Advance Accounting Exam Paper

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PAPER – 1 : ADVANCED ACCOUNTING Answer all questions. Working notes should form part of the answer. Question 1 The following information has been extracted from the Books of ‘X’ Limited group (as at 31 st December, 2006): X Ltd. Rs. Share capital (Fully paid equity shares of Rs.10 each) Profit and Loss Account Dividend received: From Y Ltd. in 2005 From Y Ltd. in 2006 From Z Ltd. in 2006 Current Liabilities 40,000 11,70,000 60,000 60,000 36,000 Y Ltd. Rs. Z Ltd. Rs. Fixed Assets Less Depreciation Investment at Cost Current Assets 4,20,000 6,30,000 1,20,000 3,76,000 4,00,000 60,000 5,22,000 --40,000 X Ltd. Rs. Y Ltd. Rs. Z Ltd. Rs.

8,00,000 2,10,000

6,00,000 1,90,000

4,00,000 1,28,000

10,000 8,36,000

34,000 5,62,000 11,70,000 8,36,000 5,62,000

All the companies pay dividends of 12 percent of paid-up share capital in March following the end of the accounting year. The receiving companies account for the dividends in their books when they are received. ‘X’ Limited acquired 50,000 equity shares of Y Ltd. on 31 st December, 2004. ’Y’ Limited acquired 30,000 equity shares of Z Ltd. on 31 st December, 2005. The detailed information of Profit and Loss Accounts is as follows: X Ltd. Rs. Balance of Profit and Loss Account on 31 st December, 2004 after dividends of 12% in respect of calendar year 2004, but excluding dividends received 86,000 Y Ltd. Rs. 78,000 Z Ltd. Rs. 60,000

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FINAL EXAMINATION : MAY, 2007

calendar year 2004, but excluding dividends received Net profit earned in 2005 Less – Dividends of 12% (paid in 2006) Net profit earned in 2006 (Before taking into account proposed dividends of 12% in respect of calendar year 2006)

86,000 1,20,000 2,06,000 96,000 1,10,000 1,00,000

78,000 84,000 1,62,000 72,000 90,000 1,00,000

60,000 56,000 1,16,000 48,000 68,000 60,000

2,10,000 1,90,000 1,28,000 Taking into account the transactions from 2004 to 2006 and ignoring taxation, you are required to prepare: (i) The Consolidated Balance Sheet of X Limited group as at 31 st December, 2006. (ii) The Consolidated Profit and Loss Account for the year ending 31 st December, 2006. (iii) Cost of control. (iv) Minority shareholders interest. Answer (i) Consolidated Balance Sheet of X Ltd. and its subsidiaries Y Ltd. and Z Ltd. as on 31st December, 2006 Liabilities Share Capital: 80,000 Equity shares of Rs.10 each fully paid Minority Interest [Refer (iv)] Reserves and Surplus: Profit and Loss Account [Refer (ii)] Current Liabilities and Provision: Current Liabilities Proposed Dividend: X Ltd. Minority Interest [Refer (iv)] 96,000 24,000 15,56,000 15,56,000 84,000 Rs. Assets Fixed Assets: 8,00,000 Goodwill [Refer (iii)] 2,47,167 Other Fixed Assets less depreciation 3,04,833 Current Assets, Loans and Advances: Current Assets 2,20,000 18,000 13,18,000 Rs. (16 Marks)

PAPER – 1: ADVANCED ACCOUNTING

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(ii)
Particulars To Dividend (paid for 2005) To Minority Interest X Ltd. 96,000 Y Ltd. 72,000

Consolidated Profit and Loss Account for the year ending 31 st December, 2006 Z Ltd. Adjust- Total ments Particulars X Ltd. Y Ltd. Z Ltd. Adjust ments 48,000 96,000 1,20,000 By Balance b/d 32,000 2,06,000 1,62,000 1,16,000

(in Rs.)
Total 4,84,000

-

39,167

71,167 By Dividend 60,000 received in 2005 (for 2004) 1,16,000 By Dividend 60,000 received in 2006 (for 2005) By Profit for the year

-

-

-

60,000

To Capital Reserve (Cost of Control) To Investments Accounts (Dividend received out of capital profit) To Proposed Dividend

-

65,000

51,000

-

36,000

-

96,000

-

1,00,000 1,00,000 60,000

-

2,60,000

60,000* 36,000*

-

-

96,000

96,000

-

45,000

--

96,000 3,04,833 4,26,000 2,98,000 1,76,000 96,000 8,04,000

To Balance c/d 1,74,000 85,833

4,26,000 2,98,000 1,76,000 96,000 8,04,000

Notes:* (1) X Ltd. receives from Y Ltd., dividend amounting to Rs.60,000 for the year 2004 in the year 2005 for shares acquired in 2004. It is a capital...
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