Advanced Accounting (Group I) Model Test Paper - 3 (Questions) - CA Intermediate PDF Download

 Page 1


MODEL TEST PAPER 3 
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. MBB Ltd. has the following particulars: 
Particulars ` (lacs) 
10% Preference Share Capital (` 10 each) 2,500 
Equity Share Capital of ` 10 each 8,000 
Capital Redemption Reserve 1,000 
Securities Premium 800 
General Reserve 6,000 
Profit & Loss A/c 300 
Cash 1,650 
Investments (Market Value ` 1,500 lacs) 3,000 
 The company decides to redeem all it’s preference shares at a premium of 
10% and buys back 25% of equity shares @ ` 15 per share. Investments 
amounting to Market Value of ` 1,000 lakhs sold at ` 3,000 lakhs and raises 
a bank loan of ` 2,000 lakhs. 
Answer the following questions based on above: 
(i) The amount of Profit/Loss on Sale of Investment is: 
(a) ` 1,500 lakhs Profit 
(b) ` 1,000 lakhs Profit 
(c) ` 2,000 lakhs Loss 
(d) ` 1,000 lakhs Loss 
(ii) Securities Premium available for Buyback after redemption of 
Preference Shares 
(a) ` 550 lakhs 
(b) ` 800 lakhs 
(c) Can’t utilize securities premium for buyback 
(d) ` 350 lakhs 
26
Page 2


MODEL TEST PAPER 3 
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. MBB Ltd. has the following particulars: 
Particulars ` (lacs) 
10% Preference Share Capital (` 10 each) 2,500 
Equity Share Capital of ` 10 each 8,000 
Capital Redemption Reserve 1,000 
Securities Premium 800 
General Reserve 6,000 
Profit & Loss A/c 300 
Cash 1,650 
Investments (Market Value ` 1,500 lacs) 3,000 
 The company decides to redeem all it’s preference shares at a premium of 
10% and buys back 25% of equity shares @ ` 15 per share. Investments 
amounting to Market Value of ` 1,000 lakhs sold at ` 3,000 lakhs and raises 
a bank loan of ` 2,000 lakhs. 
Answer the following questions based on above: 
(i) The amount of Profit/Loss on Sale of Investment is: 
(a) ` 1,500 lakhs Profit 
(b) ` 1,000 lakhs Profit 
(c) ` 2,000 lakhs Loss 
(d) ` 1,000 lakhs Loss 
(ii) Securities Premium available for Buyback after redemption of 
Preference Shares 
(a) ` 550 lakhs 
(b) ` 800 lakhs 
(c) Can’t utilize securities premium for buyback 
(d) ` 350 lakhs 
26
 
(iii) Total amount to be transferred to Capital Redemption Reserve: 
(a) ` 2,000 lakhs 
(b) ` 4,500 lakhs 
(c) ` 2,500 lakhs 
(d) ` 1,750 lakhs 
(iv) Cash balance after buyback 
(a) ` 1,150 lakhs 
(b) ` 2,200 lakhs 
(c) ` 3,250 lakhs 
(d) ` 900 lakhs 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
2.  Suman Ltd. is in the business of manufacturing electronics equipment and 
selling these at its various outlets. It provides installation services for the 
equipment sold and also provide free 1 year warranty on all the sold products.  
 Beach Resorts are leading resorts in the city. It purchased 5 air conditioners 
(AC) from Suman Ltd. for its resort. Suman Ltd. sold 5 AC to Beach resort for 
` 45,000 each which includes installation fees of ` 1,000 for each AC. The 
Company also offers 1 year warranty for any repair etc. The Company also 
offered ` 500 per AC as trade discount. Beach resort placed order on March 
15, 2024 and made payment on March 20, 2024. The ACs were delivered on 
March 27, 2024 and the installation was completed on April 5, 2024.  
(i) How much revenue should be recognised by the Company as on March 
31, 2024: 
(a) ` 2,25,000 
(b) ` 2,17,500 
(c) ` 2,00,000 
(d) ` 2,30,000 
(ii) How much revenue should be recognised by the Company in the 
financial year 2024-25: 
(a) ` 5000 
(b) ` 2,20,000 
(c) ` 10,000 
(d) ` 2,40,000 
(iii) What will be the accounting for trade discount: 
(a) The same will be recognised separately in the profit and loss. 
(b) The trade discounts are deducted in determining the revenue. 
27
Page 3


MODEL TEST PAPER 3 
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. MBB Ltd. has the following particulars: 
Particulars ` (lacs) 
10% Preference Share Capital (` 10 each) 2,500 
Equity Share Capital of ` 10 each 8,000 
Capital Redemption Reserve 1,000 
Securities Premium 800 
General Reserve 6,000 
Profit & Loss A/c 300 
Cash 1,650 
Investments (Market Value ` 1,500 lacs) 3,000 
 The company decides to redeem all it’s preference shares at a premium of 
10% and buys back 25% of equity shares @ ` 15 per share. Investments 
amounting to Market Value of ` 1,000 lakhs sold at ` 3,000 lakhs and raises 
a bank loan of ` 2,000 lakhs. 
Answer the following questions based on above: 
(i) The amount of Profit/Loss on Sale of Investment is: 
(a) ` 1,500 lakhs Profit 
(b) ` 1,000 lakhs Profit 
(c) ` 2,000 lakhs Loss 
(d) ` 1,000 lakhs Loss 
(ii) Securities Premium available for Buyback after redemption of 
Preference Shares 
(a) ` 550 lakhs 
(b) ` 800 lakhs 
(c) Can’t utilize securities premium for buyback 
(d) ` 350 lakhs 
26
 
(iii) Total amount to be transferred to Capital Redemption Reserve: 
(a) ` 2,000 lakhs 
(b) ` 4,500 lakhs 
(c) ` 2,500 lakhs 
(d) ` 1,750 lakhs 
(iv) Cash balance after buyback 
(a) ` 1,150 lakhs 
(b) ` 2,200 lakhs 
(c) ` 3,250 lakhs 
(d) ` 900 lakhs 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
2.  Suman Ltd. is in the business of manufacturing electronics equipment and 
selling these at its various outlets. It provides installation services for the 
equipment sold and also provide free 1 year warranty on all the sold products.  
 Beach Resorts are leading resorts in the city. It purchased 5 air conditioners 
(AC) from Suman Ltd. for its resort. Suman Ltd. sold 5 AC to Beach resort for 
` 45,000 each which includes installation fees of ` 1,000 for each AC. The 
Company also offers 1 year warranty for any repair etc. The Company also 
offered ` 500 per AC as trade discount. Beach resort placed order on March 
15, 2024 and made payment on March 20, 2024. The ACs were delivered on 
March 27, 2024 and the installation was completed on April 5, 2024.  
(i) How much revenue should be recognised by the Company as on March 
31, 2024: 
(a) ` 2,25,000 
(b) ` 2,17,500 
(c) ` 2,00,000 
(d) ` 2,30,000 
(ii) How much revenue should be recognised by the Company in the 
financial year 2024-25: 
(a) ` 5000 
(b) ` 2,20,000 
(c) ` 10,000 
(d) ` 2,40,000 
(iii) What will be the accounting for trade discount: 
(a) The same will be recognised separately in the profit and loss. 
(b) The trade discounts are deducted in determining the revenue. 
27
(c) Trade discount will be recognised after one year, when the warranty 
will be over. 
(d) Trade discount will be recognised after installation is complete. 
(iv) Is the Company required to do any accounting for 1 year warranty 
provided by it: 
(a) No accounting treatment is required till some warranty claim is 
actually received by the Company. 
(b) As there exist a present obligation to provide warranty to customers 
for 1 year, the Company should estimate the amount that it may 
have to incur considering various factors including past trends and 
create a provision as per AS 29.  
(c) Accounting for claims will be done on cash basis i.e. expense will 
be recognised when expense is made.  
(d) As the Company is not charging separately for the warranty 
provided, there is no need to create any provision. 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
3. On April 1, 2022, X Limited approached a software company for 
implementation of SAP ERP at its organisation. The cost of implementation of 
SAP ERP is ` 25,00,000 and the time required is 15 months. The company 
was also required to pay ` 100,000 annually after implementation for 
maintenance and normal updation of ERP. The implementation work started 
in June, 2022 and could not be finished in 15 months. The ERP was 
implemented on May 2024. Due to delay in implementation the vendor 
refunded ` 2,00,000. The Company recognised the intangible asset ‘SAP 
ERP’ on September 2023 (15 months from June 2022). After two years, the 
Company has got the SAP ERP more upgraded with latest version and 
additional features and functions which also increased its speed and usage to 
X Limited for ` 7,00,000.  
(i) On which date the Intangible asset should be recognised: 
(a) April 2022 (When it was decided that SAP ERP is to be 
implemented) 
(b) June 2022  (When the implementation work started) 
(c) September 2023 (When the implementation work should have 
completed as per agreed terms) 
(d) May 2024 (When the SAP actually got implemented)  
(ii) At what amount the SAP ERP should be initially recognised as ‘intangible 
asset: 
(a) ` 25,00,000  
(b) ` 26,00,000  
(c) ` 23,00,000 
(d) ` 32,00,000   
28
Page 4


MODEL TEST PAPER 3 
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. MBB Ltd. has the following particulars: 
Particulars ` (lacs) 
10% Preference Share Capital (` 10 each) 2,500 
Equity Share Capital of ` 10 each 8,000 
Capital Redemption Reserve 1,000 
Securities Premium 800 
General Reserve 6,000 
Profit & Loss A/c 300 
Cash 1,650 
Investments (Market Value ` 1,500 lacs) 3,000 
 The company decides to redeem all it’s preference shares at a premium of 
10% and buys back 25% of equity shares @ ` 15 per share. Investments 
amounting to Market Value of ` 1,000 lakhs sold at ` 3,000 lakhs and raises 
a bank loan of ` 2,000 lakhs. 
Answer the following questions based on above: 
(i) The amount of Profit/Loss on Sale of Investment is: 
(a) ` 1,500 lakhs Profit 
(b) ` 1,000 lakhs Profit 
(c) ` 2,000 lakhs Loss 
(d) ` 1,000 lakhs Loss 
(ii) Securities Premium available for Buyback after redemption of 
Preference Shares 
(a) ` 550 lakhs 
(b) ` 800 lakhs 
(c) Can’t utilize securities premium for buyback 
(d) ` 350 lakhs 
26
 
(iii) Total amount to be transferred to Capital Redemption Reserve: 
(a) ` 2,000 lakhs 
(b) ` 4,500 lakhs 
(c) ` 2,500 lakhs 
(d) ` 1,750 lakhs 
(iv) Cash balance after buyback 
(a) ` 1,150 lakhs 
(b) ` 2,200 lakhs 
(c) ` 3,250 lakhs 
(d) ` 900 lakhs 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
2.  Suman Ltd. is in the business of manufacturing electronics equipment and 
selling these at its various outlets. It provides installation services for the 
equipment sold and also provide free 1 year warranty on all the sold products.  
 Beach Resorts are leading resorts in the city. It purchased 5 air conditioners 
(AC) from Suman Ltd. for its resort. Suman Ltd. sold 5 AC to Beach resort for 
` 45,000 each which includes installation fees of ` 1,000 for each AC. The 
Company also offers 1 year warranty for any repair etc. The Company also 
offered ` 500 per AC as trade discount. Beach resort placed order on March 
15, 2024 and made payment on March 20, 2024. The ACs were delivered on 
March 27, 2024 and the installation was completed on April 5, 2024.  
(i) How much revenue should be recognised by the Company as on March 
31, 2024: 
(a) ` 2,25,000 
(b) ` 2,17,500 
(c) ` 2,00,000 
(d) ` 2,30,000 
(ii) How much revenue should be recognised by the Company in the 
financial year 2024-25: 
(a) ` 5000 
(b) ` 2,20,000 
(c) ` 10,000 
(d) ` 2,40,000 
(iii) What will be the accounting for trade discount: 
(a) The same will be recognised separately in the profit and loss. 
(b) The trade discounts are deducted in determining the revenue. 
27
(c) Trade discount will be recognised after one year, when the warranty 
will be over. 
(d) Trade discount will be recognised after installation is complete. 
(iv) Is the Company required to do any accounting for 1 year warranty 
provided by it: 
(a) No accounting treatment is required till some warranty claim is 
actually received by the Company. 
(b) As there exist a present obligation to provide warranty to customers 
for 1 year, the Company should estimate the amount that it may 
have to incur considering various factors including past trends and 
create a provision as per AS 29.  
(c) Accounting for claims will be done on cash basis i.e. expense will 
be recognised when expense is made.  
(d) As the Company is not charging separately for the warranty 
provided, there is no need to create any provision. 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
3. On April 1, 2022, X Limited approached a software company for 
implementation of SAP ERP at its organisation. The cost of implementation of 
SAP ERP is ` 25,00,000 and the time required is 15 months. The company 
was also required to pay ` 100,000 annually after implementation for 
maintenance and normal updation of ERP. The implementation work started 
in June, 2022 and could not be finished in 15 months. The ERP was 
implemented on May 2024. Due to delay in implementation the vendor 
refunded ` 2,00,000. The Company recognised the intangible asset ‘SAP 
ERP’ on September 2023 (15 months from June 2022). After two years, the 
Company has got the SAP ERP more upgraded with latest version and 
additional features and functions which also increased its speed and usage to 
X Limited for ` 7,00,000.  
(i) On which date the Intangible asset should be recognised: 
(a) April 2022 (When it was decided that SAP ERP is to be 
implemented) 
(b) June 2022  (When the implementation work started) 
(c) September 2023 (When the implementation work should have 
completed as per agreed terms) 
(d) May 2024 (When the SAP actually got implemented)  
(ii) At what amount the SAP ERP should be initially recognised as ‘intangible 
asset: 
(a) ` 25,00,000  
(b) ` 26,00,000  
(c) ` 23,00,000 
(d) ` 32,00,000   
28
 
(iii) How should the annual maintenance and updation expenses should be 
accounted for: 
(a) Should be capitalised with ‘Intangible Asset’ 
(b) Should be recognised as a separate ‘Intangible Asset’ 
(c) Should be recognised as expense in Profit and Loss annually.  
(d) No accounting is required 
(iv) During the implementation period, how the expenditure incurred will be 
accounted for: 
(a) It will be expensed in profit and loss as and when incurred 
(b) It will be recognised as an asset ‘Intangible asset under 
development’ 
(c) It will only be disclosed in notes to accounts and will be recognised 
when complete  
(d) It will be recognised as an item of Property, Plant and Equipment  
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
4.  Vijay Ltd. borrowed ` 30 lakh at interest rate of 5% per annum and purchased 
plant and machinery for ` 60 lakh (using borrowed funds) and started 
production. It took 1 year time for Vijay Ltd. to create optimum market for the 
goods manufactured and generate revenue. How much borrowing cost can be 
capitalised with cost of plant and machinery:  
(a) ` 1.5 lakh 
(b) ` 3 Lakh 
(c) Nil 
(d) ` 5 Lakh (2 Marks) 
5. The cost of inventories of items that are not ordinarily interchangeable and 
goods or services produced and segregated for specific projects should be 
assigned using following cost formula 
(a) By specific identification of their individual costs 
(b) First-in, First-out (FIFO) Method 
(c) Weighted average cost formula 
(d) The formula used should reflect the fairest possible approximation to the 
cost incurred in bringing the items of inventory to their present location 
and condition. (2 Marks) 
6. Securities held as stock-in-trade held by an entity are: 
(a) Investments 
(b)  Not Investments 
(c) May or may not be Investments 
(d) Not an asset for entity  (2 Marks) 
29
Page 5


MODEL TEST PAPER 3 
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. MBB Ltd. has the following particulars: 
Particulars ` (lacs) 
10% Preference Share Capital (` 10 each) 2,500 
Equity Share Capital of ` 10 each 8,000 
Capital Redemption Reserve 1,000 
Securities Premium 800 
General Reserve 6,000 
Profit & Loss A/c 300 
Cash 1,650 
Investments (Market Value ` 1,500 lacs) 3,000 
 The company decides to redeem all it’s preference shares at a premium of 
10% and buys back 25% of equity shares @ ` 15 per share. Investments 
amounting to Market Value of ` 1,000 lakhs sold at ` 3,000 lakhs and raises 
a bank loan of ` 2,000 lakhs. 
Answer the following questions based on above: 
(i) The amount of Profit/Loss on Sale of Investment is: 
(a) ` 1,500 lakhs Profit 
(b) ` 1,000 lakhs Profit 
(c) ` 2,000 lakhs Loss 
(d) ` 1,000 lakhs Loss 
(ii) Securities Premium available for Buyback after redemption of 
Preference Shares 
(a) ` 550 lakhs 
(b) ` 800 lakhs 
(c) Can’t utilize securities premium for buyback 
(d) ` 350 lakhs 
26
 
(iii) Total amount to be transferred to Capital Redemption Reserve: 
(a) ` 2,000 lakhs 
(b) ` 4,500 lakhs 
(c) ` 2,500 lakhs 
(d) ` 1,750 lakhs 
(iv) Cash balance after buyback 
(a) ` 1,150 lakhs 
(b) ` 2,200 lakhs 
(c) ` 3,250 lakhs 
(d) ` 900 lakhs 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
2.  Suman Ltd. is in the business of manufacturing electronics equipment and 
selling these at its various outlets. It provides installation services for the 
equipment sold and also provide free 1 year warranty on all the sold products.  
 Beach Resorts are leading resorts in the city. It purchased 5 air conditioners 
(AC) from Suman Ltd. for its resort. Suman Ltd. sold 5 AC to Beach resort for 
` 45,000 each which includes installation fees of ` 1,000 for each AC. The 
Company also offers 1 year warranty for any repair etc. The Company also 
offered ` 500 per AC as trade discount. Beach resort placed order on March 
15, 2024 and made payment on March 20, 2024. The ACs were delivered on 
March 27, 2024 and the installation was completed on April 5, 2024.  
(i) How much revenue should be recognised by the Company as on March 
31, 2024: 
(a) ` 2,25,000 
(b) ` 2,17,500 
(c) ` 2,00,000 
(d) ` 2,30,000 
(ii) How much revenue should be recognised by the Company in the 
financial year 2024-25: 
(a) ` 5000 
(b) ` 2,20,000 
(c) ` 10,000 
(d) ` 2,40,000 
(iii) What will be the accounting for trade discount: 
(a) The same will be recognised separately in the profit and loss. 
(b) The trade discounts are deducted in determining the revenue. 
27
(c) Trade discount will be recognised after one year, when the warranty 
will be over. 
(d) Trade discount will be recognised after installation is complete. 
(iv) Is the Company required to do any accounting for 1 year warranty 
provided by it: 
(a) No accounting treatment is required till some warranty claim is 
actually received by the Company. 
(b) As there exist a present obligation to provide warranty to customers 
for 1 year, the Company should estimate the amount that it may 
have to incur considering various factors including past trends and 
create a provision as per AS 29.  
(c) Accounting for claims will be done on cash basis i.e. expense will 
be recognised when expense is made.  
(d) As the Company is not charging separately for the warranty 
provided, there is no need to create any provision. 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
3. On April 1, 2022, X Limited approached a software company for 
implementation of SAP ERP at its organisation. The cost of implementation of 
SAP ERP is ` 25,00,000 and the time required is 15 months. The company 
was also required to pay ` 100,000 annually after implementation for 
maintenance and normal updation of ERP. The implementation work started 
in June, 2022 and could not be finished in 15 months. The ERP was 
implemented on May 2024. Due to delay in implementation the vendor 
refunded ` 2,00,000. The Company recognised the intangible asset ‘SAP 
ERP’ on September 2023 (15 months from June 2022). After two years, the 
Company has got the SAP ERP more upgraded with latest version and 
additional features and functions which also increased its speed and usage to 
X Limited for ` 7,00,000.  
(i) On which date the Intangible asset should be recognised: 
(a) April 2022 (When it was decided that SAP ERP is to be 
implemented) 
(b) June 2022  (When the implementation work started) 
(c) September 2023 (When the implementation work should have 
completed as per agreed terms) 
(d) May 2024 (When the SAP actually got implemented)  
(ii) At what amount the SAP ERP should be initially recognised as ‘intangible 
asset: 
(a) ` 25,00,000  
(b) ` 26,00,000  
(c) ` 23,00,000 
(d) ` 32,00,000   
28
 
(iii) How should the annual maintenance and updation expenses should be 
accounted for: 
(a) Should be capitalised with ‘Intangible Asset’ 
(b) Should be recognised as a separate ‘Intangible Asset’ 
(c) Should be recognised as expense in Profit and Loss annually.  
(d) No accounting is required 
(iv) During the implementation period, how the expenditure incurred will be 
accounted for: 
(a) It will be expensed in profit and loss as and when incurred 
(b) It will be recognised as an asset ‘Intangible asset under 
development’ 
(c) It will only be disclosed in notes to accounts and will be recognised 
when complete  
(d) It will be recognised as an item of Property, Plant and Equipment  
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
4.  Vijay Ltd. borrowed ` 30 lakh at interest rate of 5% per annum and purchased 
plant and machinery for ` 60 lakh (using borrowed funds) and started 
production. It took 1 year time for Vijay Ltd. to create optimum market for the 
goods manufactured and generate revenue. How much borrowing cost can be 
capitalised with cost of plant and machinery:  
(a) ` 1.5 lakh 
(b) ` 3 Lakh 
(c) Nil 
(d) ` 5 Lakh (2 Marks) 
5. The cost of inventories of items that are not ordinarily interchangeable and 
goods or services produced and segregated for specific projects should be 
assigned using following cost formula 
(a) By specific identification of their individual costs 
(b) First-in, First-out (FIFO) Method 
(c) Weighted average cost formula 
(d) The formula used should reflect the fairest possible approximation to the 
cost incurred in bringing the items of inventory to their present location 
and condition. (2 Marks) 
6. Securities held as stock-in-trade held by an entity are: 
(a) Investments 
(b)  Not Investments 
(c) May or may not be Investments 
(d) Not an asset for entity  (2 Marks) 
29
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)  A Ltd. purchased on 1
st
 April, 2023 8% convertible debenture in C Ltd. 
of face value of ` 2,00,000 @ ` 108. On 1st July, 203 A Ltd. purchased 
another ` 1,00,000 debentures @ ` 112 cum interest. On 1
st
 October, 
2023 ` 80,000 debentures were sold @ `  105. On 1
st
 December, 2023, 
C Ltd. give option for conversion of 8% convertible debentures into 
equity share of ` 10 each. A Ltd. received 5,000 equity shares in C Ltd. 
in conversion of 25% debentures held on that date. The market price of 
debenture and equity share in C Ltd. on 31
st
 December, 2023 is ` 110 
and ` 15 respectively. Interest on debenture is payable each year on  
31
st
 March, and 30
th
 September. Prepare investment account in the 
books of A Ltd. on average cost basis for the accounting year ended  
31
st
 December, 2023.  (10 Marks) 
(b) A company incorporated in June 2023, has setup a factory within a 
period of 8 months with borrowed funds. The construction period of the 
assets had reduced drastically due to usage of technical innovations by 
the company and the company is able to justify the reasons for the same. 
Whether interest on borrowings for the period prior to the date of setting 
up the factory should be capitalized although it has taken less than 12 
months for the assets to get ready for use.  You are required to comment 
on the necessary treatment with reference to AS 16. (4 Marks) 
2. You are required to prepare a Balance Sheet as at 31
st
 March 2024, as per 
Schedule III of the Companies Act, 2013, from the following information of 
Mehar Ltd.: 
Particulars Amount 
(`)  
Particulars Amount  
(`) 
Term Loans (Secured) 40,00,000 Investments (Non-
current) 9,00,000 
Trade payables 45,80,000 Profit for the year 32,00,000 
Cash and Bank Balances 38,40,000 Trade receivables 49,00,000 
Staff Advances 2,20,000 
Miscellaneous 
Expenses 2,32,000 
Other advances (given by 
Co.) 
14,88,000 
Loan from other 
parties 8,00,000 
Provision for Taxation 10,20,000 
Provision for 
Doubtful Debts 80,000 
Securities Premium 19,00,000 Stores 16,00,000 
Loose Tools 2,00,000 Finished Goods 30,00,000 
General Reserve 62,00,000 
Plant and 
Machinery (WDV) 2,14,00,000 
30