Roll No………

Total No. of Questions— 6] [Total No. of Printed Pages—7

Time Allowed : 3 Hours Maximum Marks : 100

Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a
candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued.
Answer all Questions
Working notes should form part of the answer.
Wherever applicable, suitable assumptions should be made by the candidate.
Marks

1. On 31st March, 2004 Bee Ltd. became the holding company of Cee Ltd. and Dee Ltd. by acquiring 450 lakhs fully paid 16 (0)
shares in Cee Ltd. for Rs. 6,750 lakhs and Rs. 240 lakhs fully paid shares in Dee Ltd. for Rs. 2,160 lakhs. On that
date, Cee Ltd. showed a balance of Rs. 2,550 lakhs in General Reserve and a credit balance of Rs. 900 lakhs in Profit
and Loss Account. On the same date, Dee Ltd. showed a debit balance of Rs. 360 lakhs in Profit and Loss Account
while the Preliminary Expenses Account showed a balance of Rs. 30 lakhs.
After one year, on 31st March, 2005 the Balance Sheets of three companies stood as follows :

(All amounts in lakhs of Rupees)

Liabilities Bee Cee Dee
Fully paid equity shares of Rs. 10 Ltd. Ltd. Ltd.
each 27,000 7,500 3,000
General Reserve 33,000 3,150 —
Profit and Loss Account 9,000 1,200 750
15 lakh fully paid 9.5%
Debentures of Rs. 100 each — — 1,500
Loan from Cee Ltd. — — 75
Bills Payable — — 150
Sundry Creditors 14,100 2,700 930
83,100 14,550 6,405
(All amounts in lakhs of Rupees)
Assets 39,000 7,500 2,100
Machinery 6,000 1,500 600
Furniture and Pictures
Investments : 6,750 — —
450 lakhs shares in Cee Ltd. 2,160 — —
240 lakhs shares in Dee Ltd. 294 — —
3 lakhs debentures in Dee 16,500 3,000 1,500
Ltd. 9,000 1,350 1,290
stocks 3,201 1,050 900
Sundry Debtors — 90 —
Cash and Bank balances 195 60 —
Loan to Dee Ltd. — — 15
Bills Receivable
Preliminary Expanses 83,100 14,550 6,405

The following points relating to the above mentioned Balance Sheets are to be noted :

(i) All the bills payable appearing in Dee Ltd.’s Balance Sheet were accepted in
favour of Cee Ltd. out of which bills amounting to Rs. 75 lakh were
endorsed by Cee Ltd. in favour of Bee Ltd. and bills amounting to Rs. 45
lakh had been discount by Cee Ltd. With its bank.
(ii) On 29th March, 2005 Dee Ltd. remitted Rs. 15 lakh by means of a cheque
to Cee Ltd. to return part of the loan; Cee Ltd. received the cheque only
after 31st March, 2005.
Stocks with Cee Ltd. includes goods purchased from the Ltd. for Rs.200
(iii)
lakhs. Bee Ltd. invoiced the goods at cost plus 25%.
(iv) In August, 2004 Cee Ltd. declared and distributed dividend @ 10% for the
year ended 31st March, 2004. Bee Ltd. credited the dividend received to its
Profit and Loss Account.
You are required to prepare a consolidated Balance Sheet of Bee Ltd. and its subsidiaries Cee. Ltd. and Dee Ltd. as at
31st March, 2005.
2. (a) On the basis of the following Profit and Loss Account of Zed Limited and the supplementary information provided 12 (0)
thereafter, prepare Gross Value Added statement of the company for the year ended 31st March, 2005. Also
prepare another statement showing reconcidation of Gross Value Added with Profit before Taxation.

Profit and Loss Account of Zed Limited for the year ended 31st March, 2005

Amount Amount
(Rs. in (Rs. in
lakhs) lakhs)
Income
Sales 5,010
Other Income 130
5,140
Expenditure
Production and operational 3,550
expenses 185
Administrative Expenses 235
Interest 370 4,340
Depreciation 800
profit before Taxation 280
Provision for Taxation 520
Profit after Taxation 40
Credit Balance as per last Balance
Sheet
560
Appropriations
Transfer to General Reserve 100
Preference Dividend (Interim)paid 50
Proposed Preference Dividend 50
(Final) 300
proposed Equity Dividend 60
Balance carried to Balance Sheet
560
supplementary Information
Production and Operational
Expenses consist of : 1,900
Raw Materials and Stores 610
consumed 220
Wages, Salaries and Bonus 820
Local Taxes including Cess
Other Manufacturing Expenses
3,550
Administrative Expenses
consist of :
Salaries and commission to 60
Directors 24
Audit Fee 20
Provision for Bad and Doubtful in 81
Debts
Other Administrative Expenses
185
Interest is on :
Loan from Bank for Working 35
Capital 200
Debentures
235
(b) The Institute for Global Management Research maintains a combined Development Fund respect of which the 8 (0)
following information is available for the year ended 31st March, 2005.

Rs.
Govt. Grants received for acquisition of land
60,00,000
Private Grants received for construction of
30,00,000
buildings
Foreign private Grant for purchase of computing
5,00,000
equipment :USD
Transfer from unrestricted fund for purchase of
10,00,000
furniture
cost of Assets so far acquired :
59,00,000
Land
15,00,000
Buildings in progress (payments to Contractors)
3,00,000
Furniture
The USD grant has been received into a bank account in USA on 29.3.05 and is expected to be utilised there from
for purchases to be made abroad. The rate of exchange on 31.3.05 is 1 USD = Rs. 44. You are required to
prepare

— A Statement showing changes in the Development Fund for the year, and

— Balance Sheet of the Development Fund as at 31.3.2005.

3. The following abridged Balance Sheet as at 31st March, 2005 pertains to Glorious Ltd. 16 (0)

Liabilities Rs. in Assets Rs. in

Share Capital : lakhs Goodwill, at cost lakhs
180 lakh Equity shares Other Fixed Assets 420
of Rs. 10 1,800 current Assets 11,166
each, fully paid up Loans and Advances 2,910
90 lakh Equity shares 720 Miscellaneous 933
of Rs. 10 Expenditure 171
each, Rs. 8 paid up
150 lakh Equity shares 750
of Rs. 5 5,628
each, fully paid–up 4,500
Reserves and Surplus 1,242
Secured Loans 960
current Liabilities
Provisions
15,600 15,600
You are required to calculate the following for each one of three categories of equity shares appearing in the above
mentioned Balance Sheet :

intrinsie value on the basis of book values of Assets and Liabilities including
(i)
good will:
(ii) Value per share on the basis of dividend yield.
Normal rate of dividend in the concerned industry is 15%, whereas Glorious
Ltd. has been paying 20% dividend for the least four years and is expected
to maintain if in the nest few years; and
(iii) Value per share on the basis of EPS.
For the year ended 31st March, 2005 the company has earned Rs. 1,371
lakh as profit after tax, which can be considered to be normal for the
company.
Average EPS for a fully paid share of Rs. 10 of a Company in the same
industry in Rs. 2.
4. (a) Venus Ltd. has an asset, which is carried in the Balance sheet on 31–3–2005 at Rs. 500 lakhs. As at that date the 6 (0)
value in use is Rs. 400 lakhs and the Net Selling price Rs. 375 lakhs.

From the above data :

(i) Calculate Impairment Loss.

(ii) Prepare Journal Entries for adjustment of impairment loss.
(iii) show, how impairment loss will be shown in the Balance Sheet.
(b) Himalya Ltd. in the past three years spent Rs. 75,00,000 to develop a Drug to treat Cancer, which was charged to 5 (0)
Profit and Loss Account since they did not meet AS–8 criteria for capitalisation. In the current year approval of the
concerned Govt. Authority has been received. The Company wishes to capitalise Rs. 75,00,000 and disclose it as
a prior period item. Is it correct? Give reason for you views.
(c) Bottom Ltd. entered into a sale deed for its immovable property before the end of the year. But registration was 5 (0)
done with registrar subsequent to Balance Sheet date. But before funalisation, is it possible to recovnise the sale
and the gain at the Balance Sheet date? Give your view with reasons.

5. (a) In view of the provisions of Accounting Standard 25 on interior. Financial Reporting. On what basis will you 5 (0)
calculate, for an interim period, the prevision in respect of defined benefit schemes like pension, gratuity etc. for
the employees?
(b) Briefly describe the significance of Environmental accounting. 5 (0)

(c) A Company has its share capital divided into shares of Rs. 10 each. On 1st April, 2004 it granted 10,000 6 (0)
employees stock options at Rs. 40, when the market price was Rs. 130. The options were to be exercised between
16th December, 2004 and 15th March, 2005. The employees excerised their options for 9,500 shares only; the
remaining options lapsed. The company closes its books on 31st March every year.
Show Journal Entries.
6. (a) While closing its books of account on 31st March, 2005 a Non–banking Finance Company has its advances 8+4+4 (0)
classified as follows :
Rs. in
lakhs
Standard assets 16,900
Sub standard assets 1,340
Secured positions of doubtful
debts: 320
— upto one year 90
— one year to three years 30
— more than three years 97
Unsecured portions of 48
doubtful debts
Loss assets
Calculate the amount of provisions, which must be made against the Advances.
(b) In May 2004 Speed Ltd. took a bank loan to be used specifically for the construction of a new factory building. (0)
The construction was completed in January, 2005 and the building was put to its use immediately thereafter.
Interest on the actual amount used for construction of the building till its completion was Rs. 18 lakh, whereas
the total interest payable to the bank on the loan for the period till 31st March, 2005 amounted to 25 lakh.

Can Rs. 25 lakh be treated as part of the cost of factory building and thus be capitalised on the plea that the loan
was specifically taken for the construction of factory building?
(c) Distinguish between "Timing differences" and "Permanent differences" referred to in AS–22 on accounting for (0)
Taxes, giving 2 examples of each.