Gurukripa's Guideline Answers to May 2015 Exam Questions CA Inter

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Gurukripa’s Guideline Answers for May 2015 CA Inter (IPC) Group I Accounting

Gurukripa’s Guideline Answers to May 2015 Exam Questions
CA Inter (IPC) Group I Accounting

Question No.1 is compulsory (4 X 5 = 20 Marks).
Answer any five questions from the remaining six questions (16 X 5 = 80 Marks). [Answer any 4 out of 5 in Q.7]
Working Notes should form part of the answer.
Wherever necessary, suitable assumptions should be made and indicated in answer by the Candidates.

Note: All Page References given are from Padhuka’s Ready Referencer on Accounting – For CA Inter (IPC)

Question 1(a): AS – 3 Cash Flow Statement 5 Marks
Prepare Cash Flow from Investing Activities of M/s Creative Furnishings Limited for the year ended 31.03.2015.
Particulars `
Plant acquired by the issue of 8% Debentures 1,56,000
Claim received for Loss of Plant in Fire 49,600
Unsecured Loans given to Subsidiaries 4,85,000
Interest on Loan received from Subsidiary Companies 82,500
Pre–Acquisition Dividend received on Investment made 62,400
Debenture Interest Paid 1,16,000
Term Loan repaid 4,25,000
Interest received on Investment (TDS of ` 8,200 was deducted on the above Interest) 68,000
Book Value of Plant sold (Loss incurred ` 9,600) 84,000

Solution: Similar to Illustrations in AS–3 Cash Flow Statement

Particulars `
CASH FLOW FROM INVESTING ACTIVITIES
Unsecured Loans given to subsidiary (4,85,000)
Interest on Loan received from Subsidiary Companies 82,500
Pre–Acquisition Dividend received on Investment 62,400
Interest Received on Investment (68,000 – TDS 8,200) 59,800
Proceeds on Sale of Plant (84,000 – 9,600) 74,400
NET CASH USED IN INVESTING ACTIVITIES (2,05,900)
Note:
1. Plant acquired by Issue of 8% Debentures will not be considered in CFS, as Cash is not involved. They are disclosed in
Notes to Accounts.
2. Claims received for Loss of Plant in Fire is an Extraordinary Item, shown under “Operating Activities”.
3. Debenture Interest paid will be shown under “Financing Activities”
4. Term Loan Repaid will be shown under “Financing Activities”.

Question 1(b): AS – 7 Construction Contract 5 Marks
A Construction Contractor has a Fixed Price Contract for ` 9,000 Lakhs to build a bridge in 3 years timeframe. A summary of
some of the financial data is as under:
Amount ` in Lakhs Year 1 Year 2 Year 3
Initial Amount for Revenue agreed in Contract 9,000 9,000 9,000
Variation in Revenue (+) – 200 200
Contracts Costs incurred up to the reporting date 2,093 (Note 1) 6,168 (Note 2) 8,100
Estimated Profit for the whole Contract 950 1,000 1,000
Note:
1. Includes ` 100 Lakhs for Standard Materials stored at the Site to be used in Year 3 to complete the work.
2. Excludes ` 100 Lakhs for Standard Material brought forward from Year 2.

May 2015.1
Gurukripa’s Guideline Answers for May 2015 CA Inter (IPC) Group I Accounting
The variation in Cost and Revenue in Year 2 has been approved by the customer.

Compute year–wise amount of Revenue, Expenses, Contract Cost to complete and Profit or Loss to be recognised in the
Statement of Profit or Loss as per AS–7.

Solution: Similar to Page No.B.5.17, Q.No.49

Basic Calculations: (in ` Lakhs)
Particulars As at Year 1 As at Year 2 As at Year 3
Contract Price 9,000 9,000 9,000
Variations (Increase) Nil 200 200
(a) Total Contract Revenue 9,000 9,200 9,200
(b) Estimated Profit for whole Contract (given) 950 1,000 1,000
(c) Total Contract Costs = (a) – (b) 8,050 8,200 8,200
(d) Costs till date 2,093 6,168 – 100 = 6,068 8,100 + 100 = 8,200
Cost TillDate `2,093 `6,068 `8,200
(e) % of Completion = = 26% = 74% =100%
TotalContract Costs `8,050 `8,200 `8,200

The Contract Revenues, Costs & Profits recognised in each of the 3 years are given below – (in ` Lakhs)
Upto reporting date Already recognised Recognised during
Year Particulars
in previous years current year
1 Contract Revenue 9,000 × 26% = 2,340 Nil 2,340
Contract Costs 2,093 Nil 2,093
Contract Profits 247 Nil 247

2 Contract Revenue 9,200 × 74% = 6,808 2,340 4,468
Contract Costs 6,068 2,093 3,975
Contract Profits 740 247 493

3 Contract Revenue 9,200 × 100% = 9,200 6,808 2,392
Contract Costs 8,200 6,068 2,132
Contract Profits 1,000 740 260

Question 1(c): AS–2 Inventory Valuation 5 Marks
Mr. Mehul gives the following information relating to items forming part of Inventory as on 31.03.2015. His Factory produces
Product X using Raw Material A.
1. 600 units of Raw Material A (purchased at ` 120). Replacement Cost of Raw Material A as on 31.03.2015 is ` 90 per unit.
2. 500 units of Partly Finished Goods in the process of producing X and Cost incurred till date ` 260 per unit. These units can
be finished next year by incurring Additional Cost of ` 60 per unit.
3. 1,500 units of Finished Product X and Total Cost incurred ` 320 per unit.

Expected Selling Price of Product X is ` 300 per unit.

Determine how each item of inventory will be valued on 31.03.2015. Calculate the Value of Total Inventory as on 31.03.2015.

Solution: Similar to Page No.B.2.16, Q.No.51 [P (A/c) – RTP]

Item Valuation Principle Result
Raw Material Since the Finished Product using this Raw Material is expectable be sold below
600× ` 90 = ` 54,000
cost, Raw Material may be valued of NRV, i.e. Replacement Cost of ` 90.
• Cost ` 260
WIP • Estimated NRV = Sale Price ` 300 – Cost to complete ` 60 = ` 240. 500×` 240 = ` 1,20,000
• Hence, valued at least of the above, i.e. ` 240 p.u.
Finished Cost ` 320 or Net Realisable Value ` 300, whichever is lower. Hence valued at
1,500×` 300= ` 4,50,000
Goods ` 300 p.u.
Total ` 6,24,000

May 2015.2
Gurukripa’s Guideline Answers for May 2015 CA Inter (IPC) Group I Accounting
Question 1(d): AS–6 Depreciation 5 Marks
M/s. Laghu Udyog Limited has been charging depreciation on an item of Plant and Machinery on Straight line basis. The
Machine was purchased on 01.04.2012 at ` 3,25,000. It is expected to have a total useful life of 5 years from the date of
purchase and Residual Value of ` 25,000. Calculate the Book Value of the Machine as on 01.04.2015 and the Total Depreciation
charged till 31.03.2014 under SLM. The Company wants to change the method of depreciation and charge depreciation at 20%
on WDV from 2014–15.
Is it valid to change the method of depreciation? Explain the treatment required to be done in the books of accounts in the
context of AS – 6.
Ascertain the amount of Depreciation to be charged for 2014–15 and the Net Book Value of Machine as on 31.03.2015 after
giving effect of the above change.

Solution: Similar to Page No.B.4.6, Q.No.22,23 [P (A/c) – M 03, N 03, N 05, N 10, M 10, N 11, N 12]

Particulars Under Existing Method (SLM) Under New Method (WDV)
Cost on 01.04.2012 3,25,000 3,25,000
(–) Depreciation for 2012–2013 1/5th × (3,25,000 – 25,000) = 60,000 20% × 3,25,000 = 65,000
WDV on 01.04.2013 2,65,000 2,60,000
(–) Depreciation for 2013–2014 60,000 20%× 2,60,000= 52,000
WDV on 01.04.2014 2,05,000 2,08,000

1. Book Value of Plant & Machinery on 01.04.2014 (using SLM Depreciation) = ` 2,05,000
2. Total Depreciation charged till 31.03.2014 under SLM = 60,000 × 2 = ` 1,20,000
3. Change in Method of Depreciation is permissible only for –
(a) Compliance with Statutory Requirement, or
(b) Compliance with an Accounting Standard, or
(c) Consideration that the change would result in a more appropriate preparation or presentation of the Financilal
Statements of the enterprise.
4. Disclosure: A change in the method of charging depreciation is treated as a change in accounting policy and its effect is
quantified and disclosed.
5. Treatment in 2014–2015:
(a) Debit Asset & Credit P & L, by ` 3,000 (` 2,08,000 – 2,05,000) [Excess Depreciation to be reversed]
(b) Charge Depreciation at 20% on ` 2,08,000 = ` 41,600 (WDV basis)
(c) Net Book Value of Machine on 31–03–2015 after the above = ` 2,08,000 – ` 41,600 = ` 1,66,400
(d) The Company has to disclose that due to change in method of depreciation, there is a reversal of excess
depreciation of ` 3,000 and the Asset Value increased by ` 3,000 and Profits increased by ` 3,000. Such change will
have effect in future years also.

Question 2: Amalgamation 16 Marks
The financial position of two Companies Abhay Ltd and Asha Ltd as on 31.03.2015 is as follows –

Balance Sheet as on 31.03.2015
Particulars Abhay Ltd Asha Ltd
Sources of Funds
Share Capital – Issued and Subscribed: 15,000 Equity Shares at ` 100, fully paid 15,00,000
10,000 Equity Shares at ` 100, fully paid 10,00,000
General Reserve 2,75,000 1,25,000
Profit & Loss 75,000 25,000
Securities Premium 1,50,000 50,000
Contingency Reserve 45,000 30,000
12% Debentures, at ` 100 fully paid – 2,50,000
Sundry Creditors 55,000 35,000
Total 21,00,000 15,15,000
May 2015.3
Gurukripa’s Guideline Answers for May 2015 CA Inter (IPC) Group I Accounting
Particulars Abhay Ltd Asha Ltd
Application of Funds
Land and Buildings 8,50,000 5,75,000
Plant and Machinery 3,45,000 2,25,000
Goodwill – 1,45,000
Inventory 4,20,000 2,40,000
Sundry Debtors 3,05,000 2,85,000
Bank 1,80,000 45,000
Total 21,00,000 15,15,000

They decided to merge and form a New Company Abhilasha Ltd. as on 01.04.2015 on the following terms:
1. Goodwill to be valued at 2 years purchase of the Super Profits. The Normal Rate of Return is 10% of the Combined Share
Capital and General Reserve. All Other Reserves are to be ignored for the purpose of Goodwill. Average Profits of Abhay
Ltd is ` 2,75,000 and Asha Ltd is ` 1,75,000.
2. Land and Buildings, Plant and Machinery and Inventory of both Companies to be valued at 10% above Book Value and a
Provision of 10% to be provided on Sundry Debtors.
3. 12% Debentures to be redeemed by the issue of 12% Preference Shares of Abhilasha Ltd (Face Value of ` 100) at a
Premium of 10%
4. Sundry Creditors to be taken over at Book Value. There is an Unrecorded Liability of ` 15,500 of Asha Ltd as on 01.04.2015.
5. The Bank Balance of both Companies to be taken over by Abhilasha Ltd after deducting Liquidation Expenses of ` 60,000
to be borne by Abhay Ltd and Asha Ltd in the ratio of 2:1.

You are required to:
1. Compute the basis on which Shares of Abhilasha Ltd. are to be issued to the Shareholders of the Existing Company
assuming that the Nominal Value per Share of Abhilasha Ltd is ` 100.
2. Draw the Balance Sheet of Abhilasha Ltd as on 01.04.2015 after the amalgamation.

Solution: Similar to Page No.A.11.19, Q.No.9, N 97

The given question is an Amalgamation in the nature of Purchase.
1. Computation of Goodwill and Purchase Consideration
Particulars Abhay Ltd Asha Ltd
(a) Average Net Profits (Given) 2,75,000 1,75,000
Less: Normal Profits (10% on Combined Share 10% of (15,00,000 + 10% of (10,00,000 + 1,25,000)
Capital & General Reserve) 2,75,000) = (1,77,500) = (1,12,500)
(b) Super Profits 97,500 62,500
(c) Goodwill at 2 years’ Purchase of Super Profits 1,95,000 1,25,000
Add: Other Assets:
Land and Building 8,50,000 + 10% = 9,35,000 5,75,000 + 10% = 6,32,500
Plant and Machinery 3,45,000 + 10% = 3,79,500 2,25,000 + 10% = 2,47,500
Inventories 4,20,000 + 10% = 4,62,000 2,40,000 + 10% = 2,64,000
Debtors 3,05,000 2,85,000
Bank 1,80,000 – 40,000 = 1,40,000 45,000 – 20,000 = 25,000
Total Assets including Goodwill (A) 24,16,500 15,79,000
Less: Creditors & other Current Liabilities Given = (55,000) 35,000 + 15,500 = (50,500)
Provision for Doubtful Debts 3,05,000 × 10% = (30,500) 2,85,000 × 10% = (28,500)
Debentures (See Note) – 2,50,000 × 110% = (2,75,000)
Total Liabilities (B) (85,500) (3,54,000)
(d) Net Assets taken over=Purchase
23,31,000 12,25,000
Consideration (A) – (B)
(e) Number of Shares in Selling Company 15,000 10,000
(f) Intrinsic Value per Share (i.e. Book Value) ` 155.40 ` 125
(g) No. of Shares to be issued by Abhilasha Ltd 155.4 122.50
15,000 × = 23,310 10,000 × = 12,250
(FV=` 100) 100 100

May 2015.4
Gurukripa’s Guideline Answers for May 2015 CA Inter (IPC) Group I Accounting
Note: Computation of Preference Shares to be issued on Redemption of 12% Debentures
• Amount Due to Debenture Holders = ` 2,50,000 × 110% = ` 2,75,000
• Preference Shares to be issued on Redemption =2,75,000 ÷100 = 2,750 Preference Shares at ` 100 each.
• It is assumed that the Debentures are redeemed at a Premium of 10%. Alternatively, it can be assumed that Preference
Shares are issued at a Premium of 10%, i.e. ` 110 per Share for settling ` 2,50,000.

2. Balance Sheet of Abhilasha Limited as at 31st March (after Takeover)
Particulars as at 31st March Note This Year Prev. Yr
I EQUITY AND LIABILITIES:
(1) Shareholders’ Funds: Share Capital 1 38,31,000
(2) Current Liabilities:
Trade Payables Creditors (55,000+50,500) 1,05,500
Total 39,36,500
II ASSETS
(1) Non–Current Assets
(a) Fixed Assets:(i) Tangible Assets – Land (9,35,000 + 6,32,500) 15,67,500
– Plant (3,79,500 + 2,47,500) 6,27,000
(ii) Intangible Assets (Goodwill) (1,95,000 + 1,25,000) 3,20,000
(2) Current Assets:
(a) Inventories (4,62,000 + 2,64,000) 7,26,000
(b) Trade Receivables (Net of Provision) (2,74,500 + 2,56,500) 5,31,000
(c) Cash and Cash Equivalents (1,40,000 + 25,000) 1,65,000
Total 39,36,500

Note 1: Share Capital
Particulars This Year Prev. Yr
Authorised: ……. Equity Shares of ` …. Each
……. Preference Shares of `….. Each
Issued, Subscribed & Paid up: (23,310 + 12,250) Equity Shares of ` 100 each 35,56,000
2,750 Preference Shares at ` 100 each 2,75,000
Note: Above 35,560 Equity Shares of ` 100 each and 2,750 Preference Shares of `100 each are
issued for non – cash consideration, in the scheme of takeover of Abhay Ltd & Asha Ltd.
Total 38,31,000

Question 3(a): Profits Prior to Incorporation 10 Marks
The Partners Kamal and Vimal decided to convert their existing Partnership Business into a Private Limited Company called
KV Trading Private Ltd with effect from 01.07.2014.

The same books of accounts were continued by the Company which closed its account for the first term on 31.03.2015.

The summarized Profit and Loss Account for the year ended 31.03.2015 is below:
Particulars ` in Lakhs ` in Lakhs
Turnover 240.00
Interest on Investments 6.00
Total Income 246.00
Less: Cost of Goods Sold 102.00
Advertisement 3.00
Sales Commission 6.00
Salary 18.00
Managing Directors Remuneration 6.00
Interest on Debentures 2.00
Rent 5.50
Bad Debts 1.00
Underwriting Commission 2.00
May 2015.5
Gurukripa’s Guideline Answers for May 2015 CA Inter (IPC) Group I Accounting
Particulars ` in Lakhs ` in Lakhs
Audit Fees 2.00
Loss on Sale of Investment 1.00
Depreciation 4.00 152.50
Net Profit 93.50
The following additional information was provided:
1. The Average Monthly Sales doubled from 01.07.2014. GP Ratio was constant.
2. All Investments were sold on 31.05.2014.
3. Average Monthly Salary doubled from 01.10.2014.
4. The Company occupied additional space from 01.07.2014 for which rent of ` 20,000 per month was incurred.
5. Bad Debts Recovered amounting to ` 50,000 for a sale made in 2012, has been deducted from Bad Debts mentioned above.
6. Audit Fees pertains to the Company.

Prepare a Statement apportioning the Expenses between Pre and Post Incorporation Periods and calculate the Profit/ Loss for
such periods. Also suggest how the Pre–Incorporation Profits are to be dealt with.

Solution: Similar to Page No.A.9.12, Q.No.10 [N 11]

1. Computation of Time Ratio and Sales Ratio
Particulars Pre Inc. Period Post Inc. Period Total
(a) No. of Months = Time Ratio 01.04.2014 to 31.06.2014 01.07.2014 to 31.03.2015
= 3 months = 9 months 3 : 9 = 1 : 3
(b) Sales per Month Ratio (given) Say ` 1 × 3 Months ` 2 × 9
Overall Sales Ratio = 3 = 18 3 : 18= 1 : 6
(c) Rent for Addnl Premises (from 1st July) – 20,000 × 9 Months=` 1,80,000
(d) Balance Rent (` 5,50,000 – ` 1,80,000)
` 92,500 ` 2,77,500
distributed in 1 : 3 (Time Ratio)
Total Rent Expense (c) + (d) ` 92,500 ` 4,57,500
(e) Salary Ratio Say ` 1×3 Months = 3 (` 1×3 Months + ` 2×6) = 15 3: 15 = 1: 5

2. Statement showing calculation of Profit / Losses for Pre and Post Incorporation Periods
Total Ratio Post
Particulars Pre Incorpn.
Incorpn.
Turnover (Apportioned in Sales Ratio) 2,40,00,000 1:6 34,28,571 2,05,71,429
Add: Apportionment of Other Income
Interest on Investments 6,00,000 6,00,000 –
Bad Debts Recovered 50,000 50,000 –
A. Total Income 2,46,50,000 40,78,571 2,05,71,429
B. Apportionment of Expenses
Cost of Goods Sold 102,00,000 1:6 14,57,143 87,42,857
Advertisement Expenses 3,00,000 1:6 42,857 2,57,143
Sales Commission 6,00,000 1:6 85,714 5,14,286
Salary 18,00,000 1:5 3,00,000 15,00,000
Managing Directors Remuneration 6,00,000 Post – 6,00,000
Interest on Debentures 2,00,000 Post – 2,00,000
Rent (Note 1d) 5,50,000 92,500 4,57,500
Bad Debts 1,50,000 1:6 21,429 1,28,571
Underwriting Commission 2,00,000 Post – 2,00,000
Audit Fees 2,00,000 Post – 2,00,000
Loss on Sale of Investment 1,00,000 Pre 1,00,000 –
Depreciation 4,00,000 1:3 1,00,000 3,00,000
Total Expenses 1,53,00,000 21,99,643 1,31,00,357
C. Profit (A – B) 93,50,000 18,78,928 74,71,072

May 2015.6
Gurukripa’s Guideline Answers for May 2015 CA Inter (IPC) Group I Accounting
3. Accounting Treatment: Pre–Incorporation Profit is transferred to Capital Reserve A/c. Alternatively, the amount may
be set off against the Goodwill, if any, arising on acquisition of business.

Question 3(b): Insurance Claims – Loss of Profits – Computation of Policy Amount 6 Marks
M/s. Platinum Jewellers wants to take up a “Loss of Profit Policy” for the Year 2015. The Extract of the Profit and Loss Account
of the previous year ended 31.12.2014 is provided below:
Variable Expenses: Cost of Materials 18,60,000
Fixed Expenses: Wages for Skilled Craftsmen 1,60,000
Salaries 2,80,000
Audit Fees 40,000
Rent 64,000
Bank Charges 18,000
Interest Income 44,000
Net Profit 6,72,000
Turnover is expected to grow by 25% next year.

To meet the growing Working Capital needs, the Partners have decided to avail Overdraft Facilities from their Bankers @ 12%
p.a. interest. The Average Daily Overdraft Balance will be around ` 2 Lakhs. The Wages for the Skilled Craftsmen will increase
by 20% and Salaries by 10% in the current year. All other expenses will remain the same.

Determine the amount of policy to be taken up for the current year by M/s. Platinum Jewellers.

Solution: Similar to Page No.A.5.16, Q.No.22 [N 01]

1. Trading and Profit and Loss Account for Previous Year
Particulars ` Particulars `
To Variable Expenses 18,60,000 By Sales (balancing figure) 30,50,000
To Fixed Expenses 5,62,000 By Miscellaneous Income 44,000
To Net Profit 6,72,000
Total 30,94,000 Total 30,94,000
Note: Total Fixed Expenses = `1,60,000 + `2,80,000 + `40,000 + `64,000 + `18,000 = ` 5,62,000

2. Computation of Insurance Policy to be taken
Particulars `
Gross Profit (Sales ` 30,50,000 Less Variable Expenses ` 18,60,000) 11,90,000
Add: Additional GP at 25% of above 2,97,500
Add: Increasing Standing Charges
Wages @ 20% of 1,60,000 32,000
Salaries @ 10% of 2,80,000 28,000
Interest on Overdraft @ 12% of 2,00,000 24,000 84,000
Policy to be taken for Current Year 15,71,500

Question 4: Financial Statements from Incomplete Records 16 Marks
The following is the Balance Sheet of M/s Care Traders as on 01.04.2014:
Sources of Funds Amt in ` Application of Funds Amt in `
Share Capital 10,00,000 Machinery 8,25,500
Profit and Loss 1,47,800 Furniture 1,28,700
Unsecured Loan at 10% 1,75,000 Inventory 1,72.000
Trade Payables 45,800 Trade receivables 2,29,600
Bank balance 12,800
Total 13,68,600 13,68,600
A fire broke out in the premises on 31.03.2015 and destroyed the Books of Account. The Accountant could however provide the
following information:

May 2015.7
Gurukripa’s Guideline Answers for May 2015 CA Inter (IPC) Group I Accounting
1. Sales for the year ended 31.03.2014 was ` 18,60,000. Sales for the current year was 20% higher than the last year.
2. 25% Sales were made in cash and the balance was on credit.
3. Gross Profit on Sales is 30%
4. Terms of Credit: Debtors– 2 Months, Creditors – 1 month. All Creditors are paid by Cheque and all Sales are collected in
Cheque.
5. The Bank Pass Book has the following details (other than payment to Creditors and collection from Debtors)
Machinery purchased 1,14,000 Repairs 36,500
Rent paid 1,32,000 Sales of Furniture 9,500
Advertisement Expenses 80,000 Cash withdrawn for Petty Expenses 28,300
Travelling Expenses 78,400 Interest paid on Unsecured Loan 8,750
6. Machinery was purchased on 01.10.2014.
7. Rent was paid for 11 months only and 25% of the Advertisement Expenses relates to the next year.
8. Travelling Expenses of ` 7,800 for which Cheques were issued but not presented in bank.
9. Furniture was sold on 01.04.2014 at a loss of ` 2,900 on Book Value.
10. Physical Verification as on 31.03.2015 ascertained the Stock Position at ` 1,81,000 and Petty Cash Balance at Nil.
11. There was no change in Unsecured Loans during the year.
12. Depreciation is to be provided at 10% on Machinery and 20% on Furniture.

Prepare Bank A/c, Trading and Profit & Loss A/c for the year ended 31.03.2015, in the books of M/s. Care Traders and a Balance
Sheet as on that date. Make necessary assumptions wherever necessary.

Solution: Similar to Page No.A.3.59 Q.No.36, [N 02] and other Illustrations in this Chapter

1. Computation of Gross Profit
Particulars Computation `
(a) Sales for Current Year 18,60,000 + 20% 22,32,000
(b) Cash Sales 22,32,000 × 25% 5,58,000
(c) Hence, Credit Sales = Total Sales (–) Cash Sales 22,32,000 – 5,58,000 16,74,000
(d) Gross Profit = Sales × 30% 22,32,000 × 30% 6,69,600

2. Trading Account for the year ended 31st March
Particulars ` Particulars `
To Opening Stock 1,72,000 By Sales (WN 1) 22,32,000
To Purchases (balancing figure) 15,71,400 By Closing Stock 1,81,000
To Gross Profit (30%) 6,69,600
Total 24,13,000 Total 24,13,000

3. Computation of Debtors – Closing Balance
No. of Months O/S 2
Closing Debtors = Credit Sales × = ` 16,74,000 × = ` 2,79,000
12 12

4. Sundry Debtors Account (To find out Collections from Debtors)
Particulars ` Particulars `
To balance b/d 2,29,600 By Bank – Collection (balancing figure) 16,24,600
To Credit Sales (WN 1) 16,74,000 By balance c/d (WN 3) 2,79,000
Total 19,03,600 Total 19,03,600

5. Computation of Creditors – Closing Balance
No. of Months O/S 1
Closing Creditors = Credit Purchases × = ` 15,71,400 × = ` 1,30,950
12 12
(Assumed that the entire Purchases is on Credit)

May 2015.8
Gurukripa’s Guideline Answers for May 2015 CA Inter (IPC) Group I Accounting
6. Sundry Creditors Account (To find out Payments to Creditors)
Particulars ` Particulars `
To Bank – Payment (balancing figure) 14,86,250 By balance b/d 45,800
To balance c/d (WN 5) 1,30,950 By Purchases – Credit (WN 2) 15,71,400
Total 16,17,200 Total 16,17,200

7. Machinery Account
Particulars ` Particulars `
To balance b/d 8,25,500 By Depreciation (8,25,500 × 10%)+(1,14,000 × 10% × 6/12) 88,250
To Bank 1,14,000 By balance c/d 8,51,250
Total 9,39,500 Total 9,39,500
Note: Alternatively, Depreciation can be assumed at 10% on Book Value irrespective of date of addition.

8. Furniture Account
Particulars ` Particulars `
To balance b/d 1,28,700 By Bank (Sale Proceeds) 9,500
By Loss on Sale 2,900
By Depreciation (1,16,300 × 20%) (Note) 23,260
By balance c/d 93,040
Total 1,28,700 Total 1,28,700
Note: Depreciation = 20% on (1,28,700 – 9,500 – 2,900) = 23,260

9. Bank Account
Particulars ` Particulars `
To Balance b/d 12,800 By Creditors (WN 6) 14,86,250
To Debtors – Collections received (WN 4) 16,24,600 By Machinery 1,14,000
To Cash Sales (WN 1) 5,58,000 By Rent 1,32,000
To Furniture 9,500 By Advertisement 80,000
By Repairs 36,500
By Travelling (78,400 + 7,800) (Cheque issued) 86,200
By Petty Expenses 28,300
By Interest 8,750
By balance c/d (balancing figure) 2,32,900
Total 22,04,900 Total 22,04,900

10. Profit & Loss Account for the year ended 31.03.2015
Particulars ` Particulars `
1,32,000
To Rent ( × 12) 1,44,000 By Gross Profit 6,69,600
11
To Advertisement (80,000 × 75%) 60,000
To Travelling Expenses 86,200
To Loss on Sale of Furniture 2,900
To Depreciation (88,250 + 23,260) 1,11,510
To Repairs 36,500
To Petty Expenses 28,300
To Interest (1,75,000 × 10%) 17,500
To Net Profit (balancing figure) 1,82,690
Total 6,69,600 Total 6,69,600
By Opening Balance b/d 1,47,800
To Closing Balance c/d 3,30,490 By Net Profits for the year as above 1,82,690
Total 3,30,490 Total 3,30,490

May 2015.9
Gurukripa’s Guideline Answers for May 2015 CA Inter (IPC) Group I Accounting
11. Balance Sheet as at 31stMarch
Capital and Liabilities ` Properties and Assets `
Capital 10,00,000 Non–Current Assets:
Profit & Loss Account 3,30,490 Machinery (WN 7) 8,51,250
Non – Current Liabilities: Unsecured Loan 1,75,000 Furniture (WN 8) 93,040
Current Liabilities: Current Assets:
Sundry Creditors (WN 5) 1,30,950 Inventory 1,81,000
Rent Payable 12,000 Sundry Debtors (WN 3) 2,79,000
Interest Payable (17,500 – 8,750) 8,750 Bank 2,32,900
Advertisement Exp. paid in advance 20,000
Total 16,57,190 Total 16,57,190

Question 5(a): Hire Purchase Accounting – Cash Price, Repossession, Ledger A/cs 8 Marks
Lucky bought 2 tractors from Happy on 01.10.2011 on the following terms:
Description `
Down Payment 5,00,000
1st Installment at the end of First Year 2,65,000
2nd Installment at the end of Second Year 2,45,000
3rd Installment at the end of Third Year 2,75,000
Interest is charged at 10% p.a
Lucky provides Depreciation @ 20% on the Diminishing Balances.
On 30.09.2014, Lucky failed to pay the 3rd Installment upon which Happy repossessed 1 Tractor. Happy agreed to leave one
tractor with Lucky and adjusted the value of the Tractor against the amount due. The Tractor taken over was valued on the
basis of 30% depreciation annually on written down basis. The balance amount remaining in the Vendor’s Account after the
above adjustment was paid by Lucky after 3 Months with Interest @ 18% p.a.

You are required to:
1. Calculate the Cash Price of the Tractors and the Interest paid with each installment.
2. Prepare Tractor Account and Happy Account in the books of Lucky assuming that books are closed on 30th September
every year. Figures may be rounded off to the nearest Rupee.

Solution: Similar to Page A.5.73 Q.No.2 [N 12], and Page A.5.80 Q.No.14 [M 90]

1. Statement of Cash Price of the Asset acquired on HP
End of Balance due after Instalment Cumulative Interest at 10%
Paid for Principal
Instalment Instalment Amount Amount p.a
(4) = (2) + 10
(1) (2) (3) (5) = (4) × (6) = (3) – (5)
(3) 110
3 Nil 2,75,000 2,75,000 25,000 2,50,000
2 2,50,000 2,45,000 4,95,000 45,000 2,00,000
1 4,50,000 2,65,000 7,15,000 65,000 2,00,000
0 6,50,000 5,00,000 11,50,000 NIL (Down Payment) 5,00,000
12,85,000 1,35,000 11,50,000
Thus, Cash Price of the Asset = ` 11,50,000.

2.Tractor A/c
Date Particulars ` Date Particulars `
01.10.11 To Bank A/c(Down Payment) 5,00,000 30.09.12 By Depreciation (11,50,000× 20%) 2,30,000
01.10.11 To Happy A/c 6,50,000 30.09.12 By balance c/d 9,20,000
Total 11,50,000 Total 11,50,000
01.10.12 To balance b/d 9,20,000 30.09.13 By Depreciation (9,20,000× 20%) 1,84,000
30.09.13 By balance c/d 7,36,000
Total 9,20,000 Total 9,20,000
May 2015.10