Description

Advanced Financial Accounting
June 2023 Examination

Q.1 The Balance sheet of AB Co. and PQ Co. as of 31st March 2021 was as follows. AB
co. took over PQ co. for Rs 450000 and paid equity shares for settlement of PC AB Co.
took over all the assets and Liabilities of PQ Co. Identify the method of Purchase
consideration and explain it and discuss the entries to be passed in AB Company. (10
Marks)
Liabilities AB Co. PQ Co. Assets AB Co. PQ Co.
Equity share capital 400000 400000 Land 200000 100000
Debentures 100000 Nil Building 150000 100000
Creditors 50000 20000 Machinery 50000 100000
Bills Payable 50000 30000 Furniture 100000 100000
ANS:
Introduction
While it originates with making purchases, nearby are many altered aspects that arise into
play. One of the most essential of those elements is the purchase consideration method. This
refers to how individuals examine specific services or products before shopping. Humans use
several extraordinary purchase consideration methods. One of the maximum commonplaces
is the cost-advantage analysis. This involves weighing the blessings of a service or product
towards its cost to decide whether or not or now not it is well worth purchasing. This could
be a very effective manner of creating purchasing selections, particularly about large or more
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Q. 2 There are various methods used for the valuation of goodwill. However, the
selection of a valuation method depends on different business practices adopted by the
company. So you are required to discuss commonly used methods for the valuation of
goodwill in detail with suitable examples. (10 Marks)
ANS:
Introduction
The premium salaried for the attainment reflects the worth of the developed business’s
intangible sources, such as its reputation, customer base, and logo recognition. Therefore,
goodwill is the change in the acquisition worth of a business & the reasonable marketplace
worth of its tangible sources. Valuing goodwill can be complicated and requires a thorough
know-how of the company’s financial statements, marketplace position, and the industry in
which it operates. Several strategies are used to fee goodwill: the revenue method,

Q.3 Shell Ltd furnishes the following information. Calculate the Valuevalue of closing
inventory as of 31st March and the cost of goods sold during March Month

(a).Using the FIFO method under a periodic inventory system and explaining the
concept of the FIFO Method (5 Marks)
ANS:
Introduction
The FIFO (First-In, First-Out) scheme is a popular account estimate technique many
companies use. Its miles based on the precept that the first items sold or fashioned are the
1stitems vented or used, and the latest items are left in inventory. Implementing the FIFO
method includes keeping tune of stock by its purchase or production date. When merchandise

b) Under the Perpetual Inventory system and interpret it. (5 Marks)
Date Particulars Units Rate
1st March Opening stock 1000 10
5th March Purchase 2000 20
16th March Purchase 2500 25
20th March Sales 1500
28th March Sales 2000
ANS:
Introduction
A perpetual Inventory Method is a method of record administration that involves keeping a
continuous record of inventory movements, including purchases, sales, and adjustments, in
real-time. This system provides an up-to-date history of inventory levels. It helps businesses