Advanced Accounting (Group I) Model Test Paper - 2 (Questions) - CA Intermediate PDF Download

 Page 1


MODEL TEST PAPER 2
INTERMEDIATE COURSE: GROUP - I 
PAPER – 1 : ADVANCED ACCOUNTING 
Time Allowed – 3 Hours Maximum Marks – 100 
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Case Scenario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
PART I – Case Scenario based MCQs (30 Marks) 
Part I is compulsory. 
Case Scenario 
1. Mars Ltd. is a manufacturing enterprise which is starting a new manufacturing
plant at X Village. It has commenced construction of the plant on April 1, 2023
and has incurred following expenses:
? It has acquired land for installing Plant for ` 50,00,000
? It incurred ` 35,00,000 for material and direct labour cost for developing the
Plant.
? The Company incurred ` 10,00,000 for head office expenses at New Delhi
which included rent, employee cost and maintenance expenditure.
? The Company borrowed ` 25,00,000 for construction work of Plant @12%
per annum on April 1, 2023.  Director finance of the Company incurred
travel and meeting expenses amounting to ` 5,00,000 during the year for
arranging this loan.
? On November 1, 2023, the construction activities of the plant were
interrupted as the local people alongwith the activists have raised issues
relating to environmental impact of plant being constructed. Due to agitation
the construction activities came to standstill for 3 months.
? With the help of Government and NGOs, the agitation was over by February
28, 2024 and the work resumed. However, to balance the impact on
environment, government ordered the company to install certain devices
for which the Company had to incur ` 6,00,000 in March 2024.
? The rate of depreciation on Plant is 10%.
Based on the above information, answer the following questions. 
(i) Which of the following expenses cannot be included in the cost of plant:
(a) Cost of Land
(b) Construction material and labour cost
(c) Head office expenses
(d) Borrowing cost
(ii) How much amount of borrowing cost can be capitalised with the plant:
(a) ` 300,000
14
Page 2


MODEL TEST PAPER 2
INTERMEDIATE COURSE: GROUP - I 
PAPER – 1 : ADVANCED ACCOUNTING 
Time Allowed – 3 Hours Maximum Marks – 100 
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Case Scenario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
PART I – Case Scenario based MCQs (30 Marks) 
Part I is compulsory. 
Case Scenario 
1. Mars Ltd. is a manufacturing enterprise which is starting a new manufacturing
plant at X Village. It has commenced construction of the plant on April 1, 2023
and has incurred following expenses:
? It has acquired land for installing Plant for ` 50,00,000
? It incurred ` 35,00,000 for material and direct labour cost for developing the
Plant.
? The Company incurred ` 10,00,000 for head office expenses at New Delhi
which included rent, employee cost and maintenance expenditure.
? The Company borrowed ` 25,00,000 for construction work of Plant @12%
per annum on April 1, 2023.  Director finance of the Company incurred
travel and meeting expenses amounting to ` 5,00,000 during the year for
arranging this loan.
? On November 1, 2023, the construction activities of the plant were
interrupted as the local people alongwith the activists have raised issues
relating to environmental impact of plant being constructed. Due to agitation
the construction activities came to standstill for 3 months.
? With the help of Government and NGOs, the agitation was over by February
28, 2024 and the work resumed. However, to balance the impact on
environment, government ordered the company to install certain devices
for which the Company had to incur ` 6,00,000 in March 2024.
? The rate of depreciation on Plant is 10%.
Based on the above information, answer the following questions. 
(i) Which of the following expenses cannot be included in the cost of plant:
(a) Cost of Land
(b) Construction material and labour cost
(c) Head office expenses
(d) Borrowing cost
(ii) How much amount of borrowing cost can be capitalised with the plant:
(a) ` 300,000
14
 
 (b) ` 2,00,000 
 (c) ` 7,00,000 
 (d) ` 6,00,000 
(iii) The total cost of plant as on march 31, 2024 will be: 
(a) ` 85,00,000 
(b) ` 98,00,000  
(c) ` 93,00,000 
(d) ` 95,00,000 
(iv) The amount of depreciation to be charged for the year end March 31, 
2024 
(a) ` 4,30,000 
(b) ` 9,30,000 
(c) ` 9,80,000 
(d) Nil 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
2.  Beloved Finance Ltd. is a financial enterprise which is in the business of 
lending loan to small businesses and earn interest on loans.  
• During the year the Company has lend 50 crores and earned ` 1.5 crore 
as interest on loans.  
• The Company had surplus funds during the year and invested then in 
Fixed Deposits with bank and earned interest on fixed deposits of ` 20 
lacs.  
• The Company also acquired a gold loan unit for ` 10 crore during the 
year and the Company provided interest free loan of ` 15 crore to its 
wholly-owned subsidiary. 
• The Company paid a total income tax of ` 75 lacs for the year.  
Based on the above information, answer the following questions. 
(i) In the Cash Flow Statement as per AS 3, the interest income of ` 1.5 
crore earned on earned on loans given by the Company will be disclosed 
as: 
(a) Cash Flow from Operating Activities  
(b) Cash Flow from Investing Activities 
(c)  Cash Flow from Financing Activities   
(d) Non-cash Items 
(ii) In the Cash Flow Statement as per AS 3, the interest income of ` 20 
Lacs earned fixed deposits with bank will be disclosed as: 
(a) Cash Flow from Operating Activities  
15
Page 3


MODEL TEST PAPER 2
INTERMEDIATE COURSE: GROUP - I 
PAPER – 1 : ADVANCED ACCOUNTING 
Time Allowed – 3 Hours Maximum Marks – 100 
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Case Scenario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
PART I – Case Scenario based MCQs (30 Marks) 
Part I is compulsory. 
Case Scenario 
1. Mars Ltd. is a manufacturing enterprise which is starting a new manufacturing
plant at X Village. It has commenced construction of the plant on April 1, 2023
and has incurred following expenses:
? It has acquired land for installing Plant for ` 50,00,000
? It incurred ` 35,00,000 for material and direct labour cost for developing the
Plant.
? The Company incurred ` 10,00,000 for head office expenses at New Delhi
which included rent, employee cost and maintenance expenditure.
? The Company borrowed ` 25,00,000 for construction work of Plant @12%
per annum on April 1, 2023.  Director finance of the Company incurred
travel and meeting expenses amounting to ` 5,00,000 during the year for
arranging this loan.
? On November 1, 2023, the construction activities of the plant were
interrupted as the local people alongwith the activists have raised issues
relating to environmental impact of plant being constructed. Due to agitation
the construction activities came to standstill for 3 months.
? With the help of Government and NGOs, the agitation was over by February
28, 2024 and the work resumed. However, to balance the impact on
environment, government ordered the company to install certain devices
for which the Company had to incur ` 6,00,000 in March 2024.
? The rate of depreciation on Plant is 10%.
Based on the above information, answer the following questions. 
(i) Which of the following expenses cannot be included in the cost of plant:
(a) Cost of Land
(b) Construction material and labour cost
(c) Head office expenses
(d) Borrowing cost
(ii) How much amount of borrowing cost can be capitalised with the plant:
(a) ` 300,000
14
 
 (b) ` 2,00,000 
 (c) ` 7,00,000 
 (d) ` 6,00,000 
(iii) The total cost of plant as on march 31, 2024 will be: 
(a) ` 85,00,000 
(b) ` 98,00,000  
(c) ` 93,00,000 
(d) ` 95,00,000 
(iv) The amount of depreciation to be charged for the year end March 31, 
2024 
(a) ` 4,30,000 
(b) ` 9,30,000 
(c) ` 9,80,000 
(d) Nil 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
2.  Beloved Finance Ltd. is a financial enterprise which is in the business of 
lending loan to small businesses and earn interest on loans.  
• During the year the Company has lend 50 crores and earned ` 1.5 crore 
as interest on loans.  
• The Company had surplus funds during the year and invested then in 
Fixed Deposits with bank and earned interest on fixed deposits of ` 20 
lacs.  
• The Company also acquired a gold loan unit for ` 10 crore during the 
year and the Company provided interest free loan of ` 15 crore to its 
wholly-owned subsidiary. 
• The Company paid a total income tax of ` 75 lacs for the year.  
Based on the above information, answer the following questions. 
(i) In the Cash Flow Statement as per AS 3, the interest income of ` 1.5 
crore earned on earned on loans given by the Company will be disclosed 
as: 
(a) Cash Flow from Operating Activities  
(b) Cash Flow from Investing Activities 
(c)  Cash Flow from Financing Activities   
(d) Non-cash Items 
(ii) In the Cash Flow Statement as per AS 3, the interest income of ` 20 
Lacs earned fixed deposits with bank will be disclosed as: 
(a) Cash Flow from Operating Activities  
15
(b) Cash Flow from Investing Activities 
(c)  Cash Flow from Financing Activities   
(d) Non-cash Items 
(iii) In the Cash Flow Statement as per AS 3, amount paid for acquiring gold 
loan unit will be disclosed as: 
(a) Cash Flow from Operating Activities  
(b) Cash Flow from Investing Activities 
(c)  Cash Flow from Financing Activities   
(d) Non-cash Items 
(iv) In the Cash Flow Statement as per AS 3, total income tax of ` 75 lacs 
paid for the year will be disclosed as: 
(a) Cash Flow from Operating Activities  
(b) Cash Flow from Investing Activities 
(c)  Cash Flow from Financing Activities   
(d) Non-cash Items 
(v) Is any specific disclosures required to made in relation to the interest 
free loan of ` 15 crore provided by the Company to its wholly-owned 
subsidiary, if yes, as per which Accounting Standard:  
(a) Yes, disclosure is required to be made as per AS 3, Cash Flow 
Statements. 
(b) Yes, disclosure is required to be made as per AS 18, Related Party 
Disclosures 
(c) Yes, disclosure is required to be made as per AS 13, Accounting 
for Investments 
(d) No specific disclosures are required.  
Multiple Choice Questions [5 MCQs of 2 Marks each: Total 10 Marks] 
3. Kumar Ltd., a privately-held company, operates in the manufacturing industry. 
Founded in 2008, the company has steadily grown its operations and 
established a strong presence in the market. As of 31st March, 2023, the 
company's capital structure reflects a blend of equity and debt financing. 
Capital Structure Overview: 
? Equity Share Capital: The company has a total of ` 30,00,000 invested 
in equity shares, each valued at ` 10 and fully paid. 
? Reserves & Surplus: Kumar Ltd. has accumulated reserves and surplus 
totaling `49,00,000, comprising contributions from various sources 
including General Reserve (` 32,50,000), Security Premium Account  
(` 6,00,000), Profit & Loss Account (` 4,30,000), and Revaluation 
Reserve (` 6,20,000). 
16
Page 4


MODEL TEST PAPER 2
INTERMEDIATE COURSE: GROUP - I 
PAPER – 1 : ADVANCED ACCOUNTING 
Time Allowed – 3 Hours Maximum Marks – 100 
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Case Scenario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
PART I – Case Scenario based MCQs (30 Marks) 
Part I is compulsory. 
Case Scenario 
1. Mars Ltd. is a manufacturing enterprise which is starting a new manufacturing
plant at X Village. It has commenced construction of the plant on April 1, 2023
and has incurred following expenses:
? It has acquired land for installing Plant for ` 50,00,000
? It incurred ` 35,00,000 for material and direct labour cost for developing the
Plant.
? The Company incurred ` 10,00,000 for head office expenses at New Delhi
which included rent, employee cost and maintenance expenditure.
? The Company borrowed ` 25,00,000 for construction work of Plant @12%
per annum on April 1, 2023.  Director finance of the Company incurred
travel and meeting expenses amounting to ` 5,00,000 during the year for
arranging this loan.
? On November 1, 2023, the construction activities of the plant were
interrupted as the local people alongwith the activists have raised issues
relating to environmental impact of plant being constructed. Due to agitation
the construction activities came to standstill for 3 months.
? With the help of Government and NGOs, the agitation was over by February
28, 2024 and the work resumed. However, to balance the impact on
environment, government ordered the company to install certain devices
for which the Company had to incur ` 6,00,000 in March 2024.
? The rate of depreciation on Plant is 10%.
Based on the above information, answer the following questions. 
(i) Which of the following expenses cannot be included in the cost of plant:
(a) Cost of Land
(b) Construction material and labour cost
(c) Head office expenses
(d) Borrowing cost
(ii) How much amount of borrowing cost can be capitalised with the plant:
(a) ` 300,000
14
 
 (b) ` 2,00,000 
 (c) ` 7,00,000 
 (d) ` 6,00,000 
(iii) The total cost of plant as on march 31, 2024 will be: 
(a) ` 85,00,000 
(b) ` 98,00,000  
(c) ` 93,00,000 
(d) ` 95,00,000 
(iv) The amount of depreciation to be charged for the year end March 31, 
2024 
(a) ` 4,30,000 
(b) ` 9,30,000 
(c) ` 9,80,000 
(d) Nil 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
2.  Beloved Finance Ltd. is a financial enterprise which is in the business of 
lending loan to small businesses and earn interest on loans.  
• During the year the Company has lend 50 crores and earned ` 1.5 crore 
as interest on loans.  
• The Company had surplus funds during the year and invested then in 
Fixed Deposits with bank and earned interest on fixed deposits of ` 20 
lacs.  
• The Company also acquired a gold loan unit for ` 10 crore during the 
year and the Company provided interest free loan of ` 15 crore to its 
wholly-owned subsidiary. 
• The Company paid a total income tax of ` 75 lacs for the year.  
Based on the above information, answer the following questions. 
(i) In the Cash Flow Statement as per AS 3, the interest income of ` 1.5 
crore earned on earned on loans given by the Company will be disclosed 
as: 
(a) Cash Flow from Operating Activities  
(b) Cash Flow from Investing Activities 
(c)  Cash Flow from Financing Activities   
(d) Non-cash Items 
(ii) In the Cash Flow Statement as per AS 3, the interest income of ` 20 
Lacs earned fixed deposits with bank will be disclosed as: 
(a) Cash Flow from Operating Activities  
15
(b) Cash Flow from Investing Activities 
(c)  Cash Flow from Financing Activities   
(d) Non-cash Items 
(iii) In the Cash Flow Statement as per AS 3, amount paid for acquiring gold 
loan unit will be disclosed as: 
(a) Cash Flow from Operating Activities  
(b) Cash Flow from Investing Activities 
(c)  Cash Flow from Financing Activities   
(d) Non-cash Items 
(iv) In the Cash Flow Statement as per AS 3, total income tax of ` 75 lacs 
paid for the year will be disclosed as: 
(a) Cash Flow from Operating Activities  
(b) Cash Flow from Investing Activities 
(c)  Cash Flow from Financing Activities   
(d) Non-cash Items 
(v) Is any specific disclosures required to made in relation to the interest 
free loan of ` 15 crore provided by the Company to its wholly-owned 
subsidiary, if yes, as per which Accounting Standard:  
(a) Yes, disclosure is required to be made as per AS 3, Cash Flow 
Statements. 
(b) Yes, disclosure is required to be made as per AS 18, Related Party 
Disclosures 
(c) Yes, disclosure is required to be made as per AS 13, Accounting 
for Investments 
(d) No specific disclosures are required.  
Multiple Choice Questions [5 MCQs of 2 Marks each: Total 10 Marks] 
3. Kumar Ltd., a privately-held company, operates in the manufacturing industry. 
Founded in 2008, the company has steadily grown its operations and 
established a strong presence in the market. As of 31st March, 2023, the 
company's capital structure reflects a blend of equity and debt financing. 
Capital Structure Overview: 
? Equity Share Capital: The company has a total of ` 30,00,000 invested 
in equity shares, each valued at ` 10 and fully paid. 
? Reserves & Surplus: Kumar Ltd. has accumulated reserves and surplus 
totaling `49,00,000, comprising contributions from various sources 
including General Reserve (` 32,50,000), Security Premium Account  
(` 6,00,000), Profit & Loss Account (` 4,30,000), and Revaluation 
Reserve (` 6,20,000). 
16
 
? Loan Funds: The company has acquired loan funds amounting to  
` 42,00,000 to support its operational and growth initiatives. 
Buy-Back Decision: 
Considering its financial position and market conditions, Kumar Ltd. has 
decided to initiate a share buy-back program. The company intends to 
repurchase its shares at a price of `30 per share. 
In accordance with financial regulations and internal policies, Kumar Ltd. aims 
to assess the maximum number of shares it can repurchase while maintaining 
a prudent debt-equity ratio. By utilizing the Debt Equity Ratio Test, the 
company seeks to strike a balance between its equity base and debt 
obligations. 
 Based on the above information, answer the following questions. 
(i) What is the minimum equity Kumar Ltd. needs to maintain after buy-
back, according to the Debt Equity Ratio Test?  
(a)  ` 12,95,000  
(b)  ` 21,00,000 
(c)  ` 32,50,000 
(d)  ` 6,00,000 
(ii) What is the maximum permitted buy-back of equity for Kumar Ltd.?  
(a)  ` 38,85,000 
(b)  ` 42,00,000 
(c)  ` 12,95,000  
(d)  ` 59,85,000 
(iii) How many shares of Kumar Ltd. can be bought back at ` 30 per share 
according to the Debt Equity Ratio Test? 
(a)     43,000  
(b)  1,29,500  
(c)  2,00,000  
(d)     78,000 
 Multiple Choice Questions [3 MCQs of 2 Marks each: Total 6 Marks] 
4.  Sahil Ltd agreed to sell its factory located in Assam to Kali Ltd on 4.12.2023. 
It entered into a sale deed (transferring all significant risks and rewards of 
ownership) on 1.2.2024. But the transaction was registered with the registrar 
on 30.5.2024 When should the sale and gain be recognized? 
(a) Both sale and gain should be recognized as on the balance sheet date 
i.e. 31.3.2024. 
(b) Both sale and gain should be recognized on 30.5.2024. 
17
Page 5


MODEL TEST PAPER 2
INTERMEDIATE COURSE: GROUP - I 
PAPER – 1 : ADVANCED ACCOUNTING 
Time Allowed – 3 Hours Maximum Marks – 100 
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Case Scenario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
PART I – Case Scenario based MCQs (30 Marks) 
Part I is compulsory. 
Case Scenario 
1. Mars Ltd. is a manufacturing enterprise which is starting a new manufacturing
plant at X Village. It has commenced construction of the plant on April 1, 2023
and has incurred following expenses:
? It has acquired land for installing Plant for ` 50,00,000
? It incurred ` 35,00,000 for material and direct labour cost for developing the
Plant.
? The Company incurred ` 10,00,000 for head office expenses at New Delhi
which included rent, employee cost and maintenance expenditure.
? The Company borrowed ` 25,00,000 for construction work of Plant @12%
per annum on April 1, 2023.  Director finance of the Company incurred
travel and meeting expenses amounting to ` 5,00,000 during the year for
arranging this loan.
? On November 1, 2023, the construction activities of the plant were
interrupted as the local people alongwith the activists have raised issues
relating to environmental impact of plant being constructed. Due to agitation
the construction activities came to standstill for 3 months.
? With the help of Government and NGOs, the agitation was over by February
28, 2024 and the work resumed. However, to balance the impact on
environment, government ordered the company to install certain devices
for which the Company had to incur ` 6,00,000 in March 2024.
? The rate of depreciation on Plant is 10%.
Based on the above information, answer the following questions. 
(i) Which of the following expenses cannot be included in the cost of plant:
(a) Cost of Land
(b) Construction material and labour cost
(c) Head office expenses
(d) Borrowing cost
(ii) How much amount of borrowing cost can be capitalised with the plant:
(a) ` 300,000
14
 
 (b) ` 2,00,000 
 (c) ` 7,00,000 
 (d) ` 6,00,000 
(iii) The total cost of plant as on march 31, 2024 will be: 
(a) ` 85,00,000 
(b) ` 98,00,000  
(c) ` 93,00,000 
(d) ` 95,00,000 
(iv) The amount of depreciation to be charged for the year end March 31, 
2024 
(a) ` 4,30,000 
(b) ` 9,30,000 
(c) ` 9,80,000 
(d) Nil 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
2.  Beloved Finance Ltd. is a financial enterprise which is in the business of 
lending loan to small businesses and earn interest on loans.  
• During the year the Company has lend 50 crores and earned ` 1.5 crore 
as interest on loans.  
• The Company had surplus funds during the year and invested then in 
Fixed Deposits with bank and earned interest on fixed deposits of ` 20 
lacs.  
• The Company also acquired a gold loan unit for ` 10 crore during the 
year and the Company provided interest free loan of ` 15 crore to its 
wholly-owned subsidiary. 
• The Company paid a total income tax of ` 75 lacs for the year.  
Based on the above information, answer the following questions. 
(i) In the Cash Flow Statement as per AS 3, the interest income of ` 1.5 
crore earned on earned on loans given by the Company will be disclosed 
as: 
(a) Cash Flow from Operating Activities  
(b) Cash Flow from Investing Activities 
(c)  Cash Flow from Financing Activities   
(d) Non-cash Items 
(ii) In the Cash Flow Statement as per AS 3, the interest income of ` 20 
Lacs earned fixed deposits with bank will be disclosed as: 
(a) Cash Flow from Operating Activities  
15
(b) Cash Flow from Investing Activities 
(c)  Cash Flow from Financing Activities   
(d) Non-cash Items 
(iii) In the Cash Flow Statement as per AS 3, amount paid for acquiring gold 
loan unit will be disclosed as: 
(a) Cash Flow from Operating Activities  
(b) Cash Flow from Investing Activities 
(c)  Cash Flow from Financing Activities   
(d) Non-cash Items 
(iv) In the Cash Flow Statement as per AS 3, total income tax of ` 75 lacs 
paid for the year will be disclosed as: 
(a) Cash Flow from Operating Activities  
(b) Cash Flow from Investing Activities 
(c)  Cash Flow from Financing Activities   
(d) Non-cash Items 
(v) Is any specific disclosures required to made in relation to the interest 
free loan of ` 15 crore provided by the Company to its wholly-owned 
subsidiary, if yes, as per which Accounting Standard:  
(a) Yes, disclosure is required to be made as per AS 3, Cash Flow 
Statements. 
(b) Yes, disclosure is required to be made as per AS 18, Related Party 
Disclosures 
(c) Yes, disclosure is required to be made as per AS 13, Accounting 
for Investments 
(d) No specific disclosures are required.  
Multiple Choice Questions [5 MCQs of 2 Marks each: Total 10 Marks] 
3. Kumar Ltd., a privately-held company, operates in the manufacturing industry. 
Founded in 2008, the company has steadily grown its operations and 
established a strong presence in the market. As of 31st March, 2023, the 
company's capital structure reflects a blend of equity and debt financing. 
Capital Structure Overview: 
? Equity Share Capital: The company has a total of ` 30,00,000 invested 
in equity shares, each valued at ` 10 and fully paid. 
? Reserves & Surplus: Kumar Ltd. has accumulated reserves and surplus 
totaling `49,00,000, comprising contributions from various sources 
including General Reserve (` 32,50,000), Security Premium Account  
(` 6,00,000), Profit & Loss Account (` 4,30,000), and Revaluation 
Reserve (` 6,20,000). 
16
 
? Loan Funds: The company has acquired loan funds amounting to  
` 42,00,000 to support its operational and growth initiatives. 
Buy-Back Decision: 
Considering its financial position and market conditions, Kumar Ltd. has 
decided to initiate a share buy-back program. The company intends to 
repurchase its shares at a price of `30 per share. 
In accordance with financial regulations and internal policies, Kumar Ltd. aims 
to assess the maximum number of shares it can repurchase while maintaining 
a prudent debt-equity ratio. By utilizing the Debt Equity Ratio Test, the 
company seeks to strike a balance between its equity base and debt 
obligations. 
 Based on the above information, answer the following questions. 
(i) What is the minimum equity Kumar Ltd. needs to maintain after buy-
back, according to the Debt Equity Ratio Test?  
(a)  ` 12,95,000  
(b)  ` 21,00,000 
(c)  ` 32,50,000 
(d)  ` 6,00,000 
(ii) What is the maximum permitted buy-back of equity for Kumar Ltd.?  
(a)  ` 38,85,000 
(b)  ` 42,00,000 
(c)  ` 12,95,000  
(d)  ` 59,85,000 
(iii) How many shares of Kumar Ltd. can be bought back at ` 30 per share 
according to the Debt Equity Ratio Test? 
(a)     43,000  
(b)  1,29,500  
(c)  2,00,000  
(d)     78,000 
 Multiple Choice Questions [3 MCQs of 2 Marks each: Total 6 Marks] 
4.  Sahil Ltd agreed to sell its factory located in Assam to Kali Ltd on 4.12.2023. 
It entered into a sale deed (transferring all significant risks and rewards of 
ownership) on 1.2.2024. But the transaction was registered with the registrar 
on 30.5.2024 When should the sale and gain be recognized? 
(a) Both sale and gain should be recognized as on the balance sheet date 
i.e. 31.3.2024. 
(b) Both sale and gain should be recognized on 30.5.2024. 
17
(c) The sale should be recognized as on balance sheet date but gain should 
be recognized on 30.5.2024. 
(d) Both sale and gain should be recognized on 4.12.2023. (2 Marks) 
5. Pratham and Associates is a manufacturer of steel rods. It invests its profits 
by purchasing shares of listed companies in order to earn dividend income. It 
had purchased shares of Bharti Airtel Limited in FY 2018-19. However, it sold 
all the shares of Bharti Airtel Limited during the current year i.e. FY 2023-24. 
What amount would be disclosed in the profit and loss account for  
FY 2023-24? 
(a) This transaction would not affect the profit and loss account since the 
primary business of the company is manufacturing, and not investment. 
(b) The carrying amount net of expenses would be disclosed in the profit 
and loss account. 
(c) The disposal proceeds net of expenses would be disclosed in the profit 
and loss account. 
(d) The difference between the carrying amount and the disposal proceeds, 
net of expenses, would be disclosed in the profit and loss account. 
 (2 Marks) 
6. As per Accounting Standards, difference between the Gross Investment and 
the present value of Minimum Lease Payments under finance lease (from the 
 standpoint of the lessor) and Unguaranteed Residual Value accruing to the 
lessor is recorded as 
(a) Unearned finance income 
(b) Guaranteed Residual Value 
(c) Profit on lease 
(d) Loss on lease (2 Marks) 
 
PART II – Descriptive Questions (70 Marks) 
Question No.1 is compulsory 
Answer any four questions from the remaining five questions. 
Wherever necessary, suitable assumptions may be made and indicated in answer 
by the candidates. Working Notes should form part of the answer. 
1. (a)  K Ltd. launched a project for producing product X in October, 2023.  The 
Company incurred ` 40 lakhs towards Research and Development 
expenses upto 31
st
 March, 2024.  Due to prevailing market conditions, 
the Management came to conclusion that the product cannot be 
manufactured and sold in the market for the next 10 years.  The 
Management hence wants to defer the expenditure write off to future 
years. 
 Advise the Company as per the applicable Accounting Standard.  
(5 Marks) 
18