ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER EXAMINATION – SEPT/OCT.2015

B.COM – V SEMESTER

ACC 506: ADVANCED FINANCIAL ACCOUNTING (ACCOUNTS ELECTIVE)

Duration: 3 Hours Max. Marks:100

SECTION – A

Answer ALL the questions. Each carries 2 marks. (10×2=20)

Distinguish between Holding and Subsidiary Company.

What is Price Level Accounting? What does it achieve which conventional accounting fails to achieve?

Calculate EVA with the help of the following information of Hypothetical Limited:

NOPAT = Rs. 98 Lakhs

Capital Structure = Equity Capital Rs. 170 Lakhs; Reserves and Surplus Rs. 130 Lakhs and Debentures Rs. 400 Lakhs.

Cost of Equity = 17.5%

Income Tax Rate = 30%.

Give the meaning of Brand Valuation.

How are fictitious assets treated in the balance sheet of a subsidiary company?

What is social accounting?

State the four approaches to Price Level Accounting.

H Ltd. purchased from S Ltd. goods of the value of Rs. 50,000 on which S Ltd. has charged a profit of 25% on cost and goods worth Rs. 20,000 remained unsold at the end of the financial year. Calculate the unrealized profit and how it will be treated in the Consolidated Balance Sheet?

Explain the difference between Realized Holding Gain and Unrealized Holding Gain.

10.

Define Human Resource Accounting.

SECTION – B

II)

Answer any FOUR questions. Each carries 5 marks. (4×5=20)

11.

From the following information, ascertain the cost of sales and closing inventory under Current Purchasing Power Method if the organization follows: (1) FIFO system and (2) LIFO system.

Particulars	Historical Cost (Rs.)	General Price Index
Inventory on 31.12.2014	80,000	100
Purchases during 2015	6,20,000	110 (average for 2015)
Inventory on 31.12.2015	1,00,000	115

12.

“The most valuable capital is that which is invested in human beings”—In

the light of this statement, bring out the main benefits of Human Resource Accounting.

13.

A summary of Balance Sheet of Birman Dublin Company is given below:

(Amount in Rs.)

Cash and Accounts Receivables	10,00,000	Current Debts	6,00,000
Plant & Equipment (net of depreciation)	17,00,000	Long Term Debts	10,00,000
		Owners’ Capital	11,00,000
Total Assets	27,00,000	Total Liabilities	27,00,000

Additional Information:

The current price index is 280. The Plant and Equipment and Long Term Debts were acquired when the price index was at 140.

You are required to revise the summary balance sheet in term of current rupees. How will you treat the monetary gain or loss, if any?

14.

“Discharge of social responsibilities by a business unit is not something opposed to earning profits”—In this context discuss the various responsibilities of business towards the society.

15.

From the data below, calculate the gearing adjustment required under Current Cost Accounting Method:

Particulars	Opening (Rs. in 000’s)	Closing (Rs. in 000’s)
Convertible Debentures	200	240
Bank Overdraft	120	160
Cash	20	60
Paid up Share Capital	300	400
Reserves	100	160

Additional Information: (in 000’s)

Cost of Sales Adjustment = 40

Monetary Working Capital Adjustment = 30

Depreciation Adjustment = 10

Total = 80

16.

Discuss the advantages of Environmental Accounting.

SECTION – C

III)

Answer any THREE questions. Each carries 15 marks. (3×15=45)

17.

Following are the liabilities and assets of H Ltd. and its subsidiary S Ltd. as at 31^st March, 2015:

Liabilities	H Ltd.	S Ltd.	Assets	H Ltd.	S Ltd.
Equity Shares Fully paid of Rs. 10 each	6,00,000	2,00,000	Machinery	3,90,000	1,35,000
General Reserve	3,40,000	80,000	Furniture	80,000	40,000
Surplus A/c	1,00,000	60,000	80% Shares in S Ltd. at Cost	3,40,000	—-
Creditors	70,000	35,000	Stock	1,80,000	1,20,000
			Debtors	50,000	30,000
			Cash at Bank	70,000	50,000
	11,10,000	3,75,000		11,10,000	3,75,000

Additional Information:

a. Surplus A/c of S Ltd. stood at Rs. 30,000 on 1^st April, 2014 whereas General Reserve has remained unchanged since that date.

b. H Ltd. acquired 80% shares in S Ltd. on 1^st October, 2014 for Rs. 3,40,000 as mentioned above.

c. Included in Debtors of S Ltd. is a sum of Rs. 10,000 due from H Ltd. for goods sold at a profit of 25% on cost price. Till 31^st March, 2015 only one half of the goods had been sold while the remaining goods were lying in the godown of H Ltd. as on that date.

You are required to prepare Consolidated Balance Sheet as at 31^st March, 2015. Show all calculations clearly.

18.

Following figures for a period were called out from the books of Value for Value Corporation:

Particulars	Amount	Particulars	Amount
Sales	24,80,000	Advertisement	25,000
Purchase of Raw Materials	10,00,000	Salaries & Wages	6,30,000
Agent’s Commission	20,000	Postage & Telegrams	14,000
Consumable Stores	25,000	Contribution to Provident Fund	60,000
Packing Material	10,000	Director’s Sitting Fees & Travelling Expenses	40,000
Stationery	10,000	Subscriptions Paid	2,000
Audit Fees	4,000	Carriage	22,000
Staff Welfare Expenses	1,58,000	Interest to Loans taken	18,000
Insurance	26,000	Dividend to Shareholders	30,000
Rent, Rate & Taxes	16,000	Depreciation provided	55,000
Managing Director’s Remuneration	84,000	Income Tax provided	1,00,000
Travelling Expenses	21,000	Retained Earnings	1,25,000
Fuel & Oil	9,000	Opening Stock: Raw-Materials	85,000
Electricity	5,000	Finished Goods	2,00,000
Materials used in Repairs: Plant & Machinery	24,000	Closing Stock: Raw Materials	1,08,000
Buildings	10,000	Finished Goods	2,40,000

From the above you are required to prepare a Statement detailing the Source and Disposal of Added Value. Does your statement verify the assertion of the Chairman of the Company in the Annual General Meeting that 75% of Added Value is accounted by Employees’ Costs?

19.

The Balance Sheet of a trader as on 1.4.2014 and Income Statement for the year ending 31^st March, 2015 are given below:

Balance Sheet as on 1.4.2014

Liabilities	Amount	Assets	Amount
Capital	20,00,000	Fixed Assets	17,00,000
Creditors	7,50,000	Closing Stock	3,00,000
		Debtors	2,50,000
		Cash	5,00,000
	27,50,000		27,50,000

Income Statement for the year ending 31^st March, 2015 is below:

Particulars	Amount	Amount
Sales		50,00,000
Less:Cost of goods sold: Opening Stock	3,00,000
Add: Purchases	35,50,000
	38,50,000
Less: Closing Stock	3,50,000	35,00,000
Gross Profit		15,00,000
Less: Operating Expenses	8,20,000
Depreciation on Fixed Assets	2,45,000	10,65,000
Net Profit		4,35,000

Additional Information:

Debtors and Creditors balances remained constant throughout the year. The general price index was as follows:

On April 1, 2014 = 150

Average for the year = 160

On March 31, 2015 = 180

You are required to prepare the final accounts for the year ending 31^st March, 2015 after adjusting for price level changes under Current Purchasing Power Method.

20.

(a) Write short notes on Approaches for Valuation of Human Resources:

– Historical Cost Approach

– Replacement Cost Approach

– Opportunity Cost Approach

– Standard Cost Approach (8 marks)

(b) Explain in brief the various methods of measurement of social costs and benefits for accepting or rejecting a project. (7 marks)

21.

Following are the Balance Sheets and Profit and Loss A/c of a firm prepared on the basis of Historical Cost Accounting.

Balance Sheet as on 1.4.2014

Liabilities	Amount	Assets	Amount
Capital	10,00,000	Fixed Assets	10,00,000
Profit & Loss A/c	3,00,000	Inventory	4,00,000
Sundry Liabilities	5,00,000	Debtors	3,00,000
		Cash	1,00,000
	18,00,000		18,00,000

Balance Sheet as on 31.3.2015

Liabilities	Amount	Assets	Amount
Capital	10,00,000	Fixed Assets Less: Depreciation 10%	9,00,000
Profit & Loss A/c	3,00,000	Inventory	3,20,000
Sundry Liabilities	5,00,000	Debtors	4,00,000
		Cash	1,80,000
	18,00,000		18,00,000

Profit & Loss Account

For the year ending 31.3.2015

Particulars	Amount	Particulars	Amount
To Inventory (1.4.2014)	4,00,000	By Sales	30,00,000
To Purchases	23,20,000	By Inventory	3,20,000
To Depreciation	1,00,000
To Other Operating Expenses	3,00,000
To Net Profit	2,00,000
	33,20,000		33,20,000

Additional Information:

a. The current replacement cost of the goods sold on the dates sales were made amounting to Rs. 23,60,000.

b. On 1.4.2014, the replacement cost of the fixed assets was Rs. 12,00,000.

c. The current replacement cost of the inventory on 31.3.2015 is Rs. 3,50,000.

You are required to prepare Income Statement for the year ending 31^st March, 2015 and Balance Sheet as on that date on the basis of Current Cost Accounting. Show all necessary calculations.

SECTION – D

IV)

Case Study (1×15=15)

22.

Liabilities and Assets of Finite Ltd. and Infinite Ltd. as on 31^st March, 2015 are as follows:

Liabilities	Finite Ltd.	Infinite Ltd.	Assets	Finite Ltd.	Infinite Ltd.
Share Capital – Shares of Rs. 10 each	5,00,000	1,00,000	Assets	5,00,000	1,70,000
Reserves	80,000	30,000	8,000 shares in Infinite Ltd.	1,40,000	—
Surplus A/c	60,000	40,000
	6,40,000	1,70,000		6,40,000	1,70,000

Additional Information:

Infinite Ltd. had a credit balance of Rs. 30,000 in the Reserves when Finite Ltd. acquired shares in Infinite Ltd. Infinite Ltd. decided to make a bonus issue out of post-acquisition profits of two shares of Rs. 10 each fully paid for every five shares held. Calculate the cost of control before the issue of bonus shares and after the issue of bonus shares. Also prepare the Consolidated Balance Sheet after the issue of bonus shares.

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