JMD Tutorials TYBBI - Revision Sheet Question Bank Prelim Papers With Solution

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JMD Tutorials - REVISION SHEET

Question Bank for FRA

Topic Sum numbers

Vertical Formats Learn formats and list of items on Pg. 3. Problems -2,4,7 Common Size 1,7 & also go through extra practice sums given on pg. no 11

For comparative and trend – just go through the steps to solve given in revision sheet

Fund Flow & Cash Flow Statements 4,5,7,8,9,10,14,15 Insurance Company accounts 3,6,9,12,14,19,20 Banking Company Accounts 6,8,16,18,21,23,26

Company Final Accounts 1,2,3,13,14,15,16,17,18,21. Sums & Theory given in Extra sheet Ratio Analysis 1,2,6,7,8,9,10,11,12,16,18,19,21,24,26.Functional Classification on pg.13

Theory Do ALL (Don’t keep theory for last minute. It is only 6 pages)

Comparative and Trend- Format

Steps for Comparative statements: 2 years will be given: make 4 columns.

1. Year 1: Amount 2. Year 2: Amount

3. Absolute increase/ decrease i.e Year 2 – Year 1

4. % increase / decrease i.e Column no 3/ Column 1 X 100

Note: If 3rd column is negative then 4th column will also be negative. The above formats is applicable for both Balance sheet and profit and loss

Steps for Trend statements: normally 3 to 4 years are given

Make extra columns for %. No of columns will be same as number of years.

1 year is taken as base year which is 100% and find % row wise for rest of the years.

COMPANY FINAL ACCOUNTS-EXTRA PRACTICE SUM ON FIXED ASSET SCHEDULE (WHEN SALE OF ASSET TAKES PLACE IN BETWEEN THE YEAR)

The Trial Balance of Ajay Ltd shows the following figures relating to Fixed Assets as on 31-3-2009

Particulars Rs.

Plant & Machinery Land

Goodwill Motor Vehicles

Opening Depreciation Provision On Plant and Machinery On Motor Vehicles Sale proceeds of old machinery

4,20,000 1,60,000 1,00,000 80,000 1,78,000 44,000 60,000 Additional Information:

1) Depreciation to be provided during the year at 10% on Straight line method 2) There was an addition to Plant and Machinery on 30-6-2008 for Rs. 1,20,000

3) A Machinery costing Rs. 160,000 was sold on 30-6-2008, depreciation provided on it was Rs. 80,000 Prepare schedule of Fixed Assets.

Hints for Plant and Machinery

Sale is taking place not at the beginning but after using it for 3 months on 30.6.2008 Particulars Cost Accumulated depreciation WDV

Opening balance 300000 178000 122000 Add: Purchase 120000 0 120000 Less: Sale 160000 80000 80000 Closing balance 260000 98000 162000

Calculation of Current Years Depreciation

As depreciation is SLM breakup Cost of Rs.260000 into New Machinery Rs.120000 on which Depreciation @10% would be provided for 9 months Rs.9000 and balance is Old Machinery Rs.140000 on which

Depreciation @10% would be provided for full year Rs.14000. Also in this sum Machinery has been sold not at the beginning but on 30.6.2008 after using it for 3 months, therefore Depreciation will be calculated @10% on 160000 for 3 months Rs.4000.

Therefore Total Current years Depreciation is Rs.27000 (9000+14000+4000) which will go in Column 6 as current years Depreciation

Cost 160000 AD 80000 WDV 80000 SP 60000 Loss 20000

FUND FLOW & CASHFLOW

1) If Net profit is given in adjustment-Ignore it

2) If Business Purchase Journal Entry does not tally-Difference in Dr side will be taken as Goodwill and difference in credit side will be taken as Capital reserve.

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Question Bank for SAPM

1. Objectives and Abbreviation Pg. 36 to 42+ extra objectives given in revision sheet. DON’T forget to write

reasons for in objectives in exam

2. Time value of money 1,3,4,5,7,10,12,16,18,20,22,25,26,27,28 Learn all formulaes of PVF, PVAF, FVF & FVAF 3. Risk and Return 4,6,8,12,14,16,17,21,22,24,27,28

4. Valuation of Equity 4,6,7,11,13,14,16,20,23,26,29,30,32,34 5. Valuation of bonds 3,4,5,6,9,11,12

6. Beta & CAPM 1,2,3,5

7. Ratios 1,2,6,7,8,9,10,11,12,16,18,19,21,24,26. (Emphasis on overall profitability ratios & Ratios for equity shareholders)

8. Portfolio Performance Evaluation 1,2,3 + extra problem given below on jensens measure

9. Make a list of ALL imp formulae For last min revision & make a list of important assumptions

Extra Problem of Portfolio Performance evaluation:

The following information is available in respect of certain securities:

Security Beta Actual Return of the portfolio

I 1.4 22%

II 1.2 18%

III 1.1 14%

The market return is 16% and the risk free return is 6%. Find out whether these securities are correctly priced or not.

Solution:

In this problem we have do Jensens differential measure. 1st_{step to calculate CAPM retun and then do step 2}

where we find Jensens differential i.e Actual return – CAPM return.

If the answer is Positive – it means the security is undervalued and we should buy If the answer is negative – it means the security is overvalued and we should not invest If the answer is zero – it means the security is fairly or correctly valued

CAPM return= Rf + beta (Rm – Rf)

Security CAPM return= Rf + beta (Rm – Rf) Jensens Differential = Actual return – Capm return Valuation I = 6 + 1.4(16-6)= 20% = 22 -20 = +2% Undervalued

Ranker 2010

Jaihind College

Meher Patel

Ranker 2010

H.R College

Khushbu Patel

Ranker 2010

K.C College

Feroza

1

st

_{Rank 2011}

_{K.C College}

Shaili Doshi

Ranker 2011 (V Sem)

H.R College

Hiral Shah

1

st

_{Rank 2012 (V Sem)}

_{H.R College}

Keshika Lakhani

2nd Rank 2012 (V Sem) & 60 out of

60 in SAPM, 59 out of 60 in FRA

H.R College

Shernaz Marfatia

3rd Rank 2012 (V Sem)

Jaihind College

Swati Kandapalli

Highest in FRA – 100 out of 100

SIES College

And many more…………

Admission in Progress for:

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SAPM Theory

Theory

Meaning of Investment Learn Investment & Speculation Learn Investment Alternatives Learn

Investment Attributes/ principles/ Objectives Learn

Investment Decision Making and Approaches Learn

Investment Avenues in Detail:

Emphasis on:

PPF

9% Senior Citizen Scheme

Money Market Instruments ( for detail refer fsm)

Mutual Funds

Derivatives

Life Insurance

Examples of Tax saving Investment avenues ( Important)

Read

Learn

Security Market – Primary V/s. Secondary Market (Important) Learn

Margin Trading Learn

Stock Market indices – functions/ Criticism/ Methods Read SEBI & Future Challenges Learn

Concepts: Bull/ bear/ Scriptless Trading/ Dematerialisation/ Speculation Learn Types of Risk

Systematic & Unsystematic Risk (Important)

Read Learn Risk Preferences of Investors Read

Du Pont Analysis ( Important) Learn

Objectives of Financial Statement Analysis Read Problems in Financial Statement Analysis Learn Guidelines in Financial Statement Analysis Read

Time Value of Money Learn

Meaning of Portfolio & its Diversification Learn Traditional V/s Modern Theory Learn Modern Theory:

Markowitz Theory of Portfolio management (Full Co-variance Model) Sharpe’s Portfolio Theory (Market Model/ Single Index Model)

CAPM

Inputs for CAPM (Important)

Learn Read Learn Learn

Efficient Market Hypothesis – Random Walk Theory and its three forms ( Very Important)

Learn

Portfolio Management Framework/ Elements/ Phases (*Very Important*****) Learn Fundamental Analysis Economic Company Industry Learn Read Read Read Technical Analysis & its limitations Learn

Distinction between Fundamental & Technical (Important) Learn

Dow Theory Read

Types of Charts Learn

Interest Rate Risk Learn

Determinants of interest rate Learn

Financial Markets and its important players Read Derivatives & Credit Rating Read

Extra Objectives:

State one word or group of words for the following:

1) Plotting of price movement of the stock and drawing inferences from the price movement in the stock market – Technical Analysis

2) Loan taken by the company from the public at a specific rate of interest and on certain terms and conditions – Debentures if it secured loan and Public deposit if it is unsecured loan.

3) A speculator on the stock exchange who expects a rise in the price of a certain security- Bull

4) A measure of performance of a particular share in relation to general movement of the market – Beta 5) A special contract in which the owner enjoys the right to buy or sell something without obligation to do

so – Option contract (Call Option & Put Option)

6) A institution which enables the trading of securities – Stock Exchange

7) A contract due to which the owner has the right to sell and move out at a predetermined price – Put Option

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Extra Objectives

1. The usual period of issue of commercial paper is : i) 90 days ii) 180 days iii) 30 days iv) one year

Ans. 180 days. Commercial paper: the maturity of commercial papers should be atleast 7 days and maximum 180 days in India. Usually the period of issue of commercial paper is 180 days.

2. Dividend payout ratio of a company is ______if NPAT is Rs. 2,25,000, 8% Preference Share capital is Rs. 2,00,000. Equity share capital of Rs. 10/- is Rs. 10,00,000 and dividend is Rs. 1 per share.

Dividend Payout ratio = DPS/EPS X 100 = 1/2.09 X 100 = 47.85% EPS = 225000 – 16000 / 100000 = 2.09

3. According to CAPM the correct measure of risk is termed as –

a) C) Business Risk b) Financial Risk c) Beta Coefficient d) Systematic Risk

According to CAPM the correct measure of risk is Beta Coefficient which measures systematic or non-diversifiable risk.

4. The negative correlation of two securities indicates that_______

a) The portfolio would yield maximum return b) the portfolio would yield minimum return c) the risk can be completely minimized d) the risk cannot be minimized

If the correlation of two securities is negative then the risk of two securities gets diversified. Thus the risk can be completely minimized

5. Firm A has a margin of 12%, sales of Rs. 600000 and ROI of 18%. Its average total assets are_______ a) 720000 b) 400000 c) 108000 d) 33,33,333

As per Du Pont Analysis:

Return of Total Assets (ROTA) or Return on Investment (ROI) = Net Profit Margin X Total Asset Turnover ratio Net profit margin = 12%

ROI = 18%

Therefore, Total Asset turnover ratio = 18/12 = 1.5 times Total Asset turnover ratio = Net sales/ average total assets 1.5 = 600000/ Average total assets

Therefore average total assets = 400000

6. The institutional investor operates under the advantages of ____________

a) Diversification b) Liqudity of funds c) Quality of management d) all of the above

All of the above. All are the advantages of institutional investments i.e. mutual funds. (Explain all in brief) Liquidity of funds means that the mutual funds provide liquidity through open ended schemes.

7. When a trader transacts in the market for price risk management, he is called as_____ a) Bull b) Bear c) Hedger d) Broker

Hedger. Explain each of them and justify your answer. Hedger is one who counterbalances one transaction (as a bet) against another in order to protect against loss. Thus he tries to manage risk-reward relationship

8. Which theory quantifies the relationship between risk and return?

a) Modern portfolio b) efficient Market c) Traditional Portfolio d) Equity Portfolio Modern Portfolio.

9. Financial Statements disclose only historical facts- True or False TRUE

Full form of SHCIL – Stock Holding Corporation of India ltd.

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Series A

N.B. (1) All questions are compulsory. (2) Figures in the brackets to the right indicate the marks Q 1. (A) Indicate the right answer with your reasoning: (10) 1. Unsystematic risk is

a. Internal risk b. External risk c. Controllable risk d. Uncontrollable risk e. Internal and controllable

2. The random walk theory suggests that the successive price changes are a. Dependent

b. Interdependent c. Correlated d. Uncorrelated

3. If the Efficient Markets Hypothesis is true:

i) Technical analysis will not help investors to make superior returns; ii) Fundamental analysis will not help investors to make superior returns Which of the following is correct?

a) Neither i) nor ii) b) i) but not ii) c) ii) but not i) d) Both i) and ii)

4. An individual who is carrying out technical analysis of the shares of a company would be likely to: a. study annual report and accounts of the company

b. study the past pattern of share prices movements of the company c. study the production process and marketing methods of the company

d. Compare the products produced by the company with those of its competitors. 5. Which measures the systematic or non-diversifiable risk of a security?

(i) Beta (ii) Standard Deviation (iii) Variance (iv) Range

Q.1 (B) Mrs Agarwal had purchased on 1/7/2003, 100 shares of ABC @ Rs. 150 per share including Brokerage and transaction tax of 1%. The face value of the share is Rs. 10. Company declared dividend as under.

August 2003 Final Dividend of 40% for F.Y. 02-03 December 2003 Interim Dividend of 30%

August 2004 Final Dividend of 50% for F.Y. 03-04 December 2004 Interim Dividend of 20%

The company also declared Bonus shares in the ratio of 1:2 on 15th September 2004.

On 01/01/2005, she sold all her shares of ABC @ 510 per share, net of Brokerage and Transaction Tax @ 1%. Calculate following for Mrs. Agarwal

1. Holding Period Return

2. Annual Rate of Return. (5)

OR

Q.1 (a) What are the approaches to investment decision making? (5)

(b) "Mutual Fund' acts as a boon to investors in general and small investors in particular". Explain. (5)

(c) Primary Market v/s. Secondary Market. (5)

Q.2 (a) Mittal Enterprises purchases a machinery for Rs. 1,00,000 on the 1st of January 1999. The cash flows expected

from the machinery are as follows: (10)

2000 Rs. 7,000 2001 Rs. 9,000 2002 Rs. 19,000 2003 Rs. 23,000 2004 Rs. 35,000

The depreciation on machinery is to be provided @ 10% p.a. on written down value method. At the end of 2004 the machinery is sold at a loss of Rs. 7,500. The rate of interest being 9%, comment on your decision. The Present value of Re. 1 at 9 % discounting rate are .917, .842, .772, .708, .649

Q.2 (b) Krishnamurthy has inherited Rs. 1000 a year for the next 20 years. First payment being made in one year’s time. However, he is in need of money immediately & would like to sell his income to any buyer who would pay him the right price. Assume current market rate of interest is 9%. PVAF = 9.129 @9%, 20yrs

a) What should be the right price he should accept?

b) How much of his income should he sell if he wants only Rs. 2500 at present? (5) OR

Q.2) (a) What is DU Pont analysis? (7)

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Q.3 The information below is taken from the records of two companies in the same industry (in 000). (15)

Particulars X Y

Cash Debtors-net Stock

Plant and equipments

210 330 1,230 1,695 320 630 950 2,400 Total assets 3,465 4,300 Sundry creditors 8% Debentures Equity share capital Retained earnings 900 500 1,100 965 1,050 1,000 1,750 500 Total liabilities 3,465 4,300 Sales

Cost of goods sold

Other operating expenses Interest expenses Income taxes Dividends 5,600 4,000 800 40 266 100 8,200 6,480 860 80 273 180

Answer each of the following questions by making a comparison of one or more relevant ratios. a) Which company is using the ordinary shareholders' money more profitably?

b) Which company is better able to meet its current debts?

c) If you were to purchase the debentures of one company, which company's debentures would you buy? d) Which company collects its receivables faster, assuming all sales to be credit sales?

e) Which company is extended credit for a longer period by the creditors, assuming all purchases to be credit purchases?

f) How long does it take the company to convert an investment in stock to cash? g) Which company retains the larger proportion of income in the business?

h) If you were to purchase shares of one company, which company’s shares would you buy? OR

Q. 3(a) Pan India Products pays a dividend of Rs. 2.2 per share and this dividend is expected to grow at 12% p.a. for three years, then at 10% for the next three years, after which it will stabilize at 5% forever.

What value would you place on the equity if 10.5% rate of return were expected? PVF = 1/(1+r)n ₍₁₀₎

Q.3 (b) A Bond of Rs. 1,000 face value with a coupon of 7% is redeemable after 5 years at a premium of 5%. The required rate of return is 8%. The current market price of the bond is Rs. 940. Whether investment at current market price of Rs. 940 is advisable? The Present Value of Re. 1 at 8% discounting rate are, 0.9259, 0.8573, 0.7938, 0.7350 and 0.6806. (5) Q.4) The rate of return on the Mutual fund and on the market portfolio are given below (15)

Year Fund A % Fund B % Market Portfolio % 1997 1998 1999 2000 2001 20 16 30 40 30 15 18 40 35 40 10 9 20 18 20 Calculate:

a. Expected return of A, B & Market portfolio, b. Standard Deviation of A, B & Market portfolio, c. Beta of A & B

d. If the risk free rate of return is 10%. Rank these funds by Jensen’s, Sharpe’s and Treynor’s Performances Indexes. OR

Q.4 (a) What is technical analysis? How it is different from Fundamental analysis ? (7) Q.4 (b) What is an option ? What are the different types of options ? (8)

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Series B

N.B. (1) All questions are compulsory. (2) Figures in the brackets to the right indicate the marks

Q (A) Indicate the right answer with your reasoning: (10)

1. Investment process takes into account a. Time dimension

b. Today’s sacrifice c. Prospective gain d. All of the above e. None of the above

2. 90 days Treasury Bills of Rs. 100 are sold for Rs. 97 per bill. The annualized rate of return on this investment is:

a. 12.37%; b. 4.04%; c. 11.88%; d. 3%

3. The approach towards investment decision which involve the price movements of the securities and drawing inferences from the price movement in the market is known as

a. Fundamental Approach b. Technical Approach c. Psychological approach

d. Efficient market theory approach

4. When a portfolio consisting of 12 to 15 securities is built then, a. Unsystematic risk can be reduced

b. Systematic risk can be reduced c. Total risk can be reduced d. None of the above

5. If the Net profit margin (NPM) is 5% and Return on total assets (ROTA) is 20%, then the Total Asset Turnover ratio is

a. 100, b. 0.25, c. 4, d. none of the above.

Q1 (B) Give the full forms of the following: (5)

a) SBTS b) PMS c) NCDEX d) BOLTS d) OTCEI

OR

Q.1) a) Explain the term investment. What are the attributes/ Principles/ objectives of investment? (7) b) Investment is a game but you must know how to play it. Explain this statement keeping in view various

approaches to investment decision making. (8)

Q.2) Write short notes on:

a) Primary V/s. Secondary Market (4)

b) Stock Market Indices – its functions and limitations (4)

c) SEBI & Future Challenges (4)

d) Stock Markets abroad (3)

OR

Q2) (A) The following information is available in respect of Company A and Company B: (10)

Particulars Company A Company B

Equity shares of Rs. 10/- each 20,00,000 25,00,000

9% Preference Shares 8,00,000 10,00,000

Reserves & Surplus 40,00,000 50,00,000

Profit after Tax 60,00,000 80,00,000

Proposed Equity Dividend 36,00,000 40,00,000

Market Price per share Rs. 96 Rs. 132

Depreciation 400000 700000

Calculate: 1. EPS; 2. Cash EPS; 3. P/E ratio; 4. Dividend Payout ratio; 5. Retention ratio; 6. Dividend Yield ratio; 7. Dividend Cover for Preference and Equity separately 8. Book Value per share. Advise which company is worth investing.

Q.2) (B) Mr. Puneet is planning to invest Rs. 50000 on Xerox machine on 1st_{Jan 2002. He estimates net cash}

income from Xerox machine in next 5 years as under: (5)

Year Estimated Inflows

2002 12000

2003 15000

2004 18000

2005 25000

2006 30000

At the end of 5th_{year machine will be sold at scrap value of Rs. 5000. In addition to investment in machine he}

will also invest Rs. 10000 for working capital at the beginning of venture. Advice him whether his project is viable, considering interest rate of 10% p.a. PVF @ 10% for Year 1 to Year 5 are, .909, .826, .751, .683, .621. Q.3) (A) As per the financial accounts for the last year, the company has paid dividend @ 20%. Amount of paid up equity capital is Rs. 600000 and 10% preference share capital Rs. 1,00,000. Operating Profit is Rs. 4,00,000. The tax rate is 40%. The company expects a growth rate of 3%. The required rate of return is 10%. Compute value per Equity Share using: a) Dividend approach, (b) Dividend Growth Approach; (c) Earnings approach (10)

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OR

Q.3) (A) Munnas equity shares currently sells for Rs. 66 per share. His Finance Manager Mr. Circuit anticipates a constant growth rate of 15% and dividend per share of Rs.3.00. (5)

a) What is the expected rate of return if the share is sold for Rs.70?

b) If the required rate of return is at 20 percent, what would be the indicative value of the stock? c) Is it worth investing in the share?

Q.3) (B) You are considering an investment in one of the following Bonds:

Coupon Rate Maturity Price (Rs. 100 par value) Bond A Bond B 12% 10% 10 Years 6 Years Rs. 70 Rs. 60 What is YTM of each Bond & which Bond would you recommend for investment? (5)

Q.3) (C) An Rs.5000 bond with a 12% coupon rate matures in 8 years and currently sells at 96%. Is this bond a desirable investment for an inverter whose required rate of return is 10%?

PVAF @ 10% for 7 years = 4.868 and PVF @ 10% for 8th_{year = 0.467} ₍₅₎

Q.4) (A) Following information is available in respect of the rate of return of two securities A and B in different

economic conditions: (8)

Condition Probability Rate of Return Security A Security B Recession Normal Boom .20 .50 .30 -.15 .20 .60 .20 .30 .40

Find out the expected returns and the standard deviations for these two securities suppose an investor has Rs. 20,000 to invest. He invests Rs. 15,000 in security A and balance in security B, what will be the expected return and the standard deviation of the portfolio?

Q.4) (B) The details of three portfolios are given below. Compare these portfolios on performance using the

Sharpe, Treynor and Jensen’s measures. (7)

Portfolio Average return Standard deviation Beta

JMD Growth Fund Reliance Growth Fund Templeton Growth Fund Market index 15% 12% 10% 12% 0.25 0.30 0.20 0.25 1.25 0.75 1.10 1.00 The risk free rate of return is 9%.

OR

Q.4) Explain in detail the steps/ elements/ phases in the construction of a portfolio. (15)

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Solution to Series A Q.1) e,d,d,b,a

Q.1) (B) Refer Q.8 of Risk and Return

Q.2) Refer Q.5 & Q.21 of time value of money of JMD Q.3) Refer Ratios sum no 24 of JMD

Q.3(a) Alternative Year F.V PVF @ 10.5% P.V 1 2.2 (1.12) = 2.464 0.905 2.23 2 2.2 (1.12)2 _{= 2.760} _0.819 _2.26 3 2.2 (1.12)3 _{= 3.091} _0.741 _2.29 4 3.091(1.10)1 _{= 3.399} _0.671 _2.281 5 3.091(1.10)2 _{= 3.74} _0.607 _2.27 6 3.091(1.10)3 _{= 4.114} _0.549 _2.259 13.59 V6 = D7/ k –g = 4.114(1.05)/ 0.105 – 0.05 =78.54 Vo =78.54 X 0.549 = 43.12 Total Vo = 43.12 + 13.59 = 56.71

Q.3 (b) alternative: Refer valuation of bond sum no 3

Q.4)Make same table as beta and add one more column for (Rx – Rx(bar)]^2

A B Market

Expected return 27.2 29.6 15.4 Std Deviation 9.44 12.17 5.46

Beta 1.42 2.2 --

Ranks: (Don’t rank market)

Sharpes: A,B ; Treynor: A,B; Jensens: A,B

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Solution to Series B

Q.1) d, a (use HPR formula and Current Income is nil, and then find annualized return),b , a, c (ROTA = NPM X TATA) Q1 (B) Refer JMD notes. SBTS: Screen Based Trading System. (in notes incorrectly printed as training)

Q.2) A)

A B

EPS Rs 29.64 Rs 31.64

DPS Rs 18 Rs 16

Cash EPS Rs. 31.64 Rs 34.44

P/E ratio 3.23 times 4.17 times

Dividend Payout ratio 60.73% 50.57%

Retention ratio/ Retained earnings ratio = 100 – Div payout ratio

39.27% 49.43%

Dividend Yield ratio 18.75% 12.12%

Preference Div coverage ratio 83.33 times 88.88 times

Equity Div coverage ratio 1.65 times 1.98 times

Total Div coverage ratio 1.63 times 1.95 times

Book Value per share Rs. 30 Rs.30

Q.2 B) Refer JMD class work problems Q. 3 – time value Q3) A) Refer Valuation of equity sum no 32

Q.3(A) alternative: k = 19.29%

V = 3/ 0.2-0.15 = Rs. 60

No as the market price (Rs 66) is more then the expected price. Q.3) b) alternative: YTM Refer Q.9 of JMD – valuation of bonds Q.3) c) alternative: JMD – valuation of bonds- sum no 2 Q.4) Refer Q.25 of JMD – Risk and return

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JMD TUTORIAL’s - FRA Prelims – Series A

Q.1) From the foll information, prepare Profit and loss account of Trinity Bank Ltd. for the year 31 March 2008.

Rs

Interest on Investments Interest on Balance with RBI Interest on Loans

Interest on fixed deposits

Rebate on Bills discounted (1-4-2007) Commission

Establishment Charges Discount on Bills discounted Interest on Cash Credit Interest on Current Accounts Salaries

Contribution to Provident fund Rent and Rates

Interest on Overdraft Directors' fees Auditor's Fees

Interest on Savings Bank Deposits Postage and Telegram

Printing and Stationery Sundry Charges

Profit and Loss Account (1-4-2007) Share Capital

Dividend on shares

Income from Joint ventures Interest on Borrowings 3,00,000 2,00,000 25,95,000 27,50,000 4,90,000 82,000 5,40,000 14,60,000 22,30,000 4,20,000 80,000 20,000 80,000 15,40,000 30,000 12,000 6,80,000 14,000 29,000 17,000 2,00,000 20,00,000 2,00,000 1,00,000 2,00,000

1. Bad debts to be written off amounted to Rs. 4,00,000 & RDD RS. 1,00,000 2. Provision for taxation to be made at 55%.

3. Unexpired Discount on bills discounted (31-3-2008) Rs. 5,00,000.

4. Interest accrued on doubtful loans is included in interest on loans above Rs. 5,000. 5. Directors proposed dividend of 10%.

OR

Q.1) Write Short Notes on any Three

a) Rule for valuation of investments by Banks b) Rebate on Bill Discounted

c) Non Performing Assets

d) Acceptances Endorsements and other Obligations e) Cash Credit, Loan & overdraft

f) Money at Call & Short Notice

Q.2) From the foll information as on 31st March 2004, prepare Revenue Account of the Indian Marine Insurance Co. Ltd. Direct Business Rs. Reinsurance Rs.

1. Premium: Received Receivable-1st April -31st March Paid Payable-1st April -31st March 2. Claims: Paid Payable-1st April -31st March Received Receivable-1st April -31st March 3. Commission: On insurance accepted On re-insurance ceded 46,00,000 2,48,000 3,36,000 - - - 23,50,000 1,66,000 2,08,000 - - - 2,20,000 - 7,20,000 27,000 34,000 4,60,000 37,000 62,000 3,00,000 39,000 44,000 1,70,000 16,000 23,000 19,000 26,000

4. Other Expenses and Income: Salaries - Rs. 3,20,000, Rent Rates and Taxes Rs.29,000; Postage & Telegrams Rs.43,000; Advertisement and Publicity paid - Rs. 4,40,000; Interest, Dividends and Rent Received (net) Rs. 1,37,500; Income Tax deducted at Source Rs. 40,250; Legal expenses (inclusive of Rs. 40,000 in connection with settlement of claims) Rs. 72,000.

5. Balance of Fund on 1st April, Rs. 38,45,000 including Additional Reserve of Rs. 4,45,000. Additional Reserve has to be maintained at 5% of the net premium of the year.

OR

Q.2a) Explain surrender value and how is it different from paid-up value. b) Life Insurance Fund.

c) Reserve for Unexpired Risk.

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Q.3 a) JMD LTD-TRIAL BALANCE AS ON 31.3.2008 6 marks Depreciation w/off upto last year

Q.3b) ) JMD COMMUNICATION LTD. 31.3.2005

Particulars Amt. Amt.

Advance Tax / Tax Provision 02-03 (Assessment year 03-04) 03-04 (Assessment year 04-05) 04-05 (Assessment year 05-06) 81,000 72,600 65,000 84,000 70,000 ---

Assessment for assessment year 03-04 completed resulting in additional demand of Rs. 3,000 and for

assessment year 04-05 resulting in additional demand Rs. 26,000 of which company has disputed Rs. 12,000 in appeal. 6 marks

Q.3c) How will you treat following in Company Final accounts: 3 marks i) Sundry Debtors Total Rs.460000 out of Which Rs 60000 due for Less than Six months. ii) Arrears of Preference Dividend Rs.25000

iii) Disputed Income Tax Dues Rs 50000

iv) Disclosure Requirement payment to Auditors

OR Q.3) Following is the Balance Sheet of P Ltd.

LIABILITIES 2000 2001 ASSETS 2000 2001

Equity Share Capital 7% Redem. Pref. Shares Capital Reserve

General Reserve P& L A/c

Sundry Creditors Bills Payable

Liability for Expenses Proposed Dividend Provision for taxation

30,000 15,000 — 4,000 3,000 2,500 2,000 3,000 4,200 4,000 40,000 10,000 2,000 5,000 4,800 4,700 1,600 3,600 5,000 5,000 Goodwill Land Plant Investments Debtors Stock Bills Receivable Cash in hand Cash at bank Misc Expenses 10,000 20,000 8,000 2,000 14,000 7,700 2,000 1,500 1,000 1,500 8,000 1 7,000 20,000 3,000 17,000 10,900 3,000 1,000 800 1,000 Total (Rs) 67,700 81,700 Total (Rs) 67,700 81,700 Additional information:

i) A plot of land was sold in 2001 and profit on its sale was transferred to capital reserve.

ii) A machine has been sold for Rs.3,600 on 1.1.2001. It was originally purchased for Rs.10000/- on 1.1.1998 and its WDV as on the date of sale was Rs. 5,120.

iii) Depreciation of Rs.4,000 is charged on plant account in 2001.

iv) Income tax Rs.3,500 was paid during the year and charged against provision for taxation. v) An interim dividend of Rs.2,000 has been paid in 2001.

vi) Investments costing Rs.500 were sold on 10.5.2001 for Rs.800 Prepare Cash Flow for the year ended 31st December 2001

Q.4) (a) Following ratios & data pertain to the financial statements of P Ltd. for the year ended 31st Dec 2001. a) Working Capital Ratio 1.75:1

Acid Test Ratio 1.27:1 Working Capital Rs.33000

Find out Current Assets & Current Liabilities

b) If Stock turnover ratio is 4 times and Avg Stock is Rs.20000, Find COGS c) IF COGS is Rs.80000 and Gross profit Ratio is 20%, Find Sales.

d) If Credit Sales is Rs.100000, ACP is 36 days; Avg Bills Receivable is Rs2000, Find Debtors

e) If Working Capital is Rs.33000, Fixed Assets to Shareholders' Equity is 0.625:1, assuming no Investments & Borrowed Funds. Find Fixed Assets & Shareholders Fund

Q.4 (b) Find out the amount of provision to be made:

Facility Advances

Amount outstanding 10,00,000

Security 1,00,000

Realisable value of security 1,50,000 Doubtful period 2 years

ECGC/DIGC/CGESI Cover 50% or Maximum 20,00,000 whichever is lower

OR Q.4) Write Short Notes on

a) Directors Report

b) Importance and items to listed in Corporate Governance Report c) Management Discussion and Analysis

d) Contingent Liabilities and Commitments.

e) Section 212: Accounts of Holding and Subsidiary Companies

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Particulars Dr.

Building (WDV) Plant (WDV)

Furniture & Fitting (WDV)

1,50,000 80,000 15,000

Particulars Amt. Rate

Building Plant

Furniture & Fitting

5000 45000 5000 2.5% 15% 10%

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JMD TUTORIAL’s - FRA Prelims – Series B

Q.1) On 31st_{March, 2008, the foll balances stood in the books of New Bank Ltd. after preparing final a/cs.}

Particulars Rs. ‘000 Particulars Rs. ‘000

Share Capital Reserve fund

Fixed deposit accounts Savings bank accounts Current Accounts (credit) Money at call and short notice Investments at cost

Profit and Loss Accounts (credit 1-4-2007) Dividend for 2007

Land and Buildings (after depreciation upto 31-3-2008) Cash in hand 7,000 4,900 13,300 42,000 1,12,000 4,200 42,000 2,940 700 14,890 840

Cash with RBI

Loans, overdrafts and Cash Credits Cash with other banks

Borrowings from other banks Bills discounted and purchased Sundry creditors

Bills payable Unclaimed dividend Bills for collection

Acceptances on behalf of customers Net Profit for 2007-08

21,000 98,000 18,200 8,800 8,400 420 11,200 420 1,960 2,800 3,360 The net profit is after deducting provisions for bad debts Rs. 4,20,000 tax provision Rs. 14,00,000 and Rebate on bills discounted Rs. 70,000. Prepare Balance Sheet of the bank as on 31-3-2008.

OR

Q.1) (A) Following are the details of advances if Swedish Bank Ltd. as on 31st_{March 2008.}

Bills purchased and discounted (others) In India

Out of India Term Loans in India

Priority sector Public sector Banks Others

Term loans out of India Banks

Others

Demand loans in India Banks Others 8,782 1,653 12,782 1,289 1,652 28,256 278 4,285 750 11,279

Cash Credits in India Priority sector Public sector Others

Cash credits out of India Banks

Others Overdrafts in India

Banks Others

Overdrafts out of India Others

Demand loans out of India Others 11,250 6,105 31,250 1,225 469 4,523 11,785 250 620 Prepare schedule 9 of Advances in the statutory format.

Q.1 (b) Following are the statements of interest on advance in respect of performing & non-performing assets. Find out the

income to be recognized for the year ended 31st March 2008. (Rs in Lakhs) 5 marks

Performing Assets Interest Earned Interest Received

C.C. and Overdrafts Term Loan

Bills purchased and Discounted

1,800 480 700 1060 320 550

Non- Performing Assets

C. C. and Overdrafts Term Loan

Bills purchased and Discounted

450 300 350 70 40 36

Q.2) From the following balances as at March 31, 2004 in the books of General Insurance Co. Ltd. prepare a Revenue

Account in respect of Fire Insurance business carried on by them.

Particulars Rs

Claims

Claims outstanding on April 1, 2003

Claims intimated and accepted, but not paid on March 31, 2004 Premium received

Re-insurance Premium Commission

Commission on re-insurance ceded Commission on re-insurance accepted Expenses of Management

Provision for unexpired risk on April 1

Additional provision for unexpired risk on April 1 Re-insurance recoveries of claims

Survey expenses regarding claims Loss on sale of Motor Car

Bad debts

Interest in income tax refund Interest and Dividends (Net) Income tax deducted thereon Legal expenses regarding claims Profit on sale of investments Depreciation of Furniture 4,80,000 40,000 70,000 12,00,000 1,20,000 2,00,000 8,000 4,000 3,02,000 4,00,000 20,600 8,000 5,000 3,500 2,500 4,500 8,000 1,500 4,000 3,500 4,600 You are required to provide for additional reserve for unexpired risk at 1% of the net premium.

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Q.3) (a) Current Ratio of a company is 2: 1. Explain which of the following transactions will:

(a) Improve the ratio; (b) Reduce the ratio; (c) Does not affect the ratio.

1. Issued debentures for Rs. 1, 00,000; 2. Bank O/d. of Rs. 50,000 is converted into a bank loan

3. Drawn bill of exchange worth Rs. 1, 00,000 on debtors. 4. Pay a current liability

Q.3 (b) The Trial Balance of Ajay Ltd shows the following figures relating to Fixed Assets as on 31-3-2009

Particulars Rs. Plant & Machinery

Opening Depreciation Provision On Plant and Machinery Sale proceeds of old machinery

4,20,000 1,78,000 60,000 Additional Information:

1) Depreciation to be provided during the year at 10% on Straight line method 2) There was an addition to Plant and Machinery on 30-6-2008 for Rs. 1,20,000

3) A Machinery costing Rs. 160,000 was sold on 30-6-2008, depreciation provided on it was Rs. 80,000 Prepare schedule of Fixed Assets.

Q.3 (c) JMD I FLEX SOLUTIONS LTD: TRIAL BALANCE AS ON 31.3.2008 FXED ASETS AT COST /ACCUMULATED DEPRECIATION

Particulars Dr. Cr.

Land Vehicles

Vehicle sold(cost 65000/ profit 600)

1,40,000 1,67,700

- 42,000 50,000

Depreciation is charged on WDV basis at 10% vehicles. Land was Revalued by Rs.10000, effect of which was not given in books of accounts.

OR

Q.3) The following are the balance sheets of Z Limited as at 31st March 2002 and 2001

Liabilities 31.3.01 31.3.02 Assets 31.3.01 31.3.02 Share capital

Reserves

Profit & Loss A/c. Sundry Creditors Bills Payable Bank Overdraft Prov. for tax

1,20,000 30,000 23,814 23,700 20,268 35,706 24,000 1,56,000 35,000 25,732 19,681 5,915 — 30,000 Goodwill

Land & Building Plant & Machinery Cash Sundry Debtors Sundry Advances Stock — 89,100 67,770 1,500 51,105 1,389 66,624 12,000 86,550 69,720 1,620 43,575 441 58,422 2,77,488 2,72,328 2,77,488 2,72,328 The following additional information is obtained: -

1. During the year ended 31st March 2002, an interim dividend of Rs. 16,000 was paid,

2. The assets and liabilities of another company were purchased for Rs. 36000 payable in fully paid shares or the

company. These assets consisted of stock Rs. 14,984, machinery Rs. 11,016 and goodwill Rs. 12,000 and creditors Rs. 2,000, Additional plant for Rs. 3,390 was purchased.

3. Income tax paid during the year amounted to Rs. 15,000.

You are required to prepare a statement showing the source and application of funds for the year ending 31st March 2002 and a schedule of changes in working capital.

Q.4) Based on the following information, prepare Balance Sheet of Dhoni Ltd. as on 31st_{march, 2006.}

Current Ratio Liquidity ratio Net Working Capital Stock Turnover Ratio

Turnover Ratio to Net Fixed Assets (COGS/FA) Ratio of Gross Profit to sales

Average Debt Collection period Fixed Assets to Net Worth

Long Term debt to Capital and Reserve

2.5 1.5 600000 5 2 20% 2.4 months 0.80 7/25 OR

Q.4) From the following balance sheet presented by Messrs. Deepak Ltd. prepare common size statement

Liabilities Rs. Assets Rs. Share Capital

Reserves

Dividend Equalisation Reserve Profit and Loss A/c.

15% Debentures Public Deposits Creditors

Outstanding Expenses Proposal Dividend Provision for Taxation

1,35,000 34,000 10,000 10,000 45,000 62,010 20,920 5,000 16,200 12,600 Goodwill Preliminary Expenses Land and Buildings Plant and Machinery Furniture Investment Debtors Bank Balance 4,450 500 45,000 85,000 40,500 49,500 1,14,170 11,610 Total Rs. 3,50,730 Total Rs. 3,50,730

1. Fixed Assets are shown in balance sheet at Gross Value. Accumulated depreciation is 10% of gross block value and wrongly included in Reserves.

2. Out of investments, which are otherwise current in nature, a sum of Rs. 1,500 is represented by the shares of a co-operative society, who has allotted shares enabling the company to occupy its office premises.

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Solutions: All sums are from text book except for the hints and solutions given below Series A:

Q.1) Banking: Interest accrued on doubtful loans is to be deducted from interest on loans given in the table and net interest can only be shown under schedule 13.1a

Q.4a)

C.A= 77000, CL = 44000 COGS = Rs. 80000 Sales = Rs. 100000 Debtors = Rs. 8000

Shareholders Fund = Rs. 88000 (see note down) Fixed assets = Rs. 55000

Note:

SF + BF = FA + WC

SF=FA + 33000 (There are no BF) --- Equation 1. FA =0.625

SF 1

Therefore FA = 0.625SF—substitute this in equation 1 Q.4 (b)

Advances Doubtful

Secured 150000

Doubtful for 2 years , therefore RDD at the rate of 30% = 150000 X 30% =45000 Unsecured 850000 RDD @ 100% = 850000 Total RDD = 45000 + 850000 = 895000 Less: ECGC 50% = 447500 RDD required = 447500 Series B:

Q3 (b) Refer to extra sum given for company final accounts in this master revision sheet, solution is given there only, go through it. It is sale in between the year.

Q4- alternative – common size statements – refer pg. no 11 og JMD text book for solutions.