Prelim paper Question Paper 2014 of Special Studies in Finance

Solve all questions.

Q1. Shweta Ltd. has purchased machinery from Shreya Ltd. on hire purchase basis. The details of purchase are: Cash Price Rs. 31,70,000. Down Payment 20% and remaining amount to be discharged in four yearly installments of Rs. 8,00,000 each. Pass the journal entries in Shweta’s books for the first 2 years only. (5 marks)

1. Explain the IPO process in detail. (10 marks)

Q2. A. Calculate EVA from the following data for the year ended 31^st March 2003.   (5 marks)

1. What are the merits and demerits of investing in a mutual fund (10 marks)

Q3 A. Bravo Ltd. furnishes the following data for the year ended 31st March, 2010:    Depreciation provided as per accounting records amounted to Rs. 50,00,000 whereas the depreciation provided as per tax records, under the block of assets concept amounted to Rs. 87,50,000.  Unamortized preliminary expenditure as per tax records amounted to Rs. 7,00,000. The income tax rate applicable is 40% and there is adequate evidence of future profit sufficiency.How much deferred tax asset/liability should be recognized as transition adjustment, as per Accounting Standard – 22 as issued by the Institute of Chartered Accountants of India? (5 marks)

1. Hammer Ltd. furnishes the following data regarding its six segments for the year ended 31^st March, 2010: (Rs. in Lakhs)

Identify the reportable segments and advise the management of Hammer Ltd. keeping in view the provisions of Accounting Standard 17 on Segment Reporting as issued by the ICAI (10 marks)

Q4.  In Mumbai the suburban railway services are inadequate for the ever rising population. Every day there are millions of people flocking in this city in search of a better quality of livelihood. In order to meet the daily commutation requirements there is a need to provide rail transportation services through metro rail. The task of providing such infrastructure project is shouldered by Tata’s. For this purpose the required technology is imported from Switzerland. Also training is provided by the European company to Indian technicians for repairs and maintenance. Promoters are B.E. (Civil) and having 122 years past experience of operating in India. For setting up a Metro Rail at Mumbai the technical requirements are 4000 Sq. Ft. land for Railway Stations and Railway tracks 20,000 sq. ft administration building, and others a total 8,200 acres land. The members of Directors family are also possessing MBA qualifications and take keen interest in the business activities.

Depreciation SLM @ 20% p.a. Tenure of term loan 5 years. Principal to be repaid in equal installments. Income tax @ 35%. 100% Tax holiday for initial 4 years. Life of project 5 years. ROI @ 30% for initial 2 years which will increase to 35% for the remaining years.

Prepare flash report and calculate DSCR for all the years. Give your recommendation. (15 MARKS)

Q 5. A. Kutub Minar Ltd. acquired a machine on 1.4.2007 costing US $ 2,00,000. The suppliers agreed to the following terms of payment

The company depreciates machinery @ 10% on the Straight Line Method. The rate of exchange is steady at US $ 1 = Rs.47 upto 30.9.2008. On 1.10.2008, due to an official revaluation of rates, the exchange rate is adjusted to US $ 1 = Rs.57. Show the extracts of the relevant entries in the Profit and Loss Account for the year ending 31^st March, 2009 and the Balance Sheet as on that date, showing such workings as necessary as per AS-11. (5 marks)

1. Explain the various participants in the Indian capital markets (10 marks)