SUNDAY TEST 1

Question 1: A Ltd. has the following Capital Structure as at 31.03.2013. : PARTICULARS Equity Share Capital (Fully paid up shares of Rs.10 each) 15% Preference Share Capital (Fully paid shares of Rs.10 each) 15% Debentures (Fully paid of Rs.100 each) Retained Earnings AMOUNTS Rs.300 lac Rs.100 lac Rs.800 lac Rs.300 lac Rs.1500 lac

Additional Information: Currently quoted price in the stock exchange : Equity Shares @ Rs.60 , Preference Shares @ Rs.90. Required: Calculate the MVA and interpret it. [ 5 Marks ] Question 2: Raw Material Inventory of a company includes certain material purchased at Rs.100 per kg. The price of the material is on decline and the replacement of the inventory at the year-end is Rs.75 per kg. It is possible to convert the material into finished product at conversion cost of Rs.125. Decide whether to make the product or not to make the product if selling price is (i) Rs.175 and (ii) Rs.225. Also find out the value of inventory in each case. [ 5 Marks ] Question 3: Which of the following events should be taken into account while finalizing (30th September , 2012) the annual accounts for the year ended 31st March , 2012 : a) The wages of the employees are revised retrospectively from January 1 , 2012 vide agreement with the trade union signed on August 1 , 2012. b) One of the several factories destroyed by fire on July 28 , 2012.

Page -1 of 6

c) A debtor against whom insolvency proceedings were proceedings were instituted prior to March 2012. d) The factory of the entrepreneur is permanently sealed under Supreme Court order since it was polluting industry on September 20 , 2012. e) A theft of cash of Rs.1 crore by the cashier in January 2012 was detected on 17th May 2012. [ 5 Marks ] Question 4: Interest Cost should not be included to determine Cost Of Inventory. Comment. [ 5 Marks ] Question 5: The data given below relates to companies X Ltd. and Y Ltd. Particulars Expected Dividend Current MPS Expected MPS after 1 year (Optimistic) Expected MPS after 1 year (Pessimistic) X Ltd. 5 60 100 50 Y Ltd. 8 120 175 100 31, 2012 is declared insolvent on July 21 ,

If an investors holding period is one year , which stock he should buy from the point of view of Holding Period Return assuming that the level of risk is same in both the stocks ? [ 5 Marks ] Question 6: An investor is considering investment in either security A or security B. State of Economy Boom Normal Recession Probability 0.2 0.6 0.2 Return of A 30% 20% 10% Return of B 10% 20% 30%

i) Which security should he invest ? ii) Calculate Risk and Return of portfolio consisting 60% of A and 40% of B.

Page -2 of 6

[ 5 Marks ] Question 6: What are the differences between Systematic Risk & Unsystematic Risks ? [ 5 Marks ] Question 7: From the following information determine Basic and Diluted EPS for 11 12 and 10 11. Net Profit for the year ended 31.03.2011. Net Profit for the year ended 31.03.2012. No. of Equity Shares as on 01.04.2011. Bonus Issue on 01.01.2012. No. of 12% Convertible Debentures of Rs.100 each issued on 01.01.2012. Conversion ratio of Debentures Tax rate 1,00,000 10 shares per Debentures 30% [ 5 Marks ] Question 8: A Limited has paid minimum alternative tax under Section 115JB of the Income Tax Act , 1961 for the year ended 31st March , 2012. The company wants to disclose the same as an asset since the company is eligible to claim credit for the same. Advise. [ 5 marks ] Question 9: You have Rs.5,00,000 to invest in a portfolio. Your choices are stock A where you invest Rs.1,40,000 , stock B where you invest Rs.1,60,000 and stock C and Risk Free security where you invest the balance. Given that beta of stock A is 0.9 , stock B is 1.2 , that of stock C is 1.6 and the overall beta is same as that of whole market. How much money will you invest in Risk Free Asset. [ 5 marks ] Question 10: A senior citizen has Rs.5,00,000 to invest. He wants to invest this amount in different securities. He wants that Beta of his portfolio should Rs.75,50,000 Rs.1,00,25,000 50,00,250 1 share for every 2 held

Page -3 of 6

be 0.90. He selected 5 securities having average Beta of 1.20. How can he weight his portfolio to reach target beta ? [ 5 marks ] Question 11: A company installed a plant at a cost of Rs.20 lakhs with estimated useful life of 10 years and decided to depreciate on SLM. In the fifth year , company decided to switch over from SLM to WDV. Compute the resultant surplus / deficiency , if any , and state how will you treat the same in accounts ? [ 5 Marks ] Question 12:

A company is engaged in the business of financial

services and in undergoing tight liquidity position , since most of the assets of the company are blocked in various claims / petitions in a special court. The company has accepted Inter-Corporate Deposits (ICD) and is making its best effort to settle the dues. There were claims at varied rates of interest from lenders from the due date of ICD to the date of repayment. The company has provided interest , as per the terms of the till the due date and a note for non-provision of interest from the due date to the date of repayment. On account of uncertainties existing regarding the determination of the amount and in the absence of any specific legal obligation at present as per the terms of the contract , the company considers that these claims are in the nature of Claim Against The Company Not Acknowledged As Debts and the same has been disclosed by way of note in the accounts instead of making a provision in the Statement of Profit and Loss. Comment on the correctness of the treatment for such claims as done by the company.
[ 5 Marks ]

Page -4 of 6

Question 13: Microtech Ltd. produces batteries for scooters , cars ,

trucks , and specialized batteries for invertors and UPS. How many segments should it have and why ?
[ 5 Marks ] Question 14: From the following data suggest accounting treatment w.r.t. the contract as per requirement of AS 7 :

Contract Price Cost incurred to date Estimated costs to complete

Rs.960 lakhs Rs.600 lakhs Rs.400 lakhs

[ 5 Marks ]

Question 15: ABC Ltd. sells agricultural products to dealers. One of

the condition of sale is that interest is payable at the rate of 2% p.m. for delayed payments. Percentage of interest recovery is only 10%on such overdue outstanding due to various reasons. During the year 12 13 the company wants to recognize the entire interest receivables. Do you agree ?
[ 5 Marks ] Question 16: On 1st April , 2009 , A Ltd. purchased a Fixed Asset for

Rs.125 lakhs for which it got Government Grant of Rs.36.90 lakhs. The Salvage Value at the end of useful life of 4 years estimated at Rs.51.20 lakhs. X Ltd. decides to treat the Grant as Deferred Income. Calculate the amount of Depreciation and Grant to be recognized every year in Profit & Loss Account during the useful life of the machinery if the company followed (a) SLM (b) WDV.
[ 5 Marks ] Question 17: Consider the following data :

Accounting Profit Profit as per Income Tax Act

Page -5 of 6

Rs.2,70,000 Rs.5,00,000

 Book Profit as per MAT Tax Rate MAT Rate

Rs.3,00,000 30% 20%

Pass the necessary journal entries relating to tax , as per requirement of AS 22.
[ 5 Marks ] Question 18: B Ltd. acquired a patent at a cost of Rs.80,00,000 for a

period of 5 years and the product life-cycle is also 5 years. The company capitalized the cost and started amortizing the asset at Rs.10,00,000p.a. After two years it was found that the product lifecycle may continue for another 5 years were expected to be Rs.36,00,000 the years.
[ 5 Marks ] Question 19:

Rs.46,00,000

Rs.44,00,000

Rs.40,00,000

and

Rs.34,00,000. Find out the amortization cost of the patent for each of

From the following information , determine carrying

amount of the asset at the end of each accounting year : Fixed Assets purchased on 01.04.09. for Rs.11 lakhs. Estimated Residual value Rs.1 lakh Useful Life = 5 years Recoverable Amount on 31.03.2010. = Rs.7 lakhs Recoverable Amount on 31.03.2012. = Rs.7 lakhs
[ 5 Marks ] Question 20:

A retail store has a policy of refunding purchases by

dissatisfied customers , even though it is under no legal obligation to do so. Its policy of refund is generally known. Analyze as per AS 29.
[ 5 Marks ]

Page -6 of 6