ISC Class 12 Accountancy Sample Paper 2022 with Solutions

Section-A (Answer all questions)

Question 1.
Select the correct option for each of the following questions.

(i) Eagle Ltd., has 3,000; 10% Debentures of Rs. 100 each outstanding as on 31^st March, 2020. These debentures are due for redemption on 31^st March, 2021. The Debenture Redemption Reserve has a balance of Rs. 40,000 on 31^st March, 2020. Amount of Debenture Redemption Reserve to be transferred before redemption of debentures would be:
(a) Rs. 3,00,000
(b) Rs. 45,000
(c) Rs. 75,000
(d) Rs. 35,000

Answer: (d) Rs. 35,000

DRR required = 25% of 3,00,000 = 75,000; already available = 40,000; to be transferred = 75,000 - 40,000 = Rs. 35,000

Teacher's Note:
a) This answer uses the old rule of DRR at 25% of the debentures, which the options are based on.
b) Since August 2019, an unlisted company needs DRR of only 10%, and listed companies, NBFCs and HFCs need none.
c) Under the 10% rule, the existing Rs. 40,000 would already be enough.
d) Only the shortfall over the existing balance is transferred.

(ii) Recording of an unrecorded liability on the reconstitution of firm will be:
(a) Gain to the existing partners
(b) Loss to the existing partners
(c) Gain to all the partners including new partner
(d) Loss to the remaining partners after one partner retires

Answer: (b) Loss to the existing partners

Teacher's Note:
a) An unrecorded liability, when recorded, increases liabilities, so it is a loss.
b) It is debited to the Revaluation A/c.
c) Revaluation profit or loss belongs to the old (existing) partners.
d) A new partner does not share it.

(iii) X Ltd., took over running business of Y Ltd., having assets worth Rs. 30,00,000 and liabilities worth Rs. 2,00,000. It was also agreed to pay Rs. 80,000 for Goodwill. Y Ltd., issued debentures of Rs. 100 each at a discount of 4 per cent in full settlement of the purchase consideration. The number of debentures issued to vendor is:
(a) Rs. 30,000
(b) Rs. 28,800
(c) Rs. 32,000
(d) Rs. 27,648

Answer: (a) 30,000 debentures

Purchase Consideration = 30,00,000 - 2,00,000 + 80,000 = Rs. 28,80,000
Issue price = 100 - 4 = Rs. 96; Number of debentures = 28,80,000 / 96 = 30,000

Teacher's Note:
a) Purchase consideration = Assets - Liabilities + Goodwill.
b) Divide by the issue price (after discount), not the face value.
c) The debentures are issued by the buyer, X Ltd.; the question prints Y Ltd.
d) The answer is a number of debentures, though the options show Rs.

(iv) Raj, a partner was appointed to look after dissolution process for which he was allowed a commission of Rs. 34,000. The actual dissolution expenses paid by him were Rs. 20,000. What will be the journal entry at the time of dissolution of partnership firm?
(a) Realisation A/c Dr 34,000 To Raj's Capital A/c 34,000
(b) Realisation A/c Dr 20,000 To Raj's Capital A/c 20,000
(c) Realisation A/c Dr 54,000 To Raj's Capital A/c 54,000
(d) Realisation A/c Dr 14,000 To Raj's Capital A/c 14,000

Answer: (c) Realisation A/c Dr 54,000 To Raj's Capital A/c 54,000

Commission 34,000 + expenses paid on behalf of the firm 20,000 = Rs. 54,000

Teacher's Note:
a) The question does not say Raj agreed to bear the expenses, so the firm owes him both amounts.
b) If he had agreed to bear the expenses, only the commission of Rs. 34,000 would be recorded.
c) Both the commission and the expenses are realisation expenses.
d) The answer key shows option (c) but writes Rs. 20,000; option (c) is Rs. 54,000.

Question 2.

(i) List any two reserves which can be utilised to write off discount/loss on issue of debentures.

Answer:
(a) Securities Premium Reserve
(b) Statement of Profit and Loss (surplus)

Teacher's Note:
a) Securities Premium is used first (Section 52).
b) The balance is written off from the Statement of Profit and Loss.
c) General Reserve can also be used if needed.
d) Two correct names earn the marks.

(ii) On dissolution of partnership firm of A and B, Stock appeared in the balance sheet at Rs. 80,000. Some of the stock was taken over by partner A for Rs. 27,000 (at 90% of book value) and remaining stock realised at 80% of book value.
You are required to pass necessary journal entries for realisation of stock.

Answer:
Book value of stock taken by A = 27,000 × 100/90 = Rs. 30,000
Remaining stock = 80,000 - 30,000 = 50,000; realised at 80% = Rs. 40,000

Journal

Teacher's Note:
a) Work back from the agreed value to find the book value taken by A.
b) An asset taken by a partner is debited to that partner's Capital A/c.
c) Both entries credit the Realisation A/c.
d) The answer key shows only the bank entry; A's entry is also needed.

Question 3.
On 1^st April, 2012, Dream Home Finance Company (a listed HFC) issued Rs. 5,00,000, 9% Debentures of Rs. 100 each at a discount of 10% to be redeemed at a premium of 5% on 31^st March, 2021.
You are required to pass necessary journal entries for the issue and redemption of debentures.

Answer:

Journal (Issue and Redemption)

Teacher's Note:
a) Discount on issue (10%) and premium on redemption (5%) are both capital losses recorded at issue.
b) A listed HFC does not need to create DRR.
c) It must still invest 15% of the debentures maturing in the year (DRI), which is not asked here.
d) On redemption, the premium is paid along with the face value.

Question 4.

(i) BGP Ltd. invited applications for issuing 15,000, 11% debentures of Rs. 100 each at a premium of Rs. 50 per debenture. The full amount was payable on application. Applications were received for 25,000 debentures. Applications for 5,000 debentures were rejected and the application money was refunded. Debentures were allotted to the remaining applicants on pro-rata basis.
You are required to pass the necessary journal entries for the above transactions in the books of BGP Ltd.

Answer:

Journal of BGP Ltd.

Teacher's Note:
a) The full amount (Rs. 150) is paid on application, so there is no allotment to adjust.
b) Refund = rejected 5,000 plus pro rata excess 5,000 = 10,000 debentures × 150.
c) The answer key labels the credits as 9%; the debentures are 11%.
d) Premium on issue of debentures goes to Securities Premium A/c.

(ii) A, B and C are partners sharing profits in the ratio of 3:2:1. B retires from the firm. A and C decided to share profits in the ratio of 3 : 2. The adjusted capital accounts of A, B and C at the time of B's retirement showed the balances of Rs. 33,000, Rs. 54,000 and Rs. 70,500 respectively. A and C decided to pay Rs. 60,000 to B in full settlement.
You are required to:
Calculate Goodwill of the firm.
Pass journal entry for adjustment of goodwill on B's retirement.

Answer:
B's share of goodwill = 60,000 - 54,000 = Rs. 6,000
B's share in profit = 2/6 = 1/3
Goodwill of the firm = 6,000 × 3/1 = Rs. 18,000
Gaining ratio: A = 3/5 - 3/6 = 3/30; C = 2/5 - 1/6 = 7/30. Gaining ratio = 3:7

Journal

Teacher's Note:
a) Amount paid over the capital balance is the retiring partner's share of goodwill.
b) Divide by his share to get the firm's goodwill.
c) Gaining ratio = New ratio - Old ratio.
d) Check: 1,800 + 4,200 = Rs. 6,000.

Question 5.

(i) X, Y and Z are partners sharing profit and losses in the ratio of 2 : 2 : 1. Z decided to retire. X and Y decided to share future profits and losses in the ratio of 3 : 1. Following balances appeared in the balance sheet of firm on the date of Z's retirement:
General Reserve Rs. 1,00,000
Profit and Loss Account debit balance Rs. 20,000
X and Y decided to record the effect of the above reserves and accumulated profit/loss without affecting their book values by passing a single entry.
You are required to:
(a) Calculate gain/sacrifice ratio of remaining partners.
(b) Pass the journal entry for adjustment of reserve and accumulated profit/loss.

Answer:
(a) X = 3/4 - 2/5 = 7/20 (Gain); Y = 1/4 - 2/5 = -3/20 (Sacrifice)
(b) Net surplus = 1,00,000 - 20,000 = Rs. 80,000
Z (retiring) is credited 80,000 × 1/5 = Rs. 16,000
Y (sacrificing) is credited 80,000 × 3/20 = Rs. 12,000
X (gaining) is debited 80,000 × 7/20 = Rs. 28,000

Journal

Teacher's Note:
a) When reserves are not to be touched, only the net effect is adjusted between partners.
b) A remaining partner can also sacrifice, as Y does here.
c) The gaining partner pays both the retiring and the sacrificing partner.
d) Check: 12,000 + 16,000 = 28,000.

(ii) Agam Ltd. issued 40,000 9% debentures of Rs. 100 each on April 1, 2019 at a discount of 10%, redeemable at a premium of 10%. Assuming that interest was paid half yearly on September 30 and March 31 and the tax deducted at source was 10%,
You are required to pass necessary journal entries relating to debenture interest for the year ended March 31, 2020.

Answer:
Half-yearly interest = 40,00,000 × 9% × 6/12 = Rs. 1,80,000; TDS 10% = 18,000; net = 1,62,000

Journal of Agam Ltd.

Teacher's Note:
a) Interest is on the face value (Rs. 40,00,000), not on the issue price.
b) Discount and premium do not change the interest.
c) TDS is deducted from the interest and paid to the government.
d) Total interest for the year = Rs. 3,60,000.

Question 6.
Singh and Jain were partners in a firm sharing profits and losses in the ratio of 3:7. On 31^st March, 2019, their firm was dissolved. On that date the Balance Sheet showed a stock of Rs. 90,000 and creditors of Rs. 1,00,000. After transferring the assets and liabilities to the realisation account, the following transactions took place:
(a) Singh took over 50% of the total stock at 10% discount.
(b) 20% of the total stock was taken over by creditors of Rs. 20,000 in full settlement.
(c) Remaining stock was sold at 10% loss.
(d) 40% of the remaining creditors were paid by cheque at a discount of 5% and the balance were taken by Partner Jain.
You are required to pass necessary journal entries in the books of the firm.

Answer:

Journal

Working Notes:
1. Stock taken by creditors = 20% of 90,000 = 18,000, in full settlement of creditors of Rs. 20,000: no entry is needed.
2. Remaining stock = 90,000 - 45,000 - 18,000 = 27,000; sold at 90% = Rs. 24,300
3. Remaining creditors = 1,00,000 - 20,000 = 80,000; 40% = 32,000, paid at 5% less = Rs. 30,400
4. Balance of creditors = 80,000 - 32,000 = Rs. 48,000, taken over by Jain.

Teacher's Note:
a) When creditors accept an asset in full settlement, no entry is passed.
b) A partner taking an asset is debited; a partner taking over a liability is credited.
c) Take each percentage on the correct base.
d) Always add the narration with the working.

Section-B (Answer all questions)

Question 7.
Select the correct option for each of the following questions.

(i) If Long-term Loans & Advances for 2020 is Rs. 3,60,000 and the absolute change is 20%, calculate Long-term Loans & Advances for 2019.
(a) Rs. 2,40,000
(b) Rs. 72,000
(c) Rs. 4,50,000
(d) Rs. 3,00,000

Answer: (d) Rs. 3,00,000

2019 amount = 3,60,000 × 100/120 = Rs. 3,00,000

Teacher's Note:
a) The 20% change is on the 2019 (base) figure.
b) So 2020 = 120% of 2019.
c) Taking 20% of 3,60,000 is a common mistake.
d) Check: 3,00,000 + 20% = 3,60,000.

(ii) State with reason whether issue of bonus shares would lead to inflow, outflow or no flow of Cash and Cash Equivalents.

Answer:
No flow of cash. Bonus shares are issued out of reserves and accumulated profits; share capital rises and reserves fall by the same amount, and no cash comes in or goes out.

Teacher's Note:
a) Bonus issue only transfers reserves to share capital.
b) It is a non-cash transaction.
c) It is not shown in the Cash Flow Statement.
d) Give the reason along with the answer.

Question 8.
From the following details have been extracted from the Cash Flow Statement of Beta Ltd. for the year ended 31^st March 2020.

Fill in the missing figure in Note to Accounts.

Answer:

Accumulated Depreciation on Machinery Account

Machinery Account (at cost)

Notes to Accounts

Teacher's Note:
a) Find depreciation on the machine sold from the Accumulated Depreciation A/c first.
b) Cost of machine sold = Sale 15,000 + Loss 5,000 + Depreciation 10,000 = 30,000.
c) The balancing figure of the Machinery A/c gives the closing cost.
d) Net value = Cost - Accumulated depreciation.

Question 9.
You are required to prepare a Comparative Statement of Income from the following information:

Answer:

Comparative Statement of Profit and Loss for the years ended 31^st March, 2019 and 2020

Teacher's Note:
a) Percentage change = Absolute change / Previous year amount × 100.
b) Put the earlier year first and the later year second.
c) All items rise by 60% because every item is a fixed percentage of revenue.
d) Tax is 50% of profit before tax.

Question 10.
From the following extracts of a company's Balance Sheet, and the additional information, you are required to calculate Cash Flow from Financing activities for the year ended 31^st March 2020.

Additional Information :
(a) During the year 2019-20, a bonus issue of 1 equity share for every 2 held was made. The face value of equity share was Rs. 10 per share.
(b) Remaining Shares were issued at a premium of 10%.
(c) 10% Debentures were redeemed on 1st April 2019.
(d) Proposed dividend for the year 2018-19 and 2019-20 were Rs. 40,000 and Rs. 60,000 respectively.

Answer:

Working Notes:
1. Bonus shares = 10,00,000 × 1/2 = Rs. 5,00,000 (non-cash). Capital after bonus = Rs. 15,00,000
2. New shares issued for cash = 25,00,000 - 15,00,000 = 10,00,000 + premium 10% = 1,00,000. Cash received = Rs. 11,00,000
3. Securities Premium: 4,00,000 + 1,00,000 = 5,00,000, which matches, so the bonus was not issued out of Securities Premium.
4. Debentures redeemed = 2,00,000 - 1,50,000 = Rs. 50,000 on 1^st April, 2019
5. Interest on debentures = 1,50,000 × 10% = Rs. 15,000 (only the remaining debentures were outstanding all year)
6. Dividend paid in 2019-20 = proposed dividend of 2018-19 = Rs. 40,000

Cash Flow from Financing Activities for the year ended 31^st March, 2020

Teacher's Note:
a) Bonus shares bring no cash, so remove them from the increase in share capital.
b) Last year's proposed dividend is paid this year; this year's is paid next year.
c) Interest is only on debentures outstanding during the year.
d) Shares issued at a premium bring in face value plus premium.