Cochin University of Science and Techology (CUST) 2006-6th Sem B.Tech Information Technology ,, IT 601 Financial Management And Corporate Tax Planning - Question Paper

8TS(C)-VI-06-017 (A)

B. Tech Degree VI Semester Examination, June 2006

IT 601 FINANCIAL MANAGEMENT AND CORPORATE TAX PLANNING

(Common for 1999 A 2002 Admissions)

Time: 3 Hours    Maximum Marks: 100

! () Distinguish between single entry and double entry system of accounting.    (10)

(b) Describe the fundamental accounting equation. How arc the revenue and expense

accounts related to it?    (10)

OR

H-    The following trial balance was extracted from the books of XYZ Ltd. as on

31 "December 2005:

	Ja.
Plant and Machinery	20,000	Capital account	80,000
Manufacturing wages	34,500	Sundry creditors	44,560
Salaries	15.850	Bank loan	15,000
Furniture	10,000	Purchase returns	1.740
Freight on purchase	1,860	Sales	2.50.850
Buildings	24,000	Reserve for bad debts	2,000
Freight on sales	2,140
Manufacturing expenses	9.500
Insurance and tax	4,250
Goodwill	25,000
General expenses	8,200
Factory fuel and power	IJSO
Sundry debtors	78,200
Factory lighting	950
Stock (31*Jan. 2005)	34,200
Motorcar	12.000
Purchases	t,02.000
Sales returns	3.100
Bad debts	1.400
Interests and Bank charges	400
Cash at Bank	4.200
Cash ia hand	1,120

3,94,150    3,94.150

Prepare the trading and profit and loss accounts for the year ended 31" December 2005. and the balance sheet as on that date taking into consideration the following information.

(i)    Stock in hand on 31* December 2005 was valued at Rs. 30.500/*

(ii)    Depreciate plant and machinery by 10% furniture by 5% and motor car by Rs.

1.000/-

(iii)    Create reserve for bad debts at 5H on sundry debtors

(iv)    A commission of 1% on the gross profH is to be provided to works manager

(v)    General manager is to be allowed a commission @ 2% oo net profit after charging works managers and before charging general managers commission.    (20)

(Turn Oyer)

2

Write short notes on (i) Earnings per share (ii) Du point financial analysis (iii) Ratios for predicting bankruptcy (iv) Inter firm comparison.    (20)

OR

From the data given below calculate (i) Material cost variance (ii) Material price variance (Iii) Material usage variance.    (20)

Products	Standard quantity (units)	Standard price (Rs.)	Actual quantity (units)	Actual price (Rs)
A	1.050	2.00	1.100	2.25
B	1,500	3.25	1,400	3.50
C	2,100	3.50	2,000	3.75

What is a fund flow statement? Examine its uses and significance for management.    (10)

Discuss in detail the procedure of making a fund flow statement.    (10)

OR

Distinguish between cost cocfiro! and cost reduction. What are the prerequisites for an

effective cost reduction program?    (10)

Explain tbe procedure for introducing a cost reduction program.    (10)

ABC Ltd. proposes to increase tbe production of tbe company. They are willing to purchase a new machine. There are three types in the market. Tbe following are the detaib:

	Type F (Rs.)	TTypeQ (R*-)	TypeR (Rs)
Cost of machine	17.500	12,500	9,000
Estimate savings in scrap	400	750	250
Wages per operative	250	300	250
Cost of indirect materials	.	400	-
Expected savings in indirect materials	100	-	250
Additional cost of maintenance	750	550	500
Additional cost of supervision	.	goo
Operatives not required (number)	11	20	9
Estimated life of machine Taxation at 50% of the profit	10 years	6 years	5 years

You are required to advise the management which type of the machine should be purchased.    (20)

OR

Explain feasibility reports.    0)

Define risk in capital budgeting. Explain methods for the treatment of risk.    (10)

What is inflation accounting? What are its advantages and disadvantages?    Explain

various approaches of inflatioo accounting.    (10)

Describe different types of leasing.    (10)

OR

Explain different methods of financial reporting.    (10)

Explain the procedure for computation of income from salary.    (10)

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Earning:   Approval pending.