Advanced Accounting (Group I) Model Test Paper - 6 (Questions) - CA Intermediate PDF Download

 Page 1


MODEL TEST PAPER 6  
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. Fly Ltd. made a sale of INR 7,00,000 to Wings International in May 2023 and
recognised Trade Receivables which was initially recorded at the prevailing
exchange rate on the date of sales, transaction recorded at US$ 1= ` 79.4.
The Company also took a loan from U.S Company for ` 10,00000 in December
2023 which was initially recorded at the prevailing exchange rate on the date
of transaction, transaction recorded at US$ 1= ` 81.1.
On 31
st
 March 2024, exchange rate was US$ 1 = ` 83.3
a. What will be the closing balance of Trade Receivables on 31
st
 March
2024:
(i) ` 700,000
(ii) ` 7,14,978 approx
(iii) ` 7,34,383 approx
(iv) ` 7,50,000 approx
b. How much is the reporting difference (gain or loss) in case of Trade
Receivable:
(i) Gain of ` 34,383 approx
(ii) Loss of ` 34,383 approx
(iii) Gain of ` 19,395 approx
(iv) Loss of ` 19,395 approx
c. What will be the closing balance of Loan as on 31
st
 March 2024:
(i) ` 10,00,000
(ii) ` 10,27,127 approx
(iii) ` 9,79,002 approx
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Page 2


MODEL TEST PAPER 6  
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. Fly Ltd. made a sale of INR 7,00,000 to Wings International in May 2023 and
recognised Trade Receivables which was initially recorded at the prevailing
exchange rate on the date of sales, transaction recorded at US$ 1= ` 79.4.
The Company also took a loan from U.S Company for ` 10,00000 in December
2023 which was initially recorded at the prevailing exchange rate on the date
of transaction, transaction recorded at US$ 1= ` 81.1.
On 31
st
 March 2024, exchange rate was US$ 1 = ` 83.3
a. What will be the closing balance of Trade Receivables on 31
st
 March
2024:
(i) ` 700,000
(ii) ` 7,14,978 approx
(iii) ` 7,34,383 approx
(iv) ` 7,50,000 approx
b. How much is the reporting difference (gain or loss) in case of Trade
Receivable:
(i) Gain of ` 34,383 approx
(ii) Loss of ` 34,383 approx
(iii) Gain of ` 19,395 approx
(iv) Loss of ` 19,395 approx
c. What will be the closing balance of Loan as on 31
st
 March 2024:
(i) ` 10,00,000
(ii) ` 10,27,127 approx
(iii) ` 9,79,002 approx
61
 (iv) ` 10,79,002 approx 
d.     How much is the reporting difference (gain or loss) in case of Loan: 
 (i) Gain of ` 48,087 approx 
 (ii) Loss of ` 48,087 approx  
 (iii) Gain of ` 27,127 approx  
 (iv) Loss of ` 27,127 approx  
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
2.  X Ltd. purchased 3,000 shares of Amazing Ltd. in December 2023 @ ` 100 
each and paid brokerage @ 1%. In May 2024, Amazing Ltd. issued bonus 
shares at one for every three shares held by shareholders.   
X Ltd. sold 1000 shares in September 2024 at ` 110 each. After issue of 
bonus, shares were quoted at ` 95.  In December 2024, the shares were 
quoted at ` 70. 
a. What would be the carrying cost of investments in Amazing Ltd. after 
sale of shares as per AS 13: 
(i) ` 3,03,000 
(ii) ` 2,27,250 
(iii) ` 3,00,000 
(iv) ` 3,30,000 
d. What is the cost of bonus shares: 
(i) ` 1,00,000 
(ii) ` 1,10,000  
(iii)   Nil 
(iv) ` 1,01,000 
c.  What is the profit on sale of Bonus Shares: 
(i) ` 100,000 
(ii) ` 75,750 
(iii) ` 34,250 
(iv) ` 1,01,000 
d. What would be the carrying cost of investments in Amazing Ltd. in 
quarter ending in December 2024 as  per AS 13: 
(i) ` 2,10,000 
(ii) ` 2,27,250 
(iii) ` 2,20,000 
(iv) ` 3,00,000 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
62
Page 3


MODEL TEST PAPER 6  
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. Fly Ltd. made a sale of INR 7,00,000 to Wings International in May 2023 and
recognised Trade Receivables which was initially recorded at the prevailing
exchange rate on the date of sales, transaction recorded at US$ 1= ` 79.4.
The Company also took a loan from U.S Company for ` 10,00000 in December
2023 which was initially recorded at the prevailing exchange rate on the date
of transaction, transaction recorded at US$ 1= ` 81.1.
On 31
st
 March 2024, exchange rate was US$ 1 = ` 83.3
a. What will be the closing balance of Trade Receivables on 31
st
 March
2024:
(i) ` 700,000
(ii) ` 7,14,978 approx
(iii) ` 7,34,383 approx
(iv) ` 7,50,000 approx
b. How much is the reporting difference (gain or loss) in case of Trade
Receivable:
(i) Gain of ` 34,383 approx
(ii) Loss of ` 34,383 approx
(iii) Gain of ` 19,395 approx
(iv) Loss of ` 19,395 approx
c. What will be the closing balance of Loan as on 31
st
 March 2024:
(i) ` 10,00,000
(ii) ` 10,27,127 approx
(iii) ` 9,79,002 approx
61
 (iv) ` 10,79,002 approx 
d.     How much is the reporting difference (gain or loss) in case of Loan: 
 (i) Gain of ` 48,087 approx 
 (ii) Loss of ` 48,087 approx  
 (iii) Gain of ` 27,127 approx  
 (iv) Loss of ` 27,127 approx  
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
2.  X Ltd. purchased 3,000 shares of Amazing Ltd. in December 2023 @ ` 100 
each and paid brokerage @ 1%. In May 2024, Amazing Ltd. issued bonus 
shares at one for every three shares held by shareholders.   
X Ltd. sold 1000 shares in September 2024 at ` 110 each. After issue of 
bonus, shares were quoted at ` 95.  In December 2024, the shares were 
quoted at ` 70. 
a. What would be the carrying cost of investments in Amazing Ltd. after 
sale of shares as per AS 13: 
(i) ` 3,03,000 
(ii) ` 2,27,250 
(iii) ` 3,00,000 
(iv) ` 3,30,000 
d. What is the cost of bonus shares: 
(i) ` 1,00,000 
(ii) ` 1,10,000  
(iii)   Nil 
(iv) ` 1,01,000 
c.  What is the profit on sale of Bonus Shares: 
(i) ` 100,000 
(ii) ` 75,750 
(iii) ` 34,250 
(iv) ` 1,01,000 
d. What would be the carrying cost of investments in Amazing Ltd. in 
quarter ending in December 2024 as  per AS 13: 
(i) ` 2,10,000 
(ii) ` 2,27,250 
(iii) ` 2,20,000 
(iv) ` 3,00,000 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
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3. Sun Limited has acquired 40% share in Moon Ltd. for ` 500,000 on 
01.07.2023.  Moon Ltd. is holding 40% stake in Star Limited. Now, sun limited 
can exercise significant influence on Moon Limited. Moon limited declared 
dividend of ` 80,000 for the Financial Year 2022-23 on 15.09.2023. For the 
year 2023-24, Moon Ltd. earned profit of ` 4,00,000 and declared dividend for 
` 90,000 on 15.09.2024.  
a. With respect to relationship between Companies, it can be said that: 
(i) Star Ltd. is associate of Sun Ltd.  
(ii) Moon Ltd. and Star Ltd. both are associates of Sun Ltd.  
(iii) Moon Ltd. is an associate of Sun Ltd.  
(iv) Sun Ltd. is Parent of both Moon Ltd. and Star Ltd. 
b. What will be the carrying amount of investment in Separate Financial 
Statements of Sun Limited as on 31.03.2024? 
(i) ` 5,00,000 
(ii) ` 5,80,000 
(iii) ` 4,68,000 
(iv) ` 5,32,000 
c. What will be the carrying amount of investment in Consolidated Financial 
Statements of Sun Limited as on 31.03.2024? 
(i) ` 9,00,000 
(ii) ` 5,88,000 
(iii) ` 4,52,000 
(iv) ` 6,20,000 
d. As per AS 23, the existence of significant influence by an investor is 
usually evidenced in one or more of the following ways: 
(a) participation in policy making processes 
(b) interchange of managerial personnel 
(c) right to receive dividend 
(d) provision of essential technical information 
(i)  All the statements are correct 
(ii)  Statements (a), (b) and (c) are correct 
(iii)  Statements (b), (c) and (d) are correct 
(iv)  Statements (a), (b) and (d) are correct 
 
 Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
 
63
Page 4


MODEL TEST PAPER 6  
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. Fly Ltd. made a sale of INR 7,00,000 to Wings International in May 2023 and
recognised Trade Receivables which was initially recorded at the prevailing
exchange rate on the date of sales, transaction recorded at US$ 1= ` 79.4.
The Company also took a loan from U.S Company for ` 10,00000 in December
2023 which was initially recorded at the prevailing exchange rate on the date
of transaction, transaction recorded at US$ 1= ` 81.1.
On 31
st
 March 2024, exchange rate was US$ 1 = ` 83.3
a. What will be the closing balance of Trade Receivables on 31
st
 March
2024:
(i) ` 700,000
(ii) ` 7,14,978 approx
(iii) ` 7,34,383 approx
(iv) ` 7,50,000 approx
b. How much is the reporting difference (gain or loss) in case of Trade
Receivable:
(i) Gain of ` 34,383 approx
(ii) Loss of ` 34,383 approx
(iii) Gain of ` 19,395 approx
(iv) Loss of ` 19,395 approx
c. What will be the closing balance of Loan as on 31
st
 March 2024:
(i) ` 10,00,000
(ii) ` 10,27,127 approx
(iii) ` 9,79,002 approx
61
 (iv) ` 10,79,002 approx 
d.     How much is the reporting difference (gain or loss) in case of Loan: 
 (i) Gain of ` 48,087 approx 
 (ii) Loss of ` 48,087 approx  
 (iii) Gain of ` 27,127 approx  
 (iv) Loss of ` 27,127 approx  
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
2.  X Ltd. purchased 3,000 shares of Amazing Ltd. in December 2023 @ ` 100 
each and paid brokerage @ 1%. In May 2024, Amazing Ltd. issued bonus 
shares at one for every three shares held by shareholders.   
X Ltd. sold 1000 shares in September 2024 at ` 110 each. After issue of 
bonus, shares were quoted at ` 95.  In December 2024, the shares were 
quoted at ` 70. 
a. What would be the carrying cost of investments in Amazing Ltd. after 
sale of shares as per AS 13: 
(i) ` 3,03,000 
(ii) ` 2,27,250 
(iii) ` 3,00,000 
(iv) ` 3,30,000 
d. What is the cost of bonus shares: 
(i) ` 1,00,000 
(ii) ` 1,10,000  
(iii)   Nil 
(iv) ` 1,01,000 
c.  What is the profit on sale of Bonus Shares: 
(i) ` 100,000 
(ii) ` 75,750 
(iii) ` 34,250 
(iv) ` 1,01,000 
d. What would be the carrying cost of investments in Amazing Ltd. in 
quarter ending in December 2024 as  per AS 13: 
(i) ` 2,10,000 
(ii) ` 2,27,250 
(iii) ` 2,20,000 
(iv) ` 3,00,000 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
62
3. Sun Limited has acquired 40% share in Moon Ltd. for ` 500,000 on 
01.07.2023.  Moon Ltd. is holding 40% stake in Star Limited. Now, sun limited 
can exercise significant influence on Moon Limited. Moon limited declared 
dividend of ` 80,000 for the Financial Year 2022-23 on 15.09.2023. For the 
year 2023-24, Moon Ltd. earned profit of ` 4,00,000 and declared dividend for 
` 90,000 on 15.09.2024.  
a. With respect to relationship between Companies, it can be said that: 
(i) Star Ltd. is associate of Sun Ltd.  
(ii) Moon Ltd. and Star Ltd. both are associates of Sun Ltd.  
(iii) Moon Ltd. is an associate of Sun Ltd.  
(iv) Sun Ltd. is Parent of both Moon Ltd. and Star Ltd. 
b. What will be the carrying amount of investment in Separate Financial 
Statements of Sun Limited as on 31.03.2024? 
(i) ` 5,00,000 
(ii) ` 5,80,000 
(iii) ` 4,68,000 
(iv) ` 5,32,000 
c. What will be the carrying amount of investment in Consolidated Financial 
Statements of Sun Limited as on 31.03.2024? 
(i) ` 9,00,000 
(ii) ` 5,88,000 
(iii) ` 4,52,000 
(iv) ` 6,20,000 
d. As per AS 23, the existence of significant influence by an investor is 
usually evidenced in one or more of the following ways: 
(a) participation in policy making processes 
(b) interchange of managerial personnel 
(c) right to receive dividend 
(d) provision of essential technical information 
(i)  All the statements are correct 
(ii)  Statements (a), (b) and (c) are correct 
(iii)  Statements (b), (c) and (d) are correct 
(iv)  Statements (a), (b) and (d) are correct 
 
 Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
 
63
4. Cost of current investment acquired was ` 1000 but the fair value was ` 800. 
The Investment was recorded at ` 800. Now the fair value of Investment is Rs 
1200. At what value should it be recorded and how much gain will be credited 
to profit and loss account. 
(i) No change is required and it will continue at ` 800  
(ii) Current investment will be recorded at ` 1000 and gain of ` 200 will be 
credited to profit and loss account. 
(iii) Current investment will be recorded at ` 1200 and gain of ` 400 will be 
credited to profit and loss account. 
(iv) Current investment will be recorded at ` 1200 but no gain will be credited 
to profit and loss account. (2 Marks) 
5. As per AS 20 an enterprise should present/disclose the following: 
(a) the amounts used as the numerators in calculating basic and diluted 
earnings per share, and a reconciliation of those amounts to the net profit 
or loss for the period. 
(b) the weighted average number of equity shares used as the denominator 
in calculating basic and diluted earnings per share, and a reconciliation 
of these denominators to each other. 
(c) basic and diluted earnings per share, even if the amounts disclosed are 
negative (a loss per share). 
(d) the nominal value of shares along with the earnings per share figures. 
(i)  All the statements are correct 
(ii  Statements (a), (b) and (c) are correct 
(iii)  Statements (b), (c and (d) are correct 
(iv)  Statements (a), (b and (c) are correct (2 Marks) 
6. Accounting Standard 10, Property, Plant and Equipment is applicable to: 
(i) Biological Assets (other than Bearer Plants) related to agricultural 
activity 
(ii) Wasting Assets including Mineral rights, Expenditure on the exploration 
for and extraction of minerals, oil, natural gas and similar non 
regenerative resources 
(iii) Inventories 
(iv) Bearer Plant (except produce on Bearer Plants) (2 Marks) 
 
  
64
Page 5


MODEL TEST PAPER 6  
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. Fly Ltd. made a sale of INR 7,00,000 to Wings International in May 2023 and
recognised Trade Receivables which was initially recorded at the prevailing
exchange rate on the date of sales, transaction recorded at US$ 1= ` 79.4.
The Company also took a loan from U.S Company for ` 10,00000 in December
2023 which was initially recorded at the prevailing exchange rate on the date
of transaction, transaction recorded at US$ 1= ` 81.1.
On 31
st
 March 2024, exchange rate was US$ 1 = ` 83.3
a. What will be the closing balance of Trade Receivables on 31
st
 March
2024:
(i) ` 700,000
(ii) ` 7,14,978 approx
(iii) ` 7,34,383 approx
(iv) ` 7,50,000 approx
b. How much is the reporting difference (gain or loss) in case of Trade
Receivable:
(i) Gain of ` 34,383 approx
(ii) Loss of ` 34,383 approx
(iii) Gain of ` 19,395 approx
(iv) Loss of ` 19,395 approx
c. What will be the closing balance of Loan as on 31
st
 March 2024:
(i) ` 10,00,000
(ii) ` 10,27,127 approx
(iii) ` 9,79,002 approx
61
 (iv) ` 10,79,002 approx 
d.     How much is the reporting difference (gain or loss) in case of Loan: 
 (i) Gain of ` 48,087 approx 
 (ii) Loss of ` 48,087 approx  
 (iii) Gain of ` 27,127 approx  
 (iv) Loss of ` 27,127 approx  
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
2.  X Ltd. purchased 3,000 shares of Amazing Ltd. in December 2023 @ ` 100 
each and paid brokerage @ 1%. In May 2024, Amazing Ltd. issued bonus 
shares at one for every three shares held by shareholders.   
X Ltd. sold 1000 shares in September 2024 at ` 110 each. After issue of 
bonus, shares were quoted at ` 95.  In December 2024, the shares were 
quoted at ` 70. 
a. What would be the carrying cost of investments in Amazing Ltd. after 
sale of shares as per AS 13: 
(i) ` 3,03,000 
(ii) ` 2,27,250 
(iii) ` 3,00,000 
(iv) ` 3,30,000 
d. What is the cost of bonus shares: 
(i) ` 1,00,000 
(ii) ` 1,10,000  
(iii)   Nil 
(iv) ` 1,01,000 
c.  What is the profit on sale of Bonus Shares: 
(i) ` 100,000 
(ii) ` 75,750 
(iii) ` 34,250 
(iv) ` 1,01,000 
d. What would be the carrying cost of investments in Amazing Ltd. in 
quarter ending in December 2024 as  per AS 13: 
(i) ` 2,10,000 
(ii) ` 2,27,250 
(iii) ` 2,20,000 
(iv) ` 3,00,000 
Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
62
3. Sun Limited has acquired 40% share in Moon Ltd. for ` 500,000 on 
01.07.2023.  Moon Ltd. is holding 40% stake in Star Limited. Now, sun limited 
can exercise significant influence on Moon Limited. Moon limited declared 
dividend of ` 80,000 for the Financial Year 2022-23 on 15.09.2023. For the 
year 2023-24, Moon Ltd. earned profit of ` 4,00,000 and declared dividend for 
` 90,000 on 15.09.2024.  
a. With respect to relationship between Companies, it can be said that: 
(i) Star Ltd. is associate of Sun Ltd.  
(ii) Moon Ltd. and Star Ltd. both are associates of Sun Ltd.  
(iii) Moon Ltd. is an associate of Sun Ltd.  
(iv) Sun Ltd. is Parent of both Moon Ltd. and Star Ltd. 
b. What will be the carrying amount of investment in Separate Financial 
Statements of Sun Limited as on 31.03.2024? 
(i) ` 5,00,000 
(ii) ` 5,80,000 
(iii) ` 4,68,000 
(iv) ` 5,32,000 
c. What will be the carrying amount of investment in Consolidated Financial 
Statements of Sun Limited as on 31.03.2024? 
(i) ` 9,00,000 
(ii) ` 5,88,000 
(iii) ` 4,52,000 
(iv) ` 6,20,000 
d. As per AS 23, the existence of significant influence by an investor is 
usually evidenced in one or more of the following ways: 
(a) participation in policy making processes 
(b) interchange of managerial personnel 
(c) right to receive dividend 
(d) provision of essential technical information 
(i)  All the statements are correct 
(ii)  Statements (a), (b) and (c) are correct 
(iii)  Statements (b), (c) and (d) are correct 
(iv)  Statements (a), (b) and (d) are correct 
 
 Multiple Choice Questions [4 MCQs of 2 Marks each: Total 8 Marks] 
 
63
4. Cost of current investment acquired was ` 1000 but the fair value was ` 800. 
The Investment was recorded at ` 800. Now the fair value of Investment is Rs 
1200. At what value should it be recorded and how much gain will be credited 
to profit and loss account. 
(i) No change is required and it will continue at ` 800  
(ii) Current investment will be recorded at ` 1000 and gain of ` 200 will be 
credited to profit and loss account. 
(iii) Current investment will be recorded at ` 1200 and gain of ` 400 will be 
credited to profit and loss account. 
(iv) Current investment will be recorded at ` 1200 but no gain will be credited 
to profit and loss account. (2 Marks) 
5. As per AS 20 an enterprise should present/disclose the following: 
(a) the amounts used as the numerators in calculating basic and diluted 
earnings per share, and a reconciliation of those amounts to the net profit 
or loss for the period. 
(b) the weighted average number of equity shares used as the denominator 
in calculating basic and diluted earnings per share, and a reconciliation 
of these denominators to each other. 
(c) basic and diluted earnings per share, even if the amounts disclosed are 
negative (a loss per share). 
(d) the nominal value of shares along with the earnings per share figures. 
(i)  All the statements are correct 
(ii  Statements (a), (b) and (c) are correct 
(iii)  Statements (b), (c and (d) are correct 
(iv)  Statements (a), (b and (c) are correct (2 Marks) 
6. Accounting Standard 10, Property, Plant and Equipment is applicable to: 
(i) Biological Assets (other than Bearer Plants) related to agricultural 
activity 
(ii) Wasting Assets including Mineral rights, Expenditure on the exploration 
for and extraction of minerals, oil, natural gas and similar non 
regenerative resources 
(iii) Inventories 
(iv) Bearer Plant (except produce on Bearer Plants) (2 Marks) 
 
  
64
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. provides after sales warranty for two years to its customers. Based 
on past experience, the company has the following policy for making 
provision for warranties on the invoice amount, on the remaining balance 
warranty period.  
Less than 1 year: 2% provision  
More than 1 year: 3% provision 
The company has raised invoices as under : 
Invoice Date      Amount (`) 
11
th
 Feb, 2022      60,000 
25th Dec, 2022      40,000 
04
th
 Oct, 2023            1,35,000 
 Calculate the provision to be made for warranty under AS-29 as at  
31
st 
March, 2023 and 31
st
 March, 2024.  Also compute amount to be 
debited to P & L account for the year ended 31
st
 March, 2024. 
(b) As per provisions of AS-26, how would you deal to the following 
situations: 
(1)  ` 23,00,000 paid by a manufacturing company to the legal advisor 
for defending the patent of a product is treated as a capital 
expenditure. 
(2) During the year 2023-24, a company spent ` 7,00,000 for publicity 
and research expenses on one of its new consumer products which 
was marketed in the same accounting year but proved to be a 
failure. 
(3)  A company spent ` 25,00,000 in the past three years to develop a 
product, these expenses were charged to profit and loss account 
since they did not meet AS-26 criteria for capitalization. In the 
current year approval of the concerned authority has been 
received. The company wishes to capitalize ` 25,00,000 by 
disclosing it as a prior period item. 
(4)  A company with a turnover of ` 200 crores and an annual 
advertising budget of ` 50,00,000 had taken up for the marketing of 
a new product by a company.  It was estimated that the company 
would have a turnover of ` 20 crore from the new product. The 
company had debited to its Profit & Loss Account the total 
expenditure of ` 50,00,000 incurred on extensive special initial 
advertisement campaign for the new product. 
65