IAS Mains Commerce Papers 1989

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IAS Mains Commerce 1989

Paper I

Section A

1. Clearly differentiate between any three of the following in not more than 200 words in each case:

1. Net income and cash flow

2. CPP and CCA

3. IRR and NPV

4. Budgeting and Standard costing.

2. Answer the following questions

1. Hard Times Ltd. after having sustained heavy lesses in the part few years has decided to write off its equity share capital by Rs. 20, 00, 000 and accordingly eliminate goodwill, and trademarks and patents standing in the books at Rs. 6, 00, 000 and Rs. 3, 00, 000 respectively. The remaining balance is to be utilized for slashing down the values of plant and equipment, motor vehicles and building leases for which you have to use imaginary figures. Give journal entries to record this decision.

2. Calculate the value of the business, including goodwill as being the value of super profits, based on the following information relating to Bits & Bytes Ltd.

Estimated profits (after tax) Rs. 20, 000

Value of net tangible assets Rs. 1, 00, 000

Basic return required on net tangible assets 8%

Super profits to be capitalized at 20%

If the required rate of return remains at 8% what will be the value of the business using the total capitalization method?

3. Answer the following questions

1. Explain and illustrate the difference between FIFO and the weighted average method of calculating equivalent units of production in process costing.

2. Kohima Shillong Ltd. Manufactures and sells a single product in respect of which the following dada are given

• Fixed costs Rs. 3, 20, 000 a month
• Variable costs Rs. 30 a unit
• Selling price Rs. 50 a unit
• Anticipated sales 20.000 units a month

You are required to

1. Contract a profit-volume chart, measuring volume in physical units.

2. Calculate the break-even point (in units), the margin of safety, and the anticipated income before taxes at the anticipated sales volume.

3. The company is considering increasing the selling price to Rs. 55 at which it expects to sell 18, 000 units. Recalculate the break even point (in units), the margin of safety, and the anticipated income before taxes.

4. Answer the following questions

1. In banking and insurance companies is an auditor a watching or a bloodhound? In this connection, bring out the spectral points in the audit of either a banking or an insurance company.

2. Mr. Mayank Jain, a chartered accountant, is working as Director (Finance) in Indo-Quantas Ltd. At New Delhi. For the assessment year 1989 − 90, he furnished the following particulars.

1. Salary for 12 months-Rs. 55, 000.

2. Out of he above salary, Mr. Jam drew Rs. 10, 000 at Sydney being the salary for about 2 months where he was on an official assignment.

3. Directors sitting lees-Rs. 2, 500

4. Companys contribution to recognised provident fund-Rs. 5000

5. Interest on provident fund at 12%-Rs. 21, 000

6. Assessees contribution to provident fund Rs. 5, 003 (included in the sum of Rs. 55, 000) shown in i above

7. Life insurance premium on the joint life of his and his wife Rs. 6, 500

8. Entertainment allowance paid since 1961 by the employer-Rs. 10, 000 p. a.

9. Investments in equity shares, units in PNB mutual-fund and the UTI-Rs. 8, 000 covered under Section 80CC

10. Deposits under National savings Scheme covered under Section 80 CCA-Rs. 7, 900.

The company has provided him a rent-free unfurnished house owned by it of the annual valuation of

Rs. 20, 000. Besides the company has incurred the following expenses on the house and establishment:

Repairs-Rs. 15, 000.

Pay of part-time cook and bearer Rs. 3, 000 appointed by the company

Pay of Mali Rs. 1, 600 appointed by the company.

3. Compute the total taxable income of Mr. Mayank Jain giving explanatory notes for the inclusion and exclusion of different items. Also mention the extent of rebates due to him in respect of various items.

Section B

1. Answer any three of the following in not more than 200 words each:

1. Why should maximization of shareholders wealth be the objective of financial management?

2. What is the significance of time value of money in capital budgeting decisions?

3. What is meant by negotiation? How is it effected? Distinguish between negotiation and assignment.

4. Discuss the significance to the collecting banker and the paying banker of Account Payee

Only and Not Negotiable crossing on a cheque.

2. How far do you think that the Industrial Development Bank of India as the apex body in the development banking structure has been successful in discharging its triple functions of financing, refinancing and coordination?

3. Answer the following questions

1. Discuss, very briefly, either the major provisions of the Securities Contract (Regulation) Act, 1956 or the major recommendations of the G. S. Patel Committee (1984) on the reforms of the stock exchanges in the country.

2. The management of the Blue Corporation Ltd. Must decide between two proposals. The following information is available

• Proposal Investment now Net Cash Inflows Year I Year II Year III
• A Rs. 80, 000 Rs. 95, 400 Rs. 39, 000 Rs. 12, 000
• B Rs. 1, 00, 000 Rs. 35, 000 Rs. 57, 500 Rs. 80, 000

Assuming that the company can earn 12 percent on projects of this type and that the cash inflows are received at the end each ear, advise management regarding the proposal that should he selected

Submit computations of Net Present Values and Profitability Index, Ignore income-tax considerations.

• Given at 12% p. v. Of Rs. 1 receivable at the end of
• Year 1 is Rs. 0.893
• Year 2 is Rs. 0.797
• Year 3 is Rs. 0.712
4. Answer the following questions

1. Explain and illustrate the EOQ model. In this connection, examine the relationship between risk and cost with respect to inventories.

2. Nhova Sheva Company Ltd. Is a new establishment that is in various stages of capitalization. Three alternative financial structures have been suggested to it, while its tax rate is 30% (10).

• All equity (2) 20% Debt (3) 40% Debt
• Equity Shares (Rs. 10 per share) 10, 00, 000 shares 8, 00, 000 shares 6, 00, 000 shares
• Debt (at 10%) Zero Rs. 20, 00, 000 Rs. 40, 00, 000
1. Compute EPS for each plan if the expected EBIT for Nhova Sheva is Rs. 5, 00, 000 and Rs. 10, 30, 000.

2. Graphically illustrate the three plans using an EBITEPS analysis.

Paper II

Section A

Time Allowed: 3 hours Maximum Marks: 300

Candidates should attempt Questions I and 5 which are compulsory, and any three of the remaining questions selecting at least one question from each Section.

1. Write notes an any three of the following in not more than 200 words each:

1. Strategy and structure

2. Management of conflict

3. Morale and productivity

4. Corporate objectives.

2. Organizational effectiveness is a function of organizational culture and climate. Substantiate your answer with appropriate recent illustrations from Indian Corporate Sector.

3. Discuss the contributions of McGregor, Herzberg and Liked to the theory of motivation.

4. It is postulated that participative, supportive and goaloriented leader will be universally effective. Evaluate the statement within the broader context ct Blake and Moutons Managerial Grid.

Section B

1. Write notes on any thin of the following in not more than 200 words each:

1. Role of outside leadership in Indian Trade movement

2. Problem of labour turnover in Indian industry

3. Collective bargaining

4. International Labour Organization and India.

2. What is Workers Participation in Management? Evaluate the efforts made and the progress achieved in this direction in Indian industry in recent years.

3. Enumerate the causes that give rise to industrial disputes and evaluate the effectiveness of the statutory mechanism available in the settlement of industrial disputes under industrial Disputes Act, 1947 in our country.

4. A national wage policy must aim at establishing wages at the highest possible level, which the economic conditions of the country permit, and it also oust ensure that the wage earner gets a fair share of the increased prosperity of the country as a whole resulting from economic development. In the light of the statement, critically evaluate the wage policy in India.

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