CA - INTERMEDIATE

ADVANCED ACCOUNTING
GROUP I - PAPER 1
SERIES – 3
JANUARY - 2025
VOL – 24 & 25
Date :27.10.2024

Vidya Sagar Institute

K-50, Bhawna Tower, Income Tax Colony, Tonk Road,
Near Durga Pura, Bus Stand, Jaipur - 302018
Mobile :- 93514-68666 Ph. :- 7821821250, 7821821251, 7821821252,
7821821253, 7821821254. web : www.vsijaipur.com
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 CA - INTERMEDIATE
GROUP I – PAPER 1
ADVANCED ACCOUNTING
SERIES – 3 (JANUARY 2025)
Batch : Vol :24 & 25 Date : 27.10.2024
Maximum Marks: 100 Time - 3 Hours
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Multiple Choice Questions is Compulsory.
SECTION “A”
Division “A” is compulsory.
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1 Long term investments are carried at 2

(a) fair value.
(b) cost less ‘other than temporary’ decline.
(c) Cost and market value whichever is less.
(d) Cost and market value whichever is higher.

2 Which of the following statements is correct? 2

(a) In case of 10% test based on profit/loss, we need to consider that any segment whose
profit or loss is 10% or more than the net profit or net loss respectively of all segments
taken together becomes reportable segment.
(b) In case of 10% test based on profit/loss, we need to consider that any segment whose
profit or loss is 10% or more than the net profit (after netting the losses) of all segments
taken together becomes reportable segment.
(c) In case of 10% test based on profit/loss, we need to consider that any segment whose
profit or loss is 10% or more than the net profit or loss (whichever is higher in absolute
figures) of all segments taken together becomes reportable segment.
(d) In case of 10% test based on profit/loss, we need to consider that any segment whose
profit or loss is 10% or more than the net profit or loss (whichever is lower in absolute
figures) of all segments taken together becomes reportable segment.

3 Which committee is responsible for approval of accounting standards and their 2

modification for the purpose of applicability to companies?
(a) NFRA (b) MCA
(c) Central Government Advisory Committee. (d) IASB

Case Study 1
A Ltd. acquired 25% of shares in B Ltd. as on 31.3.20X1 for ` 3 lakhs. The Balance
Sheet of B Ltd. as on 31.3.20X1 is given below:

`
Share Capital 5,00,000
Reserves and Surplus 5,00,000
10,00,000
Property, Plant and Equipment 5,00,000
Investments 2,00,000
Current Assets 3,00,000
10,00,000

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 During the year ended 31.3.20X2 the following are the additional information available:
(i) On 30.4.20X1 A Ltd. received a dividend from B Ltd. for the year ended 31.3.20X1 at
40% from the Reserves. The above balance sheet is before the adjustment of dividend.
(ii) B Ltd. made a profit after tax of ` 7 lakhs for the year ended 31.3.20X2.
(iii) B Ltd. declared a dividend @ 50% for the year ended 31.3.20X2 on 30.4.20X2.

4. Goodwill if any on investment in shares of B Ltd.’s . 2

(a) Nil (b) 50,000
(c) 2,00,000 (d) 2,50,000

5 How the dividend received for 31.3.20X2 on 30.4.20X2 from B Ltd. will be shown 2
in the Consolidated Financial Statements for the year ended 31.3.20X2?
(a) No adjustment is required as it is declared after 31.3.20X2
(b) It is a capital nature income as it is pre acquisition dividend so need to adjust to
cost of investment
(c) It is a revenue nature income as it is post-acquisition dividend so no need to
adjust to cost of investment
(d) It is a revenue nature income as it is post-acquisition dividend so need to
credited to profit and loss account

6 What will be the value of investment in B Ltd., in its Consolidated Financial 2

Statements for the year ended 31.3.20X2?
(a) 1,75,000 (b) 2,50,000
(c) 4,00,000 (d) 4,25,000

7 A plot of land with carrying amount of ` 1,00,000 was revalued to ` 90,000 at the end 2
of Year 2. Subsequently, due to increase in market values, the land was determined
to have a fair value of ` 1,05,000 at the end of Year 4. Assuming that the entity adopts
Revaluation Model, what would be the accounting treatment of Revaluation?
(a) Initial downward valuation of ` 10,000 debited to Revaluation Reserve. Subsequent
upward revaluation of ` 15,000 credited to P/L.
(b) Initial downward valuation of ` 10,000 debited to P/L. Subsequent upward
revaluation of ` 15,000 credited to P/L.
(c) Initial downward valuation of ` 10,000 debited to P/L. Subsequent upward
revaluation of ` 10,000 credited to P/L and ` 5,000 credited to Revaluation Reserve.
(c) Initial downward valuation of ` 10,000 credited to P/L. Subsequent upward
revaluation of ` 10,000 debited to P/L and ` 5,000 debited to Revaluation Reserve.

Case Study 2
G Ltd., acquired a machine on 1st April, 20X0 for ` 7 crore that had an estimateduseful
life of 7 years. The machine is depreciated on straight line basis and does not carry any
residual value. On 1st April, 20X4, the carrying value of the machine was reassessed at
` 5.10 crore and the surplus arising out of the revaluation being credited to revaluation
reserve. For the year ended March, 20X6, conditions indicating an impairment of the
machine existed and the amount recoverable ascertained to be only ` 79 lakhs. You are
required to calculate the loss on impairment of the machine and show how this loss is to
be treated in the books of G Ltd. G Ltd., had followed the policy of writing down the
revaluation surplus bythe increased charge of depreciation resulting from the revaluation.

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 8 What is the carrying value of machine on 1 st April, 20X4 2
(a) 3 crore (b) 2.1 crore
(c) 5.1 crore (d) 1.7 crore

9 What is the amount of impairment loss

(a) .79 crore (b) .91 crore
(c) 1.7 crore (d) 2.1 crore

10 Suggest the correct accounting treatment of impairment loss 2

(a) Entire loss will be debited to revaluation reserve account
(b) Entire loss will be debited to profit and loss account
(c) .7 crore loss will be debited to revaluation reserve account and balance of loss
will be debited to profit and loss account
(d) .21 crore loss will be debited to revaluation reserve account and balance of loss
will be debited to profit and loss account

11 As per AS 28 if corporate asset or goodwill can be reasonably allocated then 2

impairment testing of corporate asset will be done on the basis of
(a) Apply Bottom up test
(b) Apply Top down test
(c) Apply both Bottom up test and Top down test
(d) Apply either Bottom up test or Top down test
Case Study 3
The following information is available for AB Ltd. for the accounting year 2012-13 and
2013-14:
Net profit for `
Year 2012-13 22,00,000
Year 2013-14 30,00,000
No of shares outstanding prior to right issue 10,00,000 shares.

Right issue One new share for each five shares

outstanding i.e. 2,00,000 shares
Right issue price `25
Last date to exercise rights 31st July, 2013
Fair value of one equity share `32
immediately prior to exercise of rights
on 31.07.2013
.
12. Basic earnings per share for the year 2012-13 will be 2
(a) 2.20 (b) 2.12
(c) 1.83 (d) 3

13. Restated basic earnings per share for the year 2012-13 for right issue 2
(a) 2.20 (b) 2.12
(c) 1.83 (d) 3

14. Basic earnings per share for the year 2013-14 2

(a) 2.71 (b) 2.62
(c) 3 (d) 1.04
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15 As per AS 20 which one of the following is to be treated as issued from the 2
beginning of the earliest period reported
(a) contingent shares
(b) share warrant
(c) shares issued under scheme of amalgamation in nature of merger
(d) sub division/splitting of shares

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 Division – B
Question No. 1 is compulsory.
Attempt any four questions out of the remaining five questions.
Working notes should from part of the answer.
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1(a) The following particulars are stated in the Balance Sheet of Deep Limited as on 31st March, 4
2020:
(` In Lakhs)
Deferred Tax Liability (Cr.) 28.00
Deferred Tax Assets (Dr.) 14.00

The following transactions were reported during the year 2020 -2021:
(i) Depreciation as per books was ` 70 Lakhs whereas Depreciation for Tax purposes was
` 42 Lakhs. There were no additions to Fixed Assets during the year.
(ii) Expenses disallowed in 2019-20 and allowed for tax purposes in 2020-21 were ` 14
Lakhs.
(iii) Share issue expenses allowed under section 35(D) of the Income Tax Act, 1961 for the
year 2020-21 (1/10th of ` 70.00 lakhs incurred in 2019-20).
(iv) Repairs to Plant and Machinery were made during the year for ` 140.00 Lakhs and was
spread over the period 2020-21 and 2021-22 equally in the books. However, the entire
expenditure was allowed for income-tax purposes in the year 2020-21.
Tax Rate to be taken at 40%.
You are required to show the impact of above items on Deferred Tax Assets and Deferred Tax
Liability as on 31st March, 2021.

(b) Due to inadequacy of profits during the year ended 31st March, 20X2, XYZ Ltd. proposes to 5
declare 10% dividend out of general reserves. From the following particulars, ascertain the
amount that can be utilized from general reserves, according to the Companies (Declaration
of dividend out of Reserves) Rules, 2014:
`
17,500 9% Preference shares of ` 100 each, fully paid up 17,50,000
8,00,000 Equity shares of ` 10 each, fully paid up 80,00,000
General Reserves as on 1.4.20X1 25,00,000
Capital Reserves as on 1.4.20X1 3,00,000
Revaluation Reserves as on 1.4.20X1 3,50,000
Net profit for the year ended 31st March, 20X2 3,00,000
Average rate of dividend during the last three years has been 12%.
.
(c) Zebra Limited began construction of a new plant on 1st April,2021 and obtained a special 5
loan of ` 20,00,000 to finance the construction of the plant. The rate of interest on loan was
10%.
The expenditure that was incurred on the construction of plant was as follows:

`
1st April,2021 10,00,000
1st August,2021 24,00,000
1st January,2022 4,00,000

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 The company's other outstanding non-specific loan was ` 46,00,000 at an interest rate of
12%.The construction of the plant completed on 31st March,2022.
You are required to:
(i) Calculate the amount of interest to be capitalized as per the provisions of AS 16
"Borrowing Cost".
(ii) Pass a journal entry for capitalizing the cost and the borrowing cost in respect of the
plant.

2 Moon Star has a branch at Virginia (USA). The Branch is a non-integral foreign operation of 14
the Moon Star. The trial balance of the Branch as at 31st March, 2012 is as follows:
US $ US $ Cr.
Particulars
Dr.
Office equipment’s 48,000
Furniture and Fixtures 3,200
Stock (April 1, 2011) 22,400
Purchases 96,000
Sales --- 1,66,400
Goods sent from H.O 32,000
Salaries 3,200
Carriage inward 400
Rent, Rates & Taxes 800
Insurance 400
Trade Expenses 400
Head Office Account --- 45,600
Sundry Debtors 9,600
Sundry Creditors --- 6,800
Cash at Bank 2,000
Cash in Hand 400 .
2,18,800 2,18,800
The following further information's are given:
(1) Salaries outstanding $ 400.
(2) Depreciate office equipment and furniture & fixtures @10% p.a. at written down
value.
(3) The Head Office sent goods to Branch for `15,80,000
(4) The Head Office shows an amount of `20,50,000 due from Branch.
(5) Stock on 31st March, 2012 -$21,500.
(6) There were no transit items either at the start or at the end of the year.
(7) On April 1, 2010 when the fixed assets were purchased the rate of exchange was `43
to one $. On April 1, 2011, the rate was 47 per $. On March 31, 2012 the rate was `50
per $. Average rate during the year was 45 to one $.
Prepare:
(a) Trial balance incorporating adjustments given converting dollars into rupees.
(b) Trading, Profit and Loss Account for the year ended 31st March, 2012 and Balance
Sheet as on date depicting the profitability and net position of the Branch as would
appear in the books of Moon Star for the purpose of incorporating in the main Balance
Sheet.

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3(a) From the following information, prepare cash flow statement of A (P) Ltd. as at 31st March, 7
2015 by using indirect method:
Balance Sheet
2014 2015
(`) (`)
Liabilities:
Share capital 12,00,000 12,00,000
Profit and loss account 8,50,000 10,00,000
Long term loans 10,00,000 10,60,000
Trade payables 3,50,000 4,00,000
34,00,000 36,60,000
Assets:
Fixed assets 17,00,000 20,00,000
Investment in shares 2,00,000 2,00,000
Inventory 6,80,000 7,00,000
Trade receivables 7,60,000 6,90,000
Cash 60,000 70,000
34,00,000 36,60,000

Income Statement For the Year Ended 31st March, 2015

Sales 40,80,000
Less: Cost of sales (27,20,000)
Gross profit 13,60,000
Less: Operating expenses:
Administrative expenses 4,60,000
Depreciation 2,20,000 (6,80,000)
Operating profit 6,80,000
Add: Non-operating incomes (dividend received) 50,000
7,30,000
Less: Interest paid (1,40,000)
Profit before tax 5,90,000
Less: Income-tax (2,60,000)
Profit after tax 3,30,000
Statement of Retained Earnings
Opening balance 8,50,000
Add: Profit 3,30,000
11,80,000
Less: Dividend paid (1,80,000)
Closing balance 10,00,000
.

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(b) X Ltd. furnishes the following summarized Balance Sheet as at 31 -03-2018. 7

Liabilities (in `) (in `)

Share Capital
Equity Share Capital of ` 20 each fully paid up 50,00,000
10,000, 10% Preference Shares of ` 100 each fully paid up 10,00,000 60,00,000

Reserves & Surplus

Capital Reserve 1,00,000
Security Premium 12,00,000
Revenue Reserve 5,00,000
Profit and Loss 20,00,000
Dividend Equalization Fund 5,50,000 43,50,000
Non-Current Liabilities
12% Debenture 12,50,000
Current Liabilities and Provisions 5,50,000
Total 1,21,50,000
Assets
Fixed Assets
Tangible Assets 1,00,75,000
Current Assets
Investment 3,00,000
Inventory 2,00,000
Cash and Bank 15,75,000 20,75,000
Total 1,21,50,000
The shareholders adopted the resolution on the date of the above mentioned Balance Sheet
to:
(1) Buy back 25% of the paid up capital and it was decided to offer a price of 20% over
market price. The prevailing market value of the company's share is ` 30 per share.
(for the purpose of creating capital redemption reserve use reserve in the order of
revenue reserve , security premium and P/L A/c )
(2) To finance the buy-back of shares, company:
(a) Issues 3000, 14% debentures of ` 100 each at a premium of 20%.
(b) Issues 2500, 10% preference shares of ` 100 each.
(3) Sell investment worth ` 1,00,000 for ` 1,50,000.
(4) Maintain a balance of ` 2,00,000 in Revenue Reserve.
(5) Later the company issue three fully paid up equity share of ` 20 each by way of bonus
share for every 15 equity share held by the equity shareholders.
You are required to pass the necessary journal entries to record the above transactions and
prepare Balance Sheet after buy back.

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4 The summarized Balance Sheet of Bad Luck Ltd. as on 31st March, 2013 was as follows: 14

Note Amount Amount

(` ) (` )
A. Equity and Liabilities
1. Shareholders' Fund
(a) Share Capital 1 7,50,000
(b) Reserve and Surplus 2 (10,00,000) 2,50,000
2. Non-current Liabilities
(a) Long Term borrowings 3 5,00,000
3. Current Liabilities
(a) Short Term Borrowings 4 5,00,000
(b) Trade Payables 2,50,000 7,50,000
B. Assets
1. Non-current Assets
(a) PPE 5 5,50,000
(b) Intangible Assets 6 1,50,000 7,00,000
2. Current Assets
(a) Inventories 1,50,000
(b) Trade Receivables 1,25,000
(c) Deferred revenue Expenditure 25,000 3,00,000
Total 10,00,000

Notes to Accounts
Amount Amount
(` ) (` )
1. Share Capital
Authorized, issued & Fully paid
5,000 equity shares of ` 100 each 5,00,000
2,500 8% Preference shares of `100 each 2,50,000 7,50,000
2. Reserve and Surplus
Profit and Loss Account (10,00,000)
3. Long Term borrowings
8% Debentures 5,00,000
4. Short Term Borrowings
Loan from Directors 3,00,000
Bank Overdraft 2,00,000 5,00,000
5. PPE
Freehold Property 4,00,000
Plant 1,50,000 5,50,000
6. Intangible Assets
Goodwill 1,00,000
Trademark 50,000 1,50,000

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 The following scheme of internal reconstruction was framed, approved by the Court, all the
concerned parties and implemented:
(i) The preference shares to be written down to `25 each and the equity shares to `20
each. Each class of shares then to be converted into shares of `100 each.
(ii) The debenture holders to take over freehold property (book value `2,00,000) at a
valuation of `2,50,000 in part repayment of their holdings. Remaining freehold
property to be revalued at `6,00,000.
(iii) Loan from directors to be waived off in full.
(iv) Inventory of `50,000 to be written off, `12,500 to be provided for bad debts.
(v) Profit and Loss account balance, Trademark, goodwill and deferred revenue
expenditure to be writ- ten off.
Pass Journal Entries for all the above mentioned transactions. Also Prepare Capital Reduction
account and company's Balance Sheet immediately after reconstruction.

5 14
Liabilities Gee Ltd. Pee Ltd. Assets Gee Ltd. Pee Ltd.
( `) ( `) (`) ( `)
Equity Share 25,00,000 15,00,000 Buildings 12,50,000 7,75,000
Capital Plant and 16,25,000 8,50,000
( 10 per share) Machinery
14% Preference 11,00,000 8,50,000 Furniture & 2,87,500 1,75,000
share Capital Fixtures
(100 each)
General Reserve 2,50,000 2,50,000 Investments 3,50,000 2,50,000
Export Profit 1,50,000 1,00,000 Inventory 6,25,000 4,75,000
reserve
Investment – 50,000 Trade 4,50,000 5,15,000
allowance Reserve Receivables
Profit and Loss A/c 3,75,000 1,25,000 Cash at bank 3,62,500 2,60,000
15% Debentures 2,50,000 1,75,000
(100 each)
Trade payables 2,25,000 1,75,000
Other current
liabilities 1,00,000 75,000
49,50,000 33,00,000 49,50,000 33,00,000

All the bills receivables of Pee Ltd. were having Gee Ltd.'s acceptances.
Gee Ltd. takes over Pee Ltd. on 1st April, 2015. The purchase consideration is discharged as
follows:
(i) Issued `1,65,000 equity shares of `10 each at par to the equity shareholders of Pee
Ltd.
(ii) Issued 15% preference shares of `100 each to discharge the preference shareholders
of Pee Ltd. at 10% premium.
(iii) The debentures of Pee Ltd. will be converted into equivalent number of debentures of
Gee Ltd.
(iv) The statutory reserves of Pee Ltd. are to be maintained for two more years.
(v) Expenses of amalgamation amounting to `10,000 will be borne by Gee Ltd.
(vi) Details of trade receivables and trade payables as under:

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 Gee L td. Pee Ltd.
Trade payables
Creditors 1,50,000 75,000
Bills payables 75,000 1,00,000
2,25,000 1,75,000
Trade receivables
Debtors 4,00,000 4,60,000
Bills receivables 50,000 55,000
4,50,000 5,15,000

Show the opening Journal entries and the opening balance sheet of Gee Ltd. as at 1st April,
2015 after amalgamation, on the assumption that the amalgamation is in the nature of the
merger.

6(a) The fair value of plan assets of Anupam Ltd. was ` 2,00,000 in respect of employee benefit 4
pension plan as on 1st April, 20X1. On 30th September, 20X1 the plan paid out benefits of
`25,000 and received inward contributions of ` 55,000. On 31st March, 20X2 the fair value of
plan assets was ` 3,00,000. On 1st April, 20X1 the company made the following estimates,
based on its market studies and prevailing prices.
%
Interest and dividend income (after tax) payable by fund 10.25
Realized gains on plan assets (after tax) 3.00
Fund administrative costs (3.00)

Expected rate of return (half yearly compounding) 10.25

Calculate the expected and actual returns on plan assets as on 31 st March, 20X2, as per
AS 15.

OR
6(a) What are the qualitative characteristics of the financial statements which improve the 4
usefulness of the information furnished therein?

(b) Explain briefly the accounting treatment needed in the following cases as per AS 11 as on 4
31.3.2015.
Sundry Debtors include amount receivable from Umesh` 5,00,000 recorded at the prevailing
exchange rate on the date of sales, transaction recorded at US $ 1= `58.50.
Long term loan taken from a U.S. Company, amounting to ` 60,00,000. It was recorded at
US $ 1 = ` 55.60, taking exchange rate prevailing at the date of transaction.
US $ 1 = ` 61.20 on 31.3.2015.

(c) At the end of the financial year ending on 31st December, 20X1, a company finds that there 6
are twenty law suits outstanding which have not been settled till the date of approval of
accounts by the Board of Directors. The possible outcome as estimated by the Board is as
follows:

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 Probability Loss (` )
In respect of five cases (Win) 100% 
Next ten cases (Win) 50% 
Lose (Low damages) 40% 1,20,000
Lose (High damages) 10% 2,00,000
Remaining five cases
Win 50% 
Lose (Low damages) 30% 1,00,000
Lose (High damages) 20% 2,10,000

Outcome of each case is to be taken as a separate entity. Ascertain the amount of contingent
loss and the accounting treatment in respect thereof.

**********************************************

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CA INTERMEDIATE ADV ACCOUNTING
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