The Institute of Cost and Works Accountants of India 2008 Certification CWA/ICWA Accounting- Test 2 - Question Paper
Time Allowed : 3 hours Full Marks : 100
Test Paper -II
Answer question one which is compulsory. Answer any five from the rest.
Q. 1. (1) Please choose the correct answer from the alternatives given (1 x 10 marks)
a) The time period principle assumes that an organization's activities can be divided into specific time periods including:
(i) Months
(ii) Quarters
(iii) Years
(iv) All of above
b) The accounting principle that requires revenue to be reported when earned is the:
(i) Matching principle
(ii) Revenue recognition principle
(iii) Accounting period principle
(iv) Going concern principle
c) Adjusting entries
(i) Affect only income statements
(ii) Affect only balance sheet accounts
(iii) Affect both income statements and balance sheet accounts
(iv) Affect cash flow statements
d) The recurring steps performed each accounting period, starting with analyzing and recording transactions in the journal and continuing through the postclosing trial balance, is referred to as the:
(i) Accounting period
(ii) Operating cycle
(iii) Closing cycle
(iv) Accounting cycle
e) If a company failed to make an adjusting entry at the end of its accounting period to record depreciation for this period, the omission will cause:
(i) An understatement of expenses
(ii) An overstatement of revenues
(iii) An understatement of assets
(iv) An overstatement of liabilities
f) Which of the following assets is not depreciated?
(i) Fixtures
(ii) Motor car
(iii) Land
(iv) Machinery
g) If furniture is bought on account, it will result into
(i) Increase in asset & decrease in liability
(ii) Increase in liability and increase in asset
(iii) Decrease in asset & decrease in liability
(iv) Increase in liability and decrease in asset
h) Which of the following is an item of expense
(i) Charges paid for installation of machinery
(ii) Recovery of electricity bills paid for employees
(iii) Payment of electricity deposit
(iv) Payment of electricity bill
i) Material was purchased for Rs 25000 and freight was paid for Rs 5000 for bringing it to the warehouse. Half of it was sold for Rs 25000. The company maintains the policy of selling at 66.67% above cost. The value of closing stock will be
(i) Rs 12500
(ii) Rs 15000
(iii) Rs 20875
(iv) Cant say
j) The prepaid expenses account showed an opening balance of Rs 10000 and closing balance of Rs 17500. The effect of this will mean
(i) Decrease in profit by Rs 10000
(ii) Increase in profit by Rs 17500
(iii) Increase in profit by Rs 7500
(iv) Decrease in profit by Rs 7500
(2) Classify the following into asset, liability, expense or income (5 marks)
a. Rent received in advance
b. Prepaid insurance
c. Provision for doubtful debt
|
d. |
Deposit with government office |
|
e. |
Commission received |
|
f. |
Cash received from customer |
|
g. |
Employers contribution to provident fund |
|
h. |
Unsold material |
|
i. |
Carriage inwards |
|
j. |
Free samples distributed |
(3) Please choose the correct answer from the alternatives given. Show your calculations (3X5 marks)
a) The annual fixed costs of a company are Rs 60000. It manufactures a product which it sells at Rs 20 each. The contribution to sales ratio is 40 per cent. The breakeven point in units is
(i) 1200
(ii) 3000
(iii) 7500
(iv) 5000
b) The selling price of a product is Rs 9 per unit with variable cost of Rs 6 each and the fixed costs are Rs 54000 per month. In a period when actual sales are Rs 180000, the margin of safety in units is:
(i) 2000
(ii) 14000
(iii) 18000
(iv) 20000
c) A company had opening stock of raw material A as Rs 90000. The purchases during the period were Rs 270000. The closing stock was valued at Rs 110000. The inventory turnover ratio is:
(i) 2.45
(ii) 2.50
(iii) 3.00
(iv) 1.22
d) P Ltd had an opening stock of Rs 2640 (300 units valued at Rs 8.80 each) on 1st April. The following receipts and issues were recorded during April
|
10the April |
Receipt |
1000 units |
Rs 8.60 per unit |
|
23rd April |
Receipt |
600 units |
Rs 9.00 per unit |
|
29th April |
Issues |
1700 units |
Under LIFO method, what was the total value of issues on 29th April?
(i) Rs 14840
(ii) Rs 14880
(iii) Rs 14888
(iv) Rs 15300
The following data relates to stock item A452:
e)
100 units per day 60 units per day 130 units per day 20-26 days 4000 units
Average usage Minimum usage Maximum usage Lead time EOQ
The maximum stock level is:
(i) 4780 units
(ii) 5080 units
(iii) 5380 units
(iv) 6180 units
Q. 2. The following is the trial balance of M/s Futuristic trading as 0n 31-03-2007: Particulars Amount Dr Amount Cr
28,000
52,000
1.240.000
1.720.000
428.000
322.000
1.200.000
400.000
860,000
600,000
60,000
4,600,000
52,000
2,800,000
84.000 220,000
72.000 110,000
54.000
42.000
48.000
24.000
40.000
240.000
36.000
44.000
110.000
60.000
40.000
30.000
32,000
3,240,000
Cash in Hand
Bank balance
Stock as on 1st April 2006
Debtors
Furniture
Office equipment
Building
Motor Car
Creditors
Loan from HDFC bank Reserve for bad debt Purchases Sales
Purchase returns Sales returns Salaries
Motor car expenses Godown rent Interest on loan Rates & taxes Discount Allowed Discount received Freight
Carriage outwards Drawings
Printing & stationery Electricity Insurance premium General expenses Bad debts Bank charges Capital of Mr. Roy
9,444,000
9,444,000
Prepare the final account for the year ended 31st March 2007 after considering the following:
1) Depreciate building used for business by 5%, furniture by 10%, office equipment by 15% and motor car by 20%
2) A steel table purchased during the year for Rs 28000 was sold for the same price, but sale proceeds were credited to sales account.
3) A printer purchased during the year for Rs 8000 was wrongly debited to purchase account.
4) Closing stock was valued at Rs 880000
5) One months salary and one months rent are outstanding.
6) The loan from HDFC bank was taken on 1st July 2006 @ 12% pa.
7) The reserve for bad debts is to be maintained at 5% on debtors
8) Insurance premium included Rs 8000 paid towards the life policy of Mr. Roy and the balance of the insurance was paid for the period 1st July 2006 to 30st June 2007
9) Half of the building is used for residential purpose of Mr. Roy. (14 marks)
Q. 3.
(a)
i) From the following details of bank column of the cash book, find out the collection from debtors being the balancing figure:
Opening balance Rs 8000
Closing balance Rs 4000
Payment to creditors Rs 160000 Bills receivables encashed Rs 18000
Bills payable paid Rs 12000
Drawings Rs 24000
Expenses Rs 36000
ii) From the following details of the creditors account, find out the figure of credit purchases being the balancing figure:
Opening balance Rs 160000
Closing balance Rs 190000
Payments by cheques Rs 940000 Payments by bills payable Rs 100000
Payments by cash Rs 20000
Discount received Rs 10000
Purchase returns Rs 20000
(3X2 marks)
(b)
Mr. Patel sold goods to Mr. Shah and drew a bill of exchange for Rs 10000 which the later accepted. Show journal entries in the books of Mr. Patel for each of the following independent situations:
(i) Here retains the bill till due date and then realized the money.
(ii) He discounts the bill with the bank paying Rs 750 as discounting charges & bill is honoured.
(iii) He endorses the bill to Mr. Surana against amount due to him for Rs 10200, & the bill is honoured.
(iv) He sent the bill to the bank for collection and the bill is honoured.
(2X4 Marks)
Q. 4.
(a) On 1st April 2006, the balance in Machinery account of a company stood at Rs 567000/-. The company had the system of providing depreciation at 10% pa on diminishing balance. Now it is contemplating to change the method to straight line with retrospective effect from 1st April 2004, keeping the rate of depreciation same. Show machinery account for the years 2004-05, 2005-06 & 2006-07. The company had purchased a new machine for Rs 60000 on 1st October 2006.
(7 marks)
(b) Mohan and Sohan entered into a joint venture agreeing to share profits or losses in the ratio of 2:1. The following transactions took place during the tenure of the venture:
Sohan
25000
5000
2500
Mohan
Cash deposited in joint bank a/c 50000 Goods bought in 10000
Expenses incurred 5000
The joint transactions were:
Goods bought for cash Rs 20000 and on credit from Mr. Sahani Rs 40000. Expenses paid Rs 1800. Goods sold to Mr. Roy Rs 40000 against immediate cheque and to Mr. Ray for Rs 50000 on 3 months credit. Mr. Ray accepted a bill for this amount which was discounted at 18% pa. Mohan agreed to take over the balance stock at the value of Rs 2700. Mr. Sahani was paid Rs 39400 in full settlement. Show Joint Venture a/c, Joint bank a/c and the co-venturers a/c assuming that the venture was closed by settling the amount to the co-venturers.
(7 marks)
Q. 5.
(a) In a factory, a machine is considered to work for 208 hours in a month. It includes maintenance time of 8 hours and set-up time of 20 hours. The expense data are given below:
Cost of machine is Rs 500000 & it has life of 10 years with a salvage value of Rs 20000 at the end of life.
Repairs & maintenance Rs 60480 pa, consumables & stores Rs 47520 pa, Rent of the building Rs 72000 pa, the machine occupies 1/6th of the area.
Supervisors salary (common to three machines) Rs 6000 pm, operators wages per machine Rs 2500 pm, General lighting charges per month allocated to the machine Rs 1000, power consumption is 25 units per hour at Rs 2 per unit. The supervisor and operators are permanent. Consumables and stores vary with the running of machine.
Power is required for productive purposes only. Set-up time, although productive, does not require power.
Calculate the machine hour rate for (i) set-up time, and (ii) running time
(7 marks)
(b) The quarterly production of a companys product has a steady market at 20000 units. Each unit requires 0.5 kg of a raw material. The ordering cost is Rs 100 per order and the inventory carrying cost is Rs 2 per annum. The lead time for procurement is 36 days and the safety stock is 1000 kg. The company has negotiated the following prices for the procurement of raw material:
|
Order quantity (kg) |
Discount (Rs) |
|
Up to 6000 |
Nil |
|
6000 - 8000 |
400 |
|
8000 - 16000 |
2000 |
|
16000 - 30000 |
3200 |
|
30000 - 45000 |
4000 |
Calculate the re-order point taking 30 days in a month. Prepare a statement showing total cost of procurement & storage of material after considering discounts if company elects to place 1,2, 4 or 6 orders in a year. Also calculate the number of orders the company should place to minimize the costs after taking EOQ also into consideration.
(7 marks)
Q. 6.
The following details were extracted from the books of a manufacturing company for the month of March 2007.
Sales for the month Rs 8500000
Opening stock 125000 kg @ Rs 30 per kg
Purchases March 7 150000 kg @ Rs 31.10 per kg March 27 100000 kg @ Rs 31.20 per kg
Closing stock on March 31 130000 kg
The Administration overheads for the month amounted to Rs 172000.
Work out the following using FIFO and LIFO methods:
1) Value of closing stock as on 31st March 2007
2) Cost of sales for the month of March and
3) Profit or loss for the month of March
(6+6+2 marks)
A company has decided to install a new machine for manufacturing a new product. The maximum possible sales are Rs 50 lacs. The company is considering two models M1 and M2 for which the following details are available:
M1 M2
Maximum sales per year Rs 50 Lacs Rs 50 Lacs
Fixed cost per year Rs 5 Lacs Rs 8 Lacs
Estimated profit for maximum sales Rs 15 Lacs Rs 17 Lacs
Calculate the break-even sales for both the models of the machine. Calculate the sales level at which both machines will give same amount of profit. Based on the computations, which model will be more profitable than the other over a range of sales?
(4+6+4 marks)
|
Attachment: |
| Earning: Approval pending. |
