Institute of Chartered Financial Analysts of India (ICFAI) University 2007 Certification Finance Financial Accounting – I (111) : - Question Paper

Amount of 2nd bill = Rs.6,300
Amount of discount = Rs.6,300 – Rs.6,120 =Rs.180
Sharing ratio = Rs.2 : 1
Discount to be borne by Sumesh = Rs.180 x 2/3 = Rs.120.
Total discount to be borne by Sumesh = Rs.180 + Rs.120 = Rs.300.
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16.
ans : (a)
cause : At the time of drawing a bill ,the drawer debits the bills receivable account and credits debtor’s account
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17.
ans : (e)
cause : A bill discounted with a bank when retired, the drawer does not pass any entry as he has already passed his beneficial interest on the bill to the bank.But the situation is various in case of dishonor of the bill.
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18.
ans : (d)
cause : The discount charge is shared in the ratio of fund received ranging from the parties
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19.
ans : (b)
cause : The Accounting Standard-2 deals with regard to accounting for inventory. According to the statement, Work in progress of a manufacturing industry is covered. Thus, the option (b) is the accurate ans. The items of inventory said in other options are not covered under AS-2 Financial instruments held as stock-in-trade : Work in progress arising under construction contracts and Work in progress of service providers. Hence, options (a) reflecting statement (I); (c) combination of statements (I) and (II); option (d) combination of statements (III) and (IV) and option (e) combination Of statements II, III and IV are incorrect.
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20.
ans : (c)
cause : The working is as follows:- Rs.
Value of physical stock 35,000
Add: goods purchased not received 6,000
Goods sold during the week 5,000
Goods earlier purchased but returned 1,000
47,000
Less goods held on consignment 4,000
Closing stock as on 31.03.06. 43,000
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21.
ans : (c)
cause : Cost of conversion is made of production overheads plus direct wages plus direct expenses.
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22.
ans : (a)
cause : The basis for pricing inventory is either cost of production or cost of acquisition. FIFO method of identifying inventory is based on the assumption that costs are charged against revenue in the order in which they occur. In case of other methods i.e. LIFO (b) method matches the most latest costs incurred with current revenue, leaving the 1st cost incurred to be included as inventory. Weighted-Average method (c) assumes that costs are charged against revenue based on an avg. of the number of units acquired at every price level. Moving avg. method (d) can be used only with a perpetual inventory. The cost per unit is recomputed after every addition to the inventory. The ending inventory is valued at the last moving avg. unit cost for the period. Base stock method (e) wherein a minimal level of it is a permanent investment, which is necessary for the normal business activities. Base stock would be carried at historical cost. Thus, FIFO method is the accurate ans.

Earning:   Approval pending.