Chinmay Tutorials [9929277130/0141-2741111]
Professional Factory.....
Accounts
Maximum Marks: 100
Time Duration: 3 hours
EXECUTIVE PROGRAMME
TAX LAWS AND PRACTICE
PRACTICE TEST PAPER
(This test paper is for practice and self study only and not to be sent to the institute)
Time allowed: 3 hours Maximum mark: 100
Question 1 is compulsory. Attempt any three out of four
Q.1 A The statement of Profit and Loss of X Ltd. is given ahead. Determine Net Profit for the
purpose of calculating Managerial Remuneration and also calculate the maximum
remuneration payable to the director under the Indian Companies Act, 2013 in the
following cases:
i). When there is no managing or whole time director in a company
ii). When there is one whole time director:
iii). When there are two whole time directors.
1.
2.
3.
4.
1.
Statement of Profit and Loss
(for the year ended 31st March, 2015)
Particular
Revenue from operation:
Gross Profit (Sales – Cost of Goods Sold)
Other income:
Profit on Sale of Building (Cost Rs. 1,80,000
W.D.V. Rs. 90,000 Sold for Rs. 1,92,000)
1,02,000
Subsidy from Government
18,000
Total Revenue (I + II)
Expenses:
Employees Benefit expenses:
-Salaries
33,000
-Debenture trustee Remuneration
3,000
Finance cost:
-Interest
Depreciation & Amortization:
-Depreciation (Including development rebate Rs. 9000) 60,000
-Scientific Research (New Laboratory set-up)
57,000
Other expenses:
-Repairs
-Sundry expenses
-Loss on sale of investment
6,000
-Donations
15,000
Total expenses
Profit Before Tax (III-IV)
Less: Provision for Taxation
Net Profit After tax
Amount
9,30,000
1,20,000
10,50,000
36,000
15,000
1,17,000
12,000
9,000
42,000
2,10,000
8,40,000
(3,00,000)
5,40,000
Less : Appropriations of Profit
Proposed Dividend
3,00,000
Chinmay Tutorials [9929277130/0141-2741111]
Professional Factory.....
Accounts
Proposed Corporate Dividend Distribution
Tax @ 16.995%
Balance of Profit Carried to balance sheet
50,985
3,50,985
1,89,015
(15 Marks)
Q.1 B Following are the abridged balance sheet of Harry Ltd. and Say Ltd. as on 31st March,
2015:
Liabilities
Hary Ltd.
Say Ltd.
Rs.
Rs.
Equity share capital (Rs. 100 each)
10,00,000
4,00,000
General reserve
1,00,000
2,70,000
Profit and loss account
1,60,000
1,30,000
Current liabilities
4,40,000
2,00,000
17,00,000
10,00,000
Assets
Fixed assets
Investment in shares of say Ltd
Current assets
.
4,80,000
5,00,000
7,20,000
17,00,000
2,50,000
7,50,000
10,00,000
Additional information:
1. On 1st July, 2014, Hary Ltd. acquired 3,000 shares in Say Ltd. The reserve and surplus
position of say Ltd. as on 1st April, 2014 was as under:
General reserve
Rs. 2,50,000
Profit and loss a/c (Cr.)
Rs. 1,20,000
2. On 1st October, 2014, Say Ltd. issued one equity share for every four shares held as
bonus shares out of general reserve. No entry has been made in the books of say Ltd.
for issue of bonus shares.
3. On 30th September, 2014, say Ltd. declared a dividend out of pre-acquisition profits @
25% on Rs. 4,00,000, its capital on that date. Hart Ltd. credited the dividend to its profit
and loss account.
4. Say Ltd. owed Hary Ltd. Rs. 50,000 for purchased of stock from Hary Ltd. The entire
stock in held by say Ltd. on 31st March, 2015. Hary Ltd. made a profit of 25% on cost.
Prepare a consolidated balance sheet of Hary Ltd. and its subsidiary Say Ltd. as on 31st
March, 2015
(10 Marks)
Q.2 A
1)
Z Ltd. Went into voluntary liquidation on 31st December,2014. Balance sheet of the
company as on that date stood as follows:
I
Equity and liabilities
a)
share capital
20,000, 10% cumulative preference
Shares of Rs. 100 each, fully paid-up
10,000 equity shares of Rs. 100 each,
Rs. 75 paid up
30,000 equity shares of Rs. 100 each,
Rs. 60 paid up
20,00,000
7,50,000
18,00,000
45,50,000
Chinmay Tutorials [9929277130/0141-2741111]
Professional Factory.....
Accounts
b)
Reserves and surplus
Profit and loss account
c)
Non-current liabilities
15% debentures secured by a floating charge
d) Current liabilities
Trade payables
12,75,000
Outstanding interest on debentures
1,50,000
TOTAL
Other information :
a) Preference share dividend are in arrears for the last two years.
b) Trade payables include preferential creditors of Rs. 1,52,000.
c) The assets were sold and realized as follows:
(11,25,000)
10,00,000
4,25,000
58,50,000
Particulars
Rs.
Land and building
12,00,000
Plant and machinery
20,00,000
Furniture and fixtures
3,00,000
Stock
6,00,000
Trade receivables
8,00,000
d) Expenses of liquidation were Rs. 1,09,000.
e) Liquidator is entitled to receive commission of 3% on assets realized except cash.
f) Preference shareholders have right to dividend at the time of liquidation.
g) The final payment including those on debentures is made on 30th June, 2015.
You are required to prepare liquidator’s final statement of account.
(8 marks)
Q 2 B. The Sun Ltd. was incorporated on 1st August, 2015 to take over a business from 1st April,
2015. The accounts were made up to 31st March, 2016 as usual and Statement of Profit
& Loss showed the following results:
Statement of Profit & Loss for the year ended 31st March, 2016
Particular
Amount (Rs.)
1. Revenue from operation (sales)
2,40,000
2. Other Income
3. Total Revenue (I + II)
2,40,000
4. Expenses:
Purchase of Stock-in-Trade
1,80,000
Changes in Inventories of Stock-in-Trade:
Opening stock
30,000
Closing stock
(54,000)
(24,000)
Employees Benefit Expenses:
-Salaries
12,000
-Director’s Fees
3,000
Finance Cost:
-Debenture Interest
1,000
-Interest on purchase consideration (upto 1st Jan., 2014)
4,500
Depreciation &Amortisation Expenses:
-Deprecation
1,800
-Formation Expenses
5,000
Other Expenses:
-Rent & Rates
4,800
-Travellers Commission
2,400
Chinmay Tutorials [9929277130/0141-2741111]
Professional Factory.....
Accounts
-Office Expenses
-Bad-debts
-Discount
-Audit Fees
-Carriage outwards
-General Expenses
-Advertising
-Printing & Stationery
Total Expenses
5. Net Profit (III – IV)
12,000
500
3,600
600
1,200
2,100
1,800
3,000
2,15,300
24,700
1. It is ascertained that sales for April were one and half time of the average of the year,
while those for July, Nov. and March were only half the average and those for June
twice the average; and
2. Out of bad debts, Rs. 200 relate to debts created prior to incorporation.
Apportion the year’s profit between the pre and the post-incorporations period.
(7 Marks)
Q.3 A Sun Ltd. and Moon Ltd. were amalgamated on and from 1st April, 2016. A new company
Star Ltd. was formed to take over the business of the existing companies. The Balance
Sheet of Sun Ltd. and Moon Ltd. as at 31st March 2016 are given below :
(
Liabilities
Sun
Ltd.
Moon
Ltd.
Share Capital :
Equity Shares of
each
Assets
in Lakhs)
Sun
Moon
Ltd.
Ltd.
Fixed Assets
100
12% Preference Shares
of 100 each
400
375 Land & Building
275
200
150
100 Plant & Machinery
175
125
Investments
75
25
Reserves and Surplus
Revaluation reserve
75
50
General reserve
85
75
Investment allowance
reserve
25
25
P & L Account
25
15
Chinmay Tutorials [9929277130/0141-2741111]
Professional Factory.....
Accounts
Secured Loan
Current Assets
10% Debentures
Stock
(
100 each)
30
15 Sundry Debtors
Current Liabilities and
Bills Receivables
Provisions :
Cash and Bank
balance
Sundry creditors
Acceptance
Total
135
60
75
35
1,000
750 Total
175
125
125
150
25
25
150
100
1,000
750
Additional information :
a) Star Ltd. will issue 5 equity shares for each equity share of Sun Ltd. and 4 equity shares for
each equity share of Moon Ltd. The shares are to be issued @
value of
30 each, having a face
10 per share.
b) Preference shareholders of the two companies are issued equivalent number of 15%
preference shares of Star Ltd. at a price of
150 per share (face value
100).
c) 10% Debentureholders of Sun Ltd. and Moon Ltd. are discharged by Star Ltd. issuing such
number of its 15% Debentures of
100 each so as to maintain the same amount of interest.
d) Investment allowance reserve is to be maintained for 4 more years
e) Liquidation expenses are :
Sun Ltd. 2,00,000
Moon Ltd. 1,00,000
It was decided that these expenses would be borne by Star Ltd.
f) All the assets and liabilities of Sun Ltd. and Moon Ltd. are taken over at book value
g) Authorised equity share capital of Star Ltd. is
5,00,00,000, divided into equity shares of
10 each. After issuing required number of shares to the Liquidators of Sun Ltd. and Moon
Ltd., Star Ltd. issued balance shares to Public. The issue was fully subscribed.
Required :
Prepare the Balance Sheet of Star Ltd. as at 1st April, 2009. (12 Marks)
Chinmay Tutorials [9929277130/0141-2741111]
Professional Factory.....
Accounts
Q 3 B What are the desirable conditions for Internal Re-construction. (3 marks)
Q 4A. Swati Ltd. made on offer of 1,00,000 Equity Shares of Rs. 10 each issued at premium of
Rs. 2 per share payable as follows :
On application Rs. 3; on allotment Rs. 4 (including premium); on first call Rs. 2; and on
second call Rs. 3 per share.
Applications were received for 1,80,000 shares. Allotment was made pro-rata to
applicants for 1,50,000 shares, the remaining applications being refused and money
refunded. Money overpaid on applications by the allottees, was adjusted towards
allotment. Richa, the applicant of 3,000 shares, failed to pay the allotment money and on
her failure to pay the first call, her shares were forfeited. Ritu, another holder to whom
5,000 shares were allotted, failed to pay the last two calls and her shares were also
forfeited after making the second call. Out of the forfeited shares, 6,000 shares were reissued to Megha as fully paid up on payment of Rs. 9 per share, the whole of Richa’s
shares being included. You are required to show the Journal entries for recording the
above transactions.
(9 Marks)
Q 4 B On 10th April,2012, Zenith Ltd. Issued 12,500, 12% debentures of Rs. 100 each at Rs.
98. Holders of these debentures have an option to convert their holdings any time within
three years. On 31st March, 2013, holders of 2,500 debentures notified their intention to
exercise the option.
Show the journal entries relating to the issue and conversion of debentures in the books
of the company.
(3 marks)
Q4C
a) Distinguish between ‘cum-interest’ and ‘ex-interest’ quotations. (3 marks)
Q5A
Calculate Economic Value Added :
PAT
10,00,000
Equity Share Capital
20,00,000
12% Preference share Capital 15,00,000
10% Debentures
10,00,000
Preliminary Expenses
5,00,000
Tax Rate
20%.
Risk Free Rate of Return
8%
Beta
1.75 Times
Market Rate of Return
12%
(6 Marks)
Q5B
A company incorporated on 1st January, 2013 issued a prospectus inviting applications
for 5,00,000 equity shares of Rs. 10 each. The whole issue was fully underwritten by
four underwriters:
underwriter – A:
2,00,000 shares
underwriter – B:
1,50,000 shares
underwriter –C:
1,00,000 shares
underwriter – D:
50,000 shares
Chinmay Tutorials [9929277130/0141-2741111]
Professional Factory.....
Accounts
Applications were received for 4,50,000 shares of which marked applications were as
follows:
underwriter – A:
2,20,000 shares
underwriter – B:
90,000 shares
underwriter – C:
1,10,000 shares
underwriter – D:
10,000 shares
Find out the liabilities of each underwriter individually.
(6 Marks)
Q5C
X Ltd. Borrowed Rs. 25,00,000 from a scheduled bank at an annual interest rate 12%
and deposited 14% debentures of the face value of Rs. 40,00,000 as collateral security.
Pass the journal entries regarding the issue of debentures as collateral security and also
show the above items in the company’s balance sheet.
Part B
Attempt any two question out of three.
Q.6
a)
b)
c)
Q.7
a)
b)
c)
Q.8
a)
b)
c)
Write the qualifications and disqualifications of a statutory auditor.(5 marks)
Distinguish between ‘statutory audit’ and ‘internal audit’.
(5 marks)
Explain the different approaches used in statistical sampling during an audit. (5 marks)
In a medium size trading organization, the accountant was given additional responsibility
of making recoveries from receivables. On one occasion, an insurance claim of Rs.
75,000 was received. He credited the same to the account of a debtors and
misappropriated the cash which he had recovered from the said receivable. Pinpoint the
weaknesses in the internal control which led to this situation.
In case of government companies, comptroller and auditor general of India has a right to
issue direction to auditors and do supplementary audit. Explain.
What does SA 230 (Revised) say about utility, ownership, custody and retention of
working papers?
(5marks each)
Distinguish between ‘vouching’ and ‘verification’.
what is ‘internal control’ ? how is it different from internal audit?
Director (Finance) of KK Ltd. Informed their newly appointed statutory auditor that they
have sound internal control system implemented by a renowned professional firm and he
is satisfied with its effectiveness and functioning. Therefore, the statutory auditor should
concentrate on verifying only the routine books and financial statements.
As an auditor, how would you react to the situation.
(5 marks each)