Advanced Accounting (Group I) Model Test Paper - 7 (Questions) - CA Intermediate PDF Download

 Page 1


MODEL TEST PAPER 7
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. Excellence Ltd. is a Real Estate Company which constructs residential and
commercial projects for selling. The Company has commenced a new project
and the expenses incurred are as follows:
• The cost of land acquired for Project is ` 10 crore
• Cost of construction incurred  is ` 25 crores.
• The Company also incurred cost of ` 10 lacs for various administrative
meetings in relation to planning of the building.
• The construction of building completed and at the end of the year 1, the
net realisable value of the building was ` 40 crore.
• At the beginning of the next year (year 2), the Company decided to use
the building as its corporate office.
• The Company further incurred ` 50 lacs for making necessary changes
in the structure for using it as corporate office in accordance with
government norms for commercial spaces. Without these changes the
office cannot be set up.
• Ignore the effect of depreciation, if any.
In view of above information, answer the following issues: 
(i) At the end of Year 1, how the building should be classified:
(a) Inventory
(b) Investments
(c) Property, Plant and Equipment
(d) Intangible Asset
72
Page 2


MODEL TEST PAPER 7
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. Excellence Ltd. is a Real Estate Company which constructs residential and
commercial projects for selling. The Company has commenced a new project
and the expenses incurred are as follows:
• The cost of land acquired for Project is ` 10 crore
• Cost of construction incurred  is ` 25 crores.
• The Company also incurred cost of ` 10 lacs for various administrative
meetings in relation to planning of the building.
• The construction of building completed and at the end of the year 1, the
net realisable value of the building was ` 40 crore.
• At the beginning of the next year (year 2), the Company decided to use
the building as its corporate office.
• The Company further incurred ` 50 lacs for making necessary changes
in the structure for using it as corporate office in accordance with
government norms for commercial spaces. Without these changes the
office cannot be set up.
• Ignore the effect of depreciation, if any.
In view of above information, answer the following issues: 
(i) At the end of Year 1, how the building should be classified:
(a) Inventory
(b) Investments
(c) Property, Plant and Equipment
(d) Intangible Asset
72
(ii) At the end of Year 1, at value Project should be recognised:
(a) ` 40 Crore
(b) ` 35 Crore
(c) ` 35.10 Crore
(d) ` 25 Crore
(iii) At the end of Year 2, when the intention is to use the building as
corporate office, it should be classified as:
(a) Inventory
(b) Investments
(c) Property, Plant and Equipment
(d) Intangible Assets
(iv) At the end of Year 2, the Project should be valued at:
(a) ` 40 Crore
(b) ` 35.50 Crore
(c) ` 35.10 Crore
(d) ` 25 Crore
Multiple Choice Questions [4 MCQs of 2 Marks each: 
Total 8 Marks] 
2. Supercool ltd. is a manufacturing company, engaged in manufacturing eco-
friendly equipment.  On April 1, 2023, the Company received a grant of ` 20
crore from the Government (which is 25% of the total capital of the Company)
for various purposes that the company deems fit and no repayment is required
to be made to Government.
The Company also borrowed ` 10 crore from financial Institutions and interest
paid on the same during the year is ` 1 lac.
The Company acquired plant and machinery from the funds for ` 10 crore and
` 1 crore was spent on its installation and assembly.
` 10 lacs were spent on professional fees necessary for installation and
operating of the machine. The Company also spent ` 50 lacs on revenue
expenditure.
The Plant and Machinery was ready for its intended use on September 30,
2023)
The depreciation on plant and machinery is charged @10%.
(i) The grant of ` 20 crores received by the Company should be presented
as:
(a) Grants related to Revenue
(b) Grants related to Specific Fixed Assets
(c) Capital Reserve
73
Page 3


MODEL TEST PAPER 7
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. Excellence Ltd. is a Real Estate Company which constructs residential and
commercial projects for selling. The Company has commenced a new project
and the expenses incurred are as follows:
• The cost of land acquired for Project is ` 10 crore
• Cost of construction incurred  is ` 25 crores.
• The Company also incurred cost of ` 10 lacs for various administrative
meetings in relation to planning of the building.
• The construction of building completed and at the end of the year 1, the
net realisable value of the building was ` 40 crore.
• At the beginning of the next year (year 2), the Company decided to use
the building as its corporate office.
• The Company further incurred ` 50 lacs for making necessary changes
in the structure for using it as corporate office in accordance with
government norms for commercial spaces. Without these changes the
office cannot be set up.
• Ignore the effect of depreciation, if any.
In view of above information, answer the following issues: 
(i) At the end of Year 1, how the building should be classified:
(a) Inventory
(b) Investments
(c) Property, Plant and Equipment
(d) Intangible Asset
72
(ii) At the end of Year 1, at value Project should be recognised:
(a) ` 40 Crore
(b) ` 35 Crore
(c) ` 35.10 Crore
(d) ` 25 Crore
(iii) At the end of Year 2, when the intention is to use the building as
corporate office, it should be classified as:
(a) Inventory
(b) Investments
(c) Property, Plant and Equipment
(d) Intangible Assets
(iv) At the end of Year 2, the Project should be valued at:
(a) ` 40 Crore
(b) ` 35.50 Crore
(c) ` 35.10 Crore
(d) ` 25 Crore
Multiple Choice Questions [4 MCQs of 2 Marks each: 
Total 8 Marks] 
2. Supercool ltd. is a manufacturing company, engaged in manufacturing eco-
friendly equipment.  On April 1, 2023, the Company received a grant of ` 20
crore from the Government (which is 25% of the total capital of the Company)
for various purposes that the company deems fit and no repayment is required
to be made to Government.
The Company also borrowed ` 10 crore from financial Institutions and interest
paid on the same during the year is ` 1 lac.
The Company acquired plant and machinery from the funds for ` 10 crore and
` 1 crore was spent on its installation and assembly.
` 10 lacs were spent on professional fees necessary for installation and
operating of the machine. The Company also spent ` 50 lacs on revenue
expenditure.
The Plant and Machinery was ready for its intended use on September 30,
2023)
The depreciation on plant and machinery is charged @10%.
(i) The grant of ` 20 crores received by the Company should be presented
as:
(a) Grants related to Revenue
(b) Grants related to Specific Fixed Assets
(c) Capital Reserve
73
(d) Other Income
(ii) At what value the plant and machinery acquired should be recognised
as at 31
st
 March 2024:
(a) ` 11.10 Crore
(b) ` 11 Crore
(c) ` 10.54 Crore
(d) ` 11.60 Crore
(iii) The revenue expenditure of ` 50 lacs should be recognised as:
(a) Part of Plant and Machinery
(b) Part of Grant
(c) Revenue expenditure in the Profit and Loss
(d) Deducted from loan
(iv) Which of the following statement is true:
(a) Plant and Machinery has been acquired out of Government Grant
so the same should be disclosed at Nil value.
(b) Plant and Machinery belongs to Financial Institution
(c) Plant and Machinery belong to the Company and should be
recognised as its Property, Plant and Equipment
(d) Plant and Machinery should not be disclosed in the financial
statements of the Company at all
Multiple Choice Questions [4 MCQs of 2 Marks each: 
Total 8 Marks] 
3. Super Ltd., a manufacturing company, has the following summarized Balance
Sheet as of March 31, 2024:
Equity Shares of ` 10 each fully paid up: ` 17,00,000
Reserves & Surplus:
Revenue Reserve: ` 23,50,000 
Securities Premium: ` 2,50,000 
Profit & Loss Account: ` 2,00,000 
Infrastructure Development Reserve: ` 1,50,000 
Secured Loan: 
9% Debentures: ` 38,00,000 
Unsecured Loan: ` 8,50,000 
Property, Plant & Equipment: ` 58,50,000 
Current Assets: ` 34,50,000 
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Page 4


MODEL TEST PAPER 7
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. Excellence Ltd. is a Real Estate Company which constructs residential and
commercial projects for selling. The Company has commenced a new project
and the expenses incurred are as follows:
• The cost of land acquired for Project is ` 10 crore
• Cost of construction incurred  is ` 25 crores.
• The Company also incurred cost of ` 10 lacs for various administrative
meetings in relation to planning of the building.
• The construction of building completed and at the end of the year 1, the
net realisable value of the building was ` 40 crore.
• At the beginning of the next year (year 2), the Company decided to use
the building as its corporate office.
• The Company further incurred ` 50 lacs for making necessary changes
in the structure for using it as corporate office in accordance with
government norms for commercial spaces. Without these changes the
office cannot be set up.
• Ignore the effect of depreciation, if any.
In view of above information, answer the following issues: 
(i) At the end of Year 1, how the building should be classified:
(a) Inventory
(b) Investments
(c) Property, Plant and Equipment
(d) Intangible Asset
72
(ii) At the end of Year 1, at value Project should be recognised:
(a) ` 40 Crore
(b) ` 35 Crore
(c) ` 35.10 Crore
(d) ` 25 Crore
(iii) At the end of Year 2, when the intention is to use the building as
corporate office, it should be classified as:
(a) Inventory
(b) Investments
(c) Property, Plant and Equipment
(d) Intangible Assets
(iv) At the end of Year 2, the Project should be valued at:
(a) ` 40 Crore
(b) ` 35.50 Crore
(c) ` 35.10 Crore
(d) ` 25 Crore
Multiple Choice Questions [4 MCQs of 2 Marks each: 
Total 8 Marks] 
2. Supercool ltd. is a manufacturing company, engaged in manufacturing eco-
friendly equipment.  On April 1, 2023, the Company received a grant of ` 20
crore from the Government (which is 25% of the total capital of the Company)
for various purposes that the company deems fit and no repayment is required
to be made to Government.
The Company also borrowed ` 10 crore from financial Institutions and interest
paid on the same during the year is ` 1 lac.
The Company acquired plant and machinery from the funds for ` 10 crore and
` 1 crore was spent on its installation and assembly.
` 10 lacs were spent on professional fees necessary for installation and
operating of the machine. The Company also spent ` 50 lacs on revenue
expenditure.
The Plant and Machinery was ready for its intended use on September 30,
2023)
The depreciation on plant and machinery is charged @10%.
(i) The grant of ` 20 crores received by the Company should be presented
as:
(a) Grants related to Revenue
(b) Grants related to Specific Fixed Assets
(c) Capital Reserve
73
(d) Other Income
(ii) At what value the plant and machinery acquired should be recognised
as at 31
st
 March 2024:
(a) ` 11.10 Crore
(b) ` 11 Crore
(c) ` 10.54 Crore
(d) ` 11.60 Crore
(iii) The revenue expenditure of ` 50 lacs should be recognised as:
(a) Part of Plant and Machinery
(b) Part of Grant
(c) Revenue expenditure in the Profit and Loss
(d) Deducted from loan
(iv) Which of the following statement is true:
(a) Plant and Machinery has been acquired out of Government Grant
so the same should be disclosed at Nil value.
(b) Plant and Machinery belongs to Financial Institution
(c) Plant and Machinery belong to the Company and should be
recognised as its Property, Plant and Equipment
(d) Plant and Machinery should not be disclosed in the financial
statements of the Company at all
Multiple Choice Questions [4 MCQs of 2 Marks each: 
Total 8 Marks] 
3. Super Ltd., a manufacturing company, has the following summarized Balance
Sheet as of March 31, 2024:
Equity Shares of ` 10 each fully paid up: ` 17,00,000
Reserves & Surplus:
Revenue Reserve: ` 23,50,000 
Securities Premium: ` 2,50,000 
Profit & Loss Account: ` 2,00,000 
Infrastructure Development Reserve: ` 1,50,000 
Secured Loan: 
9% Debentures: ` 38,00,000 
Unsecured Loan: ` 8,50,000 
Property, Plant & Equipment: ` 58,50,000 
Current Assets: ` 34,50,000 
74
Super Ltd. plans to buy back 35,000 equity shares of ` 10 each fully paid up 
on April 1, 2024, at ` 30 per share. The buyback is authorized by its articles, 
and necessary resolutions have been passed. The payment for the buyback 
will be made using the company's bank balance, which is part of its current 
assets. 
Answer the following questions based on the above information: 
(i) As per The Companies Act, 2013 under Section 68 (2) the buy-back of
shares in any financial year must not exceed
(a) 20% of its total paid-up capital and free reserves
(b) 25% of its total paid-up capital and free reserves
(c) 25% of its total paid-up capital
(d) 20% of its total paid-up capital
(ii) How many shares can Super Ltd. buy back according to the Shares
Outstanding Test?
(a) 35,000 shares
(b) 42,500 shares
(c) 37,500 shares
(d) 54,375 shares
(iii) What is the maximum number of shares that can be bought back
according to the Resources Test?
(a) 35,000 shares
(b) 42,500 shares
(c) 37,500 shares
(d) 54,375 shares
(iv) According to the Debt Equity Ratio Test, what is the maximum number
of shares that can be bought back?
(a) 35,000 shares
(b) 42,500 shares
(c) 37,500 shares
(d) 54,375 shares
Multiple Choice Questions [4 MCQs of 2 Marks each: 
Total 8 Marks] 
4. Accounting Standard 19, Lease is applicable on following Leases:
(a) Lease agreements to explore for or use of natural resources, such as oil,
gas, timber metals and other mineral rights.
(b) Legal owner of an asset conveys to another party in return for a payment
or series of periodic payments, the right to use an asset for an agreed
period of time.
75
Page 5


MODEL TEST PAPER 7
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. Excellence Ltd. is a Real Estate Company which constructs residential and
commercial projects for selling. The Company has commenced a new project
and the expenses incurred are as follows:
• The cost of land acquired for Project is ` 10 crore
• Cost of construction incurred  is ` 25 crores.
• The Company also incurred cost of ` 10 lacs for various administrative
meetings in relation to planning of the building.
• The construction of building completed and at the end of the year 1, the
net realisable value of the building was ` 40 crore.
• At the beginning of the next year (year 2), the Company decided to use
the building as its corporate office.
• The Company further incurred ` 50 lacs for making necessary changes
in the structure for using it as corporate office in accordance with
government norms for commercial spaces. Without these changes the
office cannot be set up.
• Ignore the effect of depreciation, if any.
In view of above information, answer the following issues: 
(i) At the end of Year 1, how the building should be classified:
(a) Inventory
(b) Investments
(c) Property, Plant and Equipment
(d) Intangible Asset
72
(ii) At the end of Year 1, at value Project should be recognised:
(a) ` 40 Crore
(b) ` 35 Crore
(c) ` 35.10 Crore
(d) ` 25 Crore
(iii) At the end of Year 2, when the intention is to use the building as
corporate office, it should be classified as:
(a) Inventory
(b) Investments
(c) Property, Plant and Equipment
(d) Intangible Assets
(iv) At the end of Year 2, the Project should be valued at:
(a) ` 40 Crore
(b) ` 35.50 Crore
(c) ` 35.10 Crore
(d) ` 25 Crore
Multiple Choice Questions [4 MCQs of 2 Marks each: 
Total 8 Marks] 
2. Supercool ltd. is a manufacturing company, engaged in manufacturing eco-
friendly equipment.  On April 1, 2023, the Company received a grant of ` 20
crore from the Government (which is 25% of the total capital of the Company)
for various purposes that the company deems fit and no repayment is required
to be made to Government.
The Company also borrowed ` 10 crore from financial Institutions and interest
paid on the same during the year is ` 1 lac.
The Company acquired plant and machinery from the funds for ` 10 crore and
` 1 crore was spent on its installation and assembly.
` 10 lacs were spent on professional fees necessary for installation and
operating of the machine. The Company also spent ` 50 lacs on revenue
expenditure.
The Plant and Machinery was ready for its intended use on September 30,
2023)
The depreciation on plant and machinery is charged @10%.
(i) The grant of ` 20 crores received by the Company should be presented
as:
(a) Grants related to Revenue
(b) Grants related to Specific Fixed Assets
(c) Capital Reserve
73
(d) Other Income
(ii) At what value the plant and machinery acquired should be recognised
as at 31
st
 March 2024:
(a) ` 11.10 Crore
(b) ` 11 Crore
(c) ` 10.54 Crore
(d) ` 11.60 Crore
(iii) The revenue expenditure of ` 50 lacs should be recognised as:
(a) Part of Plant and Machinery
(b) Part of Grant
(c) Revenue expenditure in the Profit and Loss
(d) Deducted from loan
(iv) Which of the following statement is true:
(a) Plant and Machinery has been acquired out of Government Grant
so the same should be disclosed at Nil value.
(b) Plant and Machinery belongs to Financial Institution
(c) Plant and Machinery belong to the Company and should be
recognised as its Property, Plant and Equipment
(d) Plant and Machinery should not be disclosed in the financial
statements of the Company at all
Multiple Choice Questions [4 MCQs of 2 Marks each: 
Total 8 Marks] 
3. Super Ltd., a manufacturing company, has the following summarized Balance
Sheet as of March 31, 2024:
Equity Shares of ` 10 each fully paid up: ` 17,00,000
Reserves & Surplus:
Revenue Reserve: ` 23,50,000 
Securities Premium: ` 2,50,000 
Profit & Loss Account: ` 2,00,000 
Infrastructure Development Reserve: ` 1,50,000 
Secured Loan: 
9% Debentures: ` 38,00,000 
Unsecured Loan: ` 8,50,000 
Property, Plant & Equipment: ` 58,50,000 
Current Assets: ` 34,50,000 
74
Super Ltd. plans to buy back 35,000 equity shares of ` 10 each fully paid up 
on April 1, 2024, at ` 30 per share. The buyback is authorized by its articles, 
and necessary resolutions have been passed. The payment for the buyback 
will be made using the company's bank balance, which is part of its current 
assets. 
Answer the following questions based on the above information: 
(i) As per The Companies Act, 2013 under Section 68 (2) the buy-back of
shares in any financial year must not exceed
(a) 20% of its total paid-up capital and free reserves
(b) 25% of its total paid-up capital and free reserves
(c) 25% of its total paid-up capital
(d) 20% of its total paid-up capital
(ii) How many shares can Super Ltd. buy back according to the Shares
Outstanding Test?
(a) 35,000 shares
(b) 42,500 shares
(c) 37,500 shares
(d) 54,375 shares
(iii) What is the maximum number of shares that can be bought back
according to the Resources Test?
(a) 35,000 shares
(b) 42,500 shares
(c) 37,500 shares
(d) 54,375 shares
(iv) According to the Debt Equity Ratio Test, what is the maximum number
of shares that can be bought back?
(a) 35,000 shares
(b) 42,500 shares
(c) 37,500 shares
(d) 54,375 shares
Multiple Choice Questions [4 MCQs of 2 Marks each: 
Total 8 Marks] 
4. Accounting Standard 19, Lease is applicable on following Leases:
(a) Lease agreements to explore for or use of natural resources, such as oil,
gas, timber metals and other mineral rights.
(b) Legal owner of an asset conveys to another party in return for a payment
or series of periodic payments, the right to use an asset for an agreed
period of time.
75
(c) licensing agreements for items such as motion picture films, video
recordings, plays, manuscripts, patents and copyrights.
(d) lease agreements to use lands (2 Marks) 
5. How should the dividend paid by the Company should be disclosed in the
Cash Flows Statement:
(a) Cash flows from Operating Activities
(b) Cash flows from Investing Activities
(c) Cash flows from Financing Activities
(d) No disclosure in Cash Flow Statement (2 Marks) 
6. On 31st March 2024, Sri Radhey shyam Enterprise finds that the cost of a
partly finished unit on that date is ? 530. The unit can be finished in 2024-25
by an additional expenditure of ? 310. The finished unit can be sold for ? 750
subject to payment of 8% brokerage on the selling price.
Sri Radhey shyam Enterprise seeks your advice regarding the amount at
which the unfinished unit should be valued as at 31st March, 2024 for
preparation of final accounts. the partly finished unit cannot be sold in semi-
finished form and its NRV is zero without processing it further.
(a) ` 470
(b) ` 380
(c) ` 500
(d) ` 440 (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)  State with reasons, how the following events would be dealt with in the
financial statements of Hari Ltd. for the year ended 31
st
 March, 2024 
(accounts were approved on 25
th
 July, 2024): 
(1) Negotiations with another company for acquisition of its business
was started on 21st January, 2024. Hari Ltd. invested ` 40 lakh on
22nd April, 2024.
(2) The company made a provision for bad debts @ 4% of its total
debtors (as per trend followed from the previous years). In the
second week of March 2024, a debtor for ` 2,50,000 had suffered
heavy loss due to an earthquake; the loss was not covered by any
insurance policy. In May, 2024 the debtor became bankrupt.
76