GITAM University 2008 A.D.P.M Institute of cost and management accounts - Question Paper
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
Fall (Winter) 2010 Examinations
Saturday, the 4th December 2010
FUNDAMENTALS OF FINANCIAL ACCOUNTING . (S-101)
STAGE - 1
Time Allowed . 2 Hours 45 Minutes Maximum Marks . 90
(i) Attempt ALL questions.
(ii) Answers must be neat, relevant and brief.
(iii) In marking the question paper, the examiners take into account clarity of exposition, logic of arguments,
effective presentation, language and use of clear diagram / chart, where appropriate.
(iv) Read the instructions printed inside the top cover of answer script CAREFULLY before attempting the paper.
(v) Use of non-programmable scientific calculators of any model is allowed.
(vi) DO NOT write your Name, Reg. No. or Roll No. anywhere inside the answer script.
(vii) Question No.1 . .Multiple Choice Question. printed separately, is an integral part of this question paper.
Marks
Q.2 (a) A comparison of cash book and bank statement of Afzal Traders for the month of March,
2010 revealed the following:
Balance as per cash book Rs.24,720.
Bank statement showed an overdraft of Rs.22,660.
A cheque for Rs.14,400 deposited into the bank was shown in the debit column of the
bank statement.
A cheque for Rs.3,920 deposited into the bank was recorded in the bank statement
as Rs.3,560.
A cheque for Rs.1,600 received from Ameer Brothers and deposited into the bank
was returned dishonoured by the bank.
A cheque for Rs.14,000 issued to Saqib Traders has not so far been presented to
bank for payment.
The bank statement showed a debit of Rs.540 for bank charges and a credit of Rs.
840 for profit.
Cash amounting to Rs.30,920 was deposited into the bank late in the evening on
March 31, 2010, but it was recorded by the bank on April 1, 2010.
Required:
(i) Bank Reconciliation Statement as on March 31, 2010. 07
(ii) Entries in the General Journal to adjust the cash record of the company. 03
(b) (i) Nazim Company uses the periodic inventory system and reports the following
information for the month ended January 31, 2010:
Date Description Units Cost per Unit Total Cost
Rs. Rs.
January 1
12
15
18
25
Balance b/d
Purchases
Purchases
Purchases
Purchases
200
300
600
400
800
56
767
1,000
1,800
4,200
2,400
5,600
During the month ended January 31, 2010, two thousand units were sold.
Required:
Calculate the value of closing inventory and the value of .cost of goods sold., assuming the
company uses valuation method of weighted-average. 05
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(ii) Ahmed Brothers, a trader of household items, uses periodic inventory system. In
the last week of June 2010, a theft took place in the shop and the thief succeeded
in taking away most of the inventory with him. In order to make an insurance claim,
Ahmed Brothers need an estimate of the stolen inventory. Following information is
available:
Rs.
Opening inventory (July 1, 2009) 255,250
Purchases during the year 1,590,500
Remaining inventory on June 30, 2010 25,750
Sales 2,090,200
Ahmed Brothers apply gross profit margin of 25%.
Required:
Make an estimate of the stolen inventory in the light of the above data. 05
Q. 3 (a) Prepare adjusting and correcting journal entries for the year ended June 30, 2010 from
the information given below: 10
(i) Sales to Mr. Ali for Rs.25,600 was wrongly entered in the books as Rs.26,500.
(ii) Unearned revenue account showed a credit balance of Rs.257,500 in the trial
balance on June 30, 2010. An analysis revealed that 80% of this amount had
been earned during the year.
(iii) Sales proceeds amounting to Rs.35,500 (sold at book value) of a non-current
asset were wrongly treated as sales of goods.
(iv) Rent paid amounting to Rs. 55,000 in relation to the rented house of the proprietor
was debited to the office rent expense account.
(v) Insurance expired during the year Rs.6,500. Prepaid insurance at the beginning
being Rs.15,000.
(vi) Amount of repairs to building was debited to building account, Rs.25,500.
(vii) Purchase of office equipment for Rs.15,520 was treated as purchases of
inventory.
(viii) Allowance for doubtful debts to be maintained at 2% on sales. Sales for the year
amounted to Rs.2,850,500.
(ix) Interest on a 10% loan of Rs.275,000 was outstanding .
(x) Purchase of goods for Rs.6,500 from Mr. Ahmed was completely omitted from the
books.
(b) On January 1, 2007, .A. Limited purchased five machines for Rs.120,000. On June 30,
2008, it acquired another machine at a cost of Rs.20,000. On March 31, 2009, a
machine, purchased on January 1, 2007 for Rs.25,000, was sold for Rs.10,000. It was
replaced on the same day by a new machine costing Rs.8,000. Depreciation is to be
provided at 20% per annum using straight-line method. Company charges full year.s
depreciation in the year of purchase and no depreciation in the year of sale.
Required:
Prepare the following accounts for three years to December 31, 2009:
(i) Machine Account. 04
(ii) Accumulated Depreciation Account. 04
(iii)Machine Disposal Account. 02
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Q. 4 Yasir & Company deals in electronic items. Not only does it sell goods for cash, a big
proportion of its sales consist of credit sales. Due to liberal credit policy, Yasir & Company.s
volume of sales has increased over the last few years; however, this policy has also resulted
in additional bad debt expense. At July 1, 2008, Accounts Receivable and Allowance for
Doubtful Debts accounts, showed balances of Rs.155,890 (debit) and Rs.9,350 (credit),
respectively. Following transactions took place during two years to June 30, 2010:
2009 2010
(Rs.) (Rs.)
Credit sales 1,154,300 1,210,750
Receipts from customers 1,075,250 1,255,280
Discount allowed 15,350 15,350
Debts considered to be un-collectable 13,250 14,180
Yasir & Company makes allowance for doubtful debts @ 5% of the closing balance of
accounts receivable.
Required:
For the years ended June 30, 2009 and 2010, prepare accounts of:
(i) Accounts Receivable
(ii) Allowance for Doubtful Debts
06
04
Q. 5 Hammad drew a bill for Rs.3,000 and Khalid accepted the same for mutual accommodation
of both of them to the extent of 2/3 to Hammad and 1/3 to Khalid. Hammad discounted the
same for Rs.2,820 and remitted 1/3 of the proceeds to Khalid. Before due date Khalid drew
another bill for Rs.4,200 on Hammad in order to provide funds to meet the first bill. The
second bill was discounted for Rs.4,080 with the help of which the first bill was met and an
amount of Rs.720 was remitted to Hammad. Before the due date of the second bill, Hammad
became bankrupt and Khalid received a dividend of 50 paisa in the rupee in full satisfaction.
Required:
Pass the necessary journal entries in the books of Khalid. 15
Q. 6 The following balances have been taken from the pre-closing Trial Balance of A. Rahman
Traders prepared on June 30, 2010:
Dr. (Rs.) Cr. (Rs.)
Cash 30,000
Accounts receivable 45,000
Furniture & fixture 60,000
Office equipment 40,000
Inventory (1-7-2009) 35,000
Purchases 205,000
Carriage-in 5,500
Office supplies expense 2,500
Discount allowed 7,500
Allowance for doubtful debts 2,000
A. Rahman.s drawing 15,000
Prepaid office rent expense 5,000
Prepaid insurance 2,500
Salaries expense 25,000
Accounts payable 22,500
Sales revenues 327,500
Purchase returns and allowances 10,000
A. Rahman, Capital 120,000
480,000 480,000
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Supplementary data for adjustments on June 30, 2010:
(i) Inventory was valued at Rs.15,000.
(ii) Depreciation expenses for the year were Rs.12,000 for furniture & fixture and
Rs.4,000 for office equipment.
(iii) Insurance expired during the year, Rs.1,500.
(iv) Amount of prepaid office rent was Rs.2,000.
(v) Accrued salaries amounted to Rs.10,000.
(vi) Allowance for doubtful debts was to be raised to Rs.5,000.
(vii) Unused office supplies on hand amounted to Rs.1,000.
Required:
(a) Income Statement for the year ended June 30, 2010. 12
(b) Statement of Financial Position as at June 30, 2010. 13
ADVANCED FINANCIAL ACCOUNTING & ANALYSIS . (S-401)
STAGE . 4
Time Allowed . 2 Hours 45 Minutes Maximum Marks . 90
(i) Attempt ALL questions.
(ii) Answers must be neat, relevant and brief.
(iii) In marking the question paper, the examiners take into account clarity of exposition, logic of arguments,
effective presentation, language and use of clear diagram / chart, where appropriate.
(iv) Read the instructions printed inside the top cover of answer script CAREFULLY before attempting the paper.
(v) Use of non-programmable scientific calculators of any model is allowed.
(vi) DO NOT write your Name, Reg. No. or Roll No. anywhere inside the answer script.
(vii) Question No.1 . .Multiple Choice Question. printed separately, is an integral part of this question paper.
Marks
Q. 2 Following is the Statement of Financial Position of .A. Limited and .B. Limited as of December
31, 2009:
(Rupees in .000)
.A.
Limited
.B.
Limited
Non-Current Assets
Property, plant and equipment 47,000 38,000
Investment in .B. Limited 34,400
Current Assets
Inventory 5,000 6,000
Trade receivables 12,500 12,000
Cash and cash equivalents 4,100 -
21,600 18,000
Total Assets 103,000 56,000
Liabilities and Equity
Share capital 43,000 20,000
Revaluation reserve 11,000 5,000
Retained earnings 24,000 26,000
78,000 51,000
Payables 25,000 5,000
Total Liabilities and Equity 103,000 56,000
Additional Information:
(i) .A. Limited acquired 80% of the ordinary shares of .B. Limited on January 1, 2009
when .B. Limited had balance in its retained earnings account of Rs.6 million. There is
no change in revaluation reserve account of .B. Limited since the date of acquisition.
(ii) .B. Limited sells goods to .A. Limited at cost plus 20%. .A. Limited has unsold goods to
the value of Rs.3 million in the inventory as of December 31, 2009.
(iii) Trade receivable of .B. Limited include an amount of Rs.1 million due from .A. Limited.
(iv) There is no impairment of goodwill.
Required:
Prepare the Consolidated Statement of Financial Position of .A. Limited as of December 31,
2009. 20
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Q.3 Following are comparative Statements of Financial Position and extract from Statement of
Comprehensive Income of Crystal Power Limited:
CRYSTAL POWER LIMITED
Comparative Statements of Financial Position
As of June 30, 2010 and 2009
2010 2009
Share capital and reserves (Rs..000) (Rs..000)
Authorized capital:
50,000,000 ordinary shares of Rs. 10 each 500,000 500,000
Issued, subscribed and paid up capital 100,000 100,000
General reserve 28,000 28,000
Retained earnings 56,400 36,000
184,400 164,000
Non-Current Liabilities
Debentures 67,000 78,500
Current Liabilities
Trade and other payables 54,000 44,000
Provision for taxation 4,000 6,500
58,000 50,500
Total Liabilities and Equity 309,400 293,000
Non-Current Assets
Property, plant and equipment 159,000 135,000
Accumulated depreciation (37,500) (27,500)
121,500 107,500
Intangible assets 43,500 48,000
Current Assets
Inventory 43,000 54,000
Prepaid expenses 5,000 10,000
Short-term investment 32,000 16,000
Trade receivables 61,200 53,000
Cash and bank 3,200 4,500
144,400 137,500
Total Assets 309,400 293,000
CRYSTAL POWER LIMITED
Statement of Comprehensive Income (extract)
For the year ended June 30, 2010
(Rs..000)
Operating profit 46,350
Less: Financial charges (12,200)
Profit before tax 34,150
Less: Tax provision (5,750)
Profit after tax 28,400
Additional Information:
(i) Plant originally costing Rs.20 million and having a book value of Rs.6 million was sold
for Rs. 9.8 million during the year.
(ii) Depreciation expenses and amortization expense are included in the operating
expenses.
(iii) No change in the value of short-term investments occurred during the year.
(iv) Dividends of Rs.8 million were declared and paid by the company during the year.
Required:
Prepare Statement of Cash Flows for the year ended June 30, 2010 using indirect method as per
the requirement of IAS-7 showing necessary workings. 15
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Q.4 (a) Following financial statements relate to Pioneer Limited: Marks
Income Statement
for the year ended June 30, 2010
(Rs. .000)
Sales 21,450
Less: Cost of goods sold (14,150)
Gross profit 7,300
Other income 530
Operating Expenses:
Salaries (880)
Selling & distribution expenses (1,320)
Advertisement (880)
Misc. expenses (990)
(4,070)
Operating profit 3,760
Less: Financial charges (220)
Profit before tax 3,540
Tax provision (1,850)
Profit after tax 1,690
Dividend declared and paid during the year amounted to Rs.750,000.
Comparative Statements of Financial Position
As of June 30, 2010 and 2009
2010 2009
(Rs. .000) (Rs. .000)
Share Capital and Reserves
Ordinary share capital (Rs.10 each) 10,000 10,000
General reserve 3,300 2,500
Retained earnings 7,390 5,700
20,690 18,200
Non-Current Liabilities
Long-term loan 23,500 20,300
Current Liabilities
Bank overdraft 15,500 9,700
Accounts payable 12,000 10,000
27,500 19,700
Total Liabilities and Equity 71,690 58,200
Non-Current Assets
Equipment 42,000 31,000
Less: Accumulated depreciation (22,000) (15,000)
20,000 16,000
Current Assets
Prepaid expenses 13,490 12,000
Inventory 13,000 14,000
Trade receivables 25,200 16,200
51,690 42,200
Total Assets 71,690 58,200
Required:
Calculate the following financial ratios for the year ended June 30, 2010:
(i) Return on Capital Employed 02
(ii) Debt-Equity Ratio 01
(iii) Fixed Assets Turnover Ratio 02
(iv) Earning per Share 02
(v) Return on Equity 01
(vi) Dividend Cover 02
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(b) Royal Construction Company has signed a fixed price contract on January 1, 2009 to build
an office tower to be completed in two years. The amount of contract price is Rs.50 million.
The estimated contract cost is Rs.45 million. Additional information as of December 31,
2009 is as follows:
(Rs. in million)
Total contract price 50.0
Total estimated contract costs 45.0
Cost incurred to date 16.2
Estimated costs to completion 28.8
Progress billing 16.0
Amount received 15.4
Required:
(i) Calculate the Stage of Completion for the year 2009. 02
(ii) Prepare extract from Statement of Comprehensive Income showing the revenue and
costs to be recognized as of December 31, 2009. 03
(iii) Calculate amount due from customers that would be shown in the Statement of
Financial Position as of December 31, 2009. 03
(iv) Calculate Trade Receivable amount to be shown in the Statement of Financial Position
as of December 31, 2009. 02
Q.5 On January 1, 2009, Sunrise Limited acquired a new machine from Crescent Limited under
finance lease. The cash price of the machine is Rs.216,300. As per terms of the finance lease
agreement, five equal annual installments of Rs.60,000 each are payable in arrears with the first
payment due on December 31, 2009. The asset has an estimated useful life of five years (to be
depreciated on straight-line basis) with no residual value. The implicit rate of interest is 12%.
Required:
(a) Prepare Lease Amortization Schedule for the years 2009 to 2013. 05
(b) Prepare all relevant journal entries for the year ended on December 31, 2009, to be
incorporated in the books of accounts of Sunrise Limited. 05
(c) Prepare the relevant extracts from Statement of Comprehensive Income and the Statement
of Financial Position for the year to December 31, 2009. 05
Q.6 (a) Mercury Limited had reported profit before depreciation and tax of Rs.500,000 for each
year from 2006 to 2009. The company's plant and equipment originally costing Rs.600,000,
is being depreciated over its useful life of four years on the basis of straight-line method.
While the tax department allows to depreciate the plant and equipment at 33.33% on
straight-line basis. Assume the tax rate for the company to be 35% for each year.
Required:
(i) Calculate current and deferred tax liabilities for the years from 2006 to 2009. 06
(ii) Prepare relevant journal entries in the books of Mercury Limited from 2006 to 2009. 06
(b) .A. Limited acquired 150,000 ordinary shares at Rs.10 per share, being 25% interest in .B.
Limited, on January 01, 2009. At the end of the year, .B. Limited reported the profit after tax
of Rs.1,080,000. In addition, .B. Limited declared and paid cash dividend of Rs.324,000 on
December 31, 2009, which has been accounted for in the books of .A. Limited.
Required:
(i) Prepare necessary journal entries in the books of .A. Limited using Equity Method to
record the above transactions. 06
(ii) Prepare extract from Statement of Financial Position as on December 31, 2009
showing the effects of the above transactions. 02
| Earning: Approval pending. |
