%	12,320
(iv)	9,60,000	July 15	106 days	15%	4,1820
					60,140

(ii) Amount of discount to be credited to the Profit and Loss Account

		`
Transfer from Rebate on bills discount as on 31st March, 2012 Add: Discount received during the year ended 31st March, 2013		91,600 4,05,000
Less: Rebate on bills discounted as on 31st March, 2013	60,140
Discount credited to the Profit and Loss Account	4,36,460

Answer 5

Basic earnings per share (EPS) =Net profit attributable to equity shareholders

Weighted average number of equity shares outstanding during the year

2, 64, 000/ 88, 000 shares(as calculated in working note)

                                                                         = 3

Calculation of weighted average number of equity shares

	Number of shares	Nominal value of shares	Amount paid
1st April, 2004	1,20,000	100	50
1st September, 2004	96,000	100	100
	24,000	100	50

As per para 19 of AS 20 on Earnings per share, Partly paid equity shares are treated as a fraction of equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting period. Assuming that the partly paid shares are entitled to participate in the dividends to the extent of amount paid, weighted average number of shares will be calculated as:

                                    Shares

 120000*1/2*5/12       =  25000

 96000*7/12               = 56000

 24000*1/2*7/12         = 7000

Total                =88000 Shares

Answer 6

Adjusted Net profit for the current year

= 2,00,00,000+5,50,000 – 1,65,000 = ` 2,03,85,000

Number of equity shares resulting from conversion of debentures

= 50,000 × 8 = 4,00,000 equity shares

Total number of equity shares resulting from conversion of debentures

= 40,00,000 + 4,00,000 = 44,00,000 shares

` 2,03,85,000

Diluted Earnings per share =

      44,00,000

                                                              =   4.63(Approximately)

Answer 7

As per Para 41 of AS 26 “Intangible Assets”, expenditure on research should be recognized as an expense when it is incurred. An intangible asset arising from development (or from the development phase of an internal project) should be recognized if, and only if, an enterprise can demonstrate all of the conditions specified in para 44 of the standard. An intangible asset (arising from development) should be derecognised when no future economic benefits are expected from its use according to para 87 of the standard. Therefore, the manager cannot defer the expenditure write off to future years.

Hence, the expenses amounting ` 20 lakhs incurred on the research and development project has to be written off in the current year ending 31st March, 2006.

Answer 8

Based on sales, research and development cost (assumed that entire cost of Rs. 225 lakhs is development cost) is allocated as follows:

Year	Research and Development cost allocation
	(Rs. in lakhs)
1	225/1,500 x 600 = 90
2	225/1,500 x 450 = 67.5
3	225/1,500 x 300 = 45
4	225/1,500 x 150 = 22.5

(ii) If at the end of the 3rd year, the circumstances do not justify that further benefit will accrue in the 4th year, then the company has to charge the unamortized amount i.e. remaining Rs. 67.5 lakhs [225 – (90 + 67.5)] as an expense immediately.

Answer 9

As per AS 26 ‘Intangible Assets’

a) For the year ending 31.03.2012

       1)  Carrying value of intangible as on 31.03.2012:

At the end of financial year 31st March 2012, the production process will be recognized (i.e. carrying amount) as an intangible asset at a cost of  28 lakhs (expenditure incurred since the date the recognition criteria were met, i.e., from 1st December 2011).

      2) Expenditure to be charged to Profit and Loss account:

The 22 lakhs is recognized as an expense because the recognition criteria were not met until 1st December 2012. This expenditure will not form part of the cost of the production process recognized in the balance sheet.

  

b) For the year ending 31.03.2013

     1)  Expenditure to be charged to Profit and Loss account:

	(` in lakhs)
Carrying Amount as on 31.03.2012	28
Expenditure during 2012 – 2013	80
Total book cost	108
Recoverable Amount	(72)
Impairment loss	36

 36 lakhs to be charged to Profit and loss account for the year ending 31.03.2013

    2) Carrying value of intangible as on 31.03.2013:

	(` in lakhs)
Total Book Cost Less: Impairment loss Carrying amount as on 31.03.2013	108  (36)   72