CA IPCC-ADVANCED ACCOUNTS-UNIT EXAM 1-50MARKS

Q1) 5M

A Ltd. purchased a machinery for Rs. 40 lakhs. (Useful life 4 years and residual value Rs 8
lakhs) Government grant received Rs 16lakhs.Rs

Show the Journal Entry to be passed at the time of refund of grant In the 3rd year and
the value of the fixed Assets, if;

(i) The grant is credited to Fixed Assets A/C

(ii) The grant is credited to Deferred Grant A/C
Q2) 5M

X Oil Ltd. closed the books of accounts on March 31, 2016 for which financial statement
was finalized by the Board of Directors on September 04, 2016. During the month of
December 2015, company undertook the project of laying a pipeline across the country
and during May 2016 engineers realized that due to unexpected heavy rain, the total
cost of the project will be inflated by Rs. 50 lakhs. How this should be provided for in the
balance sheet of 2015-16 in accordance to AS 4?

Q3) 5M

A limited company created a provision for bad and doubtful debts at 2.5% on debtors in
preparing the financial statements for the year 2010-2011.
Subsequently on a review of the credit period allowed and financial capacity of the
customers, the company decided to increase the provision to 8% on debtors as on
31.3.2011. The accounts were not approved by the Board of Directors till the date of
decision. While applying the relevant accounting standard can this revision be
considered as an extraordinary item or prior period item?

1
 CA IPCC-ADVANCED ACCOUNTS-UNIT EXAM 1-50MARKS

Q4) 10M
Read, Write and Add give you the following Balance Sheet as on 31st March,
2011.
Liabilities Rs Assets Rs

Read’s Loan 15000 Plant and Machinery at cost 30000

Fixtures and Fittings
Capital Accounts Stock 2000
Read 30,000 Debtors 18,400
Write 10,000 Less: Provision (400) 18000
Add 2,000 42000
Joint Life Policy 15000
Sundry Creditors 17800 Patents and Trademarks 10000
Cash at Bank 8000
Loan on Hypothecation of 6200
Stock

Joint Life Policy Reserve 12400

93400
93400

The partners shared profits and losses in the ratio of Read 4/9, Write 2/9 and Add 1/3.
Firm was dissolved on 31st March, 2011 and you are given the following information:

(a) Add had taken a loan from insurers for ₹ 5,000 on the security of Joint Life Policy.
The policy was surrendered and Insurers paid a sum of ₹ 10,200 after deducting ₹
5,000for. Add’s loan and ₹ 300 as interest thereon.

(b) One of the creditors took some of the patents whose book value was ₹ 6,000 at
evaluation of ₹ 4,500. The balance to that creditor was paid in cash

(c) The firm had previously purchased some shares in a joint stock company and
had written them off on finding them useless. The shares were now found to be
worth ₹ 3,000 and the loan creditor agreed to accept the shares at this value

(d) The remaining assets realized the following amount: ₹

Plant and Machinery 17,000
Fixtures and Fittings 1,000
Stock 9,000
Debtors 16,500
Patents 50% of their book value

(e) The liabilities were paid and a total discount of ₹ 500 was allowed by the
creditors.
(f) The expenses of realization amounted to ₹ 2,300.

2
 CA IPCC-ADVANCED ACCOUNTS-UNIT EXAM 1-50MARKS

Prepare the Realisation Account, Bank Account and Partners Capital Accounts in
columnar form.
Q5) 5M
Ltd. furnishes the following summarized Balance Sheet as at 31st March, 2013:
Rs in ‘000 Rs in ‘000
Equity & Liabilities
Share Capital:
Authorized Capital: 5,000
Issued and Subscribed Capital :
3,00,000 Equity shares of Rs 10 each fully paid up 3,000
20,000 9% Preference Shares of 100 each 2,000
(issued two months back for the purpose of buy back) 5,000
Reserve and Surplus:
Capital reserve 10
Revenue reserve 4,000
Securities premium 500
Profit and Loss account 1,800 6,310
Non-current liabilities - 10% Debentures 400
Current liabilities and provisions 40
11,750
Assets
Fixed Assets: Cost 3,000
Less: Provision for depreciation 250 2,750
Non-current investments at cost 5,000
Current assets, loans and advances (including
cash and bank balances) 4,000
11,750

(1) The company passed a resolution to buy back 20% of its equity capital @ Rs 15 per
share. For this purpose, it sold its investments of Rs 30 lakhs for Rs 25 lakhs.
(2) The company redeemed the preference shares at a premium of 10% on 1st April,
2013.
(3) Included in its investments were 'Investments in own debentures' costing Rs 3 lakhs
(face value Rs 3.30 lakhs). These debentures were cancelled on 1st April, 2013.
You are required to pass necessary Journal entries and prepare the Balance Sheet on
01.04.2013

3
 CA IPCC-ADVANCED ACCOUNTS-UNIT EXAM 1-50MARKS

Q6) 4M
A Company has its share capital divided into shares of ₹ 10 each. On 1st April, 2012 it
granted 10,000 employees’ stock options at ₹ 40, when the market price was ₹ 130. The
options were to be exercised between 15th March, 2013 and 31st March, 2013. The
employees exercised their options for 9,500 shares only; the remaining options lapsed.
The company closes its books on 31st March every year.
Show Journal Entries

Q7) 8M
From the following balances extracted from the books of Perfect General Insurance
Company Limited as on 31.3.2013 you are required to prepare Revenue Accounts in
respect of Fire and marine Insurance business for the year ended 31.3.2013 to and a
Profit and Loss Account for the same period:

Rs Rs
Directors’ Fees 80,000 Interest received 19,000
Dividend received 1,00,000 Fixed Assets (1.4.2012) 90,000
Provision for Taxation Income-tax paid
85,000 during the year 60,000
(as on 1.4. 2012)

Fire Marine
Rs Rs
Outstanding Claims on 1.4. 2012 28,000 7,000
Claims paid 1,00,000 80,000
Reserve for Unexpired Risk on 1.4.2012 2,00,000 1,40,000
Premiums Received 4,50,000 3,30,000
Agent’s Commission 40,000 20,000
Expenses of Management 60,000 45,000
Re-insurance Premium (Dr.) 25,000 15,000

4
 CA IPCC-ADVANCED ACCOUNTS-UNIT EXAM 1-50MARKS

The following additional points are also to be taken into account :

(a) Depreciation on Fixed Assets to be provided at 10% p.a.
(b) Interest accrued on investments Rs 10,000.
(c) Closing provision for taxation on 31.3. 2013 to be maintained at Rs 1,24,138
(d) Claims outstanding on 31.3.2013 were Fire Insurance Rs 10,000; Marine
Insurance Rs 15,000.
(e) Premium outstanding on 31.3.2013 were Fire Insurance Rs 30,000; Marine
Insurance Rs 20,000.
(f) Reserve for unexpired risk to be maintained at 50% and 100% of net
premiums in respect of Fire and Marine Insurance respectively.
(g) Expenses of management due on 31.3.2013 were Rs 10,000 for Fire Insurance
and Rs 5,000 in respect of marine Insurance

Q8)4M.
From the following, you are required to calculate the loss on account of claim to be
shown in the revenue account for the year ending 31st December, 20X3:
Claim intimated in Claim admitted in Claim paid in the Rs
the year the year year
20X2 20X2 20X3 15,000
20X3 20X3 20X4 10,000
20X1 20X2 20X2 5,000
20X1 20X2 20X3 12,000
20X3 20X4 20X4 8,000
20X3 20X3 20X3 1,02,000

Claim on account of Re-insurance was Rs 25,000

5
 CA IPCC-ADVANCED ACCOUNTS-UNIT EXAM 1-50MARKS

Q9) 4M.
From the following information given by Long Live Insurance Co. Ltd., you are
required to pass necessary Journal Entries (with narration and required working notes)
relating to Unexpired Risk Reserve
(i) On 31.03.16, it had reserve for unexpired risks amounting to Rs 80 crores.
Its composition was as under:
(a) Rs 30 crores in respect of Marine insurance business
(b)Rs 40 crores in respect of Fire insurance business and
(c) Rs 10 crores in respect of Miscellaneous insurance business
(ii) Long Live Insurance Co. Ltd. reserves 100% of net premium income in
respect of Marine insurance business and 50% of net premium income
in respect of Fire and Miscellaneous income policies.
(iii) During 2016-17, the following business was conducted:

Rs In
crore
Marine Fire Miscellaneo
us
Premium Collected from:
(a) Insured in respect of Policies 36 86 24
issued
(b) Other Insurance
14 10 8
Companies in respect of risks
undertaken
Premium paid/payable to
20 10 15
other insurance Companies on
Business ceded.