Title 14. PAPER-12 CAA.pdf ✅

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Suggested Answer_ Syllabus 2016_Jun2017_Paper 12 Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1 INTERMEDIATE EXAMINATION GROUP - II (SYLLABUS 2016) SUGGESTED ANSWERS TO QUESTIONS JUNE - 2017 Paper-12 : COMPANY ACCOUNTS AND AUDIT Time Allowed : 3 Hours Full Marks : 100 The figures in the margin on the right side indicate full marks. Where considered necessary, suitable assumptions may be made and clearly indicated in the answer. The Question paper has two Sections, A and B. Both sections are to be answered as per instruction given against each. Section – A (Company Accounts) Answer Question No. 1 and any three from Question No. 2, 3, 4 and 5. 1. (a) Choose the correct answer from the four alternatives given: 1×6=6 (i) Underwriting Agreements are of (A) One type (B) Two types (C) Three types (D) Four types (ii) Segment Reporting is covered under (A) AS 16 (B) AS 17 (C) AS 18 (D) AS 19 (iii) On redemption of Debentures, the amount lying in Debenture Redemption Reserve, which is no longer necessary to be retained, should be transferred to (A) Revaluation Reserve (B) Securities Premium Reserve (C) Capital Reserve (D) General Reserve (iv) Rate of provisioning by a Bank for Advances doubtful for more than 1 year but less than 3 years is (A) 25% (B) 40% (C) 60% (D) 100% (v) Balance of Interest Accrued on Security Deposit A/c of an Electricity company should be shown (A) under Current Liability. (B) under Non-current Liability. (C) under Current Asset. (D) under Non-current Asset. (vi) Which of the following items is not a part of cash flow from operating activities? (A) Collection from customers (B) Payment of outstanding wages
Suggested Answer_ Syllabus 2016_Jun2017_Paper 12 Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 2 (C) Payment to suppliers of machinery (D) Advances to foreign suppliers for raw materials (b) Match the following items in Column 'A' with items shown in Column 'B': 1×4=4 Column 'A' Column 'B' 1. Grants Received from Government A. Capital Redemption Reserve 2. Redemption of Debentures B. AS 15 3. Issue of Bonus shares C. AS 12 4. Defined benefit plans D. Sinking Fund (c) State whether the following statements are True or False: 1x4=4 (i) Exchange difference arising in respect of monetary items is to be recognized as income or expenditure during the year. (ii) Capital Reserve is a Reserve which is available for distribution as Dividend. (iii) Interest received by a finance company is a part of cash flow from investing activities. (iv) Interest accrued and due should be shown under the head Other Current Liabilities in a Balance Sheet of a Company. Answer: 1. (a) (i) — B (ii) — B (iii) — D (iv) — B (v) — B (vi) — C (b) 1 C 2 D 3 A 4 B (c) (i) T (ii) F (iii) F (iv) T 2. (a) A joint stock company resolved to issue 5 lakh equity shares of `10 each at a premium of `1 per share. 50000 of these shares were taken up by the directors and their relatives, the entire amount being received forthwith. The remaining shares were offered to the public, the entire amount being asked for with applications. The issue was underwritten by P, Q and R for a commission of 2% of the issue price. 65% of the issue was underwritten by P, while Q and R's share were 25% and 10% respectively. Their firm underwriting was as follows: P 15000 shares, Q 10000 shares and R 5000 shares. The underwriters were to submit unmarked applications for shares underwritten firm with full application money along with the members of the general public. Marked applications were as follows: P 59750 shares, Q 28750 shares and R 5250 shares. Unmarked applications totaled 350000 shares. Accounts with the underwriters were promptly settled. You are required to prepare a statement calculating liability of the Underwriters for
Suggested Answer_ Syllabus 2016_Jun2017_Paper 12 Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 3 shares other than shares underwritten Firm and also calculate the amount due from/to the Underwriters. 8 (b) M Ltd. sold machinery having WDV of ` 200 Lakhs to N Ltd. for ` 250 Lakhs and the same machinery was leased back by N Ltd. to M Ltd. The lease back is an operating lease. Comment on the accounting treatment as per AS 19 in the following circumstances: (i) Fair value is ` 230 Lakhs and sale price is ` 250 Lakhs (ii) Fair value is ` 175 Lakhs and sale price is ` 195 Lakhs 4 Answer: 2. (a) Total number of shares issued = 5,00,000 Less: Shares taken by the directors etc. 50,000 Shares offered to public 4,50,000 Calculation of underwriters' liability Particulars P Q R Gross liability (65:25:10) 2,92,500 1,12,500 45,000 (-) Marked application 59,750 28,750 5,250 2,32,750 83,750 39,750 (-) Unmarked application in the ratio of gross liability 2,27,500 87,500 35,000 Resultant liability (or surplus) 5,250 (3,750) 4,750 (-)Surplus of Q allocated to P and R in the ratio of 65:10 3,250 3,750 500 Net liability 2,000 Nil 4,250 Workings: Calculation of amount due from/to underwriters Particulars P Q R No. of shares to be subscribed as per agreement (exc. Firm) 2,000 Nil 4,250 Amount payable @ ` 11 22,000 Nil 46,750 Underwriting commission @2 % P: (292500×11×2%) 64,350 Q: (112500×11×2%) 24,750 R: (45000×11×2%) 9,900 Amount (paid) / received (42,350) (24,750) 36,850 (b) Here the leaseback is an operating lease. So, the treatment of the given circumstances will be as follows: (i) Here, sale price > Fair value, so, profit of `(230-200) = `30 Lakhs is to be immediately recognized by M Ltd in its books and balance profit of `(250-230) i.e. `20 Lakhs is to be amortized over the lease period. (ii) Here, sale price > Fair value, so, loss of `(200-175) = `25 Lakhs is to be immediately recognized by M Ltd in its books and balance profit of ` (195-175) i.e. `20 Lakhs is to be amortized over the lease period. 3. (a) From the following information provided, prepare a Cash Flow Statement as per AS-3. Balance Sheet of PQR Ltd. Particulars Note No. As on 31.03.16 ` As on 31.03.15 ` I Equity and Liabilities 1. Shareholders' fund (a) Share Capital 1 20,00,000 20,00,000 (b) Reserves and Surplus 2 10,00,000 8,70,000 2. Share application money pending allotment Nil Nil