SUGGESTED SOLUTION

CA INTERMEDIATE

SUBJECT- ADVANCED ACCOUNTING

Test Code – IJP 2504

BRANCH - () (Date :)

Head Office : Shraddha, 3rd Floor, Near Chinai College, Andheri (E), Mumbai – 69.
Tel : (022) 26836666

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 ANSWER : 1

Books of Sanekt
Investment Account
(Scrip: Equity Shares in XYX Ltd.)

No. Amount No. Amount

Rs Rs.
1.1.2022 To Bal b/s To 50,000 12,50,000 31.10.2022 By Bank - 20,000
1.6.2022 Bank 10,000 2,00,000 (dividend
16.8.2022 To Bonus 10,000 - On Shares
30.9.2022 (W.N.1) To Bank 3,00,000 acquired
20,000
(Rights Shares( on
(W.N.3) 1.6.2022)
(W.N.4)
15.11.2022 To Profit (on 69,444 15.11.2022 By Bank 25,000 5,50,000
sale of shares) (Sale of
shares)
31.12.2022 By Bal. c/d 65,000 12,49,444
(W.N.6)
90,000 18,19,444 90,000 18,19,444

Profit and Loss Account (An extract for investment)

31.12.2022 To Balance c/d (profit) 2,09,444 31.8.22 By Sale of right (W.N.3) 40,000
31.10.22 By Dividend (W.N.4) 1,00,000
15.11.22 By Profit transferred 29,444
2,09,444 2,09,444

Working Notes :
(50,000+10,000)
(1) Bonus Share = 6
= 10,000 shares

(50,000+10,000+10,000) 2
(2) Right Shares = 7
x 3 = 30,000 shares x 3
= 20,000 shares

1
(3) Right shares renounced = 30,000 x 3
= 10,000 shares Sale
of right shares = 10,000 x 4 = Rs. 40,000
Right shares subscribed = 20,000 shares
Amount paid for subscription of right shares = 20,000 x 15 = 3,00,000

(4) Dividend received = 50,000 (shares as on 1st April 2022) x 10 x 20% = Rs. 1,00,000 Investment
A/c
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 (5) Profit on sale of 25,000 shares = Sales proceeds – Average cost sales proceeds = Rs. 5,50,000

(12,50,000+2,00,000+3,00,000−20,000)
Average cost = 90,000
= Rs. 4,80,556

Profit = Rs. 5,50,000 – Rs. 4,80,556 = Rs. 69,444.

(17,30,000)
(6) Cost of shares on 31.12.2022 90,000
x 65,000 = Rs. 12,49,444
Market value of share = 65,000 shares x Rs. 20 = 13,00,000
Shares will be valued at Rs. 12,49,444 as market value is more than cost.
(10 Marks)

ANSWER : 2
(i) Calculation of Profit earned by the branch
In the books of Journal Branch
Trading Account and Profit and Loss Account
Particulars Amount Particulars Amount
Rs RS
To Opening stock 2,20,000 By Sales 12,00,000
To Goods received by 11,00,000 By Closing stock (Refer 3,60,000
Head office W.N.)
To Expenses 45,000
To Net profit (Bal fig) 1,95,000
15,60,000 15,60,000
(ii) Stock reserve in respect of unrealized profit
= Rs. 3,60,000 x (20/120) = Rs. 60,000
Working Note:
Rs.
Cost Price 100
Invoice Price 120
Sale price 150
Calculation of closing stock at invoice price Rs
Opening Stock at invoice price 2,20,000
Goods received during the years at invoice price 11,00,000
13,20,000
Less: Cost of goods sold at invoice price (9,60,000) [12,00,000 x ( 120 )]
150

Closing stock 3,60,000

(8 Marks)
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 ANSWER : 3
(a) (i) Investment in Equity shares of JP Power Ltd.

Date Particulars No. Dividend Amount Rs Date Particulars No. Dividend Amount
Rs Rs Rs

1.1.19 To Bank A/c 600 12,000 31.3.19 By Balance 1,500 34,500

c/d
15.3.19 To Bank A/c 900 22,500 4,500
1,500 34,500 1,500 34,500
1.4.19 To Balance 1,500 34,500 15.9.19 By Bank 3,000
b/d dividend
20.5.19 To Bank A/c 1,000 23,000 20.12.1 By Bank 1,500 33,000

25.7.19 To Bonus 2,500 - 1.2.20 By Bank 1,000 24,000

shares
12.11.19 To Bank A/c 600 4,500 12,000 31.3.20 By Balance 3,100 36,812.50
c/d
20.12.19 To P&L A/c 15,187.50
(profit on
sale)
1.2.20 To P&L A/c 12,125
(profit on
sale)
31.3.20 To P&L A/c
(Dividend)
5,600 4,000 98,812.50 5,600 4,500 96,812.50

Working Note :
1. Calculation purchased at Rs 12,000
600 shares purchased at Rs22,500
1,000 shares purchased at Rs. 23,000
2,500 shares at nil cost
600 right shares purchased at Rs. 12,000
Total cost of 5,600 shares is Rs. 66,500 [Rs. 69,500 less R.s 3,000 (pre-acquisition dividend
received on 1,000 shares purchased on 20.5.19).
66,500
Hence, weighted average cost per share will be considered as Rs. 11.875 per share 5,600 ).
2. It has been considered that no dividend was received on bonus shares as the dividend
pertains to the year ended 31st March, 2019.
3. Calculation of right shares subscribed by Vijay Right Shares (consideration that right shares
5,000
have been granted on Bonus shares also) = 5 x 1 = 1,000 shares

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 Shares subscribed = 1,000 x 60% = 600 shares
Value of right shares subscribed = 600 shares @Rs. 20 per share = Rs. 12,000 Calculation of
sale right renouncement No. of right shares sold = 1,000 x 40% shares
Sale value of right = 400 shares x Rs. 3 per share = Rs. 1,200
Note : As per para 13 of AS 13, sale proceeds of rights is to be credited to P&L A/c.
4. Profit on sale of equity shares
As on 20.12.19
Sales price (1,500 shares at Rs. 22) 33,000.00
Less: Cost of shares sold (1,500 x Rs. 11.875) 17,812.50
Profit on sale 15,187.50
As on 1.2.20
Sales price (1,000 shares at Rs. 24)24,000
Less: Cost of shares sold (1,000x Rs. 11.875) (11,875)
Profit on sale (12,125)
Balance of 3,100 shares as on 31.3.20 will be valued at Rs. 36,812.50
(at rate of Rs. 11.875 per share)

(10 Marks)

ANSWER : 4

In the Head Office Books Branch Account for the year ended 31st March, 2023
Rs 000 Rs 000
To Balance b/d By Balance b/d
Cash in hand 20 Stack reserve Rs 2,160 x 1 360
6

Tread in hand 768 -

Stock 2,160 By Goods sent to branch A/c (Returns 314
Furniture and fittings 1,000 to H.O.) {144+[204-34(loading]}
To Goods sent to branch A/c 26,400 By Goods sent to branch A/c (Loading 4,376
on net goods sent to branch – (26,256
1
6
)

To Bank A/c (Payment for 200

furniture)
To Balance c/d stock reserve 456 By Bank A/c (Remittance from branch 23,400
1 to H.O.)
(2,736 x 6 )

To Outstanding expenses 12 By Balance c/d

To Profit and loss A/c (net Profit) 2,192 Cash in hand 20
Trade debtors 970
Stock 2,736
Furniture and fittings 1,032
33,208 33,208

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Working Notes:
1. Invoice price and cost
Let cost be 100
So, invoice price 120
Loading 20
Loading : Invoice price =20:120= 1:6

2. Invoice price of closing stock in branch

Branch Stock Account
Rs 000 Rs 000
To Balance b/d 2,160 By Goods sent to branch 144
To Goods sent to branch 26,400 By Branch Cash 19,400
By Branch debtors 6,280
By Balance c/d (Bal fig) 2,736
28,560 28,560
Note : adjustment regarding returns by Customers direct to Head office has not been made in
branch stock account.
3. Closing balance of branch debtors
Branch Debtors Account
Rs 000 Rs 000
To Balance b/d 768 By Branch Cash 5,684
To Branch stock 6,280 By Branch expenses discount 116
By Goods sent to branch 204
(Returns)
By Branch expenses (Bad 74
debts)
By Balance c/d (Bal. fig.) 970
7,048 7,048

4. Closing balance of furniture and fittings

Branch Furniture and Fittings Account
Rs 000 Rs 000
To Balance b/d 1,000 By Depreciation (160+8) 168
To Bank 200 By Balance c/d 1,032
1,200 1,200

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Note: Since the new furniture was purchased on 1st Jan 2023 depreciation will be for 3 moths.

5. Remittance by branch to head office

Branch Cash Account
Rs 000 Rs 000
To Balance b/d 20 By Branch expenses 1,684
To Branch stock 19,400 By Remittances to H.O. 23,400
To Branch debtors 5,684 By Balance b/d 20
25,104 25,104

(10 Marks)
ANSWER : 5

Investment in Debentures A/c

Rs Rs
Lakh Lakh
June 1, 2018 To bank 10.70 June 1, 2018 By Interest 0.20
Recoverable (Note-1)
Nov 1,2018 To Bank 5.42 Nov 1, 2018 By Interest 0.05
Recoverable (Note-2)
Feb 28, 2019 To Interest 0.30 Feb 28,2019 By Bank 6.78
Recoverable (Note-3)
Feb 28,2019 To Interest 0.12 Mar 31, 2019 By Balance c/d 9.54
Recoverable (Note-3)
16.57 16.57

Working Notes:
12 2
1. 10,000 x 100 x 100
x 12
= Rs. 0.20 Lakhs

12 1
2. 5,000 x 100 x 100
x 12
= Rs. 0.05 Lakhs

12 5
3. 6,000 x 100 x 100
x 12
= Rs. 0.30 Lakhs
[(10,70,000 – 20,000) +(5,45,000 – 5,000)]
4. Cost of investments (Per unit) = 15,000
units

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 [(10,50,000 – 5,40,000]
= 15,000
= Rs. 106
Cost of investments sold = Rs. 106 x 6,000 = 6,36,000
Sale proceeds

= Rs. 6,78,000-30,000(interest) = Rs. 6,48,000

Profit

= Rs. 6,48,000 – Rs. 6,36,000 = Rs. 12,000

(7 Marks)

ANSWER : 6

Journal Entries in Books of Branch A

Particular Dr. Amount Cr. Amount
Rs Rs
(i) Head office account Dr. 5,000
To Salaries account 5,000
(Being the rectification of salary paid on behalf
of H.O.)

(ii) Head office account Dr. 25,000

To Bank / Liability A/c 25,000
(Being Asset purchased by branch but Asset
account retained at head office books)
(iii) No Entry in branch books
(iv) Head office account Dr. 25,000
To Debtors accounts 25,000
(Being the amount of branch debtors collected
by H.O.)
(v) Bank A/c Dr. 5,000
To Head Office (Remittance of Funds by H.O. to 5,000
Branch)

(5 Marks)

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