Accounting MJ 2015

7/24/2019 Accounting MJ 2015

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ACCOLINTINC

Tirneallowed-2hours

Total

marks- 100

[NB

-Thefigtresinthemarginindicatefullmarks.Qnestionsmustbeanweret]inEnglish.Examinertyill

takeaccornio/

the

quality

of language

and

of

the

manner

in which

the

qnswers

are

presented.

Different

ports,

(

anv,

of the

same

question

must

be

answered

in

one

place

in order

of

sequenceJ

Marks

l.

(a)

whatistheobjectiveoffinanciar

statements?Howdoesanorganizationachieveit?

(b)

Define'Materiality'

as

per

BAS

L

(c)

What is

meant

by

substance

over form?

(d)

What

is accrual

basis

ofaccounting?

(e)

Preparejournal

entries for

the lollowing

transactions:

i)

Red Ltd.

lost inventories

thal

cost TK.

100,000

in

a fire.

The

goods

were

insured

fbr

75%o

of

the cost

ii)

A

business

has

been told

by its

lawyers

that

it

is

likely

to have

to

pay

TK.

10,000

darrages

lor

a

product

that lailed.

The

business

duly

set

up a

provision

as at Decernber

3l

2d.]

However,

the flo-llowing

year,

the

lawyers

found

that

the damage

were more

likely

to be TK.

50,000.

iii)

Fashion

Ltd.

estimates that"TK._

i

00.000

is

payible

as

tax

on

the

protlts

earned in

the

year

ended

Decenrber

31,2014.

TK.

70,000

has

already

been

paid

as

advance

tax.

iv)

Green Ltd.

has 10,000

ordinary

shares

ofTk.

5 each.

Now

board

decides

to make

a I fbr

5 bonus

rssue.

This

will

be lollowed

by a I for

2 right

issue

at TK. 8

each.

I

2

2

2

t0

2.

(a)

Drscuss

the

technlques

for

the measurement

ofcost

ol inventorres

wrth

an

example.

5

(b)

on I

December

2014.P

&

G Ltd held

300

units

offinished

goods

in inventory

These

cost t'K

3.600.

Bur soon

after

12

units are damaged

frorr

these

goods

due

to

evaporation

which

rs

nornrally

expected.

During

Deoember

2014

three

batches olflnished goods

were

received

into

Store flro:r

the Production

Department.

as lollows:

Date

Units

received

Production

cost

pcr

unit

I 0 December

400

Tk t2

50

20 December

400

Tk

14

25

December

300

]'k 15

Ason30Decemberl0unitsaredamagedduetohu,diffi

are

stolen

by an employee.

Determine

the

value of

closing inventory

and identify

the

profit

from

the

sellrng inventory

in

December

2014

applying

the

principle

of FIFO.

Between

FIFo

and AVCo

lonnula.

advise

tiie

management

which

rnethod

should

be followed ifthey

are highly

tax

conscious.

j

0

3.

(a)

In a

set of financial

statements

prepared

in

accordance with

BAS

1 6,

is it

correct

to say

that the

carrying

arnount

figure in

a statement

offinancial

position

cannot be

greater

that

the market

value

lnei

realizable)

ofan

asset

as

at the reporting

date? Explain

your

reasons

for

your

answer.

1

(b)

Good

Company Ltd.

comlnenced

business

in January

I,2009,

it

purchased

Iand

& bLrilding

at a cost

ol TK

I

00,000.

Finished

sold

duflng December

were

as

follov

Date

Units

sold

Sellins

orice Der unit

l4

December

500

Tk

20

2l

December

s00

Tk

20

28 Decerrber

100

l'k 20

For the

purpose

ofaocounting

for depreciation.

followrng were

agreed:

.

Land was

worth TK. 60,000

which

would

not

be depreciated

'

Building

was

worth TK. 60,000

which

would be depreciated

at straight

line

method

to

ntl residual

value

over 30

years.

After

five

years

olbusiness,

January I

2Ol4

an

independent

valuation

was done

and

now

business

prernises

worth TK.

300,000

(Land:

TK.

I

50,000

& Building:

TK. I 50,000)

with 25

years

of building's

remaining

uselui

lile.

Required:

(i)

Calculate

the

annual charge

for

depreciation

tbr first five years

ol

the

bui)ding's

life

and the

statenlent

ol

financial position carrying

val

ue

ol

busi

ness premises as at

the

end

of

each

of firsr five

years.

I

0

(ii)

What would

be

the impact

of

revaluation

on financial statements.

3

(iii)

what would

be

the

excess depreciation

and its

accounting

i.e..journal

entries

and reportrng

3

Well Ltd. has

the following

trial balance

at December

3l

,

2014

Debit

TK,

Cash

at bank

Inventory

at

January l, 201 4

Administrative

expenses

Distribution

cost

Non-current

assets

at cost:

Buildings

Piant

and Equlpment

Credit

TK,

t00

2,400

2.206

650

i0,000

1.400

PaBe

L of 2


2/12

Motor

Vehicles

Retatned

earnings

Suspense

account

Accumulated

deprecation:

Buildings

Plant

and

Equipment

Motor

Vehicles

Accounts

receivables

Purchases

Dividend

paid

Sales

revenue

VAT

payable

Accounts

payables

Share

premium

Share

capital

TK. 1

each

The

following

addrtional

information

are relevant

320

5o0

I

500

4,000

480

120

876

4,200

200

t

1,7

52

1,390

I,050

500

1.000

)) 1\) 1. ).r

--

--:-.JJ

a)

InventoryasatDecember3l,2ol4wasvaluedatTK.

l,600.whiledoingtheinventorycount,errorsrn

the

previous

vear's

invenrory

cor.rnr

were

discovered

rhe

invenrory

t;;4,;;;;;;;;;

beginrring

of

rhe

year

should

have

been

TK.2,2OO.

b)

Deprecation

to

be

provided

as

follows:

i)

Building

at 5%

straight

line,

charged

to administrative

expenses

ii)

Plant

and

equipment

at 20%

on

the

reducing

balance

basii,

crrarged

to cost

orgoods

sord

iii)

Motorvehiclesat25o/oonreducingbalance-basis,chargedtodis]ributioncost.-

---"

c)

No final

dividend

is

being

proposed

d)

A..cr.tstomer

has gone

bankrupt

owing

TK.

76.

This

debt

is

not

expected

to

be

recovered

and

an

ad.iustment

should

be made.

An

allowance

for

receivables

of 5%

is

to

be'set

uf

e)

one

thousand

new

ordinary

shares

were

issued

at TK.

r.50

on December

i,

zot+.

rn" proceeds

have

been

kept

in

a suspense

account.

Required to prepare the

following:

a)

Profit

and loss

account

for

the

year

ended

December

3 I

,

20

I

4

b)

Statement

olchanges

in

equity

for

the

year

ended Decembe

r

31.

20 I

4

c)

Statement

offinancial position

as

at December

31,

2014

All

statements

are

to be

prepared

in

accordance

with BAS.

ignore

taxation.

(a)

on

January

l'

2014,

xYZ

company

Ltd.

acquired production

equipment

on credit

by

the

amount

of

Tk

250,000.

The

following

further

costs

were incurred

in

cash:

8

8

12

The installation and setting up period

was

3

months

and a further amount

ol Tk

42,000

was

spent

on

cost

directly

related

to

bringingthe

asset to

its

working

condition.

the

equipment

was

."uav

io,

use

on I

Aprrl

20

I 4.

But

actually

used

from

1 May

2014

in

commercial production.

The

equiprnent

has

an

estimated

useful

lrfe

o1'l4

years

and

a

residual

value

ol

Tk

36.000.

Estirrated

dismantling

costs

amount

orrk.

25,000

which

wiil

be

piid

at

the rime

oraisruriirg

"'

'

Give

theiournal

entry

for recording

the

asset in

2014

ancl

show

the

presentation

in

staternent

of llnancial

position

as

on

3l

December

2014

and in

statement

of comprerrensive

income

for

,rra

y"u,

-

I0

(b)

Following

are

the information

of

Allex

Gullible

for

the

year

to

3l

December

20i4:

Tk.

7.000

I l 8,000

9,000

70,000

1,000

6,000

8,000

I

500

29,500

Delivery

Tk 36,000

40.000

nature

6.000

tne rnstallatton

ot the

equiplnent

5.000

lnterest

charges

paid

to

supplier

oteqrif,rentGiOet

rreO

.reO,t

12,000

upcraung

rosses

Delore

commerctal

production

7,000

Receivable,

I January

2014

Collection

from

receivable

Receivable

3 I December

201

4

Cost

ofsales

Discounts

allowed

Discounts

received

lrrecoverable

debts

expenses

Debts pard

in

2014

which

were previously

written

offas

irrecoverable

in

2013

Other

expenses

From

the

above

information you

are required

to

prepare

lncome

statement

ofAirex

Guliible

-The

End-

PaEe

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of

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Documents

Accounting MJ 2015