DOEACC Society 2006 DOEACC B Level BE9 Accounting

extent of Rs. 10,200.
iii) Loan on Mortgage bear interest at 12% p.a. with monthly rates and was taken on
1st Oct, 2004.
iv) Depreciation is chargeable as follows:
Building 5.0%
Furniture and Fittings 10.0%
Air Conditioners 15.0%
Motor Vehicles 20.0%
v) Provision for Bad and Doubtful Debts is to be created at 2% on net outstanding
debtors.
You are needed to:
a) Ascertain the opening balance in capital account.
b) Prepare Trading and Profit & Loss account for the year ended 2005 and
also a balance sheet as on that date.
(3+15)
3.
a) How will you treat the subsequent items of expenses in cost accounts?
i) Cost of tools
ii) Incentives to indirect workers
iii) Leave travel assistance to employees
iv) Carriage and cartage cost of trends and dies
b) M/s. Aditya Bearing Ltd. Produces 72,000 units. The extracts from the costing records
of the company is reproduced below:
Direct Material Rs. 3,60,000
Direct Wages 2,52,000
Variable Overheads 1,44,000
Semi-variable overheads 84,000
Fixed Overheads 2,40,000
The product is sold at Rs. 60 per unit. The management proposes to raise the
production by 9000 units for sales in the foreign market. It is estimated that the semivariable
overheads will increase by Rs. 3000. But the product will be sold at Rs. 42 in
BE9-R3 Page two of four January, 2006
the foreign market. However, no additional capital cost will be incurred. The
management seeks your advice as cost accountant regarding viability of this proposal.
What shall be your advice? Prepare improper statements in support of you advice.
(8+10)
4. A Company is considering the replacement of its existing machine, which is obsolete
and unable to meet the rapidly growing demand for its product. The company is faced
with a situation of twin alternatives: to buy a new Machine-X that is similar to the existing
machine or go in for Machine-Y that is more expensive and has much greater capacity
and capability. The cash flows at the current level of operations under the two
options are as provided below:
Period Cash Flows (in Rs.) From
Machine-X Machine-Y
0 (50,00,000) (80,00,000)
1 -- 20,00,000
2 10,00,000 28,00,000
3 40,00,000 32,00,000
4 28,00,000 34,00,000
5 28,00,000 30,00,000
Figures within brackets for 0 period indicate the initial outlays for every of these
alternatives. The company’s cost of financing works out to be 10% for above projects.
The finance manager wants to appraise the above options by computing:
· Net current values
· Profitability Index
· Payback period
· Discounted payback period
At the end of his calculations, however, the finance manager is unable to make up his
mind as to which machine to recommend. You are needed to help him by making these
computations and advice as to which choice he should exercise and why?
A table of current values for 1 Re. To be received in future at a discount rate of 10%
is as provided below:
Year one two three four 5
Rate .9091 .8264 .7513 .6830 .6209
(18)
5.
a) The product of a manufacturing concern passes through 2 processes X and Y and
then to finished stock. It is obtained that in every process normally 5% of the total weight is
lost and 10% is scrap from which Processes X and Y realize Rs. 800 per tonne and Rs.
2000 per tonne respectively. The subsequent are the particulars relating to both
processes:
Particulars Processes
X Y
Materials in tonnes 1,000 70
Cost of materials in Rupees per tonne 1,250 2,000
Wages in rupees 2,80,000 1,00,000
Manufacturing Expenses in rupees 80,000 52,500
Output in tonnes 830 780
BE9-R3 Page three of four January, 2006
Prepare process cost accounts showing cost per tonne of every process.
presume that there was not stock or work-in-progress in any process.
b) Distinguish ranging from Absorption Costing and Variable Costing.
(14+4)
6. You are given with the subsequent summarized balances sheets of M/s. Rachan
Enterprises as at the end of financial years: 2004 and 2005.
Liabilities Amount in Rs.
2004 2005
Assets Amount in Rs.
2004 2005
Share Capital 4,00,000 5,00,000Goodwill 4,00,000 3,80,000
General Reserves 1,00,000 1,20,000 Land and Building 3,00,000 3,38,000
Profit and Loss 61,000 61,200Plant and Machinery 2,00,000 1,58,000
Bank Loan-Long Term 1,40,000 --Stock in Trade 1,60,000 1,28,400
Trade Creditors 3,00,000 2,70,400 Trade Debtors 1,000 1,200
Taxation Provision 60,000 70,000Bank Balance -- 16,000
Cash in Hand -- 10,000
Total 10,61,00010,21,600 Total 10,61,00010,61,000
During the year ended March 31 2005, subsequent transactions occurred:
· Dividend of Rs. 46,000 was paid
· Assets of a different company were acquired for a consideration of Rs. 1,00,000 by
issuing equity shares. Assets being: Stock 40,000 and Machinery 50,000.
· Additional Machinery was purchased for Rs. 16,000.
· Depreciation Written off Machinery Rs. 24,000.
· Loss on Sale of Machinery amounted to Rs. 400 that has been written off to
General Reserves.
You are needed to prepare a statement of Cash Flow.
(18)
7.
a) Write short notes on any 3 of the following:
i) Operating Leverage
ii) Financial distress and value of the firm
iii) Optimum capital structure
iv) Weighted cost of capital
b) describe working capital management? What methods do you suggest for estimating
working capital needs of a corporate enterprise? Illustrate your ans.
(12+6)
BE9-R3 Page four of four January, 2006

Earning:   Approval pending.