47246mtpbosicai Sa p1 Sr2
47246mtpbosicai Sa p1 Sr2
47246mtpbosicai Sa p1 Sr2
1. (a) As per para AS 2 Valuation of Inventories, abnormal amounts of wasted materials, labour
and other production costs are excluded from cost of inventories and such costs are
recognized as expenses in the period in which they are incurred. The normal loss will be
included in determining the cost of inventories (finished goods) at the year end.
Amount of Normal Loss and Abnormal Loss:
Material used 12,000 MT @ Rs. 150 = Rs. 18,00,000
Normal Loss (4% of 12,000 MT) 480 MT
Net quantity of material 11,520 MT
Abnormal Loss in quantity 150 MT (630 MT less 480 MT)
Abnormal Loss Rs. 23,437.50 [150 units @ Rs. 156.25
(Rs.18,00,000/11,520)]
Amount Rs. 23,437.50 will be charged to the Profit and Loss statement.
(b) Statement showing amount to be charged to Profit and Loss Statement as per AS 7
Rs. in crores
Cost of construction incurred upto 31.03.2014 120
Add: Estimated future cost 45
Total estimated cost of construction 165
Degree of completion (120/165 x 100) 72.73%
Revenue recognized (72.73% of 150) 109 (approx)
Total foreseeable loss (165 150) 15
Less: Loss for the current year (120 109) 11
Loss to be provided for 4
(c) As per AS 9 Revenue Recognition, where the ability to assess the ultimate collection with
reasonable certainty is lacking at the time of raising any claim, the revenue recognition is
postponed to the extent of uncertainty involved. In such cases, the revenue is recognized only
when it is reasonably certain that the ultimate collection will be made. In this case, the
company never realized interest for the delayed payments made by the agent. Hence, based
on the past experience, the realization of interest for the delayed payments by the agent is
very much uncertain. The interest should be recognized only if the ultimate collection is
certain. Therefore, the interest income of Rs. 5 lakhs should not be recognized in the books
for the year ended 31 st March, 2015. Thus the contention of accountant is incorrect. However,
if the agents have agreed to pay the amount of interest and there is an element of certainty
associated with these receipts, the accountant is correct regarding booking of Rs. 5 lakhs as
interest amount.
Working Notes:
(1) Balance sheet as at 31st Dec., 2015
Liabilities Rs. Assets Rs.
Capital Fund Building 90,000
(Balancing Figure) 49,300 Equipment 34,000
Building Fund 80,000 Subscription Receivable 6,500
Creditors for Expenses: Cash at Bank 5,200
Salaries payable 7,200 Cash in hand 800
1,36,500 1,36,500
(2) Building Rs.
Balance on 31st Dec. 2016 1,40,000
Paid during the year (50,000)
Balance on 31st Dec. 2015 90,000
(3) Equipment
Balance on 31st Dec. 2016 51,000
Paid during the year (17,000)
Balance on 31st Dec. 2015 34,000
(4) Subscription due for 2015
Receivable on 31st Dec. 2015 6,500
Received in 2016 (5,100)
Still Receivable for 2015 1,400
(b) Capital Redemption Reserve A/c Dr. 30,000
Securities Premium A/c Dr. 40,000
General Reserve A/c Dr. 30,000
To Bonus to Shareholders 1,00,000
(Being issue of bonus shares by utilization of various
Reserves, as per resolution dated .)
Bonus to Shareholders A/c Dr. 1,00,000
To Equity Share Capital 1,00,000
(Being capitalization of Profit)
Working Notes:
15 3
(i) Accrued Interest as on 1 st April, 2015 = Rs. 2,00,000 x x ` 7,500
100 12
15 4
(ii) Accrued Interest as on 1.5.2015 = Rs. 1,00,000 x x ` 5,000
100 12
(iii) Cost of Investment for purchase on 1 st May = Rs. 1,07,000 Rs. 5,000 = Rs. 1,02,000
15 6
(iv) Interest received as on 30.6.2015 = Rs. 3,00,000 x x ` 22,500
100 12
(v) Accrued Interest on debentures sold on 1.11.2015
15 4
= Rs. 1,20,000 x x ` 6,000
100 12
15 5
(vi) Accrued Interest = Rs. 80,000 x x ` 5,000
100 12
15 6
(vii) Accrued Interest on sold debentures 31.12.2015 = Rs. 80,000 x x ` 6,000
100 12
(viii) Sale Price of Investment on 31 st Dec. = Rs. 1,10,000-Rs. 6,000 = Rs. 1,04,000
(ix) Loss on Sale of Debenture on 1.1.2015
Sale Price of debenture 1,14,600
Less: Cost Price of debenture
2,10,000
x ` 1,20,000 1,26,000
2,00,000
Loss on sale 11,400
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