All India Management Association (AIMA) 2007 M.B.A Marketing Management Accounting for ision Making – I - Question Paper

Net cash flow from operating activities 2,65,500
Payment of dividend is a financing activity. Therefore, it does not come under operating activity. < TOP >
26. E Occurrence of fire is an extraordinary item. Therefore choice (e) is the accurate ans. < TOP >
27. E Inventories should be valued at lower of cost or net realizable value. < TOP >
28. A Balances with Customs and Port Trust, comes under the head Loans and advances in the balance sheet of a company. < TOP >
29. E Operating expenses does not include loss on sale of investment. It is a non operating expense. Remaining all other choices are operating expenses. < TOP >
30. B Payment of dividends tax is a financing activity in a cash flow statement.
i. Payment made to acquire shares is an investing activity
ii. Payment of dividend tax is a financing activity
iii. Dividends received is an investing activity.
iv. Payments to employees is an operating activity
v. Acquisition of long lived assets is an investing activity.
Hence, (b) is accurate ans. < TOP >
31. D Investing activities include all cash flows involving assets, other than operating assets. The investing activities are:
Particulars Rs.
Purchase of shares (26,000)
Sale of investment 35,000
Acquisition of 5-year Fixed Deposit (50,000)
Interest received on Fixed Deposit 3,750
Dividend received on investments 1,200
Net cash outflow from investing activities 36,050
Note that the sale of investments is reported in the investing part at the cash inflow amount (Rs.35,000), not at the carrying value of the investment (Rs.33,000). < TOP >
32. D Revenue manipulation is the most common kind of earnings management. The sales transaction is the pillar for recognition of revenue in the business and it is this figure that is manipulated to inflate earnings. This is resorted to by any of the subsequent practices:
Vendor financing.
Trade loading.
Channel stuffing.
Understating the value of accounts receivables.
Not recognizing rebates.
Overstating the allowance for uncollectible accounts is not revenue manipulation to inflate the earnings. Hence, (d) is accurate ans. < TOP >
33. A Capital gearing ratio = Fixed interest bearing securities/ Equity Shareholder’s fund
Capital gearing ratio = 0.6
Fixed interest bearing securities = Rs.6,00,000
0.6 = Rs.6,00,000 ÷ Equity shareholder’s fund
Therefore, Equity Share holder’s fund = Rs.6,00,000 ÷ 0.6 = Rs.10,00,000. < TOP >
34. D Interest paid out of capital to the extent not written off is a miscellaneous expenditure. Hence it does not appear in Profit and Loss account of a company. < TOP >

Earning:   Approval pending.