Practice Test - 04 27/10/2024

CA Intermediate UDESH Regular May/Sept 2025 (Group 1)

ADVANCE ACCOUNTING

ANSWER KEY (MCQ)

1(i). (1)

(ii). (3)

(iii). (1)
 Hints & Solution
2. (H & S)
In the Books of Yellow Ltd.
Realization Account
₹ ₹
To Goodwill 90,000 By Retirement Gratuity Fund 35,000
To Building 2,50,000 By Trade payables 1,45,000
To Machinery 3,80,000 By Orange Ltd. 14,63,000
(Purchase Consideration)
To Inventory 3,30,000
To Trade receivables 3,60,000
To Cash at Bank 85,000
To Preference Shareholders 30,000
(Premium on Redemption)
To Equity Shareholders 1,18,000
(Profit on Realization)
16,43,000 16,43,000
Equity Shareholders Account
₹ ₹
To Equity Shares of Orange Ltd. 11,33,000 By Share Capital 9,00,000
By General Reserve 1,15,000
By Realization Account 1,18,000
(Profit on Realization)
11,33,000 11,33,000
Preference Shareholders Account
₹ ₹
To 9% Preference Shares of Orange 3,30,000 By Preference Share Capital 3,00,000
Ltd.
By Realization Account (Premium 30,000
on Redemption of Preference
Shares)
3,30,000 3,30,000
Orange Ltd. Account
₹ ₹
To Realization Account 14,63,000 By 9% Preference Shares of Orange 3,30,000
Ltd.
By Equity Shares of Orange Ltd. 3,30,000
14,63,000 14,63,000
 In the Books of Orange Ltd.
Journal Entries
Dr. Cr.
₹ ₹
Business Purchase A/c Dr. 14,63,000
To Liquidator of Yellow Ltd. Account 14,63,000
(Being business of Yellow Ltd. taken over)
Goodwill Account Dr. 1,50,000
Building Account Dr. 3,50,000
Machinery Account Dr. 4,25,000
Inventory Account (3,33,000 x 100/10) Dr. 3,00,000
Trade receivables Account Dr. 3,33,000
Bank Account Dr. 85,000
To Retirement Gratuity Fund Account 35,000
To Trade payables Account 1,45,000
To Business Purchase A/c 14,63,000
(Being Assets and Liabilities taken over as per agreed valuation)
Liquidator of Yellow Ltd. A/c Dr. 14,63,000
To 9% Preference Share Capital A/c 3,30,000
To Equity Share Capital A/c 10,30,000
To Securities Premium A/c (10%) 1,03,000
(Being Purchase Consideration satisfied as above).
Balance Sheet of Orange Ltd. (after absorption) as at 31st March, 2023
Particulars Notes ₹
Equity and Liabilities
1. Shareholders' funds
A. Share capital 1 41,10,000
B. Reserves and Surplus 2 4,08,000
2. Non-current liabilities
A. Long-term provisions 3 1,85,000
3. Current liabilities
A. Trade Payables (4,25,000 + 1,45,000) 5,70,000
Total 52,73,000
Assets
1. Non-current assets
A. Property, Plant and Equipment & Intangible Assets
(i) Property, Plant & Equipment 4 28,15,000
(ii) Intangible assets 5 3,60,000
2. Current assets
A. Inventories (6,60,000 + 3,00,000) 9,60,000
B. Trade receivables 6 8,13,000
C. Cash and cash equivalents (2,40,000 + 85,000) 3,25,000
Total 52,73,000
Notes to accounts:
₹
1 Share Capital
Equity share capital
3,53,000 Equity Shares of ₹ 10 each fully paid 35,30,000
(out of above 1,03,000 Equity Shares were issued in consideration other than for
cash)
Preference share capital
5,800 9% Preference Shares of ₹ 100 each (Out of above 3,300 Preference Shares 5,80,000
were issued in consideration other than for cash)
Total 41,10,000
2 Reserves and Surplus
Securities Premium 1,03,000
General Reserve 3,05,000
Total 4,08,000
3 Long-term provisions
Gratuity fund (1,50,000 + 35,000) 1,85,000
4 Property, Plant & Equipment
Buildings (7,90,000 + 3,50,000) 11,40,000
Machinery (12,50,000 + 4,25,000) 16,75,000
Total 28,15,000
5 Intangible assets
Goodwill (2,10,000 + 1,50,000) 3,60,000
6 Trade receivables (4,80,000 + 3,33,000) 8,13,000
Working Notes:
Purchase Consideration: ₹
Goodwill 1,50,000
Building 3,50,000
Machinery 4,25,000
Inventory 3,00,000
Trade receivables 3,33,000
Cash at Bank 85,000
16,43,000
Less: Liabilities:
Retirement Gratuity (35,000)
Trade payables (1,45,000)
Net Assets/Purchase Consideration 14,63,000
To be satisfied as under:
10% Preference Shareholders of Yellow Ltd. 3,00,000
Add: 10% Premium 30,000
3,300 9% Preference Shares of Orange Ltd. 3,30,000
Equity Shareholders of Yellow Ltd. to be satisfied by issue of 1,03,000 equity Shares of 11,33,000
Orange Ltd. at 10% Premium
Total 14,63,000
3. (H & S)
Amalgamation in the nature of Purchase:
Balance Sheet of M Ltd.
As on 1st April, 2023
Note No. (₹ in lakhs)
1. Equity and Liabilities
(1) Shareholder's Funds
(a) Share Capital 1 2,105.00
(b) Reserves and Surplus 2 3,679.80
(2) Non-Current Liabilities
Long-term borrowings 3 185.20
(3) Current Liabilities
(a) Trade payables 4 480.00
6,450.00
I. Assets
(1) Non-current assets
(a) Property, Plant & Equipment & Intangible Assets
Property, Plant & Equipment 5 2,540.00
(b) Non-current Investments (150+100) 250.00
(2) Current assets
(a) Inventories (650+538) 1,188.00
(b) Trade Receivables 6 1,200.00
(c) Cash & Cash equivalents (770+502) 1,272.00
Total 6,450.00
Notes to Accounts

(₹ in lakhs) (₹ in lakhs)

1 Share Capital
1,11,50,000 Equity shares of ₹10 each 1115.00
9,90,000 15% preference shares of 100 each 990.00 2,105
2 Reserves and surplus
Capital Reserve (WN 1) 644.80
Securities premium (2,787.50+247.50) 3,035
Investment Allowance Reserve (100+60) 160.00
Amalgamation Adjustment Reserve (100+60) (160.00) 3679.80
3 Long Term Borrowings
15% Debentures 135.20
Public Deposit 50.00 185.20
4 Trade payables
L Ltd. 330
S Ltd. 150 480
 5 Property, Plant & Equipment
Land & building 1,470
Plant & Machinery 1,070 2,540
6 Trade Receivables
L Ltd. 660
S Ltd. 540 1,200
Working Note

1. Computation of Purchase consideration ₹ in lakhs

L Ltd. S Ltd.
(a) Preference shareholders:
Share capital = 6,40,000 shares × ₹100 each 640
Securities premium = 6,40,000 shares × ₹25 each 160 800
Share capital = 3,50,000 shares × ₹100 each 350
Securities premium = 3,50,000 shares × ₹25 each 87.50 437.50
(b) Equity shareholders:
Share capital = 68,00,000 shares x 10 each 680
Securities premium = 68,00,000 shares x ₹25 each 1700 2380
Share capital = 43,50,000 shares x 10 each 435
Securities premium = 43,50,000 shares x ₹25 each 1522.50
1087.50
Amount of purchase consideration 3180 1960
2 Calculation of number of debentures issued
13% Debentures of ₹100 each 100 56
15% Debentures to be issued to maintain same amount of interest:
Interest = ₹1,00,00,000 x 13% = ₹13,00,000
13, 00, 000 86.67
Value of 15% Debentures = 100
15
Interest = 56,00,000 x 13% =7,28,000
7, 28, 000 48.53
Value of 15% Debentures = 100
15
3.

₹ in lakhs
L Ltd. S Ltd.
Assets taken over:
Land and Building 920 550
Plant and Machinery 650 420
Investments 150 100
Inventory 650 538
Trade Receivables 660 540
Cash and Bank 770 502
3,800 2,650
Less: Liabilities taken over:
13% Debentures 86.67 48.53
Public Deposits 50 -
Trade payables 330 (466.67) 150 (198.53)
Net Assets taken over 3,333.33 2,451.47
Less: Purchase consideration (3,180) (1,960)
Capital Reserves 153.33 491.47

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