Practice Test - 03 13/10/2024

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

ADVANCED ACCOUNTING

ANSWER KEY (MCQ)

1(i). (3)

(ii). (1)

(iii). (1)
 Hints & Solution
2. (H & S)
Journal Entries

₹ ₹
I Equity share capital (Rs.50) A/c Dr. 60,00,000
To Equity share capital (Rs.10) A/c 8,00,000
To 9% preference share capital (25,000 × Rs.8) A/c 2,00,000
To 10% debentures A/c (Rs.80) (6,000 × R.80) 4,80,000
To Capital Reduction A/c. 45,20,000
(Being payment made in lieu of equity share capital of Rs.50 each by issue of
equity shares of Rs.10 each, 9% Preference share capital and 10% debentures
as per reconstruction scheme)
II 9% Preference share capital (Rs.10) A/c Dr. 40,00,000
To 9% Preference share capital (Rs.8) A/c 32,00,00
To Capital Reduction A/c 8,00,00
(Being 9% preference share capital of Rs.10 each reduced to Rs.8 each as per
reconstruction scheme)
III Bank A/c Dr. 16,00,000
To Equity Share Capital A/c 16,00,000
(Being preference shareholders subscribed for 2 new equity shares of 10 each
against every 5 shares)
IV (a) Provision for Taxation A/c Dr.
To Capital Reduction A/c 13,000
To Taxation Liability A/c 62,000
(Being liability for taxation settled)
(b) Taxation Liability A/c Dr. 62,000
To Bank A/c 62,000
(Being liability for taxation paid)
(v) Trade payables A/c Dr. 1,00,000
To Equity share capital A/c 70,000
To Capital Reduction A/c 30,000
(Being payment made to creditors in shares to the extent of 70% as per
reconstruction scheme)
(vi) Trade Creditors A/c Dr. 5,00,000
To 9% Preference share capital A/c (43,750 x 8) 3,50,000
To Bank A/c 1,20,000
To Capital Reduction A/c 30,000
(Being payment made to creditors in shares and cash as per reconstruction
scheme)
(vii) Capital Reduction A/c Dr. 26,000
To Bank A/c 26,000
(Being contractual commitment settled by payment of 4% penalty)
 (viii) 7% Debentures A/c Dr. 23,00,000
To Plant & Machinery A/c To Capital Reduction A/c 22,00,000
1,00,000
(ix) 8% Debentures A/c (34,000 x 50) Dr. 17,00,000
To 10% Debentures A/c (17,000 x 80) 13,60,000
To Capital Reduction A/c 3,40,000
(Being conversion of 8% debentures to 10% debentures at 1 for every two
debentures held by them as per reconstruction scheme)
(x) Capital Reduction A/c Dr. 10,80,000
To Land & building A/c 3,75,000
To Profit and loss A/c 2,15,000
To Trade receivables A/c 3,00,000
To Inventories A/c 1,90,000
(Being amount of Capital Reduction utilized in writing off Profit & loss Dr.
bal. Land & building, Current Assets, Inventories through capital reduction
account)
(xi) Capital Reduction A/c Dr. 47,27,000
To Capital Reserve A/c 47,27,000
(Being balance in capital reduction account transferred to capital reserve
account)
Working Notes:
Capital Reduction Account
Particulars Rs. Particulars Rs.
To Land & building A/c 3,75,000 By Equity share capital A/c 45,20,000
To Machinery A/c 2,15,000 By Preference share capital 8,00,000
To Trade receivables A/c 3,00,000 By 7% Debentures 1,00,000
To Inventories A/c 1,90,000 By Provision for tax 13,000
To Bank 26,000 By Trade Payables (30,000+30,000) 60,000
To Capital Reserve (bal. fig.) 47,27,000 By 8% Debentures 3,40,000
58,33,000 58,33,000

3. (H & S)
Journal Entries in the Books of Z Ltd.

Particulars Debit (₹) Credit (₹)

1. Equity share capital A/c (₹ 10) Dr. 50,00,000
To Equity share capital A/c (₹ 5) 25,00,000
To Reconstruction A/c 25,00,000
(Being conversion of 5,00,000 equity shares of ₹ 10 each fully paid into same
number of fully paid equity shares of ₹ 5 each as per scheme of reconstruction.
2. 9% Preference share capital A/c (₹ 100) Dr. 2,00,000
To 10% Preference share capital A/c (₹ 50) 10,00,000
To Reconstruction A/c 10,00,000
(Being conversion of 9% preference share of ₹ 100 each into same number of
10% preference share of ₹ 50 each and claims of preference dividends settled
as per scheme of reconstruction.)
3. 10% Secured Debentures A/c Dr. 9,60,000
Trade payables A/c Dr. 1,00,000
 Interest on Debentures Outstanding A/c Dr. 96,000
Bank A/c Dr. 1,00,000
To 12% Debentures A/c 6,78,000
To Reconstruction A/c 5,78,000
(Being ₹ 11,56,000 due to Y (including trade payables) cancelled and 12%
debentures allotted for the amount after waving 50% as per scheme of
reconstruction.)
4. 10% Secured Debentures A/c Dr. 6,40,000
Trade payables A/c Dr. 60,000
Interest on Debentures Outstanding A/c Dr. 64,000
Bank A/c Dr. 60,000
To 12% Debentures A/c 4,42,000
To Reconstruction A/c 3,82,000
(Being 7,64,000 due to Z (including trade payables) cancelled and 12%
debentures allotted for the amount after waving 50% as per scheme of
reconstruction.)
5. Trade payables A/c Dr. 1,70,000
To Reconstruction 1,70,000
(Being remaining trade payables sacrificed 50% of their claim.)
6. Director's Loan A/c Dr. 1,00,000
To Equity share capital A/c (₹ 5) 40,000
To Reconstruction 60,000
(Being Directors' loan claim settled by issuing 12,000 equity shares of ₹ 5
each as per scheme of reconstruction.)
7. Reconstruction A/c Dr. 15,000
To Bank A/c 15,000
(Being payment made towards penalty of 5% for cancellation of capital
commitments of ₹ 3 Lakhs.)
8. Bank A/c Dr.. 1,00,000
To Reconstruction A/c 1,00,000
(Being refund of fees by directors credited to reconstruction A/c.)
9. Reconstruction A/c Dr. 15,000
To Bank A/c 15,000
(Being payment of reconstruction expenses.)
10. Provision for Tax A/c Dr. 1,00,000
To Bank A/c 75,000
To Reconstruction A/c 25,000
(Being payment of tax liability in full settlement against provision for tax)
11. Land and Building A/c Dr. 2,00,000
To Reconstruction A/c 2,00,000
(Being appreciation in value of Land & Building recorded)
12. Reconstruction A/c Dr. 49,85,000
To Goodwill A/c 10,00,000
To Patent A/c 5,00,000
To Profit and loss A/c 14,60,000
To Discount on Issue of Debentures A/c 1,00,000
To Plant & Machinery A/c 6,50,000
To Furniture and Fixture A/c 1,00,000
 To Trade Investment A/c 50,000
To Inventory A/c 2,50,000
To Trade Receivables A/c 1,00,000
To Capital Reserve A/c (Bal. Fig.) 7,75,000
(Being writing off of losses and reduction in the value of assets, balance of
reconstruction A/c transfer to Capital Reserve.)
Cash at Bank Account
Particulars Rs. Particulars Rs.
To Reconstruction (Y) 1,00,000 By Balance b/d 1,00,000
To Reconstruction(Z) 60,000 By Reconstruction A/c 15,000
To Reconstruction A/c 1,00,000 By Reconstruction A/c 15,000
By Provision for tax A/c 75,000
By Balance c/d (Bal. Fig.) 55,000
2,60,000 2,60,000
Reconstruction Account
Particulars Rs. Particulars Rs.
To Bank (penalty) 15,000 By Equity share capital A/c 25,00,000
To Bank (reconstruction expenses) 15,000 By 9% Pref. Share capital A/c 10,00,000
To Goodwill 10,00,000 By Y A/c (settlement) 5,78,000
To Patent 5,00,000 By Z A/c (settlement) 3,82,000
To Profit and Loss A/c 14,60,000 By Trade Payables A/c 1,70,000
To Discount on issue of debentures 1,00,000 By Director's loan 60,000
To P & M 6,50,000 By Bank 1,00,000
To Furniture and Fixtures 1,00,000 By Provision for tax 25,000
To Trade investment 50,000 By Land & Building 2,00,000
To Inventory 2,50,000
To Trade Receivables 1,00,000
To Capital Reserve (bal. fig.) 7,75,000
50,15,000 50,15,000

4. (H & S)
Journal Entries
Particulars Debit (₹) Credit (₹)
Sep. Equity Share Capital A/c (Rs. 50) Dr. 9,90,000
2019 To Equity Share Capital A/c (Rs.10) 9,90,000
X Ltd. (Being subdivision of 22,000 equity shares of Rs. 50 (Rs. 45 paid
up) each into 1,10,000 shares of Rs. 10 each (Rs. 9 paid up) as per
resolution dated...)
Z Ltd. Equity Share Capital A/c (Rs.10) Dr. 4,80,000
To Equity Share Capital A/c (Rs.50) 4,48,000
(Being consolidation of 80,000 shares of Rs. 10, Rs. 6 paid up
each into 16,000 shares of Rs. 50 each (Rs. 30 paid up) as per
resolution dated...)

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