CA INTERMEDIATE - HACK TEST SERIES

PAPER 1 – ADVANCE ACCOUNTING

MARKS : 100 TIME ALLOWED : 3 Hrs

PART I - MCQs (30 Marks)

Write the most appropriate answer to each of the following multiple-choice questions by
choosing one of the four options given. All MCQs are compulsory and carries 2 Marks each.

Case Scenario 1

Mars Ltd. is a manufacturing enterprise which is starting a new manufacturing plant at X Village. It
has commenced construction of the plant on April 1, 2023 and has incurred following expenses:

 It has acquired land for installing Plant for Rs. 50,00,000

 It incurred Rs. 35,00,000 for material and direct labour cost for developing the Plant.

 The Company incurred Rs. 10,00,000 for head office expenses at New Delhi which included
rent, employee cost and maintenance expenditure.

 The Company borrowed Rs. 25,00,000 for construction work of Plant @12% per annum on
April 1, 2023. Director finance of the Company incurred travel and meeting expenses
amounting to Rs. 5,00,000 during the year for arranging this loan.

 On November 1, 2023, the construction activities of the plant were interrupted as the local
people along with the activists have raised issues relating to environmental impact of plant
being constructed. Due to agitation the construction activities came to standstill for 3
months.

 With the help of Government and NGOs, the agitation was over by February 28, 2024 and
the work resumed. However, to balance the impact on environment, government ordered
the company to install certain devices for which the Company had to incur Rs. 6,00,000 in
March 2024.

 The rate of depreciation on Plant is 10%.

©Hari Academy CA CS CMA Faculty: SUTHARSHAN S.H 9043971982

 Based on the above information, answer the following questions.

1. Which of the following expenses cannot be included in the cost of plant:

a) Cost of Land
b) Construction material and labour cost
c) Head office expenses
d) Borrowing cost

2. How much amount of borrowing cost can be capitalised with the plant:
a) Rs. 300,000
b) Rs. 2,00,000
c) Rs. 7,00,000
d) Rs. 6,00,000

3. The total cost of plant as on march 31, 2024 will be:

a) Rs. 85,00,000
b) Rs. 98,00,000
c) Rs. 93,00,000
d) Rs. 95,00,000

4. The amount of depreciation to be charged for the year end March 31,2024
a) Rs. 4,30,000
b) Rs. 9,30,000
c) Rs. 9,80,000
d) Nil

Case Scenario 2

X Ltd. purchased 3,000 shares of Amazing Ltd. in December 2023 @ Rs. 100 each and paid
brokerage @ 1%. In May 2024, Amazing Ltd. issued bonus shares at one for every three shares held
by shareholders. X Ltd. sold 1000 shares in September 2024 at Rs. 110 each. After issue of bonus,
shares were quoted at Rs. 95. In December 2024, the shares were quoted at Rs. 70.

5. What would be the carrying cost of investments in Amazing Ltd. after sale of shares as per AS 13:
a) Rs. 3,03,000
b) Rs. 2,27,250
c) Rs. 3,00,000
d) Rs. 3,30,000

6. What is the cost of bonus shares:

a) Rs. 1,00,000
b) Rs. 1,10,000
c) Nil
d) Rs. 1,01,000

©Hari Academy CA CS CMA Faculty: SUTHARSHAN S.H 9043971982

7. What is the profit on sale of Bonus Shares:
a) Rs. 100,000
b) Rs. 75,750
c) Rs. 34,250
d) Rs. 1,01,000

8. What would be the carrying cost of investments in Amazing Ltd. in quarter ending in December
2024 as per AS 13:
a) Rs. 2,10,000
b) Rs. 2,27,250
c) Rs. 2,20,000
d) Rs. 3,00,000

Case Scenario 3

Super Ltd., a manufacturing company, has the following summarized Balance Sheet as of March
31, 2024:

Equity Shares of Rs. 10 each fully paid up: Rs. 17,00,000

Reserves & Surplus:

Revenue Reserve: Rs. 23,50,000

Securities Premium: Rs. 2,50,000
Profit & Loss Account: Rs. 2,00,000
Infrastructure Development Reserve: Rs. 1,50,000

Secured Loan:

9% Debentures: Rs. 38,00,000

Unsecured Loan: Rs. 8,50,000
Property, Plant & Equipment: Rs. 58,50,000
Current Assets: Rs. 34,50,000

Super Ltd. plans to buy back 35,000 equity shares of Rs. 10 each fully paid up on April 1, 2024, at
Rs. 30 per share. The buyback is authorized by its articles, and necessary resolutions have been
passed. The payment for the buyback will be made using the company's bank balance, which is
part of its current assets.

©Hari Academy CA CS CMA Faculty: SUTHARSHAN S.H 9043971982

 Answer the following questions based on the above information:

9. As per The Companies Act, 2013 under Section 68 (2) the buy-back of shares in any financial year
must not exceed

a) 20% of its total paid-up capital and free reserves

b) 25% of its total paid-up capital and free reserves
c) 25% of its total paid-up capital
d) 20% of its total paid-up capital

10. How many shares can Super Ltd. buy back according to the Shares Outstanding Test?
a) 35,000 shares
b) 42,500 shares
c) 37,500 shares
d) 54,375 shares

11. What is the maximum number of shares that can be bought back according to the Resources
Test?
a) 35,000 shares
b) 42,500 shares
c) 37,500 shares
d) 54,375 shares

12. According to the Debt Equity Ratio Test, what is the maximum number of shares that can be
bought back?
a) 35,000 shares
b) 42,500 shares
c) 37,500 shares
d) 54,375 shares

13. How should the dividend paid by the Company should be disclosed in the Cash Flows Statement:
a) Cash flows from Operating Activities
b) Cash flows from Investing Activities
c) Cash flows from Financing Activities
d) No disclosure in Cash Flow Statement

©Hari Academy CA CS CMA Faculty: SUTHARSHAN S.H 9043971982

14. On 31st March 2024, Sri Radhey shyam Enterprise finds that the cost of a partly finished unit on
that date is Rs. 530. The unit can be finished in 2024-25 by an additional expenditure of Rs. 310.
The finished unit can be sold for Rs. 750 subject to payment of 8% brokerage on the selling price.
Sri Radhey shyam Enterprise seeks your advice regarding the amount at which the unfinished unit
should be valued as at 31st March, 2024 for preparation of final accounts. the partly finished unit
cannot be sold in semifinished form and its NRV is zero without processing it further.
(a) Rs. 470
(b) Rs. 380
(c) Rs. 500
(d) Rs. 440

15. Accounting Standard 19, Lease is applicable on following Leases:

a) Lease agreements to explore for or use of natural resources, such as oil, gas, timber metals
and other mineral rights.
b) Legal owner of an asset conveys to another party in return for a payment or series of
periodic payments, the right to use an asset for an agreed period of time.
c) licensing agreements for items such as motion picture films, video recordings, plays,
manuscripts, patents and copyrights.
d) lease agreements to use lands

PART II - Descriptive Questions

Question No. 1 is compulsory.

Attempt any four questions from the remaining five questions

1. (a) X Ltd. purchased a Property, Plant and Equipment four years ago for Rs. 150 lakhs and
depreciates it at 10% p.a. on straight line method. At the end of the fourth year, it has revalued the
asset at Rs. 75 lakhs and has written off the loss on revaluation to the profit and loss account.
However, on the date of revaluation, the market price is Rs. 67.50 lakhs and expected disposal costs
are Rs. 3 lakhs. What will be the treatment in respect of impairment loss on the basis that fair value
for revaluation purpose is determined by market value and the value in use is estimated at Rs. 60
lakhs?. (4 Marks)

(b) A company incorporated in June 2023, has setup a factory within a period of 8 months with
borrowed funds. The construction period of the assets had reduced drastically due to usage of
technical innovations by the company and the company is able to justify the reasons for the same.
Whether interest on borrowings for the period prior to the date of setting up the factory should be
capitalized although it has taken less than 12 months for the assets to get ready for use. You are
required to comment on the necessary treatment with reference to AS 16. (5 Marks)

©Hari Academy CA CS CMA Faculty: SUTHARSHAN S.H 9043971982

 (c) As per provisions of AS-26, how would you deal to the following situations:

(1) Rs. 23,00,000 paid by a manufacturing company to the legal advisor for defending the patent of
a product is treated as a capital expenditure.

(2) During the year 2023-24, a company spent Rs. 7,00,000 for publicity and research expenses on
one of its new consumer products which was marketed in the same accounting year but proved to
be a failure.

(3) A company spent Rs. 25,00,000 in the past three years to develop a product, these expenses
were charged to profit and loss account since they did not meet AS-26 criteria for capitalization. In
the current year approval of the concerned authority has been [Link] company wishes to
capitalize Rs. 25,00,000 by disclosing it as a prior period item.

(4) A company with a turnover of Rs. 200 crores and an annual advertising budget of Rs. 50,00,000
had taken up for the marketing of a new product by a company. It was estimated that the
company would have a turnover of Rs. 20 crore from the new product. The company had debited to
its Profit & Loss Account the total expenditure of Rs. 50,00,000 incurred on extensive special initial
advertisement campaign for the new product. (5 Marks)

2. From the following particulars furnished by the Prashant Ltd., prepare the Balance Sheet as at 31st
March, 2024 as required by Schedule III of the Companies Act, 2013: (14 Marks)

PARTICULARS DEBIT (Rs.) Credit (Rs.)

Equity share capital (face value of Rs. 10 each) 15,00,000
Calls-in-arrears 5,000
Land 5,50,000
Building 4,85,000
Plant & machinery 5,60,000
General reserve 2,70,000
Loan from State Financial Corporation 2,10,000
Inventories 3,15,000
Provision for taxation 72,000
Trade receivables 2,95,000
Short-term loans & advances 58,500
Profit & loss account 1,06,800
Cash in hand 37,300
Cash at bank 2,85,000
Unsecured loans 1,65,000
Trade payables 2,67,000
Total 25,90,800 25,90,800

©Hari Academy CA CS CMA Faculty: SUTHARSHAN S.H 9043971982

 The following additional information is also provided:

(1) 10,000 equity shares were issued for consideration other than cash.

(2) Trade receivables of Rs. 55,000 are due for more than six months.

(3) The cost of building and plant & machinery is Rs. 5,50,000 and Rs. 6,25,000 respectively.

(4) The loan from State Financial Corporation is secured by hypothecation of plant &
machinery. The balance of Rs. 2,10,000 in this account is inclusive of Rs. 10,000 for interest
accrued but not due.

(5) Balance at Bank included Rs. 15,000 with Aakash Bank Ltd., which is not a scheduled bank.

3. (a) Wow Ltd. agreed to takeover Wonder Ltd. on 1st April, 2024. The terms and conditions of
takeover were as follows: (4 Marks)

(i) Wow Ltd. issued 56,000 equity shares of Rs. 100 each at a premium of Rs. 15 per share to
the equity shareholders of Wonder Ltd.
(ii) Cash payment of Rs. 39,000 was made to equity shareholders of Wonder Ltd.
(iii) 24,000 fully paid preference shares of Rs. 50 each issued at par to discharge the preference
shareholders of Wonder Ltd.
(iv) The 8% Debentures of Wonder Ltd. (Rs. 78,000) converted into equivalent value of 9%
debentures in Wow Ltd.
(v) The actual cost of liquidation of Wonder Ltd. was Rs. 23,000. Liquidation cost is to be
reimbursed by Wow Ltd. to the extent of Rs. 15,000.

You are required to:

(1) Calculate the amount of purchase consideration as per the provisions of AS 14 and
(2) Pass Journal Entry relating to discharge of purchase consideration in books of Wow Ltd.

(b) Mukti Ltd. (a non-listed company) provide the following information as on 31.3.2023:

Particulars Amount (Rs.)

Land and Building 21,50,000
Plant & Machinery 15,00,000
Non-current Investment 2,00,000
Trade Receivables 5,50,000
Inventories 1,80,000
Cash and Cash Equivalents 40,000
Share capital:1,00,000 Equity Shares of Rs. 10 each fully paid up 10,00,000
Securities Premium 3,00,000
General Reserve 2,50,000
Profit & Loss Account (Surplus) 1,50,000
10% Debentures (Secured by floating charge on all assets) 20,00,000

©Hari Academy CA CS CMA Faculty: SUTHARSHAN S.H 9043971982

 Unsecured Loans 8,00,000
Tarde Payables 1,20,000

On 21st April, 2023 the Company announced the buy back of 15,000 of its equity shares @ Rs. 15
per share. For this purpose, it sold all its investment for Rs. 2.50 lakhs.

On 25th April, 2023, the company achieved the target of buy back. On 1 st May, 2023 the company
issued one fully paid up share of Rs. 10 each by ay of bonus for every eight equity shares held by
the equity shareholders.

You are required to pass necessary Journal Entries for the above transactions. (10 Marks)

4. Aqua Ltd. has authorized capital of Rs. 50 lakhs divided into 5,00,000 equity shares of Rs. 10 each.
Their books show the following ledger balances as on 31st March, 2023:

PARTICULARS Rs. PARTICULARS Rs.

Inventory 1.4.2022 6,65,000 Bank Current Account 20,000
Discounts & Rebates 30,000 (Dr. balance)
allowed Cash in hand 11,000
Carriage Inwards 57,500 Calls in Arrear @ Rs. 2 per 10,000
Purchases 12,32,500 share
Rate, Taxes and 55,000 Equity share capital 20,00,000
Insurance (2,00,000 shares of Rs. 10
Furniture & Fixtures 1,50,000 each)
Business Expenses 56,000 Trade Payables 2,40,500
Wages 14,79,000 Sales 36,17,000
Freehold Land 7,30,000 Rent (Cr.) 30,000
Plant & Machinery 7,50,000 Transfer fees received 6,500
Engineering Tools 1,50,000 Profit & Loss A/c (Cr.) 67,000
Trade Receivables 4,00,500 Repairs to Building 56,500
Advertisement Expenses 15,000 Bad debts 25,500
Commission &
Brokerage Expenses 67,500

The inventory (valued at cost or market value, which is lower) as on 31st March, 2023 was Rs.
7,05,000. Outstanding liabilities for wages Rs. 25,000 and business expenses Rs. 36,500. Charge
depreciation on written down values of Plant & Machinery @ 5%, Engineering Tools @ 20% and
Furniture & Fixtures @10%. Provide Rs. 25,000 as doubtful debts for trade receivables. Provide for
income tax @ 30%. It was decided to transfer Rs. 10,000 to reserves.
You are required to prepare a Statement of Profit & Loss for the year ended 31st March,
2023 and Balance Sheet as at that date. (14 Marks)

©Hari Academy CA CS CMA Faculty: SUTHARSHAN S.H 9043971982

5. (a) Exe Ltd. acquires 70% of equity shares of Zed Ltd. as on 31st March, 2024 at a cost of Rs.70
lakhs. The following information is available from the balance sheet of Zed Ltd. as on 31st March,
2024: (7 Marks)

Rs. (in lakhs)

Property, plant and equipment 120
Investments 55
Current Assets 70
Loans & Advances 15
15% Debentures 90
Current Liabilities 50

The following revaluations have been agreed upon (not included in the above figures):

Property, plant and equipment Up by 20%

Investments Down by 10%

Zed Ltd. declared and paid dividend @ 20% on its equity shares as on 31st March, 2024 (Face value
– Rs.10 per share). Exe Ltd. purchased the shares of Zed Ltd. @ Rs. 20 per share.

Calculate the amount of goodwill/capital reserve on acquisition of shares of Zed Ltd.

(b) Gamma Ltd. acquired 24,000 equity shares of Rs. 10 each, in Beta Ltd. on October 1, 2023
forRs. 4,60,200. The profit and loss account of Beta Ltd. showed a balance of Rs. 15,000 on April
1,2023. The plant and machinery of Beta Ltd. which stood in the books at Rs. 2,25,000 on April
1,2023 was considered worth Rs. 2,70,000 on the date of acquisition. The information of the two
companies as at 31-3-2024 was as follows:

Gamma Ltd. (Rs.) Beta Ltd. (Rs.)

Shares capital (fully paid equity shares 7,50,000 3,00,000
of Rs. 10 each)
General reserve 3,60,000 1,50,000
Profit and loss account 85,800 1,23,000
Current Liabilities 2,54,700 49,500
Land and building 2,70,000 2,85,000
Plant and machinery 3,60,000 2,02,500
Investments 4,60,200
Current assets 3,60,300 1,35,000

You are required to compute impact of revaluation of Plant and Machinery. (7 Marks)

©Hari Academy CA CS CMA Faculty: SUTHARSHAN S.H 9043971982

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

(Or)

What are the issues, with which Accounting Standards deal? (4 Marks)

(b) Following is the information of the Jammu branch of Best New Delhi for the year ending 31st
March, 2023 from the following:

(1) Goods are invoiced to the branch at cost plus 20%.

(2) The sale price is cost plus 50%.
(3) Other information: Rs.
Stock as on 01.04.2022(invoice price) 2,20,000
Goods sent during the year (invoice price) 11,00,000
Sales during the year 12,00,000
Expenses incurred at the branch 45,000

Ascertain
(i) the profit earned by the branch during the year.
(ii) branch stock reserve in respect of unrealized profit. (6 Marks)

(c) From the following information, calculate cash flow from operating activities: (4 Marks)

Summary of Cash Account for the year ended March 31, 2023
Rs. Particulars Rs.
Particulars
To Balance b/d 1,00,000 By Cash Purchases 1,20,000
To Cash sales 1,40,000 By Trade payables 1,57,000
To Trade receivables 1,75,000 By Office & Selling Expenses 75,000
To Trade Commission 50,000 By Income Tax 30,000
To Sale of Investment 30,000 By Investment 25,000
To Loan from Bank 1,00,000 By Repayment of Loan 75,000
To Interest & Dividend 1,000 By Interest on loan 10,000
By Balance c/d 1,04,000
5,96,000 5,96,000

©Hari Academy CA CS CMA Faculty: SUTHARSHAN S.H 9043971982