222

Roll No

Time allowed : 3 hours Maximum marks : 100

Total number of questions : 8 Total number of printed pages : 7

NOTE : All working notes should be shown distinctly.

PART A
(Answer Question No.1 which is compulsory
and any two of the rest from this part.)
1. (a) 15,000, 9% Redeemable preference shares of Rs.100 each of Global
Customer Care Ltd., repayable at a premium of 12% are now due for
redemption. The company has accumulated reserves the amount of which
is much in excess of the sum required for redemption. In addition, there is
a large balance lying in securities premium account which is available for
payment of premium on redemption.
Show the journal entries in the books of the company to give effect to the
above.
(4 marks)
(b) Under what circumstances, a company is required to present a
consolidated financial statement ?
(4 marks)
(c) Distinguish between preliminary expenses and pre-operative expenses.
State how these two expenses are to be treated in a balance sheet ?
(4 marks)
(d) From the following particulars of a limited company, calculate the
maximum remuneration payable to managing director and other part-time
directors of a company :
Rs.
Net profit before provision for income-tax and
managerial remuneration, but after
depreciation and provision for repairs 86,84,100
Depreciation provided in the books 32,00,000
Repairs of machinery provided for during the year 2,50,000
Actual expenditure incurred on repairs during the year 1,50,000

(4 marks)

(e) Explain the circumstances when dividend can be paid out of capital profits
of a company.

(4 marks)

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2. (a) Explain how amalgamation is different from external reconstruction.
(3 marks)
(b) Define mutual fund. State its objectives.
(3 marks)
(c) The balance sheet of Modern Marbles Ltd. as at 31 st March, 2003 is as
follows :
Liabilities Rs. Assets Rs.
Share capital of Rs.10 each 50,00,000 Fixed assets 66,00,000
General reserve 6,50,000 Investments 18,00,000
Securities premium 5,40,000 Stock 11,87,000
Profit and loss a/c 3,75,000 Sundry debtors 9,60,000
12% Debentures 25,00,000 Cash and bank
Term loan 13,25,000 balance 7,10,000
Current liabilities & provisions 8,67,000
1,12,57,000 1,12,57,000

The shareholders adopted the resolution on the date of the above

mentioned balance sheet to :
(i) Buy-back 20% of the paid-up capital @ Rs.15 per share;
(ii) Issue 13% debentures of Rs.5,00,000 at a premium of 10% to
finance the buy-back of shares;
(iii) Maintain a balance of Rs.3,00,000 in general reserve account; and
(iv) Sell investments worth Rs.8,00,000 for Rs.6,50,000.

You are required to pass the necessary journal entries to record the above
transactions and prepare the balance sheet immediately after the buy-back.
(9 marks)
3. (a) Write short note on reasonable return under the Electricity (Supply)
Act, 1948.
(3 marks)
(b) What are the objectives of database management system ?
(6 marks)
(c) The balance sheet of Dreamers Ltd. as on 31st March, 2003 stood as under:
Liabilities Rs. Assets Rs.
(in lakh) (in lakh)
Share capital : Fixed assets 130
10% Preference shares Investments 24
of Rs.100 each 30 Current assets 20
Equity shares of
Rs.10 each 60
General reserve 36
12% Debentures 28
Current liabilities 20
174 174

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Performers Ltd. signified their agreement to take over the assets and
liabilities of Dreamers Ltd. as per the following terms and conditions:
(i) Fixed assets at 90% of the book value.
(ii) Investments at 10% above the par value.
(iii) Current assets and liabilities at book value except that stock- in-
trade at cost amounting to Rs.10 lakh was agreed to be taken over
at a discount of 20%.
(iv) 12% Debentures are to be discharged at a premium of 15% by
issuing 12% debentures of Performers Ltd.
(v) Preference shareholders are to be discharged at a premium of 15%
by issuing 10% preference shares of Rs.100 each.
(vi) The equity shareholders in Dreamers Ltd. are to be issued 5 equity
shares of Rs.10 each in Performers Ltd. for every 3 shares held by
them.
Work out the consideration for the take-over under :
Net assets method; and
Net payment method. (6 marks)
4. (a) Mention the various provisions to be made by a banking company with
respect to its quality of assets.
(4 marks)
(b) The capital structure of Hertz Ltd. is as follows :
Rs.
14% Preference shares of Rs.10 each 20,00,000
Equity shares of Rs.10 each 32,00,000
Reserves and surplus 16,00,000
10% Debentures 24,00,000
11% Loans from banks/financial institutions 28,00,000
1,20,00,000

The average annual profit before payment of tax and interest is

Rs.24,00,000. The income-tax rate is assumed to be @ 40%.
Compute the value of equity shares of the company, if the applicable
price-earning ratio is 9.
(5 marks)

(c) On 1st August, 2002, Honey Ltd. purchased 8,000 shares in Sony Ltd. at
Rs.175 per share. The balance sheet of Sony Ltd. as at 31 st March, 2003 is
as follows:

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Liabilities Rs. Assets Rs.

Share capital (fully paid Goodwill 1,00,000

shares of Rs.100 each) 10,00,000 Fixed assets (cost
Reserves (as on 1.4.2002) 4,00,000 Rs.20,00,000) 16,00,000
Profit & loss account 3,00,000 Current assets 6,00,000
10% Debentures of Rs.100 each 2,00,000
Sundry creditors 4,00,000
23,00,000 23,00,000

Additional information
the opening balance in the profit and loss account was Rs.1,60,000 out
of which dividend amounting to Rs.1,00,000 was paid in September,
2002.
Honey Ltd. held 50% of the debentures in Sony Ltd.
Sundry creditors include Rs.40,000 payable to Honey Ltd.
You are required to ascertain the (i) minority interest; and (ii) cost of
control (or capital reserve).
(6 marks)

PART B
(Answer Question No.5 which is compulsory
and any two of the rest from this part.)
5. (a) In Process A of a manufacturing concern, 10,000 units are
introduced during May, 2003. The normal loss is estimated to be 4% of
the input. At the end of the month 1,200 units were lying as
incomplete. The stagewise completion of the inventory was given as
under :
Material 80% complete; labour 60% complete; and overheads 50%
complete.
You are required to prepare a statement of equivalent production assuming
that 8,300 units were transferred to finished goods stores.
(4 marks)
(b) Enumerate the importance of flexible budgeting as a tool of control.
(4 marks)

(c) Job order costing method is a specific order costing method.

Explain.
(4 marks)

(d) Discuss the basic principles of responsibility accounting.

(4 marks)

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(e) The following data are available from the books of Customers Choice Ltd.
as on 31 st March, 2003 :
1st April, 2002 31st March, 2003
(Rs.) (Rs.)
Cash 3,500 4,500
Book debts 25,000 30,000
Creditors 18,000 22,000
Loan 40,000 40,000
You are required to work out the net monetary result of the company as at
31st March, 2003 considering the following retail price index numbers :
1st April, 2002 240; 31st March, 2003 360; and
Average for the year 300.
(4 marks)
6. (a) What do you understand by weighted average method of stock
valuation ?
(3 marks)
(b) Mention the basis of apportionment of the following items of overheads :
(i) Rent, rates and taxes paid for the building
(ii) Insurance and depreciation of plant, machinery and equipment
(iii) Works managers remuneration
(iv) Electric light
(v) Electric power
(vi) Other fringe benefits to workers.
(3 marks)
(c) The balance sheets of Magus Technologies Ltd. for the year ended
31st March, 2002 and 31st March, 2003 are reproduced below :

Liabilities 31.03.2003 31.03.2002

(Rs.) (Rs.)
Equity share capital 6,00,000 4,50,000
8% Preference share capital 1,50,000 2,25,000
Capital reserve 30,000
General reserve 75,000 60,000
Profit and loss account 72,000 45,000
Proposed dividends 75,000 63,000
Sundry creditors 70,500 37,500
Bills payable 24,000 30,000
Liability for expenses 54,000 45,000
Provision for taxation 75,000 60,000
12,25,500 10,15,500

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Assets 31.03.2003 31.03.2002

(Rs.) (Rs.)
Goodwill 1,20,000 1,50,000
Land and building 2,55,000 3,00,000
Plant and machinery 3,00,000 1,20,000
Investments 45,000 30,000
Sundry debtors 2,55,000 2,10,000
Stock 1,63,500 1,15,500
Bills receivable 45,000 30,000
Cash in hand 15,000 22,500
Cash at bank 12,000 15,000
Preliminary expenses 15,000 22,500
12,25,500 10,15,500

The additional information is as under :

(i) An interim dividend of Rs.30,000 has been paid in 2002 03.
(ii) Investments are trade investments - Rs.4,500 by way of dividends
is received which included Rs.1,500 from pre-acquisition profit
which has been credited to investment account.
(iii) A machinery was sold for Rs.15,000. The written down value of
the machine was Rs.18,000. Depreciation of Rs.15,000 is charged
on plant and machinery in 2002 03.
(iv) A piece of land has been sold during the year and profit on sale has
been credited to capital reserve account. Depreciation charged on
buildings during the year amounted to Rs.7,500. No additions
existed under this head during the current year.
You are required to prepare a cash flow statement for the year ended
31st March, 2003 in accordance with AS-3 (Revised).
(9 marks)
7. (a) What are imputed costs and common costs.
(2 marks)
(b) State briefly the recent trends in presenting financial statements.
(4 marks)
(c) From the following data available in the books of a manufacturing
concern, work out the fixed overhead variance analysed into various
heads :
Budgeted output for the year 2,40,000 units
Budgeted fixed overheads for the year Rs.4,80,000
Standard output per hour 100 units
Actual output for the month 17,000 units
Actual fixed overhead for the month Rs.48,000.

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The company follows a budget year of 50 weeks with 48 hours per week.
The month consists of 4 working weeks. Due to idle time, two hours are
lost every week.
Due to erratic supply of materials, the company had to curtail its
manufacturing operations to 5-day a week instead of six.
(9 marks)

8. (a) State the objectives of transfer pricing.

(2 marks)
(b) Dinesh Ltd. has provided following information :
Sale price : Rs.20 per unit
Variable cost : Rs.14 per unit
Fixed overheads : Rs.7,92,000 per annum
How many units must be sold to earn 10% of sales.
(3 marks)
(c) Following are the selected ratios of Sharp Publishers Ltd.:
Total debt to net worth 1.4
Total assets turnover 3 times
Inventory turnover (sales inventory) 9 times
Average collection period 20 days
(Assume 360 days in a year)
Current ratio 3.3
Quick ratio 1.3
Total debts Rs.7,00,000
On the basis of above information, prepare the balance sheet of Sharp
Publishers Ltd.
(9 marks)

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2/2003/CACMA