SUGGESTED SOLUTION IPCC Nov. 2014 EXAM

SUGGESTED SOLUTION
I.P.C.C No v. 2014 EXAM
ADVANCED ACCOUNTING
Te st Co d e - I N J 4 0 2 8
Vashi (Regular) Dt.: 25 May 2014
Head Office : Shraddha, 3rd Floor, Near Chinai College, Andheri (E), Mumbai – 69.
Tel : (022) 26836666
1|Page
Ans. 1
(a)
In the Books of ABC & Co.
Journal
Date
Particulars
Building A/c
Dr.
Machinery A/c
Dr.
Furniture A/c
Dr.
Stock A/c
Dr.
Debtors A/c
Dr.
Cash A/c
Dr.
Due from BC & Co A/c
Dr.
Goodwill A/c
Dr.
To Creditors A/c
To Bank Loan A/c
To Anil Capital A/c
To Bunny Capital A/c
(Being the different assets and liabilities taken over from AB &
Co)
Machinery A/c
Dr.
Furniture A/c
Dr.
Stock A/c
Dr.
Debtors A/c
Dr.
Cash A/c
Dr.
Advance A/c
Dr.
Goodwill A/c
Dr.
To Creditors A/c
To Due to AB & Co A/c
To Bunny Capital A/c
To Chandu Capital A/c
(Being different assets and liabilities taken over from BC & Co)
Due to AB & Co A/c
Dr.
To Due to BC & Co A/c
(Being the adjustment of mutual indebtedness)
Dr.
Goodwill A/c (20,000 16,400)
To Anil Capital A/c
To Bunny Capital A/c
To Chandu Capital A/c
(Being the goodwill written-off in the ratio of 3:2:1)
Cash A/c
Dr.
To Anil Capital A/c
To Chandu Capital A/c
(Being necessary cash brought in by partners to make their
capital in profit staring ratio)
Bunny Capital A/c
Dr.
To Cash A/c
(Being the cash paid to BUNNY)
Balance Sheet of ABC & Co. as at 31st March, 2012
Liabilities
` Assets
Fixed Assets:
Partners' Capitals:
Anil
2,13,000 Building
Bunny
1,42,000 Machinery
Chandu
71,000 Furniture
Creditors
94,400 Current Assets:
Bank Loan
32,000 Stock
Debtors
Advances
Dr.
`
40,000
90,000
8,000
48,000
64,000
20,000
40,000
20,000
Cr.
`
48,000
32,000
1,63,500
86,500
80,000
2,400
56,000
80,000
40,000
24,000
16,400
46,400
40,000
1,41,600
70,800
40,000
40,000
36,400
18,200
12,133
6,067
73,967
67,700
6,267
73,967
73,967
`
40,000
1,70,000
10,400
1,04,000
1,44,000
24,000
2|Page
Cash
60,000
5,52,400
5,52,400
Working Notes:
(1) Calculation of Purchase Consideration
Assets taken over:
Building
Machinery
Furniture
Stock
Debtors
Cash
Due from BC & Co
Advances
Goodwill
(A)
Liabilities taken over
Creditors
Due to AB & Co
Bank Loan
(B)
(A-B)
Purchase Consideration
(2) Dr.
Date Particulars
To Building A/c
To Machinery
A/c
To Furniture A/c
To Stock A/c
To Debtors a/c
To Cash A/c
To Due from BC
& Co A/c
To Advance A/c
To Partners’
capital A/cs:
Anil
Bunny
Bunny
Chandu
AB &
Co.
20,000
60,000
8,000
48,000
64,000
20,000
40,000
-
AB & Co. BC & Co.
(`)
(`)
40,000
90,000
80,000
8,000
2,400
48,000
56,000
64,000
80,000
20,000
40,000
40,000
24,000
20,000
16,400
3,30,000 2,98,800
48,000
32,000
80,000
2,50,000
Realisation Account
Cr.
BC & Date Particulars
AB &
BC &
Co.
Co.
Co.
By Creditors
48,000
46,400
64,000
By Due to AB &
40,000
Co
2,400
By Bank Loan A/c
32,000
56,000
By ABC & Co A/c 2,50,000 2,12,400
(Purchase
Consideration)
80,000
40,000
24,000
-
52,500
17,500
21,600
10,800
3,30,000 2,98,800
3,30,000 2,98,800
(3) Dr.
In the Books of AB & Co. Partners’ Capital Accounts
Particulars
Anil
Bunny Particulars
Anil
To Balance c/d
1,63,500
86,500 By Balance b/d
96,000
By Reserve A/c
15,000
By Realisation A/c
52,500
(profit)
1,63,500
86,500
1,63,500
(4) Dr.
Particulars
To Balance c/d
46,400
40,000
86,400
2,12,400
In the Books of BC & Co. Partners’ Capital Accounts
Bunny Chandu Particulars
1,41,600
70,800 By Balance b/d
By Reserve A/c
By Realisation A/c
Bunny
80,000
40,000
21,600
Cr.
Bunny
64,000
5,000
17,500
86,500
Cr.
Chandu
40,000
20,000
10,800
3|Page
(profit)
1,41,600
(5) Dr.
Particulars
To Goodwill A/c
(written-off)
To Cash A/c
To Balance c/d
(Note 6)
70,800
1,41,600
In the Books of ABC & Co. Partners’ Capital Accounts
Anil
Bunny Chandu Particulars
Anil
18,200
12,133
6,067 By Balance b/d
2,13,000
73,967
1,42,000
71,000
2,31,200
2,28,100
77,067
AB & Co.
BC & Co.
By Cash A/c
70,800
Bunny
Cr.
Chandu
1,63,500
86,500
- 1,41,600
70,800
67,700
2,31,200 2,28,100
6,267
77,067
(6) Total Capital of Partners in ABC & Co:
Anil – 1,63,500 0
Bunny – 86,500 1,41,600
Chandu – 0 70,800
Less: Goodwill written-off
Total Capital after Goodwill adjustment
Anil’s capital 3/6 4,26,000 2,13,000
Bunny’s capital 2/6 4,26,000 1,42,000
Chandu’s capital 1/6 4,26,000 71,000
`
1,63,500
2,28,100
70,800
4,62,400
36,400
4,26,000
(b)
Number of employees accepting the offer : 400 50% 200.
Total number of shares to be issued : 200 100 20,000.
Fair value of the option: `28 `25 `3.
Total value of options : 20,000 `3 `60,000.
In the books of ...
Journal
Date
Particulars
L.F
2012
Dr.
Bank A/c (20,000 `25)
April 30 Employees' Compensation Expense A/c
Dr.
To Equity Share Capital A/c (20,000 `10)
To Securities Premium A/c (20,000 `18)
(Being the exercise of option by 200 employees
@ 100 shares each)
Dr. (`)
5,00,000
60,000
Dr. (`)
2,00,000
3,60,000
Ans. 2
Statement Showing the Liability of Underwrites
Underwriters
A
B
C
D
Gross liability (3 : 3 : 2 : 2)
30,000
30,000
20,000
20,000
Less: Marked applications
19,000
10,000
21,000
8,000
11,000
20,000
(1,000)
12,000
Less: Unmarked applications (Note 1)
5,700
5,700
3,800
3,800
Resultant Liability (or Surplus)
5,300
14,300
(4,800)
8,200
Less: Surplus of C allocated to A, B and D in the
1,800
1,800
4,800
1,200
ratio of 3 : 2 : 2
Net Liability as per agreement
3,500
12,500
Nil
7,000
Add: Firm underwriting
3,000
2,000
1,000
1,000
Total Liability
6,500
14,500
1,000
8,000
As per the provision of Section 76 of the Companies Act, 1956, the commission paid or agreed to
be paid does not exceed in case share 5% of the issue price. However, SEBI has allowed
underwriting commission in respect of equity shares at the rate of 2.5% of the issue price.
Thus, the commission payable to:
`
A : 30,000 `15 2.5%
11,250
B : 30,000 `15 2.5%
11,250
C : 20,000 `15 2.5%
7,500
D : 20,000 `15 2.5%
7,500
4|Page
Total 37,500
Working Note :
(1) Under this method, firm underwriting is treated as unmarked application and it is to be divided in
the ratio of gross liability (i.e., 3 : 3 : 2 : 2). Total unmarked applications are calculated as
follows:
(a) Calculation of unmarked Applications No.
(b) Total Allocation of Shares
No.
Applications received
70,000 Marked applications
58,000
Less: Marked applications
58,000 Unmarked application
12,000
12,000 Total liability
30,000
Add: Applications under firm underwriting
7,000
1,00,000
Total unmarked applications
19,000
Ans. 3
Prakash Processors Limited (In liquidation)
Liquidator's Final Statement of Accounts for the period 1st January to 30th June, 2013
Receipts
Estimated
Valued Payments
Estimated
Valued
value Realised
value Realised
`
`
`
`
Bank
75,000 Liquidation Expenses
27,250
Assets Realised
Liquidator's
36,750
Remuneration (Note 1)
Land and Building
3,00,000 Debenture holders:
Machinery and Plant
5,00,000
Principal
2,50,000
Patents
75,000
Interest Accrued
37,500
Stock
1,50,000
Interest upto
18,750 3,06,250
30.6.2013 (Note 2)
Sundry Debtors
2,00,000 Creditors:
Collection from
Preferential
38,000
Contributories
19,875
Unsecured
2,80,750 3,18,750
@ `2.65 on 7,500
equity shares on which
`60 paid up (Note 3)
Return to
Contrlbutories:
Preference
5,00,000
Shareholders Capital
Arrears of Dividend
1,00,000 6,00,000
Equity Shareholders
30,875
(Note 4) @ `12.35
on 2,500 shares on
which `75 was paid
up
13,19,875
13,19,875
Working Notes :
1. Liquidator's Remuneration @ 3% on amount realised `12,25,000 3/100 `36,750.
2. Debenture holders are entitled to interest up to the date of payment since the company is
solvent.
Interest for 1.1.2013 to 30.6.2013 `2,50,000
`18,750.
3. Preference dividend is payable up to 31.12.2012, as it is cumulative preference shares.
4. Collection from Contributories / Payment to Contributors
Particulars
`
6,37,500
Total equity capital paid up (`1,87,500 4,50,000)
less: Balance available to equity shareholders after payment to creditors and
11,000
preference shareholders (Note 5)
loss to be borne by 10,000 equity shareholders
6,26,500
62.65
less per share `6,26,500 10,000
Amount of call on `60 paid shares (`62.65 `60.00) `2.65.
5|Page
Total amount collected 7,500 `2.65 `19,875.
Total amount to be refunded 2,500 (`75 `62.65)
5. Amount available for payment
(`75,000 3,00,000 5,00,000
Amount paid (`27,250 36,750
`30,875.
75,000 1,50,000 2,00,000)
3,06,250 3,18,750 6,00,000)
`
13,00,000
12,89,000
11,000
Ans. 4
In the books of Ajay Ltd.
Dr.
6% Debentures Account
Date
Particulars
Date
`
30.9.2012 To Debenture Trustees’
12,090 1.4.2012
Cash A/c (Note 1)
30.9.2012 To Debenture Trustees’
910
Fund A/c (Note 2)
31.3.2013 To Debenture Trustees’
7,000
Cash A/c
31.3.2013 To Balance c/d
80,000
1,00,000
Cr.
`
1,00,000
Particulars
By Balance b/d
1,00,000
Dr.
Debenture Trustees’ Fund Account
Date
Particulars
Date
Particulars
`
30.6.2012 To General Reserve A/c
13,000 1.4.2012 By Balance b/d
30.6.2012 To Capital Reserve A/c
910 30.9.2012 By 65% Debentures A/c
30.6.2012 To Debenture Trustees’
250 30.9.2012 By Interest on
Invest. A/c (Note 3)
Investment A/c (Note 4)
31.3.2013 To General Reserve A/c
7,000 31.3.2013 By Interest on
Investment A/c (Note 4)
31.3.2013 To Balance c/d
9,182 31.3.2013 By Profit & Loss
Appropriation A/c
30,342
Cr.
`
16,900
910
319
Dr.
Cr.
Cost
Date
1.4.2012
Particulars
To Balance
b/d
31.12.2013 To Debenture
Trustees’
Cash A/c
Debenture Trustees’ Investment Account
Face
Cost
Date
Particulars
Value
17,000
16,000 30.9.2012 By Debenture
Trustees’ Cash A/c
6,000
6,092 31.9.2012 By Debenture
Trustees’ Fund A/c
(Note 3)
31.3.2013 By Balance c/d
23,000
22,092
Face
Value
12,750
12,000
30,342
11,750
---
250
10,250
23,000
10,092
22,092
Dr.
Debentures Trustees’ Cash Account
Date
Particulars
Date
Particulars
`
1.4.2012 To Balance b/d
900 30.9.2012 By 6% Debenture A/c
30.9.2012 To Debenture Trustees’
11,750 31.3.2012 By 6% Debenture A/c
Investment A/c
30.9.2012 To Interest on Investment
319 31.3.2012 By Debenture Trustees’
A/c (Note 4)
Investment A/c
31.3.2013 To Interest on Investment
213
A/c (Note 4)
31.3.2013 To Bank A/c (Annual
12,000
contribution)
25,182
Dr.
Date
Particulars
30.9.2012 To Bank A/c
213
Debenture Interest Account
Particulars
` Date
390 31.3.2013 By Profit & Loss A/c
Cr.
`
12,090
7,000
6,092
25,182
Cr.
`
5,610
6|Page
31.3.2013 To Bank A/c (6% on `87,000)
5,220
5,610
5,610
Working Note :
(1) Price paid for ` 13,000 debentures purchased on 30.9.2012 is cum-interest. Total amount paid
`12,480 which includes interest for 6 months (April to September) = `
`390. The actual cost of debentures purchased = `42,480 – `390 `12,090.
(2) Profit on cancellation of debentures = `13,000 – `12,090 `910
(3) Loss on Sale of investments *`12,000 – `11,750 = `250
·
`12,000 (Cost of investment sold)
(4) Interest on 5% Investments has been calculated as follows :
On 30.9.2012 : `12,750 5% 6/12
`319
On 31.3.2013 : `4,250 5% for full year
`213
Ans. 5
(a)
In the books of Modern Marbles Limited
Journal
Date Particulars
L.F
Dr. (`)
Cr. (`)
Bank A/c
Dr.
5,50,000
To 13% Debentures Application A/c
5,50,000
(Being application money reed, for 5,000 debentures of
`100 each at a premium of 10%)
13% Debentures Application A/c
Dr.
5,50,000
To 13% Debentures A/c
5,00,000
To Debenture Premium A/c
50,000
(Being the debentures application money transferred to
13% Debentures Account and Debenture Premium
Account as per Board's Resolution No dated ...)
Bank A/c
Dr.
6,50,000
Profit and Loss A/c
1,50,000
To Investments A/c
8,00,000
(Being the investments sold at a loss)
Equity Share Capital A/c
Dr.
10,00,000
Securities Premium A/c
Dr.
5,00,000
To Equity Shareholders A/c
15,00,000
(Being the amount payable to equity shareholders on buy
back of 1,00,000 equity shares as per Special Resolution
No….dated...)
Equity Shareholders A/c
Dr.
15,00,000
To Bank A/c
15,00,000
(Being equity shareholders paid-off against buy back of
shares)
Dr.
3,50,000
General Reserve A/c (`6,50,000 3,00,000)
Dr.
1,50,000
Profit and Loss A/c (`5,00,000 3,50,000)
To Capital Redemption Reserve A/c (Note 1)
5,00,000
(Being the creation of capital redemption reserve as per
requirement of the Act)
*It should be noted that debenture premium is not a part of the Securities Premium Account.
Working Notes:
(1) Calculation of Amount to be Transferred to Capital Redemption Reserve
Face value of equity shares bought back
Less: Proceeds from issue of 13% Debentures
(2) Balance of Profit and Loss Account
Balance as per Balance Sheet
Less: Loss on Sale of Investment
`
10,00,000
5,00,000
5,00,000
`
3,75,000
1,50,000
2,25,000
7|Page
Less: Transferred to Capital Redemption Reserve
1,50,000
75,000
(b)
(i) Value of option
(ii) Amount to be amortised
`30,000
`30,000 / 2.5 years `12,000 each year
In the books of S Ltd.
Journal
Date
2005
April 1
2006
Mar 31
2007
Mar 31
2008
Mar 31
July 31
Particulars
Deferred Employee Compensation Expense A/c
Dr.
To Employee Stock Options Outstanding A/c
(Being the grant of 1,000 options at a discount of `30
each)
Employee Compensation Expense A/c
Dr.
To Deferred Employee Compensation Expense A/c
(Being the amortisation of the deferred compensation
over 2½ years on straight line basis)
Profit and Loss A/c
Dr.
To Employee Compensation Expenses A/c
(Being the amount charged to Profit and loss Account)
Employee Compensation Expense A/c
Dr.
To Deferred Employee Compensation Expense A/c
(Being the amortisation of the deferred compensation
over 2½ years on straight line basis)
Profit and Loss A/c
Dr.
To Employee Compensation Expenses A/c
(Being the amount charged to Profit and Loss Account)
Employee Compensation Expense A/c
Dr.
To Deferred Employee Compensation Expense A/c
(Being the amortisation of the deferred compensation
over 2½ years on straight line basis)
Profit and Loss A/c
Dr.
To Employee Compensation Expenses A/c
(Being the amount charged to Profit and Loss Account)
Dr.
Bank A/c (1,000 `60)
Employee Stock Options Outstanding A/c
Dr.
To Equity Share Capital A/c (1,000 `10)
To Securities Premium A/c
(Being the exercise of 1,000 options)
L.F.
Dr. (`)
30,000
Cr. (`)
30,000
12,000
12,000
12,000
12,000
12,000
12,000
12,000
12,000
6,000
6,000
6,000
6,000
60,000
30,000
10,000
80,000
8|Page
MARKS ALLOCATION SHEET
Que.
No.
Name of Chapter
Description of Concept
1
1
1
1
Sub point
No.(if
any)
(a)
(a)
(a)
(a)
Partnership
Partnership
Partnership
Partnership
1
(a)
Partnership
1
(a)
Partnership
1
1
1
1
2
2
2
2
2
2
(a)
(a)
(b)
(b)
-
Partnership
Partnership
ESOP
ESOP
Underwriters Liability
Underwriters Liability
Underwriters Liability
Underwriters Liability
Underwriters Liability
Underwriters Liability
3
-
3
-
3
-
3
-
3
-
4
-
4
-
4
-
4
-
4
-
4
-
4
-
4
-
4
-
5
(a)
Liquidation of
company
Liquidation of
company
Liquidation of
company
Liquidation of
company
Liquidation of
company
Redemption of
Debenture
Redemption of
Debenture
Redemption of
Debenture
Redemption of
Debenture
Redemption of
Debenture
Redemption of
Debenture
Redemption of
Debenture
Redemption of
Debenture
Redemption of
Debenture
Buy-back of shares
Journal Entries (each has 1 mark)
Preparation of Balance Sheet
Calculation of Purchase consideration
Preparation of partners cap. A/c in the
books of AB & Co.
Preparation of partners cap. A/c in the
books of BC & Co.
Preparation of partners cap. A/c in the
books of ABC & Co.
Preparation of realisation A/c
Calculation of partner’s capital
Relevant Calculation
Journal Entries
Calculation of unmarked Application
Calculation of Surplus of C
Calculation of Net Liability
Calculation of Total Liability
Calculation of Total allocation of shares
Calculation of Commission (each has 1
mark)
Preparation of Liquidator’s final
statement of A/c
Calculation of Liquidator’s
Remuneration
Calculation of Interest on Debenture
Mark
Allocatio
n
6
2
2
1
Total
Marks
1
1
2
1
2
2
2
1
1
1
1
4
16
4
10
5
1
1
Calculation of collection from
contributories
Calculation of amount available for
payment
Preparation of 6% Debenture A/c.
2
Preparation of Debenture trustee’s fund
Account
Preparation of Debenture trustee’s
Investment Account
Preparation of Debenture trustee’s cash
Account
Preparation of Debenture Interest
Account
Calculation of Cost of debenture
purchased
Calculation of profit on cancellation
2
Calculation of loss on sale of investment
0.5
Calculation of Interest on Investment
0.5
10
Journal Entries including workings (each
has 1 mark)
6
6
1
10
1
2
2
1
0.5
0.5
9|Page
5
(b)
ESOP
Journal Entries (each has 0.5 mark)
4
4
10 | P a g e

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