Solved Scanner Appendix - Shuchita · Solved Scanner Appendix CA Final Gr. I Paper - 1 3 The amount...

SolvedScanner Appendix

CA Final Gr. I(Solution of November - 2015)

Paper - 1 : Financial Reporting

Chapter - 1 : Accounting Standards & Guidance Notes

2015 - Nov [1] {C} (a), (b), (c), (d)

(a)

= 20

Theoretical Ex-Right fair value = 20 per shareComputation of adjustment factor

= = = 1.05

Computation of EPS

1. EPS For 2013-14 = = ` 2.20/-

2. EPS For 2013-14 Restated = = ` 2.10/-

1

Solved Scanner Appendix CA Final Gr. I Paper - 1 2

3. EPS For 2014-15(5,00,000 × 1.05 × 5/12) + (6,00,000 × 7/12) Shares= 2,18,750 + 3,50,000 = 5,68,750 Shares

EPS = = ` 2.64/-

(b) Fine Ltd.(` Crore)

N-1 Calculation of Depreciation

April- 2009 =

=

= 2 croreDepreciation charged upto April-13used upto 4 yearsDepreciation = 2 crore x 4

= 8 croreValue of machine on April-13

14 croreLess: 8 crore

6 croreValue of machine Re assessed to 10.20 crore

Revaluation surplus = 10.20 crore (-) 6.00 crore

T/F Revaluation reserve 4.20 croreCalculation of Impairment loss:Carrying amount before Impairment 6Recoverable 1.4Carrying amount after Impairment 4.6

1.4


The amount of impairment loss, reduces the current carrying amount ofasset. This needs to alter the periodic depreciation being charged againstto adjust for this lower carrying amount.

(c) (i) Quoted Current Investments for each category shall be valued atcost or market value whichever is lower. For this purpose, theinvestments in each category shall be considered scrip-wise andthe cost and market value shall be aggregated for all investmentsin each category. If the aggregate market value for the category isless than the aggregate cost for that category, the Net Deprecation shall be charged to the Profit/Loss Account. If the aggregatemarket value for the category exceeds the aggregate cost for thecategory, the net Appreciation shall be ignored. Therefore,Depreciation of a particular item of investments can be adjustedwithin the same category of Investments.

(ii) Value of Investments as on 31-3-15Type of Investment Value Principle ` in

lacs

Equity shares Lower of cost of M.V. 406.50

Mutual Funds NAV (M.V. assumed) 54.00

Gov. Securities Cost 135.00

595.50As per para 14 of AS 1.3 “Accounting for Investments” the carryingAmount for current Investments is the lower of cost and marketvalue.

(iii) Inter category Adjustments of Appreciations and Depreciation invalues of Investments cannot be done. It is not possible to offsDepreciation in Investment in Mutual Funds against Appreciationof the value of Investment in Equity Shares and Government Securities.


(d) Lets Compute Expected Return on Plan AssetsReturn on opening Balance : 1,00,000 × 10.25 % = 10,250 + Returnon Net Cash Contributions:(49,000 - 19,000) x 10.25% × ½ = 1537.50Total Expected Return = 11,790/-Lets compute Actual Return on plan assets

Opening FV of Plan Assets: 1,00,000+ Net cash contributions 30,000

Expected FV 1,30,000(-) Actual FV of Plan Assets 1,50,000

Actual Return earned – 20,000Compare with Expected Return 11,790

Actuarial gain 8,210Actuarial loss due to obligation Difference (600)

Net gain 7,610

2015 - Nov [7] (a), (c)(a) In this case, Company is not correct because claim against the company

may arise in future that why it would be considered as expenditure whichis not accured but there is possibilities to accure in the future. That whyCompany Policy to neglect claim against the company it not good for thecredibility & financial wealth of the company. That why it should notneglect .

(c) Aakash Ltd. (` lakh)N.1 Calculation of Timing Difference:

(I) Calculation of Impairment lossCarrying cost before Imp lossRecoverable amount

1,000 550

Impairment loss 450

Carrying amount after Impairment loss 550


(ii) OP Bal. of Timing difference 220.395

A/c Block

IT

1161.58

941.18

Addition: Impairment loss 450A 450A

Deletion: Reversal of Depreciation

A/c Depreciation 1161.58 × 13.91% = 161.58Tax Depreciation 941.18 × 15% = 141.18 20.4 20.4

Closing Balance 250.01

Asset @ 30% 75.00

Surcharge @10% 7.50

T/F to P&L 332.51As per AS-22 Tax on Income DTA/DTL will be created only if there is avirtual certainty supported by reasonable document then it can becreated.Here, Total Direct Tax assets is 82.50. This will be recorded as othercurrent asset & credited to P&L A/c.

Chapter - 3 : Corporate Financial Reporting2015 - Nov [7] (e)FECG Company made expenditure after Nepal Earth quake for the societyand company shares that expenditure in his Balance Sheet for C.S.R. So asper the company A/c 2013 any company who has turnover above 250crores must give few percentage of its Profit to the C. S. R.So, In this case FECG doing work for providing help to the earthquakeaffected people will be covered under C.S.R.


Chapter - 4 : Accounting for Corporate Restructuring

2015 - Nov [2](I) Journal Entries in the Books of white Ltd.

S .No.

Particulars Amount (`) Amount (`)

(1) Bank A/c Dr. 200

To Investment A/c 175

To P/L A/c 25

(2) Debenture A/c Dr. 180

Discount on Debenture A/c Dr. 20

To Bank 200

(3) Bank Loan A/c Dr. 20

Current Liab. A/c Dr. 305

Provision for Deprecation A/c Dr. 240

Bright Ltd. A/c Dr. 840

To Fixed Assets 510

To Current Asset 645

To Capital Reserve 250

(4) Capital Reserve A/c Dr. 250

P/L A/c Dr. 590

To Bright A/c 840


(ii) Balance Sheet:Balance Sheet of white Ltd. as on 1-4-2014 (After demerger)

` in croresParticulars `

I. Equities & Liabilities

1. Shareholders Funds

(a) Share Capital 420

[42 cor. equity share of ` 10 each fully paid]

(b) Reserve & Surplus [W.N = 1] 155

2. Non-Current Liabilities

(a) Long Term Borrowing [WN-2] 310

3. Current Liabilities 275

Total 1,160

II. Assets

1. Non-Current Assets

(a) Fixed Assets Cost 975

(-) Depreciation (340) 635

2. Current Assets [WN-3] 525

Total 1,160 Working Notes:

1. Revenue ReserveBalance 31-3-15 720+ Profit on sale of Investments 25(-) loss on Demerger (590)


Balance on 1-4-14 1552. Loan Funds

Balance 31-3-15 530(-) Bank Loan Transfer to Bright (20)(-) Cash Paid on Debenture (200)

Balance 1-4-14 310

3. Current AssetsBalance 31.3.15 525+ Cash Received on sale of Investments 200(-) Cash Paid on Debentures (200)Balance 1-4-14 525

4. Capital ReservesPurchase Consideration 840(Less) Net Asset Taken over

(645 + 400) 1,045(-) Current Liabilities

(305 + 20) (325) (720)Capital Reserves/CT/W 120

Balance Sheet of Bright Ltd. as at 1-4-14Particulars (` in crores)

I. Equities & Liabilities

1. Shareholders Funds

(a) Share Capital [84 Cor. Ed. Share @ 10/-] 840

(b) Reserve & Surplus —

2. Non Current Liabilities

(a) Long Term Borrowing 20

(b) Current Liabilities 305

Total 1,165


II. Assets

1. Non-Current Assets

(a) Fixed Assets 400

(b) Goodwill 120

2. Current Assets 645

Total 1,165

(iii) Current of Intrinsic value per share before and after DemergersParticular Before

demergerAfter

demerger

Fixed Assets 905 635

Net Current Assets (W.N. 5) 590 250

Total Assets 1495 885

(-) Loan Funds (330) (310)

- Net Asset Value 1,165 575

- No. of shares 42 42

Intrinsic Value per share 27.74 shares 13.69 shares

W.N.5 Current Asset Before After

Balance Sheet Balance 590 250

(-) Cash Paid on Debentures (200) (200)

+ Cash Received on Investment 200 200

590 250


W.N.6 Loan Funds Before After

Balance as B/s 530 530

(-) Redemption of Debentures (200) (200)

(-) Transfer of LF to Bright Ltd. — (20)

330 310(iv) Gain per share to the Shareholders of White Ltd. arising out of the

demergers.For every share in White Ltd., the Shareholders will hold 2 shares inBright Ltd.

`

(i) After Demergers 2(a) Value of one share in White Ltd.

Before merger 13.69(b) Value of two shares in Bright Ltd.

(10 x 2) 20.0033.69

(ii) Before Demerger(a) Value of one share in White Ltd.

Before merger 27.74Gain Per share 5.95

2015 - Nov [5] (a)(1) Calculation of operational synergy Expected to arise out of mergersYears 1 2 3 4 5

Cash flow of RPPL after mergers 2,800 3,200 3,700 4,300 5,000

() Cash flow of RPPL W/o mergers (2,000) (2,500) (3,000) (3,500) (4,000)

800 700 700 800 1,000


(2) Valuation of ACL in case of mergersYears Cash flows Discount factors Discounted cash flow

1 800 0.870 6962 700 0.756 529.23 700 0.658 460.64 800 0.572 457.65 1,000 0.497 497

2,640

(3) Maximum value to be paid Particulars `

Value as per Discounted CF 2,640

(+) Increase in goodwill of RPPL 200

2,840

(+) Cash to be collected by disposal of assets- Fixed Assets- Investment- Inventory

3002,000

80

5,220

() Current Liabilities(1,500 1,646) (820 × 20%)

Compensation claim

(1,336)

(820)

3,064


(4) Valuation of ACL Ignoring MergersYears Cash flow Discounted Factors discounted cash flow

1 600 0.870 522

2 600 0.756 453.6

3 800 0.658 526.4

4 800 0.572 457.6

5 1,000 0.497 497

2,456

Chapter - 5: Consolidated Financial Statements of Group Companies2015 - Nov [3]

Consolidate Balance Sheetof Ltd. as on 31-3-15

Liabilities Amount Lakhs

A. Shareholder Fund(1) Share Capital(2) Res. & Surplus (W. N.1)

B. M.I. (Minority interest)C. Current liabilities

8002,052

—1,060

Total of (A + B + C) 3,912

Assets

A. Non Current(1) Fixed assets

(I) Tangible(ii) Intangible

B. Investment (Refer Note 2)C. C.A. (Current Assets)

——

3123,600

3,912


Working Note: 1(Calculation of Res. & Surplus)

(Lakhs)X Ltd. (X) : 1,100Y Ltd. 840Z Ltd. 144

2,084Less: 32

2,052Working Note : 2Find out investment

(Lakhs)G.W. 40Others 160+ Profit 144(-) G/W W/OFF (32)

312

(Lakhs)Calculation of G.W.ESC (200 × 40%) 80Res. (200 × 40%) 80C.T. 160C.O.C 200G/W 40/5No. of year 5Amount W/OFF 40/5 × 4 = 32Analysis of Y Ltd. Bal. on 31-3-15


Analysis of Z Ltd.

Chapter - 6 : Accounting & Reporting of Financial Instruments2015 - Nov [4] (b)(a) Ascertaining fair value of liability component

Present value of ` 25,00,000Repayable After 3rd year 18,27,500

(25,00,000 × 0.731)Present value of Interest:Year - 1 = 2,25,000 × 0.900 = 2,02,500Years - 2 = 2,25,000 × 0.812 = 1,82,700Years - 3 = 2,25,000 × 0.731 = 1,64,475

Liability component 23,77,175

(b) Equity component:Fair value: 25,00,000() Liability comp. (23,77,175)Equity component 1,22,825


(c) Initial Recognition at the inception of Bond:Cash/Bank A/c Dr 25,00,000

To Convertible Bond 23,77,175To Equity A/c 1,22,825

(d) Bond liability at the end of each year:Year 1 Years 2 Years 3

Beginning Add: Interest 11%

23,77,1752,61,490

24,13,6652,65,503

24,54,1682,69,960

() Interest @ 9% 26,38,665(2,25,000)

26,79,168(2,25,000)

27,24,128(2,25,000)

Round off 24,13,665—

24,54,168—

24,99,128872

24,13,665 24,54,168 25,00,000

(e) For Recording finance charge of each year:Year - 1 Finance Charge A/c Dr.

To BondsTo Cash/Bank

2,61,490——

—36,490

2,25,000

Years - 2 Finance Charge A/c Dr. 2,65,503 —

To BondsTo Cash/Bank

——

40,5032,25,000

Years - 3 Finance Charge A/c Dr.To BondsTo Cash/Bank

2,69,960——

—44,960

2,25,000


2015 - Nov [7] (b), (d)(b) Company A/c

Particulars Amount ` Particulars Amount `To investor 150 million By Balance c/d 175 millionTo loss on sell ofbuilding

25 million

175 million 175 million

Investor A/cParticulars Amount ` Particulars Amount `

To Bal. c/d 175 million By Company 150 million

By profit onpurchase ofbuilding

25 million

175 million 175 million

(d) Yes, In this case the contract made between two party is consideredunder the derivative because company made contract and fixed price ofcopper while entering in to the contract and company want to get copperafter 12 months.That is why this contract may be considered as derivatives.

Chapter - 7 : Share Based Payments2015 - Nov [4] (a)Calculation of provision for SAR as per Guidance Note on Accountingfor Employee Share based payments:

Particulars 2011-12 2012-13 2013-14No. of SARsExpected

52,478.69[575 Employees× 0.97 × 0.97 ×

0.97 × 100 SARs]

50,540[560 Employee ×0.95 × 0.95 × 100

SARs]

55,000[550 Employee ×

100 SARs]

Fair value 25 28 32


Closing provisionrequired (`)

13,11,967/

= 4,37,322

[50,540 × 28 ×2/3] = 9,43,413

[55,000 × 32]= 17,60,000

Openingprovision

0 4,37,322 9,43,413

Expense for theyear

4,37,322 5,06,091 8,16,586

Provision for SAR AccountDate Particular ` Date Particular `

31-3-12 To Balance c/d 4,37,322 31-3-12 By EmploymentcompensationExps.

4,37,322

31-3-13 To Balance c/d 9,43,413 31-3-13 To Bal. B/d To Emp. Compn.Exp.

4,37,3225,06,091

31-3-14 To Bal. c/d 17,60,000 31-3-14 To Bal. B/dTo Emp. Com.Exp

9,43,4138,16,586

Chapter - 10 : Valuation of Intangibles & Liabilities2015 - Nov [5] (b)

Particulars ShareholdersApproach

Long TermFund Approach

– Future Maintainable profits (W.N.1) 1,80,000 2,25,000

– Normal Rate of Return 15% 12%


– Normal Capital employed 12,00,000 18,75,000

– Actual Capital employed (11,50,000) (16,00,000)

– Goodwill 50,000 2,75,000

– Leverage effect on goodwill 2,25,000

W.N.1: FMPShareholders

ApproachLong Term

Fund Approach

Profit earned after 1,80,000 1,80,000

Cost Adjustment – 45,000

+ Interest on L.T @ 10% FMP 1,80,000 2,25,000

W.N.2: Actual Capital EmployedParticulars Shareholders

ApproachLong Term

Fund Approach

Cost of capital employed 11,50,000 11,50,000

+ 10% Term Fund – 4,50,000

Capital Employed 11,50,000 16,00,000

2015 - Nov [6] (b)Balance Sheet (Extract)

Particular Notes to A/c Amount

Assets1. Non Current Asset

(a) Fixed AssetsIntangible Assets 1. 12,14,301


Note to Account:1. (a) Intangible Asset 12,00,000

Less: Depreciation 22,000 11,78,000(b) Amortisation of Expenses of patent 7,301(c) Goodwill (11,40,000 - 8,50,000) = 2,90,000÷10 29,000

12,14,301P& L A/c of Power Ltd. (Extract)

Particular Amount ` Assets Amount `

To Dep. of Intangibleassets

22,000 By F ranch i serevenue

14,10,000

To Expenditure offranchise revenue

2,40,000

To Amortise of patent expenditure

7,301

Chapter - 12 : Statements of Value Addition2015 - Nov [6] (a) Interest on Debentures = 2,50,000 × 100 × 10%

= 25,00,000 Financial Leverage =

1.1 =

1.1 PBIT - 27,50,000 = PBIT0.1 PBIT = 27,50,000PBIT = 27,50,000

Profit After Interest = 2,75,00,000Before TaxInterest = 25,00,000

= 2,50,00,000Tax @ 30% = 75,00,000Profit After Tax & Interest = 1,75,00,000


Calculation of WACCEquity Shareholders Fund:Common Shares 791 weight

Securities Premium 54

Free Reserves 75

Capital Reserves 80

Equity 1000 80% 12 9.6

Debentures 250 20% 7 1.4

1250 100% 11%

Debentures = 10 - Tax = 30% = 7%Cost of Capital = 1,250 × 11% = 137.5 lakhs.

= 1,37,50,000

Calculation of EVA Profit after Tax = 1,75,00,000

+ Interest = 17,50,000

Return to Providers 1,92,50,000(-) Cost of Capital 1,37,50,000

EVA 55,00,000

Shuchita Prakashan (P) Ltd.25/19, L.I.C. Colony, Tagore Town,

Allahabad - 211002Visit us: www.shuchita.com


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