CA Inter Suggested Answers | September 24 Advanced Accounting

PART- A

Case Scenario-1:

Mr. Vikram took a loan of ₹ 6,00,000 carrying interest @ 10% p.a. on 1st August, 2023 to purchase raw material. He purchased 4000 units of raw material @125 per unit. Replacement cost of raw material as on 31st March, 2024 is 100 per unit. Labour charges and variable overheads incurred are 1,00,000 to produce 1000 units of finished goods.

1000 units of Finished goods are produced with raw material (for every unit of finished goods produced, 2 units of raw material are required). Net realizable value of finished good is ₹ 300 per unit. All the finished goods produced are lying in stock as on 31st March, 2024.

There is no opening stock of raw material and finished goods.

Mr. Vikram used 1500 units of raw material to construct an Asset (Qualifying Asset). Labour and other overhead charges incurred on construction of asset are ₹ 90,000. Mr. Vikram also paid ₹ 15,000 to install the asset at Factory premises.

Mr. Vikram used Balance of loan proceeds of ₹ 1,00,000 to invest in Equity Shares of P. Ltd. He purchased 9,000 Equity shares (Face Value ₹ 10 each) for ₹ 1,00,000 on 25th March, 2024.

The P. Ltd declared and paid dividend @ 20% on 30th March for previous year 2023-24.

Based on the information given in above Case Scenario, answer the following Question No. 1-4 :

1. What would be the value of closing stock of Raw Material X and Finished Goods as on 31st March 2024?

1. Closing Stock of Raw Material X ₹ 50,000 and closing stock of Finished Goods ₹ 3,50,000
2. Closing Stock of Raw Material X ₹ 50,000 and closing stock of Finished Goods ₹ 3,00,000
3. Closing Stock of Raw Material X ₹ 62,500 and closing stock of Finished Goods ₹ 3,50,000
4. Closing Stock of Raw Material X ₹ 62,500 and closing stock of Finished Goods ₹ 3,00,000

Answer : b

2. Cost of Self Constructed Asset as per AS 10 will be?

1. ₹ 2,92,500
2. ₹ 2,77,500
3. ₹ 3,05,000
4. ₹ 2,90,000

Answer : c

3. As per AS 16 what will be the amount of interest to be capitalized and amount of interest to be charged to Profit & Loss A/c ?

1. ₹ 12,500 interest to be capitalised and ₹ 27,500 interest to be charged to Profit & Loss A/c.
2. ₹ 12,500 interest to be capitalised and ₹ 20,833 interest to be charged to Profit & Dots A/c. 
3. ₹ 19,167 interest to be capitalised and ₹ 20,833 interest to be charged to Profit & Loss A/c.

4. Whole of ₹ 40,000 interest to be charged to Profit & Loss A/c.

Answer : a

4. What is the carrying amount of investment as on 31st March, 2024 as per AS 13 and suggest the treatment of dividend received from P. Ltd.?

1. Carrying amount of Investment as on 31st March, 2024 is ₹ 72,000 and the dividend is deducted from the nominal value of investment.
2. Carrying amount of Investment as on 31st March, 2024 is ₹ 90,000 and the dividend is credited to Profit & Loss A/c.
3. Carrying amount of Investment as on 31st March, 2024 is ₹ 1,00,000 and the dividend is credited to Profit & Loss A/c
4. Carrying amount of Investment as on 31st March, 2024 is ₹ 82,000 and the dividend is deducted from the cost of investment

Answer : d

 

Case Scenario-2

Kay Ltd. sold goods of ₹ 22,00,000 to Mr. Ravi Kumar on 1st Feburary, 2024 but at the request of the buyer, these goods were delivered on 10th April 2024.

Kay Ltd. also sold ₹ 2,00,000 goods on approval basis on 1st January, 2024 to Sheetal Enterprises. The period of approval is 3 months after which they were considered sold. Buyer sent disapproval for 25% of goods and approval for 50% of goods till 31st March, 2024.

Mr. Ravi Kumar has commenced legal action against Kay Ltd. for supply of faulty goods to claim damages. The lawyers of Kay Ltd. have advised that it is not remote yet that resources may be required to settle the claim. Legal cost to be incurred irrespective of the outcome of the case is ₹ 45,000. Settlement amount if the claim is required to be paid ₹ 5,00,000. 

Sheetal Enterprises, a trade receivable of Kay Ltd. suffered a heavy loss due to an earthquake that occurred on 30th March, 2024. The loss was not covered by any insurance policy. In April, 2024, Sheetal Enterprises became bankrupt. The Balance due from Sheetal Enterprises as on 31st March, 2024 is ₹ 75,000.

Kay Ltd. makes provision for doubtful debts @ 5%.

Based on the information given in above Case Scenario, answer the following Question No. 5-7 :

5. What is the amount to be recognized as Revenue as per AS 9 in the books of Kay Ltd. as on 31st March, 2024?

1. ₹ 23,50,000
2. ₹ 1,50,000
3. ₹ 23,00,000
4. ₹ 1,00,000

Answer : a

6. What will be the treatment of legal cost and claim for legal action commenced by Mr. Ravi Kumar in the Books of Kay Ltd.as on 31st March, 2024 as per AS 29?

1. Create a Provision for ₹ 5,45,000
2. Create a Provision for ₹ 5,00,000
3. Create a Provision for ₹ 45,000 and make a disclosure of contingent liability of ₹ 5,00,000
4. Make a disclosure of contingent liability of ₹ 5,45,000

Answer : c

7. What is the treatment of insolvency of Sheetal Enterprises in the Books of Kay Ltd. as on 31st March, 2024 as per AS 4?

1. An Adjusting Event, full provision of ₹ 75,000 should be made in the Final Accounts for the year ended 31st March, 2024.
2. An Adjusting Event, provision of ₹ 3,750 should be made in the Final Accounts for the year ended 31st March, 2024.
3. A Non-adjusting event, no provision is required to be made as Sheetal Enterprises became bankrupt in April, 2024.
4. A Non-adjusting event, only disclosure is required in the Final Accounts for the year ended 31st March, 2024.

Answer : a

8. P Ltd. has 60% voting right in Q Ltd. Q Ltd. has 20% voting right in R Ltd. Also, P Ltd. directly enjoys voting right of 14% in R Ltd. R Ltd. is a Listed Company and regularly supplies goods to P Ltd. The Management of R Ltd. has not disclosed its relationship with P Ltd. While preparing Financial Statements of P Ltd., which entities would you disclose as related parties with reference to AS-18?

1. Q Ltd.
2. R Ltd.
3. Q Ltd. and R Ltd.
4. Neither of Q Ltd. or R Ltd.

Answer : c

9. A Machinery was given on 3 years lease by a dealer of the machinery for equal annual lease rentano yield 20% profit margin on cost of the machinery, which is 3,00,000. Eonomic life of the machinery is 5 years, and estimated output from the machine in 5 years is as follows:

Year I	50,000 units
Year II	60,000 units
Year III	40,000 units
Year IV	65,000 units
Year V	85,000 units

Compute Annual Lease Rent.

1. ₹ 30,000
2. ₹ 60,000
3. ₹ 50,000
4. ₹ 36,000

Answer : b

10. A Ltd. had 1,50,000 shares of common stock outstanding on 1st April, 2023. Additional 50,000 shares were issued on 1st November, 2023 and 32,000 shares were bought back on 1st February, 2024. Calculate the weighted average number of shares outstanding at the year ended on 31st March, 2024 is :

1. 1,34,500 shares
2. 1,65,500 shares
3. 1,76,167 shares
4. 1,23,833 shares

Answer : b

Case Scenario-3

Jay Ltd. submits the following data extracted from the Final Accounts as on 31st March, 2023 :

	₹
Equity Share Capital 50,000 Equity shares of ₹ 10 each	5,00,000
Profit & Loss (Dr. balance)	(50,000)
9% Debentures	2,00,000
Loan from Bank	3,00,000
Advance given to suppliers of goods	45,000
Provision for tax	14,000
Plant & Machinery	4,50,000
Furniture & Fictures	85,000
Investment in Star Ltd. 10,000 equity shares of ₹ 10 each	1,25,000
Sundry Debtors	70,000
Cash & Bank Balance	65,500

Additional information given by Jay Ltd.:

On 31st March, 2023 Jay Ltd. decided to reconstruct the company for which necessary resolution was passed. Accordingly it was decided that:

1. 9% Debentures to be settled in full by issuing them 15,000 Equity shares of ₹ 10 each.
2. Equity shareholders will give up 40% of their capital in exchange for allotment of new 11% Debentures of ₹ 1,00,000.
3. Balance of Profit & Loss to be written off.
4. Equity shares issued for ₹ 1,00,000.

In addition to above, following information was also presented by Jay Ltd. on 1st April, 2023:

1. Interest is received on advances given to suppliers of goods ₹ 3,000.
2. Taxation liability is settled at ₹ 14,000.
3. A debtor of ₹ 40,000 is insolvent, only 40% of his dues are recovered from his estate.
4. Dividend is received on Investment in Star Ltd. ₹ 1 per equity share invested.
5. Part of Plant and Machinery is sold at a loss of ₹ 3,000 (book value ₹ 15,000)

Based on the information given in above Case Scenario, answer the following Question No. 11-14:

11. The amount of Cash Flow from operating activity is:

1. ₹ 2,000
2. ₹ 5,000
3. ₹ 12,000
4. ₹ 15,000

Answer : b

12. The amount of Cash Flow from investing Activity is :

1. ₹ 28,000
2. ₹ 25,000
3. ₹ 15,000
4. ₹ 22,000 

Answer : d

13. What is the amount of closing Cash and Cash equivalents as on 1st April, 2023?

1. ₹ 1,92,500
2. ₹ 92,500
3. ₹ 1,27,000
4. ₹ 1,98,5000

Answer : a

14. The Balance of Equity Share Capital after internal reconstruction is :

1. ₹ 6,50,000
2. ₹ 4,50,000
3. ₹ 5,50,000
4. ₹ 7,50,000

Answer : c

15. "Fixed Assets held for sale" will be classified in the Balanced Sheet as Schedule III of the4 Companies Act as:

1. Deferred Tax Assets
2. Current Assets
3. Non-Current Assets
4. Long term Investments 

Answer : b

 

PART - B

Question 1 (A)

In the following cases, record Journal Entries for amortization in the books of Huge Ltd, for the year ended 31st March, 2024 with reference to AS - 26.

(i) The company had acquired Patent Right for ₹ 340 lakhs on 01.04.2022. The estimated product life is 4 years. Amortization was decided in the ratio of estimated future cash flows which are as under : 

1st year	₹140 Lakhs
2nd year	₹350 Lakhs
3rd year	₹280 Lakhs
4th year	₹420 Lakhs

(ii) The company had developed know-how by incurring expenditure of ₹ 80 lakhs. The know-how has been used by the company since 01.04.2018. Its useful life is 8 years from the year of commencement of its use. The company has not amortised the assets untill 31.03.2024.

Answers :

(i)

	₹	₹
Amortization A/c Dr.	100  (lakhs)
To Patent-Rights A/c		100 (lakhs)
[Being amortization of 2nd year ( 340* 350/1190)]

(ii)

	₹	₹
Profit and Loss A/c (Prior period item) Dr.	50,00,000
Amortization A/c Dr.	10,00,000
To Know-how A/c∗		60,00,000
[Being amortization of 6 years (out of which amortization of 5 years charged as prior period item)]

 

Question 1 (B)

Pendora Ltd. has given the following details in respect of employee benefit pension plan :

Particulars	Amount (₹)
The fair value of plan assets as on 01-04-2023	5,00,000
The benefits paid out on 30-11-2023	63,000
Inward contributions received on 30-09-2023	1,42,000
The fair value of plan assets as on 31-03-2024	7,50,000

On 01.04.2023, the company made following estimates, based on its market studies and prevailing prices :

Particulars	%
Interest and dividend income (after tax) payable by fund	10.50
Realised gains on plan assets (after tax)	2.00
Fund administartive costs	-2.00
Expected rate of annual returns (Interest is compounded annually)	10.50

You are required to find the expected and actual returns on plan assets as on 31.03.2024 as per AS 15.

Answers :

Computation of Expected Returns on Plan Assets as on 31st March, 2024, as per AS 15

	₹
Return on opening value of plan assets of ₹ 5,00,000 (held for the year) @ 10.50% p.a.	52,500
Add: Return on Inward Contributions of ₹ 142,000 @ 10.50% p.a for 6 months .	7,455
Less: Return on Benefits paid out of ₹ 63,000 @ 10.50% p.a for 4 months	(2,205)
Expected return on plan assets as on 31st March, 2024	57,750

 

Computation of Actual Returns on Plan Assets as on 31st March, 2024, as per AS 15

	₹
Fair value of Plan Assets as on 31st March, 2024	7,50,000
Less: Fair value of Plan Assets as on 1st April, 2023	(5,00,000)
Less: Contribution received as on 30th September, 2023	(1,42,000)
Add: Benefits paid as on 30th November, 2023	63,000
Actual returns on Plan Assets as on 31st March, 2024	1,71,000

 

Question 1 (C)

Delta Ltd. is working on different projects those are likely to be completed within 3 years period. It recognizes revenue from these contracts on Percentage of Completion Method for Financial Statements for the years ending 2021, 2022 and 2023 for 34 Lakhs, 50 Lakhs and 65 Lakhs respectively.

However, for Income Tax purpose, it has adopted the Completed Contract Method under which it has recognized revenue of 30 Lakhs, 52 Lakhs and 67 Lakhs for the years ending 2021, 2022 and 2023 respectively.

Answers :

Delta Limited. 

Calculation of Deferred Tax Asset/Liability

Year	Accounting Income	Taxable Income	Timing Difference (balance)	Deferred Tax Liability (balance)
2020-2021	34,00,000	30,00,000	4,00,000	1,20,000
2021-2022	50,00,000	52,00,000	2,00,000	60,000
2022-2023	65,00,000	67,00,000	NIL	NIL
	1,49,00,000	1,49,00,000

 

Question 2

The following is the Trial Balance of  Ltd. as on 31st March, 2024

Particulars	Dr. (₹ 000)	Particulars	Cr. (₹ 000)
Land at Cost	148	Equity Share of ₹ 10 each	200
Plant and Machinery at Cost	520	10% Debeture of ₹ 100 each	135
Debtors	65	General Reserve	90
Closing Stock	58	Profit & Loss A/c	48
Bank	14	Security Premium	27
Adjusted Purchases	226	Sales	473
Factory Expenses	40	Creditors	35
Administartion Expenses	22	Provision for Depriciation	116
SElling Expenses	20	Suspense A/c	3
Debentures Intrest	14
Total	1,127	Total	1,127

Additional Information: 

On 31st March, The Company issues Bonus Shares to the Shareholders on 1:2 basis (one equity issued as bonus for every 2 equity shares held). No entry relating to this has yet been made 

The Authorized Share Capital of the company is 35,000 Equity Shares if 10 each.

The Company, on the advice of an independent valuer, revalued the Land at ₹2,45,000.

The Debtors declared a Dividend of 1% on 5th April, 2024 and also transferred profit @ 10% to General Reserve.

Suspense Account of ₹3,000 represents cash received for the Sale of some Machinery on the 1st day of the financial year 2023-24. Cost of this Machinery was ₹10,000  and Accumulated Depriciation thereon being ₹8,000.

Depreciation is to be provided on Plant & Machinery at 10% in Cost.

Provisions for Income Tax is required @30% 

You are required to prepare Shivam's Ltd's Profit and Loss A/c for the year ended 31st, 2024 and Balance sheet as at bthe date as per the provisions of the company Act, 2013 after considering the above information. Ignore previous year figures.

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Question 3 (A)

On the basis of the following data, prepare Cash Flow Statement as per AS- 3 for the year ended 31^st march, 2024:

• Total Sales for the year were ₹  380 lakhs out of which Cash Sales amounted to ₹ 262 lakhs.
• Receipts from the credit customers during the year, total ₹ 134 lakhs
• Total purchase for the year amounted to ₹ 220 out of which 80% were credit purchases.
• Opening balance in creditors ₹ 84 lakhs and Closing balance in creditors ₹ 92 lakhs.
• Suppliers of other consumables and services were paid ₹ 19 lakhs in cash.
• Employees of the enterprise were paid ₹ 20 lakhs in cash.
• Fully-paid preference shares of the face value of ₹ 32 lakhs were redeemed.
• Issued equity shares of the face value of ₹ 20 lakhs at a premium of 20%.
• Debenture of ₹ 20 lakhs at premium of 10% were redeemed by issuing equity shares in lieu of their claims.
• ₹ 26 lakhs were paid by way of Income Tax.
• A new machinery costing ₹ 20 lakhs was purchased in a part exchange of an old machinery. The book value of the old machinery was 13 lakhs, but the vendor agreed to take over the old machinery at a higher value of 15 lakhs. The balance due to vendor was paid in cash.
• Dividend ₹15 laks (including dividend distribution tax of ₹2.7 lakhs) was also paid on 30^th March, 2024
• Debentures interest ₹3 Lakhs was paid
• During the year ₹ 8 lakhs rent was received from property held as investment.
• ₹0.50 lakh interest was earned on the advance payments to suppliers of Goods.
• Cash and cash equivalents on 1^st April 2023, ₹2 lakhs

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Question 3 (B)

Aerodots Ltd. has the Capital Structure as on 31.03.2024:

Particulars	Amount(in thousands)
Equity Share Capital (shares of 10 each)	600
Reserves:
General Reserve	540
Securities Premium	200
Profit & Loss	100
Revaluation Reserve	30
Investment Allowance Reserve (Statutory Reserve)	75
Infrastructure Development Reserve	25
Loan Funds	2000

On 1 April, 2024 the company wants to buy back 14,000 equity shares of ₹ 10 each at ₹ 30 per Equity share.

You are required to calculate maximum permissible number of equity shares that can be bought back.

Buy Back of shares is duly authorized by its articles and necessary resolution has been passed by the company.

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Question 4

The following are the summarized Balance Sheet of Well Ltd. and Nice Ltd. as on 31st March, 2024:

		Particulars	Notes	Nice Ltd. (₹ 000)	WellLtd. (₹ 000)
		Equity and Liablitity
1		Sharesholder's Funds
	a	Share capital	1	41,000	14,300
	b	Reserves and surplus	2	19,500	(7,350)
2		Non-current liabilities
	a	Long-term borrowings	3	20,500	5,425
3		Current Liabilities
	a	Trade Payables		15,740	4,850
	b	Short-term Borrowings		-	1,975
		Total		96,740	19,200
		Assets
1		Non-current assets
	a	Property plant and equipments	4	62,550	16,380
	b	Non-current Investments		22,500	-
2		Current assets
	a	Inventories		300	870
	b	Trade Receivables		6,590	1,950
	c	Cash and Cash equivalents		4,800	-
		Total		96,740	19,200

Notes to Accounts

		Nice Ltd. (₹ 000)	WellLtd. (₹ 000)
	Share Capital
1	Equity Sahre Capital
	issued, subscribed and paid up capital
	Equity Sahres of ₹100 each	31,500	12,500
	Preference Share Capital
	issued, subscribed and paid up capital
	9% Preference Shares of ₹100 each	9,500
	10% Preference Shares of ₹100 each		1,800
	Total	41,000	14,300
2	Reserves and Surplus
	Balance od Profit and Loss A/c	19,500	(7,350)
3	Long- term borrowings
	9% Debentures Shares of ₹100 each	11,200
	10% Debentures Shares of ₹100 each		900
	Loan from Banks	9,300	4,525
	Total	20,500	4,525

Dtails of Teade receivables and Trade payables are as under

		Nice Ltd. (₹ 000)	WellLtd. (₹ 000)
1	Trade receivables
	Debtors	6,200	1,800
	Bills receivables	390	150
		6,590	1,950
2	trade payables
	Creditors	14,750	4,400
	Bills Payables	990	450
		15,740	4,850

On 31.03.2024, Nice Ltd. absorbs the business of Well Ltd. on the following terms:

For the five equity shares held by the ewuity shareholders of Well Ltd., they receive three equity shares of Nice Ltd. issued at a premium of ₹20 per share.

The 10% debenture-holders of Well Ltd. were to be alloted such 9% debentures in Nice Ltd. as would bring the same amount of interest. 

10% Preference Shareholders Shares at par Nice Ltd.

Banks aggred to waive off the loan of ₹270 thousands of Well Ltd.

Expenses od Liquidation of Well Ltd. are to be reimnursed y Nice Ltd. ₹55 thousands.

Inventory of Nice Ltd. is taken over at 10% more than their book value by Nice Ltd. 

Debtors odf Nice Ltd. include ₹215 thousand receivables from Well Ltd. 

Property, Plant, and Equipment of Well Lts. are revalued at 20% above their book value.

The remaining Assets and Liabilities of Well Lts. are taken over at the book value by Nice Ltd. 

You are required to : 

Record Journal Entries in the books of Nice Ltd.

Prepare Balance Sheet of Nice Ltd. after absorption as at 31st March, 2024

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Question 5

On 1st February, 2024, Best Ltd. acquired 80% Equity shares of Cool Ltd. for ₹14,80,000.

On 31st March, 2024, Best Ltd. also acquired 25% Equity shares of Good Ltd. for ₹3,80,000.

The following are the balances extracted from the books of Best Ltd. , Cool Ltd. and Good Ltd. as on 31st March, 2024

Particulars	Best Ltd. Amount in ₹	Cool Ltd. Amount in ₹	Good Ltd. Amount in ₹
Equity Shares of ₹100 each fully paid	30,00,000	20,00,000	10,00,000
Securities Premium	-	2,20,000	-
9% Debentures	6,30,000	-	2,40,000
General Reserve	2,69,000	84,000	1,20,000
Profit & Loss A/c	3,26,000	2,70,000	50,000
Investments	17,50,000	6,10,000	-
Property, Plant and Equipment	18,90,000	18,14,000	12,10,000
Current Assets	9,65,000	5,60,000	2,25,000
Trade Payable (Including Bills Payable)	3,80,000	4,10,000	25,000
Sales and other Incomes	56,00,000	38,00,000	27,00,000
Raw material consumed	36,50,000	31,20,000	22,30,000
Wages and Salaries	5,07,000	4,01,000	2,69,000
Production Expenses	1,35,000	1,06,000	98,000

Additional information: 

The Profit and Loss A/c of Cool Ltd> showed a credit balance of ₹ 30,000 on 1st April, 2023.

The General Reserve balance is brought forward from the previous year.

On 31st March, 2024, all the bills payables in Cool Ltd.'s balance sheet were acceptances in favour of Best Ltd. However, on the date, Best Ltd. held only ₹ 3,00,000 of these acceptances in hand, the rest having been endrosed in favour of its creditors. 

Best Ltd. purchased goods costing ₹ 5,00,000 from Cool Ltd. on 1st June, 2023 at a price of ₹6,50,000 The entire goods remain unsold with Best Ltd. at the end of the financial year. 

Best Ltd. is preparing Consolidated Financial Statements for thr year ending 31.03.2024.

You are required to calculated :

(1) Trade Payable (Consolidated)

(2) Current Asstes(Consolidated)

(3) Minority Intrest

(4) Goodwill/Capital Reserve on the acquisition of Cool Ltd.'s shares

(5) Goodwill/Capital Reserve on the acquisition of Good Ltd.'s shares

(6) Profit & Loss A/c (Consolidated)

(7) Genaral Reserve (Consolidated)

(8) Revenue from Opeartions (consolidated)

(9) Cost of material purchased/consumed (Consolidated)

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Question 6 (A)

A 01.04.2021, M. Day has 25,000 shares of Square Ltd. at a book value of ₹ 25 per share (nominal value of ₹10 each) . Feration information is as under:

(i) 31st July 2023, the Directors of Squares Ltd. issued equity bonus share for every five shares held by the shareholders.

(ii) On 30th September 2023, the Directors of Squares Ltd, announced a right issue which entitled the holders to subscribe three shares for every two shares at 20 per share. Shareholders can transfer their rights in full or in part.

Mr. Day sold 1/4th of entitlement to Dhwani for a consideration of ₹5 per share and subscribed the rest on 5th October, 2023.

You are required to prepare Investment A/c in the books of Mr. Day for the year ending 31.03.2024.

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OR

 

Question 6 (A)

"In determining the cost of inventories, it is appropriate to exclude certain costs and recognise them as expenses in the period in which they are incurred."

Provide examples of such costs as per AS 2 (Revised) 'Valuation of Inventories.'

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Question 6 (B)

The following scheme of reconstruction has been approved for Equity shareholders and Debenture holders of TP Ltd.

(i) The Equity shareholders to receive in lieu of their present holding of 1,50,000 shares of ₹ 10 each, the following:

1. For ₹ 50,000, equivalent cash
2. For ₹ 9,00,000, 10% debentures issued at premium of 20% (Face value of debenture is ₹100 each)
3. For balance ₹ 5,50,000, Equity shareholders agreed to accept 50,000 equity shares of  ₹10 each in full settlement.

(ii) 8% Debenture ₹ 5,00,000.

Debenture holders agreed to accept Freehold property (Book value ₹ 3,50,000) at a valuation of ₹ 4,45,000 in full settlement of their claim. Pass necessary Journal Entries in the Books of TP Ltd. for the above reconstruction. Narration for Journal entries is not required to be given.

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Question 6 (C)

Following is the information of Kullu Branch of M/s Best Enterprises of Shimla for the year ending 31st March 2023:

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

(2) Branch sold goods at invoice price plus 25%.

(3) Other Information is as follows:

1. Stock (at cost price) as on 1st April, 2022 is ₹ 2,25,000
2. Goods sent by Head office to branch during the year ( at cost price) are ₹ 14,85,000
3. Goods returned by Branch to Head office during the year ( Invoice price) are ₹ 75,000
4. Sales by the branch during the year ₹ 19,50,000
5. Expenses incurred at Branch ₹ 56,000.

You are required to ascertain the following:-

1. Profit earned by the Branch by Preparing Trading and profit and loss account for the year ended 31st March 2023
2. Also find the stock reserve on Closing stock

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